Caleres, Inc. raised its 2022 sales and earnings per share guidance after delivering its strongest first-quarter performance for sales, gross profit margins and earnings.
Famous Footwear’s sales were down 3.4 percent but the off-price chain achieved another quarter of strong gross profit margin.
The overall company recorded a 15.1 percent year-over-year sales improvement, generated a 44.5 percent consolidated gross profit margin and achieved net earnings of $50.5 million. The company also used its strong cash generation to augment inventory levels to better align with consumer demand to repurchase approximately 701,000 shares of Caleres common stock and to fund its quarterly dividend.
“Caleres had an outstanding start to the year, executing at a high level and delivering record first-quarter sales, gross profit margins and earnings despite significant and ongoing macro-challenges,” said Diane Sullivan, chairman and CEO. “Notably, Famous extended its exceptional performance from 2021 achieving another quarter of strong gross profit margin and generating nearly $50 million in operating earnings while strategically investing for growth. In addition, our Brand Portfolio returned to nearly full strength during the first quarter, setting the stage for a significantly improved earnings contribution in 2022. In fact, our strong product design, diverse and targeted assortments and bold and strategic approach to inventory drove the best-ever quarterly sales and operating earnings performance for the Brand Portfolio.”
First Quarter 2022 Highlights
(13-weeks ended April 30, 2022 compared to 13-weeks ended May 1, 2021)
- Net sales were $735.1 million, up 15.1 percent from the first quarter of fiscal 2021;
- 3.4 percent sales decline in the Famous Footwear segment;
- 46.1 percent sales increase in the Brand Portfolio segment;
- Direct-to-consumer sales represented approximately 65 percent of the total net sales;
- Gross profit of $327.0 million, while gross margin was 44.5 percent or a 144-basis point improvement over the first quarter of 2021;
- 49.2 percent gross margin in the Famous Footwear segment, or a 405-basis point improvement over the first quarter of 2021;
- 38.1 percent gross margin in the Brand Portfolio segment, or a 53-basis point improvement over the first quarter of 2021;
- SG&A, as a percentage of sales, was 35.5 percent, 266-basis points higher than the first quarter of fiscal 2021 due primarily to an increase in variable costs on increased sales, an increase in marketing costs and higher wages and labor costs;
- Net earnings of $50.5 million, or earnings of $1.32 per diluted share, compared to net earnings of $6.1 million, or earnings of $0.16 per diluted share in the first quarter of fiscal 2021;
- Trailing twelve-month adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of approximately $320 million;
- Inventory levels up approximately 45 percent year-over-year reflecting ongoing efforts to align inventory with consumer demand, including increased in-transit inventory resulting from port delays and protracted transportation time;
- Generated $19.7 million in cash from operations; and
- Returned $17.3 million to shareholders through dividends and share repurchases.
Capital Return Progress
During the first quarter, Caleres used it operating cash generation to repurchase 701,000 shares of common stock, representing approximately 1.9 percent of shares outstanding, at a total cost of $14.7 million. At quarter-end, nearly 8.3 million shares remained available in the current share repurchase authorization.
“We remain optimistic about the company’s long-term prospects and potential for strong cash flows,” said Ken Hannah, senior vice president and chief financial officer. “We continue to view our stock as an attractive investment option and buying back shares as a prudent use of cash and expect to make ongoing purchases under the existing authorization during the remainder of 2022.”
The company also paid $2.6 million in cash dividends to shareholders during the first quarter of 2022.
Future dividend declarations and share repurchases will be based on a number of factors, including business and market conditions, the company’s future financial performance and other capital priorities.
“Looking ahead, even with ongoing supply chain challenges and persistent macro-economic headwinds, Caleres is exceptionally well-positioned to capitalize on favorable market dynamics,” said Sullivan. “As we progress through the year, we are committed to advancing our strategic priorities and have redoubled our efforts to unlock the growth opportunities identified across the enterprise. With the significant step-change achieved in the long-term cash-generating potential of our diversified portfolio, coupled with our carefully defined capital return program, we are confident we can drive substantial, long-term value for our shareholders.”
Fiscal Year 2022 Outlook
Given a strong start to the year, consumer demand for its brands and products and the structural changes implemented across its business, Caleres is raising its fiscal-year 2022 financial outlook. The company now expects consolidated sales levels to be up between 2 percent and 5 percent when compared to the fiscal year 2021 and expects earnings per diluted share to be between $4.20 and $4.40 representing another year of record or near-record earnings.
Previously, Caleres expected consolidated sales to be flat to up 3 percent to 2021 sales and earnings per diluted share to be in the range of $3.75 to $4.00.
Photo courtesy Caleres/Famous Footwear