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01/10 16:56
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call highlights weak sales performance, declining EPS, and gross margin issues. The Q&A reveals management's cautious outlook, particularly in China, and a lack of clarity on margin impact. Despite share buybacks, the challenging footwear environment and markdowns are concerning. Given the company's small market cap, the negative sentiment is likely to lead to a stock price decline in the range of -2% to -8% over the next two weeks.
Sales $741 million, down 2.8% year-over-year; decline attributed to weak seasonal demand in the boot category and an unfavorable calendar shift of about $29 million at Famous.
Adjusted Earnings Per Share (EPS) $1.23, down from $1.37 year-over-year; decrease attributed to lower sales and challenges in the boot category.
Brand Portfolio Sales Increased approximately 1%; growth driven by lead brands, with wholesale and owned dot com showing modest growth.
Famous Footwear Sales Declined 5% during the third quarter; comp sales increased 2.5%, with strong results in athletic and kids offsetting weak sales in boots.
Gross Margin Consolidated gross margin at 44.1%, a decrease of 55 basis points; decline driven by lower margin in Famous, partially offset by a slightly higher margin in brand portfolio.
Brand Portfolio Gross Margin 43.8%, up 15 basis points; supported by a favorable channel mix and higher initial margins.
Famous Gross Margin 42.9%, down 130 basis points; decrease reflects a shift to more days in BOGO promotions and softer performance in boots.
SG&A Expense $269 million, or 36.3% of sales, up 30 basis points; SG&A declined $5 million due to restructuring actions and lower incentive compensation costs.
Operating Earnings $58 million, with an operating margin of 7.9%; operating margin was 10.9% at brand portfolio and 6.9% at Famous.
Net Interest Expense $2.9 million, down $1.6 million due to lower average borrowings and a lower interest rate.
EBITDA $73 million, or 9.9% of sales.
Inventory $586 million, up 5.4% year-over-year; Famous inventory up 5.1% and brand portfolio inventory up 6%.
Debt to Trailing 12 Month EBITDA 1 times.
Share Buybacks $50 million completed in the quarter, repurchasing over 1.5 million shares at an average price of $32.82 per share.
New Product Launches: Sam Edelman introduced handbags under license in October, receiving positive early reactions.
International Expansion: Sam Edelman launched in Selfridges and John Lewis in the UK and opened a new store concept in Shanghai.
New Collection Launch: Allen Edmonds launched a new reserve collection across all channels, including an exclusive collection with Bergdorf Goodman.
Direct-to-Consumer Growth: Naturalizer returned to growth, led by its direct-to-consumer business.
New Store Opening: Naturalizer opened a new store in Beijing, relaunching the brand in Asia.
Market Share Gains: Brand portfolio gained market share in total and in women's fashion footwear according to Circana.
Kids Category Growth: Famous Footwear's kids category outperformed the total business, gaining 1.3 points of market share in shoe chains.
Famous Footwear Market Share: Famous Footwear gained 0.5 points in shoe chains according to Circana data.
Operational Efficiency: Speed initiative drove about 30% of sourcing in the quarter.
Inventory Management: Less aged inventory than last year, with more current and less core inventory.
Long-term Growth Strategy: The company announced a plan to drive growth in sales, earnings, and total shareholder return.
Sourcing Strategy: More than 50% of dollar volume is currently manufactured outside of China, aiming for 70% by the back half of 2025.
Sales Decline: Total sales declined 2.8% year-over-year, with a notable drop in boot sales across both segments.
Supply Chain Issues: Late receipts of trending athletic products at Famous Footwear impacted sales.
Credit Risk: A credit issue with one customer in the brand portfolio led to lower shipments.
China Market Softening: The company's business in China has softened, leading to a more cautious outlook.
Inventory Management: The company plans to take aggressive action on poor-performing items to end the year with a clean inventory position.
Tariff Risks: The company is adapting its sourcing strategy to mitigate the impact of additional tariffs, with plans to source more than 70% of products outside of China by 2025.
Economic Factors: The overall environment in family footwear has been challenging, impacting sales expectations.
Promotional Strategy: Increased markdowns and promotional activities are expected in Q4 to clear slow-moving inventory.
Market Competition: Competitive pressures in the footwear industry, particularly in the fashion segment, have contributed to weaker performance.
Brand Portfolio Growth: The brand portfolio reported growth, with lead brands outperforming portfolio brands, and gaining market share.
International Expansion: Sam Edelman launched in Selfridges and John Lewis in the UK, and opened a new store in Shanghai.
New Product Launches: Allen Edmonds launched a new reserve collection and Naturalizer expanded its direct-to-consumer business.
FLAIR Store Performance: FLAIR stores are outperforming the rest of the chain, with plans to open one new store in Boston.
Sourcing Strategy: The company is pivoting sourcing outside of China to mitigate tariff impacts.
Sales Guidance: Expecting sales to decline 2.5% to 3% for the full year 2024.
Earnings Per Share Guidance: Adjusted earnings per diluted share expected to be between $3.45 and $3.55.
Operating Margin Guidance: Consolidated operating margin expected to be between 6.1% and 6.3%.
Capital Expenditures Guidance: Capital expenditures projected to be between $50 million and $55 million.
Long-term Financial Targets: Expecting longer timeline to achieve specific EPS goals set in October 2023.
Share Buyback Program: The company completed $50 million of share buybacks during the quarter, repurchasing just over 1.5 million shares at an average price of $32.82 per share.
The earnings call reveals significant negative factors: a 75% drop in EPS, a 6.8% decline in sales, decreased gross margins, and suspended guidance. Despite some positive elements like strategic investments and supply chain evolution, these are overshadowed by financial setbacks and uncertainties. The Q&A section highlighted management's vague responses, indicating potential risks and lack of clarity. Given the company's small-cap status, these issues are likely to result in a strong negative stock price movement over the next two weeks.
The earnings call summary reveals weak financial performance with declining sales and margins, despite a slight EPS increase. The Q&A session highlighted concerns about tariffs, inventory, and cautious consumer spending. Guidance indicates further sales decline, with operational margin expected to be lowest in Q1. Despite shareholder returns through buybacks, the negative trends and economic uncertainties outweigh positives. Given the small market cap, the stock is likely to react negatively, aligning with the negative sentiment from financial results and guidance.
The earnings call highlights weak sales performance, declining EPS, and gross margin issues. The Q&A reveals management's cautious outlook, particularly in China, and a lack of clarity on margin impact. Despite share buybacks, the challenging footwear environment and markdowns are concerning. Given the company's small market cap, the negative sentiment is likely to lead to a stock price decline in the range of -2% to -8% over the next two weeks.
The earnings call summary presents mixed signals. Despite a record gross margin and EPS beat, there are concerns about sales decline and ERP issues. The Q&A highlights confidence in resolving ERP challenges and positive trends in athletic brands, yet acknowledges competitive pressures and economic factors. Restructuring savings and store closures add complexity. The market cap suggests moderate sensitivity to news. Overall, the combination of positive and negative factors leads to a neutral prediction, expecting the stock price to remain within -2% to 2% over the next two weeks.
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