Caleres, Inc. — Form 10-K Summary
Period clarification: The supplied filing is for the 52 weeks ended January 28, 2023 (fiscal 2022), not 2021 Q4 as indicated in the request metadata. The comparable prior year ended January 29, 2022. Amounts below are U.S. dollars.
Business context
Caleres is a global footwear company operating Famous Footwear, a family-focused retailer, and Brand Portfolio, a branded footwear wholesale and direct-to-consumer business. At fiscal year-end, it operated 873 Famous Footwear stores and 92 Brand Portfolio stores in North America and China. Direct-to-consumer sales were approximately 72% of consolidated sales, versus 75% in 2021.
Financial results and liquidity
| Metric | Fiscal 2022 | Fiscal 2021 |
|---|---|---|
| Net sales | $2,968.1 million | $2,777.6 million |
| Gross profit / margin | $1,284.9 million / 43.3% | $1,227.3 million / 44.2% |
| Operating earnings / margin | $214.3 million / 7.2% | $205.8 million / 7.4% |
| Net earnings attributable to Caleres | $181.7 million | $137.0 million |
| Diluted earnings per share | $4.92 | $3.56 |
| Net cash from operating activities | $125.9 million | $168.4 million |
- Sales increased 6.9%. Brand Portfolio sales rose 22.4% to $1,322.8 million; Famous Footwear sales fell 2.5% to $1,705.1 million.
- Gross margin declined 0.9 percentage points, reflecting more normalized pricing and promotions at Famous Footwear and a higher wholesale sales mix. Brand Portfolio margin improved to 37.6% from 35.8%; Famous Footwear margin fell to 46.3% from 48.0%.
- Operating cash flow decreased $42.5 million year over year. Investing cash use was $64.0 million, including $55.9 million of property and equipment purchases and $8.1 million of capitalized software. Cash increased $3.6 million to $33.7 million.
- Revolving-credit borrowings were $307.5 million, up $17.5 million. The company had $181.9 million of additional borrowing availability and was in covenant compliance. The $500 million facility matures October 2026; borrowings carry variable rates. The $200 million of senior notes was fully redeemed by January 2022.
- Working capital was negative $79.7 million, improving from negative $189.1 million; the current ratio was 0.91 versus 0.82. Debt-to-capital decreased to 41.9% from 47.3%.
- Caleres repurchased approximately 2.6 million shares for $63.2 million and paid $0.28 per share in dividends. It reported $664.4 million of operating lease commitments and $590.4 million of purchase obligations.
Material changes and unusual items
- Brand Portfolio growth was supported by stronger demand across most brands and improved supply-chain flow. Its wholesale backlog fell to $284.6 million from $452.4 million, which management attributed to normalized supply chains and more cautious retailer buying.
- Famous Footwear operating earnings declined to $195.8 million from $276.4 million, with comparable sales down 1.8% after record 2021 results. Brand Portfolio operating earnings increased to $112.3 million from $35.9 million.
- The 2022 effective tax rate was 15.7%, versus 27.0% in 2021, including a $17.4 million release of deferred-tax valuation allowances. The company nevertheless remained in a three-year cumulative loss position in certain tax jurisdictions and reported $39.5 million of valuation allowances at year-end.
- 2022 special charges included $2.9 million for the CFO transition. Prior-year items included $13.5 million for Naturalizer store exits and $15.4 million of fair-value adjustments to the Blowfish Malibu purchase obligation, settled for $54.6 million in November 2021.
- The auditor issued unqualified opinions on the financial statements and internal control over financial reporting; management also concluded controls were effective.
Outlook, commentary and risks
- Management provided no numerical 2023 sales or earnings guidance in the supplied text. Its priorities include aligning Famous Footwear products and customer experience to the “millennial family,” balancing athletic and non-athletic offerings, and growing leading Brand Portfolio brands. Management expects 2023 store count at Famous Footwear to be approximately flat and plans about nine new Sam Edelman stores in China.
- Management expects inflationary and macroeconomic pressures to continue and stated revolving-credit interest expense is expected to increase in 2023. Planned 2023 property, equipment and capitalized-software spending is $60–$70 million. Management believes operating cash flows can meet material cash requirements for at least 12 months and aims to reduce revolver borrowings.
- Key exposures include discretionary consumer demand, inflation, promotions and interest rates; supply-chain disruption and international trade risks; and sourcing concentration, with approximately 68% of footwear sourced from China. The filing highlights dependence on major branded suppliers and wholesale customers, competition, fashion and inventory risk, cybersecurity, and management transitions.
- The company is remediating contamination at the Redfield site and nearby residential areas. Its recorded remediation reserve was $9.8 million at January 28, 2023; actual future costs may differ. Management stated ordinary-course litigation is not expected to have a material adverse effect.
- After year-end, Caleres entered into an agreement to sell its corporate headquarters campus, subject to closing conditions.
Important facts for investors to verify
- Confirm the intended reporting period: this is fiscal 2022, not a 2021 Q4 filing.
- Assess whether Brand Portfolio growth and margins can continue as wholesale backlog normalizes, and whether Famous Footwear can stabilize sales and profitability.
- Review cash generation, working-capital needs, share repurchases, lease commitments and purchase obligations alongside the revolver balance and variable-rate exposure.
- Check the assumptions behind inventory markdown reserves, a critical audit matter, and the continuing realizability of deferred tax assets.
- Reconcile supplier concentration disclosures: Risk Factors cites Nike, Skechers and adidas at approximately 23% of consolidated sales, while the segment note reports approximately 24% for 2022.
- Monitor Redfield remediation estimates, the headquarters-campus sale closing, and any updates to 2023 outlook or capital allocation.