UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended | |
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Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _____________ to _____________ |
Commission file number:
(Exact name of registrant as specified in its charter) | |
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(State or other jurisdiction | (IRS Employer Identification Number) |
of incorporation or organization) | |
(Zip Code) | |
(Address of principal executive offices) | |
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(Registrant’s telephone number, including area code) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company," and "emerging growth company” in Rule 12b-2 of the Exchange Act:
Accelerated filer ☐ | |
Non-accelerated filer ☐ | Smaller reporting company |
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
As of May 27, 2022,
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Management’s Discussion and Analysis of Financial Condition and Results of Operations | 25 | |
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2
PART IFINANCIAL INFORMATION
ITEM 1FINANCIAL STATEMENTS
CALERES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) | |||||||||
($ thousands) |
| April 30, 2022 |
| May 1, 2021 |
| January 29, 2022 | |||
Assets |
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Current assets: |
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Cash and cash equivalents | $ | | $ | | $ | | |||
Receivables, net |
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Inventories, net |
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Income taxes |
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Property and equipment, held for sale | | | | ||||||
Prepaid expenses and other current assets |
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Total current assets |
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Prepaid pension costs |
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Lease right-of-use assets |
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Property and equipment, net |
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Goodwill and intangible assets, net |
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Other assets |
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Total assets | $ | | $ | | $ | | |||
Liabilities and Equity |
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Current liabilities: |
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Borrowings under revolving credit agreement | $ | | $ | | $ | | |||
Mandatory purchase obligation - Blowfish Malibu | | | | ||||||
Trade accounts payable |
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Income taxes |
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Lease obligations |
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Other accrued expenses |
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Total current liabilities |
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Other liabilities: |
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Noncurrent lease obligations |
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Long-term debt |
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Income taxes |
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Deferred income taxes |
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Other liabilities |
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Total other liabilities |
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Equity: |
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Common stock |
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Additional paid-in capital |
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Accumulated other comprehensive loss |
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Retained earnings |
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Total Caleres, Inc. shareholders’ equity |
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Noncontrolling interests |
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Total equity |
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Total liabilities and equity | $ | | $ | | $ | |
See notes to condensed consolidated financial statements.
3
CALERES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
| Thirteen Weeks Ended | |||||
($ thousands, except per share amounts) | April 30, 2022 |
| May 1, 2021 | |||
Net sales | $ | | $ | | ||
Cost of goods sold |
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Gross profit |
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Selling and administrative expenses |
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Restructuring and other special charges, net |
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Operating earnings |
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Interest expense, net |
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Other income, net |
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Earnings before income taxes |
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Income tax provision |
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Net earnings |
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Net (loss) earnings attributable to noncontrolling interests |
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Net earnings attributable to Caleres, Inc. | $ | | $ | | ||
Basic earnings per common share attributable to Caleres, Inc. shareholders | $ | | $ | | ||
Diluted earnings per common share attributable to Caleres, Inc. shareholders | $ | | $ | |
See notes to condensed consolidated financial statements.
4
CALERES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
| Thirteen Weeks Ended | |||||
($ thousands) | April 30, 2022 |
| May 1, 2021 | |||
Net earnings | $ | | $ | | ||
Other comprehensive income (loss) ("OCI"), net of tax: |
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Foreign currency translation adjustment |
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Pension and other postretirement benefits adjustments |
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Other comprehensive income, net of tax |
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Comprehensive income |
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Comprehensive (loss) income attributable to noncontrolling interests |
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Comprehensive income attributable to Caleres, Inc. | $ | | $ | |
See notes to condensed consolidated financial statements.
5
CALERES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| (Unaudited) | |||||
Thirteen Weeks Ended | ||||||
($ thousands) |
| April 30, 2022 |
| May 1, 2021 | ||
Operating Activities |
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Net earnings | $ | | $ | | ||
Adjustments to reconcile net earnings to net cash provided by operating activities: |
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Depreciation |
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Amortization of capitalized software |
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Amortization of intangible assets |
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Amortization of debt issuance costs and debt discount |
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Fair value adjustments to Blowfish mandatory purchase obligation | | | ||||
Share-based compensation expense |
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Loss on disposal of property and equipment |
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Impairment charges for property, equipment, and lease right-of-use assets |
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Provision/adjustment for expected credit losses | ( | ( | ||||
Deferred income taxes |
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Changes in operating assets and liabilities: |
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Receivables |
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Inventories |
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Prepaid expenses and other current and noncurrent assets |
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Trade accounts payable |
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Accrued expenses and other liabilities |
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Income taxes, net |
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Other, net |
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Net cash provided by operating activities |
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Investing Activities |
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Purchases of property and equipment |
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Capitalized software |
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Net cash used for investing activities |
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Financing Activities |
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Borrowings under revolving credit agreement |
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Repayments under revolving credit agreement |
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Dividends paid |
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Acquisition of treasury stock |
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Issuance of common stock under share-based plans, net |
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Contributions by noncontrolling interests |
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Other |
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Net cash used for financing activities |
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Effect of exchange rate changes on cash and cash equivalents |
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Increase in cash and cash equivalents |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period | $ | | $ | |
See notes to condensed consolidated financial statements.
6
CALERES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
Accumulated | |||||||||||||||||||||||
Other | Total Caleres, Inc. | Non- | |||||||||||||||||||||
(Unaudited) | Common Stock | Additional | Comprehensive | Retained | Shareholders’ | controlling | |||||||||||||||||
($ thousands, except number of shares and per share amounts) |
| Shares |
| Dollars |
| Paid-In Capital |
| Loss |
| Earnings |
| Equity |
| Interests |
| Total Equity | |||||||
BALANCE AS OF JANUARY 29, 2022 |
| | $ | | $ | | $ | ( | $ | | $ | | $ | | $ | | |||||||
Net earnings (loss) |
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Foreign currency translation adjustment |
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Pension and other postretirement benefits adjustments, net of tax of $ |
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Comprehensive income (loss) |
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Contributions by noncontrolling interests | — | | | ||||||||||||||||||||
Dividends ($ |
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Acquisition of treasury stock |
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Issuance of common stock under share-based plans, net |
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Share-based compensation expense |
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BALANCE APRIL 30, 2022 |
| | $ | | $ | | $ | ( | $ | | $ | | $ | | $ | | |||||||
BALANCE JANUARY 30, 2021 |
| | $ | | $ | | $ | ( | $ | | $ | | $ | | $ | | |||||||
Net earnings |
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Foreign currency translation adjustment |
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Pension and other postretirement benefits adjustments, net of tax of $ |
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Comprehensive income |
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Dividends ($ |
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Issuance of common stock under share-based plans, net |
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Share-based compensation expense |
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BALANCE MAY 1, 2021 |
| | $ | | $ | | $ | ( | $ | | $ | | $ | | $ | |
See notes to condensed consolidated financial statements.
7
CALERES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 Basis of Presentation and General
Basis of Presentation
The accompanying condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q of the United States Securities and Exchange Commission (“SEC”) and reflect all adjustments and accruals of a normal recurring nature, which management believes are necessary to present fairly the financial position, results of operations, comprehensive income and cash flows of Caleres, Inc. ("the Company"). These statements, however, do not include all information and footnotes necessary for a complete presentation of the Company’s consolidated financial position, results of operations, comprehensive income and cash flows in conformity with accounting principles generally accepted in the United States. The condensed consolidated financial statements include the accounts of the Company and its wholly-owned and majority-owned subsidiaries, after the elimination of intercompany accounts and transactions.
The Company’s business is seasonal in nature due to consumer spending patterns, with higher back-to-school and holiday season sales. Although the third fiscal quarter has historically accounted for a substantial portion of the Company’s earnings for the year, the Company is beginning to experience more equal distribution among the quarters. Interim results may not necessarily be indicative of results which may be expected for any other interim period or for the year as a whole.
Certain prior period amounts in the notes to the condensed consolidated financial statements have been reclassified to conform to the current period presentation. These reclassifications did not affect net earnings attributable to Caleres, Inc.
The accompanying condensed consolidated financial statements and footnotes should be read in conjunction with the consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the year ended January 29, 2022.
Noncontrolling Interests
During 2019, the Company entered into a joint venture with Brand Investment Holding Limited (“Brand Investment Holding”), a member of the Gemkell Group, to sell Sam Edelman, Naturalizer and other branded footwear in China. The Company and Brand Investment Holding are each
The Company had a joint venture agreement with a subsidiary of C. banner International Holdings Limited (“CBI”) to market Naturalizer footwear in China. The Company was a
The Company consolidates CLT and B&H Footwear into its condensed consolidated financial statements. Net (loss) earnings attributable to noncontrolling interests represents the share of net earnings or losses that is attributable to Brand Investment Holding and CBI. Transactions between the Company and the joint ventures have been eliminated in the condensed consolidated financial statements.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates.
COVID-19, Supply Chain Disruptions and Inflationary Pressures
The coronavirus (“COVID-19”) continues to adversely impact the United States and global economies. During 2021, our business operations were impacted by the delayed receipt of inventory attributable to temporary factory shutdowns, border closures, port congestion and shipping vessel and container availability. While inventory receipts improved during the first quarter of 2022, supply chain disruptions continue to impact our business operations and financial results. We experienced higher transportation costs throughout 2021 and continue to experience inflationary pressures for freight and other product costs.
8
On March 27, 2020, the Coronavirus Aid, Relief and Economic Security ("CARES") Act was enacted. The CARES Act includes a provision that allows the Company to defer the employer portion of social security payroll tax payments that would have been paid between the enactment date and December 31, 2020, with 50% payable by December 31, 2021 and 50% payable by December 31, 2022. During 2020, the Company deferred approximately $
Property and Equipment, Held for Sale
In April 2021, the Company announced that it would begin marketing for sale its
Note 2 Impact of New Accounting Pronouncements
The Company has evaluated all recently issued, but not yet effective, accounting pronouncements and does not expect any of the pronouncements to have a material impact on the Company’s condensed consolidated financial statements or disclosures.
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Note 3 Revenues
Disaggregation of Revenues
The following table disaggregates revenue by segment and major source for the periods ended April 30, 2022 and May 1, 2021:
Thirteen Weeks Ended April 30, 2022 | ||||||||||||
Eliminations and | ||||||||||||
($ thousands) |
| Famous Footwear |
| Brand Portfolio |
| Other |
| Total | ||||
Retail stores | $ | | $ | | $ | | $ | | ||||
Landed wholesale - e-commerce - drop ship (1) |
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E-commerce - Company websites (1) |
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Total direct-to-consumer sales | | | ( | | ||||||||
Wholesale - e-commerce (1) |
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Landed wholesale |
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First-cost wholesale |
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Licensing and royalty |
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Other (2) |
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Net sales | $ | | $ | | $ | ( | $ | |
| Thirteen Weeks Ended May 1, 2021 | |||||||||||
Eliminations and | ||||||||||||
($ thousands) |
| Famous Footwear |
| Brand Portfolio |
| Other |
| Total | ||||
Retail stores | $ | | $ | | $ | | $ | | ||||
Landed wholesale - e-commerce - drop ship (1) | | | ( | | ||||||||
E-commerce - Company websites (1) |
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Total direct-to-consumer sales | | | ( | | ||||||||
Wholesale - e-commerce (1) |
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Landed wholesale |
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First-cost wholesale |
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Licensing and royalty |
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Other (2) |
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Net sales | $ | | $ | | $ | ( | $ | |
(1) | Collectively referred to as "e-commerce" in the narrative below |
(2) | Includes breakage revenue from unredeemed gift cards |
Retail stores
Traditionally, the majority of the Company’s revenue is generated from retail sales where control is transferred and revenue is recognized at the point of sale. Retail sales are recorded net of estimated returns and exclude sales tax. The Company records a returns reserve and a corresponding return asset for expected returns of merchandise.
Retail sales to members of the Company’s loyalty programs, including the Famously You Rewards program, include
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E-commerce
The Company also generates revenue from sales on websites maintained by the Company that are shipped from the Company’s distribution centers or retail stores directly to the consumer, picked up directly by the consumer from the Company’s stores and e-commerce sales from the Company’s wholesale customers’ websites that are fulfilled on a drop-ship or first-cost basis (collectively referred to as "e-commerce"). The Company transfers control and recognizes revenue for merchandise sold that is shipped directly to an individual consumer upon delivery to the consumer.
Landed wholesale
Landed sales are wholesale sales in which the merchandise is shipped directly to the customer from the Company’s warehouses. Many customers purchasing footwear on a landed basis arrange their own transportation of merchandise and, with limited exceptions, control is transferred at the time of shipment.
First-cost wholesale
First-cost sales are wholesale sales in which the Company purchases merchandise from an international factory that manufactures the product and subsequently sells to a customer at an overseas port. Revenue is recognized at the time the merchandise is delivered to the customer’s designated freight forwarder and control is transferred to the customer.
Licensing and royalty
The Company has license agreements with third parties allowing them to sell the Company’s branded product, or other merchandise that uses the Company’s owned or licensed brand names. These license agreements provide the licensee access to the Company’s symbolic intellectual property, and revenue is therefore recognized over the license term. For royalty contracts that do not have guaranteed minimums, the Company recognizes revenue as the licensee’s sales occur. For royalty contracts that have guaranteed minimums, revenue for the guaranteed minimum is recognized on a straight-line basis during the term, until such time that the cumulative royalties exceed the total minimum guarantee. Up-front payments are recognized over the contractual term to which the guaranteed minimum relates.
The Company also licenses its Famous Footwear trade name and logo to a third-party financial institution to offer Famous Footwear-branded credit cards to its consumers. The Company receives royalties based upon cardholder spending, which is recognized as licensing revenue at the time when the credit card is used.
Contract Balances
Revenue is recorded at the transaction price, net of estimates for variable consideration for which reserves are established, including returns, allowances and discounts. Variable consideration is estimated using the expected value method and given the large number of contracts with similar characteristics, the portfolio approach is applied to determine the variable consideration for each revenue stream. Reserves for projected returns are based on historical patterns and current expectations.
Information about significant contract balances from contracts with customers is as follows:
($ thousands) |
| April 30, 2022 |
| May 1, 2021 |
| January 29, 2022 | |||
Customer allowances and discounts | $ | | $ | | $ | | |||
Loyalty programs liability |
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Returns reserve |
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Gift card liability |
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Changes in contract balances with customers generally reflect differences in relative sales volume for the periods presented. In addition, during the thirteen weeks ended April 30, 2022, the loyalty programs liability increased $
11
The following table summarizes the activity in the Company’s allowance for expected credit losses during the thirteen weeks ended April 30, 2022 and May 1, 2021:
Thirteen Weeks Ended | ||||||
($ thousands) |
| April 30, 2022 | May 1, 2021 | |||
Balance, beginning of period | $ | | $ | | ||
Provision/adjustment for expected credit losses | ( | ( | ||||
Uncollectible accounts written off, net of recoveries | ( | ( | ||||
Balance, end of period | $ | | $ | |
Note 4 Earnings Per Share
The Company uses the two-class method to compute basic and diluted earnings per common share attributable to Caleres, Inc. shareholders. In periods of net loss, no effect is given to the Company’s participating securities since they do not contractually participate in the losses of the Company. The following table sets forth the computation of basic and diluted earnings per common share attributable to Caleres, Inc. shareholders for the periods ended April 30, 2022 and May 1, 2021:
Thirteen Weeks Ended | ||||||
($ thousands, except per share amounts) |
| April 30, 2022 |
| May 1, 2021 | ||
NUMERATOR | ||||||
Net earnings | $ | | $ | | ||
Net loss (earnings) attributable to noncontrolling interests |
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Net earnings attributable to Caleres, Inc. | $ | | $ | | ||
Net earnings allocated to participating securities |
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Net earnings attributable to Caleres, Inc. after allocation of earnings to participating securities | $ | | $ | | ||
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DENOMINATOR |
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Denominator for basic earnings per common share attributable to Caleres, Inc. shareholders |
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Dilutive effect of share-based awards |
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Denominator for diluted earnings per common share attributable to Caleres, Inc. shareholders |
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Basic earnings per common share attributable to Caleres, Inc. shareholders | $ | | $ | | ||
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Diluted earnings per common share attributable to Caleres, Inc. shareholders | $ | | $ | |
Options to purchase
During the thirteen weeks ended April 30, 2022, the Company repurchased
12
Note 5 Restructuring and Other Special Charges
Brand Portfolio – Business Exits
During the thirteen weeks ended May 1, 2021, the Company incurred costs of $
Blowfish Mandatory Purchase Obligation
In 2018, the Company acquired a controlling interest in Blowfish Malibu. The remaining interest was subject to a mandatory purchase obligation after a
Note 6 Business Segment Information
Following is a summary of certain key financial measures for the Company’s business segments for the periods ended April 30, 2022 and May 1, 2021:
Famous | Brand | Eliminations | ||||||||||
($ thousands) |
| Footwear |
| Portfolio |
| and Other |
| Total | ||||
Thirteen Weeks Ended April 30, 2022 |
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Net sales | $ | | $ | | $ | ( | $ | | ||||
Intersegment sales (1) |
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Operating earnings (loss) |
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