Caleres(US:CAL)2020-09-02 03:02Financial Data and Key Metrics Changes - Caleres reported a consolidated sales of $501.4 million for Q2 2020, down 33.4% from the prior period [45] - The adjusted loss per share was $0.57, compared to an adjusted net income of $0.62 per diluted share last year [52] - The company generated approximately $67 million of cash from operations during the quarter [16] Business Line Data and Key Metrics Changes - Famous Footwear total sales were $333.9 million, down 20.5% year-over-year, but improved 75% sequentially [46] - The Brand Portfolio segment saw a total sales decline of 49% compared to the second quarter of last year, primarily due to store closures and reduced orders [30] - E-commerce sales for Famous Footwear grew approximately 150% year-over-year, making up 25% of net sales [23][24] Market Data and Key Metrics Changes - E-commerce penetration for the company increased to 27%, up from 18% in the previous 12-month period [9] - E-commerce sales accounted for 34% of total sales in Q2 2020, compared to about 17% in the same quarter last year [16] - The company cut inventory levels by 33% year-over-year, with a 23% decline at Famous Footwear and a 33% decline at the Brand Portfolio [53] Company Strategy and Development Direction - The company is focused on investing in its digital platform to capitalize on the shift to online purchasing [10] - Caleres aims to strengthen its position by managing expenses and working capital effectively [41] - The company plans to continue its direct-to-consumer approach, which aligns with current consumer trends [38] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the significant impact of COVID-19 on business but noted a strong recovery in June due to store reopenings and e-commerce growth [11][20] - The company expects a sequential improvement in sales for Q3 2020, with a decline of 20% to 25% year-over-year [57] - Management expressed confidence in the company's ability to navigate the current environment and capitalize on market opportunities [40] Other Important Information - The company reduced borrowings under its credit facility by $88.5 million, exiting Q2 with approximately $150 million in cash [17] - SG&A expenses were $201.3 million, down approximately $66 million compared to the same quarter last year [50] - The effective tax rate for Q2 was 9.4%, impacted by certain discrete tax items [55] Q&A Session Summary Question: What was the mix of your business that is sport-inspired or casual a year ago? - Management indicated it was around 80% to 82% last year [60][61] Question: Will Famous Footwear likely stay stronger than Brand Portfolio as long as there is a trend towards casual footwear? - Management confirmed that Famous Footwear is expected to lead due to its direct-to-consumer model and alignment with current consumer preferences [62] Question: Can you talk about comps for stores in markets that have been opened the longest? - Management noted that the timing of openings is less significant now, with consumer response varying widely across markets [65] Question: How are you thinking longer-term about your store footprint? - Management is evaluating store penetration in relation to e-commerce growth and optimizing market presence [68] Question: Should we expect a shift away from traditional wholesale channels towards a DTC model? - Management confirmed a focus on DTC growth, leveraging investments made in consumer fulfillment capabilities [70] Question: What impact do you believe Nike's decision to prune some of their wholesale partners will have on Famous Footwear? - Management sees this as an opportunity for Famous, estimating a potential shift of $300 million to $400 million in retail sales [87][88] Question: How much of BOPIS is a part of e-commerce? - Management indicated that BOPIS was expected to account for 15% to 20% of the business [89] Question: What are your lead times for seasonal cold weather footwear? - Management stated lead times are around 90 days for existing items and closer to 120 days for new items [99] Question: Will tightening product assortments benefit gross margins? - Management agreed that a tighter product assortment could positively impact margins, allowing for more frequent inventory flows [102][105]