Caleres, Inc. reported earnings on an adjusted basis declined 33 percent in the fourth quarter as margin declines at Famous Footwear offset improvement at its Brand Portfolio segment.
Famous Footwear still managed a 0.7 percent comp gain in the quarter, and Caleres’ overall inventories were down 2.8 percent year-over-year. Results were in line with a pre-announcement given on February 15.
Report highlights include:
- Achieves record fourth quarter consolidated net sales of $696.4 million and record annual net sales of $2.97 billion;
- Generates record annual earnings per share of $4.92 and adjusted earnings per share of $4.52;
- Drives inventory decline of 2.8 percent compared to fiscal 2021;
- Expects fiscal 2023 net sales to be flat to up 2 percent over fiscal 2022; and
- Expects fiscal 2023 earnings per share of $4.10 to $4.30.
“Caleres closed a record-setting 2022 with another quarter of strong sales and earnings performance that exceeded initial expectations,” said Jay Schmidt, president and CEO. “Our fourth quarter results were led by our Brand Portfolio, which experienced strong growth in sales, gross margin and earnings and a solid performance from Famous Footwear, which continues to provide the brands, trends and value aligned with consumer preferences.”
Specifically, during the quarter, the Brand Portfolio capitalized on continued strength to drive a 6.4 percent increase in year-over-year net sales and a nearly 200 basis point improvement in gross margin resulting in record fourth-quarter earnings for the segment. The Brand Portfolio also delivered its best-ever annual operating earnings, which topped $112 million with an 8.5 percent return on sales. At the same time, Famous Footwear leaned into its improved inventory position to take advantage of strong pockets of demand – leading to record fourth-quarter sales as well as an increase in comparable sales. For the full year, Famous achieved its second consecutive year of double-digit operating margin.
“Overall, Caleres generated annual results well ahead of pre-pandemic levels,” said Schmidt. “The power of the Caleres portfolio and the structural changes made in recent years have effectively doubled the baseline earnings power of the company. Looking ahead, we are confident in our ability to consistently deliver annual earnings per share of more than $4.00, generate strong cash flow, and create long-term value for our shareholders.”
Fourth Quarter 2022 Results
(13 weeks ended January 28, 2023, compared to 13 weeks ended January 29, 2022)
- Net sales were $696.4 million, up 2.5 percent from the fourth quarter of 2021;
- Famous Footwear segment sales improved 0.1 percent, with comparable sales up 0.7 percent
- Brand Portfolio segment sales increased 6.4 percent
- Direct-to-consumer sales represented approximately 75 percent of total net sales
- Gross profit was $281.2 million, while gross margin was 40.4 percent against 43.4 percent a year ago;
- Famous Footwear segment gross margin of 42.4 percent against 48.9 percent a year ago
- Brand Portfolio segment gross margin of 36.0 percent versus 34.0 percent a year ago
- SG&A as a percentage of net sales was 36.7 percent, effectively in-line with the fourth quarter of fiscal 2021;
- Net earnings of $40.8 million, or earnings per diluted share of $1.13, compared to net earnings of $33.9 million, or earnings per diluted share of $0.88 in the fourth quarter of fiscal 2021; and
- Adjusted net earnings of $23.4 million, or adjusted earnings per diluted share of $0.65, compared to adjusted net earnings of $34.9 million, or adjusted earnings per diluted share of $0.91 in the fourth quarter of fiscal 2021
Fiscal Year 2022 Results
(52 weeks ended January 28, 2023, compared to 52 weeks ended January 29, 2022)
- Net sales were $2.97 billion, up 6.9 percent from fiscal 2021;
- Famous Footwear segment sales declined 2.5 percent, with comparable sales down 1.8 percent
- Brand Portfolio segment sales increased 22.4 percent
- Direct-to-consumer sales represented approximately 72 percent of total net sales
- Gross profit was $1.28 billion, while gross margin was 43.3 percent;
- Famous Footwear segment gross margin of 46.3 percent
- Brand Portfolio segment gross margin of 37.6 percent
- SG&A as a percentage of net sales was 36.0 percent, down 30 basis points compared to fiscal 2021;
- Net earnings of $181.7 million, or earnings per diluted share of $4.92, compared to net earnings of $137.0 million, or earnings per diluted share of $3.56 in fiscal 2021;
- Adjusted net earnings of $167.1 million, or adjusted earnings per diluted share of $4.52, compared to adjusted net earnings of $165.2 million, or adjusted earnings per diluted share of $4.29 in fiscal 2021;
- Trailing twelve-month earnings before interest, taxes, depreciation, and amortization (EBITDA) of $278.4 million and adjusted EBITDA of $281.3 million, or 9.5 percent of sales;
- Inventory was down 2.8 percent compared to fiscal 2021, reflecting the company’s disciplined approach to inventory management;
- Returned $73.4 million to shareholders through dividends and share repurchases; and
- Ended the year with $307.5 million of borrowings under its asset-based revolving credit facility.
Capital Allocation Update
Caleres continued to reduce the borrowings under its asset-based revolving credit facility – paying down $57 million during the fourth quarter. The company also returned $2.5 million to shareholders through its quarterly dividend. The Caleres board of directors recently approved its next quarterly dividend.
In fiscal 2022, Caleres continued to invest in value-driving growth opportunities while at the same time returning $73.4 million to shareholders through share repurchases and dividend payments. Specifically, Caleres repurchased 2.6 million shares of common stock, or approximately 7 percent of shares outstanding, for $63.2 million. The company returned $10.2 million to shareholders through its quarterly dividend.
Fiscal 2023 Outlook
The company is introducing its financial outlook for fiscal 2023 and first quarter of 2023 and notes that its fiscal 2023 is a 53-week year and compares to a 52-week year in fiscal 2022.
Caleres expects consolidated net sales to be flat to up 2 percent, including the 53rd week this year, compared to 2022 and earnings per diluted share to be in the range of $4.10 to $4.30. This outlook balances strong momentum in our business and structural improvements in our earnings ability against anticipated headwinds that include inflationary pressures, higher interest rates, and continuing uncertainty in the macroeconomic environment.
The company also expects for fiscal 2023:
- Consolidated operating margin of 7.1 percent to 7.3 percent;
- Interest expense of $18 million to $20 million, reflecting higher interest rates;
- Capital expenditures of $60 million to $70 million; and
- Effective tax rate of about 25 percent.
For the first quarter 2023, the company expects:
- Consolidated net sales down 4 percent to 6 percent, due to the timing of wholesale shipments in the Brand Portfolio in the first quarter of 2022 to satisfy customer restocking efforts; and
- Diluted earnings per share of $0.92 to $0.97.
Photo courtesy Famous Footwear