Caleres is making the most out of its product, and it’s showing up on the balance sheet.
The Famous Footwear parent is raising its full-year outlook for both sales and adjusted earnings after clearing through more inventory across its operation than expected—marking new records in both metrics.
The footwear seller said it expects consolidated sales to increase 7 percent to approximately $2.97 billion, up from the firm’s previous expectations for growth of 4 percent to 6 percent.
And adjusted earnings per diluted share is forecast to range between $4.50 and $4.52, versus previous expectations for adjusted earnings per share between $4.30 to $4.40. Caleres also unveiled earnings per diluted share for the first time, with an expected to range between $4.86 and $4.92.
“The strong finish to 2022 capped off a significant year of growth at Caleres, with results surpassing our recent expectations,” said Jay Schmidt, president and CEO of Caleres, in a statement. “This record performance demonstrates the power of our brands, the strength of our platform and the successful execution of our strategies.”
Consolidated inventory is down approximately 3 percent compared to fiscal year 2021, versus the prior expectation for a mid-single digit percent increase. The company already had been clearing through its inventory throughout the year, indicating that total merchandising levels declined 15.8 percent sequentially in the third quarter to $649.2 million, or up 19.5 percent on a year-over-year basis.
The inventory progress was already part of a larger initiative to align stock with demand, called the “Edit to Win” strategy, which aims to tighten the overall SKU count of its owned brands, enhance productivity and lower costs. But the company also has leveraged drop shipping to be more flexible in getting product to the consumer. In a third quarter earnings call in November, Schmidt said drop shipping now comprises approximately 20 percent of the Caleres business.
The revised outlook sent Caleres stock up more than 8 percent in morning trading on Wednesday.
The updates came just a month after Caleres initially reiterated its full-year guidance, and also after Schmidt replaced outgoing CEO Diane Sullivan, who retired on Jan. 15.
At January’s ICR Conference, Schmidt outlined several priorities for 2023 to further grow the slate of footwear brands, including sharpening Famous Footwear’s focus on millennial families, and migrating the retailer’s product mix to 50/50 split of athletic/non-athletic product.
“At Famous, we really have a target customer who is a millennial mother,” said Schmidt during the conference. “And if you think about Famous, kids are clearly our differentiator and family is our home base and our strength and story. We know when she shops for herself and her family that she shops more often, she spends more, she returns more, and she connects more with us.”
Additionally, the Sam Edelman and Allen Edmonds owner aims to capitalize on its lead brand strength by expanding into and exploring new growth vectors.
Schmidt said at the conference that the footwear group may look to acquire men’s brands or brands that appeal to millennials, even confirming that the company received brand pitches from private equity firms. The company has no plans to divest any of its 13 brands, which also include Vionic, Naturalizer, Vince and Ryka among others.
According to NPD Group data, Caleres has a 6 percent total footwear market share.
Through the first three quarters of the year, the footwear distributor saw net sales increase 8.3 percent to $2.27 billion on $140.5 million, with gross margin of 44.2 percent. The direct push appears to be working for the company, which has seen a 22 percent increase in customers to its brands’ websites throughout 2022. In total, 71 percent of Caleres’ sales come from the company’s direct-to-consumer business.
Caleres was able to accomplish this even with 25 percent average unit retail (AUR) price increases across all products.
Caleres said it deployed cash generated during the quarter to pay its quarterly dividend, marking 100 consecutive years of regular dividend payments, and to reduce borrowings on its revolving credit facility by approximately $57 million, ending the fiscal year at approximately $308 million borrowed.
“Looking ahead, we believe the strength of our brands combined with the structural changes we’ve made in recent years have increased the annual earnings baseline of the company to in excess of $4.00 per share,” said Schmidt in the statement. “We look forward to discussing our 2022 results and providing a detailed outlook for 2023 on our fourth quarter earnings call in mid-March.”
The company will release official fourth quarter and fiscal year 2022 results on March 14.