Caleres Reports Second Quarter 2015 Results

Caleres (NYSE: CAL) (caleres.com) today reported second quarter 2015 financial results, with net sales of $637.8 million versus second quarter 2014 net sales of $635.9 million. Second quarter 2015 net earnings were $16.8 million, or $0.38 per diluted share, and included $5.3 million of after-tax expense related to the company’s debt extinguishment. Excluding this expense, net earnings were $22.1 million, or $0.50 per diluted share, up 22.4% versus second quarter 2014 net earnings of $18.1 million, or $0.41 per diluted share. Gross margin was 41.2%, up approximately 40 basis points year-over-year, while operating margin was 5.6%.

“Today we reported a solid quarter, as expected, with improved sales, margins and adjusted earnings,” said Diane Sullivan, CEO, president and chairman of Caleres. “Total sales were up 2%, excluding Shoes.com, while gross and operating margin both expanded in the quarter. We also improved bottom-line performance by 22%, thanks to continued progress toward our long-term strategic initiatives.”

Second Quarter Highlights

Famous Footwear second quarter 2015 sales of $395.9 million were up 0.6% year-over-year, excluding Shoes.com, which was sold in December of 2014. For the quarter, same-store-sales were up 0.1%, with strong growth in canvas outweighing weakness in performance athletic product and sandals. During the quarter, 10 new stores were opened and six stores were closed.

Brand Portfolio sales of $242.0 million were up 4.4% in the second quarter, with performance in the quarter driven by a 14.1% improvement in Contemporary Fashion. Healthy Living sales were down 1.5%, as increases in wholesale sales were unable to offset weakness on the retail side, where the company operated nine fewer stores year-over-year.

Consolidated gross profit of $262.8 million was up 1.2% in the second quarter, while gross margin of 41.2% was up approximately 40 basis points year-over-year. SG&A for the second quarter was $227.1 million, representing 35.6% of net sales – down approximately 30 basis points versus the prior year. For the quarter, operating margins improved approximately 70 basis points year-over-year to 5.6%.

Inventory at the end of the second quarter was $641.1 million, down 2.5% from $657.7 million in the prior year. Famous Footwear inventory was down 0.7% on a per store basis, while Brand Portfolio inventory was down 3.4%. At quarter-end, Caleres had no borrowings against its revolving credit facility and had $129.3 million of cash and equivalents.

Financial Review and 2015 Outlook

“In the second quarter, we made steady progress toward achieving our full year earnings guidance, as we continued to drive margin expansion and further strengthened our balance sheet,” said Ken Hannah, chief financial officer of Caleres. “This progress has enabled us to accelerate investment in our long-term strategic growth initiatives.”

Quarterly Dividend

The company also declared a quarterly dividend of $0.07 per share, payable October 1, 2015, to shareholders of record as of September 17, 2015. This dividend will be the 371^st consecutive quarterly dividend paid by the company.

Investor Conference Call: Caleres will host an investor conference call at 5 p.m. ET today, August 27, 2015. The webcast and slides will be available at investor.caleres.com/news/events. A live conference call will be available at (877) 217-9089 for analysts in North America or (706) 679-1723 for international analysts by using the conference ID 5950620. A replay will be available at investor.caleres.com/news/events/archive for a limited period. Investors may also access the replay by dialing (855) 859-2056 in North America or (404) 537-3406 internationally and using the conference ID 5950620 through September 10, 2015.

Definitions: All references in this press release, outside of the condensed consolidated financial statements that follow, unless otherwise noted, related to net earnings attributable to Caleres, Inc. and diluted earnings per common share attributable to Caleres, Inc. shareholders, are presented as net earnings and earnings per diluted share, respectively.

Non-GAAP Financial Measures: In this press release, the company’s financial results are provided both in accordance with generally accepted accounting principles (GAAP) and using certain non-GAAP financial measures. In particular, the company provides historic and estimated future gross profit, operating earnings, net earnings and earnings per diluted share adjusted to exclude certain gains, charges and recoveries, which are non-GAAP financial measures. These results are included as a complement to results provided in accordance with GAAP because management believes these non-GAAP financial measures help identify underlying trends in the company’s business and provide useful information to both management and investors by excluding certain items that may not be indicative of the company’s core operating results. These measures should not be considered a substitute for or superior to GAAP results. Reconciliations to the applicable GAAP financial measures have been included in the attached schedules.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: This press release contains certain forward-looking statements and expectations regarding the company’s future performance and the performance of its brands. Such statements are subject to various risks and uncertainties that could cause actual results to differ materially. These risks include (i) changing consumer demands, which may be influenced by consumers’ disposable income, which in turn can be influenced by general economic conditions; (ii) rapidly changing fashion trends and purchasing patterns; (iii) intense competition within the footwear industry; (iv) political and economic conditions or other threats to the continued and uninterrupted flow of inventory from China and other countries, where the Company relies heavily on third-party manufacturing facilities for a significant amount of its inventory; (v) the ability to accurately forecast sales and manage inventory levels; (vi) cybersecurity threats or other major disruption to the Company’s information technology systems; (vii) customer concentration and increased consolidation in the retail industry; (viii) a disruption in the Company’s distribution centers; (ix) the ability to recruit and retain senior management and other key associates; (x) foreign currency fluctuations; (xi) compliance with applicable laws and standards with respect to labor, trade and product safety issues; (xii) the ability to secure/exit leases on favorable terms; (xiii) the ability to attract, retain, and maintain good relationships with licensors and protect intellectual property rights; and (xiv) the ability to maintain relationships with current suppliers. The company’s reports to the Securities and Exchange Commission contain detailed information relating to such factors, including, without limitation, the information under the caption Risk Factors in Item 1A of the company’s Annual Report on Form 10-K for the year ended January 31, 2015, which information is incorporated by reference herein and updated by the company’s Quarterly Reports on Form 10-Q. The company does not undertake any obligation or plan to update these forward-looking statements, even though its situation may change.

About Caleres: Caleres is a diverse portfolio of global brands, which fit people’s lives: Family, Healthy Living and Contemporary Fashion. Our products are available virtually everywhere - in the over 1,200 retail stores we operate, in hundreds of major department and specialty stores, on our branded ecommerce sites, and on many additional third-party retail websites. Famous Footwear and Famous.com serve as our Family brands. Our Contemporary Fashion brands include Sam Edelman, Franco Sarto, Vince, Via Spiga, Diane von Furstenberg, Fergie Footwear and Carlos Santana. Naturalizer, Dr. Scholl’s, LifeStride, Bzees and Ryka represent our Healthy Living brands. Combined, these brands help make Caleres a company with both a legacy and a mission. Our legacy is our more than 130 years of craftsmanship, our passion for fit and our business savvy, while our mission is to continue to inspire people to feel better feet first. Visit caleres.com to learn more about us.

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