Caleres, Inc. (NYSE:CAL) Q1 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reveals significant negative factors: a 75% drop in EPS, a 6.8% decline in sales, decreased gross margins, and suspended guidance. Despite some positive elements like strategic investments and supply chain evolution, these are overshadowed by financial setbacks and uncertainties. The Q&A section highlighted management's vague responses, indicating potential risks and lack of clarity. Given the company's small-cap status, these issues are likely to result in a strong negative stock price movement over the next two weeks.
Key Financial Performance
Earnings Per Share (EPS) $0.22 EPS, down from $0.88 last year, a decrease of 75% due to lower sales and gross margins.
Sales $614.2 million, down 6.8% year-over-year, primarily due to weak February sales and lower gross margins.
Gross Margin 45.4%, down 150 basis points year-over-year, driven by lower margins in both segments.
Brand Portfolio Gross Margin 43.8%, down 280 basis points year-over-year, impacted by lower initial margins and costs associated with canceling and moving production.
Famous Gross Margin 45.3%, down 80 basis points year-over-year, due to more promotional days and higher shipping costs.
SG&A Expense $266.5 million, flat year-over-year, but as a percentage of sales, it increased by 300 basis points to 43.4%.
Operating Earnings $12.2 million, with an operating margin of 2%, down from previous levels due to lower sales and gross margins.
Net Interest Expense $3.8 million, flat year-over-year, as higher average borrowings were offset by a lower weighted average borrowing rate.
Inventory $573.6 million, up $43 million or 8.1% year-over-year, due to higher levels of inventory in both segments.
Cash Flow from Operations Negative $5.7 million, impacted by lower net income and higher inventory levels.
Debt to EBITDA Ratio 1.4 times, reflecting an increase in borrowings to $258.5 million, up $67.5 million year-over-year.
Trailing Twelve-Month EBITDA $187.9 million, representing 7% of sales.
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Operating Highlights
New Product Launches: Vionic launched three new walking styles and announced Gabby Reif as the brand’s first wellness ambassador, with a consumer-facing campaign starting this fall.
Expansion of Product Offerings: Naturalizer invested in its first Shop in Shop at Macy’s Herald Square, which drove over a 50% sales increase in the first quarter.
Jordan Brand Launch: Famous Footwear launched the Jordan brand in 147 stores, with early selling results being encouraging.
Market Share Gains: Caleres' brand portfolio gained market share in women’s fashion footwear during the period.
Famous Footwear Market Positioning: Famous gained 0.5 points of market share in shoe chains in the kids’ category.
Cost Reduction Initiatives: Caleres expects to decrease SG&A by $15 million on an annualized basis through structural expense cuts.
Sourcing Strategy Optimization: The company is optimizing its sourcing strategy and has paused production in China due to tariff escalations.
Acquisition Plans: Caleres plans to acquire Stuart Weitzman, viewing it as a strategic fit due to its premium positioning and strong direct-to-consumer presence.
Future Growth Initiatives: Caleres is focused on executing its strategic plan to drive sustained value for shareholders.
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Risk or Challenges
Earnings Miss: Caleres, Inc. reported an EPS of $0.22, missing expectations of $0.37.
Sales Decline: First quarter sales declined 6.8% year over year, with brand portfolio sales down 6.9%.
Tariff Escalation: The company faced larger-than-planned impacts related to tariff escalation, which affected sourcing and gross margins.
Sourcing Disruption: Sourcing disruptions due to production pauses in China led to additional costs, impacting gross margin profit by nearly $1.9 million.
Inventory Challenges: Higher inventory levels required additional markdown reserves, impacting profits by about $2.3 million.
Customer Credit Issues: Expanding customer credit concerns resulted in bad debt write-downs, affecting profits by approximately $3.1 million.
SG&A Expenses: The company plans to decrease SG&A by $15 million annually through structural expense cuts.
Economic Environment: The operating environment has become more challenging, necessitating efforts to drive growth and profitability.
Suspended Guidance: Due to continued uncertainty in the sourcing environment, the company has suspended guidance.
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Guidance & Outlook
Sourcing Strategy Optimization: Caleres is focused on optimizing its sourcing strategy to control costs and improve profitability.
SG&A Expense Reduction: The company expects to decrease SG&A by $15 million on an annualized basis through structural expense cuts.
Acquisition of Stuart Weitzman: Caleres plans to acquire Stuart Weitzman, viewing it as a strategic fit due to its premium positioning and strong direct-to-consumer presence.
Expansion of FLAIR Stores: Caleres is enhancing the consumer experience at Famous Footwear by adding more FLAIR stores, with plans to increase from 44 to 53 by July.
New Product Launches: Caleres is launching the Jordan brand in 147 stores and expanding assortments from other brands for back-to-school.
Q2 Sales Performance: For Q2, comparable sales for Famous are slightly better than Q1, down 4.6%.
Suspension of Guidance: Caleres has suspended guidance due to ongoing uncertainty in the operating environment.
Cost Savings Initiatives: The company is executing a structural cost initiative that will result in $15 million of SG&A savings on an annualized basis.
Inventory Management: Caleres is managing inventory levels carefully, with a focus on markdown reserves for slow-moving products.
Future Sourcing Strategy: Caleres expects about 10% of its dollars sourced to come from China in the back half of the year.
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Shareholder Return Plan
Share Repurchase Program: Caleres has not announced any share repurchase program during this earnings call.
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Key Q&A
Q:How are you thinking about the prices of your portfolio brands moving into the summer and into fall?
A:We’re making selective price increases, taking a thoughtful approach, brand by brand, starting with fall one receipts.
Q:On the gross margin side of the business, particularly with brand portfolio, how do you think of that going forward?
A:We see the lead brands getting stronger as a percent of total, but we have work to do across the board.
Q:Would there ever be a time where maybe the weaker brand portfolio brands, do you ever think of a restructuring or exiting of any of those brands?
A:We don’t have anything to announce on that, but we are good portfolio managers and will continue to review it.
Q:On the Famous Footwear business with Back to School, do you have the goods for Back to School?
A:We’re in a pretty good position for back to school and haven’t been informed of any major cancellations.
Q:What is being adjusted in the strategic expense cutting of $15 million on an annualized basis?
A:These reductions are permanent and structural in nature, expected to begin in the third quarter.
Q:Is there a significant shift in trend with the Jordan launch?
A:The launch was very new, and we are excited about the potential, but limited marketing has been done so far.
Q:Does the recent news on tariffs change your plan?
A:We have made no change to our current plan and will monitor the situation closely.
Q:Can you provide more color on the comment that wholesale is fluid at brand portfolio?
A:We saw improving retail trends, but we are characterizing what we know right now.
Q:What lift did the stores get over the period based on Jordan?
A:We don’t have much data to pull that lift together, but we are excited about the early trends.
Q:How should we think about the cost impacts on the quarter?
A:The tariff-related piece is TBD, and we believe we’ve taken the necessary reserves for spring 25 product.
Q:What should we think about the SG&A dollars being up year over year?
A:It was mostly in the international area, and we continue to see good growth coming out of it.
Q:Can you quantify how much of the 280 bps headwind was one-time in nature?
A:The higher reserves for inventory markdowns were the first item, and we don’t expect that to continue.
Q:What are you assuming around the headwinds related to tariffs?
A:It’s a volatile environment, and it’s hard to provide specifics, but we have strategies in place.
Q:Review of Unclear Management Responses
A:Management appeared to avoid giving a direct answer regarding the specific lift from the Jordan launch, stating they don't have much data to pull that together. Additionally, they were vague about the tariff situation, indicating it is fluid and they are still trying to get answers.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Birkenstock New
Blowfish Ryka
Brooks Timberland
Caleres firm
China
Famous point
Jordan
Shop
Vionic
advantage
brand Famous
brand consumer
brand portfolio
campaign
casuals
customer credit
disruption
end store
footprint
future
good
issue
kid accessory
launch
lead brand
lift
location
outlet
production
profitability term
reserve
retail
sale trend
session
softness
store point
store school
style
tariff
track
transaction
woman
CAL Transcript
Caleres, Inc. (NYSE:CAL) Q1 2025 Earnings Call Transcript
Unknown5-30
The earnings call reveals significant negative factors: a 75% drop in EPS, a 6.8% decline in sales, decreased gross margins, and suspended guidance. Despite some positive elements like strategic investments and supply chain evolution, these are overshadowed by financial setbacks and uncertainties. The Q&A section highlighted management's vague responses, indicating potential risks and lack of clarity. Given the company's small-cap status, these issues are likely to result in a strong negative stock price movement over the next two weeks.
Caleres, Inc. (NYSE:CAL) Q4 2024 Earnings Call Transcript
Unknown3-22
The earnings call summary reveals weak financial performance with declining sales and margins, despite a slight EPS increase. The Q&A session highlighted concerns about tariffs, inventory, and cautious consumer spending. Guidance indicates further sales decline, with operational margin expected to be lowest in Q1. Despite shareholder returns through buybacks, the negative trends and economic uncertainties outweigh positives. Given the small market cap, the stock is likely to react negatively, aligning with the negative sentiment from financial results and guidance.
Caleres, Inc. (CAL) Q3 2024 Earnings Call Transcript
Unknown12-5
The earnings call highlights weak sales performance, declining EPS, and gross margin issues. The Q&A reveals management's cautious outlook, particularly in China, and a lack of clarity on margin impact. Despite share buybacks, the challenging footwear environment and markdowns are concerning. Given the company's small market cap, the negative sentiment is likely to lead to a stock price decline in the range of -2% to -8% over the next two weeks.
Caleres, Inc. (CAL) Q2 2024 Earnings Call Transcript
Unknown9-12
The earnings call summary presents mixed signals. Despite a record gross margin and EPS beat, there are concerns about sales decline and ERP issues. The Q&A highlights confidence in resolving ERP challenges and positive trends in athletic brands, yet acknowledges competitive pressures and economic factors. Restructuring savings and store closures add complexity. The market cap suggests moderate sensitivity to news. Overall, the combination of positive and negative factors leads to a neutral prediction, expecting the stock price to remain within -2% to 2% over the next two weeks.
CAL Slides
CAL Report
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