Caleres, a leading footwear company with a diversified portfolio of consumer-driven brands, has been making strategic moves to navigate the evolving retail landscape and drive sustained growth. With a history spanning over a century, Caleres has established itself as a market leader, offering a wide range of footwear options to meet the diverse needs of consumers across various age groups and lifestyles.
Company History
Founded in 1878 as the Brown Shoe Company in St. Louis, Missouri, Caleres has undergone a remarkable transformation over the years. The company started as a small family-owned shoe business and quickly grew to become a leading producer and retailer of footwear in the United States. In the early 1900s, Caleres expanded its manufacturing capabilities and began producing shoes for major department stores and retailers. The company demonstrated resilience during the Great Depression by focusing on producing affordable, high-quality shoes for the mass market. During World War II, Caleres shifted production to manufacture shoes for the U.S. military, showcasing its adaptability to changing market conditions.
In the post-war era, Caleres continued its expansion by acquiring several regional shoe companies and growing its retail footprint with the Famous Footwear chain. The 1980s and 1990s saw further diversification of the company's brand portfolio through the acquisition of well-known footwear brands such as Naturalizer, Dr. Scholl's, and Sam Edelman. This strategic expansion allowed Caleres to cater to a broader customer base and strengthen its position in the industry.
The early 2000s presented new challenges for Caleres as consumer shopping habits shifted towards e-commerce. In response, the company invested heavily in its online presence and omni-channel capabilities, demonstrating its commitment to adapting to evolving consumer preferences. A significant milestone in the company's history came in 2015 when it changed its name from Brown Shoe Company to Caleres, reflecting its diverse portfolio of consumer-driven footwear brands.
Current Operations
Today, Caleres operates over 1,000 retail stores across North America under the Famous Footwear and Naturalizer brands, while also wholesaling its portfolio of brands to major retailers. The company's ability to weather industry disruptions and economic downturns through strategic acquisitions, operational improvements, and a relentless focus on meeting the evolving needs of its customers has solidified its position as a market leader in the footwear industry.
In recent years, Caleres has placed a strong emphasis on enhancing its digital capabilities and expanding its omnichannel presence. The company's e-commerce platforms, including its own branded websites and strategic partnerships with leading online retailers, have been instrumental in reaching consumers across various shopping channels. This diversified approach has enabled Caleres to adapt to the shifting consumer preferences and capitalize on the growing demand for seamless, multi-channel shopping experiences.
Financials and Liquidity
Financially, Caleres has maintained a solid footing, with a healthy balance sheet and strong liquidity position. As of August 3, 2024, the company reported $51.75 million in cash and cash equivalents and $146.50 million in borrowings under its revolving credit facility, providing ample flexibility to navigate market dynamics and pursue strategic initiatives.
For the most recent fiscal year (2024), Caleres reported revenue of $2.82 billion, net income of $171.39 million, operating cash flow of $200.15 million, and free cash flow of $150.53 million. In the most recent quarter (Q2 2024), the company's revenue was $683.32 million, with net income of $30.27 million, operating cash flow of $79.62 million, and free cash flow of $68.14 million. The year-over-year revenue change for Q2 2024 was -1.8%, primarily driven by lower wholesale sales in the Brand Portfolio segment.
The company's liquidity position remains strong, with a debt-to-equity ratio of 0.2417, available credit line of $344.10 million, current ratio of 1.09, and quick ratio of 0.32. Caleres maintains a revolving credit facility for working capital needs, with an aggregate amount available of up to $500 million, subject to borrowing base restrictions.
Business Segments
Caleres operates in two main business segments: Famous Footwear and Brand Portfolio.
The Famous Footwear segment is the company's retail division, operating 855 Famous Footwear stores across the United States and Canada as of August 3, 2024. This segment focuses on selling family brand name shoes, particularly in the athletic and casual footwear categories. In Q2 2024, Famous Footwear reported net sales of $420.3 million, up 1.5% from Q2 2023, although comparable store sales declined 2.9% due to decreased customer traffic. The segment's gross profit margin was 45.0%, down from 46.2% in Q2 2023, with operating earnings of $34.4 million.
The Brand Portfolio segment encompasses Caleres' wholesale and branded retail operations. It designs, sources, and distributes footwear products under various owned and licensed brand names, including Sam Edelman, Vionic, Naturalizer, and Dr. Scholl's. As of August 3, 2024, this segment operated 104 company-owned stores in North America and East Asia, along with 106 international franchise locations. In Q2 2024, the Brand Portfolio segment reported net sales of $285.5 million, down 5.1% from Q2 2023, primarily due to lower wholesale sales. However, the segment's gross profit margin increased to 42.7%, up from 41.3% in Q2 2023, driven by higher merchandise margins and a greater mix of retail sales. Operating earnings for the segment were $23.6 million in Q2 2024.
COVID-19 Response
Despite the challenges posed by the COVID-19 pandemic, Caleres has demonstrated resilience and agility. The company navigated through the disruptions by implementing cost-saving measures, optimizing its inventory, and strengthening its digital capabilities. These proactive measures have allowed Caleres to emerge from the pandemic in a stronger position, poised to capitalize on the recovering consumer demand.
Future Outlook
Looking ahead, Caleres remains focused on its strategic priorities, which include further enhancing its brand portfolio, expanding its international presence, and leveraging its omnichannel capabilities to drive sustainable growth. The company's recent appointment of Nancy Bitetto as the Senior Vice President of New York Brands, a move aimed at accelerating the growth and profitability of its contemporary and luxury footwear offerings, underscores its commitment to strategic brand development.
Moreover, Caleres' ongoing investment in its cloud-based Enterprise Resource Planning (ERP) system is expected to streamline its operations, improve data analytics, and enhance decision-making capabilities. While the initial implementation faced some challenges, particularly affecting the Brand Portfolio segment's wholesale and e-commerce channels, the company has taken proactive measures to address the issues and ensure a smoother transition going forward.
For the full year 2024, Caleres has revised its guidance, expecting sales to be down a low-single digit percent versus last year, or flat to down 2% excluding the impact of the 53rd week in 2023. Earnings per diluted share are projected to be $3.94 to $4.09, or adjusted earnings per diluted share of $4.00 to $4.15, including about $2 million in savings and excluding $3 million in one-time restructuring costs. The company anticipates a consolidated operating margin of 7.0% to 7.1% and capital expenditures of $50 million to $55 million. Famous Footwear is expected to close an additional 10 stores, ending the year with 850 stores.
For the third quarter of 2024, Caleres expects consolidated net sales to be flat to down 2%, with earnings per diluted share projected at $1.24 to $1.34, or adjusted earnings per diluted share of $1.30 to $1.40. The company also anticipates a cash restructuring charge of $3 million in Q3.
In conclusion, Caleres' diversified brand portfolio, digital-first approach, and strategic initiatives position the company well to navigate the evolving retail landscape and capitalize on emerging opportunities. As Caleres continues to execute its growth strategy, investors will be closely watching the company's ability to drive consistent financial performance and solidify its position as a leading player in the dynamic footwear industry.