Adjusted earnings per share improves 22% year-over-year

Company reiterates full-year guidance

ST. LOUIS--(BUSINESS WIRE)-- Caleres (NYSE: CAL) (caleres.com) today reported second quarter 2015 financial results, with net sales of $637.8 million versus second quarter 2014 net sales of $635.9 million. Second quarter 2015 net earnings were $16.8 million, or $0.38 per diluted share, and included $5.3 million of after-tax expense related to the company’s debt extinguishment. Excluding this expense, net earnings were $22.1 million, or $0.50 per diluted share, up 22.4% versus second quarter 2014 net earnings of $18.1 million, or $0.41 per diluted share. Gross margin was 41.2%, up approximately 40 basis points year-over-year, while operating margin was 5.6%.

“Today we reported a solid quarter, as expected, with improved sales, margins and adjusted earnings,” said Diane Sullivan, CEO, president and chairman of Caleres. “Total sales were up 2%, excluding Shoes.com, while gross and operating margin both expanded in the quarter. We also improved bottom-line performance by 22%, thanks to continued progress toward our long-term strategic initiatives.”

	US$M, except per share (unaudited)					2Q’15							2Q’14							2Q Chg						1H’15							1H’14							1H Chg
	Consolidated net sales					$	637.8						$	635.9						0.3	%					$	1,240.1						$	1,227.0						1.1	%
	Famous Footwear						395.9							404.1						(2.0	%)						755.9							770.8						(1.9	%)
	Brand Portfolio						242.0							231.8						4.4	%						484.2							456.2						6.1	%
	Gross profit						262.8							259.6						1.2	%						511.3							502.0						1.9	%
	Margin						41.2	%						40.8	%					40 bps							41.2	%						40.9	%					30 bps
	SG&A						227.1							228.3						(0.6	%)						445.2							442.0						0.7	%
	% of net sales						35.6	%						35.9	%					-30 bps							35.9	%						36.0	%					-10 bps
	Operating earnings						35.7							31.3						14.2	%						66.1							60.0						10.1	%
	Margin						5.6	%						4.9	%					70 bps							5.3	%						4.9	%					40 bps
	Net interest expense						4.1							5.0						(18.1	%)						8.3							10.2						(19.3	%)
	Earnings before income taxes						22.9							26.3						(12.7	%)						49.1							49.8						(1.3	%)
	Tax rate						26.5	%						31.4	%					-490 bps							26.2	%						32.7	%					-650 bps
	Net earnings					$	16.8						$	18.1						(6.9	%)					$	36.1						$	33.5						7.7	%
	Per diluted share					$	0.38						$	0.41						(7.3	%)					$	0.82						$	0.76						7.9	%
	Adjusted net earnings					$	22.1						$	18.1						22.4	%					$	41.4						$	33.5						23.5	%
	Per diluted share					$	0.50						$	0.41						22.0	%					$	0.94						$	0.76						23.7	%

Second Quarter Highlights

Famous Footwear second quarter 2015 sales of $395.9 million were up 0.6% year-over-year, excluding Shoes.com, which was sold in December of 2014. For the quarter, same-store-sales were up 0.1%, with strong growth in canvas outweighing weakness in performance athletic product and sandals. During the quarter, 10 new stores were opened and six stores were closed.

Brand Portfolio sales of $242.0 million were up 4.4% in the second quarter, with performance in the quarter driven by a 14.1% improvement in Contemporary Fashion. Healthy Living sales were down 1.5%, as increases in wholesale sales were unable to offset weakness on the retail side, where the company operated nine fewer stores year-over-year.

Consolidated gross profit of $262.8 million was up 1.2% in the second quarter, while gross margin of 41.2% was up approximately 40 basis points year-over-year. SG&A for the second quarter was $227.1 million, representing 35.6% of net sales – down approximately 30 basis points versus the prior year. For the quarter, operating margins improved approximately 70 basis points year-over-year to 5.6%.

Inventory at the end of the second quarter was $641.1 million, down 2.5% from $657.7 million in the prior year. Famous Footwear inventory was down 0.7% on a per store basis, while Brand Portfolio inventory was down 3.4%. At quarter-end, Caleres had no borrowings against its revolving credit facility and had $129.3 million of cash and equivalents.

Financial Review and 2015 Outlook

“In the second quarter, we made steady progress toward achieving our full year earnings guidance, as we continued to drive margin expansion and further strengthened our balance sheet,” said Ken Hannah, chief financial officer of Caleres. “This progress has enabled us to accelerate investment in our long-term strategic growth initiatives.”

Guidance Metric

FY’15

Consolidated net sales

$2.61 to $2.63 billion

Famous Footwear same-store sales

Up low-single digits

Famous Footwear reported sales

Flat, due to sale of Shoes.com

Brand Portfolio sales

Up mid-single digits

Gross margin

Up approximately 15 bps

SG&A

Less than or equal to 35.4% of sales

Net interest expense

~$18 million

Effective tax rate

30% to 33%

Adjusted earnings per diluted share

$1.84 to $1.94

Depreciation and amortization

~$53 million

Capital expenditures

~$75 million

Quarterly Dividend

The company also declared a quarterly dividend of $0.07 per share, payable October 1, 2015, to shareholders of record as of September 17, 2015. This dividend will be the 371st consecutive quarterly dividend paid by the company.

Investor Conference Call: Caleres will host an investor conference call at 5 p.m. ET today, August 27, 2015. The webcast and slides will be available at investor.caleres.com/news/events. A live conference call will be available at (877) 217-9089 for analysts in North America or (706) 679-1723 for international analysts by using the conference ID 5950620. A replay will be available at investor.caleres.com/news/events/archive for a limited period. Investors may also access the replay by dialing (855) 859-2056 in North America or (404) 537-3406 internationally and using the conference ID 5950620 through September 10, 2015.

Definitions: All references in this press release, outside of the condensed consolidated financial statements that follow, unless otherwise noted, related to net earnings attributable to Caleres, Inc. and diluted earnings per common share attributable to Caleres, Inc. shareholders, are presented as net earnings and earnings per diluted share, respectively.

Non-GAAP Financial Measures: In this press release, the company’s financial results are provided both in accordance with generally accepted accounting principles (GAAP) and using certain non-GAAP financial measures. In particular, the company provides historic and estimated future gross profit, operating earnings, net earnings and earnings per diluted share adjusted to exclude certain gains, charges and recoveries, which are non-GAAP financial measures. These results are included as a complement to results provided in accordance with GAAP because management believes these non-GAAP financial measures help identify underlying trends in the company’s business and provide useful information to both management and investors by excluding certain items that may not be indicative of the company’s core operating results. These measures should not be considered a substitute for or superior to GAAP results. Reconciliations to the applicable GAAP financial measures have been included in the attached schedules.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: This press release contains certain forward-looking statements and expectations regarding the company’s future performance and the performance of its brands. Such statements are subject to various risks and uncertainties that could cause actual results to differ materially. These risks include (i) changing consumer demands, which may be influenced by consumers’ disposable income, which in turn can be influenced by general economic conditions; (ii) rapidly changing fashion trends and purchasing patterns; (iii) intense competition within the footwear industry; (iv) political and economic conditions or other threats to the continued and uninterrupted flow of inventory from China and other countries, where the Company relies heavily on third-party manufacturing facilities for a significant amount of its inventory; (v) the ability to accurately forecast sales and manage inventory levels; (vi) cybersecurity threats or other major disruption to the Company’s information technology systems; (vii) customer concentration and increased consolidation in the retail industry; (viii) a disruption in the Company’s distribution centers; (ix) the ability to recruit and retain senior management and other key associates; (x) foreign currency fluctuations; (xi) compliance with applicable laws and standards with respect to labor, trade and product safety issues; (xii) the ability to secure/exit leases on favorable terms; (xiii) the ability to attract, retain, and maintain good relationships with licensors and protect intellectual property rights; and (xiv) the ability to maintain relationships with current suppliers. The company’s reports to the Securities and Exchange Commission contain detailed information relating to such factors, including, without limitation, the information under the caption Risk Factors in Item 1A of the company’s Annual Report on Form 10-K for the year ended January 31, 2015, which information is incorporated by reference herein and updated by the company’s Quarterly Reports on Form 10-Q. The company does not undertake any obligation or plan to update these forward-looking statements, even though its situation may change.

About Caleres: Caleres is a diverse portfolio of global brands, which fit people’s lives: Family, Healthy Living and Contemporary Fashion. Our products are available virtually everywhere - in the over 1,200 retail stores we operate, in hundreds of major department and specialty stores, on our branded ecommerce sites, and on many additional third-party retail websites. Famous Footwear and Famous.com serve as our Family brands. Our Contemporary Fashion brands include Sam Edelman, Franco Sarto, Vince, Via Spiga, Diane von Furstenberg, Fergie Footwear and Carlos Santana. Naturalizer, Dr. Scholl’s, LifeStride, Bzees and Ryka represent our Healthy Living brands. Combined, these brands help make Caleres a company with both a legacy and a mission. Our legacy is our more than 130 years of craftsmanship, our passion for fit and our business savvy, while our mission is to continue to inspire people to feel better feet first. Visit caleres.com to learn more about us.

	SCHEDULE 1
	CALERES, INC.
	CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
					(Unaudited)										(Unaudited)
					Thirteen Weeks Ended										Twenty-six Weeks Ended
	(Thousands, except per share data)				August 1, 2015					August 2, 2014					August 1, 2015					August 2, 2014
	Net sales				$	637,834				$	635,877				$	1,240,117				$	1,227,039
	Cost of goods sold				375,039					376,235					728,796					725,056
	Gross profit				262,795					259,642					511,321					501,983
	Selling and administrative expenses				227,061					228,340					445,251					441,955
	Operating earnings				35,734					31,302					66,070					60,028
	Interest expense				(4,345		)			(5,125		)			(8,808		)			(10,431		)
	Loss on early extinguishment of debt				(8,690		)			—					(8,690		)			—
	Interest income				238					109					542					185
	Earnings before income taxes				22,937					26,286					49,114					49,782
	Income tax provision				(6,074		)			(8,247		)			(12,860		)			(16,267		)
	Net earnings				16,863					18,039					36,254					33,515
	Net earnings (loss) attributable to noncontrolling interests				38					(25		)			168					22
	Net earnings attributable to Caleres, Inc.				$	16,825				$	18,064				$	36,086				$	33,493
	Basic earnings per common share attributable to Caleres, Inc. shareholders				$	0.38				$	0.41				$	0.82				$	0.77
	Diluted earnings per common share attributable to Caleres, Inc. shareholders				$	0.38				$	0.41				$	0.82				$	0.76
	Basic number of shares				$	42,325				$	42,074				$	42,319				$	41,980
	Diluted number of shares				$	42,448				$	42,276				$	42,455				$	42,198

	SCHEDULE 2
	CALERES, INC.
	CONDENSED CONSOLIDATED BALANCE SHEETS
					(Unaudited)
					August 1, 2015				August 2, 2014					January 31, 2015
	(Thousands)
	ASSETS
	Cash and cash equivalents				$	129,345			$	46,876				$	67,403
	Restricted cash					41,482				—					—
	Receivables, net					144,213				125,484					136,646
	Inventories, net					641,128				657,656					543,103
	Prepaid expenses and other current assets					41,002				39,167					43,744
	Total current assets					997,170				869,183					790,896
	Property and equipment, net					150,839				148,358					149,743
	Goodwill and intangible assets, net					132,737				136,762					134,587
	Other assets					146,727				134,779					141,586
	Total assets				$	1,427,473			$	1,289,082				$	1,216,812
	LIABILITIES AND EQUITY
	Current portion of long-term debt				$	39,157			$	—				$	—
	Trade accounts payable					382,626				341,694					215,921
	Other accrued expenses					156,106				159,152					181,162
	Total current liabilities					577,889				500,846					397,083
	Long-term debt					200,000				199,104					199,197
	Deferred rent					40,981				36,560					39,742
	Other liabilities					39,375				43,320					39,168
	Total other liabilities					280,356				278,984					278,107
	Total Caleres, Inc. shareholders’ equity					568,345				508,582					540,910
	Noncontrolling interests					883				670					712
	Total equity					569,228				509,252					541,622
	Total liabilities and equity				$	1,427,473			$	1,289,082				$	1,216,812

	SCHEDULE 3
	CALERES, INC.
	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
					(Unaudited)
					Twenty-six Weeks Ended
	(Thousands)				August 1, 2015					August 2, 2014
	OPERATING ACTIVITIES:
	Net cash provided by operating activities				$	101,255				$	66,491
	INVESTING ACTIVITIES:
	Capital expenditures					(27,570	)				(26,225	)
	Disposals of property and equipment					7,111					—
	Acquisition of trademarks					—					(65,065	)
	Net cash used for investing activities					(20,459	)				(91,290	)
	FINANCING ACTIVITIES:
	Borrowings under revolving credit agreement					86,000					456,000
	Repayments under revolving credit agreement					(86,000	)				(463,000	)
	Proceeds from issuance of 2023 senior notes					200,000					—
	Redemption of 2019 senior notes					(160,700	)				—
	Restricted cash					(41,482	)				—
	Debt issuance costs					(3,650	)				—
	Dividends paid					(6,135	)				(6,110	)
	Acquisition of treasury stock					(4,921	)				—
	Issuance of common stock under share-based plans, net					(4,428	)				(523	)
	Tax benefit related to share-based plans					2,838					2,097
	Net cash used for financing activities					(18,478	)				(11,536	)
	Effect of exchange rate changes on cash and cash equivalents					(376	)				665
	Increase (decrease) in cash and cash equivalents					61,942					(35,670	)
	Cash and cash equivalents at beginning of period					67,403					82,546
	Cash and cash equivalents at end of period				$	129,345				$	46,876

	SCHEDULE 4
	CALERES, INC.
	RECONCILIATION OF NET EARNINGS AND DILUTED EARNINGS PER SHARE (GAAP BASIS) TO ADJUSTED NET EARNINGS AND ADJUSTED DILUTED EARNINGS PER SHARE (NON-GAAP BASIS)
					(Unaudited)														(Unaudited)
					Thirteen Weeks Ended August 1, 2015														Thirteen Weeks Ended August 2, 2014
	(Thousands, except per share data)				Pre-Tax ImpactofCharges/OtherItems					Net EarningsAttributable toCaleres, Inc.				DilutedEarnings PerShare					Pre-Tax ImpactofCharges/OtherItems					Net EarningsAttributable toCaleres, Inc.				Diluted EarningsPer Share
	GAAP earnings									$	16,825			$	0.38									$	18,064			$	0.41
	Charges/Other Items
	Loss on early extinguishment of debt				$	8,690					5,281				0.12					—					—				—
	Total charges/other items				$	8,690				$	5,281			$	0.12				$	—				$	—			$	—
	Adjusted earnings									$	22,106			$	0.50									$	18,064			$	0.41
					(Unaudited)														(Unaudited)
					Twenty-six Weeks Ended August 1, 2015														Twenty-six Weeks Ended August 2, 2014
	(Thousands, except per share data)				Pre-Tax ImpactofCharges/OtherItems					Net EarningsAttributable toCaleres, Inc.				DilutedEarnings PerShare					Pre-Tax ImpactofCharges/OtherItems					Net EarningsAttributable toCaleres, Inc.				Diluted EarningsPer Share
	GAAP earnings									$	36,086			$	0.82									$	33,493			$	0.76
	Charges/Other Items
	Loss on early extinguishment of debt				$	8,690					5,281				0.12				$	—					—				—
	Total charges/other items				$	8,690					5,281				0.12				$	—					—				—
	Adjusted earnings									$	41,367			$	0.94									$	33,493			$	0.76

	SCHEDULE 5
	CALERES, INC.
	SUMMARY FINANCIAL RESULTS BY SEGMENT
	(Unaudited)
SUMMARY FINANCIAL RESULTS
					Thirteen Weeks Ended
					Famous Footwear										Brand Portfolio										Other										Consolidated
	(Thousands)				August 1,2015					August 2,2014					August 1,2015					August 2,2014					August 1,2015					August 2,2014					August 1,2015					August 2,2014
	Net sales				$	395,873				$	404,069				$	241,961				$	231,808				$	—				$	—				$	637,834				$	635,877
	Gross profit				$	179,510				$	180,974				$	83,285				$	78,668				$	—				$	—				$	262,795				$	259,642
	Gross profit rate					45.3	%				44.8	%				34.4	%				33.9	%				—	%				—	%				41.2	%				40.8	%
	Operating earnings (loss)				$	27,672				$	25,524				$	16,005				$	17,497				$	(7,943	)			$	(11,719	)			$	35,734				$	31,302
	Operating earnings %					7.0	%				6.3	%				6.6	%				7.5	%				—	%				—	%				5.6	%				4.9	%
	Same-store sales % (on a 13-week basis)					0.1	%				1.6	%				(5.2	)%				2.3	%				—	%				—	%				—	%				—	%
	Number of stores					1,044					1,035					163					170					—					—					1,207					1,205
					Twenty-six Weeks Ended
					Famous Footwear										Brand Portfolio										Other										Consolidated
	(Thousands)				August 1,2015					August 2,2014					August 1,2015					August 2,2014					August 1,2015					August 2,2014					August 1,2015					August 2,2014
	Net sales				$	755,893				$	770,795				$	484,224				$	456,244				$	—				$	—				$	1,240,117				$	1,227,039
	Gross profit				$	347,724				$	346,336				$	163,597				$	155,647				$	—				$	—				$	511,321				$	501,983
	Gross profit rate					46.0	%				44.9	%				33.8	%				34.1	%				—	%				—	%				41.2	%				40.9	%
	Operating earnings (loss)				$	55,632				$	52,254				$	27,065				$	28,700				$	(16,627	)			$	(20,926	)			$	66,070				$	60,028
	Operating earnings %					7.4	%				6.8	%				5.6	%				6.3	%				—	%				—	%				5.3	%				4.9	%
	Same-store sales % (on a 26-week basis)					1.5	%				1.5	%				(3.9	)%				(1.5	)%				—	%				—	%				—	%				—	%
	Number of stores					1,044					1,035					163					170					—					—					1,207					1,205

	SCHEDULE 6
	CALERES, INC.
	BASIC AND DILUTED EARNINGS PER SHARE RECONCILIATION
					(Unaudited)										(Unaudited)
					Thirteen Weeks Ended										Twenty-six Weeks Ended
	(Thousands, except per share data)				August 1,2015					August 2,2014					August 1,2015					August 2,2014
	Net earnings attributable to Caleres, Inc.:
	Net earnings				$	16,863				$	18,039				$	36,254				$	33,515
	Net (earnings) loss attributable to noncontrolling interests					(38	)				25					(168	)				(22	)
	Net earnings allocated to participating securities					(544	)				(669	)				(1,195	)				(1,262	)
	Net earnings attributable to Caleres, Inc. after allocation of earnings to participating securities				$	16,281				$	17,395				$	34,891				$	32,231
	Basic and diluted common shares attributable to Caleres, Inc.:
	Basic common shares					42,325					42,074					42,319					41,980
	Dilutive effect of share-based awards					123					202					136					218
	Diluted common shares attributable to Caleres, Inc.					42,448					42,276					42,455					42,198
	Basic earnings per common share attributable to Caleres, Inc. shareholders				$	0.38				$	0.41				$	0.82				$	0.77
	Diluted earnings per common share attributable to Caleres, Inc. shareholders				$	0.38				$	0.41				$	0.82				$	0.76

	SCHEDULE 7
	CALERES, INC.
	BASIC AND DILUTED ADJUSTED EARNINGS PER SHARE RECONCILIATION
					(Unaudited)										(Unaudited)
					Thirteen Weeks Ended										Twenty-six Weeks Ended
	(Thousands, except per share data)				August 1,2015					August 2,2014					August 1,2015					August 2,2014
	Adjusted net earnings attributable to Caleres, Inc.:
	Adjusted net earnings				$	22,144				$	18,039				$	41,535				$	33,515
	Net (earnings) loss attributable to noncontrolling interests					(38	)				25					(168	)				(22	)
	Net earnings allocated to participating securities					(715	)				(669	)				(1,370	)				(1,262	)
	Adjusted net earnings attributable to Caleres, Inc. after allocation of earnings to participating securities				$	21,391				$	17,395				$	39,997				$	32,231
	Basic and diluted common shares attributable to Caleres, Inc.:
	Basic common shares					42,325					42,074					42,319					41,980
	Dilutive effect of share-based awards					123					202					136					218
	Diluted common shares attributable to Caleres, Inc.					42,448					42,276					42,455					42,198
	Basic adjusted earnings per common share attributable to Caleres, Inc. shareholders				$	0.51				$	0.41				$	0.95				$	0.77
	Diluted adjusted earnings per common share attributable to Caleres, Inc. shareholders				$	0.50				$	0.41				$	0.94				$	0.76

View source version on businesswire.com: http://www.businesswire.com/news/home/20150827005870/en/

Caleres

Peggy Reilly Tharp, 314-854-4134

[email protected]

Source: Caleres

Press Releases

Sterne Agee CRT Reiterates Buy on Caleres (CAL) Following 2Q15 August 28, 2015 8:49 AM Caleres (CAL) Misses Q2 EPS by 3c; Guides FY15 EPS Below ExpectationsAugust 27, 2015 4:15 PM