Caleres, Inc.

Good morning and welcome to the Calera's fourth quarter earnings conference call. My name is Robert and I'll be your conference coordinator. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. At this time, I'll turn the call over to Logan Bonacorsi, Vice President of Investor Relations. Please go ahead.

Good morning. I'd like to thank you for joining our fourth quarter and full year 2022 earnings call and webcast. A press release with detailed financial tables as well as our quarterly slide presentation are available at Calaris.com. Please be aware today's discussion contains forward-looking statements, which are subject to a number of risks and uncertainties. Actual results may differ materially due to various risk factors, including but not limited to the factors disclosed in the Company's Form 10-K and other filings with the U.S. Securities and Exchange Commission. Please refer to today's press release and our SEC filings for more information on risk factors and other factors which could impact forward-looking statements. Copies of these reports are available online. In discussing the results of our operations, we will be providing and referring to certain non-GAAP financial measures. You can find additional information regarding these non-GAAP financial measures as well as others used in today's earnings release and our presentation on the investor section of our website. The company undertakes no obligation to update any information discussed in this call at any time. Joining me on the call today are Jay Schmidt, President and CEO, and Jack Calandra, Vice President and CFO. We will begin this morning's call with our prepared remarks and thereafter we will be happy to take your questions. I would now like to turn the call over to Jay. Jay?

Thank you, Logan, and good morning, everyone. I'm pleased to report that Calaris delivered strong results and exceeded expectations during the fourth quarter of 2022, capping off our best year ever. In short, 2022 was a year of significant operational and financial accomplishments at Calaris. In total, we delivered a 6.9% year-over-year increase in sales and achieved adjusted operating earnings of 217 million. Our adjusted earnings per share of $4.52 was 23 cents better than the high watermark set in fiscal 2021. Perhaps even more notable, this EPS level more than doubled our pre-pandemic record, and we generated approximately $281 million in adjusted EBITDA. In addition, during 2022, we grew total Calaris market share to more than 6% of the U.S. footwear market, outpacing market growth for the second year in a row with our lead brands gaining share. We improved brand perception metrics with our new customer file in the brand portfolio increasing 28% year over year. We managed our inventory levels well, ultimately ending the year approximately 3% below fiscal 2021. We intensified our focus on strategic priorities, including edit to win, where we reduced SKU counts and amplified key product trends and items to drive sales. We continued to prioritize investment areas, namely consumer marketing and experience, that are essential for future growth. We made significant progress toward our long-term ESG goals, and we returned more than $73 million to our shareholders through share repurchases and dividends. These exceptional annual results underscore the power of our brands the strength of our platform, and the successful execution of our strategic initiatives. Now let's move to some performance highlights from the fourth quarter. During the period, we achieved record quarterly sales of 696 million, which was 2.5% higher than the fourth quarter of 2021. We generated strong margin levels despite a more challenging competitive landscape at Famous. And we achieved solid fourth quarter operating earnings and earnings per share. In addition, we prioritize debt reduction utilizing our free cash flow to reduce the borrowings under our asset-based revolving credit facility by $57 million. Jack will talk more about our capital allocation priorities for 2023, but we believe that near term continued debt reduction is the top priority for cash flow due to rising interest rates and an uncertain macro environment. In our brand portfolio, strong demand for our lead brands drove this outstanding quarterly performance and translated into year over year improvements across all key financial metrics for the segment. Of note, sales in the segment were 6.4% higher than fourth quarter of 2021 as the consumer prioritized fashion footwear, especially dressed and casual shoes, as well as boots. In fact, for the year, our lead brands, which include Sam Edelman, Naturalizer, and Allen Edmonds, delivered positive sales trends, grew market share, and increased earnings. It's also worth highlighting that for the full year, the brand portfolio delivered over 20% growth in its overall annual earnings. Segment operating earnings climbed to a record 112 million, eclipsing the previous record of 80 million set in 2017. Again, this performance was driven by strong consumer reaction to our fashion products and reflects the progress we've made against key strategic initiatives to elevate product design, sharpen brand messaging, and maximize our inventory investment. The bar is now higher, yet we believe there is significant runway to build on this momentum and further increase the contribution of the brand portfolio. We also saw outsized growth in our direct-to-consumer and own e-commerce businesses in line with our objectives. In the brand portfolio, we capitalized on strong product trends, advanced dropship capabilities, and enhanced consumer analytics to drive an approximately 23% increase in our D2C business compared to fourth quarter of 2021. Similarly, our own e-commerce business grew 18% over the same period with double digit sales increases from nearly every one of our own websites. Further, we expanded the number of new consumers to the brand portfolio by 25% over the same time period. Going forward, we believe we can unlock even more value from our customer file as we continue to build expertise in this area. Now moving on to famous footwear, where we also turned in an impressive performance despite the challenging competitive landscape at the beginning of the quarter. Fourth quarter sales got off to a slow start, down high single digits in November, before rebounding sharply in mid-December. Sales exceeded our expectations in the last six weeks of the period, resulting in record fourth quarter sales and a positive sales count. This late quarter performance was driven by robust demand for key athletic brands, which the famous team was able to capitalize on due to a stronger in-stock position compared to last year. In addition, our kids' business A key differentiator and one we view as a future growth opportunity delivered another outsized performance. Kids sales increased by 9% over the fourth quarter of 2021 and by 23% in the last six weeks of the year. This performance was a continuation of the strong results we achieved during the back to school period and further solidifies FAMIS's position as the footwear destination for kids and the millennial family. During the quarter, FAMIS did experience gross margin declines due to more normalized inventory levels, especially in seasonal product. Going forward, we do expect to maintain gross margins above pre-pandemic levels due to the structural changes we've made to our promotional strategies. All in, Famous performed again at a high level during 2022. And while results didn't quite reach the record-setting number achieved in 2021, the segment contributed $196 million of operating earnings and an 11.5% operating margin. In other words, the second best performance in Famous history. And while we understand that consumers are still navigating an uncertain macro environment, we continue to believe Famous is exceptionally well positioned to compete and excel due to its leadership position with the family, its leading assortment of national brands, its retail locations across the country in key markets, and its enhanced consumer experience both in-store and online. Before I hand it over to Jack to walk through our financials in more detail, I would like to highlight the key focus areas that will enable us to win in 2023 and beyond. First, we will sharpen our focus on the millennial family at Famous Footwear. Our objective is to align our product assortment, store experience, digital presence, and marketing approach with the millennial family's footwear needs. As discussed, we rolled out a new prototype famous store in early 2022. And we've now opened an additional 10 stores using this same format. This new format has proven highly successful in highlighting our top national brands, creating a localized assortment and facilitating direct engagement with the family in a convenient manner. So far, on average, These stores have significantly outpaced their market areas in both sales and traffic. Second, we will continue to enhance our famous footwear assortment to a more balanced athletic and fashion mix. As outlined last quarter, we are seeing meaningful progress on the fashion side of the business. We know that when she buys for her family and for herself, she is spending more connecting more, and returning more often. In fact, we continue to see growth in our top fashion brands from the market as well as a 9% improvement in sales in our own Kolaris brands. We believe we can take our extensive consumer knowledge to deliver the right brands and styles in the right quantities and locations to deliver highly profitable, incremental sales at Famous. Third, We intend to capitalize on the strength and relevance of our lead brands in our brand portfolio. We have continued to see outsized performance and robust demand from Sam Edelman, Phionic, Allen Edmonds, and Naturalizer brands in recent years. At the same time, we are leveraging that strength and success as well as our brand building and operational expertise to expand the profitability of the entire portfolio. Fourth, we are focused on maximizing Calaris' platform capabilities to expand the entire enterprise. This includes leveraging our shared centers of knowledge around design and innovation, edit to win, digital, marketing, analytics, as well as sourcing and logistics to unlock growth opportunities and to increase operating margin. Finally, we are committed to delivering exceptional sales and earnings going forward. As we've stated previously, we believe the structural changes we've made in recent years have transformed Calaris into a more agile, efficient, and profitable organization. We are confident in our ability to deliver annual earnings in excess of $4 per share on a consistent basis as we generate strong levels of free cash flow and create long-term value for our shareholders. We look forward to providing more detail on each of these strategic priorities at our Investor Day on Wednesday, June 14th in New York City. And with that, I will now hand it over to Jack for a more detailed view of our financials. Jack?