Caleres Reports Third Quarter 2021 Results, Raises Full Year Outlook

• Achieved all-time record quarterly earnings
• Generated record quarterly sales at Famous Footwear
• Sequential sales improvement in the Brand Portfolio
• Raises fiscal full-year 2021 adjusted earnings per share guidance to between $3.80 and $3.90

Caleres (NYSE: CAL)(caleres.com), operator of a powerful portfolio of consumer-centric footwear brands, today reported financial results for the third quarter ended October 30, 2021. During the quarter, Caleres continued to capitalize on strong consumer demand trends, achieving sequential revenue growth, recording strong gross margins, and delivering the highest level of quarterly earnings in company history. In addition, the company made further progress toward its balance sheet initiatives, enhancing its cash position, reducing its debt levels and securing more advantageous terms on its asset-based credit facility.

“Caleres achieved another record performance in the quarter just ended, driven principally by continued, exceptional upward momentum in our Famous Footwear business,” said Diane Sullivan, Chairman and Chief Executive Officer. “As robust consumer demand dynamics continue to accelerate, we fully expect the ongoing recovery in the Brand Portfolio to be an increasingly strong complement to the ongoing success at Famous Footwear in the quarters ahead.”

Third Quarter 2021 Highlights

(13-weeks ended October 30, 2021 compared to 13-weeks ended October 31, 2020)

• Net sales were $784.2 million, up 21.1 percent from the third quarter of fiscal 2020
  • A 26.3 percent sales increase in the Famous Footwear segment;
  • A 12.3 percent sales increase in the Brand Portfolio segment;
  • Direct-to-consumer sales represented 73.5 percent of total net sales

• Gross profit was $335.4 million, while gross margin was 42.8 percent, or a 308-basis point improvement over third quarter 2020;
  • A 47.6 percent gross margin in the Famous Footwear segment;
  • A 32.9 percent gross margin in the Brand Portfolio segment;

• SG&A expense of $254.0 million, or 32.4 percent of total net sales, down from 36.6 percent of total net sales in the third quarter of fiscal 2020;
• Net income of $59.6 million, or earnings of $1.54 per diluted share, compared to net income of $14.4 million, or earnings of $0.38 per diluted share, in the third quarter of fiscal 2020. Earnings of $1.54 per share includes $0.05 for the below items:
  • Fair value adjustment of $0.04 associated with the mandatory purchase obligation for Blowfish Malibu; and
  • Loss on early extinguishment of debt of $0.01 related to the redemption of $100 million of senior notes and the amendment to the credit facility;

• Adjusted net income was approximately $61.5 million, or adjusted earnings of $1.59 per diluted share compared to adjusted net income of $18.2 million, or adjusted earnings of $0.48 per diluted share, in the third quarter of fiscal 2020;
• Generated $54.2 million in cash from operations and ended the third quarter with $74.8 million of cash on hand;
• Inventory levels were up 7.1 percent, year-over-year, with in-transit inventory 3.1x higher than the third quarter of 2020, reflecting the ongoing disruptions in the global supply chain;
• Ended the third quarter with $274.6 million of short-term debt; and
• Returned $2.7 million to shareholders during the quarter through its long-standing and uninterrupted quarterly dividend.

Capital Structure

As previously indicated, during the third quarter, Caleres renegotiated and renewed the terms of its asset-based credit facility. The terms of the new facility, which was restored to pre-COVID terms, includes a 5-year extension on the maturity date and features a reduction in the interest rate. This new agreement more accurately reflects the company’s significantly improved capital structure, accelerated recovery in the footwear market and more positive business outlook. Caleres notified its bondholders that it plans to redeem the remaining $100 million of its senior notes in January of 2022 – shifting that higher-cost debt to the revolving credit facility and extinguishing all of the company’s remaining long-term debt. These actions, coupled with the company’s proactive debt reduction activities in recent quarters, will result in approximately a $12 million decline in annual interest expense – bolstering its financial foundation further and driving long-term value for its shareholders.

Outlook

“As we progress through the remainder of the year and head into 2022, we expect supply chain challenges to persist,” said Sullivan. “However, our global Associates have taken quick action – leaning into our capabilities; optimizing our inventory position; and diversifying and leveraging our sourcing model to help offset the impacts caused by the ongoing disruptions. We believe we are well-positioned to navigate this dynamic market environment and we are confident in our ability to utilize our diversified brand model, achieve our short and long-term strategic objectives, and continue to create value for our shareholders.”

With the momentum continuing in its underlying business, the company now expects record adjusted earnings per share between $3.80 and $3.90 for fiscal year 2021.

Investor Conference Call

Caleres will host an investor conference call at 5:00 p.m. ET today, Thursday, November 18. The webcast and associated slides will be available at investor.caleres.com/news/events. A live conference call will be available at (877) 217-9089 for analysts in North America or (706) 679-1723 for international analysts by using the conference ID 4368498. A replay will be available at investor.caleres.com/news/events/archive for a limited period. Investors may also access the replay by dialing (855) 859-2056 in North America or (404) 537-3406 internationally and using the conference ID 4368498 through Thursday, December 2.

Definitions

All references in this press release, outside of the condensed consolidated financial statements that follow, unless otherwise noted, related to net earnings (loss) attributable to Caleres, Inc. and diluted earnings (loss) per common share attributable to Caleres, Inc. shareholders, are presented as net earnings (loss) and earnings (loss) per diluted share, respectively.

Non-GAAP Financial Measures

In this press release, the company’s financial results are provided both in accordance with generally accepted accounting principles (GAAP) and using certain non-GAAP financial measures. In particular, the company provides historic and estimated future gross profit, operating earnings (loss), net earnings (loss) and earnings (loss) per diluted share adjusted to exclude certain gains, charges, and recoveries, which are non-GAAP financial measures. These results are included as a complement to results provided in accordance with GAAP because management believes these non-GAAP financial measures help identify underlying trends in the company’s business and provide useful information to both management and investors by excluding certain items that may not be indicative of the company’s core operating results. These measures should not be considered a substitute for or superior to GAAP results.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995

This press release contains certain forward-looking statements and expectations regarding the company’s future performance and the performance of its brands. Such statements are subject to various risks and uncertainties that could cause actual results to differ materially. These risks include (i) the coronavirus pandemic and its adverse impact on our business operations, store traffic and financial condition (ii) changing consumer demands, which may be influenced by consumers' disposable income, which in turn can be influenced by general economic conditions and other factors; (iii) rapidly changing consumer preferences and purchasing patterns and fashion trends; (iv) intense competition within the footwear industry; (v) customer concentration and increased consolidation in the retail industry; (vi) foreign currency fluctuations; (vii) impairment charges resulting from a long-term decline in our stock price; (viii) political and economic conditions or other threats to the continued and uninterrupted flow of inventory from China and other countries, where the company relies heavily on third-party manufacturing facilities for a significant amount of its inventory; (ix) cybersecurity threats or other major disruption to the company’s information technology systems; (x) the ability to accurately forecast sales and manage inventory levels; (xi) a disruption in the company’s distribution centers; (xii) the ability to recruit and retain senior management and other key associates; (xiii) the ability to maintain relationships with current suppliers; (xiv) the ability to secure/exit leases on favorable terms; (xv) transitional challenges with acquisitions and divestitures; (xvi) changes to tax laws, policies and treaties; (xvii) compliance with applicable laws and standards with respect to labor, trade and product safety issues; and (xviii) the ability to attract, retain, and maintain good relationships with licensors and protect our intellectual property rights.

About Caleres

Caleres is a diverse portfolio of global footwear brands. Our products are available virtually everywhere - in the nearly 1,000 retail stores we operate, in hundreds of major department and specialty stores, on our branded e-commerce sites, and on many additional third-party retail websites. Famous Footwear offers great casual and athletic brands for the entire family with convenient, curated, affordable collections. Sam Edelman keeps expressive women in step with the latest trends in a playful, whimsical way. Naturalizer shoes are beautiful from the inside out, with elegant simplicity and legendary fit re-imagined for today’s consumer. Allen Edmonds combines old world craft with new world technology to create luxe footwear for the discerning man who wants sophisticated, modern classics. Rounding out our family of brands are Vionic, Vince, Franco Sarto, Dr. Scholl’s Shoes, LifeStride, Blowfish Malibu, Bzees, Circus by Sam Edelman and Ryka. Combined, these brands make Caleres a company with both a legacy and a mission. Our legacy is our more than 140 years of craftsmanship and our passion for fit, while our mission is to continue to inspire people to feel great… feet first. Visit caleres.com to learn more about us.