28 Aug Caleres Q2 Boosted by Higher Gross Margins
Caleres, formerly Brown Shoe, reported that second-quarter earnings, excluding a charge for debt extinguishment, rose 22.4 percent, to $22.1 million, or 50 cents per share, versus second quarter 2014 net earnings of $18.1 million, or 41 cents per diluted share. Analysts consensus estimate had been 44 cents a share.
Second quarter 2015 net earnings were $16.8 million, or 38 cents per diluted share, and included $5.3 million of after-tax expense related to the company’s debt extinguishment.
Sales of $637.8 million were slightly ahead of second quarter 2014 net sales of $635.9 million.
Gross margin was 41.2 percent, up approximately 40 basis points year-over-year, while operating margin was 5.6 percent.
“Today we reported a solid quarter, as expected, with improved sales, margins and adjusted earnings,” said Diane Sullivan, CEO, president and chairman of Caleres. “Total sales were up 2 percent, excluding Shoes.com, while gross and operating margin both expanded in the quarter. We also improved bottom-line performance by 22 percent, thanks to continued progress toward our long-term strategic initiatives.”
Second Quarter Highlights
Famous Footwear second quarter 2015 sales of $395.9 million were up 0.6 percent year-over-year, excluding Shoes.com, which was sold in December of 2014. For the quarter, same-store-sales were up 0.1 percent, with strong growth in canvas outweighing weakness in performance athletic product and sandals. During the quarter, 10 new stores were opened and six stores were closed.
Brand Portfolio sales of $242.0 million were up 4.4 percent in the second quarter, with performance in the quarter driven by a 14.1 percent improvement in Contemporary Fashion. Healthy Living sales were down 1.5 percent, as increases in wholesale sales were unable to offset weakness on the retail side, where the company operated nine fewer stores year-over-year.
Consolidated gross profit of $262.8 million was up 1.2 percent in the second quarter, while gross margin of 41.2 percent was up approximately 40 basis points year-over-year. SG&A for the second quarter was $227.1 million, representing 35.6 percent of net sales – down approximately 30 basis points versus the prior year. For the quarter, operating margins improved approximately 70 basis points year-over-year to 5.6 percent.
Inventory at the end of the second quarter was $641.1 million, down 2.5 percent from $657.7 million in the prior year. Famous Footwear inventory was down 0.7 percent on a per store basis, while Brand Portfolio inventory was down 3.4 percent. At quarter-end, Caleres had no borrowings against its revolving credit facility and had $129.3 million of cash and equivalents.
Financial Review and 2015 Outlook
“In the second quarter, we made steady progress toward achieving our full year earnings guidance, as we continued to drive margin expansion and further strengthened our balance sheet,” said Ken Hannah, chief financial officer of Caleres. “This progress has enabled us to accelerate investment in our long-term strategic growth initiatives.”