Caleres, Inc.

Good morning and welcome to the Calaris first quarter 2024 earnings conference call. My name is Christine and I will be your conference coordinator. A brief 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 will turn the call over to Logan Bonacorsi, Vice President of Investor Relations Please go ahead.

Good morning, and thank you for joining our first quarter 2024 earnings call and webcast. A press release of 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 is Jay Schmidt, President and CEO, Jack Calandra, Senior 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 Calera started the year in strong fashion, delivering solid financial results, making important progress against key strategic initiatives, and investing carefully and deliberately for the long term. In total, we achieved earnings per share of 88 cents. exceeding our expectations and providing a solid foundation for the year. While our first quarter sales were slightly below our expectations, declining less than 1% year over year, we generated stronger than expected gross margins, which led to bottom line strength. In fact, the consolidated gross margin of 47% represented a first quarter record for the company. In addition to our financial accomplishments during the first quarter, we gained market share in both the brand portfolio in women's fashion footwear and in shoe chains for famous footwear and saw significant growth in the total sales and increased market share in the important kids category. We utilized our leading speed to market capability growing our speed penetration to 30% of brand portfolio receipts to capitalize on top-selling brands and styles. At the same time, we strategically invested in initiatives essential for our future growth plans. These included enhancing our marketing ecosystem, specifically new marketing campaigns at lead brand Sam Edelman and Naturalizer, which resulted in improved consumer metrics for both, expanding our international presence, opening two own Sam Edelman stores with plans for more, including the first flagship store in Southeast Asia at the premium Marina Bay Sands in Singapore. improving the consumer experience at famous footwear, where we converted 10 locations to flare and refreshed other stores in the fleet and upgrading our financial and operational system into a new integrated SAP platform. The go live for the first phase is on schedule for early June. Finally, We returned 18 million to shareholders through share repurchases and dividends. Now let's turn to our operating segments. The brand portfolio sales declined 2.6% versus our internal expectations of a 1% decline. However, the segment delivered a very strong operating margin and more than half of the company's operating earnings. We are seeing strong growth in demand for new products and momentum in fashion sneakers as well as flats and casuals, which were both up double digits. Seasonal product continued to underperform with dress sandals down double digits versus last year and boots down significantly. We are well positioned in sneakers and casuals going forward and have aligned our inventory with consumer demand by increasing the penetration of these categories to the total business. Higher initial margins, fewer closeouts, and a 9% increase in our own e-commerce sales resulted in a 240 basis point improvement in segment gross margin. We invested in both marketing and design and delivered a strong 13% return on sales for the brand portfolio, which was even with last year. Segment performance was led by growth in sales and profitability from our lead brands, along with Dr. Scholz. In total, our four lead brands, which include Sam Edelman, Allen Edmonds, Naturalizer, and Bionic, represented about 60% of the brand portfolio sales and about 65% of the segment's operating earnings during the first quarter. Now, digging into the performance of our lead brands, Sam Edelman delivered strong international growth driven by new locations, including our first flagship store in Southeast Asia. Additionally, the brand was successful in attracting new consumers during the quarter, particularly younger Gen Z and millennial consumers. The brand partnered with Nordstrom to amplify its marketing campaign at point of sale, and retail sellers were strong. While softer seasonal demand and lack of closeout sales versus the prior year period impacted the top line, Gross margins were up nicely on higher AURs. Naturalizer delivered another quarter of growth, rising one ranking to number 11 in the women's fashion footwear U.S. market versus last year, according to Cercana's retail tracking. Its spring product and marketing efforts focused on sneakers, slingbacks, and ballet flats and were effective at driving growth. Our speed to market capabilities allowed the brand to reorder best sellers at a record rate and a setup naturalizer for additional sales opportunities moving forward. In addition, we were pleased with the Deepika Live Tinted Beauty collaboration that we announced last quarter. All the styles sold out, but perhaps more importantly, the collaboration successfully attracted new consumers who respond to our brand positioning of comfort and inclusivity. Allen Edmonds posted its 13th consecutive quarter of growth with increases across both retail and wholesale channels. The business continues to be driven by sports sneakers, and dress and casual loafers. During the first quarter, we continued to see double digit growth in our wholesale business and open new points of distribution for the brand, including Nordstrom, as well as premier specialty store accounts. As we laid out at investor day, we believe the wholesale channel is a significant growth opportunity for the brand. Finally, Vionic climbed three spots in Circona's fashion footwear ranking, while at the same time delivering a strong first quarter where sales and profitability improved markedly. The uptown mock continues to be a top-selling style, not only for Vionic, but for all of Calaris. We are introducing new colors and getting behind the style with inventory, marketing, and retail activations. Going forward, Vionic has a major opportunity to build consumer awareness and brand loyalty. We know that when consumers wear Vionic, they often become loyalists to the brand. The Uptown franchise is introducing the brand to new consumers. Beyond the lead brands, Dr. Scholz deserves a special call out for its significant sales and profit growth in the quarter. Dr. Scholz has two big sneakers, the Time Off and the Madison Lace, and they have each had viral TikTok videos driving a sellout on our website and at our wholesale partners. Our speed program has allowed us to get back into these trending styles and we are well positioned to capture demand. Dr. Scholz is celebrating its 100th anniversary this year and the brand is stronger than ever. Overall, the brand portfolio performed at a high level during the first quarter. delivering a solid start to the year and has set the stage to lead the financial performance of the company once again in 2024. We have the right brands and products and the strategy and team to both navigate changes in consumer behavior and to win market share in this dynamic marketplace. Moving on to famous footwear. Total sales were flat during the first quarter and comp sales declined 2.3%. While sales were lower than anticipated, we are encouraged by the sequential improvement in trends since the prior quarter and in each month during the first quarter. Seasonal products continued to underperform relative to last year with boots down double digit representing almost half of the comparable sales shortfall. While sales moved roughly in line with the overall market, Famous once again outperformed its competitive set, gaining market share in shoe chains driven primarily by kids and women. Notably, we continue to see the strategically important kids category outpace the total business, with sales up high single digits. Our kids' business has now outpaced the rest of the chain for 13 consecutive quarters. Kids' penetration of the Total Famous Footwear business reached 21% in the quarter, and we gained 1.9 points of market share in shoe chains based on Circana data. we are leaning into our competitive advantage in kids for the balance of the year big time, particularly as we approach the back to school season from both an inventory and marketing standpoint. We were also pleased with the performance of our own brands at Famous. Sales of our Calaris brands were up in the quarter and the chain benefited from Dr. Scholl's and Naturalizer's brand strength. Our own portfolio does provide famous with greater access to fashion products. As you know, at an enterprise level, Kolaris captures a higher gross margin on brands sold vertically. Additionally, our famous footwear e-commerce business was strong in the quarter, up 11% year over year, with much of the business fulfilled through stores. Finally, we continue to focus on and further our efforts to enhance the consumer experience at Famous. As I mentioned earlier, we converted 10 stores into the Flare format during the period, and we now have 31 Flare locations in total. We experienced a seven-point sales lift versus the rest of the chain in our fall 2023 and spring 2024 flair stores. All in, Famous Footwear continues to perform well despite the challenging consumer demand environment. Looking ahead, we believe its inherent competitive advantages, namely its leadership position with the millennial family, especially kids, coupled with its clear avenues for growth and support from the Calera structure, position the business to gain additional market share in shoe chains, generate robust levels of cash, and increase profitability over the long term. As we look forward, we are confident in our ability to deliver earnings per share in line with our guidance. Longer term, We believe we are exceptionally well-positioned to execute our clear and actionable growth plan, invest to fuel our growth initiatives, achieve our three-year growth plan, and drive sustained value for our shareholders. And with that, I will now hand it over to Jack for a more detailed view of our financial performance and outlook. Jack?