Caleres, the American company that owns the Famous Footwear chain along with several footwear brands, has drafted a long-term strategy to increase its share in the global footwear market. The interesting business plan is based on three main pillars that the company outlined to investors in a recent meeting in New York City.
The first pillar foresees increasing efforts to reinforce the firm's own brands in a bid to capture additional consumers and maximize profitability. The second focuses on investments in marketing and data-driven analysis in order to determine the desires of the consumers. This also involves amplifying the messaging to consumers through the use of new media and the launch of a five-star quality program with its sourcing teams in Asia to improve the quality of the footwear.
Caleres also wants to build an emotional connection between its brands and the consumers. The company has a list of ten so-called blocks – including behavioral analytics, analysis of social groups, analysis of third-party data and commercial market intelligence – to precisely define the emotional dimensions of the audience.
The third pillar is based on accelerating the innovation of the company's operations to quickly respond to changes in the market. In terms of retailing, Caleres will launch a new e-commerce platform in January, while looking to streamline its store count, but without a particular target or number in mind. It wants to reposition itself in a number of key markets that have not been entered yet or where it is not big enough.
On the financial side, Caleres is targeting a low single-digit compound annual growth rate (CAGR) for revenues between now and 2022, accompanied by double-digit CAGR for adjusted earnings per share and a return on invested capital greater than 15 percent. By 2022, the Ebitda margin should be somewhere in the range of 8.4 percent to 8.5 percent, as compared to a current company guidance of 7.4 to 7.5 percent this year on total revenues of around $3 billion. Thanks in part to the acquisition of new brands, the turnover has grown briskly from $2.6 billion in 2015.
With the addressable U.S. footwear market expected to grow at less than 2 percent annually, Caleres feels it can do better than that at the wholesale level, budgeting low to mid-single-digit growth in the brand portfolio segment of its business, consistently with its recent performance. At Famous Footwear, the forecast calls for flat to low single-digit growth annually. In both segments, the Ebitda margin is budgeted to increase by one full percentage point.
The store fleet will be reduced by 25 to 30 units per year. It will be compensated by an increase in e-commerce, which is already exceeding a ratio of 30 percent of sales for Caleres' brand portfolio in 2019, up four percentage points over 2018.
The company wants to further develop its capabilities in the management of e-commerce and in product innovation, while entering new international markets. In terms of products, the management feels that the weekend casual shoe and the sneaker will evolve based on its analysis of the data.
Sustainable design is the next frontier for Caleres, whose largest target audience is concerned about this topic. The Dr. Scholl's brand, for which the company has the American license, is regarded as the innovation pioneer among the brands to then bring the changes to others. Every component and packaging is analyzed to make improvements, too.
Internationally, Caleres continue to place emphasis on China, after the start of a joint venture with Brand Investment Holding. In China, Caleres sells primarily the brands Naturalizer and Sam Edelman in several locations and on Tmall, but it plans to further roll out the concept in the country, bringing additional brands to the market, or take the joint venture to other markets.
Only 40 percent of Caleres' footwear comes from outside China, but the management feels that it can live with higher import duties from that country. The company has halved its suppliers to a total of 20, which still aggregate about 45 million pairs of shoes across 20 key factory partners. It has also introduced in-line inspection in the factories rather than just have final inspections.
Caleres' digital supply system involves a bidding process for materials that enables tracking of spending on products. In doing so, Caleres aggregates the raw material spend across key categories, leveraging that with key suppliers by letting them come in and bid against those materials.