Q4 2025 Caleres Inc Earnings Call
Greetings and welcome to the Claris, Inc. Fourth quarter 2024 earnings call. At this time all participants are in a listen only mode. A 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.
Operator: Greetings and welcome to the Caleres Inc. 4th Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode.
Operator: A 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 device. As a reminder, this conference is being recorded.
Liz Dunn: I would now like to turn the conference over to your host, Liz Dunn, Senior Vice President, Corporate Development and Strategic Communications. Thank you. Good morning and thank you for joining our fourth quarter and full year 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 today's discussion contains forward-looking statements which are subject to several risks and uncertainties. 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.
Speaker Change: I would now like to turn the conference over to your host Liz Dunn Senior Vice President corporate development and strategic communications. Thank you you may begin.
Liz Dunn: Good morning, and thank you for joining our fourth quarter and full year 'twenty 'twenty four earnings call webcast.
Liz Dunn: A press release with detailed financial tables, as well as our quarterly slide presentation are available at Claris Dot com.
Liz Dunn: Please be aware today's discussion contains forward looking statements, which are subject to several risks and uncertain.
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: Securities and Exchange Commission. Please refer to today's press release and our SEC filings for more information on risk factors and other factors which could impact forward-looking state Copies of these reports are available online. In discussing our operational results today, we will be providing and referring to certain non-GAAP financial measures. Additional details on these measures, as well as other features in today's earnings release and presentation, are available at Caleres.com.
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.
Liz Dunn: Copies of these reports are available online.
Liz Dunn: In discussing our operational results today, we will be providing I'm, referring to certain non-GAAP financial measures.
Liz Dunn: Additional details on these measures as well as other features in todays earnings release.
Liz Dunn: Asian or available at Clarus dotcom.
Liz Dunn: The company undertakes no obligation to update any information discussed on this call at any time.
Liz Dunn: The company undertakes no obligation to update any information discussed on this call at any time.
Jack Calandra: Joining me today are Jay Smith, President and CEO, and Jack Calandra, Senior Vice President and CFO.
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.
Speaker Change: Our call will begin with prepared remarks, followed by Q&A session to address any questions you have with that I will now turn the call over to J J.
Liz Dunn: With that, I will now turn the call over to Jay. Jay?
Speaker Change: Good morning, and thank you for joining us today.
Jay Schmidt: Good morning, and thank you for joining us today. I've just returned from Seattle, where Caleres was honored with the Nordstrom Vendor Partner in Excellence Award for footwear in 2024. I'm proud of this recognition and it underscores the powerful brands and innovative products all fueled by our Caleres capabilities. and our talented team members that led to this win. Our fourth quarter earnings were at the high end of our recent guidance. We gain market share in women's fashion footwear according to Circana. Our lead brands, including Sam Edelman, Allen Edmonds, Naturalizer, and Vionic, outperformed. We grew our sneaker penetration, and we invested to support our long-term growth while reducing expense elsewhere to align with our area's strategic focus.
Speaker Change: I've just returned from Seattle, where Clarus was honored with the Nordstrom vendor partner in Excellence award for footwear in 2024.
Speaker Change: I'm proud of this recognition.
Speaker Change: Their scores the powerful brands and innovative products all fueled by our <unk> capabilities.
Speaker Change: And our talented team members that led to this win.
Speaker Change: Our fourth quarter earnings were at the high end up our recent guidance.
Speaker Change: We gained market share in women's fashion footwear, according to its economy.
Speaker Change: Our lead brands, including Sam Edelman, Allen Edmonds natural laser and Bionic outperformed.
Speaker Change: We grew our sneaker penetration and we invested to support our long term growth, while reducing expense elsewhere to align with our areas of strategic focus.
Speaker Change: And while business in the shoe chain segment softened overall in the quarter famous footwear was able to maximize key selling periods.
Jay Schmidt: And while business in the shoe chain segment softened overall in the quarter, Famous Footwear was able to maximize key selling periods. Also in the quarter, we accelerated the evolution of our supply chain and further mitigated the impact of additional tariffs. By the end of second quarter in 2025, we now expect about 75% of our direct product sourcing to be outside of China. with our lead brand even further along in this transition. This is higher than the goal we communicated last quarter. For the remaining portion of our business still sourced from China, we are well positioned to manage additional tariffs through a combination of factory negotiations, selective price increases, and modest gross margin pressure, which has been incorporated into our forward outlook.
Speaker Change: Okay.
Speaker Change: Also in the quarter, we accelerated the evolution of our supply chain and further mitigated the impact of additional tariffs.
Speaker Change: By the end of second quarter in 2025, we now expect about 75% of our direct product sourcing to be outside of China.
Speaker Change: With our lead brands, even further along in this transition.
Speaker Change: This is higher than the goal we communicated last quarter.
Speaker Change: For the remaining portion of our business still sourced from China.
Speaker Change: We are well positioned to manage additional tariffs through a combination of factory negotiation.
Speaker Change: Selective price increases and modest gross margin pressure, which has been incorporated into our forward outlook.
Speaker Change: While 2024 overall was disappointing relative to our initial expectations, we made meaningful progress in advancing our strategic priorities and positioning our brands for sustainable growth.
Jay Schmidt: While 2024 overall was disappointing relative to our initial expectations, we made meaningful progress in advancing our strategic priorities and positioning our brands for sustainable growth. We also laid the foundation for new brands and strategies that support future growth while returning approximately $75 million to shareholders through buybacks and our long-standing dividends.
Speaker Change: We also laid the foundation for new brands and strategies to support future growth.
Speaker Change: Returning approximately $75 million to shareholders through buybacks and our long standing dividend.
Speaker Change: Now turning to our results.
Jay Schmidt: Now turning to our results. In total, we delivered fourth quarter adjusted earnings per share of $0.33. and full year adjusted earnings per share of $3.30. at the high end of our most recent guidance. Fourth quarter sales were down approximately 4% to last year, excluding the impact of the 53rd week, reflecting continued weak boot sales, softer wholesale demand, and cautious consumer spending in some portions of our business. However, we ended the quarter with more current inventory in the brand portfolio and more core in Famous Footwear, and are poised for improved trends in 2025. Our brand portfolio sales declined 7.2% in the fourth quarter, or 5% excluding the impact of the 53rd week.
Speaker Change: In total we delivered fourth quarter adjusted earnings per share of 33 cents.
Speaker Change: Full year adjusted earnings per share of $3.30.
Speaker Change: At the high end of our most recent guidance.
Speaker Change: Fourth quarter sales were down approximately 4% last year, excluding the impact of the 50 <unk> week.
Speaker Change: Reflecting continued weak food sales softer wholesale demand and cautious consumer spending in some portions of our business.
Speaker Change: However, we ended the quarter with more current inventory and the brand portfolio and more core in famous footwear and our poised for improved trends in 2025.
Speaker Change: Yes.
Speaker Change: Our brand portfolio sales declined seven 2% in the fourth quarter or 5%, excluding the impact of the 53rd week.
Speaker Change: Strength in contemporary brands.
Jay Schmidt: Strengthened contemporary brands, continued growth in sneakers, and standout performance from Allen Edmonds and Bionic was offset by weakness in boots and softness in demand among our more value-oriented brands and wholesale customers. Despite the challenges in the quarter, Grand Portfolio delivered solid adjusted operating margins of 9.4%.
Continued growth in sneakers and standout performance from Allen Edmonds, and Bionic was offset by weakness in boots and softness in demand among our more value oriented brands and wholesale customers.
Despite the challenges in the quarter.
Speaker Change: Brand portfolio delivered solid adjusted operating margin of nine 4%.
Speaker Change: Now, let's take a look at our lead brands performance.
Jay Schmidt: Now let's take a look at our lead brand's performance. As a reminder, these four brands represent over 50% of the segment's sales and profits. for the quarter and the year. lead brand performance outplays the overall brand portfolio, reinforcing our strategy that these brands will continue powering the future of Caleris. During the fourth quarter, Sam Edelman declined modestly year over year with strength in tall boots, Mary Janes, and sneakers, offset by weakness in booties.
Speaker Change: As a reminder, these four brands represent over 50% of the segment sales and profit.
Speaker Change: For the quarter and the year.
Speaker Change: The brand performance I will place the overall brand portfolio, we enforcing our strategy that these brands will continue powering the future of Polaris.
Speaker Change: During the fourth quarter, Sam Edelman declined modestly year over year with strength in tall boots, Mary James and sneakers.
Speaker Change: Offset by weakness in beauty.
Speaker Change: Internationally, we continued to make progress on our strategic growth agenda.
Jay Schmidt: Internationally, we've continued to make progress on our strategic growth agenda. Over the last six months, our team activated new premium wholesale partnerships in Europe with Printemps, Selfridges, and John Lewis, adding to the existing partnerships with Level Shoes, Palazzo, and Lane Crawford. In China and Southeast Asia, we continued to focus on expansion. We added three net new owned stores in the quarter through our international joint venture. and seven franchise stores, bringing our total to 56 owned stores by year-end and 47 international franchise stores.
Speaker Change: Over the last six months, our team activated new premium wholesale partnerships in Europe with print, Tom Selfridges, and John Lewis, adding to the existing partnerships with level shoes, philosophy, Oh and Lane Crawford.
Speaker Change: In.
Speaker Change: In Southeast Asia, we continued to focus on expansion.
Speaker Change: We added three net new owned stores in the quarter grew our international joint venture.
Speaker Change: And seven franchise stores, bringing our total to 56 owned stores by year end and 47 international franchise stores.
Speaker Change: At Allen Edmonds, we had a strong fourth quarter.
Jay Schmidt: At Allen Edmonds, we had a strong fourth quarter. Excluding the impact of the 53rd week, the brand delivered growth on a comparable basis across all channels of the business. Performance was strongest in sport and in dress loafers, while boots saw a meaningful recovery. The recently launched Reserve Collection continues to perform well, creating a new level of luxury footwear in the brand and attracting new consumers. Allen Edmonds ended the quarter with 56 retail stores, including 12 in the elevated Port Washington Studio format.
Speaker Change: Excluding the impact of the 50 <unk> week, the brand delivered growth on a comparable basis across all channels of the business.
Speaker Change: Performance was strongest in sport and in dress slope versus well boots on meaningful recovery.
Speaker Change: The recently launched reserve collection continues to perform well, creating a new level of luxury footwear in the brand and attracting new consumers.
Speaker Change: Allen Edmonds ended the quarter with 56 retail stores.
Speaker Change: Including 12 in the elevated Port Washington studio format.
Speaker Change: Also we were excited to announce earlier this week that Nick Westar has joined the brand as a creative consultant.
Jay Schmidt: Also, we were excited to announce earlier this week that Nick Wuster has joined the brand as a creative consultant. Nick brings decades of experience in design and branding, having worked at Barneys New York, Neiman Marcus, Tom Brown, and many others. His expertise will be instrumental in evolving Allen Edmonds while staying true to its heritage. Naturalizer had a more challenged quarter with strength in sneakers offset by weakness in casual and dress shoes. while Dressed Boots continued to be strong, especially in wide shaft. Short boots remain weak. We are seeing good early selling in spring in sneakers, including the new Bedita sneaker with colorful suede uppers.
Speaker Change: Nick brings decades of experience in design and branding.
Speaker Change: <unk> worked at Barneys, New York, Neiman, Marcus Tom Brown, and many others.
Speaker Change: His expertise will be instrumental in evolving Allen Edmonds, while staying true to its heritage.
Speaker Change: Naturalize or had a more challenged quarter with strength in sneakers offset by weakness in casual and dress shoes.
Speaker Change: While dress boots continue to be strong, especially in wide shaft.
Speaker Change: <unk> remained weak.
Speaker Change: We are seeing good early selling in spring in sneakers, including the new <unk> sneaker with colorful swayed uppers and.
Jay Schmidt: and Casual Sandal. as well as improved e-commerce methods. In the coming months, we will announce new brand ambassadors and new collaborations that will move the brand forward.
Speaker Change: In casual sandals as.
Speaker Change: As well as improved e-commerce metrics.
Speaker Change: In the coming months, we will announce new brand ambassadors and new collaborations that will move the brand forward.
Speaker Change: Bionic delivered a strong quarter with sales driven by hybrid and casual sport styles, including the Uptown Loker and Winnie lace up sneaker.
Jay Schmidt: Bionic delivered a strong quarter with sales driven by hybrid and casual sports styles including the Uptown Loker and Winnie lace-up sneaker. Bionic continues to grow at Nordstrom, where the brand was prominently featured in the successful January Make Room for Shoes event. During the quarter, Bionic led with product innovation, launching the Walk Max sneaker and the 23 Walk Loafer, further expanding the brand's position in the walking category. We also launched BioLab during the quarter, a team of brand partners who will work with the Bionic team on research and development, product innovation, and advancing brand advocacy with podiatrists and the broader wellness community.
Speaker Change: Bionic continues to grow at Nordstrom, where the brand was prominently featured in the successful January Nate pursues event.
Speaker Change: During the quarter Bionic led with product innovation launching the walk Max Sneaker and the 23 walk loafer further expanding the brand's position in the walking category.
Speaker Change: We also launched bio lab during the quarter a team of brand partners, who will work with the bionic team on research and development.
Speaker Change: Product innovation, and advancing brand advocacy with Podiatrists and the broader wellness community.
Speaker Change: Beyond the performance of our lead brands, we saw tremendous results from Vincent Veronica Beard.
Jay Schmidt: Beyond the performance of our lead brands, we saw tremendous results from Dins and Veronica Beard. These two brands operate at the top of our current price architecture and each has a unique point of view in the marketplace. The performance we are seeing from these brands gives us confidence to further expand into the contemporary segment.
Speaker Change: These two brands operate at the top of our current price architecture and each has a unique point of view in the marketplace.
Speaker Change: The performance, we're seeing from these brands gives us confidence to further expand into the contemporary segment.
Speaker Change: To that end, we recently announced the launch of favorite daughter footwear under license for fall 2025.
Jay Schmidt: To that end, we recently announced the launch of Favorite Daughter Footwear under license for Fall 2025. Founders Erin and Sarah Foster bring a distinctive fashion perspective and have built a fresh new brand at the intersection of content and commerce.
Speaker Change: Founders, Erin and Sarah Foster, bringing a distinctive fashion perspectives and have built a fresh new brand at the intersection of content and commerce.
Speaker Change: As you were also aware, we announced our definitive agreement to acquire Stuart Weitzman from tapestry.
Jay Schmidt: As you are also aware, we announced our definitive agreement to acquire Stuart Weitzman from Tapestry. While we will not be able to share our detailed plans at this time, it is clear to us that this iconic brand fits extremely well into our company as our newest lead brand. The acquisition will give us more exposure to the contemporary segment, premium price points, direct-to-consumer, and international market.
Speaker Change: While we will not be able to share our detailed plans at this time. It is clear to us that this iconic brand fits extremely well into our company as our newest lead brand.
Speaker Change: The acquisition will give us more exposure to the contemporary segment.
Speaker Change: Premium price point direct to consumer and international markets.
Speaker Change: We look forward to providing more details once the transaction closes this summer.
Jay Schmidt: We look forward to providing more details once the transaction closes this summer.
Speaker Change: Turning now to famous footwear comp store sales were down two 9%.
Jay Schmidt: Turning now to Famous Footwear, comp store sales were down 2.9%. with the brick-and-mortar comp sales down 4.1% and comparable web sales up 3.1%. During the quarter, key holiday weeks performed well, but overall business was otherwise soft. Men's performed best, kids performed about in line with the overall comp trend, and women saw the biggest decline. Total Athletic declined most single digits. albeit with solid growth from Adidas and New Balance. and Total Fashion Decline Mid-High Single-Digit. As expected, the boot category saw high single-digit sales decline. And finally, sales of Caleres-owned brands increased 1.5 points in penetration in the quarter and were up year over year.
Speaker Change: With the brick and mortar comp sales down four 1% and comparable web sales up three 1%.
Speaker Change: During the quarter key holiday weeks performed well, but overall visits with otherwise soft.
Speaker Change: Mens performed best Kids performed about in line with the overall comp trend and women's saw the biggest decline.
Speaker Change: Total athletic declined low single digits.
Speaker Change: Albeit with solid growth from Adidas and new balance.
Speaker Change: And total fashion decline mid high single digits.
Speaker Change: As expected the boot category saw high single digit sales declines.
Speaker Change: And finally sales of Calera sound brands increased one five points and penetration in the quarter and were up year over year.
Speaker Change: On the inventory side famous effectively cleared through excess seasonal inventory and is positioned well with fresh product introductions in spring 2025.
Jay Schmidt: On the inventory side, FAME is effectively cleared through excess seasonal inventory and is positioned well with fresh product introductions in spring 2025. We finished the year with 34 Flair stores, and our newest generation of Flair stores outperformed the rest of brick-and-mortar stores by almost 10 points in the quarter. We will continue improving and expanding our Flair stores with plans to upgrade 25 more stores to the Flair format in 2025 and open one additional new Flair store. The Flair concept continues to be a powerful way for us to showcase strongly demanded brands and elevated styles. while also attracting new premium products and brands.
Speaker Change: We finished the year with 34 player stores and our newest generation of player stores outperformed the rest of brick and mortar stores by almost 10 points in the quarter.
Speaker Change: We will continue improving and expanding our player stores with plans to upgrade 25 more stores a flare format in 2025 and.
Speaker Change: And opened one additional new player store.
Speaker Change: The flare concept continues to be a powerful way for us to showcase strongly demanded brands and elevated styles.
Speaker Change: Well also attracting new premium products and brands.
Speaker Change: For back to school in 2025, we have secured several new strongly demanded brands and products at famous footwear.
Jay Schmidt: For Back to School in 2025, we have secured several new, strongly demanded brands and products at Famous Footwear.
Speaker Change: Well, we can't reveal the details yet these exceptional edition to the famous brand family will add some major heat bearing a vital season, while positioning us long term to better reach.
Jay Schmidt: While we can't reveal the details yet, these exceptional additions to the famous brand family will add some major heat during a vital season while positioning us long term to better reach our target customer segment.
Speaker Change: Target customer segments.
Speaker Change: We also recently announced that we bolstered our merchandising leadership and expertise hiring.
Jay Schmidt: We also recently announced that we bolstered our merchandising leadership and expertise.
Jay Schmidt: hiring industry veteran Brian Costello as Famous Footwear's Chief Merchandising Officer. Brian most recently led Nordstrom Racks, but we're an accessories business. His success on both the fashion and the athletic sides of the business in an open-cell retail environment makes him an ideal fit for FAMOUS, and we look forward to his impact on the business.
Speaker Change: Hiring industry veteran Brian Costello at famous footwear as Chief merchandising officer.
Speaker Change: Brian Most recently led Nordstrom racks, but we're an accessories business.
Speaker Change: Is success on both the fashion and the athletic sides of the business in an open sell retail environment makes him an ideal fit for famous and we look forward to his impact on the business.
Speaker Change: So Jack will walk through the guidance in more detail.
Jay Schmidt: So Jack will walk through the guidance in more detail. But as we move forward to 2025 and the current macroeconomic environment with persistent inflation and newer tariffs. We believe it is prudent to take a conservative view for the year. At both Famous Footwear and across the brand portfolio, we are seeing signs indicating continued headwinds with the value-based consumer. and challenges for the brands that service them. In addition, the latest feedback from key retail partners indicates that they will be more cautious with receipts and inventory in light of the current economic environment. After a difficult year in 2024, we are focused on improving sales trends and delivering on our guidance in 2025.
Speaker Change: But as we move forward to 2025, and the current macro economic environment with persistent inflation and newer tariffs.
Speaker Change: We believe it is prudent to take a conservative view for the year.
Speaker Change: At both famous footwear and across the brand portfolio, we are seeing signs, indicating continued headwinds with the value based consumer.
Speaker Change: And challenges for the brand that service them.
Speaker Change: In addition, the latest feedback from key retail partners indicates that they will be more cautious with receipts and inventory in light of the current economic environment.
Speaker Change: After a difficult year in 2024, we are focused on improving sales trends and delivering on our guidance in 2025.
Speaker Change: We will continue our strategic investment spending while staying disciplined on overall expense levels.
Jay Schmidt: We will continue our strategic investment spending while staying disciplined on overall expense levels. and we will remain nimble with product strategies and sourcing to maximize our wins and minimize the impact of tariffs. So despite this posture, I remain optimistic about what we have in store for 2025. Our lead brands remain strong and are collectively gaining market share. And we have expanded our customer reach with greater focus on the significant opportunity we see in contemporary at premium price point.
Speaker Change: And we will remain nimble with product strategies and sourcing to maximize our wins and minimize the impact of tariffs.
Speaker Change: So despite this posture I remain optimistic about what we have in store for 2025.
Speaker Change: Our lead brands remained strong.
Speaker Change: And are collectively gaining market share.
Speaker Change: And we have expanded our customer reach with greater focus on the significant opportunity we see in contemporary at premium price points.
Speaker Change: The hard work of our talented teams and the impact of new leadership across several areas of our business along with strategic brand partnerships.
Jay Schmidt: the hard work of our talented teams and the impact of new leadership across several areas of our business, along with strategic brand partnerships and the planned acquisition of Stuart White's position as well to drive significant value in 2025 and beyond.
Speaker Change: The planned acquisition of Stuart Weitzman position us well to drive significant value in 2025 and beyond.
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 Calandra: And with that, I will now hand it over to Jack for a more detailed view of our financial performance and our outlook. Thanks, Jay, and good morning, everyone. During today's call, I'll review both our fourth quarter and full year 2024 results and share our outlook for 2025, including how we factored recent tariff increases into our guidance. Please note my comments will be on an adjusted basis and comparisons to 2023 will include the impact of the 53rd week unless otherwise indicated. We've included a table in the release outlining the sales impact of the extra week for each segment and total company.
Speaker Change: Jack.
Jack Calandra: Thanks, Jay and good morning, everyone.
Jack Calandra: During today's call I'll review, both our fourth quarter and full year 2024 results and share our outlook for 2025, including how we factored recent tariff increases into our guidance.
Jack Calandra: Please note my comments will be on an adjusted basis and comparisons to 2023 will include the impact of the 50 <unk> week unless otherwise indicated.
Jack Calandra: We've included a table in the release outlining the sales impact of the extra week for each segment and total company.
Jack Calandra: Yes.
Jack Calandra: Turning to the results, fourth quarter consolidated sales were $639.2 million, down 8.3 percent. On a dollar basis, sales were down $57.9 million, which included an unfavorable $30.3 million impact related to the 53rd week and one less back-to-school week in the quarter. Brand Portfolio Sales were down 7.2%, Famous Sales were down 9.6% in total, and down 2.9% on a comparable basis. Full year consolidated sales were $2.72 billion, down 3.4% to last year and in line with our latest guidance. Fourth quarter consolidated gross margin was 43 percent, an 80 basis point decrease to last year, with declines of 40 basis points at Famo.us and 100 basis points at Brand Portfolio.
Jack Calandra: Turning to the results fourth quarter consolidated sales were $639 2 million down eight 3%.
Jack Calandra: On a dollar basis sales were down $57 9 million, which include included an unfavorable $33 million impact related to the 50, <unk> week and one less back to school week in the quarter.
Jack Calandra: Brand portfolio sales were down seven 2%.
Jack Calandra: <unk> sales were down nine 6% in total and down two 9% on a comparable basis.
Jack Calandra: Full year consolidated sales were $2 72 billion down three 4% to last year and in line with our latest guidance.
Jack Calandra: Fourth quarter consolidated gross margin was 43% an 80 basis point decrease to last year with.
Jack Calandra: With declines of 40 basis points of famous and 100 basis points at brand portfolio.
Jack Calandra: The decrease at famous was primarily due to an increase in bogo days and lower clearance margins.
Jack Calandra: The decrease at Famous was primarily due to an increase in BOGO days and lower clearance margins. Brand Portfolio's decrease was due to higher discounts and markdown allowances, as well as higher freight expense. Full year consolidated gross margin was 44.9%, up approximately 10 basis points to last year. This was driven by an 80 basis point increase in brand portfolio, offset by a 60 basis point decline at famous. SG&A for the fourth quarter was $261.7 million and 40.9% of sale. SG&A dollars declined $11.2 million versus last year as a result of the restructuring actions we took earlier in the year and lower variable expenses.
Jack Calandra: Brand portfolio decrease was due to higher discounts and markdown allowances as well as higher freight expense.
Jack Calandra: Full year consolidated gross margin was 44, 9%.
Jack Calandra: Approximately 10 basis points to last year.
Jack Calandra: This was driven by an 80 basis point increase in brand portfolio.
Jack Calandra: Set by a 60 basis point decline at famous.
Jack Calandra: SG&A for the fourth quarter was $261 7 million and 49% of sales.
Jack Calandra: SG&A dollars declined $11 2 million versus last year.
Jack Calandra: As a result of the restructuring actions, we took earlier in the year and lower variable expenses.
Jack Calandra: Total year SG&A was $1.07 billion and 39.1% of sales. restructuring savings and lower incentive compensation were offset by increased investment in IT and stores, as well as incremental marketing spending in the first half of the year. Fourth quarter operating earnings were $13.4 million and 2.1% of sale. Full year operating earnings were $157 million and 5.8% of sales, down 140 basis points due to expense deleverage on lower sales. Fourth quarter net interest expense was $3.9 million, down slightly to last year. The weighted average borrowing rate in Q4 was 5.7% compared to 7.2% last year. Full year net interest expense was $14 million, down $5.4 million to last year.
Jack Calandra: Full year, SG&A was 1.07 billion and 39, 1% of sales.
Jack Calandra: Restructuring savings and lower incentive compensation were offset by increased investment in it in stores as well as incremental marketing spending in the first half of the year.
Jack Calandra: Fourth quarter operating earnings were $13 4 million and two 1% of sales.
Jack Calandra: Full year operating earnings were $157 million and five 8% of sales down 140 basis points due to expense deleverage on lower sales.
Jack Calandra: Fourth quarter net interest expense was $3 9 million down slightly to last year.
Jack Calandra: The weighted average borrowing rate in Q4 was five 7% compared to seven 2% last year.
Jack Calandra: Full year net interest expense was $14 million down $5 4 million to last year.
Jack Calandra: The weighted average borrowing rate in 2024 was 6.2% versus 6.7% last year. Fourth quarter, earnings per diluted share were 33 cents. Full year earnings per diluted share were $3.30 at the high end of our latest guidance. EBITDA for the trailing 12 months was $216.6 million and 8% of sales. Inventory at year-end was $565 million, up 4.5% versus last year. Inventory was up 2% at Famo.us and up 7.4% at Grand Portfolio. At Brand Portfolio, the increase was due to higher levels of current fall inventory and higher in-transit for Allen Edmonds as we increase our externally sourced sneaker assortment.
Jack Calandra: The weighted average borrowing rate in 2024 was six 2% versus six 7% last year.
Jack Calandra: Fourth quarter earnings per diluted share with <unk> 33.
Jack Calandra: Full year earnings per diluted share were $3 30 at.
Jack Calandra: At the high end of our latest guidance.
Jack Calandra: EBITDA for the trailing 12 months was $216 6 million and 8% of sales.
Jack Calandra: Inventory at year end was $565 million up four 5% versus last year.
Jack Calandra: Inventory was up 2% as famous and up seven 4% at brand portfolio.
Jack Calandra: At brand portfolio. The increase was due to higher levels of current fall inventory and higher in transit for Allen Edmonds as we increase our externally sourced sneaker assortments.
Jack Calandra: Aged inventory and brand portfolio was down as a percent of total.
Jack Calandra: Aged inventory in brand portfolio was down as a percent of total. We ended the year with $219.5 million in borrowings and with a debt-to-trailing 12-month EBITDA ratio of one time.
Jack Calandra: We ended the year with $219 5 million in borrowings and with a debt to trailing 12 month EBITDA ratio of one times.
Jack Calandra: Regarding cash flow from operations, we generated $105 million and deployed cash for strategic investments in the business, paid our quarterly dividend, and repurchased 1.9 million shares.
Jack Calandra: Cash flow from operations, we generated $105 million and deploy cash for strategic investments in the business paid our quarterly dividend and repurchased one 9 million shares.
Jack Calandra: Now turning to our outlook.
Jack Calandra: Now turning to our out... Given the challenging start to the year and the anticipation of continued economic uncertainty due to inflation and tariffs, we are providing the following guidance for 2025.
Jack Calandra: Given the challenging start to the year and the anticipation of continued economic uncertainty due to inflation and tariffs we are providing the following guidance for 2025.
Jack Calandra: Please note that this guidance excludes any impact for the Stuart Weitzman acquisition, which we expect to close this summer. We will update our guidance for Stuart Weitzman after the acquisition closes. For 2025, we expect consolidated sales to be down 1% to up 1% with famous sales down low single digits and brand portfolio sales up 1% to 2%. Famous sales include the expected net closure of 10 stores. We expect consolidated operating margin of 5.1% to 5.6%. an effective tax rate of about 23%. Earnings per diluted share of $2.80 to $3.20. and capital expenditures of $50 million to $55 million.
Jack Calandra: Please note that this guidance excludes any impact for the Stuart Weitzman acquisition, which we expect to close this summer.
Jack Calandra: We will update our guidance for Stuart Weitzman after the acquisition closes.
Jack Calandra: For 2025, we expect consolidated sales to be down 1% to up 1% with famous sales down low single digits and brand portfolio sales up 1% to 2%.
Jack Calandra: Famous sales include the expected net closure of 10 stores.
Jack Calandra: We expect consolidated operating margin of five 1% to five 6%.
Jack Calandra: An effective tax rate of about 23%.
Jack Calandra: Earnings per diluted share of $2 80.
Jack Calandra: To $3 20.
Jack Calandra: And capital expenditures of 50 million to $55 million.
Jack Calandra: With regard to the two new tranches of tariffs.
Jack Calandra: With regard to the two new tranches of tariffs imposed on imports from China, based on discussions and decisions to date, we have assumed that equal shares of the tariff increases will be absorbed by our factory partners and by the company, the latter in the form of lower gross margins. and a smaller share will be passed on to the consumer through selective price increases.
Jack Calandra: Posed on imports from China based on discussions and decisions to date, we have assumed that equal shares of the tariff increases will be absorbed by our factory partners and by the company.
Jack Calandra: The ladder in the form of lower gross margins.
Jack Calandra: And a smaller share will be passed onto the consumer through selective price increases.
Jack Calandra: Our guidance does not assume any further increases in tariffs on imports from China or any new reciprocal tariffs on other countries from which we source product.
Jack Calandra: Our guidance does not assume any further increases in tariffs on imports from China or any new reciprocal tariffs on other countries from which we source products.
Jack Calandra: We are also providing the following guidance for Q1, we.
Jack Calandra: We are also providing the following guidance for Q1. We expect sales to be down 5% to 6%, which reflects the very challenging business we experienced in February. and earnings per diluted share of $0.35 to $0.40.
Jack Calandra: We expect sales to be down 5% to 6%, which reflects the very challenging business we experienced in February.
Jack Calandra: And earnings per diluted share of 35 to 40.
Jack Calandra: With that we can open the line for questions operator.
Operator: With that, we can open the line for questions. Operator? Thank If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question. You may press star 2 if you'd 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 2.
Jack Calandra: Okay.
Jack Calandra: Thank you.
Speaker Change: You'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question. Kim You May press star two if you'd 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 are.
Ashley Owens: Our first question comes from the line of Ashley Owens with KeyBank Capital Markets. Please proceed with your question.
Jack Calandra: Our first question comes from the line of Ashley Ellis with Keybanc capital markets. Please proceed with your question.
Ashley Ellis: Hey, good morning, Thanks for taking the question so I want to start by touching on the EPS guide a little bit I guess could you elaborate on some of the assumptions you're making within that guide for the balance of the year as we look to two Q3 Q4, Q3s each quarter last year also had some headwinds that were at the time considered one time so are those embedded.
Ashley Owens: Good morning. Thanks for taking the question. So, I want to start by touching on the EPS guide a little bit. I guess, could you elaborate on some of the assumptions you're making within that guide for the balance of the year as we look to 2Q, 3Q, and 4Q? I believe each quarter last year also had some headwinds that were at the time considered one time. So, are those embedded at all in your assumptions? And then additionally, how do you think about the path and timeline back to that $4 threshold from here without any of the store contributions being baked in?
Ashley Ellis: At all in your assumptions and then Additionally, how do you think about the path and timeline back to that that for dollar threshold from here without any of the start contributions being baked in is that something that can be achieved in the near term. Thanks.
Ashley Owens: Is that something that can be achieved in the near term?
Ashley Ellis: Yeah, Hi, Ashley it's Jack Thanks for your question. So just in terms of the assumption for the quarterly phasing for the year, we do expect sequential quarterly improvement throughout the year.
Jack Calandra: Yeah, hi, Ashley, it's Jack. Thanks for your question. So just in terms of the assumption for the quarterly phasing for the year, we do expect sequential quarterly improvement throughout the year. And let me just break that down into the two segments. So for Famo.us, we expect this improvement to come from new product introductions that Jay referenced in his comments, as well as the impact of new leadership. We also believe the very challenging February business was an outlier, and this is supported by the significant improvement we've seen in the March month-to-date results. And then for Brand Portfolio, we expect this improvement throughout the year to come from a couple of those things that you sort of alluded to in your comments.
Ashley Ellis: And let me just break that down into the two segments. So for famous we expect this improvement to come from new product introductions that Jay referenced in his comments as well as the impact of new leadership.
Ashley Ellis: We also believe the very challenging February business was an outlier and this is supported by the significant improvement we've seen in the March month to date results.
Ashley Ellis: And then for brand portfolio, we expect this improvement throughout the year that come from a couple of those things that you sort of alluded to in your comments one youll remember we will be anniversarying be SAP upgrade challenges, we had in Q2 last year to which we attributed a $15 million sales.
Jack Calandra: One, you'll remember we will be anniversarying the SAP upgrade challenges we had in Q2 last year, to which we attributed a $15 million sales impact. We have growth in international, which continues to ramp up as we go through the year. We have the launch of Favourite Daughter in the back half. We have the continued momentum in our contemporary brands, in particular Vince and Veronica Beard. And then we have wholesale door growth for Allen Edmonds. And so all of those items, those discrete items and initiatives, give us confidence in the sequential improvement that we've built into our guidance for the balance of the year.
Ashley Ellis: <unk>.
Ashley Ellis: We have growth in international which continues to ramp up as we go through the year.
Ashley Ellis: We have the launch of favorite daughter in the back half.
Ashley Ellis: We have the continued momentum in our contemporary brands in particular, Vince and Veronica Beard.
Ashley Ellis: And then we have wholesale door growth for Allen Edmonds and so all of those all of those items those discrete items and initiatives give us confidence in the sequential improvement that we've built into our guidance.
Ashley Ellis: For the for the balance of the year.
Ashley Owens: Okay, great.
Ashley Ellis: Okay great.
Ashley Owens: And then maybe just to dial down on contemporary a little bit because it sounds like it's been a bright spot for you. If you could just discuss the trends you're seeing within that and maybe why or your thoughts as to why it's been holding given it is a higher price point. There's a couple different things I think could be driving this, but do you think the consumer there isn't as at risk?
Speaker Change: And maybe just dial down on contemporary and a little bit because it sounds like it's been a bright spot for you. If you could just discuss the trends you're seeing within that and maybe why are your thoughts as to why it's been holding given it is a higher price point, there's a couple of different things I think could be driving this but do you think the consumer there isn't.
Speaker Change: Risk is there a shift down maybe from luxury tomorrow formidable, but still elevated footwear, Josh is connecting I'll come back at all if anything you could maybe comment on the shed some light as to the resilience there would be helpful.
Ashley Owens: Is there a shift down maybe from luxury to more affordable but still elevated footwear?
Ashley Owens: Dress shoes can making a comeback at all, but anything, you know, you could maybe comment on this shed some light as to the resilience there would be helpful.
Speaker Change: Hi, Ashley it's Jay and you did hit many of them. So I'm going to just reinforce those first off we do believe fully and we've seen some data from Soekarna supporting that says designer has gotten weaker.
Jay Schmidt: Hi, Ashley, it's Jay, and you did hit many of them, so I'm going to just reinforce those. First off, we do believe fully, and we've seen some data from Cercana supporting this, that as designer has gotten weaker, key contemporary brands are trending, and we happen to have, you know, two of them currently. So that is something that we believe is a consumer choice in how they're prioritizing their spend. In addition, we have seen a real movement, I think, more toward fashion, and it's really broad-based in those brands. Like, we are seeing seasonal work well. We have great items within the flat and casual moment.
Speaker Change: Key contemporary brands are trending and and we happened to have two of them. Currently so that is something that we believe.
Speaker Change: It's a consumer choice in how they are prioritizing their spend.
Speaker Change: In addition.
Speaker Change: We have.
Speaker Change: Seen a real movement I think more towards fashion, and it's really broad based and those brands like we are seeing seasonal work well.
Speaker Change: We have great items within the flat.
Speaker Change: Casual moment interestingly enough the fashion sneaker business in both of those brands has been outstanding and it's been running that way for a long time, so combination of our capabilities along with these great brands and working across several categories has been very very strong. So we're we're excited about it.
Jay Schmidt: Interestingly enough, the fashion sneaker business in both those brands has been outstanding, and it's been running that way for a long time. So combination of our capabilities, along with these great brands, and working across several categories has been very, very strong. So we're excited about it, and again, now we're seeing, you know, more scale coming through there, which gives us a lot of confidence. It also seems that with this desire toward newness being very, very important, certainly those contemporary brands lead in that way, and we're also seeing similar trend lines coming through in our Sam Edelman business and others.
Speaker Change: And again now we're seeing you know more scale coming through there, which gives us a lot of confidence.
Speaker Change: It also seems that with this desire toward newness being very very important certainly does contemporary brands lead in that way.
Speaker Change: A similar trend lines coming through in our Sam Edelman business and others. So there's a lot to work with here, but it does seem all pointing into one direction, which is great we plan to lean into it.
Ashley Owens: So there's a lot to work with here, but it does seem all pointing into one direction, which is great, and we plan to lean into it. Okay, great.
Speaker Change: Okay, great. Thanks, I'll pass it along.
Ashley Owens: Thanks.
Ashley Owens: I'll pass it along. Thank you.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question comes from the line of Laura Champine with loop capital markets. Please proceed with your question.
Laura Champine: Our next question comes from the line of Laura Champine with Flutes Capital Markets. Thanks for taking my question. It's a follow-up on the expectation that the brand portfolio improves throughout the year, and Jack, I think you mentioned lots of sort of small things. the International Growth, the Allen Edmonds, and so forth. Can you hit your full year guidance without seeing an improvement in trend in this sort of same doors business or same store sales equivalent in the brand portfolio?
Laura Champine: Thanks for taking my question, it's a follow up on the expectation that the brand portfolio improves throughout the year and Jack I think you mentioned lots of small things.
Laura Champine: The international growth, the Allen Edmonds and so forth.
Speaker Change: Can you hit your full year guidance without seeing an improvement in trend in the sort of same doors business or some same store sales equivalent and the brand portfolio group.
Yeah, Hi, Laura it's Jack Thanks for the question so.
Laura Champine: Yeah.
Jack Calandra: Hi, Laura. It's Jack. Thanks for the question. So, you know, as we've modeled this, you know, those initiatives we've talked about, I would say some of them are on the larger side. So, the two larger ones are, you know, obviously the SAP upgrade challenges we had last year was $15 million. You know, the international sales growth we expect is also of a similar type of magnitude. And then there are those other things. And so, when we look at these initiatives and what we think they will add, we can, if you will, accommodate a decline, if you will, in maybe the base business outside of those things and still hit our guidance.
Speaker Change: You know as we've as we've modeled this those initiatives we've talked about I would say some of them. Some of them are on the larger side. So the two larger ones are obviously the SAP upgrade challenges we had last year was $15 million.
Speaker Change: The international sales growth, we expect is also.
Speaker Change: A similar type of magnitude and then there are those other things and so when we look at.
Speaker Change: These initiatives.
Speaker Change: And what we think they will add we can we can if you will.
Speaker Change: Accommodate a decline if you will and maybe the base business outside of those things and still hit and still hit our guidance. So we do feel comfortable with the quarterly cadence.
Jack Calandra: So, we do feel comfortable with the quarterly cadence and the growth there. Got it.
Speaker Change: And the growth there.
Got it and then the Q1 I know you don't guide to gross margin, but it does seem like perhaps the EPS are being impacted by.
Laura Champine: And then the Q1, I know you don't guide the gross margin, but it does seem like perhaps the EPS are being impacted by not just the tariffs, but also markdowns. Can you comment on how you expect your markdowns to progress through the year from what seems like it's going to be pretty tough, based on Q1? Yeah, I think, Laura, it's Jay, I think we have, you know, some of that behind us as we come out of Q1. But for, as we mentioned in the commentary, our inventory and grant portfolio is more current than as a percentage to total and in famous with more core coming through.
Speaker Change: Not just the tariffs, but also markdowns can you comment on how you expect your markdowns to progress through the year from what seems like it's going to be pretty tough base in Q1.
Speaker Change: I think Laurence J, we think we have some of that behind us as we come out of Q1, but.
Speaker Change: For as you mentioned in the commentary our inventory in great portfolio was more current.
Speaker Change: Then as a percentage of total and in famous with more core coming through so we think.
Jay Schmidt: So we think the future is better. We did take a lot of pressure and then we feel like we're adequately reserved for those periods coming out of the fourth quarter. Yeah, and Laura, I would just add, so we have contemplated some, some, you know, gross margin decline in the business in Q1. And with that sales forecast or guidance of down five to six, obviously, there's also some some SG&AD leverage just on that lower sale.
Speaker Change: The future is better we did take a lot of pressure and then we feel like we're adequately reserved for those periods coming out of the fourth quarter.
Laura Champine: And Laura I would just add so we have contemplated some some.
Speaker Change: Gross margin decline.
Speaker Change: And in the business in Q1.
Speaker Change: And with that sales forecast or guidance of down five to six obviously there is also some some SG&A deleverage just on that lower sales.
Speaker Change: Got it thank you.
Laura Champine: Thank you.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question comes from the line of Mitch Cummins with Seaport Research. Please proceed with your question.
Mitch: Our next question comes from the line of Mitch... Yes, thanks for taking my questions. I guess I just have a few around the guide.
Mitch Cummins: Yes, thanks for taking my questions I guess I just have a few around the guide.
Speaker Change: Maybe starting with.
Mitch: starting with. Jack, you gave us the full year outlook kind of by operating group, famous versus BP in terms of the sales. Is there anything more you can say in terms of the split for 1Q? Um, no, Mitch, I guess what I would say is, um, you know, within the guidance of the down 5 to 6% in sales, um, you know, I think, um, Brand Portfolio will likely be a little bit on the better end of that range and Famous will likely be at the lower end of that range Again, we are anticipating Some gross margin pressure in both businesses in in the first quarter That's reflected in the in the guide as well as again some SG&AD leverage just on those lower sales Okay, and then also on the first quarter, like on the year you're giving us the op margin, the 5.1 to 5.6, unless I missed it, you haven't said anything about op margin in the first quarter, you're just giving us sales and earnings.
Mitch Cummins: Yes.
Speaker Change: Jack You gave you gave us the full year outlook by operating group famous versus PPD in terms of the in terms of the sales is there anything more you can say.
In terms of the split for <unk>.
Speaker Change: Okay.
Speaker Change: No Mitch I guess, what I would say is.
Speaker Change: Within the guidance of down.
Speaker Change: Down 5% to 6% in sales.
Speaker Change: I think.
Speaker Change: Our brand portfolio will likely be a little bit on the better end of that range and famous will likely be at the lower end of that range.
Speaker Change: We are anticipating some gross margin pressure in both businesses in in the first quarter. That's reflected in the in the guide as well as again, some SG&A deleverage just on those lower sales.
Speaker Change: Okay.
Speaker Change: Then also on the first quarter.
Speaker Change: The year Youre, giving us the op margin of five 1% to five six.
Speaker Change: Unless I missed it you haven't said anything about op margin in the first quarter. You are just giving our sales and earnings is there anything you can say on the on the op margin for the first quarter.
Jack Calandra: Is there anything you can say on the op margin for the first quarter? Yeah, we generally when we give when we give quarterly guidance, which we usually don't comment on op margin, we usually just give the sales and EPS. But certainly, you know, the op margin in in Q1 will be the lowest of the year. And again, we will be building back as we go through the year, based on those other initiatives and things that we are lapping from last year that will provide benefits. And then on the earnings guide for both the year and the full year, in the press release, it's characterized as GAAP EPS.
Speaker Change: Yeah, we generally when we give when we give quarterly guidance, which we usually don't comment on op margin. We used to just give the sales and EPS, but certainly the op margin.
Speaker Change: Margin in in Q1 will be the lowest of the year and again, we will be building back as we go through the year based on those other.
Speaker Change: Initiatives and things that we are lapping from last year that will provide benefit.
Speaker Change: And then on the earnings guide for both the year and the full year and the press release, it's characterized as GAAP EPS I don't recall, if that's how you've done it in the past but is there.
Jack Calandra: I don't recall if that's how you've done it in the past, but is there, should pro forma basically be the same? Is there anything happening in those numbers that would make your pro forma earnings different than your GAAP earnings? No, the the the guidance that we've given at this point, because we don't have any, any adjusting items that we are that we know about. So the gap guide and the adjusted guide are basically the same.
Speaker Change: Pro forma basically be the same is there anything happening in those numbers that would.
Speaker Change: Would make your pro forma former earnings different than your GAAP earnings.
Speaker Change: No the guidance that we've given at this point because we don't have any.
Speaker Change: Any adjusting items that we are that we know about so.
Speaker Change: The GAAP guide and the adjusted guide are basically the same.
Speaker Change: Okay, and then maybe one last one just on the tariffs.
Mitch: Okay, and then maybe one last one just on the tariff. because you said, and this was I think in the presentation, that you're passing some of this to the consumer, but then you're also absorbing some of it yourself in terms of gross margin. Is there any way... And I just want to ask if you could maybe kind of parse that out a little bit. I mean, are you thinking about sort of low single-digit price increases? And can you say kind of what sort of hit you expect to take on gross margin? Is it, you know, 10, 20, 30 basis points?
Speaker Change: Because you've said.
Speaker Change: <unk>.
Speaker Change: The presentation that you are passing some of those to the consumer but then youre also absorbing some of it yourself in terms of gross margin is there any way.
Speaker Change: Can you maybe kind of parse that out a little bit I mean are you.
Speaker Change: Thank you about sort of low single digit price increases and you can you say kind of what sort of you expect to take on gross margin is.
Speaker Change: 10, 2030 basis points.
Jay Schmidt: Well, a couple of things. We think that the... Mitch, it's Jay. The retail price increases will be, as you suggested, on the lower side, and they are select by certain opening price brands that remain in China. Remember, this is, you know, 25%, we feel, or less of our total as we look at that. So, Jack will give you some of the, I think, the backup for that. But we do, you know, we, on the first round of tariffs, we felt like we accomplished most of the coverage on it. And then on the second round, a little more difficult.
Speaker Change: Well couple of things, we think that the.
Mitch Cummins: Mitch its shay the retail.
Mitch Cummins: Price increases will be as you suggested on the lower side and.
Mitch Cummins: And they are select.
Mitch Cummins: Certain opening price brands that remain in China.
Mitch Cummins: Remember this is.
Mitch Cummins: 25%, we feel or less of our total.
Mitch Cummins: We'd look at that so.
Mitch Cummins: Jack will give you some of the state.
Mitch Cummins: Okay.
Mitch Cummins: Back up for that but we do.
Mitch Cummins: On the first round of tariffs, we felt like we accomplished most of the coverage on it and then on the second round a little more difficult and we wanted to make sure that we don't pricing so far out that they don't that we don't get it.
Jack Calandra: And we want to make sure that we don't price things so far out that they don't, that we don't get it, you know, it's unattainable for the consumer. Yeah, and Mitch, on the gross margin impact to brand portfolio on the year, the strategy that we put forth would call for about 30 to 40 basis points of gross margin hit from absorbing that share of the tariffs at the company.
Mitch Cummins: Ciena both for the consumer.
Mitch Cummins: Yes, and Mitch on the gross margin impact to brand portfolio on the year.
Mitch Cummins: Our strategy that we've put forth would call for about 30 to 40 basis points of gross margin hit from absorbing that share of the tariffs at the company.
Mitch Cummins: Alright, Thanks, again and good luck.
Mitch: All right, thanks again and good luck. Thank you.
Mitch Cummins: Okay.
Speaker Change: Thank you. Our next question comes from the line of Dana Telsey with Telsey Advisor Group. Please proceed with your question.
Dana Telsey: Our next question comes from the line of Dana Telsey with Telsey Advisory. Hi, good morning, everyone.
Dana Telsey: Hi, Good morning, everyone. Just following up on the gross margins as you look at the other levers in gross margin like freight or discount how are you planning for those as we go.
Dana Telsey: Just following up on the gross margins, as you look at the other levers in gross margins like rate or discount, how are you planning for those as we go through the year and what you're seeing? And then, Jay, you mentioned the weakness in Stan Edelman with booties.
Speaker Change: Go through the year and what you're seeing.
Speaker Change: And then Jay you mentioned the weakness in Sam Edelman with booties.
Dana Telsey: What are you seeing from the brands overall in terms of category performance go forward and how are you planning?
Speaker Change: What are you seeing from the <unk>.
Overall in terms of category performance go forward and how <unk>. How are you planning and then just lastly on the wholesaler to think wholesale accounts, how order trends going and then in your remodeled stores with famous footwear is there any performance differential versus the base and how many remodels will you do this year. Thank you.
Jay Schmidt: And then, just lastly, on the wholesale account, two things, wholesale accounts, how are order trends going, and then in your remodeled stores with famous footwear, is there any performance differential versus the base and how many remodels will you do this year? Thank you. Okay. So, um... I think starting off, just to reference the Sam Edelman piece, is that they had a lot of bestsellers, but we did record a booty relating to the volume decrease for fourth quarter. How do I feel about that? I actually feel very good about it. I think that what we saw in the Sam Edelman brand is that they leaned strongly into fashion, and that's where Sam and his team are all focused on in terms of driving that newness.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: So.
Speaker Change: I think starting off just referenced the Sam Edelman pieces that they had a lot of.
Speaker Change: Best sellers, but we did record a beauty, we're just relating to the volume decrease for fourth quarter.
Speaker Change: How do I feel about that actually feel very good about it I think that what we saw on the Sam Edelman brand is that they lean strongly into fashion and Thats, where Sam and his team are all focused on in terms of driving that newness.
Jay Schmidt: So it was just really that moment that I would say we had there. And then in some cases, we did sell through some of the tall boots so strongly in Sam that we were out of them in fourth quarter. So those things are really there. But I do feel like that's actually coming back to us. Again, more fashion, more newness, and less of what I would say are core. And that really responds to the whole company and their food assortment to them. And then, yeah.
Speaker Change: So with just really.
You know that moment that I would say we had there and then in some cases, we did sell through some of the tall boots, so strongly and Sam that we were.
Speaker Change: Out of them in fourth quarter. So those things are really there, but I do feel like that's actually coming back to us again more fashion more newness and less of what I would say, our core and that really responds to the company and their <unk>.
Speaker Change: The assortment to them.
Speaker Change: Okay, and then yes.
Dan: Dan in terms of in terms of gross margins. So I'll just go back to it.
Jack Calandra: Dana, in terms of gross margin, so let's go back to, you know, in terms of the operating margin guidance that we gave, you know, we are expecting the operating margin, obviously, with the guidance we gave, to be down a bit from where we finished 2024. Some of that is in gross margin and coming through the pressure on the tariffs and brand portfolio. And then the remainder is, you know, the SG&A pressure, depending on where in that sales range, you know, that we fall. I would say in terms of the levers to hopefully offset some of that is in famous, we continue to sort of utilize an AI pricing tool on promotions, which we launched last year, saw some, I think, some good results on, and that's now more fully burning in.
In terms of the operating margin guidance that we gave.
Dan: We are expecting the operating margin obviously with the guidance, we gave to be down a bit from where we finished 2012.
Dan: Some of that is in gross margin and coming through the pressure on the tariffs and brand portfolio and then the remainder is the SG&A pressure.
Dan: Depending on where in that sales range.
Dan: That we fall I would say in terms of the levers too so hopefully offset some of that is in famous we continue to see.
Dan: Sort of utilize an AI a pricing tool on promotions, which we launched last year saw some I think some good results on and that's now more fully burning in and then just in terms of.
Jack Calandra: And then just in terms of, you know, the mix of the business in brand portfolio, you know, direct-to-consumer is obviously margin accretive versus the wholesale business. So as that grows faster, we get some mixed benefit. There's some benefit from international. And then some of our, those contemporary brands that we talked about, Binz and Veronica Beard, were able to get some really nice gross margins on as well. So those are some of the offsets, if you will.
Dan: The mix of the business and brand portfolio.
Dan: Direct to consumer is obviously margin accretive versus the wholesale business. So as that grows faster we get some some mixed benefit there was some benefit from international.
Dan: And then some of our contemporary brands that we talked about Vince and Veronica Beard, we're able to get some really nice gross margins on as well. So those are some of the offsets if you will.
Speaker Change: Okay, and then to just pick up on your players to our comment Dana.
Jay Schmidt: And then to just pick up on your Flare store comment, Dana, we did finish with 34. We plan to upgrade 25 more to the format and open one additional new store. So that'll take the total to 60, which we think is, you know, a continually solid number. And again, we're seeing really strong performance, even in difficult selling periods, as we really refine and improve that performance. And we think there's opportunity to even that better as we continue to work with the merchandising assortments in there with the new team that's rallying around that.
Dana Telsey: We did finished with 34, we plan to upgrade 25 more to the format and opened one additional new stores that'll take the total to 60, which we think is.
Dana Telsey: Solid number and again, we're seeing really strong performance given the difficult selling periods as we really refine and improve that performance and we think theres opportunity to even.
Dana Telsey: Better as we continue to work with.
Dana Telsey: The merchandising assortments in there with the new team that settled.
Dana Telsey: Ralph.
Dana Telsey: Going around that.
Dana Telsey: Thank you.
Dana Telsey: Thank you.
Speaker Change: Thank you, ladies and gentlemen that concludes our question and answer session for final comments I will turn the floor back to Joe Smith.
Operator: Ladies and gentlemen, that concludes our question and answer session.
Jay Schmidt: For final comments, I'll turn the floor back to Jay. Okay, thank you everyone.
Speaker Change: Okay. Thank you everyone before we close today I wouldn't wouldn't be right without thanking the entire claris team for their focus and dedication our team worked extremely hard during this 2024 that we had well really spending a lot of time laying the groundwork for a stronger 2025.
Operator: Before we close today, I wouldn't be right without thanking the entire Caleres team for their focus and dedication. Our team worked extremely hard during this 2024 that we had, while really spending a lot of time laying the groundwork for a stronger 2025. And I look forward to updating you on our progress along the way. Thank you all of us for joining us this morning, and thank you for your continued interest in Caleres. Have a good day. Thank you.
And I look forward to updating you on our progress along the way. Thank you all of us for joining US. This morning, and thank you for your continued interest in <unk> have a good day.
Speaker Change: Yeah.
Speaker Change: Thank you. This concludes today's conference call you may disconnect. Your lines at this time. Thank you for your participation.
Operator: This concludes today's conference call. You may disconnect your lines at this time. Thank you for your...