Caleres reports third quarter 2021 results, raises full year outlook
St. louis--(business wire)--caleres (nyse: cal)(caleres.com), operator of a powerful portfolio of consumer-centric footwear brands, today reported financial results for the third quarter ended october 30, 2021. during the quarter, caleres continued to capitalize on strong consumer demand trends, achieving sequential revenue growth, recording strong gross margins, and delivering the highest level of quarterly earnings in company history. in addition, the company made further progress toward its balance sheet initiatives, enhancing its cash position, reducing its debt levels and securing more advantageous terms on its asset-based credit facility. “caleres achieved another record performance in the quarter just ended, driven principally by continued, exceptional upward momentum in our famous footwear business,” said diane sullivan, chairman and chief executive officer. “as robust consumer demand dynamics continue to accelerate, we fully expect the ongoing recovery in the brand portfolio to be an increasingly strong complement to the ongoing success at famous footwear in the quarters ahead.” third quarter 2021 highlights (13-weeks ended october 30, 2021 compared to 13-weeks ended october 31, 2020) net sales were $784.2 million, up 21.1 percent from the third quarter of fiscal 2020 a 26.3 percent sales increase in the famous footwear segment; a 12.3 percent sales increase in the brand portfolio segment; direct-to-consumer sales represented 73.5 percent of total net sales a 26.3 percent sales increase in the famous footwear segment; a 12.3 percent sales increase in the brand portfolio segment; direct-to-consumer sales represented 73.5 percent of total net sales gross profit was $335.4 million, while gross margin was 42.8 percent, or a 308-basis point improvement over third quarter 2020; a 47.6 percent gross margin in the famous footwear segment; a 32.9 percent gross margin in the brand portfolio segment; a 47.6 percent gross margin in the famous footwear segment; a 32.9 percent gross margin in the brand portfolio segment; sg&a expense of $254.0 million, or 32.4 percent of total net sales, down from 36.6 percent of total net sales in the third quarter of fiscal 2020; net income of $59.6 million, or earnings of $1.54 per diluted share, compared to net income of $14.4 million, or earnings of $0.38 per diluted share, in the third quarter of fiscal 2020. earnings of $1.54 per share includes $0.05 for the below items: fair value adjustment of $0.04 associated with the mandatory purchase obligation for blowfish malibu; and loss on early extinguishment of debt of $0.01 related to the redemption of $100 million of senior notes and the amendment to the credit facility; fair value adjustment of $0.04 associated with the mandatory purchase obligation for blowfish malibu; and loss on early extinguishment of debt of $0.01 related to the redemption of $100 million of senior notes and the amendment to the credit facility; adjusted net income was approximately $61.5 million, or adjusted earnings of $1.59 per diluted share compared to adjusted net income of $18.2 million, or adjusted earnings of $0.48 per diluted share, in the third quarter of fiscal 2020; generated $54.2 million in cash from operations and ended the third quarter with $74.8 million of cash on hand; inventory levels were up 7.1 percent, year-over-year, with in-transit inventory 3.1x higher than the third quarter of 2020, reflecting the ongoing disruptions in the global supply chain; ended the third quarter with $274.6 million of short-term debt; and returned $2.7 million to shareholders during the quarter through its long-standing and uninterrupted quarterly dividend. capital structure as previously indicated, during the third quarter, caleres renegotiated and renewed the terms of its asset-based credit facility. the terms of the new facility, which was restored to pre-covid terms, includes a 5-year extension on the maturity date and features a reduction in the interest rate. this new agreement more accurately reflects the company’s significantly improved capital structure, accelerated recovery in the footwear market and more positive business outlook. caleres notified its bondholders that it plans to redeem the remaining $100 million of its senior notes in january of 2022 – shifting that higher-cost debt to the revolving credit facility and extinguishing all of the company’s remaining long-term debt. these actions, coupled with the company’s proactive debt reduction activities in recent quarters, will result in approximately a $12 million decline in annual interest expense – bolstering its financial foundation further and driving long-term value for its shareholders. outlook “as we progress through the remainder of the year and head into 2022, we expect supply chain challenges to persist,” said sullivan. “however, our global associates have taken quick action – leaning into our capabilities; optimizing our inventory position; and diversifying and leveraging our sourcing model to help offset the impacts caused by the ongoing disruptions. we believe we are well-positioned to navigate this dynamic market environment and we are confident in our ability to utilize our diversified brand model, achieve our short and long-term strategic objectives, and continue to create value for our shareholders.” with the momentum continuing in its underlying business, the company now expects record adjusted earnings per share between $3.80 and $3.90 for fiscal year 2021. investor conference call caleres will host an investor conference call at 5:00 p.m. et today, thursday, november 18. the webcast and associated 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 4368498. 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 4368498 through thursday, december 2. definitions all references in this press release, outside of the condensed consolidated financial statements that follow, unless otherwise noted, related to net earnings (loss) attributable to caleres, inc. and diluted earnings (loss) per common share attributable to caleres, inc. shareholders, are presented as net earnings (loss) and earnings (loss) 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 (loss), net earnings (loss) and earnings (loss) 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. 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) the coronavirus pandemic and its adverse impact on our business operations, store traffic and financial condition (ii) changing consumer demands, which may be influenced by consumers' disposable income, which in turn can be influenced by general economic conditions and other factors; (iii) rapidly changing consumer preferences and purchasing patterns and fashion trends; (iv) intense competition within the footwear industry; (v) customer concentration and increased consolidation in the retail industry; (vi) foreign currency fluctuations; (vii) impairment charges resulting from a long-term decline in our stock price; (viii) 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; (ix) cybersecurity threats or other major disruption to the company’s information technology systems; (x) the ability to accurately forecast sales and manage inventory levels; (xi) a disruption in the company’s distribution centers; (xii) the ability to recruit and retain senior management and other key associates; (xiii) the ability to maintain relationships with current suppliers; (xiv) the ability to secure/exit leases on favorable terms; (xv) transitional challenges with acquisitions and divestitures; (xvi) changes to tax laws, policies and treaties; (xvii) compliance with applicable laws and standards with respect to labor, trade and product safety issues; and (xviii) the ability to attract, retain, and maintain good relationships with licensors and protect our intellectual property rights. about caleres caleres is a diverse portfolio of global footwear brands. our products are available virtually everywhere - in the nearly 1,000 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, blowfish malibu, bzees, circus by sam edelman 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 great… feet first. visit caleres.com to learn more about us. schedule 1 caleres, inc. condensed consolidated statements of earnings (loss) (unaudited) thirteen weeks ended thirty-nine weeks ended ($ thousands, except per share data) october 30, 2021 october 31, 2020 october 30, 2021 october 31, 2020 net sales $ 784,156 $ 647,480 $ 2,098,323 $ 1,546,111 cost of goods sold 448,805 390,508 1,165,792 984,621 gross profit 335,351 256,972 932,531 561,490 selling and administrative expenses 254,033 236,901 757,070 663,425 impairment of goodwill and intangible assets — — — 262,719 restructuring and other special charges, net — — 13,482 65,625 operating earnings (loss) 81,318 20,071 161,979 (430,279 ) interest expense, net (5,069 ) (10,881 ) (28,803 ) (33,747 ) loss on early extinguishment of debt (649 ) — (649 ) — other income, net 3,844 5,461 11,533 12,718 earnings (loss) before income taxes 79,444 14,651 144,060 (451,308 ) income tax (provision) benefit (19,759 ) 275 (39,838 ) 89,393 net earnings (loss) 59,685 14,926 104,222 (361,915 ) net earnings attributable to noncontrolling interests 63 509 1,057 223 net earnings (loss) attributable to caleres, inc. $ 59,622 $ 14,417 $ 103,165 $ (362,138 ) basic earnings (loss) per common share attributable to caleres, inc. shareholders $ 1.56 $ 0.38 $ 2.70 $ (9.67 ) diluted earnings (loss) per common share attributable to caleres, inc. shareholders $ 1.54 $ 0.38 $ 2.68 $ (9.67 ) schedule 2 caleres, inc. condensed consolidated balance sheets (unaudited) ($ thousands) october 30, 2021 october 31, 2020 january 30, 2021 assets cash and cash equivalents $ 74,772 $ 124,330 $ 88,295 receivables, net 161,892 141,059 126,994 inventories, net 543,218 507,365 487,955 prepaid expenses and other current assets 82,816 99,401 79,312 total current assets 862,698 872,155 782,556 lease right-of-use assets 500,308 601,574 554,303 property and equipment, net 155,516 189,207 172,437 goodwill and intangible assets, net 230,625 267,074 240,071 other assets 125,411 97,050 117,683 total assets $ 1,874,558 $ 2,027,060 $ 1,867,050 liabilities and equity borrowings under revolving credit agreement $ 175,000 $ 300,000 $ 250,000 mandatory purchase obligation - blowfish malibu 54,558 30,146 39,134 current portion of long-term debt 99,598 — — trade accounts payable 352,084 285,582 280,501 lease obligations 128,151 156,200 153,060 other accrued expenses 260,669 187,980 182,814 total current liabilities 1,070,060 959,908 905,509 noncurrent lease obligations 452,786 556,343 518,942 long-term debt — 198,736 198,851 other liabilities 45,967 50,418 39,894 total other liabilities 498,753 805,497 757,687 total caleres, inc. shareholders’ equity 301,098 256,671 200,247 noncontrolling interests 4,647 4,984 3,607 total equity 305,745 261,655 203,854 total liabilities and equity $ 1,874,558 $ 2,027,060 $ 1,867,050 schedule 3 caleres, inc. condensed consolidated statements of cash flows (unaudited) thirty-nine weeks ended ($ thousands) october 30, 2021 october 31, 2020 operating activities: net cash provided by operating activities $ 189,728 $ 101,766 investing activities: purchases of property and equipment (10,437 ) (12,016 ) capitalized software (4,122 ) (3,525 ) net cash used for investing activities (14,559 ) (15,541 ) financing activities: borrowings under revolving credit agreement 363,000 340,500 repayments under revolving credit agreement (438,000 ) (315,500 ) redemption of senior notes (100,000 ) — dividends paid (8,011 ) (8,148 ) debt issuance costs (1,190 ) — acquisition of treasury stock — (23,348 ) issuance of common stock under share-based plans, net (3,779 ) (1,078 ) contributions by noncontrolling interests, net — 1,500 other (676 ) (980 ) net cash used for financing activities (188,656 ) (7,054 ) effect of exchange rate changes on cash and cash equivalents (36 ) (59 ) (decrease) increase in cash and cash equivalents (13,523 ) 79,112 cash and cash equivalents at beginning of period 88,295 45,218 cash and cash equivalents at end of period $ 74,772 $ 124,330 schedule 4 caleres, inc. reconciliation of net earnings (loss) and diluted earnings (loss) per share (gaap basis) to adjusted net earnings (loss) and adjusted diluted earnings (loss) per share (non-gaap basis) (unaudited) thirteen weeks ended october 30, 2021 october 31, 2020 pre-tax net earnings pre-tax net earnings impact of attributable diluted impact of attributable diluted charges/other to caleres, earnings charges/other to caleres, earnings ($ thousands, except per share data) items inc. per share items inc. per share gaap earnings $ 59,622 $ 1.54 $ 14,417 $ 0.38 charges/other items: fair value adjustment to blowfish purchase obligation $ 1,918 1,424 0.04 $ 5,124 3,805 0.10 loss on early extinguishment of debt 649 482 0.01 — — — total charges/other items $ 2,567 $ 1,906 $ 0.05 $ 5,124 $ 3,805 $ 0.10 adjusted earnings $ 61,528 $ 1.59 $ 18,222 $ 0.48 (unaudited) thirty-nine weeks ended october 30, 2021 october 31, 2020 net net (loss) pre-tax earnings pre-tax earnings impact of attributable diluted impact of attributable diluted (loss) charges/other to caleres, earnings charges/other to caleres, earnings ($ thousands, except per share data) items inc. per share items inc. per share gaap earnings (loss) $ 103,165 $ 2.68 $ (362,138 ) $ (9.67 ) charges/other items: fair value adjustment to blowfish purchase obligation $ 15,423 11,454 0.30 $ 14,946 11,098 0.30 brand portfolio - business exits 13,482 11,927 0.31 1,598 1,187 0.03 deferred tax valuation allowances — 3,294 0.08 — — — loss on early extinguishment of debt 649 482 0.01 — — — goodwill and intangible asset impairment charges — — — 262,719 218,506 5.84 covid-19-related expenses (1) — — — 99,040 78,047 2.08 total charges/other items $ 29,554 $ 27,157 $ 0.70 $ 378,303 $ 308,838 $ 8.25 adjusted earnings (loss) $ 130,322 $ 3.38 $ (53,300 ) $ (1.42 ) ________________________________________ (1) represents costs associated with the economic impact of the covid‑19 pandemic, primarily consisting of impairment charges associated with property and equipment and lease right-of-use assets, inventory markdowns, expenses associated with factory order cancellations, provision for expected credit losses and severance. schedule 5 caleres, inc. summary financial results by segment summary financial results (unaudited) thirteen weeks ended famous footwear brand portfolio eliminations and other consolidated october 30, october 31, october 30, october 31, october 30, october 31, october 30, october 31, ($ thousands) 2021 2020 2021 2020 2021 2020 2021 2020 net sales $ 494,660 $ 391,706 $ 300,513 $ 267,587 $ (11,017) $ (11,813) $ 784,156 $ 647,480 gross profit 235,487 160,019 98,898 94,312 966 2,641 335,351 256,972 adjusted gross profit 235,487 160,019 98,898 94,312 966 2,641 335,351 256,972 gross profit rate 47.6 % 40.9 % 32.9 % 35.2 % (8.8) % (22.4) % 42.8 % 39.7 % adjusted gross profit rate 47.6 % 40.9 % 32.9 % 35.2 % (8.8) % (22.4) % 42.8 % 39.7 % operating earnings (loss) 87,375 27,845 11,383 7,304 (17,440) (15,078) 81,318 20,071 adjusted operating earnings (loss) 87,375 27,845 11,383 7,304 (17,440) (15,078) 81,318 20,071 operating earnings (loss) % 17.7 % 7.1 % 3.8 % 2.7 % n/m 127.6 10.4 % 3.1 % adjusted operating earnings (loss) % 17.7 % 7.1 % 3.8 % 2.7 % n/m 127.6 10.4 % 3.1 % same-store sales % (on a 13-week basis) 26.5 % (9.1) % 45.8 % (41.0) % — % — % — % — % number of stores 905 925 90 197 — — 995 1,122 n/m – not meaningful reconciliation of adjusted results (non-gaap) (unaudited) thirteen weeks ended famous footwear brand portfolio eliminations and other consolidated october 30, october 31, october 30, october 31, october 30, october 31, october 30, october 31, ($ thousands) 2021 2020 2021 2020 2021 2020 2021 2020 gross profit $ 235,487 $ 160,019 $ 98,898 $ 94,312 $ 966 $ 2,641 $ 335,351 $ 256,972 charges/other items: covid-19-related expenses — — — — — — — — total charges/other items — — — — — — — — adjusted gross profit $ 235,487 $ 160,019 $ 98,898 $ 94,312 $ 966 $ 2,641 $ 335,351 $ 256,972 operating earnings (loss) $ 87,375 $ 27,845 $ 11,383 $ 7,304 $ (17,440 ) $ (15,078 ) $ 81,318 $ 20,071 charges/other items: covid-19-related expenses — — — — — — — — total charges/other items — — — — — — — — adjusted operating earnings (loss) $ 87,375 $ 27,845 $ 11,383 $ 7,304 $ (17,440 ) $ (15,078 ) $ 81,318 $ 20,071 schedule 5 caleres, inc. summary financial results by segment summary financial results (unaudited) thirty-nine weeks ended famous footwear brand portfolio eliminations and other consolidated october 30, october 31, october 30, october 31, october 30, october 31, october 30, october 31, ($ thousands) 2021 2020 2021 2020 2021 2020 2021 2020 net sales $ 1,346,413 $ 916,893 $ 789,832 $ 668,447 $ (37,922) $ (39,229) $ 2,098,323 $ 1,546,111 gross profit 642,715 348,267 287,791 211,707 2,025 1,516 932,531 561,490 adjusted gross profit 642,715 354,225 287,791 240,763 2,025 1,516 932,531 596,504 gross profit rate 47.7 % 38.0 % 36.4 % 31.7 % (5.3) % (3.9) % 44.4 % 36.3 % adjusted gross profit rate 47.7 % 38.6 % 36.4 % 36.0 % (5.3) % (3.9) % 44.4 % 38.6 % operating earnings (loss) 220,746 (38,651) 25,116 (352,556) (83,883) (39,072) 161,979 (430,279) adjusted operating earnings (loss) 220,746 (16,100) 38,598 (12,386) (83,883) (38,436) 175,461 (66,922) operating earnings (loss) % 16.4 % (4.2) % 3.2 % (52.7) % n/m 99.6 % 7.7 % (27.8) % adjusted operating earnings (loss) % 16.4 % (1.8) % 4.9 % (1.9) % n/m 98.0 % 8.4 % (4.3) % same-store sales % (on a 39-week basis) 11.5 % 3.0 % 24.3 % (32.3) % — % — % — % — % number of stores 905 925 90 197 — — 995 1,122 n/m – not meaningful reconciliation of adjusted results (non-gaap) (unaudited) thirty-nine weeks ended famous footwear brand portfolio eliminations and other consolidated october 30, october 31, october 30, october 31, october 30, october 31, october 30, october 31, ($ thousands) 2021 2020 2021 2020 2021 2020 2021 2020 gross profit $ 642,715 $ 348,267 $ 287,791 $ 211,707 $ 2,025 $ 1,516 $ 932,531 $ 561,490 charges/other items: covid-19-related expenses — 5,958 — 27,458 — — — 33,416 brand portfolio - business exits — — — 1,598 — — — 1,598 total charges/other items — 5,958 — 29,056 — — — 35,014 adjusted gross profit $ 642,715 $ 354,225 $ 287,791 $ 240,763 $ 2,025 $ 1,516 $ 932,531 $ 596,504 operating earnings (loss) $ 220,746 $ (38,651 ) $ 25,116 $ (352,556 ) $ (83,883 ) $ (39,072 ) $ 161,979 $ (430,279 ) charges/other items: goodwill and intangible asset impairment charges — — — 262,719 — — — 262,719 covid-19-related expenses — 22,551 — 75,853 — 636 — 99,040 brand portfolio - business exits — — 13,482 1,598 — — 13,482 1,598 total charges/other items — 22,551 13,482 340,170 — 636 13,482 363,357 adjusted operating earnings (loss) $ 220,746 $ (16,100 ) $ 38,598 $ (12,386 ) $ (83,883 ) $ (38,436 ) $ 175,461 $ (66,922 ) schedule 6 caleres, inc. basic and diluted earnings (loss) per share reconciliation (unaudited) thirteen weeks ended thirty-nine weeks ended october 30, october 31, october 30, october 31, 2021 2020 2021 2020 ($ thousands, except per share data) net earnings (loss) attributable to caleres, inc.: net earnings (loss) $ 59,685 $ 14,926 $ 104,222 $ (361,915 ) net earnings attributable to noncontrolling interests (63 ) (509 ) (1,057 ) (223 ) net earnings (loss) attributable to caleres, inc. 59,622 14,417 103,165 (362,138 ) net earnings allocated to participating securities (2,140 ) (512 ) (3,737 ) — net earnings (loss) attributable to caleres, inc. after allocation of earnings to participating securities $ 57,482 $ 13,905 $ 99,428 $ (362,138 ) basic and diluted common shares attributable to caleres, inc.: basic common shares 36,889 36,554 36,825 37,439 dilutive effect of share-based awards 457 176 294 — diluted common shares attributable to caleres, inc. 37,346 36,730 37,119 37,439 basic earnings (loss) per common share attributable to caleres, inc. shareholders $ 1.56 $ 0.38 $ 2.70 $ (9.67 ) diluted earnings (loss) per common share attributable to caleres, inc. shareholders $ 1.54 $ 0.38 $ 2.68 $ (9.67 ) schedule 7 caleres, inc. basic and diluted adjusted earnings (loss) per share reconciliation (unaudited) thirteen weeks ended thirty-nine weeks ended october 30, october 31, october 30, october 31, 2021 2020 2021 2020 ($ thousands, except per share data) adjusted net earnings (loss) attributable to caleres, inc.: adjusted net earnings (loss) $ 61,591 $ 18,731 $ 131,379 $ (53,077 ) net earnings attributable to noncontrolling interests (63 ) (509 ) (1,057 ) (223 ) adjusted net earnings (loss) attributable to caleres, inc. 61,528 18,222 130,322 (53,300 ) net earnings allocated to participating securities (2,208 ) (647 ) (4,729 ) — adjusted net earnings (loss) attributable to caleres, inc. after allocation of earnings to participating securities $ 59,320 $ 17,575 $ 125,593 $ (53,300 ) basic and diluted common shares attributable to caleres, inc.: basic common shares 36,889 36,554 36,825 37,439 dilutive effect of share-based awards 457 176 294 — diluted common shares attributable to caleres, inc. 37,346 36,730 37,119 37,439 basic adjusted earnings (loss) per common share attributable to caleres, inc. shareholders $ 1.61 $ 0.48 $ 3.41 $ (1.42 ) diluted adjusted earnings (loss) per common share attributable to caleres, inc. shareholders $ 1.59 $ 0.48 $ 3.38 $ (1.42 )
