Caleres(US:CAL)2022-11-22 18:40Financial Data and Key Metrics Changes - Caleres reported record quarterly sales of $798 million, nearly 2% higher than Q3 2021, with a 7.6% year-over-year increase from the brand portfolio segment [7][41] - Operating earnings reached $57 million, with earnings per share at $1.15, marking a significant increase compared to pre-pandemic levels [7][50] - Gross margin was 42.6%, reflecting a decrease in Famous gross margin but an increase in brand portfolio gross margin [41][42] Business Line Data and Key Metrics Changes - Famous Footwear sales declined 2.6%, with comparable sales down 0.8%, but maintained a double-digit operating margin of 12.3% [41][44] - The brand portfolio achieved a gross margin of 37.9%, a 490 basis point increase year-over-year, driven by higher wholesale prices and growth in direct-to-consumer sales [42][44] - Caleres brands performed well, with sales at Famous increasing 19% year-over-year, particularly in the kids' segment, which saw a 6% increase for the full quarter [21][25] Market Data and Key Metrics Changes - Caleres grew its total market share during the period, managing inventory effectively, ending nearly 16% lower than Q2 2022 [8][39] - The brand portfolio's e-commerce sales grew nearly 22%, with significant gains from brands like Sam Edelman and Naturalizer [29][30] - The company noted that the consumer environment remains challenging due to inflationary pressures, but Famous is well-positioned to compete [25][39] Company Strategy and Development Direction - The company is focused on delighting consumers, building relevant products, and enhancing consumer experiences, which are embedded in its strategic focus areas [9][10] - Investment in consumer marketing and experience is prioritized as essential for future growth [16] - The company plans to continue leveraging its brand-building expertise and digital commerce capabilities to drive long-term value [11][38] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in delivering record earnings per share for the year despite macroeconomic uncertainties [39][52] - The transition in leadership is seen as a positive step, with confidence in the new CEO's ability to lead the company forward [12][40] - Management highlighted the importance of maintaining margins and managing expenses in light of potential sourcing deflation and increased promotional activity [66][67] Other Important Information - The company returned $24 million to shareholders through share repurchases and dividends during the quarter [8][48] - Inventory levels were managed effectively, with a 15.8% sequential decrease noted [46][47] - The company expects to generate significant cash flow in Q4 and plans to reduce revolver borrowing to increase liquidity [49] Q&A Session Summary Question: Trends in November compared to Q3 - Management noted that brand portfolio trends have continued to be strong, while Famous Footwear faced some challenges due to consumer stress and weather-related issues [55][56] Question: Order book and dropship performance - The dropship business has grown high double digits, now representing about 20% of total business, providing flexibility and maximizing inventory [61][62] Question: Inventory strategy and promotions - Management emphasized a focus on full-price selling and maintaining competitive positioning, with a significant portion of inventory being new [74][75] Question: Famous Footwear's comparable sales outlook - Management expects improvements in Famous Footwear's comparable sales as the balance between athletic and non-athletic categories is addressed [82][83] Question: Impact of weather on boot sales - Management indicated that while warm weather initially affected boot sales, there has been a rebound as conditions improved [89][90] Question: Margin sustainability and promotional environment - Management expressed confidence in maintaining operating margins due to structural changes and effective pricing strategies [102][103]