Caleres(US:CAL)2020-11-20 01:30Financial Data and Key Metrics Changes - The company reported adjusted earnings of $0.48 per share, with a net income increase and a 30% sequential increase in revenues, benefiting from the full operation of store networks and solid digital demand [8][36] - Consolidated sales for Q3 were $647.5 million, down 18.3% year-over-year, with a gross margin of 39.7%, compared to 40.4% in the same period last year [36][38] - The company achieved a $38 million reduction in overall expenses during the quarter, resulting in the highest level of third-quarter cash generation in 10 years, with net cash provided by operating activities at $34.2 million [9][43] Business Segment Data and Key Metrics Changes - Famous Footwear generated revenues of $391.7 million, a 12% year-over-year decline but a 17% increase from Q2, with e-commerce sales up 48% year-over-year [11][12][37] - The Brand Portfolio reported net sales of $267.6 million, a 26% decline year-over-year but a 45% sequential improvement, with positive operating earnings of $7.3 million [20][38] - E-commerce penetration for Famous Footwear reached 17% of net sales, up from 10% in the previous year [12] Market Data and Key Metrics Changes - The back-to-school season was impacted by uncertainty, with store-for-store sales in August below historical levels, but September sales exceeded last year's levels by approximately $15 million [13][15] - The company noted a decline in sales momentum in October due to rising virus cases affecting consumer demand [15][18] Company Strategy and Development Direction - The company is focusing on digital growth and plans to allocate resources to enhance its e-commerce presence, particularly for the Naturalizer brand, which will see a reduction in physical stores [28][70] - The company aims to maintain a disciplined approach to managing expenses while investing in areas expected to yield strong returns, particularly in digital business [30][31] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the future, acknowledging ongoing uncertainty but highlighting strong cash generation and lean inventory as advantages [31][32] - The company expects Q4 sales to decline approximately 20% year-over-year, with Famous Footwear sales projected to be down between 10% and 15% [46] Other Important Information - The company plans to exit most of its legacy Naturalizer retail stores in the U.S. and Canada by the end of fiscal 2020, anticipating annual savings of $10 million to $12 million [27][47] - The company is committed to maintaining safety protocols in response to COVID-19 and is closely monitoring local conditions [18] Q&A Session Summary Question: Can you elaborate on the management changes at Famous Footwear? - Management confirmed that Mike Edwards will lead Famous Footwear, succeeding Molly Adams, and emphasized Edwards' extensive experience and commitment to the brand [49] Question: How has the November performance compared to expectations? - Management indicated that November performance is in line with expectations, but noted potential impacts from local store closures [53] Question: What are the expectations for wholesale buying patterns in the first half of 2021? - Management noted a significant shift towards online purchasing, predicting that e-commerce could represent 40% to 50% of business in 2021 [56][57] Question: What is the impact of the Naturalizer liquidation on revenues? - Management stated that the liquidation process has begun, and they do not anticipate issues in liquidating remaining inventory by the end of the fiscal year [67] Question: How will the company manage inventory in a post-vaccine world? - Management plans to keep inventory tight and responsive to market demands, ensuring agility in product offerings [60][62] Question: What are the expectations for SG&A expenses in Q4? - Management expects SG&A expenses to remain at similar levels to Q3, with a focus on maintaining cost discipline [81]