On the heels of a better-than-expected fourth quarter, Caleres Inc. CEO Diane Sullivan said the “future feels brighter” for the company but cautioned that not all is going to be rosy amid a host of challenging external factors.
Among those issues are “ongoing pandemic-related impacts” as well as supply chain disruptions due to port congestion, Caleres’ chief told analysts during a call on Tuesday evening to discuss the company’s Q4 results. Sullivan said Caleres is currently facing between $60 million and $70 million of delayed inventory receipts with roughly $50 million of those belonging to Famous Footwear and about $10 million to $20 million related to the Brand Portfolio, which includes Sam Edelman, Vionic and Allen Edmonds.
“It’s hard to tell [at this time] exactly when we’re going to be caught up fully with respect to all of those receipts; we don’t have the visibility yet on what that looks like,” Sullivan explained, adding that “there’s a number of actions that we’re taking, and we are obviously taking a look at this week to week.”
She said the company is working to ensure it’s placing orders on the Brand Portfolio side in “advance of where our needs are going to be” into the back half of the year — calling the effort a “proactive” one whereby the company engages a “rapid response program.”
“With respect to Famous, the good news is they have been really operating at a lower inventory level throughout 2020,” Sullivan noted. “And our expectation is that they will be down in the range of 5% to 10% on their inventory levels, typically, going through the rest of the year.”
Caleres joins a growing list of companies — including Steve Madden, Wolverine World Wide Inc., Nordstrom and The Gap Inc. — bemoaning a bottleneck situation at the United States’ busiest ports. Mainly, the ports of Los Angeles and Long Beach in California — which account for nearly half of total United States imports from Asia — are dealing with heightened volumes due to increased consumer demand as well as a shortage of workers.
The challenges are especially concerning for companies like Caleres and Madden, which were fairly well-positioned ahead of COVID-19 and had been able to safeguard much of their liquidity and remain relatively agile amid the crisis. Now, as another round of stimulus makes its way to the bank accounts of millions of Americans and the COVID-19 vaccine rollout shows promising signs, brands and retailers risk a stalled recovery due to port issues. (Meanwhile, off-price retailers like Ross, TJ Maxx, Burlington and Marshalls may be able to take advantage of opportunistic buys stemming from out-of-season merchandise and inventory overages at big brands.)
For the fourth quarter ended Feb. 1, Caleres reported net sales of $571 million, a decline of 18% year over year but significantly better than the $557.4 million analysts expected. Sales at Famous Footwear dipped 6.2% and those of the Brand Portfolio were down 32.4% year over year. Nevertheless, company owned e-commerce website sales increased 25%, with e-commerce penetration rising to account for 30% of net sales.
Overall, the company’s net income totaled $1.3 million, or 3 cents per diluted share compared to adjusted net income of $13.9 million, or 34 cents per share, in the comparable year-ago period. Those results trounced market watchers’ predictions for a loss of 10 cents per share.
“Even with macro challenges, there are signs of stabilization in the marketplace,” Sullivan told analysts of the firm’s outlook. “There is no doubt Caleres is a more agile and focused organization than it was at the start of 2020, and we believe we are well positioned to capitalize as the market rebounds, more likely in the second half of the year as the world returns to a greater degree of normalcy.”