Caleres on Monday reduced its expected full-year earnings per share to $2.35 to $2.45, down from $2.45 to $2.55 and a consensus of $2.48, because of a soft marketplace, said CEO Diane Sullivan..
“Despite a soft marketplace, Brand Portfolio performed extremely well and continued to grow – with sales up more than 20 percent year-over-year – and to take share. Once again, we owned six of the top 25 women’s fashion footwear brands and grew sales ahead of market rate while gaining share,” said Diane Sullivan, CEO, president and chairman of Caleres. “At Famous Footwear, while the quarter ended on an encouraging note – with positive same-store-sales for both March and April – the slow start in February was tough to overcome. Going forward, we expect to see softness at Famous Footwear through at least the second quarter, as we continue to prepare for back-to-school by aggressively clearing underperforming inventory. While new additions to our elevated and refreshed product assortment are gaining traction, we expect to see more evidence of this during back-to-school, as we’ve previously discussed.
“Rather than maintaining the mid-point of our adjusted EPS guidance range at a 13 percent growth rate, we are prudently bringing the mid-point for earnings growth down to 9 percent,” continued Sullivan. “While we still expect to see year-over-year gains, we believe this new rate more accurately reflects industry challenges to date and gradual improvement over the balance of the year.”
First Quarter 2019 Results Versus 2018
- Consolidated sales of $677.8 million, up 7.2 percent.
- Brand Portfolio sales of $341.1 million were up 20.3 percent.
- Famous Footwear total sales were $352.2 million, while same-store-sales were down 1.0 percent.
- Gross profit was $279.8 million, up 1.8 percent, while gross margin was 41.3 percent and adjusted gross margin was 42.3 percent and excluded $7.2 million related to Vionic inventory adjustment amortization and for Brand Portfolio business exit expense.
- SG&A expense of $262.1 million represented 38.7 percent of sales, an improvement of more than 90 basis points.
- Operating earnings of $16.9 million and adjusted operating earnings of $24.9 million.
- Net earnings were $9.1 million, resulting in earnings per diluted share of $0.22.
- Adjusted net earnings were $15.0 million, while adjusted earnings per diluted share were $0.36.
Balance Sheet and Cash Flow
- Cash and equivalents of $35.8 million and cash from operations of $49.9 million.
- There were $318.0 million of outstanding borrowings under the revolving credit facility, following the October 18, 2018, acquisition of Vionic.
- Inventory of $648.1 million was up 11.8 percent year-over-year and included $49.6 million of Vionic and Blowfish Malibu inventory.
- Capital expenditures of $21.4 million were up approximately $12 million year-over-year, due to the investment in automation at the new Brand Portfolio fulfillment center.
- Returned $2.9 million to shareholders, via dividends.
Impact of New Lease Accounting Rules
- On February 3, 2019, Caleres adopted the new accounting standard for leases (ASC 842), which resulted in a significant increase in reported assets and liabilities associated with leases. The company does not expect any material differences in lease expense, lease payments, operating earnings or cash flows, as compared to the previous accounting rules. However, due to the incremental asset value required for operating leases under the new standard, ongoing impairment charges for underperforming retail stores are expected to be higher. The adoption of ASC 842 will not impact the company’s credit facility covenants.
Photo courtesy Caleres