10-Q 1 cal-20240504x10q.htm 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended May 4, 2024

 

 

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: 1-2191

CALERES, INC.

(Exact name of registrant as specified in its charter)

 

 

New York

43-0197190

(State or other jurisdiction

(IRS Employer Identification Number)

of incorporation or organization)

8300 Maryland Avenue

63105

St. Louis, Missouri

(Zip Code)

(Address of principal executive offices)

(314) 854-4000

(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

Common Stock - par value of $0.01 per share

CAL

New York Stock Exchange

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. Yes    No

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). Yes     No

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:

Large accelerated filer

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       No

As of May 31, 2024, 35,129,724 common shares were outstanding.

INDEX

PART I

Page

Item 1

Financial Statements (Unaudited)

3

Condensed Consolidated Balance Sheets

3

Condensed Consolidated Statements of Earnings

4

Condensed Consolidated Statements of Comprehensive Income

5

Condensed Consolidated Statements of Cash Flows

6

Condensed Consolidated Statements of Shareholders’ Equity

7

Notes to Condensed Consolidated Financial Statements

8

Item 2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

24

Item 3

Quantitative and Qualitative Disclosures About Market Risk

31

Item 4

Controls and Procedures

32

 

 

PART II

32

Item 1

Legal Proceedings

32

Item 1A

Risk Factors

32

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

33

Item 3

Defaults Upon Senior Securities

33

Item 4

Mine Safety Disclosures

33

Item 5

Other Information

33

Item 6

Exhibits

34

Signature

35

2

PART IFINANCIAL INFORMATION

ITEM 1FINANCIAL STATEMENTS

CALERES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

($ thousands)

    

May 4, 2024

    

April 29, 2023

    

February 3, 2024

Assets

 

  

 

  

 

  

Current assets:

  

 

  

 

  

Cash and cash equivalents

$

30,709

$

36,151

$

21,358

Receivables, net

 

164,865

 

148,068

 

140,400

Inventories, net

 

530,570

 

559,467

 

540,674

Income taxes

 

8,407

 

11,882

 

14,215

Property and equipment, held for sale

16,777

16,777

16,777

Prepaid expenses and other current assets

 

54,008

 

48,535

 

55,485

Total current assets

 

805,336

 

820,880

 

788,909

Prepaid pension costs

 

76,302

 

84,782

 

74,951

Lease right-of-use assets

 

565,822

 

513,817

 

528,029

Property and equipment, net

 

168,154

 

157,730

 

167,583

Deferred income taxes

 

4,321

 

26

 

4,401

Goodwill and intangible assets, net

 

200,551

 

212,353

 

203,310

Other assets

 

40,624

 

28,495

 

37,563

Total assets

$

1,861,110

$

1,818,083

$

1,804,746

Liabilities and Equity

 

  

 

  

 

  

Current liabilities:

 

  

 

  

 

  

Borrowings under revolving credit agreement

$

191,000

$

291,500

$

182,000

Trade accounts payable

 

267,388

 

261,753

 

251,912

Income taxes

 

14,141

 

11,953

 

11,222

Lease obligations

 

120,872

 

136,297

 

112,764

Other accrued expenses

 

170,964

 

177,774

 

185,058

Total current liabilities

 

764,365

 

879,277

 

742,956

Other liabilities:

 

  

 

  

 

  

Noncurrent lease obligations

 

482,163

 

437,171

 

453,097

Income taxes

 

2,464

 

6,940

 

2,464

Deferred income taxes

 

11,928

 

19,185

 

11,536

Other liabilities

 

23,161

 

23,629

 

27,123

Total other liabilities

 

519,716

 

486,925

 

494,220

Equity:

 

  

 

  

 

  

Common stock

 

351

 

363

 

355

Additional paid-in capital

 

180,314

 

173,640

 

184,451

Accumulated other comprehensive loss

 

(34,121)

 

(26,260)

 

(34,504)

Retained earnings

 

423,760

 

298,574

 

410,329

Total Caleres, Inc. shareholders’ equity

 

570,304

 

446,317

 

560,631

Noncontrolling interests

 

6,725

 

5,564

 

6,939

Total equity

 

577,029

 

451,881

 

567,570

Total liabilities and equity

$

1,861,110

$

1,818,083

$

1,804,746

See notes to condensed consolidated financial statements.

3

CALERES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

    

(Unaudited)

Thirteen Weeks Ended

($ thousands, except per share amounts)

    

May 4, 2024

April 29, 2023

Net sales

$

659,198

$

662,734

Cost of goods sold

 

350,103

 

360,052

Gross profit

 

309,095

 

302,682

Selling and administrative expenses

 

266,337

 

253,095

Operating earnings

 

42,758

 

49,587

Interest expense, net

 

(3,778)

 

(5,623)

Other income, net

 

992

 

1,492

Earnings before income taxes

 

39,972

 

45,456

Income tax provision

 

(9,174)

 

(10,664)

Net earnings

 

30,798

 

34,792

Net (loss) earnings attributable to noncontrolling interests

 

(141)

 

65

Net earnings attributable to Caleres, Inc.

$

30,939

$

34,727

Basic earnings per common share attributable to Caleres, Inc. shareholders

$

0.88

$

0.97

Diluted earnings per common share attributable to Caleres, Inc. shareholders

$

0.88

$

0.97

See notes to condensed consolidated financial statements.

4

CALERES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

Thirteen Weeks Ended

($ thousands)

May 4, 2024

    

April 29, 2023

Net earnings

$

30,798

$

34,792

Other comprehensive (loss) income ("OCI"), net of tax:

 

  

 

  

Foreign currency translation adjustment

 

(830)

 

(151)

Pension and other postretirement benefits adjustments

 

1,140

 

710

Other comprehensive income, net of tax

 

310

 

559

Comprehensive income

 

31,108

 

35,351

Comprehensive (loss) income attributable to noncontrolling interests

 

(214)

 

134

Comprehensive income attributable to Caleres, Inc.

$

31,322

$

35,217

See notes to condensed consolidated financial statements.

5

CALERES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Thirteen Weeks Ended

($ thousands)

May 4, 2024

    

April 29, 2023

Operating Activities

  

 

  

Net earnings

$

30,798

$

34,792

Adjustments to reconcile net earnings to net cash provided by operating activities:

 

 

  

Depreciation

 

9,396

 

8,481

Amortization of capitalized software

 

1,335

 

1,194

Amortization of intangible assets

 

2,759

 

3,039

Amortization of debt issuance costs and debt discount

 

102

 

102

Share-based compensation expense

 

3,710

 

2,905

Loss on disposal of property and equipment

 

39

 

245

Impairment charges for property, equipment, and lease right-of-use assets

 

245

 

39

Adjustment to expected credit losses

(1,038)

(264)

Deferred income taxes

 

472

 

184

Changes in operating assets and liabilities:

 

 

Receivables

 

(23,549)

 

(15,028)

Inventories

 

9,881

 

20,656

Prepaid expenses and other current and noncurrent assets

 

(2,716)

 

(648)

Trade accounts payable

 

15,536

 

31,885

Accrued expenses and other liabilities

 

(19,399)

 

(59,624)

Income taxes, net

 

8,729

 

9,102

Other, net

 

(226)

 

437

Net cash provided by operating activities

 

36,074

 

37,497

Investing Activities

 

  

 

  

Purchases of property and equipment

 

(9,802)

 

(5,750)

Capitalized software

 

(524)

 

(798)

Net cash used for investing activities

 

(10,326)

 

(6,548)

Financing Activities

 

  

 

  

Borrowings under revolving credit agreement

 

118,500

 

126,000

Repayments under revolving credit agreement

 

(109,500)

 

(142,000)

Dividends paid

 

(2,442)

 

(2,482)

Acquisition of treasury stock

 

(15,070)

 

Issuance of common stock under share-based plans, net

 

(7,847)

 

(10,006)

Net cash used for financing activities

 

(16,359)

 

(28,488)

Effect of exchange rate changes on cash and cash equivalents

 

(38)

 

(10)

Increase in cash and cash equivalents

 

9,351

 

2,451

Cash and cash equivalents at beginning of period

 

21,358

 

33,700

Cash and cash equivalents at end of period

$

30,709

$

36,151

See notes to condensed consolidated financial statements.

6

CALERES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Accumulated

Total

Other

Caleres, Inc.

(Unaudited)

Common Stock

Additional

Comprehensive

Retained

Shareholders’

Noncontrolling

($ thousands, except number of shares and per share amounts)

    

Shares

    

Dollars

    

Paid-In Capital

    

Loss

    

Earnings

    

Equity

    

Interests

    

Total Equity

BALANCE FEBRUARY 3, 2024

 

35,490,019

$

355

$

184,451

$

(34,504)

$

410,329

$

560,631

$

6,939

$

567,570

Net earnings (loss)

 

 

 

 

 

30,939

 

30,939

 

(141)

 

30,798

Foreign currency translation adjustment

 

 

 

 

(757)

 

  

 

(757)

 

(73)

 

(830)

Pension and other postretirement benefits adjustments, net of tax of $395

 

 

 

 

1,140

 

  

 

1,140

 

  

 

1,140

Comprehensive income (loss)

 

 

 

 

383

 

30,939

 

31,322

 

(214)

 

31,108

Dividends ($0.07 per share)

 

 

 

 

  

 

(2,442)

 

(2,442)

 

  

 

(2,442)

Acquisition of treasury stock

 

(416,000)

 

(4)

 

 

 

(15,066)

 

(15,070)

 

  

 

(15,070)

Issuance of common stock under share-based plans, net

 

61,388

 

0

 

(7,847)

 

 

 

(7,847)

 

  

 

(7,847)

Share-based compensation expense

 

 

 

3,710

 

  

 

  

 

3,710

 

  

 

3,710

BALANCE MAY 4, 2024

 

35,135,407

$

351

$

180,314

$

(34,121)

$

423,760

$

570,304

$

6,725

$

577,029

BALANCE JANUARY 28, 2023

 

35,715,752

$

357

$

180,747

$

(26,750)

$

266,329

$

420,683

$

5,430

$

426,113

Net earnings

 

 

 

 

 

34,727

 

34,727

 

65

 

34,792

Foreign currency translation adjustment

 

 

 

 

(220)

 

  

 

(220)

 

69

 

(151)

Pension and other postretirement benefits adjustments, net of tax of $245

 

 

 

 

710

 

 

710

 

 

710

Comprehensive income

 

490

34,727

35,217

134

 

35,351

Dividends ($0.07 per share)

 

 

 

 

 

(2,482)

 

(2,482)

 

 

(2,482)

Issuance of common stock under share-based plans, net

 

558,847

 

6

 

(10,012)

 

 

 

(10,006)

 

  

 

(10,006)

Share-based compensation expense

 

 

 

2,905

 

  

 

  

 

2,905

 

  

 

2,905

BALANCE APRIL 29, 2023

 

36,274,599

$

363

$

173,640

$

(26,260)

$

298,574

$

446,317

$

5,564

$

451,881

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 has experienced more equal distribution among the quarters in recent years.  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.

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 February 3, 2024.

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.

Noncontrolling Interests

Noncontrolling interests in the Company’s condensed consolidated financial statements result from the accounting for noncontrolling interests in partially-owned consolidated subsidiaries or affiliates.  In 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 50% owners of the joint venture, which is named CLT Brand Solutions (“CLT”).    

Net sales and operating (loss) earnings of CLT for the periods ended May 4, 2024 and April 29, 2023 were as follows:

    

Thirteen Weeks Ended

($ thousands)

    

May 4, 2024

    

April 29, 2023

Net sales

$

5,722

$

5,221

Operating (loss) earnings

 

(300)

 

120

The Company consolidates CLT into its condensed consolidated financial statements on a one-month lag.  Net (loss) earnings attributable to noncontrolling interests represents the share of net earnings or losses that is attributable to Brand Investment Holding.  Transactions between the Company and the joint venture have been eliminated in the condensed consolidated financial statements.

Supplier Finance Program

The Company facilitates a voluntary supplier finance program (“the Program”) that provides certain of the Company’s suppliers the opportunity to sell receivables related to products that the Company has purchased to participating financial institutions at a rate that leverages the Company’s credit rating, which may be more beneficial to the suppliers than the rate they can obtain based upon their own credit rating. The Company negotiates payment and other terms directly with the suppliers, regardless of whether the supplier participates in the Program, and the Company’s responsibility is limited to making payment based on the terms originally negotiated with the supplier.  The suppliers that participate in the Program have discretion to determine which invoices, if any, are sold to the participating financing institutions.  The liabilities to the suppliers that participate in the Program are presented as accounts payable in the Company’s condensed consolidated balance sheets, with changes reflected within cash flows from operating activities when settled.  As of May 4, 2024 and April 29, 2023, the Company had $16.0 million and $16.8 million, respectively, of accounts payable subject to the Program arrangements.

8

Property and Equipment, Held for Sale

The Company continues to actively market for sale its nine-acre corporate headquarters campus (the “Campus”) located in Clayton, Missouri and, as of May 4, 2024, was engaged in discussions with multiple potential buyers.  The Company expects the Campus to qualify as a completed sale within the next year.  Accordingly, the Campus, primarily consisting of land and buildings, has been classified as property and equipment, held for sale on the condensed consolidated balance sheet as of May 4, 2024 within the Eliminations and Other category.  The Company evaluated the Campus asset group for impairment and determined that no indicators were present as of May 4, 2024.

Enterprise Resource Planning (“ERP”) Implementation

The Company is in the process of undergoing a multi-year cloud-based ERP implementation.  Other assets on the condensed consolidated balance sheets included $14.5 million and $2.3 million as of May 4, 2024 and April 29, 2023, respectively, for capitalized costs associated with this implementation.

Note 2    Impact of New Accounting Pronouncements

Impact of Recently Issued Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which is intended to improve reportable segment disclosures by disclosing significant segment expenses that are regularly provided to the chief operating decision maker.  The ASU is effective for the Company’s annual disclosures for fiscal year 2024 and for interim periods beginning with the first quarter of 2025.  The adoption of the ASU is not expected to have a material impact on the Company’s financial statement disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures.  The ASU expands the income tax disclosure requirements, principally related to the rate reconciliation table and income taxes paid by jurisdiction.  ASU 2023-09 is effective for the Company on a prospective basis in fiscal year 2025, with the option to apply the standard retrospectively, and early adoption is permitted.  The adoption of the ASU is not expected to have a material impact on the Company’s financial statement disclosures.

9

Note 3    Revenues

Disaggregation of Revenues

The following table disaggregates revenue by segment and major source for the periods ended May 4, 2024 and April 29, 2023:

Thirteen Weeks Ended May 4, 2024

Eliminations and

($ thousands)

    

Famous Footwear

    

Brand Portfolio

    

Other

    

Total

Retail stores

$

304,528

$

17,089

$

$

321,617

E-commerce - Company websites (1)

 

44,478

 

58,007

 

 

102,485

E-commerce - wholesale drop-ship (1)

 

 

30,370

 

(1,348)

 

29,022

Total direct-to-consumer sales

349,006

105,466

(1,348)

453,124

Wholesale - e-commerce (1)

 

 

67,787

 

 

67,787

Wholesale - landed

 

 

125,757

 

(6,218)

 

119,539

Wholesale - first cost

 

 

15,736

 

 

15,736

Licensing and royalty

 

427

 

2,438

 

 

2,865

Other (2)

 

120

 

27

 

 

147

Net sales

$

349,553

$

317,211

$

(7,566)

$

659,198

    

Thirteen Weeks Ended April 29, 2023

Eliminations and

($ thousands)

    

Famous Footwear

    

Brand Portfolio

    

Other

    

Total

Retail stores

$

308,239

$

16,438

$

$

324,677

E-commerce - Company websites (1)

 

40,206

 

53,431

 

 

93,637

E-commerce - wholesale drop-ship (1)

 

34,798

 

(1,268)

33,530

Total direct-to-consumer sales

348,445

104,667

(1,268)

451,844

Wholesale - e-commerce (1)

 

 

54,979

 

 

54,979

Wholesale - landed

 

 

142,896

 

(10,672)

 

132,224

Wholesale - first cost

 

 

19,949

 

 

19,949

Licensing and royalty

 

585

 

3,015

 

 

3,600

Other (2)

 

128

 

10

 

 

138

Net sales

$

349,158

$

325,516

$

(11,940)

$

662,734

(1)Collectively referred to as "e-commerce" in the narrative below
(2)Includes breakage revenue from unredeemed gift cards, which is recognized during the 24-month period following the sale of the gift cards according to the Company’s historical redemption patterns.

Retail stores

The Company generates revenue 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 two performance obligations: the sale of merchandise and the delivery of points that may be converted to savings certificates and redeemed for future purchases.  The transaction price is allocated to the separate performance obligations based on the relative stand-alone selling price.  The stand-alone selling price for the points is estimated using the retail value of the merchandise earned, adjusted for estimated breakage based upon historical redemption patterns.  The revenue associated with the initial merchandise purchased is recognized immediately and the value assigned to the points is deferred until the points are redeemed, forfeited or expired.

10

E-commerce

The Company 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, or picked up directly by the consumer from the Company’s stores (“e-commerce – Company websites”); sales from the Company’s wholesale customers’ websites that are fulfilled on a drop-ship basis (“e-commerce – wholesale drop ship”); and other e-commerce sales (“wholesale – e-commerce”), 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 Company obtains title to the footwear from the overseas suppliers and maintains title until the merchandise is shipped 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.  Landed sales generally carry a higher profit rate than first-cost wholesale sales as a result of the brand equity associated with the product along with the additional customs, warehousing and logistics services provided to customers and the risks associated with inventory ownership.

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. Many of the customers then import this product into the United States.  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 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)

    

May 4, 2024

    

April 29, 2023

    

February 3, 2024

Customer allowances and discounts

$

17,090

$

19,076

$

21,497

Loyalty programs liability

 

8,350

 

16,993

 

11,457

Returns reserve

 

15,100

 

13,915

 

10,586

Gift card liability

 

5,841

 

5,920

 

6,385

Changes in contract balances with customers generally reflect differences in relative sales volume for the periods presented.  In addition, during the thirteen weeks ended May 4, 2024, the loyalty programs liability increased $9.7 million due to points and material rights earned on purchases and decreased $12.8 million due to expirations and redemptions.  In addition, during 2023, the Company modified its Famous Footwear Rewards loyalty program.  Under the modified program, points and savings certificates have a shorter time period to be either utilized or expired, which has resulted in a lower liability as of May 4, 2024.  During the thirteen weeks ended April 29, 2023, the loyalty programs liability increased $8.8 million due to points and material rights earned on purchases and decreased $9.5 million due to expirations and redemptions.  The liability for loyalty programs is presented within other accrued expenses when earned and is generally expected to be recognized as revenue within one year.  The gift card liability is established upon the sale of a gift card and revenue is recognized either upon redemption of the gift card by the consumer or based upon the gift card breakage rate, which is generally within the 24-month period following the sale of the gift card.

11

The Company estimates and records an expected lifetime credit loss on accounts receivable by utilizing credit ratings and other customer-related information, as well as historical loss experience.  The following table summarizes the activity in the Company’s allowance for expected credit losses during the thirteen weeks ended May 4, 2024 and April 29, 2023:

Thirteen Weeks Ended

($ thousands)

    

May 4, 2024

April 29, 2023

Balance, beginning of period

$

8,820

$

8,903

Adjustment to expected credit losses

(1,038)

(264)

Uncollectible accounts written off, net of recoveries

319

(20)

Balance, end of period

$

8,101

$

8,619

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 May 4, 2024 and April 29, 2023:

Thirteen Weeks Ended

($ thousands, except per share amounts)

    

May 4, 2024

    

April 29, 2023

NUMERATOR

Net earnings

$

30,798

$

34,792

Net loss (earnings) attributable to noncontrolling interests

 

141

 

(65)

Net earnings attributable to Caleres, Inc.

$

30,939

$

34,727

Net earnings allocated to participating securities

 

(1,208)

 

(1,478)

Net earnings attributable to Caleres, Inc. after allocation of earnings to participating securities

$

29,731

$

33,249

 

  

 

  

DENOMINATOR

 

  

 

  

Denominator for basic earnings per common share attributable to Caleres, Inc. shareholders

 

33,793

 

34,407

Dilutive effect of share-based awards

 

106

 

Denominator for diluted earnings per common share attributable to Caleres, Inc. shareholders

 

33,899

 

34,407

 

  

 

  

Basic earnings per common share attributable to Caleres, Inc. shareholders

$

0.88

$

0.97

 

  

 

  

Diluted earnings per common share attributable to Caleres, Inc. shareholders

$

0.88

$

0.97

As further discussed in Item 2, Unregistered Sales of Equity Securities and Use of Proceeds, the Company has a publicly announced share repurchase program.  The Company repurchased 416,000 shares under this program during the thirteen weeks ended May 4, 2024.  The Company did not repurchase any shares during the thirteen weeks ended April 29, 2023.  No excise taxes are due on the Company’s share repurchases during the thirteen weeks ended May 4, 2024 under the provisions of the Inflation Reduction Act of 2022.

   

12

Note 5    Business Segment Information

Following is a summary of certain key financial measures for the Company’s business segments for the periods ended May 4, 2024 and April 29, 2023:

Famous

Brand

Eliminations

($ thousands)

    

Footwear

    

Portfolio

    

and Other

    

Total

Thirteen Weeks Ended May 4, 2024

  

  

  

  

Net sales

$

349,553

$

317,211

$

(7,566)

$

659,198

Intersegment sales (1)

 

7,566

 

7,566

Operating earnings (loss)

 

16,855

 

41,425

 

(15,522)

 

42,758

Segment assets

 

868,729

 

827,645

 

164,736

 

1,861,110

 

  

 

  

 

  

 

  

Thirteen Weeks Ended April 29, 2023

 

  

 

  

 

  

 

  

Net sales

$

349,158

$

325,516

$

(11,940)

$

662,734

Intersegment sales (1)

 

 

11,940

 

 

11,940

Operating earnings (loss)

 

17,056

 

42,669

 

(10,138)

 

49,587

Segment assets

 

830,994

 

844,263

 

142,826

 

1,818,083

 

  

 

  

 

  

 

  

(1)Included in net sales in the Brand Portfolio segment and eliminated in the Eliminations and Other category.

The Eliminations and Other category includes corporate assets, administrative expenses and other costs and recoveries, which are not allocated to the operating segments, as well as the elimination of intersegment sales and profit.

Following is a reconciliation of operating earnings to earnings before income taxes:

    

Thirteen Weeks Ended

($ thousands)

    

May 4, 2024

    

April 29, 2023

Operating earnings