Caleres, Inc. — Form 10-K Summary
Reporting period: Fiscal year ended February 3, 2024 (FY2023; 53 weeks), filed April 2, 2024. Although the request metadata says “2022 Q4,” this filing reports FY2023 and compares it principally with FY2022, ended January 28, 2023.
Business context
Caleres is a global footwear company operating Famous Footwear retail and e-commerce businesses and the Brand Portfolio wholesale, retail and e-commerce businesses. It operated 860 Famous Footwear stores and 98 Brand Portfolio stores at year-end. Direct-to-consumer sales represented approximately 72% of consolidated sales in both FY2023 and FY2022.
Financial performance
| Metric | FY2023 | FY2022 | Change |
|---|---|---|---|
| Net sales | $2,817.3 million | $2,968.1 million | Down 5.1% |
| Gross profit / margin | $1,263.0 million / 44.8% | $1,284.9 million / 43.3% | Profit down 1.7%; margin up 154 bps |
| Operating earnings / margin | $194.5 million / 6.9% | $214.3 million / 7.2% | Down 9.3% |
| Net earnings attributable to Caleres | $171.4 million | $181.7 million | Down 5.7% |
| Diluted EPS | $4.80 | $4.92 | Down 2.4% |
| Cash from operations | $200.2 million | $125.9 million | Up $74.3 million |
Interest expense rose to $19.4 million from $14.3 million, mainly due to higher variable interest rates, partly offset by lower average borrowings. The effective tax rate fell to 5.2% from 15.7%, largely reflecting a $26.7 million release of deferred-tax valuation allowances in FY2023 (versus $17.4 million in FY2022).
Segments and material comparisons
- Famous Footwear: Sales fell 5.6% to $1,609.4 million; comparable sales declined 6.3%. Operating earnings decreased to $123.8 million from $195.8 million, and operating margin fell to 7.7% from 11.5%. Lower traffic and a more normalized level of clearance sales weighed on results.
- Brand Portfolio: Sales fell 3.9% to $1,270.9 million, while operating earnings increased to $145.5 million from $112.3 million and margin rose to 11.4% from 8.5%. Lower markdowns, improved merchandise margins and lower inbound freight costs supported the improvement. Owned e-commerce sales increased 5.1%.
- The 53rd week added approximately $25 million of FY2023 sales and had an immaterial impact on net earnings. Without it, the reported sales comparison would have been weaker.
- Brand Portfolio wholesale backlog decreased to $234.5 million from $284.6 million, reflecting more cautious retailer buying and inventory management.
Liquidity, debt and capital allocation
- Revolver borrowings were $182.0 million at year-end, down $125.5 million; cash and cash equivalents were $21.4 million. The company had $308.5 million of additional borrowing availability and was in compliance with credit agreement covenants.
- Working capital improved to $46.0 million from negative $79.7 million; the current ratio was 1.06 versus 0.91, and debt-to-capital was 24.3% versus 41.9%.
- Cash used for investing was $49.6 million, including $44.6 million of property and equipment purchases and $5.0 million of capitalized software. Cash used for financing was $163.0 million, including net revolver repayments and $17.4 million of share repurchases.
- The company paid $0.28 per share in dividends during FY2023 and declared a subsequent quarterly dividend of $0.07 per share. Management said debt reduction remains a 2024 capital-allocation priority.
- Operating lease obligations totaled $565.9 million on the balance sheet; contractual minimum lease payments were $646.6 million before imputed interest.
Outlook, risks and unusual items
- Management cited inflation, elevated interest rates, consumer debt and recession concerns as pressures on discretionary spending and retail traffic. It expects FY2023 expense-reduction actions to generate further savings in 2024.
- Management described a three-year strategic and financial plan announced in October 2023 and said it expects earnings per share to remain above its $4.00 baseline. The filing provides no specific FY2024 sales or earnings forecast. Planned 2024 capital expenditures and capitalized software purchases are $60–$70 million.
- Planned store activity includes an approximately flat Famous Footwear store count; roughly 35 new Brand Portfolio stores in East and Southeast Asia; and about six Allen Edmonds openings and four closures. These are plans, not guaranteed outcomes.
- Key risks include fashion and demand shifts, intense price competition, reliance on major suppliers (Nike, Skechers and adidas represented approximately 24% of consolidated sales), wholesale customer concentration, and international sourcing concentration (about 60% of sourced pairs came from China). Supply disruptions, tariffs, currency, wage and freight costs, cybersecurity, the multi-year ERP implementation and variable-rate debt are also cited risks.
- FY2023 restructuring and expense-reduction charges were $6.1 million ($4.5 million after tax); FY2022 included $2.9 million of CFO-transition costs. The Redfield environmental remediation reserve was $9.2 million; management said ordinary-course litigation was not expected to materially affect results or financial position.
- Management reported effective disclosure controls and internal control over financial reporting; the auditor issued unqualified opinions on the financial statements and internal controls. Inventory markdown reserves were identified as a critical audit matter.
Most important facts for investors to verify
- Whether Famous Footwear sales and margins stabilize after the 6.3% comparable-sales decline and sharp operating-earnings reduction.
- Whether Brand Portfolio’s margin improvement persists despite lower sales and a smaller wholesale backlog.
- How much FY2023 EPS depended on the $26.7 million tax valuation-allowance release and the 53rd week’s sales contribution.
- Whether operating cash flow remains strong enough to fund investment, dividends and further debt reduction amid higher interest rates.
- Progress on the ERP implementation, planned Asian store expansion, and environmental remediation costs relative to the recorded reserve.