Footwear Company Caleres Faces Tough Q2 With Lowered FY24 Forecast As Back-To-School Sales Lag

Caleres, Inc. CAL shares are trading lower after the company reported worse-than-expected second-quarter results and lowered its annual outlook.

The company reported revenues of $683.32 million, missing the analyst consensus of $723.80 million. Famous Footwear sales rose 1.5% Y/Y, driven by a later-than-expected back-to-school season.

Meanwhile, Brand Portfolio sales fell 5.1%, impacted by operational reporting challenges from its SAP ERP implementation and weak seasonal demand in certain areas.

The company’s gross margin rate expanded 30 basis points year-over-year to 45.5%, with EBITDA totaling $57.2 million. Adjusted EPS of $0.85 missed the consensus of $1.22.

The company disclosed restructuring actions that are expected to result in $7.5 million in annualized SG&A savings, with $2 million in savings anticipated for fiscal 2024.

Outlook: The company lowered its guidance for FY24 net sales to decline by low single digits, compared to its previous guidance of flat to up 2%.

Caleres lowered its fiscal 2024 outlook for EPS to $3.94 – $4.09 versus prior guidance of $4.30 – $4.60 and guided adjusted EPS of $4.00 to $4.15 (consensus $4.42), which excludes $3 million in restructuring costs expected to occur in the third quarter.

For the third quarter, Caleres expects net sales to be flat to down 2% and adjusted EPS of $1.30 – $1.40 versus estimate of $1.50.

Jay Schmidt, president and chief executive officer, said, “While our brands and products continue to resonate with consumers and we remain confident in our long-term vision, our second quarter results in both segments fell short of our potential.”

“Our systems implementation led to lack of visibility that prevented us from delivering our expected results. We also experienced weak seasonal demand and back-to-school business came later than expected.” 

“We are confident in our ability to get back on track and have addressed the issues from the ERP implementation that temporarily impacted visibility. We are also accelerating certain restructuring actions to improve the efficiency and effectiveness of our teams.” 

As of August 3, 2024, inventories stood at $661.1 million, with cash and equivalents of $51.8 million. Borrowings under the asset-based revolving credit facility totaled $146.5 million at the end of the period.

In the near term, the company expects to continue focusing on reducing debt and still expects borrowings under its asset-based revolving credit facility to be less than $100 million by 2026.

Investors can gain exposure to the stock via SPDR S&P Retail ETF XRT and Cambria ETF Trust Cambria Micro and SmallCap Shareholder Yield ETF MYLD.

Price Action: CAL shares are down 18.7% at $30.28 at the last check Thursday.

Photo via Shutterstock

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