Caleres has posted mixed results for the third quarter ended on Nov. 3. The group's consolidated sales for the quarter remained flat at $775.8 million, with a decline at its Famous Footwear retail chain offset by higher revenues from its growing portfolio of wholly-owned footwear brands including Allen Edmonds, Blowfish Malibu, Dr. Scholl, Franco Sarto, Naturalizer, Rykä and Via Spiga, among others.
The revenues of the company's Brand Portfolio jumped by 8.5 percent to $327.1 million, and they included for the first time Vionic, the U.S.-based producer of supportive and orthopedic footwear and orthotics that Caleres agreed to take over for $360 million in October. Its sales have been growing at a compound annual rate of more than 20 percent in the past six years, reaching a level of about $180 million in the trailing 12-month period. Only 8 percent of its revenues come from outside the U.S.
Brand Portfolio sales were driven by a 30 percent increase in sales of boots of all six women's brands. Online sales rose by nearly 20 percent, with a 25 percent increase in drop shipments, and they represented 13 percent of the segment's turnover. The segment's gross margin contracted by 0.2 percentage points to 39.2 percent, due in part to the higher proportion of online sales, but its operating income rose by 10 percent to $26.7 million.
Meanwhile, Famous Footwear delivered its seventh consecutive year of positive back-to-school same-store sales, which were up by 2.8 percent from the corresponding quarter of 2017, accelerating to 4.5 percent in October. However, the chain's total sales of $448.8 million were down by 5.1 percent, as one week of back-to-school sales shifted into the second quarter of this year and the total number of stores has declined by 35 units so far this year, down to a total of 1,007 doors.
In terms of products, women's shoes remained strong with comparable sales up by a mid-single-digit rate, while women's sandals and boots posted comparable sales up by a low double-digit rate. Women's lifestyle athletic performed even better, with comparable sales jumping by 20 percent. Sales of children's shoes rebounded from their previous weakness, but the management admitted that there is more work to do in this segment.
Famous Footwear's quarterly gross margin fell by 1.2 percentage points to 40.7 percent due to promotional efforts intended to drive sales, and the segment's operating profit ended up 28 percent lower at $24.4 million.
Across the group, the adjusted gross margin was down by 0.6 percentage points to 40.3 percent. Caleres' net income declined by 15 percent to $29.2 million for the quarter, weighed down by extraordinary charges of $5.8 million related to the acquisition of Blowfish Malibu and Vionic. On an adjusted basis, however, it improved by 1.6 percent to $34.9 million.
Caleres lowered its profit guidance for its full financial year, citing its decision to pull out of an expensive third-party distribution center. The management said that it has committed to exiting this facility to eliminate incremental expense going forward.
Due to these expenses, and its recent costly acquisition of Vionic, the company now expects to report adjusted earnings per share for the full year of between $2.25 and $2.35, compared with its previous guidance of $2.40 to $2.50.