Caleres recovered in the third fiscal quarter compared with the previous quarter but sales continued to decline sharply year-on-year. The company warned that fourth-quarter sales could be some 20 percent lower than the previous year.

In the three months ended on Oct. 31, revenues were $647.5 million, down by 18.3 percent from the year-ago period. This was much better than the difficult second quarter, with sales progressing by 30 percent sequentially. Famous Footwear struggled, but less than the Brand Portfolio. E-commerce was a bright spot, jumping by 24.6 percent across websites, and representing a quarter of total sales.

The group ‘s gross margin narrowed by 0.7 percentage points to 39.7 percent due to more e-commerce sales and the liquidation of spring seasonal products. It reported sharply higher net income compared with the second quarter, reaching $14.4 million, but still down by 48.0 percent from the year-ago period.

Caleres focused on driving down costs, achieving a $38 million reduction in overall expenses during the quarter. Through these efforts, it recorded the highest level of third quarter cash generation in 10 years and used it to reduce overall indebtedness. In total, it paid down $50 million of debt during the period, bringing overall debt reduction to nearly $140 million since the beginning of the second quarter.

Famous Footwear booked $391.7 million in revenues, representing a 12.3 percent decline but coming in well ahead of the group’s expectations for the period and increasing by 17 percent from the second quarter of this year. This is despite the loss of an equivalent of 1,700 business days in the period due to store closures related to illness, weather, fires, and civil unrest, which restricted sales by approximately $6 million, Caleres said. The brand’s online sales rose by 48 percent, accounting for 17 percent of turnover, up from 10 percent last year.

The management explained that the back-to-school season got off to an extremely slow start in August due to uncertainty related to the pandemic. However, from September, higher sales started to materialize and exceeded last year’s levels by approximately $15 million with same-store sales up by 16.9 percent. But sales in October declined by single-digits. Famous’ gross margin was down by 0.1 percentage point to 40.9 percent, while operating income inched up by 1 percent to $27.8 million.

In the brand portfolio’s segment, sales declined by 25.6 percent year-on-year, but improved by 45 percent sequentially. Athletic sport and casual products performed well, along with Vionic, Sam Edelman, Ryka, Blowfish and Vince. Wellness and comfort brands also proved popular, representing about 55 percent of portfolio sales, versus 47 percent last year. Allen Edmonds launched the Park Avenue sneaker which is currently sold out and on back order. In addition, the Ryka Athletic brand launch of a trail sneaker that was also a highlight. However, the boot business struggled. It now represents 37 percent of total brand portfolio sales, down from about 47 percent last year. The gross margin fell by 2.0 percentage points to 35.2 percent, due to inventory clearance.

Meanwhile, the group made the decision to wind down most of its Naturalizer retail brand stores in the U.S. and Canada to focus on growing the brand’s e-commerce through naturalizer.com and through retail partner sites. It expects the store closures to be complete by the end of fiscal year 2020 and anticipates savings of $10 million to $12 million per year.

Caleres expects sales to fall about 20 percent year-on-year in the final quarter, including a 10 to 15 percent drop at Famous and a 25 to 30 percent drop from the portfolio. It noted that the fourth quarter is seasonally 10 percent smaller than the third one.