8-K: Caleres Reports Mixed Q4 and Full Year 2024 Results, Provides Cautious 2025 Outlook

Caleres reports a decrease in Q4 and full-year sales and earnings, while providing a conservative outlook for 2025 and announcing the acquisition of Stuart Weitzman.

Summary

• Caleres reported fourth-quarter sales of $639.2 million, an 8.3% decrease year-over-year.
• Full-year sales reached $2,722.7 million, a 3.4% decrease year-over-year.
• Fourth-quarter earnings per diluted share were $0.15, while full-year earnings per diluted share were $3.09.
• Adjusted earnings per diluted share for the fourth quarter were $0.33, and for the full year, $3.30.
• The company returned $74.7 million to shareholders in fiscal 2024 through share repurchases and dividends.
• Caleres expects fiscal 2025 consolidated net sales to be down 1% to up 1% compared to fiscal 2024.
• Fiscal 2025 earnings per diluted share are expected to be between $2.80 and $3.20.
• The guidance excludes the acquisition of Stuart Weitzman, expected to close in the summer of 2025 for $105 million.
• Direct-to-consumer sales represented about 73% of total net sales in Q4 and 72% for the full year.
• Borrowings under the asset-based revolving credit facility were $219.5 million at the end of the period.

Sentiment

Score: 5

Explanation: The sentiment is neutral to slightly negative. While the company highlights strategic initiatives and the Stuart Weitzman acquisition, the financial results show a decline in sales and earnings. The conservative outlook for 2025 also tempers any positive sentiment.

Positives

• Caleres returned $74.7 million to shareholders through share repurchases and dividends.
• The company expects 75% of its Brand Portfolio sourcing to be outside of China by the second half of 2025.
• The company is acquiring Stuart Weitzman for $105 million, expected to close in the summer of 2025.
• Full year gross profit margin increased 10 basis points to 44.9%.

Negatives

• Fourth-quarter sales decreased by 8.3% year-over-year to $639.2 million.
• Full-year sales decreased by 3.4% year-over-year to $2,722.7 million.
• Fourth-quarter earnings per diluted share decreased to $0.15 from $1.57 in the prior year.
• Full-year earnings per diluted share decreased to $3.09 from $4.80 in the prior year.
• Famous Footwear segment net sales decreased 9.6% in Q4, with comparable sales down 2.9%.
• Brand Portfolio segment net sales decreased 7.2% in Q4.
• SG&A expenses increased to 40.9% of net sales in Q4, up 180 basis points compared to the prior year.
• Inventory is up 4.5% compared to 2023.

Risks

• Changes in United States and international trade policies, including tariffs and trade restrictions, could impact the company.
• Changing consumer demands influenced by economic conditions may affect sales.
• Inflationary pressures and supply chain disruptions pose ongoing challenges.
• Rapidly changing consumer preferences and fashion trends require constant adaptation.
• Supplier and customer concentration could create vulnerabilities.
• Intense competition within the footwear industry may impact market share.
• Foreign currency fluctuations could affect financial results.
• Political and economic conditions in countries where the company manufactures could disrupt inventory flow.
• Cybersecurity threats and disruptions to information technology systems are a concern.
• Transitional challenges with acquisitions and divestitures could arise.
• The ability to accurately forecast sales and manage inventory levels is critical.
• Disruptions in the company's distribution centers could impact operations.
• Recruiting and retaining senior management and key associates is essential.
• Securing favorable lease terms is important for profitability.
• Maintaining relationships with current suppliers is necessary.
• Changes to tax laws, policies, and treaties could affect financial results.
• Compliance with labor, trade, and product safety laws is required.
• Attracting and retaining licensors and protecting intellectual property rights are important.

Future Outlook

Caleres expects fiscal 2025 consolidated net sales to be down 1% to up 1% compared to fiscal 2024, with earnings per diluted share of $2.80 to $3.20. This guidance excludes the acquisition of Stuart Weitzman, which is expected to close in the summer of 2025.

Management Comments

• Our fourth quarter earnings were at the high end of our most recent guidance.
• We gained market share in womens fashion footwear, our Lead Brands outperformed, and we grew our sneaker penetration.
• Famous Footwears business softened in the quarter, but we maximized key selling periods.
• We invested to support our long-term growth while continuing to evolve our supply chain and further mitigate the impact of additional tariffs.
• While 2024 overall was disappointing relative to our initial expectations, we made meaningful progress in advancing our strategic priorities and positioning our brands for sustainable growth.
• As we look forward to 2025 and the macroeconomic environment with persistent inflation and newer tariffs, we believe it is prudent to take a conservative view for the year.
• Our Lead Brands remain strong and are collectively gaining market share, and we have expanded our customer reach with greater focus on the significant opportunity we see in contemporary.
• The hard work of our talented teams and the impact of new leadership across several areas of our business, along with strategic brand partnerships and the planned acquisition of Stuart Weitzman, position us well to drive significant value in 2025 and beyond.

Industry Context

The announcement reflects the challenges faced by the footwear industry, including changing consumer preferences, inflationary pressures, and supply chain disruptions. The acquisition of Stuart Weitzman indicates a strategic move to strengthen Caleres' brand portfolio and market position. The focus on shifting sourcing outside of China aligns with broader industry trends to mitigate tariff risks and diversify supply chains.

Comparison to Industry Standards

• Comparing Caleres' performance to competitors like Steven Madden (SHOO) or Deckers Outdoor Corporation (DECK) would provide a better understanding of its relative position.
• Steven Madden has shown strong growth in recent years, driven by its diverse brand portfolio and effective marketing strategies.
• Deckers, known for brands like UGG and Hoka, has benefited from the popularity of its comfort-focused footwear.
• Caleres' focus on direct-to-consumer sales aligns with industry trends, but its ability to maintain profitability in this channel will be crucial.
• The planned acquisition of Stuart Weitzman is similar to Tapestry's (TPR) acquisition of Capri Holdings, indicating a trend of consolidation in the fashion and footwear industry.

Stakeholder Impact

• Shareholders may be concerned about the decline in sales and earnings, but reassured by the dividend and share repurchase program.
• Employees may experience uncertainty due to restructuring and expense reduction initiatives.
• Customers may see changes in product offerings and sourcing as the company evolves its supply chain.
• Suppliers may be affected by the shift in sourcing outside of China.
• Creditors should monitor the company's debt levels and ability to generate cash flow.

Next Steps

• Complete the acquisition of Stuart Weitzman in the summer of 2025.
• Continue to evolve the supply chain and mitigate the impact of additional tariffs.
• Focus on strategic priorities to position brands for sustainable growth.
• Monitor business performance and market conditions to evaluate opportunities for free cash flow.

Key Dates

Keywords

Caleres, footwear, sales, earnings, guidance, acquisition, Stuart Weitzman, dividends, share repurchases, retail