Caleres(US:CAL)2023-08-31 17:40Financial Data and Key Metrics Changes - Consolidated sales decreased by 5.8% year-over-year, totaling $696 million, with Famous Footwear sales down 5.1% and comparable sales down 4.3% [95][108] - Consolidated gross margin decreased by 45 basis points to 45.2%, with Brand Portfolio gross margin increasing by 295 basis points to a record 41.3% [19][120] - Diluted earnings per share were $0.98, exceeding the high end of guidance, with EBITDA at $65 million or 9.4% of sales [20][82] - SG&A expenses were $263 million, representing 37.8% of sales, which was $5.6 million lower than the previous year [46] Business Line Data and Key Metrics Changes - Brand Portfolio sales were $301 million, down 7.2% due to seasonal weakness in sandals and cautious buying behavior in the wholesale channel [143] - Famous Footwear generated nearly $41 million in adjusted operating earnings on net sales down 5%, maintaining a gross margin rate of 46% [91][120] - Direct channels saw brick-and-mortar sales up 5% and e-commerce sales up 13%, driven by increased traffic and conversion [11] Market Data and Key Metrics Changes - The kids' footwear segment increased by 5% year-over-year, significantly outperforming the overall business [115] - The company noted a shift in consumer preferences towards casual flats and sneakers, impacting seasonal categories like sandals [84][143] Company Strategy and Development Direction - The company is focused on profitability over promotions, prioritizing inventory management and strategic investments in lead brands [4][108] - The goal is to enhance the consumer experience through new prototype stores and to leverage competitive advantages in the market [17][120] - The company aims to achieve a higher percentage of revenue from lead brands in 2023, with various growth opportunities identified [111] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving annual sales and earnings guidance, citing strong brand performance and clear strategies [44] - The company anticipates easier year-over-year comparisons in the second half of 2023, which should support improved sales trends [40] - Management highlighted the importance of maintaining a healthy inventory-to-sales relationship to adapt to market dynamics [74] Other Important Information - The company reduced borrowings by $48 million during the quarter, achieving a leverage ratio target of 1 times debt to EBITDA [21][107] - Capital expenditures are expected to be between $50 million and $60 million, reflecting adjustments in project timing [49] Q&A Session Summary Question: Can you comment on the performance of the Brand Portfolio? - Management noted that lead brands are taking market share, with a focus on newness driving consumer interest [31][51] Question: How is the company managing inventory levels? - The company is managing inventory to a new normal, focusing on driving newness while maintaining controlled levels [165] Question: What are the expectations for the back-to-school season? - Management indicated that while they do not anticipate matching last year's record performance, they believe Famous is well-positioned to maintain leadership in shoe chains [117][138]