On December 5, 2024, Caleres Inc (CAL, Financial) released its 8-K filing, detailing its financial performance for the third quarter of 2024. The company, a leading footwear retailer in the United States, operates through two main segments: Famous Footwear and Brand Portfolio. Despite efforts to drive growth, Caleres reported a decline in sales and earnings, prompting a revision of its fiscal 2024 outlook.
Performance Overview and Challenges
Caleres Inc (CAL, Financial) reported third-quarter sales of $740.9 million, marking a 2.8% decrease compared to the same period last year. This figure fell short of the analyst estimate of $751.36 million. The Famous Footwear segment experienced a 4.8% decline in sales, although comparable store sales rose by 2.5%. Conversely, the Brand Portfolio segment saw a modest increase of 0.7% in sales.
The company's gross margin rate decreased by 55 basis points year-on-year to 44.1%. Reported earnings per diluted share were $1.19, with adjusted earnings per diluted share at $1.23. Both figures were below the estimated EPS of $1.38. These results highlight the challenges Caleres faces, including softer seasonal demand, late product receipts, and issues in the Chinese market.
Financial Achievements and Industry Context
Despite the challenges, Caleres generated third-quarter EBITDA of $71.4 million. The company's ability to maintain a positive EBITDA is crucial in the retail-cyclical industry, where economic fluctuations can significantly impact consumer spending. Caleres' focus on aligning expenses with expected sales and investing in high-return areas is a strategic move to navigate the current market conditions.
Key Financial Metrics
Caleres continued its capital allocation strategy by repurchasing approximately 1.5 million shares for $50 million during the quarter. The company aims to reduce debt, expecting borrowings under its asset-based revolving credit facility to be less than $100 million by the end of 2026. This focus on debt reduction is vital for maintaining financial stability and flexibility.
Commentary and Strategic Outlook
“The third quarter saw progress toward our strategy highlighted by the Brand Portfolio delivering growth, Famous Footwear delivering positive comparable store sales, and both segments increasing market share. That said, performance was below our expectations reflecting softer seasonal demand in the boot category, late receipts of key athletic product at Famous Footwear, and a discrete customer credit issue that impacted shipments. In addition, our business in China was also weaker than planned,” said Jay Schmidt, President and Chief Executive Officer.
Caleres has revised its fiscal 2024 outlook, anticipating continued sales trends and pressure on gross margins due to excess inventory. The company remains committed to executing its strategic plan and driving shareholder value in the long term.
Analysis and Conclusion
Caleres Inc (CAL, Financial) faces significant challenges in the current retail environment, with declining sales and earnings falling short of expectations. However, the company's strategic initiatives, such as focusing on market share growth and expense alignment, are steps in the right direction. For value investors, Caleres' efforts to reduce debt and invest in growth opportunities may present potential long-term benefits, despite the near-term hurdles.
Explore the complete 8-K earnings release (here) from Caleres Inc for further details.
