Caleres(CAL) - 2025 Q2 - Quarterly Results

Caleres Q2 2024 Earnings Release Overview and Key Highlights 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] - 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] Second Quarter 2024 Financial Performance 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] - 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] Capital Allocation and Debt Management 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] - A key long-term target is to have borrowings under the asset-based revolving credit facility be less than $100 million by 2026[5] - Caleres will continue returning cash to shareholders via dividends and will evaluate share repurchases as the year progresses[5] Fiscal 2024 Outlook 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] Financial Statements and Schedules Condensed Consolidated Statements of Earnings (Schedule 1) 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) 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) 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) 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 | $0.98 | Summary Financial Results by Segment (Schedule 5) Famous Footwear sales grew 1.5% while Brand Portfolio sales fell 5.1%, though the latter saw improved gross margin Q2 2024 Segment Results (Thirteen Weeks Ended) | ($ 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) 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 | $0.85 | EBITDA and Debt/EBITDA Leverage Ratio (Schedule 8) The Debt/EBITDA leverage ratio improved significantly to 0.6x from 1.0x year-over-year, reflecting lower debt EBITDA and Leverage Ratio | Metric | Aug 3, 2024 | July 29, 2023 | | :--- | :--- | :--- | | Q2 EBITDA ($ 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) 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 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] - Non-GAAP measures like EBITDA and adjusted EPS are used to help management and investors identify underlying business trends[10] - The Safe Harbor statement lists potential risks including economic conditions, supply chain issues, and cybersecurity threats related to the ERP upgrade[11]