Financial Performance - Q2 2024 - Sales reached $683 million[6] - Earnings Per Share (EPS) stood at $0.85[7], a decrease of 1.8% compared to Q2 2023[7] - Gross margin was 45.5%[7], up 30 basis points year-over-year[7] - Debt reduction of $98 million[7] under the revolving credit facility compared to Q2 2023[7] Segment Performance - Q2 2024 - Famous Footwear sales increased by 1.5% to $420.3 million[11] - Brand Portfolio sales decreased by 5.1% to $285.5 million[9] due to systems implementation issues and weak demand for sandals[9] Fiscal Year 2024 Outlook (Revised) - Sales change is expected to be down low-single digits[13] - Operating margin is projected to be between 7.0% and 7.1%[13] - GAAP EPS is estimated to be between $3.94 and $4.09[13] - Adjusted EPS is expected to be between $4.00 and $4.15[13] Capital Allocation and Debt Reduction - The company aims to reduce debt to below $100 million[15] - The company targets a debt/EBITDA ratio of less than 0.5x[14]

Core Insights - Caleres reported disappointing second-quarter earnings, leading to a significant drop in its stock price by 19.1% [1] - The company experienced a revenue decline of 1.8% to $683.3 million, falling short of the estimated $723.8 million [2] - Gross margin improved by 30 basis points to 45.5%, but profit per share decreased to $0.85 from $0.95 year-over-year, missing the consensus estimate of $1.22 [3] Financial Performance - Revenue for the quarter was $683.3 million, down 1.8% compared to the previous year [2] - Famous Footwear sales increased by 1.5%, but overall brand portfolio sales declined by 5.1% due to weak seasonal demand and challenges with a new enterprise resource planning system [2] - Selling, general, and administrative expenses rose by 2% to $268.3 million [3] Management Commentary - CEO Jay Schmidt acknowledged the disappointing results and expressed confidence in the long-term vision despite the shortfall [4] - The company has lowered its full-year sales guidance to a decline in the low single digits, down from a previous forecast of flat to up 2% [4] - Adjusted earnings per share guidance was cut to $4.00-$4.15 from $4.30-$4.60 [4] Market Context - The disappointing results from Caleres follow similar trends in the footwear industry, as seen with Designer Brands [5] - The stock is perceived as undervalued with a forward price-to-earnings ratio of less than 8, suggesting potential for recovery if the business can return to positive growth [6]

Core Insights - Caleres Inc. reported quarterly earnings of $0.85 per share, missing the Zacks Consensus Estimate of $1.21 per share, representing a -29.75% earnings surprise [1] - The company posted revenues of $683.32 million for the quarter ended July 2024, which was 4.55% below the Zacks Consensus Estimate and a decrease from $695.53 million year-over-year [2] Financial Performance - Over the last four quarters, Caleres has surpassed consensus EPS estimates two times [2] - The current consensus EPS estimate for the upcoming quarter is $1.52, with expected revenues of $767.2 million, and for the current fiscal year, the estimate is $4.40 on $2.84 billion in revenues [7] Stock Performance - Caleres shares have increased approximately 21.2% since the beginning of the year, outperforming the S&P 500's gain of 16.4% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating it is expected to perform in line with the market in the near future [6] Industry Outlook - The Shoes and Retail Apparel industry, to which Caleres belongs, is currently ranked in the top 32% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact Caleres' stock performance [5]

[Caleres Q2 2024 Earnings Release](index=1&type=section&id=Caleres%20Reports%20Second%20Quarter%20Results%20and%20Updates%20Guidance) [Overview and Key Highlights](index=1&type=section&id=Overview%20and%20Key%20Highlights) The company reported lower-than-expected Q2 results due to operational challenges but saw improved gross margins Q2 2024 Key Performance Indicators | Metric | Value | Change (YoY) | | :--- | :--- | :--- | | Net Sales | $683.3 million | -1.8% | | Famous Footwear Sales | - | +1.5% | | Brand Portfolio Sales | - | -5.1% | | Consolidated Gross Margin | 45.5% | +30 bps | | Earnings Per Share (EPS) | $0.85 | - | | EBITDA | $57.2 million | - | - CEO Jay Schmidt attributed underperformance to systems implementation, weak seasonal demand, and a late back-to-school season, but noted that **back-to-school sales surged in August**[3](index=3&type=chunk) - The company is implementing restructuring actions expected to generate **$7.5 million in annualized SG&A savings**, with $2 million anticipated in fiscal 2024[2](index=2&type=chunk) [Second Quarter 2024 Financial Performance](index=1&type=section&id=Second%20Quarter%202024%20Results) Net sales declined 1.8% to $683.3 million, with Famous Footwear growing while the Brand Portfolio segment contracted Q2 2024 Financial Results vs. Q2 2023 | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Net Sales | $683.3M | $695.5M | | Gross Profit | $310.9M | $314.2M | | Gross Margin | 45.5% | 45.2% | | Net Earnings | $30.0M | $33.9M | | Diluted EPS | $0.85 | $0.95 | Q2 2024 Segment Performance | Segment | Net Sales Change (YoY) | Gross Margin | Gross Margin Change (YoY) | | :--- | :--- | :--- | :--- | | Famous Footwear | +1.5% | 45.0% | -120 bps | | Brand Portfolio | -5.1% | 42.7% | +140 bps | - SG&A expenses as a percentage of net sales were **39.3%**, reflecting planned investments in marketing, international expansion, and the SAP platform[4](index=4&type=chunk) - Borrowings under the asset-based revolving credit facility were **reduced by $98 million** year-over-year to $146.5 million, while inventory levels remained flat[4](index=4&type=chunk) [Capital Allocation and Debt Management](index=2&type=section&id=Capital%20Allocation%20Update) The company prioritizes near-term debt reduction, targeting borrowings below $100 million by 2026 - The company's near-term capital allocation strategy is focused on **reducing debt**[5](index=5&type=chunk) - A key long-term target is to have borrowings under the asset-based revolving credit facility be **less than $100 million by 2026**[5](index=5&type=chunk) - Caleres will continue returning cash to shareholders via **dividends** and will evaluate **share repurchases** as the year progresses[5](index=5&type=chunk) [Fiscal 2024 Outlook](index=2&type=section&id=Fiscal%202024%20Outlook%3A) The company lowered its full-year 2024 guidance, now expecting a low-single-digit sales decline and adjusted EPS of $4.00-$4.15 Revised Fiscal 2024 Annual Guidance | Metric | Prior Guidance | Revised Guidance | | :--- | :--- | :--- | | Sales Change | Flat to up 2% | Down low single digits | | Operating Margin | 7.3% - 7.5% | 7.0% - 7.1% | | GAAP EPS | $4.30 - $4.60 | $3.94 - $4.09 | | Adjusted EPS | $4.30 - $4.60 | $4.00 - $4.15* | | Capital Expenditures | $60 - $70 million | $50 - $55 million | Third Quarter 2024 Guidance | Metric | Q3 2024 Guidance | | :--- | :--- | | Sales Change | Flat to down 2% | | GAAP EPS | $1.24 - $1.34 | | Adjusted EPS | $1.30 - $1.40* | - The adjusted EPS guidance excludes **$0.06 per share** associated with restructuring costs expected in the third quarter[7](index=7&type=chunk) [Financial Statements and Schedules](index=5&type=section&id=Financial%20Statements%20and%20Schedules) [Condensed Consolidated Statements of Earnings (Schedule 1)](index=5&type=section&id=SCHEDULE%201) Net sales were $683.3 million and net earnings fell to $30.0 million from $33.9 million year-over-year Statement of Earnings Highlights (Thirteen Weeks Ended) | ($ thousands) | Aug 3, 2024 | July 29, 2023 | | :--- | :--- | :--- | | Net sales | 683,317 | 695,533 | | Gross profit | 310,878 | 314,173 | | Operating earnings | 42,529 | 49,703 | | Net earnings attributable to Caleres, Inc. | 29,958 | 33,943 | | Diluted EPS | $0.85 | $0.95 | [Condensed Consolidated Balance Sheets (Schedule 2)](index=6&type=section&id=SCHEDULE%202) Total assets grew to $2.02 billion, while borrowings under the revolving credit agreement were significantly reduced Balance Sheet Highlights | ($ thousands) | Aug 3, 2024 | July 29, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | 51,753 | 47,098 | | Inventories, net | 661,146 | 660,690 | | Total assets | 2,019,985 | 1,903,960 | | Borrowings under revolving credit agreement | 146,500 | 244,000 | | Total Caleres, Inc. shareholders' equity | 606,062 | 464,992 | [Condensed Consolidated Statements of Cash Flows (Schedule 3)](index=7&type=section&id=SCHEDULE%203) Net cash from operations was $115.7 million, a decrease from the prior-year period Cash Flow Highlights (Twenty-Six Weeks Ended) | ($ thousands) | Aug 3, 2024 | July 29, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | 115,696 | 125,176 | | Net cash used for investing activities | (21,808) | (16,877) | | Net cash used for financing activities | (63,426) | (94,952) | | Increase in cash and cash equivalents | 30,395 | 13,398 | [Reconciliation of GAAP to Non-GAAP Earnings (Schedule 4)](index=8&type=section&id=SCHEDULE%204) Q2 2024 GAAP and Adjusted EPS were identical at $0.85, with no adjustments made during the quarter Q2 GAAP vs. Adjusted EPS Reconciliation | Per Share Data | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | GAAP diluted EPS | $0.85 | $0.95 | | Adjustments (Expense reduction) | $— | $0.03 | | Adjusted diluted EPS | $0.85 | $0.98 | [Summary Financial Results by Segment (Schedule 5)](index=9&type=section&id=SCHEDULE%205) Famous Footwear sales grew 1.5% while Brand Portfolio sales fell 5.1%, though the latter saw improved gross margin Q2 2024 Segment Results (Thirteen Weeks Ended) | ($ thousands) | Famous Footwear | Brand Portfolio | | :--- | :--- | :--- | | Net sales | $420,289 | $285,497 | | Gross profit | $189,337 | $121,883 | | Gross margin | 45.0% | 42.7% | | Operating earnings | $34,384 | $23,620 | [Basic and Diluted EPS Reconciliation (Schedules 6 & 7)](index=11&type=section&id=SCHEDULE%206%20%26%207) These schedules detail the calculation of basic and diluted EPS, arriving at a diluted EPS of $0.85 for Q2 2024 Q2 2024 Diluted EPS Calculation | Metric | Value | | :--- | :--- | | Net earnings attributable to Caleres, Inc. | $29,958 thousand | | Diluted common shares | 33,989 thousand | | Diluted EPS | $0.85 | [EBITDA and Debt/EBITDA Leverage Ratio (Schedule 8)](index=13&type=section&id=SCHEDULE%208) The Debt/EBITDA leverage ratio improved significantly to 0.6x from 1.0x year-over-year, reflecting lower debt EBITDA and Leverage Ratio | Metric | Aug 3, 2024 | July 29, 2023 | | :--- | :--- | :--- | | **Q2 EBITDA ($ thousands)** | $57,209 | $63,631 | | **TTM EBITDA ($ thousands)** | $240,737 | $239,958 | | **Debt/EBITDA Ratio** | 0.6x | 1.0x | [Reconciliation of GAAP to Non-GAAP EPS Guidance (Schedule 9)](index=15&type=section&id=SCHEDULE%209) The forward-looking guidance reconciliation shows a $0.06 per share adjustment for restructuring costs Fiscal 2024 EPS Guidance Reconciliation | Per Share Data | Low | High | | :--- | :--- | :--- | | GAAP diluted EPS | $3.94 | $4.09 | | Restructuring costs | $0.06 | $0.06 | | Adjusted diluted EPS | $4.00 | $4.15 | [Other Information](index=2&type=section&id=Other%20Information) This section contains conference call details, definitions, and the Safe Harbor statement outlining forward-looking risks - The company will host an investor conference call and webcast to discuss the results[8](index=8&type=chunk) - Non-GAAP measures like **EBITDA** and **adjusted EPS** are used to help management and investors identify underlying business trends[10](index=10&type=chunk) - The Safe Harbor statement lists potential risks including **economic conditions**, **supply chain issues**, and **cybersecurity threats** related to the ERP upgrade[11](index=11&type=chunk)

Group 1: Company Performance - Caleres Inc. (CAL) has returned approximately 10.7% year-to-date, outperforming the average return of -1.7% for Consumer Discretionary companies [3] - Within the Shoes and Retail Apparel industry, which includes 12 companies, Caleres Inc. is performing better as this group has lost about 27.7% so far this year [4] - The Zacks Consensus Estimate for Caleres Inc.'s full-year earnings has increased by 0.6% over the past quarter, indicating an improving earnings outlook [6] Group 2: Industry and Sector Context - Caleres Inc. is part of the Consumer Discretionary sector, which consists of 281 individual stocks and currently holds a Zacks Sector Rank of 13 [5] - The Shoes and Retail Apparel industry, where Caleres operates, is ranked 49 in the Zacks Industry Rank [4] - Another notable stock in the Consumer Discretionary sector, Hasbro (HAS), has a year-to-date return of 15.6%, indicating strong performance within the sector [9]

Core Concept - The price-to-sales ratio is a preferred metric over price-to-earnings as it is less susceptible to manipulation, providing a more reliable measure of a company's value [2][9]. Screening Parameters - Companies with a debt-to-equity ratio below the industry median are likely to maintain a stable price-to-sales ratio [4]. - Stocks with a price-to-sales ratio lower than the industry median are considered more attractive investments [20][17]. - A current stock price of at least $5 is a requirement for inclusion in the screening [21]. Company Highlights - **Caleres**: Focuses on reducing debt, aiming to keep borrowings under $100 million by 2026, currently holds a Value Score of A and Zacks Rank 2 [5][31]. - **MRC Global**: Benefits from increased energy transition activities and diverse market presence, currently has a Zacks Rank 2 and a Value Score of A [6][32]. - **G-III Apparel**: Committed to brand building and digital growth, holds a Value Score of A and Zacks Rank 1, indicating strong potential for growth [13][22]. - **KB Home**: Engages in aggressive land acquisition and development, optimistic about boosting gross margin and returns, currently has a Value Score of A and Zacks Rank 2 [14][23]. - **Greenbrier**: A leading supplier in freight transportation markets, leveraging strong market relationships and product offerings for ongoing success, currently has a Value Score of A and Zacks Rank 2 [24][28]. Investment Insights - A stock with a lower price-to-sales ratio is generally seen as a more suitable investment compared to those with a higher ratio [17]. - The price-to-sales ratio can reveal hidden strengths in loss-making companies, indicating potential recovery or growth [18][26]. - Companies with high debt and low price-to-sales ratios are less favorable due to the risks associated with debt repayment [19].

Core Insights - The price-to-sales (P/S) ratio is highlighted as a valuable metric for evaluating companies, especially those with negative earnings or in early development stages [1][2][4] - A P/S ratio below 1 indicates a potentially undervalued stock, making it an attractive investment option [3] - The P/S ratio is considered more reliable than the price-to-earnings (P/E) ratio due to the difficulty of manipulating sales figures compared to earnings [4] Investment Opportunities - Companies such as GIII Apparel Group, Caleres, Pampa Energia, ProPetro Holding, and The Greenbrier Companies are identified as having low P/S ratios and potential for higher returns [5] - GIII Apparel is focusing on digital growth and omnichannel strategies, aiming for continued profitability and growth in fiscal 2025 and beyond [11][12] - Caleres is capturing market share in the footwear sector and is focused on reducing debt while maintaining a strong growth trajectory [13][14] - Pampa Energia operates in the energy sector in Argentina, engaging in electricity generation and oil and gas production, with a strong market position [15] - ProPetro is leveraging its operations in the Permian Basin to benefit from a multi-year upcycle in the oilfield services market [16][17] - Greenbrier is positioned as a leading supplier in the freight transportation market, with a focus on profitable leasing and strategic growth [18][19] Screening Parameters - The screening criteria for identifying potential investments include a P/S ratio less than the industry median, a low P/E ratio, and a low debt-to-equity ratio [6][7] - Stocks must be trading at a minimum price of $5 and have a Zacks Rank of 1 or 2 to qualify for consideration [8][10]

Core Insights - Value investing remains a preferred strategy for identifying strong stocks across various market conditions, relying on fundamental analysis and traditional valuation metrics to uncover undervalued stocks [1] Company Metrics - Caleres (CAL) has a Price to Cash Flow (P/CF) ratio of 5.17, significantly lower than the industry average of 20.46, indicating potential undervaluation based on cash flow [2] - CAL's P/CF has fluctuated between a high of 6.21 and a low of 3.75 over the past 12 months, with a median of 4.88, suggesting a favorable cash outlook [2] - The Price to Sales (P/S) ratio for CAL is 0.42, compared to the industry average of 0.86, further supporting the notion that CAL may be undervalued [4] Investment Ratings - CAL currently holds a Zacks Rank of 2 (Buy) and an A grade for Value, indicating strong potential for value investors [7] - The Zacks Rank system emphasizes earnings estimates and revisions, which are critical for identifying promising stocks, while also considering value, growth, and momentum trends [3][5] Overall Assessment - The combination of CAL's strong value metrics and positive earnings outlook positions it as an attractive investment opportunity in the current market [6]

Financial Performance - Net sales for the thirteen weeks ended May 4, 2024, were $659,198 thousand, a decrease from $662,734 thousand for the same period in 2023, representing a decline of approximately 0.8%[72] - Gross profit for the period was $309,095 thousand, compared to $302,682 thousand in the prior year, indicating an increase of about 2.0%[72] - Operating earnings decreased to $42,758 thousand from $49,587 thousand year-over-year, reflecting a decline of approximately 13.7%[72] - Net earnings attributable to Caleres, Inc. were $30,939 thousand, down from $34,727 thousand in the previous year, a decrease of about 10.3%[72] - Basic and diluted earnings per share attributable to Caleres, Inc. shareholders were both $0.88, compared to $0.97 in the same quarter last year, a decline of approximately 9.3%[72] - Comprehensive income for the period was $31,322 thousand, compared to $35,217 thousand in the prior year, reflecting a decrease of approximately 11.0%[76] - Selling and administrative expenses rose to $266,337 thousand from $253,095 thousand, an increase of about 5.2% year-over-year[72] - Operating earnings for the same period were $42,758 thousand, down from $49,587 thousand in the prior year, reflecting a decrease of approximately 15.5%[93] - Net sales for the first quarter of 2024 were $659.2 million, a slight decrease of 0.5% compared to $662.7 million in the first quarter of 2023[175] - Gross profit increased by $6.4 million, or 2.1%, to $309.1 million for the first quarter of 2024, with a gross margin of 46.9%, up from 45.7% in the prior year[176] - Operating earnings for the first quarter of 2024 were $42.8 million, representing 6.5% of net sales, compared to $49.6 million or 7.5% of net sales in the first quarter of 2023[175] - Net earnings attributable to Caleres, Inc. were $30.9 million for the first quarter of 2024, down from $34.7 million in the same period last year[180] Sales and Revenue - Net sales for the thirteen weeks ended May 4, 2024, were $659,198 thousand, a slight decrease from $662,734 thousand for the same period in 2023[93] - Net sales decreased by $3.5 million, or 0.5%, to $659.2 million for the first quarter of 2024 compared to $662.7 million for the first quarter of 2023[144] - The Brand Portfolio segment net sales declined by $8.3 million, or 2.6%, primarily due to lower wholesale sales[147] - Comparable sales for the Famous Footwear segment decreased by 2.3%, while the Brand Portfolio segment experienced a decline of 8.5%[135] - Direct-to-consumer sales represented approximately 69% of consolidated net sales for the first quarter of 2024, up from 68% in the prior year[147] - The company experienced a 9.4% increase in sales from owned e-commerce businesses compared to the first quarter of 2023[147] - E-commerce sales improved, with e-commerce penetration at approximately 13% of net sales in Q1 2024, up from 12% in Q1 2023[265] - The kids category continued to perform well, exceeding last year's volume[265] Expenses and Liabilities - Selling and administrative expenses increased by $2.1 million, or 1.5%, to $144.1 million for the first quarter of 2024, with expenses as a percentage of net sales rising to 41.3%[184] - The loyalty programs liability increased by $9.7 million during the thirteen weeks ended May 4, 2024, due to points earned on purchases[89] - Cash paid for lease liabilities during the thirteen weeks ended May 4, 2024, was $42.2 million, compared to $41.2 million for the same period in 2023[99] - Operating lease expense increased to $40.023 million from $39.142 million in the prior year[154] - Selling and administrative expenses rose by $5.2 million, or 5.1%, to $106.4 million for Q1 2024, representing 33.5% of net sales, compared to 31.1% in Q1 2023[190] Assets and Inventory - The total segment assets as of May 4, 2024, amounted to $1,861,110 thousand, compared to $1,818,083 thousand as of April 29, 2023, indicating an increase of about 2.4%[93] - The net inventory balance as of May 4, 2024, was $530,570 thousand, down from $559,467 thousand a year earlier, representing a decrease of approximately 5.1%[120] - The goodwill and intangible assets, net, as of May 4, 2024, were $200,551 thousand, down from $212,353 thousand as of April 29, 2023, reflecting a decrease of about 5.5%[121] - Customer allowances and discounts as of May 4, 2024, were $17,090 thousand, a decrease from $19,076 thousand as of April 29, 2023[116] - The loyalty programs liability decreased to $8,350 thousand as of May 4, 2024, from $16,993 thousand a year earlier, indicating a significant reduction of approximately 50.8%[116] Shareholder Actions - The company repurchased 416,000 shares during the thirteen weeks ended May 4, 2024, under its publicly announced share repurchase program[92] - The company declared and paid dividends of $0.07 per share in both Q1 2024 and Q1 2023, with future dividends subject to Board discretion[200] Tax and Remediation - The effective tax rate for the first quarter of 2024 was 23.0%, slightly down from 23.5% in the first quarter of 2023[179] - The reserve for anticipated future remediation activities is $9.2 million, with $4.8 million allocated for off-site remediation and $4.4 million for on-site remediation[168] Operational Changes - The company opened 3 new stores and closed 8 stores, resulting in a total of 855 ending stores[135] - The company is undergoing a multi-year cloud-based ERP implementation, with the first phase scheduled to go live in Q2 2024[225]

Core Insights - The article emphasizes the importance of the Zacks Rank system and Style Scores in identifying strong stocks, particularly for value investors [1][3] - Value investing is highlighted as a preferred strategy for finding undervalued stocks across various market conditions [2] Company Analysis: Caleres (CAL) - Caleres currently holds a Zacks Rank of 2 (Buy) and an A grade for Value, indicating strong potential for value investors [4] - The stock has a Forward P/E ratio of 7.92, significantly lower than the industry average of 22.31, suggesting it may be undervalued [4] - Over the past 52 weeks, CAL's Forward P/E has fluctuated between a high of 9.17 and a low of 4.02, with a median of 6.59 [4] - The P/S ratio for CAL is 0.43, compared to the industry's average of 0.91, reinforcing its undervaluation [5] - CAL's P/CF ratio stands at 5.48, well below the industry average of 21.73, indicating strong cash flow relative to its valuation [6] - The P/CF ratio has varied from a high of 6.22 to a low of 2.75 over the past year, with a median of 4.82 [6] - Overall, these metrics suggest that CAL is likely undervalued and presents an attractive investment opportunity for value investors [7]