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Caleres, Inc. (NYSE: CAL), a leading portfolio of consumer-driven footwear brands, reported its financial results for the second quarter of 2024. The company saw net sales of $683.3 million, marking a 1.8% decline from the same period last year. Despite the dip in sales, Caleres managed to improve its consolidated gross margin rate to 45.5%, a 30 basis point increase year-on-year. This improvement was attributed to the strength in the Brand Portfolio segment, offsetting some of the challenges faced during the quarter.
The company’s earnings per share (EPS) for the quarter were reported at $0.85, falling short of market expectations. Additionally, Caleres generated EBITDA of $57.2 million during this period. The Famous Footwear segment saw a 1.5% increase in sales compared to the second quarter of 2023, although comparable sales were down by 2.9%. On the other hand, the Brand Portfolio segment experienced a 5.1% decline in sales due to operational reporting challenges associated with the SAP ERP implementation and weak seasonal demand.
Jay Schmidt, President and CEO of Caleres, acknowledged that the second quarter results did not meet the company’s potential. He cited the ERP implementation issues and delayed back-to-school sales as significant factors. Despite these hurdles, Schmidt emphasized the company’s strong gross margin and the market share gains in the Kids category within the Famous Footwear segment.
Caleres Falls Short of Expectations in Q2
When comparing the current performance against market expectations, it becomes evident that Caleres fell short in several key areas. Analysts had anticipated an EPS of $1.22 and revenue of $724.89 million. The actual EPS of $0.85 (adj. $0.98) was significantly below the expected figure, and the reported revenue of $683.3 million also missed the mark by a considerable margin.
Gross profit for the quarter stood at $310.9 million, with a gross margin rate of 45.5%. Although the gross margin saw a slight improvement, it wasn’t enough to counterbalance the overall decline in net sales. The company’s SG&A expenses as a percentage of net sales were 39.3%, reflecting planned investments in marketing and the implementation of the integrated SAP platform. This increase in SG&A expenses further impacted the company’s bottom line.
In terms of segment performance, the Famous Footwear segment’s gross margin was 45.0%, down 120 basis points from the previous year. Conversely, the Brand Portfolio segment saw an improvement in gross margin to 42.7%, up 140 basis points year-on-year. Despite these mixed results, the operational challenges and delayed back-to-school season were significant contributors to the overall underperformance.
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Caleres Revises Fiscal 2024 Outlook
Caleres has revised its fiscal 2024 financial outlook, reflecting a more cautious stance. The company now expects net sales to decline in the low single digits, compared to the previous guidance of flat to a 2% increase. The operating margin is projected to be between 7.0% and 7.1%, down from the prior range of 7.3% to 7.5%.
The revised guidance for GAAP EPS is now set between $3.94 and $4.09, a decrease from the earlier projection of $4.30 to $4.60. Adjusted EPS, which excludes restructuring costs, is forecasted to be between $4.00 and $4.15. For the third quarter specifically, Caleres anticipates GAAP EPS to range from $1.24 to $1.34, with adjusted EPS expected to be between $1.30 and $1.40.
Schmidt expressed confidence in the company’s ability to recover and align with the revised guidance. He highlighted the steps taken to address the ERP implementation issues and accelerate restructuring actions to enhance operational efficiency. The company remains focused on executing its strategic plan and investing in growth initiatives to drive sustained value for shareholders.
Disclaimer: The author does not hold or have a position in any securities discussed in the article.
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