Q1 2024 Caleres Inc Earnings Call
Christine: Good morning, and welcome to the Caleres first quarter 2024 earnings conference call. My name is Christine, and I will be your conference coordinator. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. At this time, I will turn the call over to Logan Bonacorsi, Vice President of Investor Relations. Please go ahead.
Good morning, and welcome to the Claris first quarter 2024 earnings conference call.
Christine: My name is Christine and I'll be your conference coordinator.
Christine: A brief question and answer session will follow the formal presentation.
Christine: If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
Christine: As a reminder, this conference is being recorded.
Speaker Change: At this time I will turn the call over to Logan, but of course, he vice President of Investor Relations. Please go ahead.
Logan Bonacorsi: Good morning, and thank you for joining our first quarter 2024 earnings call and webcast. A press release with detailed financial tables, as well as our quarterly slide presentation, are available at 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 10K and other filings with the US Securities and Exchange Commission.
Speaker Change: Good morning, and thank you for joining our first quarter 2024 earnings call and webcast a press release with detailed financial tables as well as our quarterly slide presentation are available at <unk> Dot com. Please be aware today's discussion contains forward looking statements, which are subject to a number of risks and uncertainties.
Speaker Change: 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.
Logan Bonacorsi: 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. 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 and our presentation, in the investor section of our website.
Speaker Change: Could impact forward looking statements copies of these reports are available online.
Speaker Change: Discussing the results of our operations, we will be providing I'm, 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 and our presentation on the investors section of our website. The company undertakes no obligation to update any information discussed in this call at any.
Logan Bonacorsi: The company undertakes no obligation to update any information discussed in this call at any time. Joining me on the call today is Jay Schmidt, President and CEO, and Jack Calandra, Senior Vice President and CFO. We will begin this morning's call with our prepared remarks, and thereafter we will be happy to take your questions.
Speaker Change: Time.
Speaker Change: Joining me on the call today is Jay Smith, President and CEO, Jack Calandra, Senior Vice President and CFO 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, Logan, and good morning, everyone. I'm pleased to report that Caleres started the year in strong fashion, delivering solid financial results, making important progress on key strategic initiatives, and investing carefully and deliberately for the long term. In total, we achieved earnings per share of 88 cents, exceeding our expectations and providing a solid foundation for the year. While our first quarter sales were slightly below our expectations, declining less than 1% year over year, we generated stronger than expected gross margins, which led to bottom line strength. In fact, the consolidated gross margin of 47% represented a first quarter record for the company.
J J: Thank you Logan and good morning, everyone.
Speaker Change: I'm pleased to report that Calera started the year in strong fashion.
Speaker Change: Delivering solid financial results, making important progress against key strategic initiatives and investing carefully and deliberately for the long term.
Speaker Change: In total we achieved earnings per share of 88 cents exceeding our expectations and providing a solid foundation for the year.
Speaker Change: While our first quarter sales were slightly below our expectations.
Speaker Change: Declining less than 1% year over year, we generated stronger than expected gross margins, which led to bottom line strength.
Speaker Change: In fact, the consolidated gross margin of 47% represented a first quarter record for the company.
John W. Schmidt: In addition to our financial accomplishments, during the first quarter, we gained market share in both the brand portfolio in women's fashion footwear and in shoe chains for famous footwear and saw significant growth in total sales and increased market share in the important kids category. We utilized our leading speed to market capability, growing our speed penetration to 30% of brand portfolio receipts to capitalize on top selling brands and styles. At the same time, we strategically invested in initiatives essential to our future growth plans.
Speaker Change: In addition to our financial accomplishments during the first quarter, we gained market share in both the brand portfolio in women's fashion footwear and in shoe chains for famous footwear and saw significant growth in the total sales and increased market share.
Speaker Change: In the important kids category.
Speaker Change: We utilized our leading speed to market capability growing our speed penetration to 30% of brand portfolio receipts to capitalize on top selling brands and styles.
Speaker Change: At the same time, we strategically invested in initiatives essential for our future growth plans.
John W. Schmidt: These included Enhancing our marketing ecosystem, specifically new marketing campaigns at lead brands Sam Edelman and Naturalizer, which resulted in improved consumer metrics for both. Expanding our international presence, opening two own Sam Edelman stores with plans for more, including the first flagship store in Southeast Asia at the premium Marina Bay Sands in Singapore. Improving the consumer experience at Famous Footwear, where we converted 10 locations to Flair and refreshed other stores in the fleet, and upgrading our financial and operational system to a new integrated SAP platform. The go-live for the first phase is on schedule for early June.
These included.
Speaker Change: Enhancing our marketing ecosystem.
Speaker Change: Typically new marketing campaigns at lead brands, Sam Edelman, and naturalize, there, which resulted in improved consumer metrics for both.
Speaker Change: Expanding our international presence.
Speaker Change: Opening two one Sam Edelman stores with plans for more.
Speaker Change: Including the first flagship store in South East Asia at the premium Marina Bay Sands in Singapore.
Speaker Change: Improving the consumer experience at famous footwear, where we converted 10 locations to flare and refreshed other stores in the fleet.
Speaker Change: And upgrading our financial and operational system into our new integrated S. H P platform.
Speaker Change: The go live for the first phase is on schedule for early June.
John W. Schmidt: Finally, we returned $18 million to shareholders through share repurchases and dividends. Now, let's turn to our operating segment. The brand portfolio sales declined 2.6% versus our internal expectations of a 1% decline. However, this segment delivered a very strong operating margin and more than half of the company's operating earnings. We are seeing strong growth and demand for new products and momentum in fashion sneakers, as well as flats and casuals, which were both up double digits. However, seasonal products continued to underperform, with dress sandals down double digits versus last year and boots down significantly.
Finally, we returned $18 million to shareholders through share repurchases and dividends.
Speaker Change: Now, let's turn to our operating segments.
Speaker Change: The brand portfolio sales declined two 6% versus our internal expectations of a 1% decline.
Speaker Change: However, the segment delivered a very strong operating margin and more than half of the company's operating earnings.
Speaker Change: We are seeing strong growth in demand for new products and momentum in fashion sneakers as well, it's flat and casuals, which were both up double digits.
Speaker Change: Seasonal product continued to underperform, what dress sandals down double digits versus last year and boots down significantly.
John W. Schmidt: We are well positioned in sneakers and casuals going forward and have aligned our inventory with consumer demand by increasing the penetration of these categories into the total business. Higher initial margins, fewer closeouts, and a 9% increase in our owned e-commerce sales resulted in a 240 basis point improvement in segment gross margin. We invested in both marketing and design and delivered a strong 13% return on sales for the brand portfolio, which was even with last year. Segment performance was led by growth in sales and profitability from our lead brands, along with Dr. Scholl.
Speaker Change: We are well positioned in sneakers, and casuals going forward and have aligned our inventory with consumer demand by increasing the penetration of these categories to the total business.
Speaker Change: Higher initial margins fewer closeouts and a 9% increase in our own ecommerce sales resulted in a 240 basis point improvement in segment gross margin.
Speaker Change: We invested in both marketing and design and delivered a strong 13% return on sales for the brand portfolio, which was even with last year.
Speaker Change: Segment performance was led by growth in sales and profitability from our lead brands along with Doctor Shoals.
John W. Schmidt: In total, our four lead brands, which include Sam Edelman, Allen Edmonds, Naturalizer, and Bionic, represented about 60% of the brand portfolio sales and about 65% of the segment's operating earnings during the first quarter. Now, digging into the performance of our lead brands, Sam Edelman delivered strong international growth driven by new locations, including our first flagship store in Southeast Asia. Additionally, the brand was successful in attracting new consumers during the quarter, particularly younger Gen Z and millennial consumers.
Speaker Change: In total our four lead brands, which include Sam Edelman, Allen Edmonds naturalize, her and Bionic Rep.
Speaker Change: Represented about 60% of the brand portfolio sales and about 65% of the segments operating earnings during the first quarter.
Speaker Change: Okay.
Speaker Change: Now digging into the performance of our lead brands, Sam Edelman delivered strong international growth driven by new locations, including our first flagship store in South East Asia.
Speaker Change: Additionally, the brand was successful in attracting new consumers during the quarter, particularly younger Gen Z and millennial consumers.
John W. Schmidt: The brand partnered with Nordstrom to amplify its marketing campaign at the point of sale, and retail filters were strong. While softer seasonal demand and a lack of closeout sales versus the prior year period impacted the top line, gross margins were up nicely on higher AURs.
Speaker Change: The brand partnered with Nordstrom to amplify its marketing campaign at point of sale and retail sell throughs were strong.
Speaker Change: While softer seasonal demand and lack of closeout sales versus the prior year period impacted the topline gross margins were up nicely on higher aur's.
John W. Schmidt: Naturalizer delivered another quarter of growth, rising one ranking to number 11 in the women's fashion footwear US market versus last year, according to Circana's retail track. Its spring product and marketing efforts focused on sneakers, slingbacks, and ballet flats, and were effective at driving growth. Our speed to market capabilities allowed the brand to reorder bestsellers at a record rate and a set up naturalizer for additional sales opportunities moving forward. In addition, we were pleased with the Deepika Live Tinted Beauty collaboration that we announced last quarter.
Speaker Change: Naturalize are delivered another quarter of growth rising one ranking to number 11 in the women's fashion footwear U S market versus last year, According to Sir Connors retail tracking.
Speaker Change: It's spring product and marketing efforts focused on sneakers sling backs in ballet flats.
Speaker Change: And were effective at driving growth.
Speaker Change: Our speed to market capabilities allowed the brand to reorder best sellers at a record rate and is set up naturalize there for additional sales opportunities moving forward.
Speaker Change: In addition, we were pleased with the depot live tinted beauty collaboration that we announced last quarter.
John W. Schmidt: All the styles sold out, but perhaps more importantly, the collaboration successfully attracted new consumers who responded to our brand positioning of comfort and inclusivity. Allen Edmonds posted its 13th consecutive quarter of growth with increases across both retail and wholesale channels.
Speaker Change: All of the style sold out, but perhaps more importantly, the collaboration successfully attracted new consumers, who respond to our brand positioning of comfort and inclusivity.
Speaker Change: Okay.
Speaker Change: Allen Edmonds posted its 13th consecutive quarter of growth with increases across both retail and wholesale channels.
John W. Schmidt: The business continues to be driven by sports sneakers, hybrids, and dress and casual loafers. During the first quarter, we continued to see double-digit growth in our wholesale business and opened new points of distribution for the brand, including Nordstrom, as well as premier specialty store accounts. As we laid out at Investor Day, we believe the wholesale channel is a significant growth opportunity for the brand. Finally, Bionic climbed three spots in Circana's fashion footwear ranking while at the same time delivering a strong first quarter where sales and profitability improved markedly. The Uptown Mock continues to be a top selling style, not only for Vionic but for all of Caleres.
Speaker Change: The business continues to be driven by sports sneakers hybrid and dress and casual loafers.
Speaker Change: During the first quarter, we continued to see double digit growth in our wholesale business and open new points of distribution for the brand, including Nordstrom as well as Premier specialty store accounts.
Speaker Change: As we laid out at Investor Day, we believe the wholesale channel is a significant growth opportunity for the brand.
Speaker Change: Finally, bionic climbed three spots sensor canez fashion footwear rankings, while at the same time, delivering a strong first quarter, where sales and profitability improved markedly.
Speaker Change: The Uptown market continues to be a top selling style not only for bionic, but for all of Clarus.
John W. Schmidt: We are introducing new colors and getting behind the style with inventory, marketing, and retail activations. Going forward, Vionic has a major opportunity to build consumer awareness and brand loyalty. We know that when consumers wear Bionic, they often become loyal to the brand.
Speaker Change: We are introducing new colors, and getting behind us style with inventory marketing and retail activations.
Speaker Change: Going forward Bionic has a major opportunity to build consumer awareness and brand loyalty.
Okay.
Speaker Change: We know that when consumers were biotic, they often become loyalists to the brand.
John W. Schmidt: The Uptown franchise is introducing the brand to new consumers. Beyond the lead brands, Dr. Scholz deserves a special call out for its significant sales and profit growth in the quarter. Dr. Scholz has two big sneakers, the Time Off and the Madison Lace.
Speaker Change: The Uptown franchise is introducing the brand to new consumers.
Speaker Change: Beyond the lead brands Doctor shows deserves a special call out for significant sales and profit growth in the quarter.
Speaker Change: Doctor Shoals has two big sneakers, the time off and the Madison Leif.
John W. Schmidt: And they have each had viral TikTok videos driving a sellout on our website and at our wholesale partners. Our speed program has allowed us to get back into these trending styles, and we are well positioned to capture demand. Dr. Scholz is celebrating its 100th anniversary this year, and the brand is stronger than ever.
Speaker Change: And they have each had viral tick tock videos driving our sell out on our website and at our wholesale partners.
Speaker Change: Our speed program has allowed us to get back into these trending styles and we are well positioned to capture demand.
Speaker Change: Doctor Shoals is celebrating its 100th anniversary this year and the brand is stronger than ever.
John W. Schmidt: Overall, the brand portfolio performed at a high level during the first quarter, delivering a solid start to the year and has set the stage to lead the financial performance of the company once again in 2024. We have the right brands and products, and the strategy and team to both navigate changes in consumer behavior and win market share in this dynamic marketplace. Moving on to famous footwear, total sales were flat during the first quarter, and comp sales declined 2.3 percent.
Speaker Change: Overall, the brand portfolio performed at a high level during the first quarter.
Speaker Change: Delivering a solid start to the year and has set the stage to lead the financial performance of the company once again in 2024.
Speaker Change: We have the right brands and products.
Speaker Change: And the strategy and team to both navigate changes in consumer behavior and to win market share in this dynamic marketplace.
Speaker Change: Moving on to famous footwear toe.
Speaker Change: <unk> sales were flat during the first quarter and comp sales declined two 3%.
John W. Schmidt: While sales were lower than anticipated, we are encouraged by the sequential improvement in trends since the prior quarter and in each month during the first quarter. Seasonal products continued to underperform relative to last year, with boots down double digits, representing almost half the comparable sales shortfall. While sales moved roughly in line with the overall market, Famous once again outperformed its competitive set, gaining market share in shoe chains driven primarily by kids and women.
Speaker Change: While sales were lower than anticipated we are encouraged by the sequential improvement in trends since the prior quarter and in each month during the first quarter.
Speaker Change: Seasonal products continued to underperform relative to last year with boots down double digit representing almost half the comparable sales shortfall.
Speaker Change: While sales moved roughly in line with the overall market famous once again outperformed its competitive set gaining market share in the shoe chains, driven primarily by kids and women's.
John W. Schmidt: Notably, we continue to see the strategically important kids category outpace the total business with sales up high single digits. Our kids business has now outpaced the rest of the chain for 13 consecutive quarters. Kids penetration of the Total Famous Footwear business reached 21% in the quarter.
Speaker Change: Notably we continued to see the strategically important kids category outpaced the total business with sales up high single digits.
Speaker Change: Our kids business has now outpaced the rest of the chain for 13 consecutive quarters.
Speaker Change: Kids penetration of the total famous footwear business reached 21% in the quarter.
John W. Schmidt: And we gained 1.9 points of market share in shoe chains based on Circana data. We are leaning into our competitive advantage in kids for the balance of the year big time, particularly as we approach the back-to-school season from both an inventory and marketing standpoint. We were also pleased with the performance of our own brands at FAMOUS. Sales of our Caleres brands were up in the quarter, and the chain benefited from Dr. Scholl's and Naturalizer's brand strength.
Speaker Change: And we gained 1.9 points of market share in shoe chains based on <unk> data.
Speaker Change: We are leaning into our competitive advantage in kids for the balance of the year Big time, particularly as we approach the back to school season from both an inventory and marketing standpoint.
Speaker Change: We were also pleased with the performance of our own brands at famous.
Speaker Change: Sales of our Calera brands were up in the quarter and the chain benefited from Doctor Shoals, and Naturalize Hertz brand strength.
John W. Schmidt: Our own portfolio does provide Famous with greater access to fashion products. As you know, at an enterprise level, Caleres captures a higher gross margin on brands sold vertically. Additionally, our famous footwear e-commerce business was strong in the quarter, up 11% year over year, with much of the business fulfilled through stores. Finally, we continue to focus on and further our efforts to enhance the consumer experience at FAMIS. As I mentioned earlier, we converted 10 stores into the FLARE format during the period, and we now have 31 FLARE locations in total.
Speaker Change: Our own portfolio does provide famous with greater access to fashion products.
Speaker Change: As you know at an enterprise level hilarious captures a higher gross margin on brand sold vertically.
Speaker Change: Additionally, our famous footwear E Commerce business was strong in the quarter up 11% year over year with much of the business fulfilled through stores.
Speaker Change: Finally, we continue to focus on and further our efforts to enhance the consumer experience at famous.
Speaker Change: As I mentioned earlier, we converted 10 stores into the flare format. During the period and we now have 31 player locations in total.
John W. Schmidt: We experienced a seven point sales lift versus the rest of the chain in our fall 2023 and spring 2024 flare stores. All in all, Famous Footwear continues to perform well despite the challenging consumer demand environment. Looking ahead, we believe its inherent competitive advantages, namely its leadership position with the millennial family, especially kids, coupled with its clear avenues for growth and support from the Caleres structure, position the business to gain additional market share in shoe chains, generate robust levels of cash, and increase profitability over the long term.
Speaker Change: We experienced a seven point sales lift versus the rest of the chain in our fall 2023, and spring 2020 for flare stores.
Speaker Change: All in famous footwear continues to perform well despite the challenging consumer demand environment.
Speaker Change: Looking ahead, we believe its at its inherent competitive advantages, namely its leadership position with the millennial family, especially kids.
Speaker Change: <unk> with its clear avenues for growth and support from the Calera structure position the business to gain additional market share in shoe chains.
Speaker Change: Generate robust levels of cash and increased profitability over the long term.
John W. Schmidt: As we look forward, we are confident in our ability to deliver earnings per share in line with our guidance. In the longer term, we believe we are exceptionally well positioned to execute our clear and actionable growth plan. Invest to fuel our growth initiative, achieve our three-year growth plan, and drive sustained value for our shareholders. And with that, I will now hand it over to Jack for a more detailed view of our financial performance and outlook. Jack
Speaker Change: As we look forward, we are confident in our ability to deliver earnings per share in line with our guidance.
Speaker Change: Longer term, we believe we are exceptionally well positioned to execute our clear and actionable growth plan.
Speaker Change: Invest to fuel our growth initiatives.
Speaker Change: Chief our three year growth plan and drive sustained value for our shareholders.
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.
Jack P. Calandra: Thanks, Jay. And good morning, everyone.
Jack P. Calandra: Thanks, Jay and good morning, everyone. During today's call I'll provide additional details on our first quarter 2020 for performance and share our outlook for the second quarter.
Jack P. Calandra: During today's call, I'll provide additional details on our first quarter 2024 performance and share our outlook for the second quarter. For the first quarter, sales were $659 million, down slightly from last year. As Jay mentioned, this performance was driven primarily by declines in seasonal items, namely sandals and boots, in both business segments, as well as by pressures from the challenging consumer demand environment. Brand portfolio sales were down 2.6%, and famous sales were up 0.1%, with comparable sales down 2.3%.
Jack P. Calandra: Consolidated gross margin was 46.9%, a 120 basis point increase versus last year and a record for the first quarter. Brand portfolio gross margin was 46.6%, a 240 basis point increase versus last year. This improvement was due to higher initial margins, a favorable channel mix, and a reduction of discounts and allowances on cleaner inventory. Famous Footwear's gross margin was 46.1%, up 50 basis points versus last year. While the business was more promotional, which resulted in lower initial margins, improved shrink and lower freight costs more than offset that decline. SG&A expense was $266 million, or 40.4% of sales, and included planned investments in marketing behind our lead brands. The expansion of our international business and the implementation of the integrated SAP platform.
Jack P. Calandra: For the first quarter sales were 659 million down slightly to last year.
Jack P. Calandra: As Jay mentioned this performance was driven primarily by declines in seasonal items, namely sandals and boots in both business segments as well as by pressures from the challenging consumer demand environment.
Brand portfolio sales were down two 6%.
Jack P. Calandra: And famous sales were up 1% with comparable sales down two 3%.
Jack P. Calandra: Consolidated gross margin was 46, 9%, a 120 basis point increase versus last year and a record for the first quarter.
Jack P. Calandra: Brand.
Jack P. Calandra: Folio gross margin was 46, 6%, a 240 basis point increase versus last year.
Jack P. Calandra: This improvement was due to higher initial margins, a favorable channel mix and a reduction of discounts and allowances on cleaner inventory.
Jack P. Calandra: Famous footwear gross margin was 46, 1% up 50 basis points versus last year.
Jack P. Calandra: While the business was more promotional which resulted in lower initial margins improved shrink and lower freight costs more than offset that decline.
Jack P. Calandra: SG&A expense was $266 million or 44% of sales.
Jack P. Calandra: And included planned investments in marketing behind our lead brands.
Jack P. Calandra: The expansion of our international business and the implementation of the integrated SAP platform.
Jack P. Calandra: Operating earnings were $43 million, and operating margin was 6.5%. Operating margin was 13.1% at Brand Portfolio and 4.8% at Famo. Net interest expense was $4 million, down about $2 million from last year. The weighted average borrowing rate in Q1 was 6.6% this year versus 6.2% last year.
Jack P. Calandra: Operating earnings were 43 million and operating margin was six 5%.
Jack P. Calandra: Operating margin was 13, 1% at brand portfolio and four 8% at famous.
Jack P. Calandra: Net interest expense was $4 million down about $2 million from last year.
Jack P. Calandra: The weighted average borrowing rate in Q1 was six 6% this year versus six 2% last year.
Jack P. Calandra: Earnings per diluted share were $0.88 versus $0.97 last year, and EBITDA was $57 million, or 8.7% of sales. Turning now to the balance sheet and cash flow, we ended the first quarter with $191 million in borrowings, down over $100 million from Q1 2023, and no long-term debt. Inventory at quarter end was 531 million, down 5.2% versus last year, primarily in the brand portfolio and reflecting disciplined inventory management across the business. By segment, inventory at Brand Portfolio was down 10%, and at Famous was down 1%.
Jack P. Calandra: Earnings per diluted share were 88 cents versus <unk> 97 last year and.
Jack P. Calandra: And EBITDA was 57 million or eight 7% of sales.
Jack P. Calandra: Okay.
Jack P. Calandra: Turning now to the balance sheet and cash flow. We ended the first quarter with $191 million in borrowings down over 100 million from Q1, 2023, and no long term debt.
Jack P. Calandra: Inventory at quarter end was $531 million down five 2% versus last year, primarily in brand portfolio, and reflecting disciplined inventory management across the business.
Jack P. Calandra: By segment inventory at brand portfolio was down 10%.
Jack P. Calandra: And at famous was down 1%.
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. Regarding cash flow from operations, we generated $36 million and deployed cash for strategic investments in the business, paid our quarterly dividend, and repurchased shares to offset dilution. Specifically, we spent $10.2 million on capital expenditures, $2.4 million on our quarterly dividend, and $15.1 million to buy back 416,000 shares at an average price of about $36 per share.
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 $36 million and deploy cash for strategic investments in the business.
Jack P. Calandra: Paid our quarterly dividend and repurchase shares to offset dilution.
Jack P. Calandra: Specifically, we spent $10 2 million on capital expenditures $2 4 million on our quarterly dividend.
Jack P. Calandra: And $15 1 million to buy back 416000 shares at an average price of about $36 per share.
Jack P. Calandra: Now turning to our Outlook, we are reiterating our full year 2024 guidance. Specifically, we still expect sales to be flat to up 2% versus last year. This includes the impact of the 53rd week in 2023. Excluding the 53rd week, sales are up 1% to 3%, and earnings per diluted share of $4.30 to $4.60. Additionally, we still expect the following for 2024: a 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.
Jack P. Calandra: Now turning to our outlook.
We are reiterating our full year 2024 guidance.
Jack P. Calandra: Specifically, we still expect sales to be flat to up 2% versus last year.
Jack P. Calandra: This includes the impact of the 50 <unk> week in 2023.
Jack P. Calandra: Excluding the 50, <unk> week sales up 1% to 3%.
Jack P. Calandra: And earnings per diluted share of $4 30.
Jack P. Calandra: To $4 60.
Jack P. Calandra: Additionally.
Ali: Ali we still expect the following for 2024.
Ali: Consolidated operating margin of seven 3% to seven 5%.
Ali: An effective tax rate of about 24%.
Ali: And capital expenditures of 60 million to $70 million.
Jack P. Calandra: We are also providing the following guidance for Q2. We expect consolidated net sales up 3% to 4%. This includes an estimated 20 to 25 million benefit in FAMIS as a result of the calendar shift of an important back-to-school week into Q2 this year from Q3 last year, and earnings per diluted share of $1.20 to $1.25. With that, I'd like to turn the call over to the operator for questions. Operator? Thank you
Ali: We are also providing the following guidance for Q2.
Ali: We expect consolidated net sales up 3% to 4%.
Ali: This includes an estimated $20 million to $25 million benefit and famous as a result of the calendar shift of an important back to school week into Q2. This year from Q3 last year.
Ali: And earnings per diluted share of $1 20 to $1 25.
Speaker Change: With that I'd like to turn the call over to the operator for questions operator.
Operator: Thank you. We will now be conducting a question and answer session. 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. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: Thank you we will now be conducting a question and answer session.
Speaker Change: 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 you would like to remove your question from the queue.
Operator: One moment, please, while we poll for questions. Thank you. Our first question comes from the line of Ashley Owens with KeyBank. Please proceed with your question.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.
Speaker Change: Thank you. Our first question comes from the line of Ashley Owens with Keybanc. Please proceed with your question.
Ashley Anne Owens: Hi, thanks for taking the question. First, is there any more color you can give on the guidance for both the second quarter and fiscal year for your expectations between famous and the brand portfolio, given what we saw in 1Q? I guess specifically on the brand portfolio, do you expect that we'll continue to face a couple of trends within the underperforming categories and lack of promos in the second quarter? Or is that more of a first quarter dynamic?
Ashley Anne Owens: Hi, Thanks for taking the questions. So first just is there any more color you can give on the guidance for both the second quarter and fiscal year.
Speaker Change: Patients between famous and brand portfolio, given what we thought in mind.
Speaker Change: I guess, specifically on the brand portfolio.
Speaker Change: That will continue to face tougher trends within the underperforming categories and lack of promos in the second quarter or is that more of a first quarter. Thank you Matt.
Speaker Change: Yeah.
Jack P. Calandra: Yeah, actually, this is Jack. Thanks for the question. I'll start. Certainly, I think when we look at the second quarter, we expect Famous to, you know, have sales growth probably in the mid single digits. And again, that is coming in large part from the shift of that critical back-to-school week into Q2 this year from Q3 last year. That said, we also expect the brand portfolio to generate a low single-digit comp.
Jack P. Calandra: Yeah actually this is Jack thanks for the question I'll start certainly I think when we look at the second quarter, we expect famous too.
Have provide sales growth probably in the mid single digits and again that is coming in large part from that shift of that critical back to school week into Q2. This year from Q3 last year.
Jack P. Calandra: That said, we also expect the brand portfolio to generate a low single digit comp.
Jack P. Calandra: So that gives you some sense about Q2, and then obviously as we get into the back half we're starting to see the initiatives that we've been investing in continuing to take to take hold and so expect that trend to continue into the back half obviously knowing that in Q4, we have that 50 <unk> week that we are <unk>.
Jack P. Calandra: So that gives you some sense about Q2. And then obviously, as we get into the back half, we're starting to see, you know, the initiatives that we've been investing in, continuing to take hold. And so expect that trend to continue into the back half. Obviously, knowing that in Q4, we have that 53rd week that we are lapping from last year.
Jay Smith: From last year, Yeah, Hi, Ashley, it's Jay and I think on the brand portfolio I think some of the category callouts that we made are going to be behind us in first quarter and so second quarter. We think we'll be in a better position to hit the guidance that Jack indicated.
John W. Schmidt: Hi Ashley, it's Jay, and on the brand portfolio, I think some of the category call-outs that we made are going to be behind us in the first quarter, and so second quarter, we think we'll be in a better position to hit the guidance that Jack indicated.
Jack P. Calandra: Yeah.
Ashley Anne Owens: Okay, great. And then also on wholesale, really quickly, can you elaborate on anything trend wise between the channels, the department stores, shoe chains off price, and just how you expect that to look in the back half, or anything you can comment on what you're seeing so far this quarter?
Speaker Change: Okay, Great and then just also on wholesale really quickly.
Speaker Change: Library on anything trend wise between the channels like private star shoe chains off price and just how you expect that to look in the back half or anything you can comment on what you're seeing so far this quarter.
John W. Schmidt: Well, we are seeing a significant movement toward casual and away from dress, and we see that building for the full year. As I called out, our sneaker business has been good, and it's been good across channel, across brand, and across price point, and that's on the fashion side of the brand portfolio. So we see that trend continuing as we move forward and then again the shift toward more casual and lower heeled products as we go through, and that will probably go into the boot piece.
Speaker Change: Well, we are seeing a significant.
Speaker Change: <unk> movement towards casual and away from dress and we see that building for the full year as called out our sneaker business has been good and it's been a good in across channel and across brand and across price points and that's in the fashion side on the brand portfolio.
Speaker Change: So we see those.
Speaker Change: That trend continuing as we move forward and then again the shift towards more casual and lower heel product as we go through and that will probably go into the boot piece.
John W. Schmidt: Over on FAMOUS, we continue to see that build happening, and in FAMOUS, the prioritization between kids being first, women second, and men third seems to be continuing, which is why we're really amplifying the priority of that in that order. The other thing about FAMOUS is that athletic continues to perform better than fashion at the moment, and we do see a lot of athletic strength per brand going forward into the third quarter and fourth quarter. So I think you'll see... Those trends again toward athletics, sneakers, and casuals continue through the year, and our ability to pivot toward that is really going to be, you know, what drives those numbers going forward.
Speaker Change: Her on famous we continue to see that build happening in in famous the prioritization between kids being first womens second immense third seems to be continuing.
Speaker Change: Which is why we're really amplifying.
Speaker Change: The priority of that in that order. The other thing about famous is that athletic continues to perform better than fashion at the moment and we do see a lot of athletics drag her brand going forward into the third quarter and fourth quarter. So I think you'll see them.
Speaker Change: Those trends again toward athletic sneakers, and casual continue through the year and our ability to pivot toward that is really going to be.
Speaker Change: You know what drives those numbers going forward.
Ashley Anne Owens: Great, thanks so much.
Speaker Change: Great. Thanks, so much.
Speaker Change: Thank you.
Speaker Change: Yeah.
Operator: As a reminder, if you would like to ask a question, press star 1 on your telephone keypad. Our next question comes from the line of Dana Telsey with Telsey Advisory. Please proceed with your question.
Speaker Change: As a reminder, if you would like to ask a question press star one on your telephone keypad.
Speaker Change: Our next question comes from the line of Dana Telsey with Telsey Advisory. Please proceed with your question.
Dana Lauren Telsey: Hi, good morning, everyone. As you think about the current state of the consumer, both for famous brands and also for the brand portfolio, anything that you're noticing change between the fourth quarter and the first quarter, and when you think about, Jay, fashion innovation and newness out there, what percentage of the offering is being driven by that? Are you adjusting any prices, or is the margin or price point on that higher? And then lastly, as we think about back to school, is there any difference in how you're planning back to school this year versus last year?
Dana Lauren Telsey: Hi, Good morning, everyone. As you think about the current state of the consumer both for famous and also for the brand portfolio.
Speaker Change: Thing that you're noticing change between the fourth quarter and the first quarter and when you think about J fashion innovation newness out there what percentage of the offering is being driven by that are you adjusting any prices or is the margin of our price points on that higher and then lastly, as we think about back back.
Speaker Change: School any difference in how you're planning back to school this year versus last year, and just lastly, with the flare stores how are those doing any updates on versus the base and any tweaks being made in terms of how you're thinking about performance for the back half of the year. Thank you.
Dana Lauren Telsey: And just lastly, with the flare stores, how are those doing? Any updates on versus the base, and any tweaks being made in terms of how you're thinking about performance for the back half of the year? Thank you.
John W. Schmidt: Okay, well, in terms of coming at Q4, we're really just seeing a build of again, the sneaker performance and also the casual component being much stronger. We can see it in places like, again, our fashion sneaker business and the brand portfolio is very, very good, up double digits. We're continuing to lean into that with our speed program, and that works completely across.
Speaker Change: Okay, well I think totally in terms of coming out of Q4, we're really just seeing a build of again the sneaker performance and also the casual.
Speaker Change: Component being much stronger we can see it in places like Asia again, our fashion sneaker business and the brand portfolio is very very good up double digits, we're continuing to lean into that with our speed program and networks completely across we're even seeing the same thing in our men's business and Allen Edmonds, where the sneaker.
John W. Schmidt: We're even seeing the same thing in our men's business now at Edmonds, where the sneaker business is very, very strong. So we're going to continue to make that probably. It's not that it changed, but it's even building faster, so we're really using our speed to really pick up and get that to be a very high penetration of the casual offering. Over on the famous side, I think we saw strength in a lot of brands coming out of the fourth quarter that were more athletic, and also brands like Birkenstock and Crocs and others. And those big brands continue to perform.
Speaker Change: Our business is very very strong so we're going to continue to make that probably.
Speaker Change: It's not that they change, but it's even building faster. So we're really using our speed to really pick up and get that to be a very high penetration of the of the casual offering.
Speaker Change: Over on the famous side I think we saw strength in a lot of brands coming out of fourth quarter that were more athletic and also brands like Bergen stock and crocs and others and those big brands continued to perform we're seeing some good athletic strength happening there and a continued focus on.
John W. Schmidt: We're seeing some good athletic strength happening there and a continued focus on really the item and the sneaker that the consumer wants. So it's continually being very specific and item driven. In terms of newness, we continue to make that a priority of our business every single moment. I don't have the exact number on what that would be to our total sales, but for sure, the consumers like that.
Speaker Change: And really.
Speaker Change: The item and the sneaker that the consumer wants and so it's it's continually being very specific and item driven.
Speaker Change: In terms of newness, we continue to make that a priority of our business every single.
Speaker Change: Moment I don't have the exact number on what that would be to our total but for sure. The consumers like that they also like new versions of the same styles that they've had before new skus new materials, new colors as we continue to build on items strength. So that's what we're also leaning into and getting.
John W. Schmidt: They also like new versions of the same styles that they've had before, new SKUs, new materials, new colors, as we continue to build on item strength. So that's what we're also leaning into and getting this to really work. And then, finally, our flare stores are doing well. What did we learn from our experience?
Speaker Change: This to really work and then finally or flare stores are doing well what did we learn from our experience we like a a larger store footprint that we can really showcase the the brands that were showcasing in those stores. So that's very important to us and.
John W. Schmidt: We like a larger store footprint so that we can really showcase the brands that we're showcasing in those stores. So that's very important to us in terms of the size of the store. We're also, highly visible stores from a major entrance or something are actually working better. And, and we continue to, the other thing we did with all of the flare stores beginning this year was move kids to the front of the store.
Speaker Change: Terms of the size of the store we're also.
Speaker Change: Highly visible stores from a major you know entrants or something are actually working better.
John W. Schmidt: And we've seen that had a very strong effect as people walked in. And then we continually pivot and make sure that as you walk through all of the brand assortments that we're seeing continue to shift as the business shifts with them and the brands become more important. But we're very, very excited about what we're seeing, and mostly because the consumer is excited about it, and that combines with a better growth lift. You'll continue to see more effort from us in this area going forward.
And and we continue to the other thing we did with all of the flare stores. Beginning this year has moved kids to the front of the store and we've seen that had a very strong effect as people walk in.
Speaker Change: And and then we continually pivot and make sure that as as you walk through all of the brand Assortments that were seeing them continue to shift as the business shifts with him in the brands become more important but we're very very excited about what we're seeing and mostly because the consumers are excited about it and.
Speaker Change: And that combined with a better growth lift youll continue to see more effort on us from in this area going forward.
Speaker Change: Thank you.
Operator: Our next question comes from the line of Mitch Kummetz with Seaport Research. Please proceed with your question.
Speaker Change: Our next question comes from the line of Mitch <unk> with Seaport Research. Please proceed with your question.
Mitchel John Kummetz: Yes, thanks for taking my questions. Jay, you mentioned in your prepared remarks sequential improvement through the quarter. Can you elaborate on that on the famous side and any Anything on early May as well, and then I have some follow-up.
Mitch: Yes, Thanks for taking my questions. Jay you mentioned in your prepared remarks, a sequential improvement.
Jay Smith: Through the quarter can you elaborate that on the stainless side and any.
Speaker Change: Anything on early May as well and then I have some follow ups.
John W. Schmidt: Okay, so we did see basically with that sequential performance that the quarter, the months got better as we moved into it. I think that's kind of embedded in the fact that we saw boots being down significantly in February that impacted our February performance, got better in March, and then improved somewhat better in April. We're seeing maybe slightly softer as we get into, you know, head through the month there. It is one of our smallest months in the quarter.
Speaker Change: Okay. So we did see basically would that sequential performance that the quarter the months got it.
Jay Smith: Better as we moved into it I think that's kind of embedded in the fact that we saw like you know boots being down significantly in famous that impacted our February performance got better in March and then improves somewhat better in April we're seeing a maybe slightly softer as we get into.
Jay Smith: Do you know had been through the month there. It is one of our smallest months in the quarter and.
John W. Schmidt: And, you know, obviously, we're focused on our key back to school time period, which is, you know, going to be soon. So that's really where we saw the trend lines going for famous as we move through.
Jay Smith: We're focused on our key back to school time period, which is going to be soon so that's really where we saw the trend lines going for famous as we move through.
Mitchel John Kummetz: And then, actually, maybe a follow-up there on back-to-school. How confident are you from a product standpoint, just in terms of kind of what the pipeline looks like and your availability of inventory, particularly around sneakers, which I would think would be important for you guys for back-to-school?
Speaker Change: And then actually maybe a follow up there.
Speaker Change: And back to school.
Speaker Change: How confident are you from a from a product standpoint, and just in terms of kind of what the pipeline looks like in your availability on inventory, particularly around sneakers, which I would think would be important for you guys for back to school.
John W. Schmidt: For sure, and the pipeline is very, very good. We're not having issues with that.
Speaker Change: For sure and the pipeline is very very good we're not having issues with that obviously, we continue to build on our kids inventory and we'll be in good position for back to school, but for sure.
John W. Schmidt: Obviously, we continue to build on our kids' inventory, and we'll be in a good position for back to school, but for sure, we're looking to continue to expand on that. And then the other piece, as we talked about, is that a lot of key athletic brands have continued to surge, as well as Nike, so we are in a better position going into back to school. So we're feeling really very good and confident about that, and that's been a key effort. And then having our marketing and our stores' positioning aligned with that is gonna be very important. But for sure, we're not experiencing pipeline issues at this moment.
Speaker Change: Looking to continue to expand on that and then the other piece is we talked about it a lot of he.
Speaker Change: He has lettic brands.
Speaker Change: Have continued to surge as well as Nike, where we are in better position going into back to school. So.
Speaker Change: We're feeling really very good and confident about that and that's been a key effort and then having our marketing and our stores positioning aligned with that is going to be very important, but but for sure. We're not experiencing pipeline issues at this moment.
Mitchel John Kummetz: And then, Jack, on the margins for 2Q, can you maybe speak to what you're anticipating, gross margin versus SG&A, and then I've got a follow-up for you.
Speaker Change: And then Jack on the margins for two Q can you maybe speak to what Youre anticipating.
Speaker Change: Gross margin versus SG&A, and then I've got a follow up for you.
Jack P. Calandra: Yeah, Mitch. So, you know, I think if I go back to the comments we made when we gave our full-year guidance back in March, we expected this year to get 20 to 40 basis points of operating margin improvement. And for that operating margin improvement to come from gross margin improvement, and for that gross margin improvement to really be focused on the brand portfolio. I think you've seen that play out in Q1.
Jack P. Calandra: Yeah, Mitch So you know I think if I go back to the comments, we made when we gave our full year guidance back in March was that we expect this year to get 20 to 40 basis points of operating margin improvement and for that operating margin improvement to come from gross margin.
Jack P. Calandra: And for that gross margin improvement to really be focused on our brand portfolio and I think you've seen that you've seen that play through on Q1.
Jack P. Calandra: You know, in terms of the second quarter, I would anticipate we'll continue to see, you know, nice improvement in gross margin on the brand portfolio. So, you know, a continuation of that. You know, the investments we're making in SG&A around marketing, around international, and our SAP common platform continue into the second quarter. But those start to, you know, fall off. Some of those start to fall off a little bit in the back half. So, that's how I kind of think about Q2 in terms of those two components.
Jack P. Calandra: You know in terms of in terms of the second quarter I would I would anticipate we'll continue to see.
Jack P. Calandra: Nice improvement in gross margin and brand portfolio, so a continuation of that.
Jack P. Calandra: The investments, we're making in SG&A around marketing around international and our SAP common platform continue into.
Jack P. Calandra: Into the second quarter those start to fall off some of those start to fall off a little bit in the in the back half. So that's how I kind of think about Q2 in terms of those two those two components.
Mitchel John Kummetz: And then, I guess lastly, just on the brand portfolio gross margin, I think it was over 200 basis points in the first quarter. You know, are you expecting that level of improvement over the balance of the year? Are there some, you know, when you think about the puts and takes on gross margin, are there certain things that are less beneficial to you as we kind of roll through the year? Anything you can say there? No, I again, I think.
Okay, and then I guess lastly, just just on the brand portfolio gross margin.
Jack P. Calandra:
Jack P. Calandra: I think over 200 basis points in the first quarter.
Speaker Change: Are you expecting that level of improvement over the balance of the year or there are some you know when you think about the puts and takes on gross margin are there certain things that are less beneficial to you as we kind of roll through the year and anything you can say there.
Jack P. Calandra: No, again, I think, I think, again, the gross margin in the brand portfolio, the improvement there will be the driver of that overall consolidated gross margin that we've talked about, and that will be the driver of the operating margin improvement. So, you know, I would say we're still looking for really nice improvements in gross margin year over year. Again, we're getting it through, as we said, initial margins, we're getting it through the benefits of cleaner inventory, and we're getting it through a more favorable channel mix, given that, you know, our direct-to-consumer business is growing faster than our wholesale business. So I would expect those three things to continue as we move through the year.
Speaker Change: No again, I think I think again the gross margin.
Speaker Change: In brand portfolio the improvement there will be the driver of that overall consolidated gross margin that we've talked about and that will be the driver of the operating margin improvement. So you know.
Speaker Change: I would say, we're still looking for you know.
Speaker Change: Really nice improvement in gross margin year over year again, we're getting it through as we said we're doing it through initial margins, we're getting it through the benefits of cleaner inventory and we're getting it through a more favorable channel mix given that you know our direct to consumer business is growing faster.
Speaker Change: And then our wholesale business. So I would expect that those three things to continue as we move through the year.
Speaker Change: Great. Thank you.
Speaker Change: Thank you.
Operator: Thank you. We have no further questions at this time. Mr. Schmidt, I'd like to turn the floor back over to you for closing comments. All right.
Speaker Change: Thank you we have no further questions at this time, Mr. Schmidt I'd like to turn the floor back over to you for closing comments.
John W. Schmidt: Okay, thank you. Before we close today, I would like to thank the talented Caleres team for their focus, their creativity, their hard work, and their dedication during this quarter and, of course, the year. We are pleased with our first quarter performance and confident in our plans for 2024 and beyond as we execute on our long-term strategy. Caleres is well positioned to continue to build our powerful brands, create exceptional products that exceed our consumers' expectations, and deliver financial results to drive significant value for our shareholders. Thank you all for joining us this morning and thank you for your interest in Caleres.
John W. Schmidt: Okay. Thank you before we close today I would like to thank the talented Polaris team for their focus their creativity their hard work and their dedication during this quarter and throughout of course, a year. We are pleased with our first quarter performance and confident in our plans for 2024 and beyond as we.
John W. Schmidt: Executing on our long term strategies.
John W. Schmidt: Claris is well positioned to continue to build our powerful brands create exceptional products that exceed our consumers' expectations and deliver financial results to drive significant value for our shareholders.
John W. Schmidt: Thank you all for joining us this morning, and thank you for your interest in <unk> have a great day.
Unknown Executive: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.
Speaker Change: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.