Q1 2020 Caleres Inc Earnings Call
MS Erika I will be your conference coordinator.
All participants are in listen only mode. After the speakers presentation. There will be a question answer session to ask a question. During this session you wouldn't be depressed star one on your telephone if you require any further assistance. Please press star zero.
As a reminder, this conference is being recorded at this time I would like to turn the call over to Logan and of course senior Vice President of Investor Relations. Please go ahead.
Good afternoon, I would like to thank you for joining our first quarter 2020 earnings call and webcast a press release with detailed financial tables as always our quarterly slide presentation are available at Caleres Dot com.
Please be aware that today's discussion contains forward looking statements, which are subject to a number of risks and uncertainties.
Actual results may differ materially due to various risk factors, including but not limited to the factors disclosing the company's form 10-K, and other filings with the U.S. Securities and Exchange Commission.
Please refer to todays press release, an RFP filings for more information on risk factors and other factors, which could impact forward looking statements copies of these reports are available online. The company undertakes no obligation to update any information discussed in this call at any time.
Joining me on the call today is Diane Sullivan, CEO, President and chairman.
Ken Hannah Senior Vice President and CFO, we'll begin the call with brief prepared remarks, and thereafter, we'll be happy to take your questions I would now like to turn the call ever to Diane Dan.
Thanks slogan and good afternoon, everyone. Before we began I think it's important to acknowledge the profound changes that have occurred in the world and in the marketplace than the three short month since our last earnings call on March 12.
The acceleration of the Cobot 19 pandemic launched the world into unfamiliar territory, causing extreme economic disruption and disciplined uncertain to.
These changes it had to varying degrees of effects on people regions in businesses from the way we interact with one another to the way we work.
More recently, we have seen a period of social unrest in the United States.
As horrible Axa brutality have highlighted the recent racial and justice that persist.
Which has led to protest across the country as we stand against the injustice. So many are speaking out against it is also my sincere and hope that you your families and your loved ones remain healthy and safe during this time period.
I would also like to take a moment to recognize and acknowledge all of our clearest associates around the world for their drive focus and dedication during this very challenging period in our history.
From the outset, our people adapted seamlessly shifting to new ways of performing their daily jobs, while at the same time supporting the broader effort of manufacturing much needed supply for the health care community.
And of course, taking of ever required yeah, it's sometimes difficult steps to ensure the company is well positioned for the future.
As you well know the first quarter for us began and a much different manner than it ended.
We started fiscal year 2020, with a strong foundation grounded by our strategic priorities supported by our financial flexibility.
And well positioned for growth.
As we discussed in early March we were seeing good momentum in our famous footwear business, which continue to benefit from strong performances from its premium and iconic brands growth and the kids category and improved consumer engagement and retention in our rewards program.
And while we were managing through supply chain challenges and the brand portfolio. We were encouraged by the trends and outlook for 2020.
That's a health crisis accelerated in early March we immediately shifted enacting a two pronged approach of Fids guarding our people our customers in our communities.
While at the same time, taking action to protect the long term viability of our business.
By March 19th we had temporarily closed our entire fleet of retail stores and shifted our focus to the E. Commerce portion of our business that would remain operational during this time period.
In addition, we established a virtual workplace and empowered the vast majority of our associates to work from home during this period.
At the same time, we took aggressive action to ensure that the organization was equipped to weather the severe economic shutdown and emerge ready to compete as the economy recovered.
We moved very quickly to limit our cash outflows pro actively working with our partners to significantly reduced inventory receipts to.
To extend payment terms to scale back all non essential operating expenses and reduce our planned capital expenditures.
In addition, as or two stores were closing.
We proactively drew down approximately 168 million from my revolving credit facility.
We subsequently boosted our liquidity position by exercising a poor portion of the accordion feature.
Increasing the borrowing capacity under that facility.
We also made difficult decisions regarding our workforce, we permanently eliminated certain positions for low to others and implemented companywide salary reductions for the remaining associates in order to preserve essential liquidity.
During the most severe stages of the economic shut down.
Now looking at the first quarter as expected our results were materially impacted by cold in 19.
Our business was on track as we entered the crisis with comparable store sales at famous footwear up nearly 13% year over year.
And positive signs of improvement in our wholesale business.
However in mid March stores were closed in wholesale customers halted deliveries and delayed or canceled canceled orders as they grappled with their own store closures and deterioration in consumer demand.
And while we had made significant progress in recent periods expanding our ecommerce business. It was only able to replace a small portion of the sales lost from our entire store fleet and our partner stores being closed for the back half of the quarter.
So despite these significant headwinds we responded with speed and agility, leveraging our omni channel capabilities and leaning into or enhanced digital business to connect and serve our consumers.
During the period of store closures, we experienced triple digit increase in our famous footwear ecommerce business as their top brands in sport and casual product offerings offerings resonated.
With consumers to required more casual styles to fit their new stay at home reality.
And to support our the growth in our digital business, we effectively utilized our expansive network of temporarily closed doors as sourcing points for delivery and adapted our buy online pick up in store capability to include a contact with curbside pickup option at certain locations.
Currently we are offering this service at approximately 375 locations across the famous footwear fleet with the expectation that we will expand to more than 600 stores and the next couple of weeks.
Now I'd like to spend a few minutes talking about our experience with our store reopenings to date.
As previously announced in early May we began we well coming back or furloughed store associates with nearly 95% I've our store managers returning to lead this effort and initiated our first stage of in store service.
To date, we have successfully resolved in store operations at 553 famous footwear location.
Representing approximately 60% of the store fleet and 33, Allen Edmonds and 36 Naturalizer location.
We expect to have nearly 85% of our stores opened by late June with the remaining stores primarily located in the regions heavily impacted by covert 19.
Reopening when it is safe to do so.
Looking at the current period the phased restart has gone smoothly. We are taking advantage of our expanded capabilities and complimentary mix of services and are seeing sales at the newly reopened famous footwear stores coming in well above last years levels.
While it is too soon to call a trend we are encouraged and believe this positive response is due to the fact that our famous stores have great brands are for a great value and are known for always having styles that are currently experiencing a heightened demand.
In addition, the majority of our stores are off mall and ideally situated.
[noise] for physical distancing, which provides our consumers with the level of comfort safety and experience she prefers.
Our branded portfolio stores that have reopened are experiencing sales trends above our internal expectations and our wholesale partners have begun to reopen their locations and play some new orders for delivery.
We are working closely with our key retail partners to ensure we are liquidating spring inventory very aggressively and that we are set up well for fall.
In addition, looking at the first few weeks of the second quarter. Our ecommerce businesses have continued to outpace our expectations. Even a has stores have reopened with strong increases in both famous footwear and our branded E Commerce site.
During the first several weeks of May our famous footwear ecommerce sales have increased more than 200% with our internal branded sites up nearly 40% compared to last year.
Notably quarter to date, we've seen improved traffic and conversion rates at key branded sites in our portfolio.
But before I hand, the call over to can for a deeper dive on a result.
I want to share why I am confident in our future and our ability to move through this crisis and emerge even stronger.
First.
We have the capabilities to capitalize on consumers increasing preference to transact digitally having made critical investments in our digital and fulfillment capabilities platforms.
Second.
We are known for iconic brands that consumers trust weather owned or sold through famous footwear.
Consumers now more than ever before are searching for brands that they know interest to give them the style fit in value they desire.
And we are capitalizing on this across our portfolio of brands.
Third we possess a diversified offering of lifestyle brands deeply rooted in comfort casual and athletic.
This is very much aligned with the categories desired most by our customers and provides strategic and comprehensive access to a large and growing component of the footwear market.
And finally, we have a strong capital structure that gives us the ability to invest in innovation and drive our long term strategy, while returning value to shareholders through dividends and share repurchases.
You know as I reflect on this extraordinary period in our history I believe we've managed through the early stages of this crisis effectively aggressively cutting costs and preserving cash.
While we are encouraged by the early signs of improvement consumer demand is hard to predict and there is this still a great deal of uncertainty and the broader economy.
However, we are resilient resourceful and we possess the sought after brands and businesses known for comfort fit and style.
As we progressed through the year, we will continue to be laser focused on protecting our people maintaining a strong balance sheet tightly managing supply and demand.
While also strengthening the business through the advancement of our long term strategic objectives.
So we're well prepared to capitalize on the rebound when it comes.
When we entered the pandemic my message to the company was that we would operate with a sense of urgency with compassion and with their eyes wide open to the reality of the changing environment.
We will continue to operate this way as we move from protect and prepare to begin to restart and rebound.
Accelerating our decision, making product development innovation and communication.
And with that I'd like to now turn the call over to can Ah for a financial review Ken.
Thank you Diane and good afternoon, everyone.
I'd like to Echo Diane sentiment and thank our team for their commitment to our business. During this tumultuous period I'm very proud of our organization organization's ability to adapt swiftly work efficiently and focus on strengthening the business for the rebound.
Early in the quarter, we quickly shifted our priorities to ensure we had the financial flexibility to navigate through a prolonged crisis.
We took a series of deliberate steps to reduce cost and preserve cash while at the same time, putting your comprehensive action plan in place to evolve our strategy to position our company to maximize sales and profitability as the business resumed.
We immediately preserve cash aligning our workforce related expenses to meet the needs of a significantly lower demand environment.
We reduced inventory levels aggressively by reducing or delaying product receipts and extending payment terms.
He began negotiations to modify leases, including the deferral and abatement of certain lease payments and eliminated or deferred all nonessential capital projects, we didn't do a 40% reduction in our planned 2020 capital expenditure budget.
We strengthened our financial flexibility by exercising a portion of the accordion feature on our asset base revolving credit facility, increasing the borrowing capacity to $600 million.
Bond our efforts enabled us to in the quarter with $187.7 million in cash slightly above the levels when stores closed in mid March.
Now moving on to review of our first quarter financials.
Our GAAP results included $7.65 per share in charges and were primarily a result of the unfavorable business climate, our lower stock price in market cap during the period.
The majority of the charters are noncash and were triggered by the impact of Cobot 19 on our business was caused us to reassess the carrying value of the assets on our balance sheet.
These costs include $5 in 66 cents per share and non cash goodwill and intangible asset impairment charges.
$1.90 per share related to covert 19 expenses, including factory order cancellations lease impairment charges inventory markdowns customer credit losses employee severance among others.
Six cents per share related to fair value adjustment of our blowfish purchase obligation.
And three cents per share and brand exit costs associated with our decision to not renew the fergie license.
You can find our GAAP results and a reconciliation table of our GAAP results to adjusted.
Our press release.
In total for the first quarter or net sales were $397.2 billion compared to $677.8 million in the first quarter fiscal 2019.
It was footwear total sales were $191.3 million down 45.7% from the first quarter fiscal 2019.
Same store sales rose at famous footwear, 12.8% through mid March and were up 12.6% for the entire quarter driven by strength in E Commerce.
As a reminder, our comparable store sales calculation removes closed stores from both periods.
Our Brenda portfolio sales were $217.2 million, a decrease of 36.3% for the quarter impacted by wholesale cancellations and branded store closures. During the final seven weeks so the first quarter.
Our adjusted gross margin was 39.5% compared to an adjusted gross margin of 42.3% in the first quarter fiscal 2019.
The 280 basis point decline was driven by a larger mix of ecommerce sales at famous footwear, and the resulting shipping costs associated with that business.
This activity along with the delay and cancellation of inventory receipts enabled us to in the quarter with inventory down 9.7% versus Q1 last year.
[noise] famous footwear had an adjusted gross profit margin of 39.2%, which compares to an adjusted gross margin of 43.4% in the 2019 first quarter.
In the margin decline was driven by higher shipping costs associated with the larger mix of E commerce related business in the quarter.
Our branded portfolio at an adjusted gross margin of 38%.
Fair to an adjusted gross margin of 39.3% in the fiscal 2019 first quarter driven by the promotional nature of retail selling post store closures.
Our consolidated US unique expense was $225.2 million, representing a decline of approximately $37 million compared to the first quarter of last year.
This reflected lower corporate and store payroll expense as well as the initial benefits of expense reductions.
Well, we worked with landlord to defer certain payments, we expensed the full amount of rent in accordance with gap irrespective of the payment schedules.
Our lower sales or gross margin were more than offset improvements in ESG today.
And led to an adjusted operating loss of $68.3 million. This compares to adjusted operating income of $24.9 million in the fiscal 2019 first quarter.
At famous footwear, the adjusted operating loss was $45.6 million and it brand portfolio. The operating loss was $10.1 million.
The company's adjusted net loss was 50 $450.4 million score loss of $1.30 cents per diluted share.
This compares to adjusted net income of $15 million were 36 cents per diluted share last year.
Now turning to the balance sheet, we ended the first quarter with $187.7 million in cash and approximately $438.5 million a borrowings under our revolving credit facility.
As a reminder, we exercised a portion of our accordion, which increased our capacity from $500 million to $600 million, we have no significant debt maturities until 2023.
As I mentioned earlier, our inventory at quarter end was down 9.7% and included a 3.8% decline at famous footwear and an 18% decline the brand portfolio. Looking ahead, we will maintain stringent control of the flow of inventory to ensure alignment with our demand.
Net cash provided by operating activities was $728000 with capital expenditures totaling 4.5 million.
During the quarter, we returned approximately $16 million to shareholders through share buybacks and dividends investing $12.9 million in cash to fund the repurchase of 1.5 million shares of our common stock and $2.8 million to fund our quarterly dividends.
Well, we considered a prudent to shore up liquidity and protect our cash position to ensure that we were positioned to withstand even a protracted market disruption.
We expect to turn our focus to debt reduction.
We expect deleveraging to be the most value creating use of cash in future periods, given the volatility in the marketplace.
At the same time, we anticipate complementing our debt reduction efforts with a continuation of our longstanding quarterly dividend and Opportunistically repurchasing shares.
Given the rapidly evolving nature of the cobot 19 pandemic and the recent nationwide protest we continue to plan for multiple scenarios, while remaining intensely focused on the disciplined management of inventory and expense.
However, due to the ongoing business disruption and substantial uncertainty, we're not providing guidance for fiscal 2020.
In order to ensure caleres is positioned to compete in this market landscape going forward, we must be agile streamline and ready to pivot in this dynamic environment.
We believe the lessons learned the progress that has been made in the plans we have in place will transform the way we operate going forward.
During the period of closures, we closely analyze the expected performance of every store across the fleet and are accelerating the closure of approximately 160 brick and mortar locations across our specialty retail and famous footwear stores in 2020 in 2021.
Going forward, we are monitoring traffic in profitability levels across our markets as our stores reopened and we'll take actions to ensure that our fleet is rightsized for how this pandemic has accelerated the shift to digital.
Additionally, we are constantly reviewing our portfolio of brands to align with changing consumer preferences and lifestyles and will eliminate those that are performing in this environment to that end. We've made the decision to exit fergie as well as several private brands and certain lower margin businesses in the portfolio.
Given this we have taken steps to align the size of the organization and our resources with the new level of consumer demand.
These decisions while difficult allow us to focus our resources on the areas of the business that will expect will yield the highest return.
We also expect to benefit from quicker decision, making as we operate a leaner and more efficient organization.
Polaris has faced numerous challenges over as long as storied history and while each instance has required a different approach. We have evolved we have overcome and we have found new ways to create value for our shareholders.
With that foundation and drive we believe that we will come through this period, a stronger more successful company.
With that I'd like to turn the call over to the operator for questions.
As a reminder to ask a question you'll need to press star one on your telephone to withdraw your question press the pound key.
The same five will be composite Q1 day roster.
[music].
And your first question comes from a Rick Patel with Needham and company.
Thank you good afternoon, and hope everyone as well.
Hi, Rick Hi, Rick. Thank you very much you as well.
Thanks, Dan.
Two questions related to the stores that have reopened so far so first I. Appreciate it's all very fluid right now, but can you give us context on how much comps are up in those stores that have reopened and second can you talk about E commerce in those markets where stores that reopened have you have you seen.
The strength in that channel continue or have you seen at decelerate with.
Consumer recently.
Yep, Okay, Rick Here's what I would say that we've actually seen our both brick and mortar and our ecommerce business accelerate.
Yet at famous footwear that not only are weak comping positively in brick and mortar in may. We also have very very strong performance in our ecommerce businesses, while we have not seen that.
Shift or decline yet now I say that again, you said it well very fluid.
Early days and we only have.
Roughly 60% of our fleets open on so were cautious, but we like the early signs of what what we're seeing now with that gets later into June and once we open those last 10 last 10% of our stores and some of these markets that are harder hit.
We'll have to see how it all on on the reveals itself, but so far I think we feel a pretty pretty good about the work that the teams have done to this point in time, but as I said, we're saying we are saying I'm very focused and knowing that this is a marathon and we've got to make sure we are.
We are really on this every day.
I appreciate that and.
Can you tie that into how you're thinking about inventory.
I guess as we think about this across famous in the brands.
First on famous.
How are you approaching inventories for the fall any pockets that you're looking to invest in versus Deemphasized and then similarly for the brand portfolio any color on the fall order book and how that would shape your inventory decisions for the fall Yeah sure I'm now on famous footwear first it would be exactly what you would.
I expect it to be.
I think.
This strengthen our in the performance categories in sport lifestyle, and casual and easy have wearing footwear is where the market really isn't actually a little bit more recently, we are seeing our ability to really sell some flats sandals, but.
Going into fall, we're going to continue to support those iconic brands that have been doing so well for us up to this point in time and make sure we continue to invest there and and.
Basically not invest is more of the traditional casual and dress side of the the equation. So the teams are looking at that every single week to make sure where calibrating it it correctly.
And frankly want to use this opportunity as a way to try to increase the turn as well as famous so that would be the famous story and then on the brand portfolio side Thats.
Little less visibility right now on.
Consumer demand because theres very few stores open the I would say this system has just starting to move so we're taking a very conservative approach there because weve generally heard that.
Most of the marketplaces thinking about planning the back half of their business, you know down 30% to 40%. So we're making sure that we keep our inventories in line with that and that were also pivoting, where we need to on certain brands to make sure. We're focused on the categories of business that we.
Believe where we believe the consumer is going to be.
I think your last question part of that was about the order book.
Our order book given that kind of initial look at the back half of.
Moving down potentially 30 to 40, we'll see.
Our order book is and is in good position to support that that level of sales, so, but again very fluid I'm looking at it every day.
And reading and reacting.
Rick I'll, just add a little bit of color.
To to today in his comments I mean I.
I know when we talk about comp stores and we vote, we only have 60% of our or store base open it's kind of hard to to model that into what the second quarter might look like.
As we're looking at that your question on the order book I think.
We're currently looking at when might those fall order shipped and one of the things that.
We're working through right now as it looks like everyone. We'll try to extend the the spring season as long as they can which means that there will probably delay when we would ship for fall. So normally on the brand portfolio, where we're shipping at the end of July for the first part of fall it looks like that.
It's going to be shifted every bit of 30 days out so.
As we look at the second quarter, we're not expecting the overall sales to be all that different than what we experienced in Q1, obviously with stores close for the first couple of weeks.
Of May and then now opening.
While we get to 85% of our store fleet open Theres still a big number of those that are in places like New York in California that.
Likely won't open until even further into the quarter.
I appreciate it thanks very much.
Your next question is from steep rise with CL King <unk> associates.
Good afternoon, Diane can and Logan want to talk a little bit about back to school and how you're planning forward specifically for payments from a by standpoint.
From an inventory standpoint from a merchandising standpoint.
No you mentioned everyone's seemingly elongating spring you think that will work for you for back to school as an aside.
I think I'm hearing that.
It seems that kids are going to go back to school. This fall that was.
In the company or a little bit if you've heard anything different to that'd be helpful. You could just talked about the season that'd be great. All right. Steve No problem I think everybody is really helping the kids are tied back to school for sure that that is what I've been here from from everybody beyond just the the obvious from a business perspective.
But.
We we think the.
The best indication of how we're going to do it back to school is really our trend right now because those segments of the business and the brands and everything that's driving our business currently.
Along with the strength in our kids business. We think is going to carry in nicely you know through the second quarter and into the third quarter. So I would say that for the second thing in terms of.
County by County in school districts, we really haven't heard too much yet about what their statuses, but.
Our famous US store teams are monitoring that and marketing teams and will be.
Managing that adjusting that as we go forward. We've heard all sides of that you know that some people are going back early and then.
Skipping.
Breaking out at Thanksgiving, there's others that May go just on time or late so it's very with its nothing definitive it's all more anecdotal and so we're just going to continue to watch that and monitor and track that we've done where we're encouraged we believe we've got the right inventory levels.
To do the business that we we'd like to do.
And we think isn't the right in the right brands in the right style, so and the other thing maybe the last point on on famous and back to school I think the teams also did a really nice job is making sure given this uncertainty of what it was going to be elongated what were the weeks gonna look like that we really moved a lot of.
Our media to to digital because it was really hard to think about TV buying and without really knowing what that timeframe was so.
We feel like we've got a terrific plan and we've got the right right assortment. So.
Looking forward to it actually so can't wait.
Sure looking forward anything in the future.
[laughter] Art, you mentioned that curbside pickup option and yet it was about 300 stores, it's going to a couple hundred more by the end of June can you talk a little bit about when I know that's impossible because.
You don't have full yours at the moment, but what is that additive or at least what is that replaced if you can quantify that in some manner that would be really helpful.
Yes, it's sort of hard to know whether it's additive we believe obviously that given the fact that no stores were opened we had our store managers and are those that offered curbside.
So it really enhance the ability as opposed to shipping that could go to the store and pick it up. So you know it's up to some degrees degree at replaced what what was our BOPUS program.
We'll have to see as stores stay open.
And what that mix looks like how many will come due curbside versus go into the store versus haven't shipped directly to their home. It's really I would say very difficult at this particular moment really get a sense of whether or not what thats going to look like but we for sure now that its.
An important part of the mix of how consumers want to shop in the future and.
Are going to make sure that we not only habits areas of stores we.
In the 600 or so that will have but we'll look to see and other places in our portfolio where else. We would we would want to do that as well so.
Very helpful. Thank you already thanks, Thanks, Steve.
Okay.
Your next question is from Chris silly season with Winglets.
Uh huh.
Hi, Chris.
So are you.
Good luck guys well, how how are you all you're doing.
A couple of things one can just go back.
And answering my previous questions you said.
Sales not much different versus the first quarter I just want to be clear are you talking about total company sales.
Okay.
Okay, and you're talking about percentage correct.
Sure.
Okay.
Jim.
Just want me when you talk about Diana famous footwear comp.
Being.
Positive you're talking about those stores that are open obviously correct part, yes of course yep okay.
Okay and that would be the 60% that are open now right.
Right Fair to say no, we're not going to give a percentage, but that is notably in excess of how youre trending prior to famous footwear closings, so 30% plus so if it's trending more than Q1 was.
Okay.
What percentage on stainless is now or what percentage of things is E com.
What was it last year, and just sort of yet from the base.
Right It last year it was.
The full year, we were at about 10% or so and then.
First quarter this year and of course, it's kind of fun.
Funky in the sense that you don't have stores opened the full time and all of that so it's going to look a little bit higher but it's about 28% of our of our business in this first quarter. So it's pretty substantial.
Okay, and you said in second quarter, it accelerated Europe north of 200% <unk> correct.
On a comp famous yes.
Yes, we did.
Okay and on the branded portfolio side what.
Similar question from understand what percentage.
No ecommerce your company owned website E commerce and how much is retail.
Let's now, though so I would say.
Our I would ecommerce related [laughter] ecommerce related businesses are about 36% in the quarter of for our brand portfolio and and the since the end of the quarter, we have seen our business and all of those accelerate as well whether it's our view.
Branded dotcom site.
Our wholesale drop ship portion of our business.
We sort of other E com businesses like.
For example, what we sell through Amazon some of those because they were focused on essential services.
It's taken a little bit at the time to ramp up but we're seeing all good things in our branded sites as well you know our measure kind of a success. There is not only just that pure volume, but also what's happening with the consumer and you know we've seen a significant increase in new new.
Consumers, we've certainly seen our revenue our traffic is up at our revenue really has been driven quite a bit by really conversion improvement in conversion and you know fairly small decreases and order value because very early on in the brand portfolio or they were sensitive too.
You know too much discounting when really the customer wasn't going to be there too to respond so and again every other every brand sort of has a different story, but those would be the general theme for the total brand portfolio.
Okay and on a on the margin just on the brand portfolio how those conversations.
Going with margins support.
I know, obviously, that's been shipped and timing of deliveries et cetera.
Should we inventory, obviously don't want full product anytime soon I was curious how those conversations are going is there potentially more intense margin pressure on branded portfolio.
You too, which you clean that out relative to Q1 or just how we should not yeah.
Thank you know given obviously the you can imagine the huge moves of inventory of cancellations and push outs and you name. It that really all of those conversations have been had as it relates to the first half and you know we believe weve accurate really reflected what.
We need to in our and our.
Our work on Q1, and the reserves that we've taken you know it's going to be an ongoing thing Chris as you can imagine to make sure. We continue to liquidate the inventory that we need to over the next month month or two.
But again everybody is trying to do the best they can to work together to get to the other side of this so I think we've got it fairly accurately reflected in and ER and are in our Q1 results.
Okay, just to find a ones for me just on not Ken just on a 262 million impairment.
What was up four is not for Allen Edmonds Bionic and then lastly, just on SGN fences, just broadly how we should think about those if you're making some assumptions about branded portfolio.
Order book could be down 30% plus in the back half, how you're managing that SGN a bucket as we move forward.
Yes, I'll start with with the impairment so.
One of the things that we had to do.
We did all of our impairment testing in the fourth quarter and obviously everything pass we had no no impairment as we were operating in Q1 with the stock price, where it was trading and obviously the book value of the company was setting quite a bit higher than the mark.
Cap based on where the stock was trading and so we had to go through and do another impairment test in Q1, and so we wrote down the company's goodwill that it was carrying on the balance sheet for.
For what was left of Bionic and and Allen Edmonds. We also had to go through and look at the.
Indefinite lived intangible so the the trade names associated with.
Both Allen Edmonds and.
We looked at via Spiga Franco Sarto all of them.
So those that were indefinite lived based on the shutdown.
And the reduction in sales and earnings there we have to write those down.
So that was part of a test that was required.
As we closed out the first quarter.
And.
Your second question.
Yes was on SGN today, so the first quarter, we were down 37 million year over year as we get a full quarter of the actions that we have taken we expect that to be closer to $50 million in the second quarter year over year.
And then I would tell you that.
No.
As we look at the back half obviously.
How that unfolds, we'll determine what those expenses look like so if we see demand that is going to be a little bit.
Stronger than what we're assuming then we'll be able to continue to.
To book those savings if we see it drop rollout to actually take another look at it. So we're really focused right now on the second quarter.
Got it okay.
Okay.
I'll jump out thank you very much and all the best Thank you very very appreciated.
Our next question is from Sam Poser with Susquehanna.
Good afternoon hope everybody is great.
Healthy and everything and thank you for taking my question I've got a few follow ups in the first one is going to be about the comp store sales.
Ken can you tell us what the comp store sales were sort of on a you know on a.
We model.
Also the negative 12, when we don't know exactly how many are plus 12, we don't know how many stores were closed next year, we can't do it. So can you tell as sort of what the.
The all store stores were opened last year, even including the store closure comp was and then also tell us how you're doing sort of.
You know with good P, 60% of your stores close.
You Comping down 40 him so.
Oh I'm sorry.
Yes, probably down 30 incentive down 40, and that sort of where that 12 is if you could give us some color on sort of the.
The all in comp so we can actually improve.
Next year.
And Uh huh.
Well for whats happening well versed in stores were opened last year that would be great.
Thank you.
All right. So let me let me try to.
Answering your question just based on.
Our total sales so when when we look at our our total sales at at famous footwear.
When we whether the stores opened or not right. We had the first two weeks with with very few stores open and so there was zero sales coming out of those stores in Q1 in Q1 lets start in Q1, where we were you did.
191 million in Q1, and and your total sales in Q1 were down in famous.
We're down whatever they were down what they are in 45.7% can we assume that.
Yes.
Yeah Comped down.
In that range, I mean isn't a 50% comped down for the quarter or is it a 30, 38% come down I mean, what's the real comp would using that $191.252 million.
So.
Ecommerce.
Was we said was up 70%.
And in total for the quarter.
Right. So in terms of when we look at the total.
China to decouple led and I'm not even sure you don't have to be couple you don't have to decouple shoe Carnival for instance.
Last quarter, Comped down whatever they comped down, including all their stores, including the stores that were close to each quarter to date, there up low single digits and they have had 80% of their stores open but they were comping up low single digit including the stores that were still close so as an all in thing.
How do you just take it including E Commerce, how do you take.
Where you are right now and where you were in Q1 on a on a comp basis, saying, Okay last year, we had.
900 never heard many stores you had this year we have this many stores that many stores are in the comp base.
This is what we did regardless of the stores were closed or not what would that copy.
Well, including a conference they cut off line, Sam I don't even know how to answer your question.
We don't we don't look at when we look at the business.
That way and so I I honestly don't even know how to answer your question.
All right how many stores did you closed during the quarter.
And how many stores you plan to close in Q2.
So how many were going to be close permanently like you're closing permanently.
I'm going to reopen they're not going to be there anymore.
In the in the quarter Q1.
In one Q, how many sort of did you decide to close aren't going to reopen.
Very good.
Yes, we have if you if you go too.
With the total number of stores that we operated forget whether they're open or not if you go to the schedule number five that is that was attached to their results.
We operated 934 stores this year and 985 stores last year.
I think that's what you closed 15 stores in the quarter could you at 949.
At the end of Q4.
Right. So there was 15 stores that were closed as part of outside of the shutdown associated with cobot.
And do you plan to open any stores at famous this year.
We've got we've got somewhere around 14 that are.
On the schedule for the back half.
Nothing really in the first half.
Okay.
And as payments within the E Commerce platform, how many cost new customers never shopped at famous online before new to you I mean can you give us some idea of what impact like how many you got what percentage of your customers were new to famous never shop there before.
Yes, and we did you sign them up and yeah. It's actually was pretty interesting Sam It was with close to half of the people that were shot that came in where we're now in about half where repeat which was rather interesting.
Quite a bit how did you did you sign all those folks up before the loyalty program or.
Or how do you assume you're going to is that I'm sure we did.
And then also lastly, what to what has to what degree our you narrowing the assortment at famous and are you going to need to use payments to help move product you wouldn't have otherwise thought you would need to use payments for from the brand portfolio.
Yeah, I would say, where we're going to narrow the assortment a little bit you know some of the extraneous brands that that really are in the casual and dress side of the equation, where we don't really.
I need to carry those so I think a you know men's dress is a like a.
Really are ripe area for us to do a little bit more of an added there. So I think we're looking at that we're making sure that we've got there.
Right inventory position against some of the obviously the big drivers. So we're doing that and actually as a matter of fact, we did have a special section on the famous footwear site, where we have been clearing some of our brand portfolio goods as well and its then actually it's it's been doing we track we.
Wanted to try to spend a lot of different things that across the company and I am I know thats true with many others as well.
Well, taking this moment to look at new ways of.
Accessing customers and liquidating goods and even curbside that was a you know a great thing that the team did very very quickly and got that up and running so you know trying to a lot of new and different things in this in this current environment and we're going to continue to try to figure out as if they work or they don't and if they do we'll continue them. If we don't we want.
Oh, you know so so yes, we did.
Not very much like the Olympic.
Yep.
Just trying to just so okay. Thank you so much and good luck Steve. Thanks appreciate it.
Your next question is from Laura Champine loop capital.
Hi, Thanks for taking my question, it's really just some clarification. So can certainly heard your comments that you expect branded portfolio down 30, and 30% to 40% in the back half or that's your planning for I take it that's not what you would plan for famous footwear and clear.
And for the current quarter, you commented that sales could end up about.
In the same ballpark as the year on year declined in Q1 was that comment directed at Grand portfolio or was that consolidated.
All in.
All in.
And the down 30 to 40 for the back half is that branded portfolio or is that all.
That was branded portfolio. The diet was referring to I had talked about that lowers the as the way we were seeing most of our retail partners planning fall that kind of what you know they've been I'm thinking about in though is the last couple of weeks you know as we see more of these stores reopening and get a better sense of how.
You know the business is going to respond that might be something that gets adjusted but it is one of those things that you know where where were managing day to day week to week, but that we're taking a fairly conservative approach on that.
Got it and.
Then when we look at the store closures that you mentioned are accelerating our they accelerate to the extent that their stores that just will not reopen or maybe you can frame up for us what it means for them to be accelerating.
Yes, so when we looked out over the next two years.
Through the end of 2021, we had identified about a 160 stores that we would accelerate some of those are stores that were closed as part of Cove. It that you know where were we won't reopened after.
So after things would return to normal. So we would go ahead and leave those stores closed a number of them we're on month to month basis.
And then Theres a big number of those that are going around the brand portfolio.
Tied to Naturalizer that we went through and made final decisions on when we would actually close those over the next two years.
Got it thank you.
Thanks, Laura Thanks, Laura.
There are no further questions in queue at this time I'll turn the call back over to you missed Sullivan for any closing remarks.
Yes, I'd like to thank everyone for their interest in Claris, then we look forward to seeing everybody on our next conference call. Thank you and be safe.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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