Caleres(CAL) - 2023 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q4 2023, the company reported sales of $697 million, a slight increase from the previous year, with adjusted earnings per share of$ 0.86, representing a 32% increase over Q4 2022 [10][71] - Annual consolidated sales were $2.82 billion, down 5.1% compared to fiscal 2022, with adjusted operating earnings of$ 201 million and a consolidated adjusted operating margin of more than 7% [22][32] - The company generated approximately $260 million in adjusted EBITDA, with a net interest expense of$ 19 million for the year [32][23] Business Line Data and Key Metrics Changes - The Brand Portfolio achieved a 4.5% increase in sales compared to Q4 2022, with a record annual adjusted operating earnings topping $148 million [11][34] - Famous Footwear experienced a 1.5% decline in total sales and a 5.9% decline in comparable sales, although it gained market share in Shoe Chains [15][22] - The Naturalizer brand saw double-digit sales growth and improved operating margins, gaining 1 point of market share during the quarter [13] Market Data and Key Metrics Changes - The company gained market share in both women's fashion footwear and Shoe Chains for Famous Footwear, particularly in the Kids segment, which saw a 2% increase in sales year-over-year [9][39] - The footwear market is expected to decline by 1% in 2024, impacting the company's growth outlook [25][51] Company Strategy and Development Direction - The company is focused on expanding its direct-to-consumer business and enhancing its e-commerce capabilities, with plans to invest in international expansion and consumer experience [18][20] - The Brand Portfolio is expected to contribute about half of total sales and 60% of operating profit within the next three years, with a strong emphasis on its Lead Brands [38][43] - The company plans to continue its SPEED programs to align inventory with consumer demand, aiming for more than 20% of Brand Portfolio receipts to come through this initiative [42] Management's Comments on Operating Environment and Future Outlook - Management noted a mixed demand environment as they transitioned from Q4 to Q1, with a focus on trend-driven consumer preferences [77] - The company anticipates modest growth in 2024, with guidance for consolidated net sales to be flat to up 1% and earnings per diluted share in line with Q4 2023 [26][73] - Management expressed optimism about the performance of key brands and the potential for improved consumer engagement through loyalty programs [18][56] Other Important Information - The company reduced borrowings by$ 126 million from 2022, maintaining a debt-to-trailing-12-month-EBITDA ratio of 0.7 times [33][72] - SG&A expenses for Q4 were $273 million, or 39.1% of sales, reflecting effective expense management initiatives [113] Q&A Session Summary Question: What is behind the expectation that the footwear industry will decline this year? - Management indicated that Circana projects the market to be down about 1%, with fashion expected to be the weakest segment [51] Question: How is the company positioned in terms of its own brands in Famous Footwear? - Management noted strong results from brands like Dr. Scholl's and Naturalizer, with plans for significant growth in the coming year [56] Question: What are the expectations for sales growth in the Brand Portfolio for 2024? - The company anticipates low-single digit positive growth for the Brand Portfolio, with Lead Brands expected to perform stronger [61] Question: How does the company plan to manage SG&A expenses throughout the year? - Management mentioned investments in SG&A for Q1, particularly related to marketing campaigns and platform implementation, but expects cost reductions to be built into the 2024 plan [55] Question: What is the outlook for the Kids segment in Famous Footwear? - Management highlighted strong performance in the Kids segment, particularly in athletic shoes, and noted a focus on key brands that resonate with consumers [96][107]