17 Mar Caleres Sees Q4 Earnings Top Guidance
Caleres Inc., the parent of Famous Footwear, reported adjusted earnings in the fourth quarter that came in the high end of its expected range but delivered a cautious near-term outlook for 2017.
“Despite a promotional and challenging retail environment in the fourth quarter, we maintained our consistent approach of managing the areas under our control while continuing to rapidly respond to changing consumer shopping behaviors,” said Diane Sullivan, CEO, president and chairman of Caleres. “We also took proactive steps to continue the diversification of our portfolio with the acquisition of Allen Edmonds in December, which allowed us to rapidly increase our exposure in men’s footwear.”
“While we are confident about the long-term outlook for our diversified portfolio, we are taking a cautious view of the near-term, as we expect to see continued pressure in retail based on the current environment,” continued Sullivan. “However, as a company, we will remain forward looking and proactively manage outcomes, to deliver shareholder value in 2017.”
Fourth Quarter 2016 Results Versus 2015
Consolidated sales of $639.5 million were up 5.1 percent
Famous Footwear total sales of $367.5 million, up 1.9 percent
Same-store-sales up 0.3 percent
Famous.com sales increased nearly 40 percent to 8.2 percent of total sales
Brand Portfolio sales of $272.0 million were up 9.6 percent, including approximately six weeks of contribution from Allen Edmonds, which was acquired in December of 2016
Gross profit of $260.9 million
Gross margin of 40.8 percent, up 4 basis points
Famous Footwear gross margin of 44.0 percent was down 148 basis points, reflecting product mix shift within the boot category and sales growth at famous.com
Brand Portfolio gross margin of 36.4 percent was up nearly 260 basis points, benefitting from higher volume and improved mix
Charges and other items impacting fourth quarter 2016 net earnings and earnings per diluted share
$12.7 million, or $0.29 per diluted share, related to the acquisition, integration and reorganization of men’s brands
$3.3 million, or $0.08 per diluted share, related to Brand Portfolio business exits and restructuring
$4.9 million, or $0.12 per diluted share, related to impairment of note and account receivable
Net loss of $6.6 million, with a loss per diluted share of $0.16, including above charges and other items
Adjusted net earnings of $14.3 million were up 25.0 percent
Adjusted diluted earnings per share of $0.33, up 26.9 percent excluding above charges and other items. The company had guided to earnings in the range of 33 to 43 cents a share.
Fiscal 2016 Results Versus 2015
Consolidated sales of $2,579.4 million
Famous Footwear total sales of $1,590.1 million were up 1.1 percent
Same-store-sales up 0.6 percent
Famous.com sales increased more than 50 percent to 5.9 percent of total sales
Brand Portfolio sales of $989.3 million were down 1.5 percent, reflecting a significant shift away from the mass channel throughout 2016
Gross profit of $1,062.0 million
Gross margin of 41.2 percent, up 52 basis points
Famous Footwear gross margin of 44.2 percent was down 75 basis points, reflecting seasonal product mix shift and sales growth at famous.com
Brand Portfolio gross margin of 36.3 percent was up nearly 240 basis points, benefitting from better inventory management and a shift away from the lower margin mass channel
Operating earnings of $111.0 million, with operating margin of 4.3 percent
Adjusted operating earnings of $137.2 million were up 1.5 percent, excluding above charges and other items
Adjusted operating margin of 5.3 percent, up 8 basis points, excluding above charges and other items
Net earnings of $65.7 million, with diluted earnings per share of $1.52, including above charges and other items
Adjusted net earnings of $86.5 million were down 1.6 percent
Adjusted diluted EPS of $2.00 was flat, excluding above charges and other items in the fourth quarter of 2016 and a loss on early extinguishment of debt in 2015
Balance sheet and cash flow
Cash from operations of $183.6 million, up 23.1 percent
Borrowings against the revolving credit facility of $110 million, following Allen Edmonds acquisition
Inventory down 2.3 percent, excluding Allen Edmonds
Famous Footwear inventory down 5.1 percent, per store on a dollar basis
Brand Portfolio inventory up 1.8 percent, to support spring orders
Famous Footwear inventory down 5.1 percent, per store on a dollar basis
Brand Portfolio inventory up 1.8 percent, to support spring orders
Capital expenditures of $59.6 million, including completion and ramp up of Lebanon, Tennessee distribution center expansion in the fourth quarter
“For the fourth quarter, we delivered solid adjusted EPS improvement of 26.9 percent over last year, despite a highly promotional and challenging retail environment,” said Ken Hannah, chief financial officer of Caleres. “Throughout 2016, we continued investing in our business, delivered strong cash from operations of $183.6 million, and maintained the strength and flexibility of our balance sheet, even as we acquired Allen Edmonds.”
Outlook for 2017 all including Allen Edmonds
Consolidated net sales $2.7B to $2.8B
Famous Footwear same-store-sales Up low-single digits
Brand Portfolio sales Up high-teens
Gross margin Up 45 to 55 bps
SG&A as a percent of revenue Up 30 to 40 bps
Effective tax rate 31 percent to 33 percent
Adjusted earnings per diluted share $2.10 to $2.20