Coronavirus Uncertainty Has Led Shoe Brands to Withdraw Their Guidance — Why This Is a Big Deal

Uncertainties surrounding the spread of the coronavirus is putting increasing pressure on retail.

Over the past few weeks, many small and large players in the sector have faced supply chain bottlenecks and widespread store shutdowns or significant declines in foot traffic — all of which are expected to dent their bottom lines. As their future financial performances come into question, more and more businesses have opted to withhold or pull their guidance, which has traditionally been viewed as an important data set for investors, market watchers, other key decision makers and companies themselves.

Now, it simply remains to be seen just how severely revenues will be hit or how long it will take for struggling retailers to be able to get back on their feet, as investors attempt to navigate a time of countless unknowns.

With all eyes on the next earnings cycle, these are the companies that have suspended their outlooks as they brace themselves for the unpredictable times ahead.

Caleres Inc.

On March 12, the Famous Footwear parent released its fourth-quarter and full-year results, predicting for the 2020 fiscal year net sales that remain flat at $2.95 billion and earnings per diluted share in the range of $1.95 to $2.15. The outlook factored in coronavirus-related headwinds between $0.15 and $0.20 per share in the first quarter.

Six days later, however, Caleres Inc. withdrew its guidance, which it said included only estimated impacts from supply chain disruptions and not the decline in consumer demand following the temporary closures of its stores across the country.

“During these extraordinary times, we are taking steps to manage the company conservatively,” added SVP and CFO Ken Hannah. “We are reducing capital expenditures and operating expenses, and we have the flexibility to leverage our strong balance sheet to shift our capital allocation priorities to align with the best interest of our shareholders.”

As of March 18, the company reported more than $175 million in cash and liquidity, with the ability to increase its asset-based credit facility by up to $250 million. “We remain confident in our ability to service our debt and in the long-term outlook for Caleres,” Hannah added.

Designer Brands Inc.

Designer Brands Inc. refrained from providing an outlook for fiscal 2020 as fears surrounding the coronavirus crisis battered its stock and negatively impacted other aspects of its business. In its fourth-quarter and full-year earnings release on March 17, the retailer said that its stores across North America have temporarily closed, but its warehouses remain open to complete online orders.

“We remain focused on strengthening our relationship with our customers and increasing our market share through the execution of our three strategic pillars of developing differentiated products; offering differentiated experiences, both in store and online; and focusing on new growth opportunities to position Designer Brands well for the long term,” CEO Roger Rawlins wrote in a statement.

In order to preserve its liquidity, the company’s board declared a quarterly cash dividend of $0.10 per share, a reduction from the previous level of $0.25 per share.

Dick’s Sporting Goods Inc.

In its better-than-expected fourth-quarter earnings report released March 10, Dick’s Sporting Goods Inc. called for “a degree of caution over the coronavirus and how it may impact our business” but remained bullish on its outlook for 2020.

It forecast earnings per share between $3.60 and $4.00, while same-store sales was predicted in the range of flat to 2%. It also ended the full year with roughly $69 million in cash and cash equivalents as well as $224 million in outstanding borrowings under a $1.6 billion revolving credit facility.

However, in a filing on March 19, the athletic retailer wrote that it has experienced a “significant reduction in customer traffic and demand” amid the COVID-19 outbreak. Because of the “uncertainty related to its duration,” Dick’s pulled its guidance and decided against providing an update. It also announced the temporary closures of its stores for two weeks, starting March 18 and ending April 2, and warned of potential supply chain disruptions in the second quarter.

Genesco Inc.

On March 18, Genesco Inc. pulled its guidance issued six days prior, when it predicted that sales for the fiscal year 2021 would increase 3% to 6% and adjusted diluted earnings per share would land in the range of $4.90 to $5.40.

Further, after reducing store hours, the Journeys parent announced the temporary closure of its North American stores until March 28 to help contain the spread of the deadly virus. Its e-commerce platforms remain in operation.

“Over the past few years, we have made strategic investments in our e-commerce operations and IT infrastructure establishing dynamic online businesses that will allow our customers to continue to shop and stay connected with our retail brands through social media during these unprecedented times,” President and CEO Mimi Vaughn said in a statement.

As of Feb. 1, Genesco had cash and cash equivalents of $81.4 million.

Ross Stores Inc.

Despite February sales that were ahead of its expectations, Ross Stores Inc. has observed a “broad-based deceleration in sales trends” over the past week due to the outbreak and withdrew its full-year guidance, the company said in a statement on March 19. It added that it was faced with the mandatory shutdown of outposts in “certain markets” and foresees additional store closures.

“I want to emphasize that our company began 2020 in a strong financial position,” CEO Barbara Rentler said. “We are proactively taking these early actions to further increase our liquidity and flexibility to successfully manage through these challenging times. We will continue to monitor ongoing developments and respond accordingly.”

In its fourth-quarter and full-year earnings release on March 3, the off-price retailer forecast 1% to 2% growth in same-store sales and earnings per share of $4.67 to $4.88. It approved an increase in the quarterly cash dividend to 28 cents per share — up 12% over the prior year — attributed to “ongoing confidence in the company’s ability to generate significant amounts of cash.”

Skechers USA Inc.

Skechers USA Inc. withdrew its first-quarter guidance on March 18, when it also announced the shutdown of company-owned stores in North America and some European markets until March 28. This followed the earlier closures of company-owned as well as third-party owned stores in other severely impacted international regions.

Upon reporting its fourth-quarter and full-year results on Feb. 6, the casual and performance shoemaker anticipated first-quarter sales in the range of $1.4 billion to $1.42 billion and diluted earnings per share of $0.70 to $0.75. It warned at the time, however, that those estimates could materially change depending on the coronavirus situation.

“With the outbreak spreading more broadly across the globe, it is apparent that the situation has deteriorated considerably,” CFO John Vandemore said on Wednesday. “While the full impact and duration of the COVID-19 outbreak is unknown, we believe the strength of our brand, and our solid balance sheet, will enable us to weather this disruption.”

In its balance sheet for the period ended Dec. 31, the company said its cash, cash equivalents and investments totaled $1.03 billion.

Steven Madden Ltd.

On March 18, the maker of Steve Madden footwear said it was pulling its fiscal year 2020 revenue and earnings guidance as a result of the “increasing uncertainty related to the potential impact of COVID-19 on the company’s global business operations.”

The decision came three days after Steven Madden Ltd. announced that all of its stores in the United States will close through March 27. “This is obviously a rapidly evolving situation, and we will monitor developments going forward and adjust our plans as needed,” the company wrote in an Instagram post.

In its fourth-quarter and full-year earnings report on Feb. 27, Steve Madden predicted a revenue gain of 0% to 1% and diluted earnings per share in the range of $1.70 to $1.80 for fiscal 2020. As of Dec. 31, its cash, cash equivalents and current marketable securities were about $304.6 million.

TJX Companies Inc.

The TJ Maxx and Marshalls parent announced on March 19 that it had taken several steps to strengthen its financial position and balance sheet in response to the coronavirus pandemic, including drawing down $1 billion from its revolving credit facilities, suspending its share repurchase program and reducing capital expenditures.

It also said it was closing all stores in the United States, Canada, Europe and Australia for two weeks and withdrawing its first-quarter and full-year 2021 financial guidance, which was given on Feb. 26. At the time, TJX Companies Inc. predicted first-quarter diluted earnings per share in the range of 53 cents to 54 cents and full-year diluted earnings per share between $2.55 and $2.60.

Similar to Ross, TJX allowed an 18% increase in its quarterly dividend to 23 cents per share since the business “continues to generate tremendous amounts of cash and deliver strong financial returns.”

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