Famous Footwear’s same-store sales declined 4.3 percent in the second quarter but showed sequential improvement from the first quarter and is estimated to be taking market share. Jay Schmidt, president and CEO of Caleres, the parent of Famous, told analysts on a call, “During the second quarter, Famous continued to navigate difficult spending trends among its target consumer and the challenging economic backdrop overall.”
He added, “Even in this environment, Famous outperformed its competitive set and increased market share in shoe chains. We saw strengthening sales trends as we move through the quarter and we delivered an expected sequential quarterly improvement in Q2.”
The 4.3 percent comp decline compared to a decrease of 8.5 percent in the first quarter. In the 2022 second quarter, same-store sales were down 3.1 percent. Comps were basically in line ith Caleres’ plan.
When it reported first-quarter results in June, Caleres said Famous’ 8.5 percent same-store sales decline was due to a weather-related delay in the sandal season and a pullback in spending from its “more moderate-income customer” due to inflationary pressures. Sequential improvement in sales was expected in coming quarters but Famous comps are expected to be negative for 2023.
Sales were down 5.1 percent to $414.2 million from $436.4 million a year ago. Famous operated 861 stores at the quarter’s end, down from 881 a year ago.
From a category standpoint, the highlight again was the kids’ business.
“Our kids’ business, a key differentiator for Famous, was a bright spot again this quarter, increasing 5 percent over last year,” said Schmidt. “Kids is an essential and growing category for Famous and our focus paid off as families continue to prioritize purchases of kids’ footwear. This strength is particularly important heading now into the back-to-school season.”
Among adult categories, sandals again delivered a below-plan performance, down 11 percent. The overall casual business outperformed athletic performance footwear styles.
Famous Footwear’s comps overall improved as the family footwear chain moved through the quarter. Schmidt said, “May was our worst month, we improved in June and then July significantly improved, too”
On an adjusted basis, operating income at Famous was down 34.7 percent to $40.8 million from $62.5 million a year ago. The adjusted operating margin was 9.9 percent against 14.3 percent a year ago.
Famous’ gross margin rate declined to 46.2 percent from 48.9 percent a year ago but was similar to the 45.6 percent margin achieved in the first quarter. Schmidt said Famous continues to be “be strategic around our promotional approach. About 50 percent of our business is now excluded from BOGO promotions, up from about 30 percent pre-pandemic.”
He added that similar to its Brand Portfolio wholesale segment, Famous is prioritizing the health of the chain “over trying to capture lower quality sales.”
Looking at back-to-school, Schmidt said Famous has executed a number of strategies to drive demand.
“First, we focused on amplifying newness to drive excitement, interest and relevance,” said Schmidt. “Second, we approach inventory in a measured and agile manner. While we built up inventory behind key brands, styles and patterns, we tightly managed our overall inventory position, which declined 2 percent compared to last year in order to have the capacity to react aggressively to best sellers in season. Finally, we continue to enhance, energize and modernize the store experience through our new prototype stores.”
He added, “While we don’t anticipate comping last year’s record back-to-school period, we do believe Famous is uniquely positioned to maintain its leadership status in shoe chains and deliver a solid performance.”
Overall, Schmidt, who replaced the retired Diane Sullivan as CEO in January, remains upbeat on Famous’ prospects. He said, “In short, we continue to have great confidence in the long-term outlook for Famous and we believe we can leverage our competitive advantages to accelerate our growth in this segment. These include our leadership position with kids and the millennial family, our leading assortment of national brands, our nationwide and largely off-mall retail footprint and our elevated consumer experience in-store and online.”
Photo courtesy Famous Footwear
