More than a hundred Naturalizer outposts are on the chopping block.
In its third-quarter earnings conference call with analysts, parent Caleres Inc. announced that it would shutter roughly 133 of the brand’s “legacy” stores in the United States and Canada — or all but two locations in its brick-and-mortar fleet in North America — by the end of the fiscal year. It will continue to operate its units in Miami’s Dadeland Mall and 34th Street in New York City.
The St. Louis-based company instead plans to grow Naturalizer’s e-commerce business through its online platform and via its retail partners’ websites. (Along with the closures, Caleres intends to “rightsize” the brand’s workforce by shifting talent to assist its digital expansion.)
“Make no mistake, we continue to view the Naturalizer brand as a strong and value-driving component of our portfolio,” chairman, president and CEO Diane Sullivan explained. “In fact, Naturalizer continues to inspire great brand loyalty. It has a great track record of anticipating and adjusting to consumer preferences and needs.”
With the move, Caleres expects pre-tax charges in the fourth quarter of between $20 million and $25 million. Once the closures are finalized, it anticipates a pre-tax benefit of between $10 million and $12 million each year.
According to the retail group, performance at Naturalizer stores have been “significantly impacted” by the coronavirus pandemic.
“We went from stores that were generating [a] decent amount of revenue and obviously that reduction [in foot traffic] has put a lot of pressure on the bottom line,” said SVP and CFO Kenneth Hannah. “Now is just a good time to go ahead and exit.”
For the three months ended Oct. 31, Caleres reported an adjusted income of $18.2 million, or adjusted earnings of 48 cents per share, compared with the prior year’s income of $31.6 million, or adjusted earnings of 78 cents per share. Revenues declined 18.3% to $647.5 million. Still, the figures beat analysts’ predictions of 13 cents in EPS and revenues of $606.89 million.
While Famous Footwear experienced a sales decline of 12.3%, the company’s brand portfolio segment recorded a 25.6% drop. Caleres’ total company-owned website sales increased 24.6%, with e-commerce penetration rising to 25.4% of its net sales.
Although it didn’t provide an outlook for the fiscal year, Caleres shared that it continues to expect “seasonally lower” sales in Q4 compared with Q3. Its net sales are forecasted to fall roughly 20% year over year, with Famous Footwear sales down 10% to 15% and its brand portfolio sales expected to sink 25% to 30%. Excluding the impact of Naturalizer’s store closures and barring any further COVID-19-related shutdowns, it anticipates positive adjusted earnings per share in the quarter.
“As we move into 2021, we expect to reallocate capital and resources to amplify our digital presence, capturing the consumers where they want to shop, intensifying our e-commerce focus and then making sure we’re leveraging those capabilities across the brand portfolio,” Sullivan added. “We’re pleased with our progress and pleased that we were able to deliver solid performance in the third quarter, and we began the fourth quarter appropriately cautious but confident in our ability to win with the consumer for the balance of the year and heading into next year.”