Caleres Inc. reported second-quarter earnings rose 17.5 percent to $19.8 million, or 46 cents a share. Results missed Wall Street’s consensus estimate of 51 cents.

Second Quarter

  • Net sales of $622.9 million, down 2.3 percent due to a challenging retail environment
  • Gross margin up 47 basis points to 41.7 percent, driven by both Famous Footwear and Brand Portfolio
  • SG&A spend flat year-over-year, reflecting continued operational investments offset by reductions in expense
  • Diluted EPS of $0.46, including continued investments for long-term growth
  • Tax rate of 32.3 percent versus 26.5 percent in the prior year
  • Cash and equivalents of $165.7 million, up $36.4 million year-over-year
  • Inventory up approximately 1 percent, ahead of the key back-to-school selling season

First Half

  • Net sales of $1,207.7 million, down 2.6 percent due in part to planned reductions in Healthy Living sales
  • Gross margin up 78 basis points to 42.0 percent, partially benefitting from the exit of some lower margin categories
  • SG&A spend up approximately $1 million year-over-year, including operational investments
  • Diluted EPS of $0.86
  • Cash from operations of $108.6 million

“Our second quarter results show the benefit of good execution during a challenging environment, as we improved gross margin, maintained SG&A spend, and continued to invest for long-term growth” said Diane Sullivan, CEO, president and chairman of Caleres. “At 41.7 percent, gross margin was up nearly 50 basis points, with both Famous Footwear and Brand Portfolio contributing to this improvement.”

Second Quarter Segment Results

Famous Footwear

  • Same-store-sales down 1.1 percent, with positive conversion in-store and on-line unable to offset the decline in retail traffic
  • Gross margin up 14 basis points to 45.5 percent, with improvement for seasonal styles in a less promotional environment
  • Inventory up 3.4 percent on an average store basis, with increases in key back-to-school styles
  • Opened 11 new stores

Brand Portfolio

  • Sales down 3.8 percent, with strength at Contemporary Fashion unable to offset weakness at Healthy Living
  • Gross margin up 85 basis points to 35.3 percent, benefitting from improved channel mix
  • Inventory down approximately 4 percent, with continued focus on inventory management

First Half Segment Results

Famous Footwear

  • Same-store-sales down 0.1 percent
  • Gross margin down 14 basis points to 45.9 percent, reflecting higher shipping costs related to increased sales at famous.com
  • Opened 21 new stores

Brand Portfolio

  • Sales down 6.5 percent, with strength in Contemporary Fashion unable to offset expected declines in Healthy Living
  • Gross margin up ~180 basis points to 35.6 percent, partially benefitting from the exit of some lower margin categories

“While realistic about the retail environment for the second half of the year, we are maintaining our fiscal 2016 EPS guidance,” said Ken Hannah, chief financial officer of Caleres. “As we did in the second quarter, we will continue to expand our gross margin and to manage the areas within our control – such as our inventory and our SG&A – to deliver bottom-line results.”