Caleres(US:CAL)2021-11-19 01:05Financial Data and Key Metrics Changes - The company reported record adjusted earnings per share of $1.59 for Q3 2021, with full-year guidance raised to between $3.80 and $3.90, up from the initial range of $3.25 to $3.50 [7][40] - Revenue for Q3 2021 was $784 million, nearly matching Q3 2019 performance, with a consolidated gross margin of approximately 43%, a 241 basis point improvement over the same period two years ago [8][37] - Operating earnings reached $81 million, with a return on sales of approximately 18%, more than 11 percentage points higher than the comparable 2019 period [17][37] Business Line Data and Key Metrics Changes - Famous Footwear achieved quarterly sales of approximately $495 million, an 11% improvement over Q3 2019, marking the highest level of quarterly sales in the brand's history [12][37] - The brand portfolio segment saw a 26% sequential sales increase, although gross margins were compressed by approximately 400 basis points due to high ocean freight costs [22][38] - Inventory levels at Famous Footwear were down 24% from two years ago, contributing to strong margins of nearly 48%, which were 657 basis points higher than 2019 [14][37] Market Data and Key Metrics Changes - The company experienced broad-based strength across various categories, with kids' business increasing 26% over 2019, and online sales up approximately 44% compared to Q3 2019 [18][19] - Brick-and-mortar sales increased 7% over Q3 2019, despite having 55 fewer stores, indicating a strong recovery in physical retail [20][37] - The company noted that supply chain disruptions, including factory closures and port delays, hindered its ability to fully capitalize on consumer demand [11][22] Company Strategy and Development Direction - The company is focused on maintaining a strong inventory position against key brands and styles, aiming for minimal promotional activity to sustain full-price selling [46] - Strategic priorities include investing in a diversified portfolio to support long-term growth and reducing debt levels to approach zero net debt over the next five quarters [9][10] - The company is optimistic about its ability to navigate ongoing supply chain challenges and expects to see significant upside as these issues moderate [33] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ongoing recovery of the brand portfolio and the strong performance of Famous Footwear, anticipating continued momentum into 2022 [58] - The company acknowledged the impact of inflationary pressures, particularly from ocean freight costs, but remains confident in managing through these challenges [52] - Management highlighted the importance of aligning inventory levels with consumer demand and making quick decisions to counterbalance supply chain headwinds [40] Other Important Information - The company completed the acquisition of Blowfish Malibu, now holding 100% ownership, which is expected to enhance growth potential [32] - The company has renegotiated its revolving credit facility, which will lower annual interest expenses by approximately $12 million [10][36] Q&A Session Summary Question: What is the normalized gross margin level for Famous? - Management indicated that while current gross margins are high, future promotions will depend on supply chain normalization and inventory levels [44][45] Question: Can you discuss the order book for the branded portfolio? - Management reported that the order book is improving, with good visibility for spring and summer orders, indicating strong demand [48][49] Question: What inflationary pressures are being observed? - Management acknowledged rising ocean freight and input costs but expressed confidence in managing these through price increases and operational adjustments [51][52]