Caleres reported it strongly began 2024, achieving earnings per share ahead of expectations, generating record first-quarter consolidated gross margin and making significant progress on key strategic initiatives while investing for the long term.

“While the consumer demand environment remained challenging, we achieved growth in sales and profitability from our Lead Brands and strong margin performance across the Brand Portfolio,” said Jay Schmidt, president and CEO of Caleres. “Notably, the segment delivered more than half of the company’s operating earnings during the quarter, with a 13 percent operating margin, and is once again expected to lead the financial performance of Caleres this year. At the same time, Famous Footwear maintained total year-over-year sales levels and generated solid gross margins, with sales and market share up significantly in the strategically important Kids category.”

First quarter net sales were $659.2 million, down 0.5 percent from the first quarter of 2023.

  • Famous Footwear segment net sales increased 0.1 percent to $349.6 million. Comparable sales were down 2.3 percent for the quarter, on top of an 8.5 percent decline in Q1 last year.
  • Brand Portfolio segment net sales declined 2.6 percent to $317.2 million.
  • Direct-to-consumer sales represented approximately 69 percent of total net sales.

In the quarter, gross profit was $309.1 million, or 46.9 percent of net sales, up 120 basis points versus the prior-year Q1 period.

  • Famous Footwear segment gross margin was 46.1 percent of sales, up 50 basis points versus Q1 last year.
  • The gross margin of the brand Portfolio segment was 46.6 percent in Q1, up 240 basis points compared to Q1 last year.

SG&A, as a percentage of net sales, was 40.4 percent in the quarter, reflecting planned investment in marketing at certain Lead Brands, international expansion and the implementation of the integrated SAP platform.

Net earnings amounted to $30.9 million, or 88 cents per diluted share, in the first quarter, compared to net earnings of $34.7 million, or 97 cents per diluted share, in the first quarter 2023.

Earnings before interest, taxes, depreciation, and amortization (EBITDA) were $57.4 million, or 8.7 percent of sales.

Inventory was down 5.2 percent from the first quarter 2023 due to strategic inventory management, primarily in the Brand Portfolio segment.

Borrowings under the asset-based revolving credit facility were $191.0 million at the end of the period, down about $100 million from the first quarter of 2023.

Capital Allocation Update
During the quarter, Caleres reported that it continued to invest in value-driving growth opportunities while at the same time returning cash to shareholders through share buybacks and dividends. More specifically, the company reported repurchasing 416,000 shares of common stock for $15.1 million and an average price of $36.23 per share. It also returned $2.4 million to shareholders through quarterly dividend payments.

In the near term, the company expects to continue to focus on reducing debt and expects borrowings under its asset-based revolving credit facility to be less than $100 million by 2026. Caleres will continue to consider business performance and market conditions as it evaluates all opportunities for free cash flow as 2024 progresses.

Fiscal 2024 Outlook
Caleres reiterated its fiscal 2024 financial outlook. As previously noted, fiscal 2024 is a 52-week year and compares to a 53-week year in fiscal 2023.

The company still expects consolidated net sales to be flat to up 2 percent, compared to 2023, and earnings per diluted share in the range of $4.30 to $4.60 a share. In addition, for fiscal 2024, the company still expects:

  • Consolidated operating margin of 7.3 percent to 7.5 percent;
  • Effective tax rate of about 24 percent; and
  • Capital expenditures of $60 million to $70 million.

For the second quarter of 2024 the company expects the following:

  • Consolidated net sales to be up 3 percent to 4 percent, which includes an estimated $20 million to $25 million benefit in Famous Footwear as a result of the calendar shift of an important back-to-school week into the second quarter of 2024 from the third quarter of 2023; and
  • Earnings per diluted share of $1.20 to $1.25.

Image courtesy Famous Footwear/Caleres