22 Nov Caleres’ Q3 Tops Wall Street Targets
Caleres continued its strong performance in the third quarter, reaching record quarterly sales and delivering another period of solid earnings. Sales grew 1.8 percent as a 7.6 percent sales increase in the Brand Portfolio segment offset a slight decline at Famous Footwear.
The family footwear chain achieved a net income of $39.2 million, or earnings per diluted share of $1.08. Adjusted net income was $42.0 million, or adjusted earnings per diluted share of $1.15. Notably, Caleres improved its inventory position sequentially with total inventory levels declining 15.8 percent from the second quarter 2022.
Adjusted EPS of $1.15 topped Wall Street’s consensus estimate of $1.12. Sales of $798.3 million exceeded Wall Street’s consensus estimate of $783.98 million.
“Caleres executed another strong operational and financial performance in the third quarter and closed the first nine months of the year with record earnings,” said Diane Sullivan, chairman and chief executive officer. “These results underscore the strength and versatility of our brands, highlight our compelling product and product creation power, and demonstrate the portfolio’s significantly enhanced agility and resilience during periods of macroeconomic uncertainty. We are particularly pleased that our Brand Portfolio segment achieved near-record third-quarter earnings and that Famous Footwear delivered a strong operating margin of 12.3 percent.”
“We are encouraged by the recent market share gains from our brands and expect to build on this progress as we drive forward by enhancing the digital experience and elevating our product design and offerings,” said Jay Schmidt, President. “As we move through the remaining months of 2022, and in light of the more challenging macroeconomic environment, we will be even more focused on controlling our spending, prioritizing inventory management and leaning into our competitive advantages in order to drive long-term shareholder value.”
Third Quarter 2022 Highlights
(13 weeks ended October 29, 2022, compared to 13 weeks ended October 30, 2021)
- Net sales were $798.3 million, up 1.8 percent from the third quarter of fiscal 2021;
- A 2.6 percent sales decline in the Famous Footwear segment, with comparable store sales down 0.8 percent;
- A 7.6 percent sales increase in the Brand Portfolio segment;
- Direct-to-consumer sales represented approximately 74 percent of total net sales;
- Gross profit was $339.9 million, while gross margin was 42.6 percent;
- A 44.7 percent gross margin in the Famous Footwear segment;
- A 37.9 percent gross margin in the Brand Portfolio segment;
- SG&A, as a percentage of sales, was 35.5 percent, 307 basis points higher than the third quarter of fiscal 2021;
- Net earnings of $39.2 million, or earnings per diluted share of $1.08, compared to net earnings of $59.6 million, or earnings per diluted share of $1.54 in the third quarter of fiscal 2021;
- Adjusted net earnings of $42.0 million, or adjusted earnings per diluted share of $1.15, compared to adjusted net earnings of $61.5 million, or adjusted earnings per diluted share of $1.59 in the third quarter of fiscal 2021;
- Trailing twelve-month adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $298.6 million; or 10.1 percent of sales;
- Inventory was up approximately 19.5 percent, in line with expectations, and 15.8 percent below the second quarter of 2022 representing significant sequential progress; and
- Returned $24.1 million to shareholders through dividends and share repurchases.
Capital Allocation Update
During the third quarter, Caleres continued to strategically invest in value-driving growth opportunities while at the same time returning $24.1 million to shareholders through share repurchases and dividend payments. Specifically, Caleres repurchased 838,025 shares of common stock, at a total cost of $21.6 million and an average share price of $25.72. Year-to-date, the company has repurchased 2.6 million shares, representing approximately 7 percent of shares outstanding, at an average share price of $24.11. In addition to buybacks, Caleres returned $2.5 million to shareholders through its recurring quarterly cash dividend during the third quarter.
Fiscal Year 2022 Outlook
“Looking ahead, we are confident that Caleres is well-positioned to close 2022 with record-setting earnings,” said Sullivan. “We believe our curated family of brands, powerful platform and robust capabilities in the areas of brand building, production creation, marketing, and logistics will enable us to navigate any market environment. In short, the Caleres team is enthusiastic about its prospects for long-term profitability and confident in our ability to generate strong levels of cash and unlock further value for our shareholders.”
Given the strong execution to date and expectations for the fourth quarter, Caleres is tightening its fiscal year 2022 earnings outlook at the upper end of its previous guidance range.
Specifically, the company expects adjusted earnings per share to be in the range of $4.30 and $4.40, representing another year of record earnings for the organization. In addition, the company is reiterating its full-year sales outlook, with the range still expected to be between 4 percent and 6 percent as compared to fiscal year 2021.
The company anticipates continued improvement in its inventory position and expects to end fiscal year 2022 with inventory up mid-single digit percent as compared to fiscal year 2021.