After Disappointing Q1, Famous Footwear Eyes Back-to-School Momentum

Following weaker-than-expected sales in the first quarter, Famous Footwear is looking ahead.

The shoe chain — whose parent company, Caleres Inc., posted earnings yesterday at market close — saw a slowdown in its performance, recording revenues that were down 3.1% to $352.2 million and same-store sales that declined 1% as it faced a number of economic headwinds in the period.

During a call with investors and analysts following the report’s release, Caleres CEO Diane Sullivan said performance at the family footwear chain “was frankly not what we wanted it to be.” She went on to address the impact of delayed tax refunds and lower returns, as well as a slow start to spring, among the reasons for slackening revenues at its star brand.

“As a result, we were more promotional at Famous Footwear during the quarter in response to the unseasonable weather and increased peer activity,” she added.

However, the St. Louis-based company — also parent to Sam Edelman, Vionic and Naturalizer — is already focused on the retailer’s strategy moving into the second quarter.

It plans to continue to use promotions to help reduce inventory and  “in order to drive freshness in our product assortment for back-to-school,” Sullivan said. “We expect significant improvement to become apparent in the second half. We’re not there yet, but we’re moving in the right direction, and we are seeing improvement and good strength in the new product.”

In late March, Famous Footwear also launched its FamouslyYou Rewards program, transitioning its Famous Footwear Rewards to a system with more engaging communications and better savings. Among the draws for customers are free shipping for online orders as well as bonus points for each e-commerce purchase or through app engagement.

The firm saw the addition of 1.1 million new members — on top of the nearly 700,000 existing rewards members — with rewards sales up 1% in the quarter and 10% in April, representing approximately 80% of the period’s sales.

“We are on track with our expectations and are already receiving a good response,” Sullivan said. “We expect to see continued and significant improvement during back-to-school and rolling into the second half of the year.”

Additionally, the company discussed the repercussions of President Donald Trump’s threatened tariffs on the retailer as well as Caleres’ overall business. Last month, Washington increased tariffs from 10% to 25% on $200 billion worth of Chinese products. The Office of the U.S. Trade Representative also released a separate list of imports, including footwear, that could be hit with another proposed 25% hike in levies.

Caleres has already been moving production away from the country over the last five years, currently sourcing about 60% of its products from China. (Sullivan noted in the call that Famous Footwear’s mix of athletic and nonathletic footwear hailing from China is “probably somewhere in the 35% to 45%.”)

“While nothing is final yet, and we are certainly hopeful for a positive resolution, we are actively working through contingency plans, which includes potentially shifting additional production out of China, working with our factory partners to reduce costs and exploring price increases,” Sullivan added. “While we are treating these issues with the same sense of urgency we’re applying across our entire business, we are taking nothing for granted.”

The company joins a list of fashion and footwear businesses — including Deckers Outdoor Corp., Shoe Carnival Inc. and VF Corp. — that have expressed concerns about the escalating trade war between the United States and China. According to the Footwear Distributors & Retailers of America, each U.S. family would have to spend an extra $131.93 on footwear annually should the proposed tariff hike take effect.

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