Q3 2020 Caleres Inc Earnings Call
[music] good afternoon, and welcome to the colors third quarter.
For 2020 earnings Conference call. My name is Erica and I will be your conference coordinator at this time all participants are in listen only mode. After this.
Features presentation, there will be a question did answer session to M. P question. During the session you only need to press star one on your telephone. Please be advised for today's conference is being recorded if you require any further assistance. Please press star zero.
At this time I will turn the call. It for two Logan about of course, the Vice President of Investor Relations. Please go ahead ma'am.
Good afternoon, I would like to thank you for joining our third quarter 2020 earnings call and webcast a press release with detailed financial tables as well as our quarterly slide presentation are available at Caleres Dot com. Please be aware todays 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 disclosed in the company's form 10-K, and other filings with the U.S. Securities and Exchange Commission. Please refer to today's press release, and our I see filings for more information on risk factors and other factors, which could impact forward looking statement.
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 and Ken Hannah Senior Vice President and CFO.
We will 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 over to Diane.
Slogan and good afternoon, everyone. We appreciate you joining us on today's call I want to first begin by thanking the caleres team for their outstanding performance in recent months under which are quite obviously extremely difficult circumstances.
As you can see from our results our people have risen to the challenge and an impressive way responding quickly and effectively to the rapidly changing footwear market driving our performance forward while at the same time in negotiating we increasing bleak complex personal lives that I think everybody finds themselves grappling with.
We are truly fortunate to have such a resilient dedicated and talented team.
[noise] because of their efforts there is lots of good news to discuss on the operation and financial from.
During the third quarter, we maintained our progress and continued our recovery delivering solid and improving sequential results across most key financial metrics.
Most notably we reported sharply higher net income with adjusted earnings of 48 cents per share. We also achieved a 30% sequential increase in revenues as the topline benefited from the return to full operation of our store network. The full reopening of our partner stores Sol.
Digital demand.
As well as an extended back to school purchasing.
At the same time, we maintained our intense focus on driving down costs.
Achieving a 38 million reduction in overall expenses during the quarter.
Through these efforts, we again generated a significant amount of free cash flow achieving the highest level of third quarter cash generation and 10 years.
And put that cash to use further strengthening.
The balance sheet and reducing overall indebtedness into.
In total we paid down 50 million of debt during the quarter, bringing overall debt reduction to nearly 140 million since the beginning of the second quarter.
Now, let's turn to our business segments, where we will start with a review our for famous footwear result.
Famous continued to benefit from our inherent competitive advantages, which included a strong offering of end demand brands and advantageously assortment of sport performance in casual oriented style and a convenient and safe store locations that are cited largely off mall.
In fact, the segment turned in 391.7 million in revenues for the third quarter, representing a roughly 12% year over year decline, but coming in well ahead of our expectations for the period and increasing 17% from the second quarter of this year.
This was even with the losses, an equivalent of 1700 business days in the period due to store closures related to illness weather fire for civil unrest.
Which restricted our sales by approximately 6 million, perhaps most notably is that famous is third quarter operating earnings were nearly 200000 better than last year. Despite the sales decline due to our ongoing conservative approach to expenses as well as very prudent.
Inventory management.
During the quarter, we continue to lean into our digital capabilities and while our ecommerce sales moderated from the high levels achieved while then store network was close we realized a 48% year over year improvement at famous in addition, ecommerce penetration reached 17% of net sales.
Up from just 10% in the third quarter of last year.
Looking at the quarter in more detail as with most things things. This year the back to school season was absolutely far from normal and as we alluded to in our second quarter call back to school purchasing got off to an extremely slow start in August and uncertainty around the format of this school year cast a pretty wide shadow over them.
Marketplace and in fact, this uncertainty let us Leds to store for store sales for that month to come in well below our historical August sales levels.
However, as we progress through September higher sales started to materialize much ahead of our expectations as children headed back to classrooms, and as consumers felt more comfortable venturing out into the world.
Notably September sales exceeded last year's levels by approximately $15 million lift store for store sales up 16.9%, providing a partial offset to the declines that we saw in August.
After five straight weeks of sales better or equal to last year sales momentum in the last month of the quarter started to slow as traffic in stores declined and rising virus cases in certain parts of the country started to dampen consumer demand.
All that said the cadence of the quarter was sales in August for down double digits.
Sales in September were up double digits in sales in October declined single digits.
And now in the quarter as it relates to brand trends you guys. We know during times of uncertainty we continue to see consumers seek out quality brands that they know and love and famous is perfectly positioned to to fulfill those ongoing needs in fact, our top 10 brands.
Represented 70% of our total sales and just as in the second quarter consumers were still gravitating towards athletic sport casual styles and boy did they share know what they want.
And they are shopping with intent in fact year over year conversion rates were up both in store and online a notable bright spot also during the period with the increase in our kids penetration rising to nearly 19% and further heightening the extended nature of our back to school season.
Now looking ahead, we understand fully that uncertainty remains and renewed local restrictions in areas, where the viruses have surges or they're starting to be reinstated.
And as has been our position from the start the health and well being of our associates customers and communities is our top priority and we are continuing to take appropriate precautions as it relates to safety.
We are closely watching the numbers in the regions, where our stores are located and we'll follow local government guidelines when it comes to the operations of our stores.
We currently have 11 stores that have re closed due to local mandates.
While store closures may increase as we approach for the holidays, we are confident that with our recent experience disciplined cost approach and customer service options, well, whether whatever may happen in the coming weeks or months.
Now before moving to our results from the brand portfolio I'd like to just take a quick moment to say how excited we are that Mike Edwards is going to be leading same as going forward. He certainly is the popular choice here at Caleres internally and I I think so also with our with our partners and his tremendous experience.
And knowledge about our business from so many different angles is going to be essential to build buildings day, Mrs future growth and success.
Now turning to the brand portfolios performance.
For the quarter, we delivered better than expected results with net sales declining approximately 26%.
Compared to the third quarter of last year, but improving 45% sequentially.
We turned in positive operating earnings of 7.3 million further highlighting the progress in our wholesale business and our ongoing focus on cost control initiatives.
The stronger than anticipated results were driven by positive consumer reaction to our athletic sport and casual.
Products as well as improving performances from Bionic, Sam Edelman racquetball efficient events among others.
And increased shipments to strategic retail partners that we're working to increase and align their inventory levels with the consumer demand.
Moreover, we continue to manage our portfolio inventory levels in a very strategic manner.
Ending the quarter down 36% from last year's levels, we feel confident we can continue to whether the ongoing in balance in the supply chain throughout the rest of the year.
In addition, I'd also like to highlight that during the quarter, our wellness and comfort brands continued to perform well as the consumer demand for these products in fact, our wellness and comfort brands represented about 55% our portfolio versus 47% last year.
And more specifically it was really terrific to see biotic recording more than a 50% improvement and its E commerce sales.
Next consumers are reacting to whats new right now and our new product offerings are certainly resonating with them. For example, Allen Edmonds recently launched its park Avenue Sneaker, which is currently sold out and on back order. In addition, our Ryka Athletic brand has been outstanding and has further if progress with the.
Launch of a trail sneaker that is also doing very well.
And as you would expect the Vince brand cosy for these styles that everybody is looking for right now and lots of different brands, particularly our share links slipper. Our experience strong are experiencing strong sell through since coming to market.
And finally, a little bit about our boot business, which now represents 37% of the total brand portfolio sales down from about 47% last year.
And that was delayed at the start of the quarter by some late deliveries. However, since that time, we've seen some strong selling trends. So far this fall not surprisingly luxel boots has been driving the strength with casual booties and as well as cold weather styles really leading the way.
I think it's worth mentioning that Sam Edelman experienced mark sequential improvement.
Lighting, the heightened demand for its for all products, particularly boot styles in.
In fact, Sam's new combat boot the Garrett.
What's the number one new item released in October According to NPD and Garrett was in good company with three other Caleres foods from Franco in Naturalizer also taking top spots in the top 10, new items during the month.
So now lets transition to the realignment of our Naturalizer brand.
We remain committed to taking a disciplined and strategic approach to managing our portfolio.
And as we continue to respond to the changing patterns of consumer demand it.
Was the moment to address Naturalizer store footprint.
As a result, we recently made the decision to wind down most of our legacy Naturalizer retail brand stores in the U.S. and Canada.
But make no mistake, we continue to view the Naturalizer brand is a strong and value driving component of our portfolio and we'll be focusing on growing the brand's ecommerce through naturalizer dotcom and through our retail partner sites.
In fact, Naturalizer continues to inspire great brand loyalty and has a great track record of anticipating ingesting to consumer preferences and needs.
And we expect the store closures to be complete by the end of fiscal year 2020, and anticipate savings of 10 to 12 million per year.
As we move into 2021, we expect to reallocate capital and resources to amplify our digital presence, capturing the consumers where they want to shop.
Intensifying, our ecommerce smokers and then making sure we're leveraging those capabilities across the brand portfolio.
So all in where were pleased with our progress Im pleased that we were able to deliver solid performance in the third quarter and.
And we began the fourth quarter appropriately cautious, but confident in our ability to win with the consumer for the balance of the year and heading into next year.
And just as a reminder, the fourth quarter is 10% smaller on average and we expect sales will be lower sequentially.
Finding approximately 20%.
There is still plenty of work to do for sure as we close out 2020, but we're excited about the potential for strong ongoing gains as we head into 2021.
As you would expect and of course, we will continue to maintain that discipline with regard to the management of expenses, while appropriately investing in the areas that we expect to give us a strong return on their investments, particularly to grow our digital business.
While the risk of uncertainty persists and in fact in the near term you know, there's a lot of conversation going on about Oh, what where it what's happening with co but again we.
We do believe that with our strong cash generation and leaner inventory that we are very well prepared to manage through this period and take advantage of market conditions as they begin to normalize.
So in short we are taking a cautious approach for the near term, but very optimistic about the intermediate term, we have the right portfolio of brands great operating platform the talent and we believe the work we've done over the last several months has positioned us well to capitalize on our opportunities and drive our growth and make sure.
We create value for all of our stakeholders.
And with that I'd like to turn the call over to Ken for a financial review.
Thank you Diane and good afternoon, everyone.
Despite facing ongoing pressure from the lingering health crisis I'm very pleased with the progress we've made to improve for competitive position during this period.
Made laser focused on appropriately managing expenses and working capital Andrew.
For these ongoing efforts, we are confident in our ability to weather the uncertainty that still persist today in the marketplace.
I'd like to start by providing an update on our liquidity position and capital structure and discuss our third quarter results and finally, we'll provide a little additional color on the outlook for the remainder of the year.
As we communicated last quarter, we believe deleveraging to be the most value creating use of cash given the volatility in the marketplace to that end during the quarter. We made debt reduction in the main priority in our capital allocation process, we paid down $50 million and revolver debt, reducing the outstanding back.
Sales to $300 million at the end of the third quarter.
Our cash balance of $124.3 million and our $600 million revolving line of credit provide more than adequate liquidity for us to continue to navigate these uncertain times looking.
Looking ahead, we expect to further our debt reduction during the fourth quarter and expect in fiscal year 2020 with borrowings under our revolving credit facility back to pre cobot levels.
Now moving onto a review of our third quarter financials.
We reported earnings per share of 38 cents, including 10 cents related to the fair value adjustment.
So she to with the mandatory purchase obligation for Blowfish Malibu.
Our adjusted earnings per share in the quarter. Excluding this item was 48 cents per share.
Our consolidated sales for the third quarter were $647.5 million down 18.3% from the same period a year ago.
Famous footwear total sales were $391.7 million down 12.3% from the third quarter of fiscal 2019, as we operated 35 fewer doors are.
Our comparable store sales were down 9.1% during the quarter, while famous footwear ecommerce sales were up more than 48%.
Sales at famous footwear improved 17% sequentially, reflecting an extended back to school season.
Our digital demand and a full quarter of operating our brick and mortar store fleet post closures.
Our brand portfolio total sales were $267.6 million.
A decrease of 25.6% year over year.
Sales from the brand portfolio improved 45.7% sequentially as our partner stores opened and started to flow orders.
Our consolidated gross margin was 39.7 per cent compared to gross margin of 40.4% in the third quarter of fiscal 2019 the.
67 basis point decline was due primarily to an increase penetration of ecommerce sales has continued liquidation of spring inventory.
[noise] famous footwear had a gross profit margin of 40.9 percentage, which compares to a gross margin of 41% in the same period last year.
Decrease is driven by the increased penetration of ecommerce related business in the quarter EPS product margins were higher in store and online.
Our brand portfolio had gross margin of 35.2 per cent compared to gross margin of 37.2% in the third quarter last year, reflecting aggressive aggressive liquidation of our spring inventory.
Our consolidated SGN, a expense was $236.9 million, representing a decline of approximately $38 million compared to the third quarter of last year. This year over year decline was driven by store selling productivity and lower facilities for marketing and corporate expenses.
Third quarter operating earnings were $20.1 million for 3.1% of sales. This compares to adjusted operating income of $44.4 million in the third quarter of 2019.
At famous footwear, we posted operating earnings of $27.8 million and a 7.1% operating margin a 91 basis point improvement year over year, essentially as Diane mentioned $200000 more operating earnings on $55 million less sales from the third quarter of last.
Here.
The brand portfolio were pre is pleased to report operating earnings of $7.3 million for the quarter.
The operating margin a brand portfolio was 2.7%.
The company's adjusted net income was $18.2 million for earnings per share diluted of 48 cents.
This compares to adjusted net income of $31.6 million or 78 cents per diluted share last year.
As I mentioned earlier, our inventory at quarter end was down 21%.
Included 11% decline at famous footwear Andrew.
36% decline from our brand portfolio, reflecting the ongoing liquidation of seasonal goods and our best efforts efforts to prudently manage for inventory.
Net cash provided by operating activities during the quarter was $34.2 million the largest third quarter level of cash generation in over 10 years our.
Our capital expenditures in the quarter totaled $6.9 million.
Net interest expense for the third quarter was $10.9 million and included $5.1 million, a fair value adjustments associated with the blowfish Malibu purchase obligation.
Our consolidated tax rate is 19.8% year to date.
Our lower tax rate in the quarter, primarily reflects the impact of a higher anticipated full year tax benefit driven by the impact of the cares Act, which allows us to carry back 2020 losses two years for the higher federal income tax rate.
In addition to our progress on debt reduction, we also returned approximately $2.7 million to shareholders through our long standing quarterly dividend.
Now given the ongoing shirt uncertainty and risk of new store closures, we will not be providing guidance for the remainder of the year.
I'd like to give you some high level perspective regarding our expectations for the fourth quarter and I'll start with a reminder, that our sales for the fourth quarter are seasonally lower than our third quarter sales and we expect that to be the case again this year.
Our net sales are expected to decline approximately 20% year over year very similar to what we experienced in the third quarter with famous footwear sales expected to be down between 10, and 15% and our brand portfolio sales expected to be down between 25 and 30%.
We do expect our credit facility outstanding outstanding borrowings to return to pre cobot levels and I'll remind you. We ended the year last year at $275 million borrowed against the facility.
Furthermore, as we discussed we've made the decision to exit our legacy Naturalizer stores in the us and Canada by the end of fiscal 2020. This.
This ex it will cost between 20 million and $25 million in pre tax charges for delivering $10 million to $12 million in annual pre tax benefits.
Excluding the impact of the Naturalizer closings and barring any further shutdowns associated with total that we would expect positive adjusted earnings per share in the quarter.
In closing, we are continuing to rapidly adjust to the current and evolving market environment, while furthering our long term strategic objectives, and driving to deliver greater cash generation and value creation in the future with that I'd like to turn the call over to the operator for questions.
Hi, Andrew to ASCII question, you would need to press star one on your telephone to withdraw your question press the pound.
Please stand by what we can tell became a day roster.
Your first question is from Laura Champine with.
Capital.
Thanks for taking my question.
Diane could you talk a little bit more about the changing management at famous footwear I think that was sort of snuck in there as a surprise to me anyway at the end.
Yes.
No no no surprise.
Yes, BOLI Adams, who has been here for a couple of years.
Terrific job and has decided to leave the company and has another opportunity Fortunately Laura.
We have a great team and a good bench strength, there and Mike Edwards has been with the company for about 12 years, and a number of different capacities across across.
Across famous including planning and allocation is our key chief customer Officer officer for a while he's been running our stores. He is basically.
Has that has a great a great sense of that brand its customer and and actually you know his his head in his heart is really in the game to win at famous so he along with terrific. Other group of people there will continue to drive that business very well into the future.
Got it thank you.
Yep.
Our next question is from Steve Marotta Wood C.L. King.
Good evening, Diane can and load and congratulations on a stellar quarter are really very very nicely done in that piece of what was a difficult time undoubtedly.
You've given very nice shifting you you've given.
Great color around the fourth quarter, just wondering if the November to day timeframe has varied significantly from what you expect from the balance for the quarter.
No I wouldn't I would say kind of as we're running quarter to date were for kind of right.
Lined with what we had said kind of laid out and again, we hesitated to as to what kind of color that we would provide but we didn't want to leave everybody out there trying to figure it out themselves. So obviously you know as we mentioned we've got some stores in some areas that have been closed and so weve tried to take that into consider.
Ration, but if we if we move towards a much larger shutdown obviously the numbers that we've we've kind of laid out will be off the table.
And that also assumes what travel patterns will be for the holiday season, which I assume is going to be reduced.
The general trajectory of what's happening right now correct.
Exactly okay.
True to other more long term questions. The first is.
To the extent that you can talk about the first half buying patterns across your wholesale customer universe, including what they expect from a digital component as well can you talk a little bit about what you're seeing there were open to buy dollars are usually obviously this is done well in advance.
Of November, but I think that this is a relatively unique year any thoughts that you can give us on how the wholesale business is currently.
Planning and trending would be really helpful. Okay, Hey, Steve It's Diane on here's what I would say, it's again a little early to talk too much about 2021, but clearly consumer behavior has shifted dramatically to consumers being very comfortable to purchase online we do not see that changing.
We see that penetration of our business continuing to grow at a pretty rapid rate that's true both at our famous business as well as with our own E commerce business and as well as our partners businesses and you know I think if you talk to people that were sort of forecast where what 2021.
Is going to look like they'll they'll tell you that it's it's most likely that E. Commerce related businesses are going to be somewhere between 40% to 50% of UBS.
Someone's business. So I think that's the biggest thing that that we see in terms of going forward and then obviously.
The.
For an athletic and casual side of life doesn't look like that that's changing anytime soon but let's help as you know we hear more about a vaccine and you know more pie I think even doctor about you are talking about sometime in June or July and August that time period might be when a good part of.
The population would have access to it that I think theres going to certainly be an opportunity for you know other types of footwear to two coming back into play again too. So that's.
That's what I would I'd, what I'd tell you right now where we're keeping our eye.
Hi on both the short term and managing our business as well as you know the medium term to make sure. We take advantage of every opportunity that we can so and staying innovative on all of our products. Because we think that's really where you know what what the consumer is going to be interested in.
Good day, it's really just touch right onto my very last question, which is how are you thinking and planning for a post vaccine world and there is no more than a likely chance that the consumer is going to experience a jailbreak and.
And that given social distancing reductions that they're going to be going to clubs and movies in restaurants and.
Well net comfort level resumes people being social animals, I think that could that could happen how do you plan for that.
It's you certainly don't want to be lot short, but obviously you can't you know yeah.
Yes.
Inventory for amount if you could just share your thoughts there would be helpful. Sure I mean, I think in the short term, Steve you know, we like having or wholesale inventory down 36, we like having our famous inventory about where it is we'd like it to be a little bit more in some of our we're a little light on some of our top 10 brands, but but in general.
We're going to continue to play it close to the vest on inventory and make sure that we can really begin to see some.
From driving of full price business again, because obviously this year has been.
One where that we've had to clear an awful lot of good everywhere. So I think we're we're going to keep inventory tight and watch it very carefully we're going to make sure that we're doing all the right work around our speed to consumer program. So you know, making sure that what we have with materials a planned on good.
For products that we think are going to be important going forward. So making sure that we that we have the agility for there to respond during the market and during the season and I think lastly, you know as we get closer I think thats one of the benefits that Caleres does have you know we have again visibility.
Crust, so many different parts of the marketplace and landscape.
We can see whats happening and we'll be able to pivot quickly to where we think the consumer is moving so.
Yeah, I think we're in we're in good position I say said.
Theres still a lot of work to do and we don't we liked what we accomplished this quarter, but but where you know not satisfied and we're going to keep pushing it a we think we can come out a winner in the end is after everything is behind.
Behind us so I hope you're right I hope people.
Definitely you know, we'll want to go out and socialize and go places so keep your fingers crossed rights.
Good day, our thank you for the color that's very helpful. All right. Thanks, Steve.
As a reminder, ladies and gentlemen, if you would like to ask a question at this time simply press Star then the number one on your telephone keypad.
Your next question is from Chris <unk> with Wedbush.
Good afternoon, everyone nice job on top and Ron Thanks.
Thank you thanks, Chris.
A couple of things one just want to go to Naturalizer I guess more specifically.
When you think about the 20 per cent reduction in revenues.
For the quarter, what impact is the Naturalizer liquidations I guess, having on that if at all for too just on Naturalizer whats the Rhonda for Naturalizer retail just in terms of sales how how big is that and then lastly.
Our net flows were selling for profitable and what do you intend to do with the savings for you just.
And to reinvest that $10 million to $12 million or is that potentially flow for.
Yeah, I think so if you step but your first question. When you were talking about liquidation, obviously, we laid out a timeline to go ahead, and and and close those stores by the end of the fourth quarter. So we began doing some of that liquidation through our own.
Retail sites in our and our web site.
In the third quarter, but don't believe given the inventory levels that will have a problem liquidating the rest of the inventory in those stores.
Between now and the end of the fiscal year.
When it when it comes to the the natural retail Naturalizer retail stores I mean, obviously you know they meant significantly impacted by what's happened. This year. So you know we we went from stores that we're generating decent amount of revenue and and obviously with that.
Production is is put a lot of pressure on the bottom line. So we went ahead and made the decision to.
Go ahead, and and exit those stores, if you recall and Diane can jump in here and provide color, but we did a total revamp of that brand and one of the things. We did is we kind of move forward and reposition that that consumer and that brand and a lot of the stores were.
Tied back to the legacy positioning of the brand and the and that and that prior consumer and so we've shifted and now was just a good time to go ahead and exit we are going to keep a couple of stores that we have that are in markets, where those consumers are that have.
Had investment put into them and and obviously we're still.
Looking to grow that brand globally as it has a nice nice meaning or across the world. So I don't know if you want to share and again I think Chris I'd, maybe just add add this you know when I said it was the moment. It really was when we looked at the size of that business and the impact that call that it had on it and as we looked at the other opportunity.
These about where we could move that customer to in the future. We felt it was much more aligned with where the where the consumer consumer was going so you know, we think that the where it will continue to drive.
Our business to our own website, we think that will continue to be an important part and we're going to allocate some resources and we have plans in place for how we're going to capture those consumers. We're also going to be looking at our retail partners. Our strategic partners. There's a lot of opportunity we already have a very strong powerful about I think.
Probably close to a little bit over half of our business with our strategic partners as already digitally driven so we think there's even more opportunity to do that and there's.
There's there's also opportunities in Canada and other places for us to look at new ways to capture that customer. So we have a full on plan for how we how we're going to do that and so I think our that 10 to 12 minutes millions.
Some of it will certainly be allocated to ensuring that we capture the maximum that we can in terms of customer acquisition as athletic brand and working with our teams to do so so it's a combination of lots of different things, but really the right the right moment because they were.
Legacy retail kind stores, where we hadn't invested a lot in the last last numbers here. So the time was right.
So is that so from just from a from a numbers perspective am I thinking about that 50 million, maybe run rate given where the revenue trajectory was and these for losing money. Obviously, we've done a fair ballpark range from trying to think about how we can think about that for next year.
I mean does the revenue impact was was a little bit less than that just with the declines we have seen.
Close to 50 per cent declines this year when with the shutdown. So it was it was well above that and and now it is below that so the the production and in topline, obviously was putting pressure and putting a number of those stores into a loss position. So we felt like.
It was about a two year payback to go ahead, and and and exit and certainly in the 10 to 12, we try to take into consideration, what we had identified as opportunities to to reinvest and so we felt like it was the time to make that decision.
How do you think about stores for Allen Edmonds.
Even maybe Sam Edelman potentially at this point.
The same sort of context are there opportunities there or no you're comfortable for do you have well I think there is I'll take this one can you can you can add to it I.
I think there is a couple of things on that Chris I think first of all you know, we always and we'll continuously look at our entire fleet, whether its famous or Allen Edmonds or Sam Edelman and make sure that you know, we're looking at the real estate and making sure it's profitable the.
You know the Naturalizer, but lot of the Naturalizer outlet business was an outlet stores as well. So it was very little sort of mall you know full price and then much more you know outlet, which wasn't really a consistent part of our strategy and as we look at Allen Edmonds said is a very critical.
Part of their overall direct to consumer App.
Effort will have to continue to monitor that because it is and mark.
Urban kind of locations so we'll have to.
Make sure that we monitor that and continue to see whether or not that makes sense and non Sam Edelman again same thing you know more mall based places are more challenging.
And we expect that we're going to continue to look at it we have if we need to make a decision on that you know we we we will so can I don't know if you wanted to make another comment on that I guess the thing I would add is when you look at at the the Naturalizer stores and the split obviously as Diane mentioned there.
Total net were outlets and I think the most important thing is they just they didn't represent what the brand stands for and that's not the case and our and Allen Edmonds and have Sam Edelman. So the total.
Totally different conversations obviously were.
All three of those brands from a retail perspective or are down.
And so we're having conversations with all of those landlords about restructuring leases and trying to do things and so you know where we can get some movement. Obviously you know it.
Well it will significantly change the financial profile, but the brands are aligned.
How we represent in store and so two totally different scenarios between kind of where we had found ourself at Naturalizer versus Allen Edmonds and Sam Edelman got it. Okay. Just couple of questions for me just on the October trends for famous footwear comping down single digits.
How much of that do you attribute to either whether factors, maybe some softness for the boot business versus specifically cobot related shoppers not shopping with the same level of frequency ex.
Sandra from Peel that back of it yes.
I think it's hard to say exactly Chris, but I would say generally speaking, it's tied much more with consumer sentiment overall and the rise and.
The cases of the virus across the costs across the country. So I think generally speaking it was overall consumer sentiment would be the reason as we thought we would see that and we were very careful around our promotional activity as well as.
And because our you know we were selling through goods at famous it debt at really good margin. So we didn't want to promote too much either so we leased we stayed pretty a pretty.
Pretty pretty careful creating that needle about making sure we were delivering good margin too. So I think thats fair I think when we look for consumer sentiment and it really you could see it in the traffic and as we go back and look at market share.
Data from an October standpoint, you know, we were able to maintain and in some cases grow our market share. So.
You know I don't think its anything other than just consumer sentiment.
From for me just on the EPS you know.
As I think about Q4, and I know, you're not providing a lot of color here, but to kind of get to profitability.
Ex.
Some of the onetime charges.
Some assumptions that asking is still down pretty materially maybe similar levels to Q3.
Am I thinking about that right and how do we think about what structural in the business versus what is going to come back pretty materially into next year.
Yeah, I think we had.
I had indicated we're down 38 million in Q3.
In our.
Second quarter call, we had kind of talked about exiting the year being down at least 25 million. So if we just if we just hold to the 235 million or so that we we had an expense in Q2 and Q in Q3 in Q4, then that will be at that level. So.
Lastly, if.
If we're closer to the higher end of some of those sales reductions we have the ability of flux net SG in a down a little bit more but it won't be it won't be any higher in gross dollars than it was in Q3 just to help you out on your modeling.
Okay.
All right that's all I got for now.
Thank you and all the best Ronald.
Thanks, Jude just Chris.
[noise] you. My final question is from Sam Poser, What's Uh huh.
Good afternoon, Thanks for taking my questions.
I'll start with famous.
Can you could you be more deposits you said mid teens up down mid teens for the first for August and September can you give us some more color on where exactly October was was it mid singles bicycles flow singles.
It was down mid singles.
And then can you.
You had a lot of help in back to back from school shift clearly help.
August and help September do you have like a combined comp number a combined sales number for.
For.
August September notice from.
Offset because there's there's no nothing incremental definitely going to happen in the fourth quarter the way moving.
Chip talk with Wood Q3, GAAP, yes, no. It was really in starting I would say second week September was when we started to see our performance really.
Lift.
Relative to our lap last year's business, though there was about there was about five weeks, there, where we were higher than or close to last year's levels.
And so that's kind of where it all came Sam was was really in those weeks on and I don't think we have I don't know Ken if we have an August September number, but we can certainly you know for.
Follow up with you and get you that if that would be helpful.
That would be and then from.
How should we think with statements on store openings and closings in the fourth quarter and then sort of just you know how are you thinking about next year.
As far as same as stores.
Yes, I mean, we've got.
Got a few opening and then obviously were for.
We're closing some additional stores I mean, we've talked about for.
For the year being down 45 to 50, and so year to date, we were down 29.
Through the third quarter. So we've got I think Theres, a third one store for share opening and one that we may push to next year. So.
As we look into next year, obviously you know.
We've continued to close.
Around 45 to 50 stores each year and you know we've we've been continuing to to reduce the number of new stores that we're opening so you know we're planning on on opening.
For you I think you know.
Somewhere in that 10 range was would be my.
My Best guess, if we were sitting here today.
But obviously.
Lots of discussions going on with landlords and as they get a little bit more realistic about rents then obviously that gives us an opportunity to open more stores.
Thanks, and then and then on the U.
Can you just can you give more color onto what the SGN. They cuts were at famous to bring to you really have your EBIT in line with last year's EBIT there.
Yes, I mean, a lot of it was was productivity in the stores with a you know.
Just just getting better productivity out of the labor.
We did reduce some marketing we had.
You know obviously originally planned to spend a lot of TV and radio at back to school and then obviously when it started shifting.
We did not.
End up spending that money some of that was was transitioned over to digital spend but a lot of that was was not and then.
You know the rest was really in facilities expense with wood, we did have stores close I think year over year were down 35 stores, so that was contributing to that as well.
When you say productivity, you're really saying.
For your head count went down in the stores no. We're.
We're saying, our our labor productivity as a percentage of sales for the hours that we were expanding to generate the sales that we did.
So a lot of cases, there was hours that were adjusted during during the quarter to to be more productive.
Okay. Thanks, and then.
When you think about the brand portfolio business here and again.
Looking forward with debt, especially since Q4 is from close to be slightly worse from Q3, how much of Q3. If you look into that there was some pull forward from Q4 on some wholesale orders from brand portfolio is it makes your net correctly. Yeah. We basically said there was a little more demand in Q3 than.
We had anticipated because we're trying to make sales that some retailers find themselves really meeting inventory on some of the you know the.
Key items. So there was a little bit of demand higher than what we anticipated I think we had talked about being down 30 in the third quarter and we came in down 26. So there was a little there was a little shifts there a little better than we anticipated and really I think we are thinking about the fourth quarter in that.
That same kind of range can I think you said right 25 to 30 down for brand portfolio in the <unk> in the fourth quarter, so pretty much in line with you know right, where we were this this year and again I mentioned are inventory levels as well you know being down and that that that 36 range going into the fourth quarter too.
And then lastly, you said that back to famous again that the famous sales or are going to be from a year over year perspective, a little weaker than they were in Q3, and that's primarily due to not having that.
You're just not going to have that spike up.
Well I think yes, I think we said, yes. We were you were down 12 in the in the third quarter and were forecasting said 10 to 10% to 15%.
So we'll see how it all shakes out, but you know Ross.
Roughly in line also.
Okay, great. Thank you very much and happy holidays.
Thanks, Thanks Sam.
Ladies.
This concludes today's conference call. Thank you for participating you may now disconnect.
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