Caleres said Famous Footwear generated third-quarter sales of $495 million, a nearly 11 percent improvement over the third quarter of 2019 and the highest level of quarterly sales in the history of the brand despite supply chain constraints.

“This outstanding revenue performance was driven by an extremely successful back-to-school period where sales and margins were up from the comparable timeframe in 2019 and marked the most profitable back-to-school period in our history,” said Diane Sullivan, chairman and CEO at Caleres, on a call with analysts.

She said, “Even more positively, sales momentum continued even after the conclusion of the back-to-school season, despite limited promotional activity. While the robust demand clearly played a role, we also believe this resilient sales activity in the second half of the quarter, reflects our inclusion of TV into our marketing mix, the power of our product allocation system, as well as the depth of our inventory, as it relates to in-demand brands and styles.”

Famous’ gross margins reached 47.6 percent, up 657 basis points higher than 2019, supported also by a much tighter inventory position. Inventory levels were down 24 percent from two years ago.

Sullivan added, “What was really a powerful driver was having the right level of inventory behind the key brands and styles.”

Sullivan said that specifically, inventory in Famous’ top 10 brands was down only 9 percent from the third quarter of 2019. At the same time, Famous experienced meaningful improvement in sales, margin and AURs (average unit retails) across both channels.

“We’ve leveraged our allocation expertise to make sure that we are maximizing our inventory with the right product in the right places to meet demand at the local level,” said Sullivan. “Through the work of our merchandising, planning and allocation teams, we really believe we’re reasonably positioned from both a product and inventory standpoint as we enter the heart of the holiday season. Looking ahead, we will maintain our sharp focus on managing the supply chain issues, working closely with our partners to properly align our inventory with consumer demand.”

By category, sales growth and gross margin rate expansion was seen across women’s, men’s, kids and accessories. Kids, as expected, was particularly strong, increasing 26 percent over 2019, highlighting the widespread return to in-classroom learning and Famous’ efforts to amplify its kids’ offerings.

Athletics, casual and sandals all recorded increases over the same period in 2019, while boot styles were down modestly.

On a two-year basis, online sales were up 44 percent, contributing an incremental $20 million of sales when compared to the third quarter of 2019. Brick and mortar sales increased 7 percent over the third quarter of 2019, even with 55 fewer stores.

Sullivan also noted that early next week Famous is testing its first-ever catalog. She said, “We’ve experienced great traction from recent catalogs with Sam and Allen Edmonds and Vionic, and we’re using these learnings to support our customer acquisition objectives for our largest brand. Famous is a convenience stop for holiday style and this is the perfect time to connect consumers with a great brand offerings and gift opportunities, including shoes, accessories and gift cards as we head into the holidays.”

Famous Footwear’s Same-Store Sales Climb 26.5 Percent Year-Over-Year
Year-over-year, Famous’ sales rose 26.2 percent to $494.7 million from $391.7 million a year ago. Same-store sales grew 26.5 percent year over year and compared to a 9.1 percent decline in the 2020 third quarter. The gross margin rate improved to 47.6 percent from 40.9 percent a year ago. Operating income tripled to $87.4 million from $27.8 million a year ago.

Famous Footwear ended the third quarter with 905 locations, down from 925 a year ago.

Full-Year Guidance Raised
Companywide, Caleres raised its earnings guidance for the year after delivering record quarterly earnings in the quarter ended October 30.

Net sales were $784.2 million, up 21.1 percent from the third quarter of fiscal 2020. Sales were above Wall Street’s consensus estimate of $753.5 million. Sales grew 12.3 percent at its Brand Portfolio segment, which includes Vionic, Sam Edelman, Allen Edmonds, Ryka and Blowfish Malibu.

Gross margin companywide was 42.8 percent, representing a 308-basis point improvement over third quarter 2020. SG&A expense was $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 reached $59.6 million, or $1.54 per share, compared to net income of $14.4 million, or 38 cents, a year ago. On an adjusted basis, net income was $61.5 million, or $1.59, against $18.2 million, or 48 cents, a year ago and easily ahead of Wall Street’s consensus estimate of $1.15. 

Inventory Down 16 Percent To Q319
Caleres’ inventory at quarter-end was down approximately 15.7 percent compared to the third quarter of 2019 and included an approximate 24 percent decline at Famous Footwear and a 6.7 percent decline for the Brand Portfolio.

Year-over-year, inventory levels were up 7.1 percent, with in-transit inventory 3.1x higher than the third quarter of 2020, reflecting the ongoing disruptions in the global supply chain;

Sullivan said supply chain and global logistics challenges “have significantly intensified” in recent months.

“During the quarter factory closures, increased delivery lead times and port delays hindered our ability to capitalize fully on the significant uptick in consumer demand,” said Sullivan. “Our teams have worked hard to mitigate the impacts of these ongoing disruptions. And while we’re encouraged by factory re-openings, we do expect increased lead times and port delays to continue and will likely affect our ability to capture incremental demand opportunities in the near term.”

Looking ahead, Caleres raised its annual guidance and now expects adjusted EPS between $3.80 and $3.90 for fiscal year 2021, up from a previous range of $3.25 and $3.50.

Ken Hannah, CFO, said, “Implicit in that guidance, of course, is the fact that the fourth quarter is typically the weakest of the year reflecting the typical seasonal sales declines for Famous, as well as supply chain and logistical cost pressures that could limit our ability to capture strong consumer demand across the portfolio.”

Famous Footwear’s sales in the fourth quarter are projected to be slightly above 2019 levels with another quarter of record earnings. Brand Portfolio sales are expected to be in line with the third quarter.

Said Hannah, “Despite supply and demand, uncertainties and volatility in the macro-environment, we believe we are well-positioned for another strong year in 2022. While it’s premature to provide specific 2022 guidance, the work we have done on our balance sheet and the progress on our expense structure alone should drive incremental 2022 earnings well above our full-year fiscal 2019 levels.”

Photo courtesy Famous Footwear