Caleres raised its earnings guidance for the year after delivering record quarterly earnings in the third quarter ended October 30.  Famous Footwear generated record quarterly sales while its Brand Portfolio segment saw sequential sales improvement.

In a statement, Caleres said it continued to capitalize on strong consumer demand trends, achieving sequential revenue growth, recording strong gross margins, and delivering the highest level of quarterly earnings in company history. In addition, the company made further progress toward its balance sheet initiatives, enhancing its cash position, reducing its debt levels and securing more advantageous terms on its asset-based credit facility.

“Caleres achieved another record performance in the quarter just ended, driven principally by continued, exceptional upward momentum in our Famous Footwear business,” said Diane Sullivan, Chairman and CEO. “As robust consumer demand dynamics continue to accelerate, we fully expect the ongoing recovery in the Brand Portfolio to be an increasingly strong complement to the ongoing success at Famous Footwear in the quarters ahead.”

Third Quarter 2021 Highlights
(13-weeks ended October 30, 2021 compared to 13-weeks ended October 31, 2020)

  • Net sales were $784.2 million, up 21.1 percent from the third quarter of fiscal 2020.
    • A 26.3 percent sales increase in the Famous Footwear segment;
    • 12.3 percent sales increase in the Brand Portfolio segment; and
    • Direct-to-consumer sales represented 73.5 percent of total net sales.
  • Gross profit was $335.4 million, while gross margin was 42.8 percent or a 308-basis point improvement over third quarter 2020.
    • A 47.6 percent gross margin in the Famous Footwear segment; and
    • 32.9 percent gross margin in the Brand Portfolio segment;
  • SG&A expense of $254.0 million, or 32.4 percent of total net sales, down from 36.6 percent of total net sales in the third quarter of fiscal 2020.
  • Net income of $59.6 million, or earnings of $1.54 per diluted share, compared to net income of $14.4 million, or earnings of $0.38 per diluted share, in the third quarter of fiscal 2020. Earnings of $1.54 per share include $0.05 for the below items:
    • Fair value adjustment of $0.04 associated with the mandatory purchase obligation for Blowfish Malibu; and
    • Loss on early extinguishment of debt of $0.01 related to the redemption of $100 million of senior notes and the amendment to the credit facility;
    • Adjusted net income was approximately $61.5 million, or adjusted earnings of $1.59 per diluted share compared to adjusted net income of $18.2 million, or adjusted earnings of $0.48 per diluted share, in the third quarter of fiscal 2020;
    • Generated $54.2 million in cash from operations and ended the third quarter with $74.8 million of cash on hand;
    • Inventory levels were up 7.1 percent, year-over-year, with in-transit inventory 3.1x higher than the third quarter of 2020, reflecting the ongoing disruptions in the global supply chain;
    • Ended the third quarter with $274.6 million of short-term debt; and
    • Returned $2.7 million to shareholders during the quarter through its long-standing and uninterrupted quarterly dividend.

Adjusted EPS of $1.59 topped Wall Street’s consensus estimate of $1.15.  Revenues of $784.2 million came in above Wall Street’s consensus estimate of $753.5 million.

Capital Structure
As previously indicated, during the third quarter, Caleres renegotiated and renewed the terms of its asset-based credit facility. The terms of the new facility, which was restored to pre-COVID terms, include a 5-year extension on the maturity date and features a reduction in the interest rate. This new agreement more accurately reflects the company’s improved capital structure, accelerated recovery in the footwear market and more positive business outlook. Caleres notified its bondholders that it plans to redeem the remaining $100 million of its senior notes in January of 2022, shifting that higher-cost debt to the revolving credit facility and extinguishing all of the company’s remaining long-term debt. These actions, coupled with the company’s proactive debt reduction activities in recent quarters, will result in approximately a $12 million decline in annual interest expense,  bolstering its financial foundation further and driving long-term value for its shareholders.

Outlook
“As we progress through the remainder of the year and head into 2022, we expect supply chain challenges to persist,” said Sullivan. “However, our global Associates have taken quick action, leaning into our capabilities, optimizing our inventory position and diversifying and leveraging our sourcing model to help offset the impacts caused by the ongoing disruptions. We believe we are well-positioned to navigate this dynamic market environment and we are confident in our ability to utilize our diversified brand model, achieve our short and long-term strategic objectives and continue to create value for our shareholders.”

With the momentum continuing in its underlying business, the company now expects record adjusted earnings per share between $3.80 and $3.90 for fiscal year 2021. Previously, the footwear chain guided full-year earnings in the range of $3.25 and $3.50.