Q3 2024 Caleres Inc Earnings Call

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Daryl: Good morning and welcome to the CalARIS Third Quarter 2024 Earnings Conference Call. My name is Daryl and I will be your conference coordinator.

Daryl: At this time, all participants are in a listen-only mode. A question and answer session will follow the prepared remarks. As a reminder, this conference is being recorded. At this time, I will turn the call over to Liz Dunn, Senior Vice President of Strategic Communications and Corporate Development. Please go ahead.

Liz Dunn: Thank you, Daryl. Good morning and thank you for joining our third quarter 2024 earnings call and webcast. A press release with detailed financial tables as well as our quarterly slide presentation are available at Calaris.com.

Liz Dunn: Please be aware today's discussion contains forward-looking statements which are subject to several risks and uncertainties.

Liz Dunn: Actual results may differ materially due to various risk factors, including those 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 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: In discussing our operating results, we will be providing and referring to certain non-GAAP financial measures. Additional details on these measures, as well as others featured in today's earnings release and presentation, are available at CLARIS.com. The company undertakes no obligation to update any information discussed in this call at any time.

Liz Dunn: Joining me today are Jay Schmidt, President and CEO, and Jack Calandra, Senior Vice President and CFO. Our call will begin with prepared remarks, followed by a Q&A session to address any questions you have. With that, I'll turn the call over to Jay.

Thank you and good morning, everyone.

Jay Schmidt: As we reported earlier today, our third quarter saw progress toward our strategy, highlighted by the brand portfolio reporting growth, famous footwear delivering positive comp store sales, and both segments increasing market share.

However, our earnings were clearly below our expectations.

Jay Schmidt: There were a number of challenges in the quarter that impacted our results.

Jay Schmidt: We saw soft boot sales in both segments of our business.

Jay Schmidt: We had discrete issues with late receipts of trending athletic product and famous footwear.

Jay Schmidt: We had a credit issue associated with one customer in the brand portfolio that resulted in lower shipments.

And finally, our China business has softened.

Jay Schmidt: While this was not the result we wanted, there were several areas of strength on both sides of our business that leave us cautiously optimistic for the future.

Jay Schmidt: Our brands and products are resonating with consumers, we are gaining market share in both segments of our business, and we remain confident in our growth strategies and long-term vision.

Jay Schmidt: In total, for the third quarter, sales declined 2.8% year-over-year, and we reported adjusted earnings per share of $1.23.

Now let's turn to our operating segments.

Grant portfolio sales increased approximately 1%.

Jay Schmidt: Our lead brands outperformed our portfolio brands, with Wholesale and Own.com both showing modest growth versus last year.

Jay Schmidt: We were encouraged to see a return to growth and pleased to report that the issues that we had last quarter related to our systems implementation did not impact this quarter.

Jay Schmidt: Additionally, our brand portfolio gained market share according to Circana during the quarter, both in total and in women's fashion footwear.

Jay Schmidt: We continue to see robust demand for new products with Momentum and Fashion Sneakers.

Jay Schmidt: In fact, sneakers and sport represented over 30% of retail selling for the quarter.

Lingbacks, Mary Janes, and Ballet Flats also performed very well.

Wholesale food shipments, however, declined 5% versus last year.

Jay Schmidt: However, at retail, short boots were down 18% and tall chaff boots were up slightly.

Why Chapboots stood out with double-digit growth to last year.

Jay Schmidt: In the Booth category, much like in the rest of our business, the consumer is prioritizing trend and newness over basics.

and more broadly, brands with premium positioning outperformed.

Jay Schmidt: From an inventory perspective, we have more current, less core, and less aged inventory.

Jay Schmidt: In addition, our speed initiative drove about 30% of our sourcing in the quarter.

Jay Schmidt: Our lead brands, Sam Edelman, Allen Edmonds, Naturalizer, and Vionic, represented more than half the brand portfolio's sales and operating earnings in the quarter.

Jay Schmidt: Three of those four brands saw growth and collectively lead brand growth exceeded that of the portfolio brands.

Jay Schmidt: The Sam Edelman brand saw strength in the quarter driven by positive response to fashion newness, particularly in sneakers, flats, and tall shaft boots.

Jay Schmidt: Dale's and Sam Edelman retail stores exceeded expectations and retail sell-throughs with our wholesale accounts were up year over year.

Jay Schmidt: Sam introduced handbags under license in October and we are encouraged by the positive early reaction.

Jay Schmidt: And finally, we continue to believe Sam Edelman has a significant opportunity internationally.

Jay Schmidt: During the quarter, the brand launched in Selfridges and John Lewis in the UK and unveiled the first global location for Sam Edelman's new store concept in Shanghai in October.

Jay Schmidt: The Allen Edmonds business was also driven by newness, particularly in new sneakers and dress lopers.

while Boots underperformed.

Jay Schmidt: We successfully launched our new Allen Edmonds Reserve collection across all channels during the quarter, including an exclusive collection with Bergdorf Goodman.

Jay Schmidt: In our retail stores, we continue to see success with our Port Washington Studios store concept and now have 11 of these prototypes with com stores outperforming the chain by a high single digit percentage.

Jay Schmidt: Naturalizer returned to growth in Q3, led by its direct-to-consumer business.

Jay Schmidt: We saw increases in purchasing by Gen Z, Millennials, and higher household income consumers.

Jay Schmidt: Our focus on inclusivity is attracting new loyal consumers to the brand.

Jay Schmidt: Additionally, we also opened a new store in Beijing, relaunching the Naturalizer brand in Asia, and are in early innings of international expansion for this brand.

Jay Schmidt: Bionic had solid trends at retail, particularly with Nordstrom, and saw continued outperformance in both its uptown casual business and the sport lifestyle category.

However, the brand faced challenge again with casual short boots.

Jay Schmidt: We continue to evolve and modernize the assortment while maintaining bionics wearable well-being positioning.

Jay Schmidt: And as we continue to fuel innovation at Bionic, we expect to further expand the brand's reach.

Jay Schmidt: Overall, the brand portfolio had a mixed quarter. Outperformance by our lead brands is encouraging and strong retail selling trends and market share gains across the portfolio will drive growth in the future.

Moving on to Famous Fudware.

Jay Schmidt: Total sales declined 5% during the third quarter, while comp sales increased 2.5%.

Jay Schmidt: After a very strong back-to-school season, sales returned to the prior trend.

Athletic was strong and positive across men's, women's, and kids.

Jay Schmidt: Boots were down over 20% at Famous during the quarter, comprising most of the sales shortfall relative to expectations.

Jay Schmidt: At the same time, we saw an extended season for sandal selling with strength from both Birkenstock and Reef.

Jay Schmidt: Once again, our strategically important kids category grew in the quarter outpacing the total business.

Jay Schmidt: Our Kids category has now outperformed the rest of the chain for 15 consecutive quarters.

Jay Schmidt: Kids penetration of the total famous business was 25% in the quarter and we gained 1.3 points of kids market share in shoe chains according to Cercana data.

Jay Schmidt: Overall, in the third quarter, Famous Footwear's market share gained a half a point in shoe chains, according to Cercana data.

Jay Schmidt: We were also pleased with our performance of our own brands at FAMOUS.

Jay Schmidt: Penetration of our Calaris brands was once again up in the quarter with strong selling for both Naturalizer and Blowfish.

Jay Schmidt: Calaris brands continue to provide famous with greater access to fashion products, while at the enterprise level vertical sales allow us to capture higher gross margins.

Jay Schmidt: Our Famous.com business was strong in the quarter, posting an 8.3% year-over-year increase on a common basis.

Jay Schmidt: Finally, we continue to focus on enhancing the consumer experience at FAMOUS.

Jay Schmidt: At the end of Q3, we had 32 flare locations in total.

Jay Schmidt: We continue to experience a mid-single-digit sales lift versus the rest of the chain in our fall 2023 and spring 2024 flare stores.

Blair is successfully attracting more elevated brands and products.

and our famous consumer is responding positively.

Jay Schmidt: We made a tactical decision to delay construction on additional remodels until the first quarter of 2025 to prevent lost holiday sales.

Jay Schmidt: However, we will open one new flare store in Boston in the fourth quarter.

Jay Schmidt: Famous is well positioned on the inventory heading into the holiday season, particularly in the key trending brands and styles.

Jay Schmidt: The strength of kids, our continued success with FLARE, and our broad-based improvement in athletic are encouraging.

We believe famous is inherent competitive advantage.

Jay Schmidt: namely its leadership position with the millennial family, especially kids, coupled with its clear avenues for growth and support from the Calera structure, position the business to gain additional market share in shoe chains, generate robust levels of cash, and increase profitability over the long term.

Jay Schmidt: Looking forward, we are now expecting lower sales and earnings than our previous guidance.

[inaudible]

Jay Schmidt: While Jack will walk you through our updated assumptions in detail, I will provide some color on the factors impacting our revised outlook.

Jay Schmidt: We are seeing several trends play out in our business that are negatively impacting our top-line performance in the near term.

Jay Schmidt: On the brand portfolio side, we expect boots to continue to trend below last year through the fourth quarter.

Jay Schmidt: We plan to take aggressive action on poor-performing items to end the year in a clean position.

Jay Schmidt: We also expect demand in China to be more muted than previous expectations for the balance of the year.

Jay Schmidt: At Famous Footwear, we are outperforming in our competitive set, but the overall environment in family footwear has been more challenged.

Jay Schmidt: Lastly, we incurred necessary investment this year to position our business for the long term.

We have restructured our business and reduced expense.

Jay Schmidt: But we do not want to set back long-term growth plans by cutting too deeply.

Jay Schmidt: Finally, I would also like to touch on two subjects, tariffs and our long-term plan.

Bursts on Terrace

Jay Schmidt: Our sourcing and supply chain capabilities are well positioned to adapt and evolve to meet the changing environment.

Jay Schmidt: We have been working closely this year with our factory partners to pivot our sourcing outside of China and mitigate the impact of additional tariffs on the business for 2025.

Jay Schmidt: Jack will discuss this with more detail on our sourcing plan shortly.

Second, on the subject of our long-term financial targets.

Jay Schmidt: In October of 2023, we announced a plan to drive growth in sales, earnings, and total shareholder return.

Jay Schmidt: While we still expect to return to more consistent growth in these metrics, we now expect it to take longer to achieve the specific EPS goals we laid out last October.

This year has clearly been a setback for us.

Jay Schmidt: Having said that, we believe we are on the right track with the right strategies for the future.

Jay Schmidt: We look forward to updating you on our 2025 expectations during our fourth quarter call.

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

Jack?

Jack Calandra: Thanks, Jay, and good morning, everyone. During today's call, I'll review our third-quarter performance and share our revised guidance for the full year.

Jack Calandra: Please note my comparisons to last year will be on an adjusted basis.

Starting with Q3 results.

Sales were $741 million, down 2.8%.

Jack Calandra: On a dollar basis, sales were down $21 million, which included an unfavorable calendar shift of about $29 million at Famo.us.

Speaker Change: As Jay mentioned, weak seasonal demand in the boot category impacted results in both segments.

Speaker Change: Brand portfolio sales were up 0.7%, primarily driven by our lead brands.

Speaker Change: OWN.com sites were up 1%, Dropship improved from Q2 and was about flat versus last year.

and Total Wholesale saw a modest uptick.

Famous sales were down 4.8%.

Speaker Change: Comparable sales, which adjust for the calendar shift, were up 2.5 percent.

Speaker Change: Strong results in athletic and kids offset weak sales in boots.

Speaker Change: Back to school came later in the season, but in total was in line with our expectations.

Speaker Change: Comparable sales were up 9% in August and down low single digits in September and October.

Thanks for watching!

Speaker Change: Consolidated gross margin was 44.1 percent, a 55 basis point decrease, and was driven by lower margin in famous, partially offset by a slightly higher margin in brand portfolio.

Speaker Change: Brand Portfolio Gross Margin was 43.8%, up 15 basis points, supported by a favorable channel mix and higher initial margins.

Famous gross margin was 42.9% down 130 basis points.

Speaker Change: This decrease reflects a shift to more days in BOGO versus Buy More Save More. However, as previously noted, the shift was gross profit accretive to what we initially saw from the Buy More Save More promotion.

Softer than anticipated performance in boots also impacted clearance margins.

Speaker Change: SG&A expense was $269 million or 36.3% of sales, up 30 basis points.

Speaker Change: and we're somewhat offset by higher rent and investments in marketing, the SAP upgrade, and international.

Speaker Change: Operating earnings were $58 million and operating margin was 7.9 percent.

Speaker Change: Operating margin was 10.9% at Brand Portfolio and 6.9% at Famous.

Speaker Change: Net interest expense was $2.9 million, down $1.6 million on lower average borrowings and a lower interest rate.

Earnings per diluted share were $1.23 versus $1.37 last year.

EBITDA was $73 million and 9.9% of sales.

Speaker Change: Turning now to the balance sheet, we ended the third quarter with $239 million in borrowings, up about $17 million versus last year.

Speaker Change: The borrowings balance included the impact of $50 million of share buybacks completed in the quarter, during which we repurchased just over 1.5 million shares at an average price of $32.82 per share.

Debt-to-trailing 12-month EBITDA was one times.

Speaker Change: Inventory at quarter end was $586 million, up 5.4% to last year on a reported basis, and up 2.7% when adjusted for the calendar shift.

Speaker Change: Famous inventory was up 5.1% on a reported basis and up 0.7% on an adjusted basis.

Brand Portfolio Inventory was up 6%.

Speaker Change: Both businesses ended the quarter with less aged inventory than last year in both dollars and as a percent to total.

Now turning to our Outlook.

Speaker Change: We are updating our full year 2024 guidance to reflect the shortfall we experienced in Q3 and a more conservative view of Q4.

We now expect...

sales to be down 2.5% to 3% versus last year.

Speaker Change: This comparison includes the impact of the 53rd week in 2023.

Speaker Change: Excluding the 53rd week, sales to be down 1.5% to 2%.

We expect a consolidated operating margin of 6.1% to 6.3%.

Speaker Change: and earnings per diluted share of $3.35 to $3.45 and adjusted earnings per diluted share of $3.45 to $3.55.

Speaker Change: We continue to expect an effective tax rate of about 24 percent.

and capital expenditures of $50 million to $55 million.

Speaker Change: We have provided a table in our earnings release and slides that summarizes our previous and revised guidance.

Speaker Change: And finally, I wanted to build on Jay's earlier comments on the evolving tariff situation.

Speaker Change: On the brand portfolio side of our business, where we source product directly, more than 50% of our dollar volume is currently manufactured outside of China.

Speaker Change: We expect to have about 70% sourced outside of China by the back half of 2025, and our lead brands are further along on this migration.

Speaker Change: At Famous, currently about 15% of our vendor receipts are made in China.

We expect this number to move lower as well.

Speaker Change: We are working proactively to mitigate the risk of additional tariffs and believe our sourcing capabilities position us well to adapt to any changes.

With that, we can open the line for questions. Operator?

Speaker Change: 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 to remove your question from the queue.

Speaker Change: you. 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 your questions.

Speaker Change: Our first questions come from the line of Ashley Owens with T-Bank Capital Markets. Please proceed with your questions.

Speaker Change: Hi, this is Chantana Madaka on for Ashley Owens this morning. So I just wanted to ask just broadly your year into your long-term plan that you outlined yesterday. Can you just provide more thoughts around the confidence levels? How should we be thinking about top-line growth and scaling to that in next year and beyond? Is there any shift in the makeup there? And then you spoke to EPS expectations that are now expected to take a bit longer. So from an OpEx perspective, is there anything to call out on what's driving the adjustment, any bucket that's contributing more? Thank you.

Speaker Change: Thanks for the question. So, as you know, we generated more than $4 of EPS over the last three years and continue to believe we have the brand, strategies, capabilities, and people to get back to that earnings power.

As Jay said, this year has clearly been a setback.

Speaker Change: And I really think, without making excuses, there have been a confluence of factors that have impacted this year. One thing I would say is that the fashion segment of footwear, where we obviously play pretty heavily, has been softer than anticipated from the forecast that we were provided in the beginning of the year.

and the seasonal business has been particularly tough.

Speaker Change: As you know from our second quarter call, we also had disruption and distraction from our ERP upgrade, and that had a pretty big impact on Q2. As Jay mentioned, that impact is now behind us.

Speaker Change: And then we have been making investments, strategic investments, to drive future growth that we feel very confident in, and particularly around international and some of our marketing investments.

Speaker Change: That said, it's gonna take us longer to achieve the goals we communicated last October.

Speaker Change: and we can provide, I think, a further update on our fourth quarter call. But we feel like we've got, again, all of the capabilities, tools, brands, and people to get our earnings back over that $4 level.

Speaker Change: Awesome. Just as a follow-up, I wanted to ask if there's anything more specific that you could discuss around the dynamics in China.

Speaker Change: What do you think is contributing to the softness there, is it more broadly macro and consumer spend? And just speak to your confidence in the region as you're investing and opening more stores there.

Jay Schmidt: Hi, it's Jay. We still believe that we have a significant growth opportunity in China and the rest of the world. While we're somewhat more cautious on China in the near term, we believe it is an important market for us with significant long-term opportunity.

Jay Schmidt: And we are looking at a more balanced approach with other markets being important as well, such as the Middle East and the EU.

Jay Schmidt: And even with our JV partner, we're kind of looking at more moderate growth, but still growing there. And then also, that JV partner is expanding into Southeast Asia as well. So we think we have a good plan there, but probably just our original China plan was probably too aggressive coming out of the gate.

That's helpful. Thank you.

Thank you.

Speaker Change: Thank you. Our next questions come from the line of Laura Champagne with Loop Capital Markets. Please proceed with your questions.

called out in your press release today.

Jack Calandra: Yes, so this is Jack. Laura, thanks for the question. So just in terms of as we look to Q4, we do expect a gross margin decline for the total company. That will be driven by a gross margin decline at brand portfolio where we plan to address the current but slow-moving inventory that we talked about.

Jack Calandra: And then in terms of the credit issue, just a little background on that, we chose to suspend shipments to a customer.

Jack Calandra: given their age receivables balance and their latest credit rating. We do expect continued challenges in Q4 and we have factored that into our guidance.

Jack Calandra: And just rest assured that the age receivable balance was appropriately reserved for at the end of the third quarter, again, based on that value and that credit rating.

Speaker Change: So that seems like more of a top line issue and I wouldn't expect a big markdown of receivables to impact margins in Q4. Is that fair?

on the credit issue specifically? Right, exactly.

Speaker Change: Yeah, I mean, we do, you know, to the extent that we do any sales there, we have to also put up a pretty significant reserve for potential credit losses. So there is a bit of that offset that goes into the earnings flow through of that account.

Speaker Change: Okay, and any framing you can give us around how large that customer is as a percentage of your wholesale business?

Speaker Change: It's pretty small, and I can say, as we think about the things that caused us to miss our top line in the third quarter, the first one, and the most significant one, is the boots issue in both segments that Jay talked about. And then I think after that, in terms of order, would be the athletic, the late deliveries of the athletic product that we didn't receive. And then the credit issue would come below that.

Speaker Change: So it sounds like you listed them in the press release in the order of their relative impact, which brings me to my final question. How large is China as a percentage of total sales at this point?

Speaker Change: It's less than, I mean the whole international piece is less than 5% of our total, and China is the largest part of that, but there are others there. So it's relatively low. It's just that our plan was more aggressive than what we delivered against, and that's where it did catch us up on third quarter.

Understood. Thank you.

Thank you. Thank you.

Speaker Change: Thank you. Our next questions come from the line of Mitch Kovetz with Seaport Research. Please proceed with your questions.

Mitch Kovetz: Yes, thanks for taking my questions. I just want to start on 4Q, the implied guide there.

Speaker Change: Looks like kind of maybe the midpoint of the range sales down. I think 6% Jack. Can you remind us? What the sales impact of the 53rd week was last year maybe in total and then how that split between famous and VP I assume it's mostly if not all on the famous side and and when you look at that implied sales outlook

Speaker Change: What are you assuming in terms of BP growth in the fourth quarter and then also famous comp?

Mitch Kovetz: Sure, Mitch. So as a reminder, the impact of the 53rd week last year was $25 million in total for the company, and you rightly point out that most of that was in Famo.us. It was $18 million for Famo.us and $7 million for Brand Portfolio.

Mitch Kovetz: So as we look at sales going forward into Q4, on a reported basis of not adjusting for the 53rd week, we expect both segments to be down mid-single digits.

Mitch Kovetz: Adjusting for the 53rd week, we expect Famous to be down slightly.

Mitch Kovetz: But BP still to be down sort of in that mid-single-digit range, given the impact of the 53rd week wasn't as significant.

Mitch Kovetz: and the plans that we have to make sure that we get through some of that current but slow-moving inventory so we finish the year clean from an inventory perspective.

Speaker Change: And on the famous down slightly adjusted, I could probably try to back into some sort of comp assumption there, but if you could save me the trouble and kind of let me know what you're thinking in terms of comp on that business.

Speaker Change: Yeah, so for the famous business, we're looking at just a marginally positive comp, so about call it about a one to a one and a half comp for Q4, which is obviously below where we finished in Q3.

And then, Jack, I think you mentioned...

in response to one of Laura's questions that's gross margin.

Speaker Change: You expect to be down in the fourth quarter. It looks like, again, if I kind of take the midpoint of your guide.

Speaker Change: It looks like maybe op margin down around 70 base points in 4Q. Can you say how much you expect gross margin to be down? I assume maybe you're assuming some SG&AD leverage as well.

Speaker Change: Yeah, so really in terms of the op margin decline in Q4, more of it is being driven by gross margin. We do, you know, just in terms of SG&A, you know, we have the 12 million dollar

Speaker Change: benefit from last year's 53rd week. So obviously that's coming out of Q4. We do have some additional savings given the work that we've been doing, but just given what the sales are coming down, we think there is likely some de-leverage in SG&A in the fourth quarter.

Speaker Change: So, that reduction in operating margin really coming from both levers, but I would say more so on the gross margin.

Speaker Change: And is your famous comp, your quarter to date, I don't know, can you say anything about quarter to date at famous, is that sort of in line with that sort of plus one to one and a half or is it below that and you expect that to pick up as the holiday season kicks in some more?

Speaker Change: Yeah, I think it is. It is running a bit below that. But because we have this

Speaker Change: compressed calendar for holiday. What we're seeing certainly so far in the month of November is some very strong comps.

Speaker Change: with that compressed holiday shopping period. So what we did was we compared sort of how we expect the quarter to build to the last time the calendar was like this, which was in 2018, and that gives us confidence in that forecast.

Speaker Change: And maybe just a last one, on the boots, you said it was the biggest negative impact on the third quarter. Is there any way to quantify that? I would imagine boots are more significant in 4Q, so are you expecting the...

Speaker Change: impact to be more significant in the fourth quarter than the third quarter.

Speaker Change: We're seeing, I mentioned, Jay, you know, Boots did, it was about two-thirds of our drop for the third quarter.

Speaker Change: We are looking today at seeing the boot sales decline, at least from what we know so far, to be similar to what we've experienced in third quarter. And obviously it's just starting to turn very cold, so we'll see if that gets improved, but right now we can only guide on what we know.

Right. Thanks and good luck.

Thank you.

Speaker Change: Thank you. Our next questions come from the line of Dana Telsey with the Telsey Advisory Group. Please proceed with your questions.

Hi, good morning, everyone.

as you think about the brand portfolio.

Speaker Change: What were the biggest brands where there was a rate of change? What decelerated? Did anything accelerate in brand portfolio?

Speaker Change: And then as you think of the famous footwear business, what are you seeing there in terms of the health of that consumer? And it sounds like the flair stores still outperform the base. Is it still 43 you're looking for this year? And just lastly, with the promotions in this current fourth quarter, how do you expect them to be different? You mentioned BOGO before. What's adjusting in the promotions in famous footwear or in brand portfolio as you go forward? Thank you.

Okay, so starting off with what's, um...

Speaker Change: in the brand portfolio as what's called out the sneaker business, fashion sneakers were very good and now represent 30% in the quarter. We had significant trends in footwear that were positive, such as

Flats, Mary Jane's, Slingbacks.

Speaker Change: And then also, we did see a, although it's a smaller category for us within boots, which got us to that better performance in tall boots, it was really on tall heeled boots.

Speaker Change: which were very strong in the quarter and both Sam Edelman and Naturalizer benefited from those trend items.

Fast forward over to.

Speaker Change: famous footwear. Athletic continues to really dominate right now and these very strong athletic brands that we've reported upon that Famous does have are continuing to trend across the women's, men's, and kids part of the business.

Speaker Change: And then, you know, across the board, it really was foods that just, you know, this particularly short casual that was the most concerning part and did cause us some, you know, pain here.

Moving forward, you know, we still see in

Speaker Change: The consumers are still wanting the brands that they desire, and that's really, whether they're value or full price, they're still really looking at the brands and the products that they want and continue to demand, so we're continuing to see that.

Speaker Change: And then finally, the Flair stores are working. We're very happy with them. We're only going to open one more store, so we have 32 open now, so we'll end with 33. And then right after the, you know, into the 25 plan, we'll continue to open more. We did delay some of those just so we could keep the stores open and get the most sales through the holiday period.

Speaker Change: Got it. And then, just on that promotional part, Jay, how are you thinking about that? Whether it's BOGO or whatever, how are you thinking about that as we go through the holiday season? Does it change at all?

Jack Calandra: Yeah. So, Dana, it's Jack. So, in terms of famous, we have a promotional calendar, which is very similar to last year, where we did do a lot of BOGO promotion. And so, we'll continue that this year. So, it should be pretty comparable year over year. I think where you'll see, you know, more, you know, markdown activity, promotional activity is on the brand portfolio side, again, as we look to AZ 2024 with a really good position on inventory. And so, that's where I think you'll see some more promotions. And that's where we have

Jack Calandra: factored in some more gross margin dilution in that business in Q4. And it will be more clearance-driven in that category, particularly in season. That's right.

Speaker Change: And just one last thing, how much was the industry down versus yourselves? Was there a change in industry trend?

Speaker Change: So the total footwear industry in total was down about one percent.

Who just drinked in the corner?

Yes. And the floor was down 3%.

Wow.

Speaker Change: and I think what we've seen is that the fashion segment

Speaker Change: of the industry has been below that, and obviously that's where we have a decent amount of exposure. So I would say, you know, both the overall footwear market and then I think the segments that we really compete in, you know, have been pressured.

Got it. Thank you.

Thank you.

Speaker Change: Thank you. That does conclude our question and answer session. I would now like to hand the call back to Jay Schmidt, President and CEO, for closing remarks.

Speaker Change: Okay, thank you. Before we close today, I would like to thank the entire Calares team for their focus and dedication during this quarter and for the whole year.

Speaker Change: Our team worked extremely hard during 2024 while laying the groundwork for a stronger 2025. Thank you all for joining us this morning, and thank you for your continued interest in Caleris. Have a good day.

Speaker Change: Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time.

Enjoy the rest of your day