Caleres' sales for its third quarter, ended on Nov. 2, reached $794.4 million, up by 2.1 percent from the year ago period. The group delivered its eighth consecutive year of same-store sales growth for the back-to-school period at its Famous Footwear chain, while its top brands – including Allen Edmonds, Blowfish Malibu, Franco Sarto, Naturalizer, Rykä and Via Spiga – continued to performed well.
The management attributed this to a strategy to broaden the reach of its portfolio and strengthen consumer connections. As previously reported, the group recently unveiled a long-term business plan based on three main pillars, the first one being an increase in 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. The company wants to build an emotional connection between its brands and the consumers and 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. The store fleet will be reduced by 25 to 30 units per year. This will be compensated for by an increase in e-commerce, which is already exceeding a ratio of 30 percent of sales for Caleres' brand portfolio in 2019, up by four percentage points over 2018. This didn't prevent the group from opening a new flagship store in New York with a particularly interesting layout (see the news brief in this issue).
During the third quarter, the revenues of the company's Brand Portfolio jumped by 4.9 percent to $359.6 million. The management said the revenues were short of internal plans as it experienced a later start to the autumn season, along with a moderation of its core products and associated replenishment programs.
At Naturalizer, the company launched the 27EDIT collection, made of premium footwear combining the comfort elements of the brand with new design and materials offering a more contemporary aesthetic. This collection was based on feedback from the consumer insights division, which identified a demand from the target customer that was not being met with the current brand offerings.
Another highlight in the quarter was the Designer Excellence Award received by the eco-conscious Dr. Scholl Herzog Sneaker at the Accessories Council. This shoe features repurposed scrap leather, plant-based foam insoles, top-cloth made from recycled bottles and natural soles, made from a blend of rice husks and rubber.
Meanwhile, Famous Footwear's sales declined by 0.5 percent to $446.6 million, as the total number of stores declined by 47 units from the corresponding quarter of 2018, down to a total of 960. However, there was an improvement of 2.5 percent in same-store sales. The management said the athletic, boots and sandals categories all saw increases. The kids business was particularly strong.
Caleres said it is pleased with the results of the chain's revamped loyalty program, Famously Rewards, with existing members shopping more frequently across all channels and spending more per shopping occasion.
Famous Footwear's quarterly gross margin inched up by 0.3 percentage points to 41.0 percent, while the segment's operating margin advanced by 0.8 percentage points to 6.2 percent.
Across the group, the adjusted gross margin was up by 0.4 percentage points to 40.4 percent, while the operating margin progressed by 0.4 percentage points to 5.5 percent. Caleres' net income climbed by 4.0 percent to $28.0 million.
The management maintained its sales guidance for the full financial year, budgeting revenues of about $3.0 billion. However, due to the impact of tariffs implemented as part of the trade dispute with China, it has reduced the top end of its full-year guidance for net earnings. This sent the company's shares down by 2 percent after the announcement.