Analysts Remain Bullish On Caleres After Q2

Sam Edelman spring 2015
Sam Edelman Spring '15 style
Courtesy of brand

Although results were lighter than expected, analysts and investors remain upbeat on St. Louis-based Caleres whose brands include top-performing Famous Footwear, Via Spiga, Vince, Sam Edelman and Naturalizer.

Sterne Agee CRT analyst Sam Poser, CL King & Associates analyst Steve Marotta and Susquehanna Financial LLLP analyst Christopher Svezia all maintained a buy or positive rating on the company’s stock following its earnings announcement.

Meanwhile the firm’s share price was also up more than 3 percent at press time Friday following the earnings release that revealed year-over-year growth in revenues and adjusted earnings but a decline in reported earnings due to an after-tax expense.

“[We reported a] solid performance despite an ever-changing retail environment,” said Caleres’ chairman, president and CEO Diane Sullivan during the firm’s Q2 conference call. “Tourist and border markets have been hard hit by the strengthening U.S. dollar and back-to-school shopping has shifted closer to need in many areas.”

The underlying fundamentals remain strong at Caleres, however, Poser said in an Aug. 27 note.

“Same-store-sales at Famous Footwear have accelerated thus far in August to mid-single-digits due to shift in back-to-school and the momentum will likely continue given the easy comparisons in October,” Poser wrote. “The margin opportunity in the Brand Portfolio still exists, although the timing is uncertain.”

Svezia described Caleres’ performance as “another solid quarter with accelerating trends in 3Q and margin opportunity in 2H” and slightly raised his FY15 EPS to $1.93 versus a prior estimate of $1.92.

Famous Footwear’s 0.1 percent comp growth was disappointing however, Svezia acknowledged.

“Comp [at Famous Footwear] was driven by a 1.9 percent gain in athletic but was offset by weakness in sandals and in women’s performance,” Svezia wrote. “But before we sound an alarm … Comp has since accelerated to [mid-single-digit growth in] 3Q to-date, supporting the notion that a later back-to-school and Labor Day are leading to a stronger sales shift into 3Q.”

Marotta highlighted that “choppy trends in tourist and border markets acted as a drag on Q2 comp performance,” but also noted that the back-to-school season for Caleres has started has gotten off to a stronger start than he expected.

“In light of the Q2 reported, we are increasing our FY15 and FY16 EPS estimates to $1.91 and $2.15 from $1.88 and $2.13, respectively,” Marotta wrote.

During the company’s Q2 conference call Sullivan said the company’s store traffic was down but there was strong improvement in e-commerce sales — up double-digits in the quarter across mobile, tablet and desktop.

“As the year progresses, we expect to continue to see the benefit of our digital investments, which remain a key part of our long-term strategy,” Sullivan said.