8-K: Caleres Reports Strong Q4 and Full Year 2023 Results, Provides Upbeat 2024 Guidance

Caleres achieved a 32% year-over-year increase in adjusted earnings per share in the fourth quarter and anticipates flat to 2% net sales growth for fiscal year 2024.

Summary

• Caleres reported its fourth quarter and full year 2023 financial results on March 19, 2024.
• The company's fourth quarter adjusted earnings per share increased by 32% year-over-year to $0.86.
• Caleres achieved its third consecutive year of adjusted earnings per share exceeding $4.00.
• The Brand Portfolio segment saw a 4.5% increase in net sales and a 660 basis point improvement in gross margin in the fourth quarter.
• The Brand Portfolio segment also achieved record annual adjusted operating earnings of over $148 million.
• Famous Footwear experienced a 1.5% decline in net sales in the fourth quarter, with comparable sales down 5.9% on a 13-week basis.
• For the full year, net sales decreased by 5.1% to $2.82 billion.
• The company reduced its revolver borrowings by $40 million in the fourth quarter and over $125 million from fiscal 2022.
• Caleres expects fiscal 2024 net sales to be flat to up 2% compared to fiscal 2023.
• The company anticipates fiscal 2024 earnings per share to be between $4.30 and $4.60.

Sentiment

Score: 7

Explanation: The document presents a generally positive outlook with strong performance in the Brand Portfolio segment and a positive earnings outlook for 2024. However, the challenges faced by Famous Footwear and the overall sales decline temper the optimism.

Positives

• The Brand Portfolio segment demonstrated strong performance with increased sales and improved margins.
• Caleres successfully reduced its debt by $40 million in the fourth quarter and over $125 million from fiscal 2022.
• The company's adjusted earnings per share exceeded the $4.00 baseline for the third consecutive year.
• Caleres is projecting positive sales growth for fiscal year 2024.
• The company returned $27.4 million to shareholders through share repurchases and dividend payments in fiscal 2023.
• Famous Footwear gained market share in the Family Channel and achieved record annual sales in the Kids category.

Negatives

• Famous Footwear experienced a decline in net sales and comparable sales in the fourth quarter.
• Overall net sales for the full year decreased by 5.1% compared to fiscal 2022.
• The company anticipates headwinds in fiscal 2024, including a forecasted decline in the footwear market and inflationary pressures.

Risks

• The company faces risks from changing consumer demands and general economic conditions.
• Inflationary pressures and supply chain disruptions could impact the company's performance.
• The footwear industry is highly competitive, which could affect Caleres' market share.
• The company is exposed to foreign currency fluctuations.
• There are risks associated with reliance on third-party manufacturing facilities in China and other countries.
• Cybersecurity threats and disruptions to IT systems pose a risk to the company.
• The company faces challenges in accurately forecasting sales and managing inventory levels.
• The company is exposed to risks related to its distribution centers.
• The company faces risks related to its ability to recruit and retain senior management and other key associates.
• The company faces risks related to its ability to secure/exit leases on favorable terms.
• The company faces risks related to its ability to maintain relationships with current suppliers.
• The company faces risks related to transitional challenges with acquisitions and divestitures.
• The company faces risks related to changes to tax laws, policies and treaties.
• The company faces risks related to its commitments and shareholder expectations related to environmental, social and governance considerations.
• The company faces risks related to compliance with applicable laws and standards with respect to labor, trade and product safety issues.
• The company faces risks related to its ability to attract, retain, and maintain good relationships with licensors and protect our intellectual property rights.

Future Outlook

Caleres expects fiscal 2024 net sales to be flat to up 2% compared to fiscal 2023, and earnings per diluted share to be in the range of $4.30 to $4.60. The company anticipates a consolidated operating margin of 7.3% to 7.5%, an effective tax rate of about 24%, and capital expenditures of $60 million to $70 million. For the first quarter of 2024, the company expects net sales to be flat to up 1% and earnings per diluted share in line with the fourth quarter of 2023 on an adjusted basis.

Management Comments

• Jay Schmidt, president and chief executive officer, stated that the Caleres team delivered another strong operational performance in the fourth quarter.
• Schmidt highlighted the record-setting performance of the Brand Portfolio segment.
• Schmidt noted that Famous Footwear expanded market share, particularly in Kids.
• Schmidt expressed confidence in the company's ability to execute its growth strategy and deliver long-term financial targets.

Industry Context

The results reflect a mixed performance in the footwear industry, with Caleres' Brand Portfolio showing strength while Famous Footwear faced challenges. The company's focus on cost reduction and strategic inventory management aligns with broader industry trends to improve profitability and efficiency. The guidance for 2024 suggests cautious optimism amid anticipated market headwinds.

Comparison to Industry Standards

• Caleres' Brand Portfolio segment's 4.5% sales growth in Q4 is a positive sign, especially when compared to some competitors who have seen flat or declining sales in the same period. Companies like Deckers Outdoor Corporation (DECK) and Crocs (CROX) have also shown strong growth in certain segments, but Caleres' diversified portfolio provides a different risk profile.
• The 660 basis point improvement in gross margin for the Brand Portfolio is notable, indicating effective pricing and cost management. This compares favorably to companies like Steven Madden (SHOO), which have seen more modest margin improvements.
• Famous Footwear's 5.9% decline in comparable sales is a concern, as it lags behind some competitors in the family footwear space. Companies like Shoe Carnival (SCVL) have shown more resilience in their comparable sales figures.
• Caleres' debt reduction of $125 million is a positive step, improving its financial flexibility. This is a key differentiator compared to some competitors who have higher debt levels.
• The projected 2024 EPS of $4.30 to $4.60 is a positive outlook, but it will be important to see how it compares to the actual results of competitors like Wolverine World Wide (WWW) and Skechers (SKX) throughout the year.

Stakeholder Impact

• Shareholders can expect continued value creation through share repurchases and dividend payments.
• Employees may see opportunities for growth and development as the company executes its strategic objectives.
• Customers can expect continued access to a variety of footwear brands and products.
• Suppliers will continue to play a key role in the company's supply chain.
• Creditors will benefit from the company's debt reduction efforts.

Next Steps

• Caleres will host a conference call on March 19, 2024, to discuss the results.
• The company will focus on executing its growth strategy and delivering on long-term financial targets.
• Caleres will continue to monitor and manage the headwinds anticipated for fiscal 2024.

Key Dates

Keywords

footwear, retail, earnings, sales, Brand Portfolio, Famous Footwear, financial results, consumer, apparel