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Caleres Misses 2019 Estimates as Virus Headwinds Loom

Footwear powerhouse Caleres Inc. sounded the alarm on outbreak-related full-year impacts Thursday, just days after the Footwear Distributors and Retailers of America urged the U.S. government to cut duties on footwear imports as the coronavirus (COVID-19) pandemic throws business into turmoil.

In a Nutshell: Caleres warned of an earnings impact in the range of 15 cents to 20 cents in 2020, but added the full-year results are “difficult to quantify” at this stage in the rapidly unfolding global health crisis.

“As of today, all of our factory partners in China are up and running, worker return rates are in excess of 70 percent, capacity utilization is increasing and product delay times are subsiding,” Caleres CEO Diane Sullivan said during the company’s quarterly conference call on Thursday afternoon. “On the other hand, consumer sentiment is harder to predict.

“Our direct-to-consumer businesses thus far have been performing well, making it difficult to anticipate the broader impact a prolonged health crisis could have on the retail sector and consumer demand overall,” Sullivan added.

Caleres will work to mitigate the impacts by managing expenses accordingly, the brand said, and will reduce its open-to-buy, evaluate promotional activity and use discipline in the management of inventory.

Sales: Consolidated sales hit $698.9 million in the fourth quarter for Famous Footwear and Caleres’ brand portfolio, including Sam Edelman and Allen Edmonds. This result was down 3 percent from the 2018 fiscal year and below the Wall Street estimate of $711.1 million.

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Famous Footwear recorded total sales of $369.5 million, rising 1.2 percent in total and 5.1 percent in terms of same-store sales. Brand portfolio sales were down 9.4 percent to $346.0 million.

Inventory was down 9.5 percent on the year at $618.4 million.

In fiscal 2019, sales grew 3.1 percent to $2.92 billion, lower than Wall Street estimates of $2.98 billion. Brand portfolio sales of $1.4 billion were up 7.1 percent due to the company’s new partnership with Veronica Beard and the revival of Zodiac footwear.

Famous Footwear’s fourth-quarter revenue fell 1.2 percent to $1.18 billion.

The company expects consolidated net sales to be flat at $2.95 billion in fiscal 2020, with brand portfolio sales flat to low-single digits and Famous Footwear same-store sales up low single digits.

Earnings: Net earnings in the fourth quarter were $0.4 million, leading to earnings per diluted share of 34 cents, below Wall Street’s estimate of 40 cents.

For the full fiscal year, net earnings of $62.8 million resulted in diluted earnings per share (EPS) of $1.53.

The company expects EPS of $1.95 to $2.15 in fiscal 2020.

CEOs Take: “We are approaching 2020 with a laser focus on managing the variables within our control and leveraging the capabilities of our operations and the investments we’ve made for the future,” Sullivan said. “We are confident in the strength of our portfolio and firmly believe we have the right team and the right strategy in place to manage through this dynamic marketplace.”