Caleres reported significantly improved earnings in the fourth quarter as sales grew 19 percent. The parent of Famous Footwear achieved all-time record operating earnings and operating margins for the year.
“The Caleres team delivered its best-ever financial performance in 2021, with adjusted earnings per share that were nearly double the company’s previous all-time record,” said Diane Sullivan, chairman and chief executive officer. “Caleres capped off that exceptional 2021 performance with record-setting fourth-quarter results, providing significant momentum as we head into fiscal 2022. These excellent results demonstrate the strength of our portfolio of brands, the success of our advanced operating capabilities, the tremendous efforts and talents of our global Associates and the significant value-enhancing transformation of the organization.”
During the quarter, Famous Footwear leveraged its concentration of sought-after brands and trend-right products to capitalize on robust consumer demand, resulting in an exceptional quarterly sales performance that was 8.8 percent higher than fourth quarter 2019, as well as a gross margin rate that was 641 basis points higher than the same period two years ago. At the same time, the Brand Portfolio continued its steady recovery post the pandemic, returning to solid profitability and establishing a strong foundation for a significantly improved earnings contribution in 2022. Notably, four of the portfolio’s key leadership brands—Sam Edelman, Allen Edmonds, Vionic, and Blowfish— surpassed fourth quarter 2019 earnings levels.
“Looking ahead, given the positive structural changes we’ve made across the business, Caleres is poised for another strong earnings performance in 2022,” said Sullivan. “As we begin the year, we are intently focused on unlocking growth opportunities across the enterprise while taking additional steps to mitigate supply chain and inflationary pressures. Our powerful and diverse portfolio is uniquely positioned to meet consumer needs and capture growth across trending footwear categories such as event, occasion and work, while at the same time continuing to capitalize on robust demand for still-popular athletic and sport-inspired styles.
“In short, Caleres is a much more agile and financially fit organization than it was two years ago. We have intensified our commitment to connect with current consumers, engage new customers and provide an elevated omnichannel experience, while also delivering fresh and compelling footwear across our portfolio of brands. We are confident that the investments we have made and the strategic priorities we have set in motion will enable Caleres to continue to drive long-term, sustainable value for our shareholders.”
Commitment To Enhancing Shareholder Value
During 2021, Caleres generated $168.4 million in cash from operations and used that cash to improve its financial position and continue its balanced capital return program. Among the highlights, the company:
- Proactively replaced its higher-cost long-term debt with additional drawings under its lower-cost revolving credit facility.
- Ended fiscal 2021 with $290 million of total debt – down from $448.9 million at the end of fiscal 2020. The actions to reduce and reposition the debt should lower the company’s 2022 annual interest expense by approximately $20 million versus 2019 levels.
- Paid $10.6 million in dividends.
- Repurchased 661,265 shares for approximately $17 million.
This strengthened financial position and potential for ongoing robust cash generation provide Caleres the flexibility to continue to return capital to shareholders, better align supply with consumer demand and invest in its long-term strategic initiatives.
The company’s Board of Directors recently authorized an incremental 7 million shares to its opportunistic share repurchase program. With this increase, the company has 9 million shares of Caleres common stock remaining for purchase under the program.
Key Financial Information
Fourth Quarter 2021 Highlights
(13-weeks ended January 29, 2022 compared to 13-weeks ended January 30, 2021)
- Net sales were $679.3 million, up 19.0 percent from the fourth quarter of fiscal 2020;
- A 15.9 percent sales increase in the Famous Footwear segment
- A 24.4 percent sales increase in the Brand Portfolio segment
- Direct-to-consumer sales represented 73.6 percent of total net sales
- A 15.9 percent sales increase in the Famous Footwear segment
- Gross profit was $294.8 million, while gross margin was 43.4 percent or a 389-basis point improvement over the fourth quarter of 2020;
- A 48.9 percent gross margin in the Famous Footwear segment
- A 34.0 percent gross margin in the Brand Portfolio segment
- A 48.9 percent gross margin in the Famous Footwear segment
- SG&A as a percentage of sales was 36.9 percent, 265-basis points lower than the fourth quarter of fiscal 2020
- Net earnings of $33.9 million, or earnings of $0.88 per diluted share, compared to a net loss of $77.0 million, or a loss of $2.11 per diluted share in the fourth quarter of fiscal 2020. Earnings of $0.88 per diluted share include $0.03 for the below items:
- Deferred tax valuation allowances of $0.02 per diluted share
- Loss on early extinguishment of debt of $0.01 per diluted share related to the redemption of $100 million of senior notes
- Deferred tax valuation allowances of $0.02 per diluted share
- Adjusted net income of $34.9 million, or $0.91 per diluted share compared to adjusted net earnings of $1.3 million, or $0.03 per diluted share in the fourth quarter of fiscal 2020; and
- Inventory levels were up 22.3 percent, year-over-year, with in-transit inventory approximately 1.9x higher than the fourth quarter of 2020, reflecting efforts to align inventory with robust consumer demand and ongoing supply chain disruptions.
Fiscal 2021 Results Versus 2020
(52-weeks ended January 29, 2022 compared to 52-weeks ended January 30, 2021)
- Consolidated sales of $2,777.6 million, up 31.2 percent from fiscal year 2020.
- 38.4 percent sales increase in the Famous Footwear segment;
- 19.8 percent sales increase in the Brand Portfolio segment
- Direct-to-consumer sales represented 75.1 percent of total net sales
- Gross profit was $1,227.3 million, while gross margin was 44.2 percent or an approximately 701-basis point improvement over fiscal year 2020.
- A 48.0 percent gross margin in the Famous Footwear segment; and
- A 35.8 percent gross margin in the Brand Portfolio segment.
- SG&A expense of $1,008.0 million, or 36.3 percent of net sales, down from 42.0 percent of sales in fiscal year 2020.
- Net earnings for the year was $137.0 million, resulting in earnings per diluted share of $3.56 including $0.73 per diluted share for the below items:
- Brand Portfolio expense of $0.31 per diluted share related to Naturalizer retail exits;
- Fair value adjustment of $0.30 per diluted share associated with the mandatory purchase obligation for Blowfish Malibu;
- Deferred tax valuation allowances of $0.10 per diluted share; and
- Loss on early extinguishment of debt of $0.02 per diluted share related to the redemption of $200 million of senior notes and the amendment to our credit facility.
- Brand Portfolio expense of $0.31 per diluted share related to Naturalizer retail exits;
- Adjusted net earnings of $165.2 million, or adjusted earnings of $4.29 per diluted share compared to an adjusted net loss of $52.0 million, or adjusted loss of $1.40 per diluted share, in fiscal 2020;
- Earnings before interest, taxes, depreciation, and amortization (EBITDA) of $272.4 million;
- Adjusted earnings before interest, taxes, depreciation, and amortization (Adjusted EBITDA) of $285.9 million;
- Generated $168.4 million in cash from operations; and
- Returned $27.6 million to shareholders during the year through dividends and share repurchases.
Financial Outlook
“Clearly, fiscal 2021 was an exceptional year for Caleres with the company delivering record adjusted earnings per share,” said Sullivan. “We believe that our business has taken a step-change forward in its sustainable earnings expectations. Going forward, given the significant structural changes we have made across a range of critical performance areas, including financial, operational, marketing and logistics we expect our operating margin rate, return on sales and gross margin rate will exceed historical averages.”
Fiscal Year 2022 Outlook
Inclusive of the company’s current expectations for its underlying business along with anticipated macro challenges that include inflationary pressures, ongoing supply chain dislocations, and lack of comparable governmental stimulus efforts, among others, Caleres expects 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. Note this earnings range reflects an approximately 75 percent increase at the midpoint above the company’s pre-pandemic high-water mark of $2.21. With the momentum coming out of the fourth quarter, the company expects 50 percent of its earnings to be in the first half of 2022.