Boosted by improved profitabillity at Famous Footwear, Caleres reported second-quarter earnings, excluding a charge for debt extinguishment, rose 22.4 percent, to $22.1 million, or 50 cents per share. Analysts’ consensus estimate had been 44 cents a share.

Net earnings were $16.8 million, or 38 cents, and included $5.3 million of after-tax expense related to debt extinguishment

The gains for Caleres, formerly Brown Shoe, came despite lower-than-expected sales, which increased 0.3 percent to $637.8 million.

Gross margin was 41.2 percent, up approximately 40 basis points year-over-year. The SG&A expense rate was 35.6 percent of sales, a 30 basis point improvement year over year.

On a conference call with analysts, Diane Sullivan, president, CEO and chairman, said the solid performance came “despite an ever-changing retail environment.”

She added, “Tourist and border markets have been hard hit by the strengthening U.S. dollar. And back-to-school shopping has shifted closer to need in many areas.”

At Famous Footwear, sales reached $395.9 million, up 0.6 percent excluding, which was sold in December 2014. Same-store-sales inched up 0.1 percent.

Gross margin at Famous increased 50 basis points to 45.3 percent and operating margin was up 70 basis points to 7 percent. Overall earnings at Famous gained 8.4 percent to $27.7 million. Inventories at the quarter’s end were down 0.7 percent on a per store basis.

“We also saw good strength in the quarter from the brands and the categories that we expect to do well during back-to-school, and our key brands continued to deliver,” said Sullivan.

Canvas was up double digits in the quarter and total athletic sales were up 1.9 percent as consumers continued to switch from performance to lifestyle product. While overall sandal sales were down in the quarter, growth was seen in key areas like women’s casual and juniors sandals. Sullivan added, “And we made it through the quarter without seeing excessive promotional activity.”

In the Q&A session, Rick Ausick, president of Famous Footwear, said the women’s side in performance athletic is seeing more softness than expected while men’s is performing close to plan, slightly less than last year. But the overall shift is toward canvas, including more skate and basketball looks.

“We call it more fashion-driven because it is really not a performance shoe,” said Ausick. “Those businesses are good and I think they are taking, again, some business away from the true performance look.”

He likewise said the weakness in sandals, which followed a stronger first quarter, likewise appears to reflect some transition to canvas.

Conversion rates and average unit retail increased while pairs per transaction were essentially flat. While traffic was down in stores, e-commerce traffic saw steady improvement and e-commerce sales were up double digits in the quarter across mobile, tablet and desktop.

“This improvement in e-commerce sales is due to the investments that we have made and will continue to make in technology and infrastructure and talent,” said Sullivan. “And as we’ve worked our way through the first half of year we’ve adapted our digital media strategy and we are pleased with the results so far.”

Famous is doing much more specific targeting in terms of native advertising, and in leveraging its e-mail list, which increased it e-mail-driven sales by mid-double digits in the quarter. Ship-from-store was also expanded during the quarter to 150 doors. Added Sullivan, “This program has clearly provided us with the opportunity for incremental sales, and it also allows for better management of each product in-store.”

Revenue per square foot at Famous was $216, up another 2 percent on a trailing 12-month basis. During the quarter Famous opened 10 stores and closed six. In total, the chain operated nine more stores year over year. For 2015 it remains on track to open approximately 50 and expect to close approximately 50, as well.

Looking ahead, Sullivan said after a “sluggish” July, Famous’ sales have picked up.

“At the start of the back-to-school season, we had been running somewhere around up 3 percent to 4 percent, and now we are seeing some acceleration in that rate as the later markets begin to kick in for back-to-school,” said Sullivan. “So, we’re very confident that we have the right product and the right styles in stock as we have seen good consumer acceptance in the regions where school has really already begun.”

In its Brand Portfolio segment, sales of $242.0 million were up 4.4 percent in the quarter, with performance in the quarter driven by a 14.1 percent improvement in Contemporary Fashion. Healthy Living sales were down 1.5 percent, as increases in wholesale sales were unable to offset weakness on the retail side, where the company operated nine fewer stores year-over-year.

The Contemporary Fashion gains were driven by double-digit growth coming from Sam Edelman, Vinc, and Franco Sarto. Among its Healthy Living segment brands, Naturalizer was down 1.1 pecent due to the store closings while LifeStride was up double digits. Dr. Scholl’s sales declined in the quarter but were ahead mid-single digits for the half similar growth is expected from this brand for the full year. The Healthy Living segment also includes Bzees and Ryka.

Caleres reiterated its EPS guidance for the year in the range of
$1.84 to $1.94 per share, adjusted for debt expenses, which compares to $1.72 a year ago. Same-store sales at Famous Footwear up low single digits with net for Caleres expected to range between $2.61 billion and $2.63 billion, which compares with $2.57 billion.