Caleres, Inc. CAL reported third-quarter fiscal 2024 results, wherein both top and bottom lines missed the Zacks Consensus Estimate and declined year over year.

The quarter showcased growth in the Brand Portfolio, positive comparable sales at Famous Footwear and market share expansion across both segments. However, overall performance did not meet expectations. Soft seasonal demand for boots, delayed arrivals of key athletic products at Famous Footwear and weaker-than-anticipated results in China hurt the company’s performance.

Management revised the outlook, citing expectations that the season-to-date sales trend will persist through the final quarter of the year. Pressure on gross margins is expected as the company takes steps to address excess inventory and strategically position itself for 2025.

CAL’s Quarterly Performance: Key Insights

The company posted adjusted earnings of $1.23 per share, which missed the Zacks Consensus Estimate of $1.34. Also, the bottom line decreased 10.2% from $1.37 reported in the same quarter a year ago.

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Consolidated net sales of $740.9 million dipped 2.8% year over year, due to soft boot sales in both segments of business. Also, the metric missed the consensus mark of $752 million.

Gross profit fell 3.9% year over year to $327 million with the gross margin decreasing 55 basis points (bps) to 44.1%. This decline was driven by a lower margin at Famous Footwear, partially offset by a slightly higher margin in the Brand Portfolio.

SG&A expenses declined 1.8% year over year to $268.7 million in the quarter. As a percentage of net sales, the figure increased 30 bps year over year to 36.3%.

Caleres reported an adjusted EBITDA of $73 million, down 10% from the prior-year quarter. The adjusted EBITDA margin decreased 70 bps to 9.9%.

CAL’s Segment-Wise Performance Details

Famous Footwear segment net sales declined 4.8% to $428.3 million, in line with the consensus estimate. This decrease was driven by more than 20% drop in boot sales. However, the comparable sales of the segment were up 2.5%.

Gross profit, as a percentage of Famous Footwear revenues, decreased 130 bps year over year to 42.9%. This decline was due to a shift toward more days in BOGO promotions compared with "Buy More, Save More" strategies. Moreover, softer-than-expected performance in boots negatively affected clearance margins.

Brand Portfolio’s sales increased 0.7% to $322.9 million, which missed the consensus estimate of $334 million. The growth was driven by the strong performance of lead brands, which outpaced the portfolio brands. Both wholesale and owned e-commerce channels showed modest year-over-year growth. However, comparable sales for the segment were down 2.7%.

Gross profit, as a percentage of Brand Portfolio revenues, increased 15 bps to 43.8%, driven by a favorable channel mix and higher initial margins.

Direct-to-consumer sales accounted for roughly 72% of the overall quarterly sales.

CAL’s Financial Health Snapshot

Caleres concluded the quarter with $33.7 million in cash and cash equivalents and $238.5 million in borrowings under its revolving credit agreement. The borrowings balance indicates the impact of $50 million in share buybacks completed in the quarter, during which the company repurchased more than 1.5 million shares at an average price of $32.82 per share. Total shareholders’ equity was $606.3 million, including non-controlling interests of $8 million. Cash generated from operating activities was $75.9 million during the 39 weeks ended Nov. 2, 2024.

CAL’s 2024 Outlook

For Fiscal 2024, Caleres now expects consolidated net sales to be down 2.5-3% compared with the earlier view of down low-single digits. The company expects a consolidated operating margin of 6.1-6.3%, down from the previous guidance of 7-7.1%.

Management forecasts fiscal 2024 adjusted earnings per share (EPS) to be in the band of $3.45-$3.55 per share, down from the earlier range of $4.00-$4.15. The figure compares with $4.18 reported in fiscal 2023. On a GAAP basis, EPS is expected to fall between $3.35 and $3.45 compared with the previous estimation of $3.94-$4.09 and $4.80 reported in fiscal 2023.

This Zacks Rank #4 (Sell) stock has lost 29.6% in the three months against the industry’s growth of 0.5%.

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Stocks to Consider

Wolverine World Wide, Inc. WWW designs, manufactures, sources, markets, licenses and distributes footwear, apparel and accessories. It currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Wolverine’s 2024 EPS of 89 cents indicates a substantial increase from 5 cents reported in the year-ago quarter. WWW delivered a trailing four-quarter earnings surprise of 17%, on average.

Adidas ADDYY designs, develops, produces and markets athletic and sports lifestyle products. ADDYY sports a Zacks Rank #2 (Buy) at present.

The Zacks Consensus Estimate for ADDYY’s 2024 sales and earnings indicates increase of 7.9% and 694.4%, respectively, from the year-ago period’s reported level. Adidas delivered an earnings surprise of 22.9% in the last reported quarter.

Steven Madden SHOO designs, sources and markets fashion-forward branded and private-label footwear, accessories and apparel. SHOO carries a Zacks Rank #2 at present.

The Zacks Consensus Estimate for Steven Madden’s 2024 sales and EPS indicates growth of 13.6% and 8.6%, respectively, from the year-ago reported figures. SHOO delivered a trailing four-quarter earnings surprise of 9.8%, on average.

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