AP NEWS

Caleres Reports Third Quarter 2018 Results

November 20, 2018

ST. LOUIS--(BUSINESS WIRE)--Nov 20, 2018--Caleres (NYSE: CAL)( caleres.com ), a diverse portfolio of global footwear brands, today reported third quarter 2018 financial results.

“Famous Footwear delivered its seventh consecutive year of positive back-to-school same-store-sales, while Brand Portfolio showed sales improvement of 8.5%, as our top brands continued to take consumer share in the market,” said Diane Sullivan, CEO, president and chairman of Caleres. “In addition, we announced the acquisition of Vionic, a strong consumer demand brand, which has demonstrated solid growth over the past six years and is expected to be accretive to adjusted EPS in 2019.

“We also continued to accelerate the transition to our in-house distribution center for Brand Portfolio. While our in-house facility is up and running efficiently, the third-party facility expense has been far greater than expected,” continued Sullivan. “In an effort to eliminate the potential for incremental expense going forward, we have committed to exiting this third-party facility immediately following fiscal 2018 shipping. Due to these expenses, and our recent Vionic acquisition, we are updating our 2018 adjusted earnings per share guidance.

“We now expect to report fiscal 2018 adjusted earnings per share of between $2.25 and $2.35, and this range includes approximately $0.05 of dilution related to Vionic interest and amortization expense. This acquisition – along with other actions we have taken this year – is part of our strategy to invest for continued success, and our plans remain on-track,” concluded Sullivan.

Third Quarter 2018 Results Versus 2017

Consolidated sales of $775.8 million. Famous Footwear same-store-sales were up 2.8%. Total sales of $448.8 million were down 5.1% as expected, as one week of back-to-school sales shifted into the second quarter of this year versus the third quarter of last year.Brand Portfolio sales of $327.1 million were up 8.5%, including Vionic. Gross profit was $310.6 million, while gross margin was 40.0% and adjusted gross margin was 40.3%. SG&A expense of $265.5 million represented 34.2% of sales. Operating earnings were $39.7 million and included $7.2 million of charges related to the previously announced transition of Allen Edmonds’ consumer-facing activities to St. Louis, the July acquisition of Blowfish Malibu, and the October acquisition of Vionic, while adjusted operating earnings were $46.9 million. Net earnings were $29.2 million, while diluted earnings per share were $0.67 and included $0.14 for charges related to the acquisitions of Allen Edmonds, Blowfish Malibu and Vionic. Adjusted net earnings of $34.9 million were up 1.6%, while adjusted diluted net earnings per share of $0.81 were up 1.3%, including approximately $0.02 of dilution related to Vionic interest and amortization expense.

First Nine Months of 2018 Results Versus 2017

Consolidated sales of $2,114.6 million. Famous Footwear same-store-sales were up 1.7%, while total sales were $1,241.6 million.Brand Portfolio sales of $872.9 million were up 4.1%. Gross profit was $878.6 million, while gross margin was 41.6% and adjusted gross margin was 41.7%. SG&A expense of $774.6 million represented 36.6% of sales. Operating earnings were $94.8 million and included $11.6 million of charges related to the acquisitions of Allen Edmonds, Blowfish Malibu and Vionic. Net earnings were $70.0 million, while diluted earnings per share were $1.62 and included $0.21 for charges related to the acquisitions of Allen Edmonds, Blowfish Malibu and Vionic. Adjusted net earnings of $79.1 million were up 9.1%, while adjusted diluted net earnings per share of $1.83 were up 8.9%.

Balance Sheet and Cash Flow

Cash and equivalents were $90.5 million and up $59.1 million year-over-year. There were $350.0 million of outstanding borrowings under the revolving credit facility, following the October 18 acquisition of Vionic. Inventory of $698.3 million was up 16.7% year-over-year and included $66.7 million of Vionic and Blowfish inventory. Capital expenditures of $38.7 million year to date were flat to last year.

* Excludes ~$0.36 of costs related to the acquisition and integration of Allen Edmonds, Blowfish Malibu and Vionic

Pension Presentation

Results for this year reflect the new accounting standard related to the presentation of retirement benefits, which impacted reported and adjusted 2017 operating income and margin. The effect of this new standard resulted in a shift of $2.5 million of retirement plan income from third quarter 2017 SG&A expense to other income, net. For the nine months of 2017, this amount was $7.6 million. There was no impact to net earnings or earnings per share for the third quarter or first nine months of 2017, due to the adoption of this standard.

Investor Conference Call

Caleres will host an investor conference call at 4:30 p.m. ET today, Tuesday, November 20. 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 1793378. 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 1793378 through Tuesday, November 27.

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, earnings per diluted share and return on invested capital 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.

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 and other factors; (ii) rapidly changing fashion trends and consumer preferences 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) foreign currency fluctuations; (vi) the ability to accurately forecast sales and manage inventory levels; (vii) cybersecurity threats or other major disruption to the Company’s information technology systems; (viii) customer concentration and increased consolidation in the retail industry; (ix) transitional challenges with acquisitions; (x) a disruption in the Company’s distribution centers; (xi) changes to tax laws, policies and treaties; (xii) the ability to recruit and retain senior management and other key associates; (xiii) compliance with applicable laws and standards with respect to labor, trade and product safety issues; (xiv) the ability to secure/exit leases on favorable terms; (xv) the ability to maintain relationships with current suppliers; and (xvi) the ability to attract, retain, and maintain good relationships with licensors and protect our intellectual property rights. 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 February 3, 2018, 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 footwear brands. 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 e-commerce sites, and on many additional third-party retail websites. Famous Footwear offers great casual and athletic brands for the entire family with convenient, curated, affordable collections. Sam Edelman keeps expressive women in step with the latest trends in a playful, whimsical way. Naturalizer shoes are beautiful from the inside out, with elegant simplicity and legendary fit re-imagined for today’s consumer. Allen Edmonds combines old world craft with new world technology to create luxe footwear for the discerning man who wants sophisticated, modern classics. Rounding out our family of brands are Vionic, Vince, Franco Sarto, Dr. Scholl’s Shoes, LifeStride, Via Spiga, Diane von Furstenberg, Blowfish Malibu, Bzees, Carlos by Carlos Santana, Circus by Sam Edelman, Fergie and Ryka. Combined, these brands make Caleres a company with both a legacy and a mission. Our legacy is our more than 140 years of craftsmanship and our passion for fit, while our mission is to continue to inspire people to feel good… feet first. Visit  caleres.com  to learn more about us.

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