Footwear Firm Caleres Struggles in Q3, Cuts Annual Forecast Amid Sales, Margin Pressures

Caleres, Inc. CAL shares are trading lower after the company reported worse-than-expected third-quarter results.

Caleres reported third-quarter revenues of $740.9 million, missing the analyst consensus of $751.36 million. Revenues fell 2.8% year-on-year. Adjusted EPS of $1.23 missed the consensus of $1.35.

Famous Footwear sales fell 4.8% year over year (Y/Y), with comparable store sales up 2.5% Y/Y. Meanwhile, Brand Portfolio sales increased 0.7% Y/Y in the quarter.

The company's gross margin rate contracted 55 basis points year-over-year to 44.1%, with EBITDA totaling $71.4 million.

Buyback: In the third quarter, Caleres repurchased approximately 1.5 million shares for $50 million.

The company aims to reduce debt, with expected borrowings under its credit facility to be less than $100 million by the end of 2026.

Caleres will evaluate free cash flow opportunities based on business performance and market conditions for the remainder of the year.

Borrowings under the asset-based revolving credit facility totaled $238.5 million at the end of the period.

Outlook: The company lowered its guidance for FY24 net sales to decline by 2.5%-3% (vs. a decline of low single digits prior) and adjusted EPS to $3.45-$3.55 (consensus $4.44) vs. $4.00 to $4.15 prior.

Jay Schmidt, President and Chief Executive Officer said, "The third quarter saw progress toward our strategy highlighted by the Brand Portfolio delivering growth, Famous Footwear delivering positive comparable store sales, and both segments increasing market share."

"That said, performance was below our expectations reflecting softer seasonal demand in the boot category, late receipts of key athletic product at Famous Footwear, and a discrete customer credit issue that impacted shipments. In addition, our business in China was also weaker than planned."

"However, we have reduced our outlook as we expect our season-to-date sales trend to continue in the final quarter of the year and anticipate pressure on our gross margin as we take action to move through excess inventory and position ourselves well for 2025."

Price Action: CAL shares are down 18.50% at $27.07 at the last check Thursday.

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