Caleres Inc. reported sales improved 34.7 percent in the second quarter ended July 31. The gains were driven by a 35.8 percent sales increase in the Famous Footwear segment and a 30.2 percent increase in its Brand Portfolio segment.In a statement, Caleres said that the company continues to capitalize on positive consumer demand trends and accelerated recovery in the footwear marketplace, achieving sequential growth in revenues and gross margin and delivering its most profitable quarter to date. The company said it made impressive progress toward its balance sheet goals, paying down $100 million of debt, bringing its total amount of debt reduction to $340 million since early 2020, reducing its credit facility borrowings to $100 million at quarter-end.”The Caleres team continued to execute at a high level during the quarter, achieving another significant sequential increase in sales and delivering earnings well in excess of pre-pandemic levels,” said Diane Sullivan, Chairman and CEO. “This exceptional performance was led by record-setting quarterly results at Famous Footwear, which, in a single quarter, delivered operating earnings that exceeded full year 2019. Driving these results, Famous Footwear achieved a more than an eight-percent increase in revenue, a more than 100 percent increase in return on sales and a 670-basis-point increase in gross margin to reach approximately 50 percent versus the same period of 2019. Complementing Famous Footwear’s outstanding performance, our Brand Portfolio surpassed its operating earnings for the same period of 2019, led by strong and improving earnings results from key leadership and emerging brands, including Vionic, Sam Edelman, Allen Edmonds, and Blowfish Malibu.
Second Quarter 2021 Highlights
(13-weeks ended July 31, 2021 compared to 13-weeks ended August 1, 2020)

  • Net sales were $675.5 million, up 34.7 percent from the second quarter of fiscal 2020;
  • A 35.8 percent sales increase in the Famous Footwear segment;
  • A 30.2 percent sales increase in its Brand Portfolio segment;
  • Direct-to-consumer sales represented 79 percent of total net sales;
  • Gross profit was $322.3 million, while gross margin was 47.7 percent or an approximately 11 full percentage point improvement over second quarter 2020;
  • A 50.1 percent gross margin in the Famous Footwear segment;
  • A 39.7 percent gross margin in the Brand Portfolio segment;
  • SG&A expense of $259.5 million, or 38.4 percent of total net sales, down from 40.1 percent of total net sales in the second quarter of fiscal 2020;
  • Net income of $37.4 million, or earnings of $0.97 per diluted share, compared to a net loss of $30.7 million, or a loss of $0.83 per diluted share, in the second quarter of fiscal 2020. Earnings of $0.97 per share include $0.22 for fair value adjustment of $0.14 associated with the mandatory purchase obligation for Blowfish Malibu and deferred tax valuation allowances of $0.08;
  • Adjusted net income was approximately $46.0 million, or adjusted earnings of $1.19 per diluted share compared to an adjusted net loss of $21.1 million, or adjusted loss of $0.57 per diluted share, in the second quarter of fiscal 2020;
  • Generated $65.2 million in cash from operations and ended the second quarter with $54.7 million of cash on hand;
  • Inventory levels were down slightly, or approximately two percent, year-over-year, reflecting ongoing disruptions in the global supply chain;
  • Reduced credit facility borrowings by $100 million from the first quarter of 2021 to end the second quarter at $100 million under its credit facility; and
  • Returned $2.7 million to shareholders during the quarter through its long-standing and uninterrupted quarterly dividend.

Results Topped Guidance
In releasing first-quarter results on May 28, Caleres said it expects sales levels to be between $625 million and $650 million, effectively flat to the first quarter of 2021, and adjusted earnings per share of between $0.50 and $0.55,

Capital Structure
The company has continued to take actions to drive long-term value for its shareholders, investing in the business and enhancing its capital structure. As indicated, Caleres reduced its borrowings under its asset-based revolving credit facility by $100 million. Subsequently, on August 16, 2021, the company proactively called $100 million, or half of the aforementioned senior secured notes, and shifted this higher-cost debt to the revolving credit facility resulting in a nearly 50 percent reduction in the interest rate on this piece of debt. The company ended the year’s fiscal first half with $200 million of short-term debt and $100 million of long-term debt, which compares to a total indebtedness of roughly $640 million at the end of the first quarter of 2020. Further complementing this effort, Caleres is currently in the process of renegotiating and renewing the terms of its asset-based revolving credit facility to better reflect the company’s improved capital structure and business outlook.

“During the period, we maintained our sharp focus on driving towards our long-term goal of zero net debt,” said Ken Hannah, senior vice president and chief financial officer. “During the course of the past five quarters, we have utilized our strong cash generation to lower our overall indebtedness creating significant long-term value for equity holders in the process. As we progress through 2021, we will continue to prioritize debt reduction in our capital allocation strategy, while simultaneously lowering interest expense levels still further on the debt that remains.”

Fiscal Full Year 2021 Outlook
“Looking ahead, we remain cautious about the macro environment given the uncertainty surrounding new COVID-19 variants and ongoing challenges in the global supply chain,” said Sullivan. “To that end, we are taking actions to minimize these disruptions and believe we are well-equipped to partially offset some of these cost headwinds. Even with these uncertainties, I remain highly confident in the team’s ability to build upon our recent strong performance at Famous and improving results in the Brand Portfolio, leverage our diversified brand model and continue to execute on our long-term strategic priorities in the year’s back half. We strongly believe in our prospects for delivering record annual adjusted earnings per share for fiscal year 2021 and are enthusiastic about our strategy for ongoing value creation and for the long-term opportunities that lie ahead for Caleres.”

For the third quarter Caleres said it expects adjusted earnings per share of between $1.10 and $1.25 and for the fiscal full-year 2021, it expects adjusted earnings per share to be between $3.25 and $3.50.

Photo courtesy Caleres/Famous Footwear