Caleres Posts Q4 Loss On Charges, Sales Down 18 Percent

Caleres, the parent of Famous Footwear, reported sales declined 18.3 percent in the fourth quarter and 27.5 percent for the year.

“I am proud of the Caleres team and the tremendous progress we have made on a wide range of strategic objectives during an unprecedented year that saw the pervasive impact of the pandemic and protracted economic lockdown,” said Diane Sullivan, Chairman and CEO. “Among the highlights, we:

• Streamlined the organization and rightsized our expense base, resulting in $100 million in ongoing annualized expense savings;
• Achieved a 40 percent increase in e-commerce sales via our rapidly growing owned websites;
• Commenced the strategic closure of a portion of our brick & mortar portfolio to better align with the accelerated consumer shift toward digital;
• Generated approximately $126 million in cash from operations;
• Strengthened the balance sheet restoring overall debt to below pre-pandemic levels by fiscal year-end and significantly reducing our working capital position; and
• Returned approximately $34 million to shareholders through our long-standing dividend and share repurchase program.

“We continued to execute at a very high level at Famous Footwear, which rebounded quickly following the extended store closures and capped off 2020 with a modest decline in fourth-quarter sales and a significant increase in year-over-year earnings. For the Brand Portfolio, we have identified areas of opportunity that are expected to position this segment for improved performance including actions to ensure the optimal alignment of our product assortment and omnichannel capabilities to more closely reflect rapidly evolving consumer behaviors, preferences and priorities.”

“While the pace of recovery is still uncertain, there are signs of stabilization in the marketplace,” said, Sullivan. “We believe we are well-positioned to capitalize as the market rebounds and the world returns to a greater degree of normalcy. As we plan for future success, we will focus on maintaining our strong momentum at Famous Footwear; driving enhanced consumer alignment and improved performance in the Brand Portfolio; taking a careful and disciplined approach to cost control and capital spending; reducing debt levels still further; and returning excess cash to shareholders.

“In short, Caleres is a more agile and focused organization than it was at the start of 2020, with an even more vigorous commitment to connecting with our consumers and providing them with a compelling and fresh product across growing footwear categories when, where and how they want to shop. We are confident that we can leverage our talented and dedicated workforce, strong operating platform, powerful portfolio, and improved financial position to capitalize on the opportunities we see ahead in order to drive long-term value for our shareholders.”

Key Financial Information | Fourth Quarter 2020 Highlights
for the 13-weeks ended January 30, 2021, compared to 13-weeks ended February 1, 2020

Net sales were $571.0 million, down 18.3 percent from the fourth quarter of fiscal 2019

• Direct-to-consumer represented 75 percent of total net sales
• 6.2 percent sales decline in the Famous Footwear segment
• 32.4 percent sales decline in the Brand Portfolio segment
• Total company-owned e-commerce website sales increased approximately 25 percent, with e-commerce penetration rising to approximately 30 percent of net sales
• Gross profit was $225.6 million, while gross margin was 39.5 percent
• SG&A expense of $226.1 million, down $34.7 million compared to the fourth quarter of 2019
• Net loss of $77.0 million, or loss of $2.11 per diluted share, compared to net earnings of $0.4 million, or earnings of $0.01 per diluted share in the fourth quarter of fiscal 2019.
• Loss of $2.11 per share includes $2.14 for the below items:
  • COVID-19-related impairments and other expenses of $1.03;
  • Intangible asset impairment charges of $0.49;
  • Brand Portfolio expense of $0.37 related to the Naturalizer brand retail exits;
  • Fair value adjustment of $0.18 associated with the mandatory purchase obligation for Blowfish Malibu; and
  • Vionic integration-related costs of $0.07.

• Adjusted net income of $1.3 million, or $0.03 per diluted share compared to adjusted net income of $13.9 million, or $0.34 per diluted share in the fourth quarter of fiscal 2019
• Generated $24.6 million in cash from operations and ended the fourth quarter with $88.3 million of cash on hand
• Reduced credit facility borrowings by $50 million during the fourth quarter to end the year at $250 million, or $25 million below last year’s pre-virus levels
• Reduced inventory levels by approximately 21 percent year-over-year, reflecting ongoing actions taken to align with consumer demand and the ongoing liquidation of Naturalizer store inventory

Fiscal 2020 Results Versus 2019
for 52-weeks ended January 30, 2021, compared to 52-weeks ended February 1, 2020

Consolidated sales of $2,117.1 million were down 27.5 percent

• Direct-to-consumer sales represented 73 percent of total net sales
• 20.4 percent sales decline in the Famous Footwear segment
• 35.8 percent sales decline in the Brand Portfolio segment
• Total company-owned e-commerce website sales increased approximately 40 percent, with e-commerce penetration rising to approximately 30 percent of net sales
• Gross profit was $787.0 million, while gross margin was 37.2 percent
• SG&A expense of $889.5 million represented 42.0 percent of sales
• Net loss for the year was $439.1 million, resulting in a loss per diluted share of $11.80 including $10.40 for the below items:
  • Goodwill and intangible asset impairment charges of $6.35;
  • COVID-19 related impairments and other expenses of $3.10;
  • Fair value adjustment of $0.48 associated with the mandatory purchase obligation for Blowfish Malibu;
  • Brand Portfolio expense of $0.40 related to brand exits, primarily Naturalizer retail; and
  • Vionic integration-related costs of $0.07.
• Adjusted net loss of $52.0 million or adjusted loss of $1.40 per diluted share compared to adjusted net income of $86.4 million, or adjusted earnings of $2.10 per diluted share, in fiscal 2019
• Generated $126.4 million in cash from operations
• Returned $34.1 million to shareholders during the year through:
  • $10.8 million in dividend payouts; and
  • $23.3 million to repurchase 2.9 million shares, or seven percent of shares outstanding, at an average share price of $8.05.

2021 Outlook
Given the ongoing disruption related to the coronavirus, supply chain dislocations and associated near-term uncertainty in the marketplace, Caleres is not providing fiscal year 2021 guidance at this time. The company will evaluate market conditions as the year progresses and will endeavor to reinstate its more traditional guidance practices in the future.

Photo courtesy Caleres, Famous Footwear