Q4 2024 Caleres Inc Earnings Call

Operator: Good morning, and welcome to Caleres' fourth quarter and fiscal year 2023 earnings conference call. My name is Sherry, and I will be your conference coordinator. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.

Good morning, and welcome to Claris fourth quarter and fiscal year 2023 earnings Conference call. My name is Sherry and I will be your conference coordinator if anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.

Operator: As a reminder, this conference is being recorded. At this time, I would like to turn the call over to Liz Dunn, Senior Vice President of Corporate Development and Strategic Communications. Please go ahead.

As a reminder, this conference is being recorded at this time I would like to turn the call over to Liz Dunn Senior Vice President of corporate development and strategic Communications. Please go ahead.

Liz Dunn: Good morning. Thank you for joining our fourth quarter and full year 2023 earnings call and webcast. A press release with detailed financial tables as well as our quarterly slide presentation are available at www.caleres.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 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 SEC filings for more information on risk factors and other factors which could impact forward-looking statements. Copies of these reports are available online.

Liz Dunn: Good morning.

Thank you for joining our fourth quarter and full year 2023 earnings call and webcast a press release with detailed financial tables as well as our quarterly slide presentation are available at Clarus Dot com.

Liz Dunn: Please be aware that today's discussion contains forward looking statements, which are subject to a number of risks and uncertainties.

Liz Dunn: 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.

Liz Dunn: Please refer to today's press release.

Liz Dunn: And our SEC filings for more information on risk factors and other factors, which could impact forward looking statements copies.

Liz Dunn: Copies of these reports are available online in.

Liz Dunn: In discussing the results of our operations, we will be providing and referring to certain non-GAAP financial measures. You can find additional information regarding these non-GAAP financial measures as well as others used in today's earnings release in our presentation in the Investors section of our website. The company undertakes no obligation to update any information discussed in this call at any time.

Liz Dunn: In discussing these in discussing the results of our operations, we will be providing and referring to certain non-GAAP financial measures. You can find additional information regarding these non-GAAP financial measures as well as others used in todays earnings release on our presentation on the investors section of our website the company.

Liz Dunn: <unk> undertakes no obligation to update any information discussed in this call at any time.

Liz Dunn: Joining me today on the call are Jay Schmidt, President and CEO, and Jack Calandra, Chief Financial Officer. We will begin this morning's call with our prepared remarks, and thereafter we will be happy to take your questions.

Liz Dunn: Joining me today on the call are J, Smith, President and CEO and Jack Calandra, Chief Financial Officer, We will begin this morning's call with our prepared remarks and thereafter, we'll be happy to take your questions I would now like to turn the call over to J J.

John W. Schmidt: Thank you and good morning, everyone. I'm pleased to report that Caleres delivered another strong performance during the fourth quarter of 2023, capping off the third straight year of adjusted earnings per share above our $4 baseline. These results continue to underscore the power of our portfolio of brands, the focus of our talented team, and the magnitude of our structural financial transformation. Overall, 2023 marked another year of significant accomplishment and disciplined financial execution at Caleres. In total, we delivered annual sales of $2.8 billion, in line with our expectations.

J: Thank you and good morning, everyone.

J: I'm pleased to report that Calera has delivered another strong performance during the fourth quarter of 2023.

J: Capping off the third straight year of adjusted earnings per share above our $4 baseline.

J: These results continue to underscore the power of our portfolio of brands.

J: Focus of our talented team.

J: And the magnitude of our structural financial transformation.

J: Overall 2023 marked another year of significant accomplishment and disciplined financial execution Ecolab rice.

J: In total we delivered annual sales of $2 8 billion.

J: In line with our expectations.

John W. Schmidt: We achieved adjusted operating earnings of $201 million and generated a strong, consolidated, adjusted operating margin of more than 7%. Our adjusted earnings per share of $4.18 was in line with the outlook we reaffirmed in January, and we generated approximately $260 million in adjusted EBITDA. We are particularly proud of these results, which were achieved while navigating a dynamic demand environment and making prudent investments in support of our future growth. In addition to our financial accomplishments during 2023, we gain market share in both the brand portfolio in women's fashion footwear, and we gain market share in shoe chains for famous footwear as well as for kids. We lean into our Edit to Win initiative and leading speed capabilities, which facilitated a nearly 7% reduction in inventory.

J: We achieved adjusted operating earnings of $201 million and generated a strong consolidated adjusted operating margin of more than 7%.

J: Our adjusted earnings per share of $4 at 18 cents was in line with the outlook we reaffirmed in January.

J: And we generated approximately 260 million in adjusted EBITA.

J: We are particularly proud of these results, which were achieved while navigating a dynamic demand environment and making prudent investments in support of our future growth.

J: In addition to our financial accomplishments during 2023.

J: We gained market share in both the brand portfolio in women's fashion footwear, and we gained market share in shoe chains for famous footwear as well as in kids.

J: We leaned into our edit to win initiative, and leading speed capabilities, which facilitated a nearly 7% reduction in inventory.

John W. Schmidt: We generated 200 million of cash from operations and strategically used that cash to invest in and accelerate value-driving capabilities essential for our future growth. This included enhancements to our marketing ecosystem, and the expansion of our international presence, particularly at Sam Edelman. The involvement in the consumer experience at Famous Footwear and the upcoming go live of our financial and operating system into a new integrated SAP platform. We also deployed cash to further strengthen our balance sheet and enhance our financial flexibility by reducing borrowings by $126 million from 2022. Finally, we return more than $27 million to our shareholders through share repurchases and dividends. Now, let's move to some performance highlights from the fourth quarter.

J: We generated 200 million of cash from operations and strategically use that cash to invest in and accelerate value driving capabilities are essential for our future growth.

J: This included enhancements to our marketing ecosystem.

J: The expansion of our international presence, particularly at Sam Edelman.

J: Involvement in consumer experience at famous footwear and the upcoming go live of our financial and operating system into a new integrated S. A P platform.

J: We also deployed cash to further strengthen our balance sheet and enhance our financial flexibility by reducing borrowings by $126 million from 'twenty to 'twenty two.

J: Finally, we returned more than 27 billion to our shareholders through share repurchases and dividends.

J: Now, let's move to some performance highlights from the fourth quarter.

John W. Schmidt: During the period, we delivered sales of $697 million, up slightly from the prior year. We generated strong margins, and we achieved fourth quarter adjusted earnings per share of 86 cents, which represented a 32% increase over the fourth quarter of 2022. Now, let's turn to our operating set.

J: During the period, we delivered sales of 697 million up slightly from the prior year.

J: We generated strong margins and we achieved fourth quarter adjusted earnings per share of 86 cents, which represented a 32% increase over the fourth quarter of 2022.

J: Now, let's turn to our operating segments.

John W. Schmidt: The brand portfolio delivered its best ever annual adjusted operating earnings, which topped $148 million, eclipsing its previous record of $112 million, and was accompanied by a nearly 12% adjusted return on sales. Of particular note, the segment led the financial performance of the company for the first time in nearly two decades. Looking more closely at the quarter, strong demand for our lead brands and largest portfolio brands drove the company's performance. Notably, sales in the segment were 4.5% higher than the fourth quarter of 2022, and segment gross margin increased significantly. And while we invested in key capabilities like our marketing network and international expansion, most of the margin strength flowed through to the bottom line, leading to a 570 basis point improvement in adjusted quarterly operating margin. This strong upward momentum was broad-based, with increases across both our wholesale and direct channels, primarily our own e-commerce, which increased 5% year over year. As the consumer continued to prioritize newness, including loafers, valets, Mary Janes, slingbacks, and, of course, fashion sneakers.

J: The brand portfolio delivered its best ever annual adjusted operating earnings, which topped 148 million.

J: Eclipsing its previous record of 112 million.

J: And was accompanied by a nearly 12% adjusted return on sales.

J: Of particular note the segment led the financial performance of the company for the first time in nearly two decades.

J: Looking more closely at the quarter strong demand for our lead brands and largest portfolio brands drove the company's performance.

J: Notably sales in this segment were four 5% higher than fourth quarter of 2022 and segment gross margin increased significantly.

J: And while we invested in key capabilities like our marketing network and international expansion most of the margin strength flowed through to the bottom line, leading to a 570 basis point improvement in adjusted quarterly operating margin.

J: This strong upward momentum was broad based with increases across both our wholesale and direct channels, primarily our own e-commerce, which increased 5% year over year.

J: As the consumer continued to prioritize the newness, including low first ballets Mary Jane Sling back and of course fashion sneakers are brands, we're well positioned to meet their diversified needs and preferences of our consumers.

John W. Schmidt: Our brands are well positioned to meet the diversified needs and preferences of our consumers. We saw particular strength across our lead brands during the last quarter of the year, with positive trends in year-over-year sales, operating earnings, and market share. In total, these four brands, which include Sam Edelman, Allen Edmonds, Naturalizer, and Bionic, represented about 55% of the brand portfolio sales and more than half the segment's operating earnings during the fourth quarter. Diving into the performance of our lead brands, Sam Edelman had a solid quarter with improving financial metrics. We announced some big news last week. In case you missed it, Sam unveiled Kylie Jenner as the face of a spring marketing campaign. This is an exciting time for the Sam Edelman-Brandon team, which is celebrating its 20th anniversary this year.

J: We saw particular strength across our lead brands during the last quarter of the year with positive trends in Europe, a year sales operating earnings and market share.

J: In total these four brands, which include Sam Edelman, Allen Edmonds naturalize her and bionic.

J: Representing about 55% of the brand portfolio sales and more than half the segment's operating earnings during the fourth quarter.

J: Yeah.

J: Diving into the performance of our lead brands, Sam Edelman had a solid quarter with improving financial metrics.

J: We announced the Big news last week.

J: In case, you missed it Sam unveiled Kylie Jenner as the face of its spring marketing campaign.

J: This is an exciting time for the Sam Edelman brand and team, which is celebrating its 20th anniversary this year.

John W. Schmidt: The brand also continued to expand internationally, opening 10 new stores in 2023, with plans to grow that number significantly in 2024. We expect the 20th anniversary marketing plans and events, international expansion with our joint venture partner in Asia and the relaunch of the Salmon Libby brand will be significant sales drivers in 2024 and beyond. Next, at Allen Edmonds, they turned in their 12th positive quarter of growth. Casual and sports styles continued to lead the way during the period, with the consumer responding to the newness and colorways of our iconic shoes and introductions of new styles. During the quarter, we opened a new Port Washington Studios concept store in Birmingham, Alabama. We now have eight Port Washington Studios stores and continue to see the sales performance outpace the rest of the chain. We already have plans to introduce the Port Washington studio into four stores during 2024 and continue to look for more opportunities to add this concept to new and existing locations.

J: The brand also continued to expand internationally opening 10, new stores in 2023 with plans to grow that number significantly in 2024.

J: We expect the 20th anniversary marketing plans and events international expansion with our joint venture partner in Asia, and the relaunch of the salmon Libbey brand will be significant sales drivers in 2024 and beyond.

J: Next at Allen Edmonds, they turned in their 12th positive quarter of growth.

J: Casual and sport styles continue to lead the way during the period with the consumer responding to newness and color ways of our iconic shoes and introductions of new styles.

J: During the quarter, we opened a new port Washington studio concept store in Birmingham, Alabama.

J: We now have eight port Washington studio stores and continue to see the sales performance outpaced the rest of the chain.

J: We already have plans to introduce the port Washington studio into four stores during 2024 and continue to look for more opportunities to add this concept to new and existing locations.

John W. Schmidt: Our naturalizer brand had a standout quarter from both a sales and a margin perspective. Sales were up double digits, and operating margin improved substantially. The brand gained one point of market share during the quarter with a significant increase in new consumers. We are pleased with the rollout of the Naturalizer Loyalty Program, named Naturalizer Insider, and are seeing positive spending trends with loyalty members.

J: Our naturalize their brand had a standout quarter from both a sales and margin perspective.

J: Sales were up double digits and operating margin improved substantially.

J: The brand gained one point of market share during the quarter with a significant increase in new consumers.

J: We are pleased with the rollout of the naturalized her loyalty program named Naturalize her insider and are seeing positive spending trends with loyalty members.

John W. Schmidt: We are also seeing an increase in younger consumers driven by strong relevant fashion offerings and targeted marketing efforts, including new collaborations and partnerships. As you know, we've done a lot of work in recent years to transform and ready naturalizer for even greater growth. We believe there is tremendous opportunity for the brand moving forward. Finally, BionX profitability improved significantly in the quarter, despite a modest decline in sales, with both our wholesale and e-commerce businesses making significant contributions.

J: We are also seeing an increase in younger consumers driven by strong relevant fashion offerings and targeted marketing efforts, including new collaborations and partnerships.

J: As you know we've done a lot of work in recent years to transform and ready naturalize there for even greater growth.

J: We believe there is tremendous opportunity for the brand moving forward.

J: Finally, bionics profitability improve significantly in the quarter. Despite a modest decline in sales with both our wholesale and e-commerce businesses, making significant contributions.

John W. Schmidt: Lopers, Flats, and Sneakers drove the brand's fourth-quarter business, and the Uptown Mock remains Bionic's number one item. In addition, our Rejuvenate Recovery slide sold very well, as did new styles in the walking category, with more to come in 2024. As I mentioned, our largest portfolio brands also delivered outsized performances in the quarter, namely Dr. Scholz, Franco Sarto, and Lifestride achieved year-over-year improvements in sales and earnings. As we've noted, these brands play an important role in our overall portfolio, reaching different customer segments while generating meaningful profit and cash flow. This year, Dr. Scholz celebrates its 100th year anniversary with sales-driven collaborations and partnerships. The first will be a collaboration with apparel brand Free People, which is set to drop in early April.

Loafers flats, and sneakers drove the brand's fourth quarter business and the Uptown Mark remains bionics number one item.

J: In addition, our rejuvenate recovery slide sold very well as did new styles into walking category with more to come in 2024.

J: Okay.

J: As I mentioned, our largest portfolio brands also delivered outsized performances in the quarter.

J: Namely Doctor Shoals, Franco Sarto and lifestyle achieved year over year improvements in sales and earnings.

J: As we've noted these brands play an important role in our overall portfolio, reaching different customer segments, while generating meaningful profit and cash flow.

J: This year, a doctor Shoals celebrates its 100th year anniversary with sales driving collaborations and partnerships.

J: The first will be a collaboration with apparel brand free people, which is set to drop in early April.

John W. Schmidt: Overall, the brand portfolio performed at a high level during 2023, delivering its best performance in portfolio history. As we outlined at our investor day last October, we continue to expect the brand portfolio to contribute about half of total sales and 60% of operating profit over the three-year period. We are confident the brand portfolio, powered by its lead brands, is positioned to lead the financial performance of Caleres over the long term. Moving on, to famous footwear. Total sales declined 1.5% and comp sales declined 5.9%, representing a sequential improvement in trend from the prior quarter period, both in-store and online. Traffic was down, and seasonal products, namely boots, represented much of the sales decline.

J: Overall, the brand portfolio performed at a high level during 'twenty twenty-three delivering its best performance and portfolio history.

J: As we outlined at our Investor Day last October we continue to expect the brand portfolio to contribute about half of total sales and 60% of operating profit within the three year period.

J: We are confident the brand portfolio powered by its lead brands is positioned to lead the financial performance of Clarus over the long term.

J: Moving on to famous footwear.

J: Total sales declined one 5% and comp sales declined five 9% representing a sequential improvement in trend from the prior quarter period, both in store and online.

J: Traffic was down and seasonal products, namely boots represent in much of the sales decline.

John W. Schmidt: Famous once again, though, outperformed its competitive set, gaining market share in two chains. During the holiday season, the consumer was motivated by highly demanded trend items instead of promotions. Robust selling on key athletic brands and styles and cozy products like slippers drove a modestly better sales trend during the seven-week holiday period. In addition, we were particularly pleased with the performance of our kids' line, where sales increased 2% year over year and we gained 1.4 points of market share in ShoeChain. As you know, we view kids as our key differentiator and the entry point for the millennial family.

J: Famous once again, though outperformed its competitive set gaining market share and to change.

During the holiday season, the consumer was motivated by highly demanded trend items instead of promotions.

J: Robust selling on key athletic brands and styles and cozy products like slippers drove a modestly better sales trend during the seven week holiday period.

J: In addition, we were particularly pleased with the performance of our kids business, where sales increased 2% year over year, and we gained one four points of market share and shoe checks.

J: As you know, we view kids as our key differentiator and the entry point for the millennial family.

John W. Schmidt: Our kids business has outpaced the rest of the chain for 12 consecutive quarters, and 2023 marked our highest level of annual kid sales ever. We were also pleased with the relative outperformance of women's fashion, and sales of key vertical brands, Naturalizer, and Dr. Scholl's were up year over year at Famous. Over the last year, we've worked to drive a more balanced athletic versus fashion assortment, and we are making progress on that front. Our vertical integration provides Famous with greater access to fashion products, a key growth driver for the business, as well as a greater ability to flex with trends and differentiate versus competitors, and vertical integration allows our own brands to reach new audiences. Our newest vertical brand, Salmon Libby, was launched and is famous for spring with solid early reeds.

J: Our kids business has outpaced the rest of the chain for 12 consecutive quarters.

J: In 2023 marked our highest level of annual kids' sales ever.

J: We were also pleased with the relative outperformance of women's fashion and sales of key vertical brands naturalize her and Doctor Shoals were up year over year at famous.

J: Over the last year, we've worked to drive a more balanced athletic versus fashion assortment and we are making progress on that front.

J: Our vertical integration provides famous with greater access to fashion products are.

J: A key growth driver for the business as well as a greater ability to flex with trends and differentiate versus competitors.

J: And vertical integration allows our owned brands to reach new audiences.

J: Our newest vertical brands, Sam <unk>, Libby launched and famous for spring with solid early reads.

John W. Schmidt: I will remind you, at an enterprise level, Caleres captures a higher gross margin on brands sold vertically. Finally, our efforts to enhance the consumer experience at Famous Footwear continue. We had 21 Flair stores open at the end of the quarter.

J: I will remind you at an enterprise level coloreds captures a higher gross margin on brands sold vertically.

J: Finally, our efforts to enhance the consumer experience at famous footwear continues.

J: We had 21 player stores opened at the end of the quarter.

John W. Schmidt: The second wave of flare stores has proven highly successful and is outperforming the chain and delivered positive year-over-year comps in the fourth quarter. We plan to continue to refine our approach to improving the consumer experience to ensure we are realizing the highest return on this investment. We will transform an additional 23 stores to the Flair concept in 2024, and we'll have 44 Flair stores by year end. All in. Famous performed well in 2023.

J: The second wave of flare stores have proven highly successful.

J: And are outperforming the chain and delivered positive year over year comps in the fourth quarter.

We plan to continue to refine our approach to improving consumer experience to ensure we are realizing the highest return on this investment.

J: We will transform an additional 23 stores to the flare concept in 2024, and we will have 44 player stores by year end.

J: All in famous performed well in 2023.

John W. Schmidt: The structural changes we've made across the business have enabled the famous segment to maintain operating earnings and operating margin well above pre-pandemic levels, and we expect this to continue. Looking ahead, we believe Famous Footwear is exceptionally well positioned to compete and solidify its leadership position in the family channel. So, before I hand it over to Jack to walk through our financials in more detail, I would like to highlight a few key focus areas that will enable us to achieve our long-term strategic operating initiatives and financial targets. First, we are focused on expanding our direct-to-consumer business and expect our own e-commerce business to continue to outperform. We have launched loyalty programs across several of our lead brands that will allow us to engage more directly with our consumers and capture more share of wallets. We are utilizing our marketing and analytics capabilities to engage consumers efficiently and profitably. Second, we will continue to focus on our enhanced speed programs to read and react in real time during 2023.

The structural changes we've made across the business have enabled the famous segment to maintain operating earnings and operating margin well above pre pandemic levels and we expect this to continue.

J: Looking ahead, we believe famous footwear is exceptionally well positioned to compete and solidify its leadership position in the family channel.

Speaker Change: So before I hand, it over to Jack to walk through our financials in more detail I would like to highlight a few key focus areas that will enable us to achieve our long term strategic operating initiatives and financial targets.

Speaker Change: First we are focused on expanding our direct to consumer business and expect our own e-commerce business to continue to outperform.

We have launched loyalty programs across several of our lead brands that will allow us to engage more directly with our consumers and capture more share of wallet.

Jack P. Calandra: We are utilizing our marketing and analytics capabilities to engage consumers efficiently and profitably.

Jack P. Calandra: Second we will continue to focus on our enhanced speed programs to read and react in real time.

Jack P. Calandra: During 2023, 20% of our brand portfolio receipts came through speed.

John W. Schmidt: 20% of our brand portfolio receipts came through Speed. And we expect that penetration to grow well above 20% moving forward. Now more than ever, our brands are positioned to capitalize on trends, whether the trend is casual, dress, or sneaker driven. Our speed programs create a virtuous circle, aligning inventory with consumer demand to drive sales productivity and expand gross margin. Third, we believe Famo.us is well positioned to return to growth and drive greater market share in the family channel. This year, we will build on our leadership position in kids, continue to focus on evolving our flare store format, offer an elevated and curated assortment of key in-demand brands for the entire family, ensuring a more advantageous mix of athletic and fashion, and leverage the Consumer Data Platform, or CDP, to connect with and drive an even greater level of engagement with consumers through personalized communication and localized assortment.

Jack P. Calandra: And we expect that penetration to grow well above 20% moving forward.

Jack P. Calandra: Now more than ever our brands are positioned to capitalize on trend whether the trend is casual dress our sneaker driven.

Jack P. Calandra: Our speed programs create a virtuous circles aligning inventory with consumer demand to drive sales productivity and expand gross margin.

Jack P. Calandra: Yes.

Jack P. Calandra: Third we believe famous is well positioned to return to growth and drive greater market share in the family channel.

This year, we will build on our leadership position in kids.

Jack P. Calandra: Continue to focus on evolving our flare store format.

Jack P. Calandra: Offering an elevated and curated assortment of key in demand brands for the entire family, ensuring a more advantageous mix of athletic and fashion.

Jack P. Calandra: And leverage the consumer data platform or CDP to connect with and drive an even greater level of engagement with consumers through personalized communication and localized assortments.

John W. Schmidt: Fourth, as we outlined at our Investor Day, International is a significant growth area for Caleres. In the fourth quarter, we hired Erica McCool as Senior Vice President of International to focus more intensely on that effort. In 2024, we will continue to build the Sam Edelman business in China with 45 new stores. Naturalizer will reenter China with its newly created global flagship store design and 10 new stores in the fall of 2024 as well as a digital relaunch.

Jack P. Calandra: Fourth as we outlined at our Investor Day International as a significant growth area for claris.

Jack P. Calandra: In the fourth quarter, we hired Eric Mckool as senior Vice President of international to focus more intensely on that effort.

Jack P. Calandra: In 2024, we will continue to build the Sam Edelman business in China with 45 new stores.

Jack P. Calandra: Naturalize her will reenter China with its newly created global flagship store design with 10, new stores in the fall of 'twenty 'twenty four as well as a digital relaunch.

John W. Schmidt: This is just the beginning. International growth is a big growth opportunity for Caleres. And finally, we are investing to fuel growth. In 2024, we will make outsized investments in international expansion, consumer experience, both in-store and online, and across our marketing platform. These investments are an accelerant to unlock additional growth opportunities for the future.

Jack P. Calandra: This is just the beginning international is a big growth opportunity for claris.

Jack P. Calandra: And finally, we are investing to fuel growth in.

Jack P. Calandra: In 2024, we will make outsized investments in international expansion consumer experience, both in store and online.

Jack P. Calandra: And across our marketing platform.

Jack P. Calandra: These investments are an accelerant to unlock additional growth opportunities for the future.

Jack P. Calandra: At the same time, we will remain disciplined and rigorous in managing our expense levels to drive strong financial performance and shareholder value. And with that, I will now hand it over to Jack for a more detailed view of our financial performance and outlook.

Jack P. Calandra: At the same time, we will remain disciplined and rigorous in managing our expense level to drive strong financial performance and shareholder value.

Jack P. Calandra: And with that I will now hand, it over to Jack for a more detailed view of our financial performance and outlook.

Jack P. Calandra: Jack.

Jack P. Calandra: Thanks, Jay. And good morning, everyone. During today's call, I'll provide additional details on our fourth quarter and full year 2023 performance, update you on our capital allocation activities and plans, and share our outlook for 2024. Today's comparisons will include the 14th week for Q4 and the 53rd week for the full year, unless otherwise indicated. We've included a table in the release outlining the sales impact of the extra week for each segment and for the total company. As a reminder, my comments will be on an adjusted basis; please see today's press release for a reconciliation of adjusted results. Before I turn to the adjusted results, I wanted to give you some detail on the factors leading to the large one-time item included in our GAAP results.

Jack P. Calandra: Thanks, Jay and good morning, everyone. During today's call I'll provide additional details on our fourth quarter and full year 2023 performance.

Jack P. Calandra: Update you on our capital allocation activities and plans and share our outlook for 2024.

Jack P. Calandra: Today's comparisons will include the 14th week for Q4, and the 50 <unk> week for the full year unless otherwise indicated.

We've included a table in the release outlining the sales impact of the extra week for each segment and for total company.

Jack P. Calandra: As a reminder, my comments will be on an adjusted basis. Please see today's press release for a reconciliation of adjusted results.

Jack P. Calandra: Before I turn to the adjusted results I wanted to give you some detail on the factors leading to the large one time item included in our GAAP results.

Jack P. Calandra: Our GAAP results include a release of deferred tax valuation allowances of $0.76 in the fourth quarter and $0.75 for the year, which had primarily been established in 2020 after incurring a significant pre-tax loss associated with the pandemic impact to the business. Additionally, as a result of our strong earnings performance in 2021, 2022, and 2023. We are no longer in a cumulative three-year loss position, and we're able to release most of these valuation allowances.

Jack P. Calandra: Our GAAP results include a release of deferred tax valuation allowances of 76 cents in the fourth quarter and 75 for the year, which had primarily been established in 2020 after incurring a significant pre tax loss associated with the pandemic impact to the business.

Jack P. Calandra: As a result of our strong earnings performance in 2021, 2022 and 2023.

Jack P. Calandra: We are no longer in a cumulative three year loss position and we're able to release most of these valuation allowances.

Jack P. Calandra: Additionally, the adjusted results include a benefit of $0.05 in Q4 and $0.13 for the full year from our cost reduction initiatives. Now turning to sales. Fourth quarter sales were $697 million, up slightly from last year. As Jay mentioned, this performance was driven by a 4.5% increase in brand portfolio. Famous footwear sales were down 1.5%, slightly better than our initial expectations.

Jack P. Calandra: Additionally, the adjusted results include a benefit of <unk> in Q4, and 13 cents for the full year from our cost reduction initiatives.

Jack P. Calandra: Now turning to sales fourth quarter sales were $697 million up slightly to last year as Jay mentioned this performance was driven by a four 5% increase in brand portfolio.

Jack P. Calandra: Famous footwear sales were down one 5% slightly better than our initial expectations comparable sales were down five 9%.

Jack P. Calandra: Comparable sales were down 5.9% Consolidated annual sales were $2.82 billion, in line with our expectations and down 5.1% versus fiscal 2022. Fourth quarter consolidated gross margin was 43.9%, a 348 basis point increase versus last year and a record for the third quarter. Brand Portfolio's fourth quarter gross margin was 42.6%, a 660 basis point increase versus last year, due to lower freight costs, higher initial margins, and fewer markdowns and allowances. Famous Footwear's fourth quarter gross margin was 42.9%, a 54 basis point improvement versus last year. For Fiscal 2023, consolidated gross margin was 44.8%, 154 basis points above last year, reflecting a 537 basis point increase at Brand Portfolio and a 156 basis point decline at Fame. SG&A expense for the fourth quarter was $273 million, for 39.1% of sales.

Jack P. Calandra: Consolidated annual sales were $2 82 billion in line with our expectations and down five 1% versus fiscal 2022.

Jack P. Calandra: Fourth quarter consolidated gross margin was 43, 9%, a 348 basis point increase versus last year and a record for the third for the fourth quarter.

Jack P. Calandra: Brand portfolios fourth quarter gross margin was 42, 6%, a 660 basis point increase versus last year.

Jack P. Calandra: Due to lower freight cost higher initial margins and fewer markdowns and allowances.

Jack P. Calandra: Famous footwear fourth quarter gross margin was 42, 9%, a 54 basis point improvement versus last year.

Jack P. Calandra: For fiscal 2023 consolidated gross margin was 44, 8% 154 basis points above last year, reflecting a 537 basis point increase at brand portfolio and a 156 basis point decline at famous.

Okay.

Jack P. Calandra: SG&A expense for the fourth quarter was $273 million or 39, 1% of sales.

Jack P. Calandra: Annual SG&A expense as a percent of sales was 37.7%. Annual SG&A expense was $5 million lower than 2022, despite absorbing an extra week, reflecting our expense management initiatives and lower incentive compensation costs. Fourth quarter operating earnings were $33 million, and operating margin was 4.7%. Operating margin was 11.9% at Brand Portfolio and 4.9% at FEMA. Annual operating earnings were $201 million, or 7.1% of sales.

Jack P. Calandra: SG&A expense as a percent of sales was 37, 7%.

Jack P. Calandra: Annual SG&A expense was $5 million lower than 2022, despite absorbing an extra week, reflecting our expense management initiatives and lower incentive compensation costs.

Jack P. Calandra: Fourth quarter operating earnings were 33 million and operating margin was four 7%.

Jack P. Calandra: Operating margin was 11, 9% at brand portfolio and four 9% at famous.

Jack P. Calandra: Annual operating earnings were $201 million or seven 1% of sales.

Jack P. Calandra: It's worth noting that this consolidated annual operating margin is 270 basis points higher than pre-pandemic levels and was achieved while navigating consumer demand headwinds at FEMA. Brand Portfolio achieved a record annual operating margin of 11.7 percent, a 316 basis point improvement versus last year. Famous delivered a 7.8% operating margin, maintaining a margin level above pre-pandemic averages. The fourth quarter net interest expense was $4 million, down about a million from last year.

Jack P. Calandra: It's worth noting that this consolidated annual operating margin is 270 basis points higher than pre pandemic levels and was achieved while navigating consumer demand headwinds at famous.

Jack P. Calandra: Brand portfolio achieved a record annual operating margin of 11, 7%, a 316 basis point improvement versus last year.

Jack P. Calandra: Famous delivered a seven 8% operating margin maintaining a margin level above pre pandemic averages.

Jack P. Calandra: Fourth quarter net interest expense was $4 million down about 1 billion from last year and annual net interest expense was $19 million.

Jack P. Calandra: And annual net interest expense was $19 million. For the fourth quarter, earnings per diluted share were 86 cents, a 32% improvement versus last year, and annual earnings per diluted share were $4.18, marking our third consecutive year of EPS above our $4 baseline. EBITDA for the trailing 12 months was $260 million, or 9.2% of sales.

Jack P. Calandra: Okay.

Fourth quarter earnings per diluted share were <unk> 86 cents, a 32% improvement versus last year and annual earnings per diluted share were $4 18.

Jack P. Calandra: Marking our third consecutive year of EPS above our $4 baseline.

Jack P. Calandra: EBITDA for the trailing 12 months was $260 million or nine 2% of sales.

Jack P. Calandra: Inventory at year-end was $541 million, down 6.8% versus last year, primarily in the brand portfolio, reflecting a more normalized supply chain and disciplined inventory management across the business. By segment, inventory of Famous was up 2.5% versus last year but down 4% when adjusted for the 53rd week. Overall, inventory was down 13.6% versus last year. We feel good about the amount and composition of inventory, with aged inventory down in both businesses in dollars and as a percent of total. Regarding cash flow from operations, we generated $200 million during the year and deployed cash for strategic investments in the business, paid our quarterly dividend, repurchased shares to offset dilution, and lowered borrowings on our revolver. Specifically, during the year, we spent $50 million on capital expenditures, $10 million on our quarterly dividend, and $17 million on share repurchases. With the 40 million dollar pay-down in Q4, borrowings are more than 125 million below fiscal year end 2022. Debt to trailing 12-month EBITDA was 0.7 times.

Jack P. Calandra: Inventory at year end was 541 million down six 8% versus last year, primarily in brand portfolio, reflecting a more normalized supply chain and disciplined inventory management across the business.

Jack P. Calandra: By segment inventory is famous was up two 5% versus last year, but down 4% when adjusted for the 50 <unk> week.

Jack P. Calandra: At brand portfolio inventory was down 13, 6% versus last year.

Jack P. Calandra: We feel good about the amount and composition of inventory with aged inventory down in both businesses in dollars and as a percent of total.

Jack P. Calandra: Regarding cash flow from operations, we generated 200 million during the year and deploy cash for strategic investments in the business paid our quarterly dividend repurchase shares to offset dilution and lower borrowings on our revolver.

Jack P. Calandra: Specifically during the year, we spent $50 million on capital expenditures 10 million on our quarterly dividend and 17 million on share repurchases.

Jack P. Calandra: And with the $40 million pay down in Q4 borrowings are more than $125 million below fiscal year end 2022.

Jack P. Calandra: Debt to trailing 12 month EBITDA was <unk> seven times.

Jack P. Calandra: Looking ahead, our capital allocation priorities remain consistent with what we've communicated previously. First, invest for organic growth, focusing on our lead brands and key capabilities. Second, maintain the dividend. Third, given still elevated interest rates, we will continue to focus on reducing debt in the near term. As we said on Investor Day, by 2026, we expect borrowings to be less than $100 million and less than half a turn of EBITDA. Fourth, Sherry Purchases.

Jack P. Calandra: Looking ahead, our capital allocation priorities remain consistent with what we've communicated previously.

First invest for organic growth focusing on our lead brands and key capabilities.

Jack P. Calandra: Second maintain the dividend.

Jack P. Calandra: Third given still elevated interest rates, we will continue to focus on reducing debt in the near term.

Jack P. Calandra: As we said at Investor day by 2026, we expect borrowings to be less than $100 million and less than half a turn of EBITDA.

Jack P. Calandra: Fourth share repurchases.

Jack P. Calandra: Given our debt reduction progress and expectation for free cash flow in 2024, we have the opportunity to both reduce leverage and buy back shares. We will evaluate these alternatives in light of business performance and market conditions as we proceed through the year. We have 5.6 million shares remaining under our current board authorization at year end.

Jack P. Calandra: Given our debt reduction progress and expectation for free cash flow in 2024, we have the opportunity to both reduce leverage and buy back shares.

Jack P. Calandra: We will evaluate these alternatives in light of business performance and market conditions as we proceed through the year.

Jack P. Calandra: We had $5 6 million shares remaining under our current board authorization at year end.

Jack P. Calandra: Now turning to our outside, As we mentioned when we outlined our three-year plan last October, we don't expect our growth to be linear, and embedded in that outlook was more modest growth in year one. In addition, our plan assumed that the overall footwear market would grow at 1% in 2024. SIRCANA now expects a decline of 1%, including this adjustment, as well as balancing the strong momentum in our brand portfolio against anticipated headwinds like inflationary pressures and higher freight costs.

Jack P. Calandra: Now turning to our outlook.

Jack P. Calandra: As we mentioned when we outlined our three year plan last October we don't expect our growth to be linear.

Jack P. Calandra: And embedded in that outlook was more modest growth in year one.

Jack P. Calandra: In addition, our plan assumed that the overall footwear market would grow at 1% in 2024.

Jack P. Calandra: <unk> now expects a decline of 1%.

Jack P. Calandra: Including this adjustment as well as balancing the strong momentum in our brand portfolio against anticipated headwinds like inflationary pressures and higher freight costs.

Jack P. Calandra: For 2024, we expect sales to be flat to up 2%, which includes the impact of the 53rd week in 2023; excluding the 53rd week, we expect sales to be up 1% to 3%, and earnings per diluted share of $4.30 to $4.60. We anticipate earnings to be up more in the first half than the second half. However, due to the timing of expenditures, including marketing for the Sam Edelman campaign and expenses for the Common Platform implementation, we expect EPS to be down in Q1 and up in Q2. Additionally, we are providing guidance on the following metrics for the full year: consolidated operating margin of 7.3% to 7.5%, an effective tax rate of about 24%, and Capital Expenditures of $60 million to $70 million. We are also providing the following guidance for Q1. We expect consolidated net sales to be flat to up 1% and earnings per diluted share in line with Q4 2020-2023 on an adjusted basis. With that, I'd like to turn the call over to the operator for questions. Operator?

For 2024, we expect.

Jack P. Calandra: Sales to be flat to up 2%, which includes the impact of the 50 <unk> week in 2023.

Jack P. Calandra: Excluding the 50 <unk> week, we expect sales to be up 1% to 3%.

Jack P. Calandra: And earnings per diluted share of $4 30.

Jack P. Calandra: To $4 60.

Jack P. Calandra: We anticipate earnings to be up more in the first half than second half.

Jack P. Calandra: However, due to the timing of expenditures, including marketing for the Sam Edelman campaign and expense for the common platform implementation, we expect EPS down in Q1 and up in Q2.

Jack P. Calandra: Additionally, we are providing guidance on the following metrics for the full year.

Jack P. Calandra: Consolidated operating margin of seven 3% to seven 5%.

Jack P. Calandra: An effective tax rate of about 24%.

Jack P. Calandra: And capital expenditures of 60 million to $70 million.

Jack P. Calandra: We are also providing the following guidance for Q1.

Jack P. Calandra: We expect consolidated net sales to be flat to up 1%.

Jack P. Calandra: And earnings per diluted share in line with Q4, 2000 22023 on an adjusted basis.

Speaker Change: With that I'd like to turn the call over to the operator for questions operator.

Operator: Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue.

Speaker Change: Thank you if you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue and for participants using speaker equipment.

Jack P. Calandra: And for participants using speaker equipment... You may have to pick up the handset before pressing the star key. Our first question is from Laura Champine with Loop Capital Markets. Please proceed. After taking my question, I wanted a little bit more about what's behind your expectation that the footwear industry will decline this year. Maybe if we could start with where you think last year likely fell out as an industry, knowing that it's fragmented, and then what's behind the expectation that we'll have another rough year this year. Yeah, Laura. This is Jack.

Speaker Change: They have to pick up the handset before pressing the star keys.

Speaker Change: Our first question is from Laura Champine with loop capital markets. Please proceed.

Laura Allyson Champine: For taking my question I wanted a little bit more about what's behind your expectation that the footwear industry will decline. This year end and maybe if we could start with where do you think last year likely fell out as an industry knowing that it's fragmented and then what's behind the expectation that we'll have.

Laura Allyson Champine: The rough year this year.

Laura Allyson Champine: Yeah. Laura this is Jack Thank you for your question, So we get as part of our.

Jack P. Calandra: Thank you for your question. So you know, we get, as part of our planning process each year, the expectations from Cercana. And what they're projecting is the market to be down about 1%, with units down a little bit more than that, and some favorability on the AUR side. And then when we look at it by segment, it looks like fashion is expected to be the weakest, with sport, leisure, and performance stronger than that.

Laura Allyson Champine: Planning process each year the expectations from <unk>.

Jack P. Calandra: And what Theyre projecting is the market to be down about 1% with units down a little bit more than that and some favorability on the AUR side.

Jack P. Calandra: And then when we look at it by by segments. It looks like fashion is expected to be the weakest with sport leisure and performance stronger than that.

Jack P. Calandra: And so we look at that and we apply, you know, those categories and those growth rates to our portfolio to come up with what we think it would look like for us to basically hold market share in 2024. And as you know, we've been very successful in growing market share, and this plan assumes that we will grow market share in both our famous and our brand portfolio. Got it.

Jack P. Calandra: So we look at that and we apply.

Jack P. Calandra: Those categories and those growth rates to our portfolio to come up with what we think it would look like for us to basically hold market share in 2024, and as you know we've been very successful in growing market share. In this plan assumes that we will grow market share in both famous and brand portfolio.

Got it thank you.

John W. Schmidt: Thank you. Our next question is from Dana Telsey with the Telsey Advisory Group. Please proceed. Hi, good morning. Good morning, everyone.

Jack P. Calandra: Our next question is from Dana Telsey with Telsey Advisory Group. Please proceed hi.

Dana Lauren Telsey: Hi, Good morning, Good morning, everyone. As you think about the cadence of the year first quarter second quarter. How are you thinking about brand portfolio and famous and did you notice any deterioration or stabilization and of course famous footwear consumer in the fourth quarter and what are you seeing in order trends.

John W. Schmidt: As you think about the cadence of the year, first quarter, second quarter, how are you thinking about brand portfolio and famous? And did you notice any deterioration or stabilization in the core famous footwear consumer in the fourth quarter? And what are you seeing in order trends for famous from the wholesale channel? Thank you. Hi Dana, it's Jay.

Dana Lauren Telsey: For brand portfolio from the wholesale channel. Thank you.

Dana Lauren Telsey: Okay.

Jay: Hi, Dana it's Jay.

John W. Schmidt: I think, you know, overall, and just thinking about the consumer, we are seeing, I think the demand environment remains mixed, as I would say, as we leave the fourth quarter and into the first quarter. We see our brand portfolio consumer continually trend-driven and responding very well to newness right now, which is driving demand. And at our famous consumer during the fourth quarter and into early the first, we did see the market environment remains choppy. Our target consumer, the millennial family, continues to prioritize kids.

Jay: I think.

Jay: Overall, and just thinking about the the consumer we are seeing them.

Jay: I think the demand environment remains mixed as I would say as we leave fourth quarter and into first quarter.

Jay: We see our brand portfolio consumer continually trend driven and responding very well to newness right now which is driving demand.

Jay: And at our famous.

Jay: Consumer during fourth quarter and into early first we did see the market environment remains choppy.

The our target consumer the millennial family continues to prioritize kids.

John W. Schmidt: And however, I will say that we're seeing some very strong reaction from both segments on these highly demanded items. So that's really our goal is to continue to get in front of them and go there. We are seeing a slightly better trend as we move from February into March, and that gives us some signs of optimism, but obviously very early on in the quarter. And then finally, in terms of order trends, they're very consistent with where they've been in previous quarters right now. As you know, our business is highly demand-driven and dynamic across our brand portfolio, and we continue to react in real time with our speed program, our dropship program, and also our replenishment program to continue to meet that consumer demand. And then, Dana, I'll just add a couple things to the cadence for FAMOUS.

Jay: However, I will say that we're seeing some very strong.

Jay: Reaction from both segments on really these highly demanded items. So that's really our goal is to continue to get in front of them and go there.

Jay: We are seeing a slightly better trend as we moved from February into March.

Jay: And that gives us some signs for optimism, but obviously very early on in the quarter.

Jay: And then finally in terms of order trends are very consistent to where they've been in previous quarters right now.

Jay: As you know our business is highly <unk>.

Jay: Demand driven and dynamic on our brand portfolio and we continue to react.

Jay: In real time with our speed program.

Jay: Our drop ship program and also our replenishment program to continue to meet that consumer demand.

Speaker Change: And then Dana I'll, just add a couple of things on the cadence for famous so just in terms of our overall guidance.

Jack P. Calandra: So just in terms of our overall guidance, you know, we are assuming that FAMOUS will be, you know, sort of a modest negative to modest positive comp in our guidance range, low and high. We are anticipating the first half to be stronger than the second half. And a lot of that is just due to the calendar shifts. So, as you know, with the calendar shift, the first week of August, which is a critical back-to-school week for FAMOUS, is now falling into fiscal Q2 versus fiscal Q3 last year.

Speaker Change: We are assuming that famous will be.

Speaker Change: Have a modest negative to modest positive comp in our guidance range of low and high.

Speaker Change: We are anticipating the first half to be stronger than the second half and a lot of that is just due to the calendar shifts. So as you know with the with the calendar shift the first week of August which is a critical back to school week for famous is now falling into fiscal Q2 versus fiscal Q3 last year.

Jack P. Calandra: And then, obviously, we have the impact of the 53rd week on Q4 this year. So there's just some shifts with the calendar that's moving numbers between the quarters. And then I would just say, you know, look, we expect the promotional activity in FAMOUS to be broadly in line with 2023, and with that would come sort of a flattish gross margin. And then as you unpack SG&A, Jack, anything that we should be thinking about as we go through the year, any quarterly ups or downs in terms of SG&A impact? And then Jay, as you think about your own brands at the famous footwear store, where are you along that path, and what could that add to the margin opportunity there? Thank you. I'll start with the SG&A.

Speaker Change: And then obviously, we have the impact of the 50 <unk> week on Q4 this year.

Speaker Change: So there's just some shifts with those with the calendar that's moving the numbers between the quarters.

Speaker Change: And then I would just say look we expect the promotional activity and famous to be broadly in line with 2023 and with that would come sort of a flattish gross margin.

Speaker Change: Got it and then if you unpack SG&A Jack anything that we should be thinking about as we go through the year any quarterly ups and downs in terms of the SG&A impact.

Speaker Change: And then Jay as you think about your own brands in the famous footwear store.

Speaker Change: Where are you along that path and what could that add to the market opportunity there. Thank you.

Jay: Sure Dan I'll start with the SG&A. So part of the reason or are you know we're guiding to earnings down in Q1 is there are some investments we're making in SG&A in Q1, particularly the Sam Edelman marketing campaign, and then expenses related to our common platform.

Jack P. Calandra: So part of the reason we're guiding to earnings down in Q1 is there are some investments we're making in SG&A in Q1, particularly the Sam Edelman marketing campaign and then expenses related to our common platform implementation, the first phase of which goes live at the end of May. And so there are some expenses associated with that. And then as we go through the year, obviously, Q4, we don't have that 53rd week of expenses in Q4. But what I will say is that, you know, we talked about last year, taking some actions on cost. And I'm pleased to say that we delivered those cost reductions in 2023, and those are built into our 2024 plan.

Jay: <unk> the first phase of which goes live at the end of May and so there are some some expenses associated with that and then as we go through the year. Obviously Q4, we don't have that 50 <unk>.

Jay: Week of expense in Q4.

Jay: But what I will say is that we talked about.

Jay: Last year, taking some actions on cost and I am pleased to say that we delivered those cost reductions both in 2023 and those are built into our 2024 plan.

Jay: Okay.

John W. Schmidt: Okay, and then, as far as our own brands are concerned, we're seeing some really nice results coming out of the fourth quarter and then moving into the first quarter, particularly with our Dr. Scholl's brand at Famous, our naturalizer brand, and we're pleased with the early launch of Salmon Libby. And so we feel that we are well on our track of how we are leading to our three-year goal there. And we are planning those brands up significantly. And obviously, Jack, the profit on vertical brands is significantly higher than where we go as a company, right? That's correct.

Jay: And then as far as our own brands, we're seeing some really nice results coming out of fourth quarter, and then moving into first quarter.

Jay: <unk> with our Doctor Shoals brand at famous are naturalize their brand and we're pleased with the early launch of salmon Libbey.

Jay: And so we've.

We feel that we are well on our track of how we led to our our three year goal there.

Jay: And we are planning those brands up significantly.

Jay: And obviously Jack the profit on vertical brands is significantly higher than where we go as a company right. That's correct. So we're very excited for what we're seeing there and again that was a concerted effort and we look like we're well on track.

Jack P. Calandra: So we're very excited about what we're seeing there. And again, that was a concerted effort, and we look like we're well on track. Thank you. Our next question is from Mitch Kummetz with Seaport Research. Please proceed. Yes, thanks for taking my questions. I've got a few. I want to start with just a guide.

Speaker Change: Thank you.

Speaker Change: Our next question is from Mitch <unk> with Seaport Research. Please proceed.

Mitch: Yes, thanks for taking my questions I've got a few I wanted to start just stomach God I want to clarify.

Mitchel John Kummetz: I want to clarify a couple of things. Because I think you guys said that you expected it to take share in both Famous and Brand Portfolio. And you're, you're, as far as kind of a market outlook, you're basing it on Cercana down 1%. So Jack, you're staying on Famous, same store sales, you know, maybe down a little to up a little. Is that correct?

Mitch: Couple of things because I think I think you guys said that you expect to.

Mitch: To take share in both famous and brand portfolio.

As far as kind of a market outlook youre basing that on <unk> down, 1%, So Jack Youre, saying I'm famous.

Mitch: Same store sales you know maybe down a little to up a little is that correct.

Jack P. Calandra: Yeah, our guide Mitch assumes the low end would be down a little bit and the upper end would be up a little bit. And again, the market numbers that I shared are, you know, total numbers that would include wholesale and retail. And obviously, what we've seen is, you know, the retail business has been a little bit more, or at least the retail channel that we compete in and measure market share against, which is the shoe chain channel, has been a little bit more challenged. And so on the brand portfolio, what kind of sales growth are you looking for there? Yeah, we're looking to continue basically the trend that we came out of Q4 with, adjusting for that 53rd week. So there was a little bit of a benefit for the 53rd week, I would say. We're looking for low single-digit positive numbers from our brand portfolio in 2024, obviously with lead brands being stronger than that, and the other brands being a little bit below that.

Jack P. Calandra: Yeah, Our guide Mitch assumes the low end would be down a little bit and on the upper end would be up a little bit and again the the the market numbers that I shared our total that would include wholesale and retail and obviously, what we've seen is the retail business has been a little bit more.

Jack P. Calandra: Or at least the the retail channel that we compete in and measure market share against which is the shoe chain channel has been a little bit more challenged.

Jack P. Calandra: And so on brand portfolio, what kind of sales growth are you looking for there.

Speaker Change: So yes, we're looking at it yes, we're looking to continue basically the the trend that we came out of Q4 with adjusting for that 50 <unk> week. So there was a little bit of a benefit for the 50 <unk> week. So I would say, we're looking for low single digit positive numbers from brand portfolio.

Speaker Change: In 2024, obviously lead brands being stronger than that and the other brands being a little bit a little bit below that.

Jack P. Calandra: And then, Jack, I think you said that a famous you expected promotions to be in line with last year. I think you made a comment about flat gross margin. Was that a famous comment or is the margin guidance you gave assumes flat gross margin on a consolidated basis for the year? Yeah, the comment that I made was famous specific about flat gross margin.

Speaker Change: And then Jack I think you said famous you expect promotions to be aligned with last year. I think you made a comment of <unk>.

Speaker Change: Flat gross margin was that of a famous car Matt comment or is the the op margin guidance you gave assume a flat gross margin on a consolidated basis for the year.

Jack P. Calandra: Yeah. The comment that I made was was famous specific on the flat gross margin in terms of the 20 to 40 basis points of operating margin improvement in 2024, we're looking for more of that actually to come from gross margin and particularly on brand portfolio.

Jack P. Calandra: In terms of the 20 to 40 basis points of operating margin improvement, in 2024, we're looking for more of that to come from gross margin, and particularly from the brand portfolio. As you remember, Mitch, when we talked about our investor day model, we talked about all of the different headwinds and tailwinds and gross margin over three years and said that gross margin at the consolidated level would be relatively flat, and we would get operating margin improvement from SG&A leverage. In 2024, again, we're looking for a little bit more on the gross margin side because of some of these critical investments we're making in international marketing for some of our lead brand marketing and in the common platform. And then Jay, you mentioned that March was better than February, I would guess it's more of a famous thing. Comment is that you think that's to do with weather or do you think there's some change in consumer shopping behavior or strengthening of the consumer. Anything you can attribute that to Yeah, well, it's early in March; I think there's I think it's all of those things. And then there was one more. I think the weather in early spring is always good.

Jack P. Calandra: As you remember Mitch when we talked about our Investor day model, we talked about all of the different headwinds and <unk> in gross margin over three years and said that gross margin at the consolidated level would be relatively flat and we would get operating margin improvement from SG&A leverage in 2024 again, we're looking for a little.

Jack P. Calandra: More on the gross margin side because of some of these critical investments, we're making in international in some of our lead brand marketing and then the common platform.

Jack P. Calandra: And then Jay you mentioned that March was better than February I would guess, it's more of a famous com.

Speaker Change: Comment is that.

Speaker Change: Is that do you think that's that's to do with weather or do you think there is some change in consumer shopping behavior or strengthening of the consumers anything you can attribute that to.

Jay: Yeah, well it thoroughly in March I think there. So I think it's all of those things and then one more.

Speaker Change: Be well.

Speaker Change: Weather and early spring is always good and it's we've had a much better weather pattern than we had last year, particularly when you think about famous being across the country.

Speaker Change: And so that's the first thing and the.

Speaker Change: I think the second thing that just really still.

John W. Schmidt: And it's we've had a much better weather pattern than we had last year, particularly when you think about the famous being across the country. And so that's the first thing. And the second thing that really stood out was that we really are in a much better position in some of these key demand items and the key brands at Famo.us, and that has really propelled it through as the consumer is really pinpointing very specifically. We've seen our top brands in Famo.us come back quite a bit. Some nice trends that are similar to that, and again, focused on just really, I think, some of our brands opening up and reacting to a warmer cycle. So, some early signs on sandals and some of our brands have been, you know, positive. And as you well know, we did not see that last March. So there's reason to be optimistic, but it is still early. And then last question for you, Jay.

Stood out was the.

Speaker Change: We really are in much better position than some of these key demanding items in the key brands at famous and that has really propelled it grew as the consumers really pointing very specifically, we've seen our top brands and famous come back quite a bit and then two just to answer your question on the brand portfolio we are seeing.

Speaker Change: King.

Speaker Change: Yeah.

Speaker Change: Some nice trends that are similar to that.

Speaker Change: And again focused on just really I think some of our brands opening up and reacting to a warmer cycle. So some early signs on sandals and some of our brands have been positive and as you well know we did not see that last March so theres. Some theres reason to be optimistic optimistic but it is early still.

Speaker Change: And then last question for you Jay there's a lot of talk.

Speaker Change: In the back half of last year of the consumer was shopping events back to school or holiday and then kind of disappearing.

Jay: <unk> do you think that continues this year and how.

Jay: How do you see the impact of the events in the first half is there much going on from an event standpoint, before we get back to school or to what extent do you think like Easter Memorial day father's day and things like that.

John W. Schmidt: There's been a lot of talk in the back half of last year as a consumer about shopping events, be it back to school or holiday, and then kind of disappearing in between. Do you think that will continue this year, and how do you see the impact of events in the first half? Is there much going on from an event standpoint before we get back to school? Like to what extent do you think Easter, Memorial Day, Mother's Day, Father's Day, things like that could drive business? Yeah, I think they're not actually not as important as they might have been in past times.

Jay: Drive the business.

Jay: Yeah, I think they've been actually not as important as they might have been in past times and we're really seeing weather has an impact spring break and vacations kind of stimulating some things, but not not as much at those bigger buildups, but really we are consistently on our best product and our best.

Jay:

Jay: Place and then.

Jay: Jack pointed out there is some.

Speaker Change: Discussion of the tax refund. So I don't know if you want to fill in on that yes.

Jack P. Calandra: The famous business, we look very carefully at where tax refunds are coming in.

John W. Schmidt: And we're really seeing weather as an impact, you know, spring break and vacations kind of stimulating some things, but not, not as much as those bigger buildups. But really, we are consistently on our best product in our best place. And then, you know, as Jack pointed out, there is some discussion of the tax refund. So I don't know if you want to fill in on that.

Jack P. Calandra: And right now it looks like through data last week. The number of refunds was down about 13%. The average refund was up about 6%. So the total dollars refunded again through through the end of last week was down 7% and we do know that that there is some impact of that.

Jack P. Calandra: Certainly to our famous consumer.

Speaker Change: Okay. Thanks, guys.

Speaker Change: Thank you.

Speaker Change: Our next question is from Abbey.

Jack P. Calandra: Yeah, we, you know, for the famous business, we look very carefully at where tax refunds are coming in. And right now, it looks like through data last week, the number of refunds was down about 13%, and the average refund was up about 6%.

Abbey: So <unk> with Piper Sandler. Please proceed.

Abbey: Great. Thanks for taking my question just.

Abbey: You talked a little bit about the consumer being more selective.

Abbey: Active buying the product that they want and promotion not moving other inventory as much as one are you seeing that same dynamic in both.

Jack P. Calandra: So the total dollars refunded again, through the end of last week was down 7%. And we do know that there is some impact of that, certainly on our famous consumer. Okay, thanks guys. Thank you. Our next question is from Abby Zvejnieks with Piper Sadler. Please proceed.

Abbey: Men's and women's versus men's kids and then two are you changing your.

Abbey: Merchandising efforts at famous footwear in any capacity in order to.

Abbey: Meet some more of that that key style demand.

Abbey: Yes, we are seeing it in both segments right now is to continue the consumer continues to prioritize spend in different ways.

Abigail Virginia Zvejnieks: Great, thanks for taking my question. You talked a little bit about the consumer being, you know, more selective about the product that they want, and promotions not moving other inventory as much. One, are you seeing that same dynamic in both, you know, men's and women's versus kids?

Abbey: We've said in famous that the consumer continues to prioritize kids purchasing so that has continued and then also very much demanded on the styles and the items that they do like and the brands that they really favor, which Fortunately we have.

John W. Schmidt: And then two, are you changing your merchandising efforts at Famous Footwear in any capacity in order to, you know, meet some more of that key style demand? Yes, we are seeing it in both segments right now as the consumer continues to prioritize spend in different ways. We've said in Famous that the consumer continues to prioritize kids purchasing, so that is continued. And then also very much demanded in the styles and the items that they do like and the brands that they really favor, which fortunately, we have.

Abbey: Over on the brand portfolio side, we're seeing the same thing in terms of newness and trend delivering yet and so I think what youll see is on our websites and our continued messaging and communications, we're continuing to focus on new item launches new styles and new drops.

Abbey: And we're seeing that both in men's and women's and then over to famous one of the things we will be adding to all stores. This year is as we go into back to school. It's really the focus on two trend tables as you walk into the stores to really call out. These key messages. So we can continue to make that impact and then as we.

John W. Schmidt: Over on the brand portfolio side, we're seeing the same thing in terms of newness and trend delivering it. And so I think what you'll see on our websites and in our continued messaging and communications, we're continuing to focus on new item launches, new styles, and new drops. And we're seeing that both in men's and women's.

Abbey: You need to build the flare store concept will continue to bring that to full.

Abbey: To its fullest extent, so you'll see a lot more from us on that but but for sure. It's it's consumer reacting in both segments very specifically by style by SKU and then the last thing I'll say is that our speed program really allows us to really meet that demand.

John W. Schmidt: And then over to famous, one of the things we will be adding to all stores this year is, as we go into back to school, the focus on two trend tables as you walk into the stores to really call out these key messages so we can continue to make that impact. And then, as we continue to build the Flair Store concept, we'll continue to bring that to its fullest extent. So you'll see a lot more from us on that, but for sure, it's the consumer reacting in both segments very specifically by style, by SKU. And then the last thing I'll say is that our speed program really allows us to meet that demand much better as we continue to bring in more product earlier, particularly online, and then get back into it exactly how the consumer is demanding. So it's been a good, a very good approach for this timing right now. Got it, that's helpful.

Abbey: <unk> better as we continue to bring in more product earlier.

Abbey: Particularly online and then get back into it exactly how the consumers demanding so it's been a good a very good oh.

Abbey: Approach for this timing right now.

Speaker Change: Got it that's helpful and just one more on <unk>.

Speaker Change: Typically on the brand portfolio and restocking has been a big topic of conversation with brands with exposure to the wholesale channel. So just in terms of brand portfolios wholesale exposure. How have you seen any of that like quote restocking yet or is that something we should look for as a tailwind.

Speaker Change: Maybe 2025.

Speaker Change: I don't think we've seen an effort on that retailers are continually monitoring there.

John W. Schmidt: And just one more on, specifically on the brand portfolio, restocking has been, you know, a big topic of conversation with brands with exposure to the wholesale channel. So just in terms of brand portfolios, wholesale exposure, have you seen any of that, quote, restocking yet? Or is that something we should look for as a tailwind, you know, maybe 2025?

Speaker Change: Their inventories well and Theyre, just reordering more and it's less upfront, but that's something that we're used to and actually our model allows us to fill into so we haven't seen the effect on that.

Speaker Change: As of yet so.

Speaker Change: But right now I would say that.

Speaker Change: That's where we are and.

Speaker Change: I don't see any change in that right now.

Speaker Change: Got it and sorry, just one more on drop ship can you just talk about that business and how you're utilizing it.

Speaker Change: It has that changed at all as the retailers have gotten into a better inventory position.

John W. Schmidt: I don't think we've seen an effort on that. Retailers are continually monitoring their inventories well, and they're just reordering more, and it's less upfront, but that's something that we're used to, and actually, our model allows us to fill it. So we haven't seen the effect on that as yet. So, but right now, I would say that's. That's where we are, and I don't see any change in that right now.

Speaker Change: Yeah. It continues to model in a very dynamic moment as we get more into position in stores, we will see some of that shift into other places where it would do slightly more business in the stores and less of that drop ship.

Speaker Change: Need we are looking at our our wholesale business really is a complete ecosystem and <unk>.

Speaker Change: And so we're continuing to manage the total and in a really omni way. So we'll see variations of that I think start to ebb and flow and then again as demand did items continued to be more bill.

John W. Schmidt: Sorry, just one more on Dropship. Can you just talk about that business and how you're utilizing it? Has that changed at all as the retailers have gotten into a better inventory position? Just anything there?

Speaker Change: Consumer will continue to find them in whatever way, we choose to fulfill them. So.

Speaker Change: But right now I don't have any major swings on that to report.

John W. Schmidt: Yeah, it continues to model in a very dynamic moment. As we get more into position in stores, we'll see some of that shift into other places where we do slightly more business in the stores and less of that dropship need. We are looking at our wholesale business really as a complete ecosystem. And so we're continuing to manage the total in a really omnipresent way. So we'll see variations of that, I think, start to ebb and flow. And then again, as demand for items continues to be more built, the consumer will continue to find them in whatever way we choose to fulfill them. So, but right now, I don't have any major swings on that to report. Okay, great.

Speaker Change: Okay, great. Thank you guys so much.

Speaker Change: Thanks.

Speaker Change: Our next question is from Ashley Owens with Keybanc capital markets. Please proceed.

Ashley Owens: Great. Thank you just on famous mentioned kids grew in the quarter could you just provide some color on the performance between athletic casual and dress, just maybe where that stands today and then secondly, just given the customer preference for munis right now as you are thinking about the cadence of product launches.

Ashley Owens: Within the brand portfolio, how does that compare to years. Prior and then would you say that you are coming to market with more products or would you say, it's better products that are kind of driving that growth. This year. Thanks.

Ashley Owens: Okay. So first on.

Ashley Owens: On famous.

Ashley Owens: The kids business is.

Abigail Virginia Zvejnieks: Thank you guys so much. Our next question is from Ashley Owens with Key Bay Capital Markets. Please proceed. Great, thank you. So just on famous, you mentioned kids grew in the quarter. Could you just provide some color on the performance between athletic, casual, and dress?

Ashley Owens: We have about a 50% penetration in total athletic on our famous business that position skews much higher in kids as they continue to focus on athletic shoes there.

John W. Schmidt: Just maybe where the assortment stands today? And then secondly, just given the customer preference for newness right now, you know, as you're thinking about the cadence of product launches throughout the year within the brand portfolio, how does it compare to years prior? And then would you say that you're coming to market with more products? Or would you say it's better products that are kind of going to be driving that growth this year? Thanks. Okay, so first on Famous, the kids business is, you know, we have about a 50% penetration in total athletic in our Famous business. That position skews much higher in kids as they continue to focus on athletic shoes there.

Ashley Owens: But we are also seeing a lot of our big brands work very well there just to name a few we have.

Ashley Owens: Crocs business, that's continually strong in kids, Hey, Dude business, it's turned out nicely and then.

Ashley Owens: You know Skechers and then obviously.

Nike is is is the biggest one there.

Ashley Owens: We're also seeing you know newer brands like Bergen stock contained.

Ashley Owens: Continue to go in and then new offerings from brands like Adidas worked very well in kids. So.

Ashley Owens: So anyway, I would say at the brands that work very well at famous continued to work at totally worked very well in kids, but we do see a distortion on athletic and then finally with your brand portfolio question I Hope, it's everything that you said and as the consumer continues to respond to it we're doing more new launches the <unk>.

John W. Schmidt: But we're also seeing a lot of our big brands work very well there. Just to name a few, you know, we have a Crocs business that's continually strong in kids, a Hey Dude business that's turned out nicely, and then, you know, Skechers, and then, obviously, Nike is the biggest one there. We're also seeing, you know, newer brands like Birkenstock continue to go in, and new offerings from brands like Adidas work very well in kids. So anyway, I would say the brands that work very well at Famous continue to work totally well in kids, but we do see a distortion on athletic.

Ashley Owens: Products will see more limited drops as we go through we're seeing more collaboration says we mentioned there were two in Doctor Shoals, Youll see more than that from Allen Edmonds and then obviously Sam Edelman.

Ashley Owens: Anniversary campaign has been events that go throughout the entire year. So we're going to continue and then we have two new collaborations coming up with naturalize there but.

You'll see more and more of this coming through from US all the way through the year so stay.

Stay tuned we'll have much more to report.

Ashley Owens: Yeah.

Speaker Change: Great. Thanks, so much.

Speaker Change: We have reached the end of our question and answer session I would like to turn the call back over to Jay for closing comments.

John W. Schmidt: And then finally, with your brand portfolio question, I hope it's everything that you said, and as the consumer continues to respond to it. We're doing more new launches of products. We'll see more limited drops as we go. We're seeing more collaborations. As we mentioned, there were two in Dr. Schull's.

Jay: Okay. Thank you before we close today I would like to thank the talented <unk> team for their focus hard work and dedication were confident in our plans for 2024 and beyond as we execute on our long term strategies.

Jay: We believe <unk> is well positioned to continue to build our powerful brands create exceptional products that exceed our consumers' expectations and deliver financial results that drive significant value for our shareholders.

John W. Schmidt: We'll see more of that from Allen Edmonds, and then obviously Sam Edelman's anniversary campaign has events that go throughout the entire year. So we're going to continue, and then we have two new collaborations coming up with Naturalizer, but... You'll see more and more of this coming from us all the way through the year, so stay tuned. We'll have much more to report. Thank you so much.

Speaker Change: Thank you all for joining us this morning, and thank you for interest in <unk> and have a great day.

Speaker Change: Thank you. This will conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.

Speaker Change: Okay.

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John W. Schmidt: We have reached the end of our question and answer session. I would like to turn the call back over to Jay for closing comments. Okay, thank you.

Speaker Change: Okay.

Speaker Change: Sure.

Speaker Change: Mhm.

John W. Schmidt: Before we close today, I would like to thank the talented Caleres team for their focus, hard work, and dedication. We're confident in our plans for 2024 and beyond as we execute on our long-term strategies. We believe Caleres is well positioned to continue to build our powerful brands, create exceptional products that exceed our customers' expectations, and deliver financial results that drive significant value for our shareholders.

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Operator: Thank you all for joining us this morning and thank you for your interest in Caleres. Have a great day. Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.

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