Core Insights - Caleres, the parent company of Famous Footwear, reported weak demand and challenges with its resource planning system, leading to disappointing second-quarter results [1][2] - The company missed profit and sales estimates, prompting a reduction in its full-year outlook [1][2] - Caleres shares fell nearly 20%, entering negative territory for 2024 [5] Financial Performance - Caleres reported second-quarter earnings per share (EPS) of 85 cents, which is over 30% below the consensus estimate [2] - Revenue decreased by 1.8% year-over-year to $683.3 million, also falling short of forecasts [2] - Famous Footwear unit sales increased by 1.5%, but comparable-store sales declined by 2.9% [3] Management Commentary - CEO Jay Schmidt acknowledged that the results were "below expectations" and that both segments did not meet their potential [4] - The CEO attributed the poor performance to weak seasonal demand and a delayed back-to-school sales period [4] - Challenges with the implementation of the enterprise resource planning (ERP) system resulted in a lack of visibility for products, negatively impacting sales [4] Revised Outlook - Caleres now expects full-year adjusted EPS to be between $4.00 and $4.15, down from the previous range of $4.30 to $4.60 [5] - The company anticipates sales to decline by a low-single-digit percentage, compared to earlier guidance of flat to up 2% [5]

Core Insights - Caleres, Inc. reported disappointing second-quarter results for fiscal 2024, with adjusted earnings of 85 cents per share, missing the Zacks Consensus Estimate of $1.21 and down from 98 cents per share year over year [1][2]. Financial Performance - Consolidated net sales were $683.3 million, a decline of 1.8% year over year, and below the Zacks Consensus Estimate of $716 million [3]. - The Famous Footwear segment saw a 1.5% increase in net sales, while the Brand Portfolio segment experienced a 5.1% drop in sales [3]. - Gross profit decreased by 1.1% to $310.9 million, with a gross margin increase of 30 basis points to 45.5% [4]. - Adjusted EBITDA fell 12.4% to $57.2 million, with an adjusted EBITDA margin contraction of 100 basis points to 8.4% [5]. Segment Performance - The Famous Footwear segment's gross margin decreased by 120 basis points to 45%, while the Brand Portfolio segment's gross margin increased by 140 basis points to 42.7% [4]. - Direct-to-consumer sales accounted for approximately 75% of total quarterly sales [3]. Balance Sheet and Cash Flow - At the end of the quarter, Caleres had cash and cash equivalents of $51.8 million and total shareholders' equity of $613.5 million [6]. - Cash generated from operating activities was $115.7 million for the 26 weeks ended August 3, 2024 [6]. - The company had borrowings of $146.5 million under its asset-based revolving credit facility [6]. Future Outlook - For Q3, Caleres expects sales to be flat to down 2% year over year, with adjusted EPS projected between $1.30 and $1.40 [7]. - For fiscal 2024, the company anticipates consolidated net sales to decline in the low single digits, down from previous guidance of flat to up 2% [8]. - The projected consolidated operating margin is now expected to be in the range of 7-7.1%, compared to earlier projections of 7.3-7.5% [8].

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]