What happened
Shares of Caleres (NYSE: CAL) were moving higher today after the footwear retailer topped profit expectations in its second-quarter earnings report, showing it's managing the challenging macro environment better than expected.
As of 2:16 p.m. ET, the stock was up 16.5% on the news.
So what
In a difficult environment, the Famous Footwear parent said revenue fell 5.8% to $695.5 million, missing estimates of $704.9 million.
Sales at Famous Footwear were down 5.1%, while the brand portfolio segment declined 7.2%. Direct-to-consumer sales represented 74% of net sales, showing it's successfully pivoted away from the wholesale channel. Despite the year-over-year decline, its results improved on a sequential basis.
Gross margin declined from 45.6% to 45.2%, and selling, general, and administrative expenses as a percentage of revenue rose from 36.3% to 37.5%, reflecting the revenue decline.
Inventory declined 14.3% from a year ago, which should help improve margins, and it reduced credit facility borrowings by $47.5 million from the previous quarter, shoring up its balance sheet.
On the bottom line, the company reported adjusted earnings per share of $0.95, which was down from $1.38 in the year-ago quarter, but better than estimates of $0.88.
CEO Jay Schmidt said, "The Caleres team performed at a high level during the second quarter, delivering a strong consolidated operating margin and exceeding adjusted earnings per share expectations despite a choppy macro environment.
Now what
Looking ahead, the company reiterated its adjusted earnings per share (EPS) guidance of $4.10 to $4.30, compared to estimates of $4.13, and expected revenue to be down 3% to 5%. For the third quarter, it expects adjusted EPS of $1.30 to $1.35, ahead of the consensus of $1.29. It also said it reduced its debt-to-EBITDA ratio to less than 1.
While the report was far from flawless, investors seemed to excuse the sales decline due to the macro environment. Caleres is also priced as a value stock, trading at a forward P/E of just 7, which helps explain the stock's jump today.
10 stocks we like better than Caleres
When our analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
They just revealed what they believe are the ten best stocks for investors to buy right now... and Caleres wasn't one of them! That's right -- they think these 10 stocks are even better buys.
*Stock Advisor returns as of August 28, 2023
Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
