UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
☒ | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended | |
|
| |
☐ | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _____________ to _____________ |
Commission file number: 1-21911-2191
CALERES, | |
(Exact name of registrant as specified in its charter) | |
|
|
New York | 43-0197190 |
(State or other jurisdiction
|
(IRS Employer Identification Number) |
of incorporation or organization) | |
| |
8300 Maryland Avenue | 63105 |
St. Louis, Missouri | (Zip Code) |
(Address of principal executive offices) |
|
| |
(314) 854-4000 | |
( |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock - par value of $0.01 per share | CAL | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company," and "emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer | Accelerated filer |
Non-accelerated filer ☐ | Smaller reporting company ☐ |
| Emerging growth company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☑
As of August 28, 2020, 37,912,15627, 2021, 38,268,064 common shares were outstanding.outstanding.
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2
PART IFINANCIAL INFORMATION | |
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(Unaudited) | ||||||||||||
($ thousands) | August 1, 2020 | August 3, 2019 | February 1, 2020 | |||||||||
Assets | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 148,544 | $ | 42,601 | $ | 45,218 | ||||||
Receivables, net | 110,249 | 167,727 | 162,181 | |||||||||
Inventories, net | 574,830 | 792,064 | 618,406 | |||||||||
Income taxes | 52,658 | 2,896 | 6,189 | |||||||||
Prepaid expenses and other current assets | 43,768 | 48,498 | 50,305 | |||||||||
Total current assets | 930,049 | 1,053,786 | 882,299 | |||||||||
Other assets | 84,054 | 78,861 | 79,654 | |||||||||
Deferred income taxes | 9,456 | 10,176 | 9,735 | |||||||||
Goodwill | 4,956 | 245,275 | 245,275 | |||||||||
Intangible assets, net | 265,405 | 300,835 | 294,304 | |||||||||
Lease right-of-use assets | 624,881 | 723,415 | 695,594 | |||||||||
Property and equipment | 558,567 | 589,885 | 593,979 | |||||||||
Allowance for depreciation | (364,974 | ) | (357,840 | ) | (369,133 | ) | ||||||
Property and equipment, net | 193,593 | 232,045 | 224,846 | |||||||||
Total assets | $ | 2,112,394 | $ | 2,644,393 | $ | 2,431,707 | ||||||
Liabilities and Equity | ||||||||||||
Current liabilities: | ||||||||||||
Borrowings under revolving credit agreement | $ | 350,000 | $ | 300,000 | $ | 275,000 | ||||||
Trade accounts payable | 280,319 | 448,596 | 267,018 | |||||||||
Income taxes | 8,310 | 11,110 | 7,186 | |||||||||
Lease obligations | 171,247 | 143,202 | 127,869 | |||||||||
Other accrued expenses | 208,024 | 179,221 | 173,877 | |||||||||
Total current liabilities | 1,017,900 | 1,082,129 | 850,950 | |||||||||
Other liabilities: | ||||||||||||
Noncurrent lease obligations | 579,399 | 649,100 | 629,032 | |||||||||
Long-term debt | 198,621 | 198,161 | 198,391 | |||||||||
Income taxes | 7,786 | 7,786 | 7,786 | |||||||||
Deferred income taxes | 13,051 | 46,573 | 55,013 | |||||||||
Other liabilities | 50,503 | 35,966 | 41,405 | |||||||||
Total other liabilities | 849,360 | 937,586 | 931,627 | |||||||||
Equity: | ||||||||||||
Common stock | 379 | 407 | 404 | |||||||||
Additional paid-in capital | 156,913 | 149,881 | 153,489 | |||||||||
Accumulated other comprehensive loss | (31,437 | ) | (31,405 | ) | (31,843 | ) | ||||||
Retained earnings | 116,385 | 504,546 | 523,900 | |||||||||
Total Caleres, Inc. shareholders’ equity | 242,240 | 623,429 | 645,950 | |||||||||
Noncontrolling interests | 2,894 | 1,249 | 3,180 | |||||||||
Total equity | 245,134 | 624,678 | 649,130 | |||||||||
Total liabilities and equity | $ | 2,112,394 | $ | 2,644,393 | $ | 2,431,707 |
ITEM 1FINANCIAL STATEMENTS
CALERES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| | | | | | | | | |
| | | | | | | |||
| | (Unaudited) | | | | ||||
($ thousands) |
| July 31, 2021 |
| August 1, 2020 |
| January 30, 2021 | |||
Assets |
| |
|
| |
|
| |
|
Current assets: | | |
|
| |
|
| |
|
Cash and cash equivalents | | $ | 54,684 | | $ | 148,544 | | $ | 88,295 |
Receivables, net | |
| 110,522 | |
| 110,249 | |
| 126,994 |
Inventories, net | |
| 565,512 | |
| 574,830 | |
| 487,955 |
Income taxes | |
| 35,026 | |
| 52,658 | |
| 33,925 |
Prepaid expenses and other current assets | |
| 41,619 | |
| 43,768 | |
| 45,387 |
Total current assets | |
| 807,363 | |
| 930,049 | |
| 782,556 |
| | | | | | | | | |
Prepaid pension costs | |
| 94,083 | |
| 55,431 | |
| 88,833 |
Lease right-of-use assets | |
| 508,597 | |
| 624,881 | |
| 554,303 |
Property and equipment, net | |
| 161,066 | |
| 193,593 | |
| 172,437 |
Deferred income taxes | |
| 0 | |
| 9,456 | |
| 0 |
Goodwill and intangible assets, net | |
| 233,777 | |
| 270,361 | |
| 240,071 |
Other assets | |
| 28,012 | |
| 28,623 | |
| 28,850 |
Total assets | | $ | 1,832,898 | | $ | 2,112,394 | | $ | 1,867,050 |
| | | | | | | | | |
Liabilities and Equity | |
|
| |
|
| |
|
|
Current liabilities: | |
|
| |
|
| |
|
|
Borrowings under revolving credit agreement | | $ | 100,000 | | $ | 350,000 | | $ | 250,000 |
Current portion of long-term debt | | | 99,540 | | | 0 | | | 0 |
Mandatory purchase obligation - Blowfish Malibu | | | 52,639 | | | 0 | | | 39,134 |
Trade accounts payable | |
| 348,795 | |
| 280,319 | |
| 280,501 |
Income taxes | |
| 17,311 | |
| 8,310 | |
| 5,069 |
Lease obligations | |
| 126,820 | |
| 171,247 | |
| 153,060 |
Other accrued expenses | |
| 233,564 | |
| 208,024 | |
| 177,745 |
Total current liabilities | |
| 978,669 | |
| 1,017,900 | |
| 905,509 |
| | | | | | | | | |
Other liabilities: | |
|
| |
|
| |
|
|
Noncurrent lease obligations | |
| 463,746 | |
| 579,399 | |
| 518,942 |
Long-term debt | |
| 99,540 | |
| 198,621 | |
| 198,851 |
Income taxes | |
| 2,464 | |
| 7,786 | |
| 5,038 |
Deferred income taxes | |
| 13,574 | |
| 13,051 | |
| 8,244 |
Other liabilities | |
| 29,614 | |
| 50,503 | |
| 26,612 |
Total other liabilities | |
| 608,938 | |
| 849,360 | |
| 757,687 |
| | | | | | | | | |
Equity: | |
|
| |
|
| |
|
|
Common stock | |
| 383 | |
| 379 | |
| 380 |
Additional paid-in capital | |
| 162,122 | |
| 156,913 | |
| 160,446 |
Accumulated other comprehensive loss | |
| (8,572) | |
| (31,437) | |
| (9,136) |
Retained earnings | |
| 86,764 | |
| 116,385 | |
| 48,557 |
Total Caleres, Inc. shareholders’ equity | |
| 240,697 | |
| 242,240 | |
| 200,247 |
Noncontrolling interests | |
| 4,594 | |
| 2,894 | |
| 3,607 |
Total equity | |
| 245,291 | |
| 245,134 | |
| 203,854 |
Total liabilities and equity | | $ | 1,832,898 | | $ | 2,112,394 | | $ | 1,867,050 |
See notes tocondensedconsolidated financial statements.
3
CALERES, INC. |
|
(Unaudited) | ||||||||||||||||
Thirteen Weeks Ended | Twenty-Six Weeks Ended | |||||||||||||||
($ thousands, except per share amounts) | August 1, 2020 | August 3, 2019 | August 1, 2020 | August 3, 2019 | ||||||||||||
Net sales | $ | 501,448 | $ | 752,485 | $ | 898,632 | $ | 1,430,239 | ||||||||
Cost of goods sold | 318,828 | 446,541 | 594,114 | 844,459 | ||||||||||||
Gross profit | 182,620 | 305,944 | 304,518 | 585,780 | ||||||||||||
Selling and administrative expenses | 201,331 | 267,531 | 426,524 | 529,642 | ||||||||||||
Impairment of goodwill and intangible assets | 0 | 0 | 262,719 | 0 | ||||||||||||
Restructuring and other special charges, net | 5,429 | 609 | 65,625 | 1,465 | ||||||||||||
Operating (loss) earnings | (24,140 | ) | 37,804 | (450,350 | ) | 54,673 | ||||||||||
Interest expense, net | (13,387 | ) | (7,389 | ) | (22,866 | ) | (14,729 | ) | ||||||||
Other income, net | 3,672 | 2,650 | 7,257 | 5,269 | ||||||||||||
(Loss) earnings before income taxes | (33,855 | ) | 33,065 | (465,959 | ) | 45,213 | ||||||||||
Income tax benefit (provision) | 3,186 | (7,838 | ) | 89,118 | (10,901 | ) | ||||||||||
Net (loss) earnings | (30,669 | ) | 25,227 | (376,841 | ) | 34,312 | ||||||||||
Net earnings (loss) attributable to noncontrolling interests | 48 | (114 | ) | (286 | ) | (112 | ) | |||||||||
Net (loss) earnings attributable to Caleres, Inc. | $ | (30,717 | ) | $ | 25,341 | $ | (376,555 | ) | $ | 34,424 | ||||||
Basic (loss) earnings per common share attributable to Caleres, Inc. shareholders | $ | (0.83 | ) | $ | 0.61 | $ | (9.94 | ) | $ | 0.83 | ||||||
Diluted (loss) earnings per common share attributable to Caleres, Inc. shareholders | $ | (0.83 | ) | $ | 0.61 | $ | (9.94 | ) | $ | 0.82 |
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
| | | | | | | | | | | | | |
|
| (Unaudited) |
| ||||||||||
| | Thirteen Weeks Ended |
| Twenty-Six Weeks Ended | | ||||||||
($ thousands, except per share amounts) |
| July 31,2021 | | August 1,2020 | | July 31, 2021 |
| August 1, 2020 |
| ||||
Net sales | | $ | 675,531 | | $ | 501,448 | | $ | 1,314,167 | | $ | 898,632 | |
Cost of goods sold | |
| 353,238 | |
| 318,828 | |
| 716,987 | |
| 594,114 | |
Gross profit | |
| 322,293 | |
| 182,620 | |
| 597,180 | |
| 304,518 | |
Selling and administrative expenses | |
| 259,501 | |
| 201,331 | |
| 503,036 | |
| 426,524 | |
Impairment of goodwill and intangible assets | |
| 0 | |
| 0 | |
| 0 | |
| 262,719 | |
Restructuring and other special charges, net | |
| 0 | |
| 5,429 | |
| 13,482 | |
| 65,625 | |
Operating earnings (loss) | |
| 62,792 | |
| (24,140) | |
| 80,662 | |
| (450,350) | |
Interest expense, net | |
| (11,941) | |
| (13,387) | |
| (23,734) | |
| (22,866) | |
Other income, net | |
| 3,860 | |
| 3,672 | |
| 7,688 | |
| 7,257 | |
Earnings (loss) before income taxes | |
| 54,711 | |
| (33,855) | |
| 64,616 | |
| (465,959) | |
Income tax (provision) benefit | |
| (16,559) | |
| 3,186 | |
| (20,080) | |
| 89,118 | |
Net earnings (loss) | |
| 38,152 | |
| (30,669) | |
| 44,536 | |
| (376,841) | |
Net earnings (loss) attributable to noncontrolling interests | |
| 756 | |
| 48 | |
| 993 | |
| (286) | |
Net earnings (loss) attributable to Caleres, Inc. | | $ | 37,396 | | $ | (30,717) | | $ | 43,543 | | $ | (376,555) | |
| | | | | | | | | | | | | |
Basic earnings (loss) per common share attributable to Caleres, Inc. shareholders | | $ | 0.98 | | $ | (0.83) | | $ | 1.14 | | $ | (9.94) | |
| | | | | | | | | | | | | |
Diluted earnings (loss) per common share attributable to Caleres, Inc. shareholders | | $ | 0.97 | | $ | (0.83) | | $ | 1.13 | | $ | (9.94) | |
See notes tocondensedconsolidated financial statements.
4
CALERES, INC. |
|
(Unaudited) | ||||||||||||||||
Thirteen Weeks Ended | Twenty-Six Weeks Ended | |||||||||||||||
($ thousands) | August 1, 2020 | August 3, 2019 | August 1, 2020 | August 3, 2019 | ||||||||||||
Net (loss) earnings | $ | (30,669 | ) | $ | 25,227 | $ | (376,841 | ) | $ | 34,312 | ||||||
Other comprehensive income (loss), net of tax: | ||||||||||||||||
Foreign currency translation adjustment | 740 | (21 | ) | (810 | ) | (979 | ) | |||||||||
Pension and other postretirement benefits adjustments | 1,058 | 461 | 1,124 | 856 | ||||||||||||
Derivative financial instruments | 0 | (5 | ) | 92 | 298 | |||||||||||
Other comprehensive income, net of tax | 1,798 | 435 | 406 | 175 | ||||||||||||
Comprehensive (loss) income | (28,871 | ) | 25,662 | (376,435 | ) | 34,487 | ||||||||||
Comprehensive income (loss) attributable to noncontrolling interests | 67 | (147 | ) | (286 | ) | (133 | ) | |||||||||
Comprehensive (loss) income attributable to Caleres, Inc. | $ | (28,938 | ) | $ | 25,809 | $ | (376,149 | ) | $ | 34,620 |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
| | | | | | | | | | | | |
| | (Unaudited) | ||||||||||
| | Thirteen Weeks Ended |
| Twenty-Six Weeks Ended | ||||||||
($ thousands) |
| July 31, 2021 |
| August 1, 2020 | | July 31, 2021 |
| August 1, 2020 | ||||
Net earnings (loss) | | $ | 38,152 | | $ | (30,669) | | $ | 44,536 | | $ | (376,841) |
Other comprehensive income (loss) ("OCI"), net of tax: | |
|
| |
|
| |
| | |
|
|
Foreign currency translation adjustment | |
| 68 | |
| 740 | |
| (155) | |
| (810) |
Pension and other postretirement benefits adjustments | |
| 347 | |
| 1,058 | |
| 713 | |
| 1,124 |
Derivative financial instruments | |
| 0 | |
| 0 | |
| 0 | |
| 92 |
Other comprehensive income, net of tax | |
| 415 | |
| 1,798 | |
| 558 | |
| 406 |
Comprehensive income (loss) | |
| 38,567 | |
| (28,871) | |
| 45,094 | |
| (376,435) |
Comprehensive income (loss) attributable to noncontrolling interests | |
| 807 | |
| 67 | |
| 987 | |
| (286) |
Comprehensive income (loss) attributable to Caleres, Inc. | | $ | 37,760 | | $ | (28,938) | | $ | 44,107 | | $ | (376,149) |
See notes tocondensedconsolidated financial statements.
5
CALERES, INC. |
|
(Unaudited) | ||||||||
Twenty-Six Weeks Ended | ||||||||
($ thousands) | August 1, 2020 | August 3, 2019 | ||||||
Operating Activities | ||||||||
Net (loss) earnings | $ | (376,841 | ) | $ | 34,312 | |||
Adjustments to reconcile net (loss) earnings to net cash provided by operating activities: | ||||||||
Depreciation | 21,875 | 22,957 | ||||||
Amortization of capitalized software | 2,939 | 3,293 | ||||||
Amortization of intangible assets | 6,499 | 6,524 | ||||||
Amortization of debt issuance costs and debt discount | 673 | 1,180 | ||||||
Fair value adjustments to Blowfish mandatory purchase obligation | 9,822 | 527 | ||||||
Share-based compensation expense | 4,401 | 6,542 | ||||||
Loss on disposal of property and equipment | 684 | 549 | ||||||
Impairment charges for property, equipment, and lease right-of-use assets | 35,222 | 2,954 | ||||||
Impairment of goodwill and intangible assets | 262,719 | 0 | ||||||
Provision for expected credit losses | 8,525 | 840 | ||||||
Changes in operating assets and liabilities: | ||||||||
Receivables | 41,275 | 23,155 | ||||||
Inventories | 43,372 | (109,850 | ) | |||||
Prepaid expenses and other current and noncurrent assets | (94,670 | ) | (3,036 | ) | ||||
Trade accounts payable | 13,399 | 135,321 | ||||||
Accrued expenses and other liabilities | 88,218 | (8,134 | ) | |||||
Other, net | (592 | ) | (556 | ) | ||||
Net cash provided by operating activities | 67,520 | 116,578 | ||||||
Investing Activities | ||||||||
Purchases of property and equipment | (6,394 | ) | (26,741 | ) | ||||
Disposals of property and equipment | 0 | 636 | ||||||
Capitalized software | (2,220 | ) | (4,084 | ) | ||||
Net cash used for investing activities | (8,614 | ) | (30,189 | ) | ||||
Financing Activities | ||||||||
Borrowings under revolving credit agreement | 250,500 | 149,000 | ||||||
Repayments under revolving credit agreement | (175,500 | ) | (184,000 | ) | ||||
Dividends paid | (5,495 | ) | (5,808 | ) | ||||
Acquisition of treasury stock | (23,348 | ) | (29,995 | ) | ||||
Issuance of common stock under share-based plans, net | (973 | ) | (2,547 | ) | ||||
Other | (649 | ) | (694 | ) | ||||
Net cash provided by (used for) financing activities | 44,535 | (74,044 | ) | |||||
Effect of exchange rate changes on cash and cash equivalents | (115 | ) | 56 | |||||
Increase in cash and cash equivalents | 103,326 | 12,401 | ||||||
Cash and cash equivalents at beginning of period | 45,218 | 30,200 | ||||||
Cash and cash equivalents at end of period | $ | 148,544 | $ | 42,601 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | | | | |
| | Twenty-Six Weeks Ended | ||||
($ thousands) |
| July 31, 2021 |
| August 1, 2020 | ||
Operating Activities |
| |
|
| |
|
Net earnings (loss) | | $ | 44,536 | | $ | (376,841) |
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: | |
| | |
|
|
Depreciation | |
| 17,341 | |
| 21,875 |
Amortization of capitalized software | |
| 2,984 | |
| 2,939 |
Amortization of intangible assets | |
| 6,294 | |
| 6,499 |
Amortization of debt issuance costs and debt discount | |
| 682 | |
| 673 |
Fair value adjustments to Blowfish mandatory purchase obligation | | | 13,505 | | | 9,822 |
Share-based compensation expense | |
| 5,431 | |
| 4,401 |
Loss on disposal of property and equipment | |
| 551 | |
| 684 |
Impairment charges for property, equipment, and lease right-of-use assets | |
| 2,288 | |
| 35,222 |
Impairment of goodwill and intangible assets | | | 0 | | | 262,719 |
Provision/adjustment for expected credit losses | | | (2,543) | | | 8,525 |
Deferred income taxes | |
| 5,330 | |
| (41,683) |
Changes in operating assets and liabilities: | |
| | |
|
|
Receivables | |
| 19,014 | |
| 41,275 |
Inventories | |
| (77,278) | |
| 43,372 |
Prepaid expenses and other current and noncurrent assets | |
| (1,045) | |
| (7,640) |
Trade accounts payable | |
| 68,197 | |
| 13,399 |
Accrued expenses and other liabilities | |
| 22,121 | |
| 88,218 |
Income taxes, net | |
| 8,567 | |
| (45,347) |
Other, net | |
| (428) | |
| (592) |
Net cash provided by operating activities | |
| 135,547 | |
| 67,520 |
| | | | | | |
Investing Activities | |
|
| |
|
|
Purchases of property and equipment | |
| (6,816) | |
| (6,394) |
Capitalized software | |
| (2,581) | |
| (2,220) |
Net cash used for investing activities | |
| (9,397) | |
| (8,614) |
| | | | | | |
Financing Activities | |
|
| |
|
|
Borrowings under revolving credit agreement | |
| 164,500 | |
| 250,500 |
Repayments under revolving credit agreement | |
| (314,500) | |
| (175,500) |
Dividends paid | |
| (5,336) | |
| (5,495) |
Acquisition of treasury stock | |
| 0 | |
| (23,348) |
Issuance of common stock under share-based plans, net | |
| (3,752) | |
| (973) |
Other | |
| (677) | |
| (649) |
Net cash (used for) provided by financing activities | |
| (159,765) | |
| 44,535 |
Effect of exchange rate changes on cash and cash equivalents | |
| 4 | |
| (115) |
(Decrease) increase in cash and cash equivalents | |
| (33,611) | |
| 103,326 |
Cash and cash equivalents at beginning of period | |
| 88,295 | |
| 45,218 |
Cash and cash equivalents at end of period | | $ | 54,684 | | $ | 148,544 |
See notes tocondensedconsolidated financial statements.
6
CALERES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Accumulated | | | | | Total | | | | | | | ||
| | | | | | | | | | Other | | | | | Caleres, Inc. | | Non- | | | | |||
(Unaudited) | | Common Stock | | Additional | | Comprehensive | | Retained | | Shareholders’ | | controlling | | | | ||||||||
($ thousands, except number of shares and per share amounts) |
| Shares |
| Dollars |
| Paid-In Capital |
| (Loss) Income |
| Earnings |
| Equity |
| Interests |
| Total Equity | |||||||
BALANCE MAY 1, 2021 |
| 38,293,472 | | $ | 383 | | $ | 159,381 | | $ | (8,936) | | $ | 52,041 | | $ | 202,869 | | $ | 3,787 | | $ | 206,656 |
Net earnings |
| | |
| | |
| | |
| | |
| 37,396 | |
| 37,396 | |
| 756 | |
| 38,152 |
Foreign currency translation adjustment |
| | |
| | |
| | |
| 17 | |
|
| |
| 17 | |
| 51 | |
| 68 |
Pension and other postretirement benefits adjustments, net of tax of $85 |
| | |
| | |
| | |
| 347 | |
|
| |
| 347 | |
|
| |
| 347 |
Comprehensive income |
| | |
| | |
| | |
| 364 | |
| 37,396 | |
| 37,760 | |
| 807 | |
| 38,567 |
Dividends ($0.07 per share) |
| | |
| | |
| | |
|
| |
| (2,673) | |
| (2,673) | |
|
| |
| (2,673) |
Issuance of common stock under share-based plans, net |
| (25,408) | |
| (0) | |
| (251) | |
| | |
| | |
| (251) | |
|
| |
| (251) |
Share-based compensation expense |
| | |
| | |
| 2,992 | |
|
| |
|
| |
| 2,992 | |
|
| |
| 2,992 |
BALANCE JULY 31, 2021 |
| 38,268,064 | | $ | 383 | | $ | 162,122 | | $ | (8,572) | | $ | 86,764 | | $ | 240,697 | | $ | 4,594 | | $ | 245,291 |
| | | | | | | | | | | | | | | | | | | | | | | |
BALANCE MAY 2, 2020 |
| 39,299,990 | | $ | 393 | | $ | 154,930 | | $ | (33,216) | | $ | 160,189 | | $ | 282,296 | | $ | 2,827 | | $ | 285,123 |
Net (loss) earnings |
| | |
| | |
| | |
| | |
| (30,717) | |
| (30,717) | |
| 48 | |
| (30,669) |
Foreign currency translation adjustment |
| | |
| | |
| | |
| 721 | |
|
| |
| 721 | |
| 19 | |
| 740 |
Pension and other postretirement benefits adjustments, net of tax of $248 |
| | |
| | |
| | |
| 1,058 | |
|
| |
| 1,058 | |
| | |
| 1,058 |
Comprehensive income (loss) |
| | | | | | | | | | 1,779 | |
| (30,717) | |
| (28,938) | |
| 67 | |
| (28,871) |
Dividends ($0.07 per share) |
| | |
| | |
| | |
|
| |
| (2,685) | |
| (2,685) | |
| | |
| (2,685) |
Acquisition of treasury stock |
| (1,391,234) | |
| (14) | |
| | |
| | |
| (10,402) | |
| (10,416) | |
|
| |
| (10,416) |
Issuance of common stock under share-based plans, net |
| 3,400 | |
| 0 | |
| (67) | |
| | |
|
| |
| (67) | |
|
| |
| (67) |
Share-based compensation expense |
| | |
| | |
| 2,050 | |
|
| |
|
| |
| 2,050 | |
|
| |
| 2,050 |
BALANCE AUGUST 1, 2020 |
| 37,912,156 | | $ | 379 | | $ | 156,913 | | $ | (31,437) | | $ | 116,385 | | $ | 242,240 | | $ | 2,894 | | $ | 245,134 |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Accumulated | | | | | | | | | | | | ||
| | | | | | | | | | Other | | | | | Total Caleres, Inc. | | Non- | | | | |||
(Unaudited) | | Common Stock | | Additional | | Comprehensive | | Retained | | Shareholders’ | | controlling | | | | ||||||||
($ thousands, except number of shares and per share amounts) |
| Shares |
| Dollars |
| Paid-In Capital |
| (Loss) Income |
| Earnings |
| Equity |
| Interests |
| Total Equity | |||||||
BALANCE AS OF JANUARY 31, 2021 |
| 37,966,204 | | $ | 380 | | $ | 160,446 | | $ | (9,136) | | $ | 48,557 | | $ | 200,247 | | $ | 3,607 | | $ | 203,854 |
Net earnings |
|
| |
|
| |
|
| |
|
| |
| 43,543 | |
| 43,543 | |
| 993 | |
| 44,536 |
Foreign currency translation adjustment |
|
| |
|
| |
|
| |
| (149) | |
|
| |
| (149) | |
| (6) | |
| (155) |
Pension and other postretirement benefits adjustments, net of tax of $182 |
|
| |
|
| |
|
| |
| 713 | |
|
| |
| 713 | |
|
| |
| 713 |
Comprehensive income |
|
| |
|
| |
|
| |
| 564 | |
| 43,543 | |
| 44,107 | |
| 987 | |
| 45,094 |
Dividends ($0.14 per share) |
|
| |
|
| |
|
| |
|
| |
| (5,336) | |
| (5,336) | |
|
| |
| (5,336) |
Issuance of common stock under share-based plans, net |
| 301,860 | |
| 3 | |
| (3,755) | |
|
| |
|
| |
| (3,752) | |
|
| |
| (3,752) |
Share-based compensation expense |
|
| |
|
| |
| 5,431 | |
|
| |
|
| |
| 5,431 | |
|
| |
| 5,431 |
BALANCE JULY 31, 2021 |
| 38,268,064 | | $ | 383 | | $ | 162,122 | | $ | (8,572) | | $ | 86,764 | | $ | 240,697 | | $ | 4,594 | | $ | 245,291 |
| | | | | | | | | | | | | | | | | | | | | | | |
BALANCE FEBRUARY 1, 2020 |
| 40,396,757 | | $ | 404 | | $ | 153,489 | | $ | (31,843) | | $ | 523,900 | | $ | 645,950 | | $ | 3,180 | | $ | 649,130 |
Net loss |
|
| |
|
| |
|
| |
|
| |
| (376,555) | |
| (376,555) | |
| (286) | |
| (376,841) |
Foreign currency translation adjustment |
|
| |
|
| |
|
| |
| (810) | |
|
| |
| (810) | |
| — | |
| (810) |
Unrealized loss on derivative financial instruments, net of tax of $31 |
|
| |
|
| |
|
| |
| 92 | |
|
| |
| 92 | |
|
| |
| 92 |
Pension and other postretirement benefits adjustments, net of tax of $380 |
|
| |
|
| |
|
| |
| 1,124 | |
|
| |
| 1,124 | |
|
| |
| 1,124 |
Comprehensive income (loss) |
|
| |
|
| |
|
| |
| 406 | |
| (376,555) | |
| (376,149) | |
| (286) | |
| (376,435) |
Dividends ($0.14 per share) |
|
| |
|
| |
|
| |
|
| |
| (5,495) | |
| (5,495) | |
|
| |
| (5,495) |
Acquisition of treasury stock |
| (2,902,122) | |
| (29) | |
|
| |
|
| |
| (23,319) | |
| (23,348) | |
|
| |
| (23,348) |
Issuance of common stock under share-based plans, net |
| 417,521 | |
| 4 | |
| (977) | |
|
| |
|
| |
| (973) | |
|
| |
| (973) |
Cumulative-effect adjustment from adoption of ASC 326 |
|
| |
|
| |
|
| |
|
| |
| (2,146) | |
| (2,146) | |
|
| |
| (2,146) |
Share-based compensation expense |
|
| |
|
| |
| 4,401 | |
|
| |
|
| |
| 4,401 | |
|
| |
| 4,401 |
BALANCE AUGUST 1, 2020 |
| 37,912,156 | | $ | 379 | | $ | 156,913 | | $ | (31,437) | | $ | 116,385 | | $ | 242,240 | | $ | 2,894 | | $ | 245,134 |
7
|
Accumulated | ||||||||||||||||||||||||||||||||
Other | Total Caleres, Inc. | Non- | ||||||||||||||||||||||||||||||
(Unaudited) | Common Stock | Additional | Comprehensive | Retained | Shareholders’ | controlling | ||||||||||||||||||||||||||
($ thousands, except number of shares and per share amounts) | Shares | Dollars | Paid-In Capital | (Loss) Income | Earnings | Equity | Interests | Total Equity | ||||||||||||||||||||||||
BALANCE MAY 2, 2020 | 39,299,990 | $ | 393 | $ | 154,930 | $ | (33,216 | ) | $ | 160,189 | $ | 282,296 | $ | 2,827 | $ | 285,123 | ||||||||||||||||
Net (loss) earnings | (30,717 | ) | (30,717 | ) | 48 | (30,669 | ) | |||||||||||||||||||||||||
Foreign currency translation adjustment | 721 | 721 | 19 | 740 | ||||||||||||||||||||||||||||
Pension and other postretirement benefits adjustments, net of tax of $248 | 1,058 | 1,058 | 1,058 | |||||||||||||||||||||||||||||
Comprehensive income (loss) | 1,779 | (30,717 | ) | (28,938 | ) | 67 | (28,871 | ) | ||||||||||||||||||||||||
Dividends ($0.07 per share) | (2,685 | ) | (2,685 | ) | (2,685 | ) | ||||||||||||||||||||||||||
Acquisition of treasury stock | (1,391,234 | ) | (14 | ) | (10,402 | ) | (10,416 | ) | (10,416 | ) | ||||||||||||||||||||||
Issuance of common stock under share-based plans, net | 3,400 | - | (67 | ) | (67 | ) | (67 | ) | ||||||||||||||||||||||||
Share-based compensation expense | 2,050 | 2,050 | 2,050 | |||||||||||||||||||||||||||||
BALANCE AUGUST 1, 2020 | 37,912,156 | $ | 379 | $ | 156,913 | $ | (31,437 | ) | $ | 116,385 | $ | 242,240 | $ | 2,894 | $ | 245,134 | ||||||||||||||||
BALANCE MAY 4, 2019 | 42,233,845 | $ | 422 | $ | 146,641 | $ | (31,873 | ) | $ | 512,046 | $ | 627,236 | $ | 1,396 | $ | 628,632 | ||||||||||||||||
Net earnings (loss) | 25,341 | 25,341 | (114 | ) | 25,227 | |||||||||||||||||||||||||||
Foreign currency translation adjustment | 12 | 12 | (33 | ) | (21 | ) | ||||||||||||||||||||||||||
Unrealized gain on derivative financial instruments, net of tax of $17 | (5 | ) | (5 | ) | (5 | ) | ||||||||||||||||||||||||||
Pension and other postretirement benefits adjustments, net of tax of $161 | 461 | 461 | 461 | |||||||||||||||||||||||||||||
Comprehensive (loss) income | 468 | 25,341 | 25,809 | (147 | ) | 25,662 | ||||||||||||||||||||||||||
Dividends ($0.07 per share) | (2,861 | ) | (2,861 | ) | (2,861 | ) | ||||||||||||||||||||||||||
Acquisition of treasury stock | (1,530,478 | ) | (15 | ) | (29,980 | ) | (29,995 | ) | (29,995 | ) | ||||||||||||||||||||||
Issuance of common stock under share-based plans, net | 17,560 | 12 | 12 | 12 | ||||||||||||||||||||||||||||
Share-based compensation expense | 3,228 | 3,228 | 3,228 | |||||||||||||||||||||||||||||
BALANCE AUGUST 3, 2019 | 40,720,927 | $ | 407 | $ | 149,881 | $ | (31,405 | ) | $ | 504,546 | $ | 623,429 | $ | 1,249 | $ | 624,678 |
Accumulated | ||||||||||||||||||||||||||||||||
Other | Total Caleres, Inc. | Non- | ||||||||||||||||||||||||||||||
(Unaudited) | Common Stock | Additional | Comprehensive | Retained | Shareholders’ | controlling | ||||||||||||||||||||||||||
($ thousands, except number of shares and per share amounts) | Shares | Dollars | Paid-In Capital | (Loss) Income | Earnings | Equity | Interests | Total Equity | ||||||||||||||||||||||||
BALANCE AS OF FEBRUARY 1, 2020 | 40,396,757 | $ | 404 | $ | 153,489 | $ | (31,843 | ) | $ | 523,900 | $ | 645,950 | $ | 3,180 | $ | 649,130 | ||||||||||||||||
Net loss | (376,555 | ) | (376,555 | ) | (286 | ) | (376,841 | ) | ||||||||||||||||||||||||
Foreign currency translation adjustment | (810 | ) | (810 | ) | — | (810 | ) | |||||||||||||||||||||||||
Unrealized gain on derivative financial instruments, net of tax of $31 | 92 | 92 | 92 | |||||||||||||||||||||||||||||
Pension and other postretirement benefits adjustments, net of tax of $380 | 1,124 | 1,124 | 1,124 | |||||||||||||||||||||||||||||
Comprehensive income (loss) | 406 | (376,555 | ) | (376,149 | ) | (286 | ) | (376,435 | ) | |||||||||||||||||||||||
Dividends ($0.14 per share) | (5,495 | ) | (5,495 | ) | (5,495 | ) | ||||||||||||||||||||||||||
Acquisition of treasury stock | (2,902,122 | ) | (29 | ) | (23,319 | ) | (23,348 | ) | (23,348 | ) | ||||||||||||||||||||||
Issuance of common stock under share-based plans, net | 417,521 | 4 | (977 | ) | (973 | ) | (973 | ) | ||||||||||||||||||||||||
Cumulative-effect adjustment from adoption of ASC 326 | (2,146 | ) | (2,146 | ) | (2,146 | ) | ||||||||||||||||||||||||||
Share-based compensation expense | 4,401 | 4,401 | 4,401 | |||||||||||||||||||||||||||||
BALANCE AUGUST 1, 2020 | 37,912,156 | $ | 379 | $ | 156,913 | $ | (31,437 | ) | $ | 116,385 | $ | 242,240 | $ | 2,894 | $ | 245,134 | ||||||||||||||||
BALANCE FEBRUARY 2, 2019 | 41,886,562 | $ | 419 | $ | 145,889 | $ | (31,601 | ) | $ | 519,346 | $ | 634,053 | $ | 1,382 | $ | 635,435 | ||||||||||||||||
Net earnings (loss) | 34,424 | 34,424 | (112 | ) | 34,312 | |||||||||||||||||||||||||||
Foreign currency translation adjustment | (958 | ) | (958 | ) | (21 | ) | (979 | ) | ||||||||||||||||||||||||
Unrealized loss on derivative financial instruments, net of tax of $79 | 298 | 298 | 298 | |||||||||||||||||||||||||||||
Pension and other postretirement benefits adjustments, net of tax of $299 | 856 | 856 | 856 | |||||||||||||||||||||||||||||
Comprehensive income (loss) | 196 | 34,424 | 34,620 | (133 | ) | 34,487 | ||||||||||||||||||||||||||
Dividends ($0.14 per share) | (5,808 | ) | (5,808 | ) | (5,808 | ) | ||||||||||||||||||||||||||
Acquisition of treasury stock | (1,530,478 | ) | (15 | ) | (29,980 | ) | (29,995 | ) | (29,995 | ) | ||||||||||||||||||||||
Issuance of common stock under share-based plans, net | 364,843 | 3 | (2,550 | ) | (2,547 | ) | (2,547 | ) | ||||||||||||||||||||||||
Cumulative-effect adjustment from adoption of ASC 842 | (13,436 | ) | (13,436 | ) | (13,436 | ) | ||||||||||||||||||||||||||
Share-based compensation expense | 6,542 | 6,542 | 6,542 | |||||||||||||||||||||||||||||
BALANCE AUGUST 3, 2019 | 40,720,927 | $ | 407 | $ | 149,881 | $ | (31,405 | ) | $ | 504,546 | $ | 623,429 | $ | 1,249 | $ | 624,678 |
CALERES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 1 Basis of Presentation and General Basis of Presentation
|
|
|
The accompanying condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q10-Q of the United States Securities and Exchange Commission (“SEC”) and reflect all adjustments and accruals of a normal recurring nature, which management believes are necessary to present fairly the financial position, results of operations, comprehensive income and cash flows of Caleres, Inc. ("the Company"). These statements, however, do not include all information and footnotes necessary for a complete presentation of the Company'sCompany’s consolidated financial position, results of operations, comprehensive income and cash flows in conformity with accounting principles generally accepted in the United States. The condensed consolidated financial statements include the accounts of the Company and its wholly-owned and majority-owned subsidiaries, after the elimination of intercompany accounts and transactions.
The Company’s business is seasonal in nature due to consumer spending patterns, with higher back-to-school and holiday season sales. Traditionally, the third fiscal quarter accounts for a substantial portion of the Company’s earnings for the year. Interim results may not necessarily be indicative of results which may be expected for any other interim period or for the year as a whole, particularly given the impact of the coronavirus pandemic on the results of operations for the thirteen and twenty-six weeks ended August 1, 2020, as further discussed below. In addition, many schools across the United States are beginning the fall semester in a virtual learning environment. Accordingly, the Company has experienced a slower start to the back-to-school selling season. The back-to-school demand in 2020 is expected to extend longer than a typical year, where demand is more concentrated over a few weeks.
whole.
Certain prior period amounts in the condensed consolidated financial statements and footnotes have been reclassified to conform to the current period presentation. These reclassifications did not affect net earnings (loss) earnings attributable to Caleres, Inc.
The accompanying condensed consolidated financial statements and footnotes should be read in conjunction with the consolidated financial statements and footnotes included in the Company'sCompany’s Annual Report on Form 10-K10-K for the year ended FebruaryJanuary 30, 2021.
Noncontrolling Interests
During 2019, the Company entered into a joint venture with Brand Investment Holding Limited (“Brand Investment Holding”), a member of the Gemkell Group. The Company and Brand Investment Holding are each 50% owners of the joint venture, which is named CLT Brand Solutions (“CLT”). Net sales and operating earnings were not significant during the thirteen or twenty-six weeks ended July 31, 2021 and August 1, 2020.2020.
The Company had a joint venture agreement with a subsidiary of C. banner International Holdings Limited (“CBI”) to market Naturalizer footwear in China. The Company was a 51% owner of the joint venture (“B&H Footwear”), with CBI owning the other 49%. The license enabling the joint venture to market the footwear expired in August 2017 and the parties are in the process of dissolving their joint venture agreements. The Company anticipates the liquidation to be completed during 2021.
COVID-19The Company consolidates CLT and B&H Footwear into its condensed consolidated financial statements. Net earnings (loss) attributable to noncontrolling interests represents the share of net earnings or losses that are attributable to Brand Investment Holding equity. Transactions between the Company and the joint ventures have been eliminated in the condensed consolidated financial statements.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Derivative Financial Instruments
The Company’s hedging policy permits the use of forward contracts as cash flow hedging instruments to manage its currency exposures in foreign currency-denominated assets, liabilities and cash flows. These derivative financial instruments are viewed as risk management tools and are not used for trading or speculative purposes. The Company recognizes all derivative financial instruments as either assets or liabilities in the condensed consolidated balance sheets and measures those instruments at fair value.
COVID-19 Pandemic
In March 2020, The United States economy and the World Health Organization declared thatretail industry have begun to recover from the outbreakadverse impact of the coronavirus ("COVID-19"(“COVID-19”) was a global pandemic. The Company has experienced a significant loss in sales and earningsCompany’s financial results were negatively impacted during the first half of 2020 as a result of COVID-19. After the temporary closure of all retail stores beginning in mid- March, mid-March. The Company experienced sequential improvement in sales in the Company has safely resumed in-store operations at substantially allsecond half of its2020, driven by the reopening of the retail stores, opening with reduced operating hours, enhanced health and safety procedures and contactless shopping options.
The Company has taken decisive actions to manage its resources conservatively to mitigate the adverse impactcontinued solid growth of the pandemic.e-commerce business. During the first half of 2021, as the vaccines became
8
widely distributed and governments continued to ease restrictions, consumer sentiment and spending began to improve. In addition, the additional stimulus measures approved by the federal government provided a boost in consumer spending. These actions included reductionsfactors strengthened demand for our products in the workforce, associate furloughs for a significant portionfirst half of the workforce,2021, which contributed to higher store traffic and reductions in salary for most remaining associates through the end of the second quarter, as well as a reductionstrong growth in the cash retainers for the Board of Directors through the end of the fiscal year; reducing inventory purchases; reducing marketing expenses;Company’s net sales and minimizing costs associated with the closed retail facilities. In addition, as a precautionary measure to increase its cash position and preserve financial flexibility given the uncertainty in the United States and global markets resulting from COVID-19, the Company increased the borrowings on its revolving credit facility in March 2020 to $440.0 million. In April, the Company entered into an amendment to its Fourth Amended and Restated Credit Agreement to increase its borrowing capacity, as further discussed in Note 10 to the condensed consolidated financial statements. During the second quarter of 2020, the Company continued to repay the incremental borrowings from March, with net repayments of $88.5 million.
operating earnings.
On March 27, 2020, the Coronavirus Aid, Relief and Economic Security ("CARES") Act was enacted. The CARES Act includes a provision that allows the Company to defer the employer portion of social security payroll tax payments that would have been paid between the enactment date and December 31, 2020, with 50% payable by December 31, 2021 and 50% payable by December 31, 2022. As of August 1,During 2020, the Company has deferred approximately $2.9$9.4 million of employer social security payroll taxes, which aretaxes. As of July 31, 2021, approximately $4.7 million is recorded in other accrued expenses and $4.7 million is recorded in other liabilities on the condensed consolidated balance sheets.
Corporate Headquarters Campus
In April 2021, the Company announced that it would begin marketing for sale its nine-acre corporate headquarters campus (“campus”) located in Clayton, Missouri. The Company is in the process of evaluating offers as well as exploring relocation options. The Company does not anticipate the campus to qualify as a completed sale within the next twelve months. Accordingly, as of July 31, 2021, the campus is considered held and used and classified within property and equipment, net on the condensed consolidated balance sheets. In addition, the CARES Act permitsCompany evaluated the carryback of certain current operating losses to prior years. As discussed in campus asset group for impairment indicators and determined that no indicators were present.
Note 16 to the condensed consolidated financial statements, this carryback provision resulted in approximately $5.2 million of incremental tax benefit, as current year losses are expected to be carried back to years with a higher federal corporate tax rate.
| 2 Impact of New Accounting Pronouncements |
Impact of Recently Adopted Accounting Pronouncements
In June 2016, August 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13,Financial Instruments - Credit Losses (Topic 326), which significantly changes how entities measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The ASU replaces the "incurred loss" model with an "expected credit loss" model that requires entities to estimate an expected lifetime credit loss on financial assets, including trade accounts receivable. The Company adopted the ASU in the first quarter of 2020 on a modified retrospective basis. Upon adoption, the Company recorded a cumulative-effect adjustment to retained earnings of $2.1 million, net of $0.4 million in deferred taxes. The Company recorded a provision for expected credit losses of $8.5 million during the twenty-six weeks ended August 1, 2020, primarily as a result of the COVID-19 pandemic and deteriorating financial conditions at several of the Company's wholesale customers.
The following table summarizes the activity in the Company's allowance for expected credit losses during the twenty-six weeks ended August 1,2020:
($ thousands) | ||||
Balance at February 1, 2020 | $ | 1,813 | ||
Adjustment upon adoption of ASU 2016-13 | 2,521 | |||
Provision for expected credit losses | 8,525 | |||
Uncollectible accounts written off, net of recoveries | 215 | |||
Balance at August 1, 2020 | $ | 13,074 |
In August 2018, the FASB issued ASU 2018-13,Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 modifies disclosure requirements on fair value measurements, removing and modifying certain disclosures, while adding other disclosures. The Company adopted the ASU during the first quarter of 2020, which did not have a material impact on the Company's financial statement disclosures. Refer to Note 15 to the condensed consolidated financial statements for detail regarding the Company's fair value measurements.
In March 2020, the SEC issued SEC Release No.33-10762 and Release No.34-88307,Financial Disclosures about Guarantors and Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralize a Registrant's Securities. The final rule amends the disclosure requirements in SEC Regulation S-X, Rule 3-10, which required entities to separately present financial statements for subsidiary issuers and guarantors of registered debt securities unless certain exceptions are met. The rule permits entities to provide summarized financial information of the parent company and its issuers and guarantors on a combined basis in either a note to the financial statements or in management's discussion and analysis. The final rule is effective for filings on or after January 4,2021, with early application permitted. The Company adopted the rule during the second quarter of 2020 and elected to provide the summarized financial information in Management's Discussion and Analysis of Financial Condition and Results of Operations.
In April 2020, the FASB issued interpretive guidance indicating that entities may elect not to evaluate whether a concession provided by lessors is a lease modification. Under existing lease guidance, an entity would be required to determine if a lease concession was the result of a new arrangement reached with the landlord, which would be accounted for under the lease modification framework, or if the concession was under the enforceable rights and obligations that existed in the original lease, which would be accounted for outside the lease modification framework. The FASB guidance provides entities with the option to elect to account for lease concessions as though the enforceable rights and obligations existed in the original lease. During the second quarter of 2020, the Company elected to treat lease concessions as variable rent. Accordingly, $2.0 million in lease concessions were recorded as a reduction of rent expense within selling and administrative expenses in the condensed consolidated statements of earnings (loss). Refer to Note 9 to the condensed consolidated financial statements for further discussion regarding the Company's leases.
Impact of Prospective Accounting Pronouncements
In August 2018, the FASB issued ASU 2018-14,2018-14, Compensation — Retirement Benefits — Defined Benefit Plans — General (Subtopic 715-20)715-20), Disclosure Framework — Changes to the Disclosure Requirements for Defined Benefit Plans. The guidance changes the disclosure requirements for employers that sponsor defined benefit pension or other postretirement benefit plans, eliminating the requirements for certain disclosures that are no longer considered cost beneficial and requiring new disclosures that the FASB considers pertinent. The Company adopted the ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The adoptionduring the first quarter of ASU 2018-14 is 2021, which did not expected to have a material impact on the Company'sCompany’s financial statement disclosures.
In December 2019, the FASB issued ASU 2019-12,2019-12, Simplifying the Accounting for Income Taxes. ASU 2019-122019-12 eliminates certain exceptions in Accounting Standards Codification (“ASC”) 740 related to intraperiod tax allocation, simplifies certain elements of accounting for basis differences and deferred tax liabilities during a business combination, and standardizes the classification of franchise taxes. The Company adopted ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. 2019-12 during the first quarter of 2021, which did not have a material impact on the Company’s condensed consolidated financial statements.
Impact of Prospective Accounting Pronouncements
The adoption of ASU 2019-12 is notCompany has evaluated all recently issued accounting pronouncements. There are no prospective accounting pronouncements that are expected to have a material impact on the Company'sCompany’s condensed consolidated financial statements.statements or disclosures.
9
|
Disaggregation of Revenues
The following table disaggregates revenue by segment and major source for the periods ended July 31, 2021 and August 1, 2020 and August 3, 2019:2020:
Thirteen Weeks Ended August 1, 2020 | |||||||||||||||||||||||||||||
| | | | | | | | | | | | | |||||||||||||||||
| | Thirteen Weeks Ended July 31,2021 | |||||||||||||||||||||||||||
| | | | | | | | Eliminations and | | | | ||||||||||||||||||
($ thousands) | Famous Footwear | Brand Portfolio | Eliminations and Other | Total |
| Famous Footwear |
| Brand Portfolio |
| Other |
| Total | |||||||||||||||||
| | | | | | | | | | | | | |||||||||||||||||
Retail stores | $ | 250,143 | $ | 7,060 | $ | 0 | $ | 257,203 | | $ | 402,178 | | $ | 12,003 | | $ | 0 | | $ | 414,181 | |||||||||
Landed wholesale - e-commerce - drop ship (1) | |
| 0 | |
| 19,661 | |
| (439) | |
| 19,222 | |||||||||||||||||
E-commerce - Company websites (1) | |
| 51,281 | |
| 49,619 | |
| 0 | |
| 100,900 | |||||||||||||||||
Total direct-to-consumer sales | | | 453,459 | | | 81,283 | | | (439) | | | 534,303 | |||||||||||||||||
First-cost wholesale - e-commerce (1) | |
| 0 | |
| 869 | |
| 0 | |
| 869 | |||||||||||||||||
Landed wholesale - e-commerce (1) | 0 | 23,234 | 0 | 23,234 | | | 0 | | | 31,190 | | | 0 | | | 31,190 | |||||||||||||
Landed wholesale - e-commerce - drop ship (1) | 0 | 20,748 | 0 | 20,748 | |||||||||||||||||||||||||
Landed wholesale - other | 0 | 78,127 | (16,109 | ) | 62,018 | |
| 0 | |
| 99,437 | |
| (16,692) | |
| 82,745 | ||||||||||||
First-cost wholesale | 0 | 11,850 | 0 | 11,850 | |
| 0 | |
| 23,618 | |
| 0 | |
| 23,618 | |||||||||||||
First-cost wholesale - e-commerce (1) | 0 | 256 | 0 | 256 | |||||||||||||||||||||||||
E-commerce - Company websites (1) | 83,652 | 40,836 | 0 | 124,488 | |||||||||||||||||||||||||
Licensing and royalty | 0 | 1,469 | 0 | 1,469 | |
| 0 | |
| 2,602 | |
| 0 | |
| 2,602 | |||||||||||||
Other (2) | 140 | 42 | 0 | 182 | |
| 190 | |
| 14 | |
| 0 | |
| 204 | |||||||||||||
Net sales | $ | 333,935 | $ | 183,622 | $ | (16,109 | ) | $ | 501,448 | | $ | 453,649 | | $ | 239,013 | | $ | (17,131) | | $ | 675,531 |
Thirteen Weeks Ended August 3, 2019 | ||||||||||||||||||||||||||||
| | | | | | | | | | | | | ||||||||||||||||
|
| Thirteen Weeks Ended August 1, 2020 | ||||||||||||||||||||||||||
| | | | | | | | Eliminations and | | | | |||||||||||||||||
($ thousands) | Famous Footwear | Brand Portfolio | Eliminations and Other | Total |
| Famous Footwear |
| Brand Portfolio |
| Other |
| Total | ||||||||||||||||
| | | | | | | | | | | | | ||||||||||||||||
Retail stores | $ | 386,014 | $ | 38,548 | $ | 0 | $ | 424,562 | | $ | 250,143 | | $ | 7,060 | | $ | 0 | | $ | 257,203 | ||||||||
Landed wholesale - e-commerce - drop ship (1) | | | 0 | | | 20,748 | | | 0 | | | 20,748 | ||||||||||||||||
E-commerce - Company websites (1) | |
| 83,652 | |
| 40,836 | |
| 0 | |
| 124,488 | ||||||||||||||||
Total direct-to-consumer sales | | | 333,795 | | | 68,644 | | | 0 | | | 402,439 | ||||||||||||||||
First-cost wholesale - e-commerce (1) | |
| 0 | |
| 256 | |
| 0 | |
| 256 | ||||||||||||||||
Landed wholesale - e-commerce (1) | 0 | 46,926 | 0 | 46,926 | |
| 0 | |
| 23,234 | |
| 0 | |
| 23,234 | ||||||||||||
Landed wholesale - e-commerce - drop ship (1) | 0 | 16,666 | 0 | 16,666 | ||||||||||||||||||||||||
Landed wholesale - other | 0 | 184,962 | (26,931 | ) | 158,031 | |
| 0 | |
| 78,127 | |
| (16,109) | |
| 62,018 | |||||||||||
First-cost wholesale | 0 | 35,931 | 0 | 35,931 | |
| 0 | |
| 11,850 | |
| 0 | |
| 11,850 | ||||||||||||
First-cost wholesale - e-commerce (1) | 0 | 1,045 | 0 | 1,045 | ||||||||||||||||||||||||
E-commerce - Company websites (1) | 33,685 | 30,248 | 0 | 63,933 | ||||||||||||||||||||||||
Licensing and royalty | 0 | 5,194 | 0 | 5,194 | |
| 0 | |
| 1,469 | |
| 0 | |
| 1,469 | ||||||||||||
Other (2) | 142 | 55 | 0 | 197 | |
| 140 | |
| 42 | |
| 0 | |
| 182 | ||||||||||||
Net sales | $ | 419,841 | $ | 359,575 | $ | (26,931 | ) | $ | 752,485 | | $ | 333,935 | | $ | 183,622 | | $ | (16,109) | | $ | 501,448 |
10
Twenty-Six Weeks Ended August 1, 2020 | ||||||||||||||||
($ thousands) | Famous Footwear | Brand Portfolio | Eliminations and Other | Total | ||||||||||||
Retail stores | $ | 387,260 | $ | 18,881 | $ | 0 | $ | 406,141 | ||||||||
Landed wholesale-e-commerce (1) | 0 | 49,476 | 0 | 49,476 | ||||||||||||
Landed wholesale - e-commerce - drop ship (1) | 0 | 39,979 | 0 | 39,979 | ||||||||||||
Landed wholesale - other | 0 | 190,695 | (27,415 | ) | 163,280 | |||||||||||
First-cost wholesale | 0 | 23,771 | 0 | 23,771 | ||||||||||||
First-cost wholesale - e-commerce (1) | 0 | 502 | 0 | 502 | ||||||||||||
E-commerce - Company websites (1) | 137,830 | 73,826 | 0 | 211,656 | ||||||||||||
Licensing and royalty | 0 | 3,655 | 0 | 3,655 | ||||||||||||
Other (2) | 97 | 75 | 0 | 172 | ||||||||||||
Net sales | $ | 525,187 | $ | 400,860 | $ | (27,415 | ) | $ | 898,632 |
Twenty-Six Weeks Ended August 3, 2019 | ||||||||||||||||||||||||||||
| | | | | | | | | | | | | ||||||||||||||||
| | Twenty-Six Weeks Ended July 31, 2021 | ||||||||||||||||||||||||||
| | | | | | | | Eliminations and | | | | |||||||||||||||||
($ thousands) | Famous Footwear | Brand Portfolio | Eliminations and Other | Total |
| Famous Footwear |
| Brand Portfolio |
| Other |
| Total | ||||||||||||||||
| | | | | | | | | | | | | ||||||||||||||||
Retail stores | $ | 706,256 | $ | 75,198 | $ | 0 | $ | 781,454 | | $ | 736,923 | | $ | 27,011 | | $ | 0 | | $ | 763,934 | ||||||||
Landed wholesale - e-commerce - drop ship (1) | |
| 0 | |
| 40,475 | |
| (833) | |
| 39,642 | ||||||||||||||||
E-commerce - Company websites (1) | |
| 114,403 | |
| 92,357 | |
| 0 | |
| 206,760 | ||||||||||||||||
Total direct-to-consumer sales | | $ | 851,326 | | $ | 159,843 | | $ | (833) | | $ | 1,010,336 | ||||||||||||||||
First-cost wholesale - e-commerce (1) | |
| 0 | |
| 1,773 | |
| 0 | |
| 1,773 | ||||||||||||||||
Landed wholesale - e-commerce (1) | 0 | 90,091 | 0 | 90,091 | | | 0 | | | 67,766 | | | 0 | | | 67,766 | ||||||||||||
Landed wholesale - e-commerce - drop ship (1) | 0 | 36,878 | 0 | 36,878 | ||||||||||||||||||||||||
Landed wholesale - other | 0 | 372,176 | (42,392 | ) | 329,784 | |
| 0 | |
| 214,784 | |
| (26,072) | |
| 188,712 | |||||||||||
First-cost wholesale | 0 | 50,702 | 0 | 50,702 | |
| 0 | |
| 40,336 | |
| 0 | |
| 40,336 | ||||||||||||
First-cost wholesale - e-commerce (1) | 0 | 1,174 | 0 | 1,174 | ||||||||||||||||||||||||
E-commerce - Company websites (1) | 65,466 | 65,944 | 0 | 131,410 | ||||||||||||||||||||||||
Licensing and royalty | 0 | 8,326 | 0 | 8,326 | |
| 0 | |
| 4,766 | |
| 0 | |
| 4,766 | ||||||||||||
Other (2) | 284 | 136 | 0 | 420 | |
| 428 | |
| 50 | |
| 0 | |
| 478 | ||||||||||||
Net sales | $ | 772,006 | $ | 700,625 | $ | (42,392 | ) | $ | 1,430,239 | |||||||||||||||||||
Total net sales | | $ | 851,754 | | $ | 489,318 | | $ | (26,905) | | $ | 1,314,167 |
| | | | | | | | | | | | |
| | Twenty-Six Weeks Ended August 1, 2020 | ||||||||||
| | | | | | | | Eliminations and | | | | |
($ thousands) |
| Famous Footwear |
| Brand Portfolio |
| Other |
| Total | ||||
| | | | | | | | | | | | |
Retail stores | | $ | 387,260 | | $ | 18,881 | | $ | 0 | | $ | 406,141 |
Landed wholesale - e-commerce - drop ship (1) | | | 0 | | | 39,979 | | | 0 | | | 39,979 |
E-commerce - Company websites (1) | |
| 137,830 | |
| 73,826 | |
| 0 | |
| 211,656 |
Total direct-to-consumer sales | | $ | 525,090 | | $ | 132,686 | | $ | 0 | | $ | 657,776 |
First-cost wholesale - e-commerce (1) | |
| 0 | |
| 502 | |
| 0 | |
| 502 |
Landed wholesale - e-commerce (1) | | | 0 | | | 49,476 | | | 0 | | | 49,476 |
Landed wholesale - other | |
| 0 | |
| 190,695 | |
| (27,415) | |
| 163,280 |
First-cost wholesale | |
| 0 | |
| 23,771 | |
| 0 | |
| 23,771 |
Licensing and royalty | |
| 0 | |
| 3,655 | |
| 0 | |
| 3,655 |
Other (2) | |
| 97 | |
| 75 | |
| 0 | |
| 172 |
Net sales | | $ | 525,187 | | $ | 400,860 | | $ | (27,415) | | $ | 898,632 |
(1) | Collectively referred to as "e-commerce" below |
(2) | Includes breakage revenue from unredeemed gift cards |
(1) Collectively referred to as "e-commerce" below
(2) Includes breakage revenue from unredeemed gift cards
Retail stores
Traditionally, the majority of the Company'sCompany’s revenue is generated from retail sales where control is transferred and revenue is recognized at the point of sale. Retail sales are recorded net of estimated returns and exclude sales tax. The Company records a returns reserve and a corresponding return asset for expected returns of merchandise.
Retail sales to members of the Company'sCompany’s loyalty programs, including the Famously You Rewards program, include two performance obligations: the sale of merchandise and the delivery of points that may be redeemed for future purchases. The transaction price is allocated to the separate performance obligations based on the relative stand-alone selling price. The stand-alone selling price for the points is estimated using the retail value of the merchandise earned, adjusted for estimated breakage based upon historical redemption patterns. The revenue associated with the initial merchandise purchased is recognized immediately and the value assigned to the points is deferred until the points are redeemed, forfeited or expired.
Landed wholesale
Landed sales are wholesale sales in which the merchandise is shipped directly to the customer from the Company’s warehouses. Many customers purchasing footwear on a landed customersbasis arrange their own transportation of merchandise and, with limited exceptions, control is transferred at the time of shipment.
11
First-cost wholesale
First-cost sales are wholesale sales in which the Company purchases merchandise from an international factory that manufactures the product and subsequently sells to a customer at an overseas port. Revenue is recognized at the time the merchandise is delivered to the customer’s designated freight forwarder and control is transferred to the customer.
E-commerce
The Company also generates revenue from sales on websites maintained by the Company that are shipped from the Company'sCompany’s distribution centers or retail stores directly to the consumer, picked up directly by the consumer from the Company'sCompany’s stores and e-commerce sales from the Company'sCompany’s wholesale customers'customers’ websites that are fulfilled on a drop-ship or first-costfirst-cost basis (collectively referred to as "e-commerce"). The Company transfers control and recognizes revenue for merchandise sold that is shipped directly to an individual consumer upon delivery to the consumer.
Licensing and royalty
The Company has license agreements with third parties allowing them to sell the Company’s branded product, or other merchandise that uses the Company’s owned or licensed brand names. These license agreements provide the licensee access to the Company'sCompany’s symbolic intellectual property, and revenue is therefore recognized over the license term. For royalty contracts that do not have guaranteed minimums, the Company recognizes revenue as the licensee'slicensee’s sales occur. For royalty contracts that have guaranteed minimums, revenue for the guaranteed minimum is recognized on a straight-line basis during the term, until such time that the cumulative royalties exceed the total minimum guarantee. Up-front payments are recognized over the contractual term to which the guaranteed minimum relates.
Contract Balances
Revenue is recorded at the transaction price, net of estimates for variable consideration for which reserves are established, including returns, allowances and discounts. Variable consideration is estimated using the expected value method and given the large number of contracts with similar characteristics, the portfolio approach is applied to determine the variable consideration for each revenue stream. Reserves for projected returns are based on historical patterns and current expectations.
Information about significant contract balances from contracts with customers is as follows:
| | | | | | | | | | ||||||||||||
($ thousands) | August 1, 2020 | August 3, 2019 | February 1, 2020 |
| July 31, 2021 |
| August 1, 2020 |
| January 30, 2021 | ||||||||||||
Customer allowances and discounts | $ | 18,464 | $ | 22,488 | $ | 26,200 | | $ | 15,867 | | $ | 18,464 | | $ | 17,043 | ||||||
Loyalty programs liability | 16,450 | 16,929 | 16,405 | |
| 17,782 | |
| 16,450 | |
| 13,986 | |||||||||
Returns reserve | 14,453 | 13,417 | 14,033 | |
| 11,858 | |
| 14,453 | |
| 11,040 | |||||||||
Gift card liability | 5,332 | 5,041 | 5,742 | |
| 5,372 | |
| 5,332 | |
| 6,091 |
Changes in contract balances with customers generally reflect differences in relative sales volume for the periodperiods presented. In addition, during the twenty-six weeks ended July 31, 2021, the loyalty programs liability increased $17.1 million due to points and material rights earned on purchases and decreased $13.3 million due to expirations and redemptions. During the twenty-six weeks ended August 1, 2020,, the loyalty programs liability increased $14.1 million due to points and material rights accrued forearned on purchases and decreased $14.0 million due to expirations and redemptions. During
The following table summarizes the activity in the Company’s allowance for expected credit losses during the twenty-six weeks ended August 3, 2019, the loyalty programs liability increased $16.7 million due to pointsJuly 31, 2021 and material rights accrued for purchases and decreased $14.4 million due to expirations and redemptions. The returns reserve is higher as of August 1, 2020 due to a higher mix2020:
| | | | | | |
| | Twenty-Six Weeks Ended | ||||
($ thousands) |
| July 31, 2021 | | August 1, 2020 | ||
Balance, beginning of period | | $ | 14,928 | | $ | 1,813 |
Adjustment upon adoption of ASU 2016-13 | | | — | | | 2,521 |
Provision/adjustment for expected credit losses (1) | | | (2,543) | | | 8,525 |
Uncollectible accounts written off, net of recoveries | | | (2,500) | | | 215 |
Balance, end of period | | $ | 9,885 | | $ | 13,074 |
(1) | The Company’s provision/adjustment for expected credit losses for the twenty-six weeks ended August 1, 2020 was higher than the comparable period in 2021 as a result of the COVID-19 pandemic and its impact on the financial condition of several of the Company’s wholesale customers. |
12
| Note 4 Earnings (Loss) Per Share |
The Company uses the two-classtwo-class method to compute basic and diluted earnings (loss) per common share attributable to Caleres, Inc. shareholders. In periods of net loss, no effect is given to the Company’s participating securities since they do not contractually participate in the losses of the Company. The following table sets forth the computation of basic and diluted earnings (loss) earnings per common share attributable to Caleres, Inc. shareholders for the periods ended July 31, 2021 and August 1, 2020 and August 3, 2019:2020:
Thirteen Weeks Ended | Twenty-Six Weeks Ended | |||||||||||||||||||||||||||
| | | | | | | | | | | | | ||||||||||||||||
| | Thirteen Weeks Ended | | Twenty-Six Weeks Ended | ||||||||||||||||||||||||
($ thousands, except per share amounts) | August 1, 2020 | August 3, 2019 | August 1, 2020 | August 3, 2019 |
| July 31, 2021 |
| August 1, 2020 |
| July 31, 2021 |
| August 1, 2020 | ||||||||||||||||
| | | | | | | | | | | | | ||||||||||||||||
NUMERATOR | | | | | | | | | | | | | ||||||||||||||||
Net (loss) earnings | $ | (30,669 | ) | $ | 25,227 | $ | (376,841 | ) | $ | 34,312 | ||||||||||||||||||
Net earnings (loss) | | $ | 38,152 | | $ | (30,669) | | $ | 44,536 | | $ | (376,841) | ||||||||||||||||
Net (earnings) loss attributable to noncontrolling interests | (48 | ) | 114 | 286 | 112 | |
| (756) | |
| (48) | |
| (993) | |
| 286 | |||||||||||
Net earnings (loss) attributable to Caleres, Inc. | | $ | 37,396 | | $ | (30,717) | | $ | 43,543 | | $ | (376,555) | ||||||||||||||||
Net earnings allocated to participating securities | 0 | (857 | ) | 0 | (1,125 | ) | |
| (1,360) | |
| — | |
| (1,575) | |
| — | ||||||||||
Net (loss) earnings attributable to Caleres, Inc. after allocation of earnings to participating securities | $ | (30,717 | ) | $ | 24,484 | $ | (376,555 | ) | $ | 33,299 | ||||||||||||||||||
Net earnings (loss) attributable to Caleres, Inc. after allocation of earnings to participating securities | | $ | 36,036 | | $ | (30,717) | | $ | 41,968 | | $ | (376,555) | ||||||||||||||||
| |
|
| |
|
| |
|
| |
|
| ||||||||||||||||
DENOMINATOR | |
|
| |
|
| |
|
| |
|
| ||||||||||||||||
Denominator for basic (loss) earnings per common share attributable to Caleres, Inc. shareholders | 37,113 | 39,951 | 37,881 | 40,346 | ||||||||||||||||||||||||
Denominator for basic earnings (loss) per common share attributable to Caleres, Inc. shareholders | |
| 36,880 | |
| 37,113 | |
| 36,794 | |
| 37,881 | ||||||||||||||||
Dilutive effect of share-based awards | 0 | 55 | 0 | 58 | |
| 267 | |
| — | |
| 212 | |
| — | ||||||||||||
Denominator for diluted (loss) earnings per common share attributable to Caleres, Inc. shareholders | 37,113 | 40,006 | 37,881 | 40,404 | ||||||||||||||||||||||||
Basic (loss) earnings per common share attributable to Caleres, Inc. shareholders | $ | (0.83 | ) | $ | 0.61 | $ | (9.94 | ) | $ | 0.83 | ||||||||||||||||||
Diluted (loss) earnings per common share attributable to Caleres, Inc. shareholders | $ | (0.83 | ) | $ | 0.61 | $ | (9.94 | ) | $ | 0.82 | ||||||||||||||||||
Denominator for diluted earnings (loss) per common share attributable to Caleres, Inc. shareholders | |
| 37,147 | |
| 37,113 | |
| 37,006 | |
| 37,881 | ||||||||||||||||
| |
|
| |
|
| |
|
| |
|
| ||||||||||||||||
Basic earnings (loss) per common share attributable to Caleres, Inc. shareholders | | $ | 0.98 | | $ | (0.83) | | $ | 1.14 | | $ | (9.94) | ||||||||||||||||
| |
|
| |
|
| |
|
| |
|
| ||||||||||||||||
Diluted earnings (loss) per common share attributable to Caleres, Inc. shareholders | | $ | 0.97 | | $ | (0.83) | | $ | 1.13 | | $ | (9.94) |
Options to purchase 24,66716,667 shares of common stock for both the thirteen and twenty-six weeks ended August 1, 2020,July 31, 2021 were not included in the denominator for diluted earnings (loss) earnings per common share attributable to Caleres, Inc. shareholders because the effect would be anti-dilutive. Options to purchase 16,66724,667 shares of common stock were excluded from the denominator for both the thirteen and twenty-six weeks ended August 3, 2019.
1, 2020.
During the thirteen and twenty-six weeks ended August 1, 2020,and August 3, 2019, the Company repurchased 1,391,234 and 1,530,4782,902,122 shares, respectively, under the 2018 and 2019 publicly announced share repurchase programs, which permits repurchases of up to 2.5 million and 5.0 million shares, respectively. The Company repurchased 2,902,122 and 1,530,478did not repurchase any shares under the share repurchase programs during the twenty-six weeks ended August 1, 2020 and August 3, 2019, respectively. SeeJuly 31, 2021. Refer to further discussion in Item 2, Unregistered Sales of Equity Securities and Use of Proceeds.
Note 5 Restructuring and Other Special Charges
Blowfish Mandatory Purchase Obligation
|
|
13
purchase obligation is expected to be settled during the third quarter of 2021. Refer to further discussion regarding the mandatory purchase obligation in Note 14 to the condensed consolidated financial statements.
Brand Exits
During the twenty-six weeks ended July 31, 2021, the Company incurred costs of $13.5 million ($11.9 million on an after-tax basis, or $0.31 per diluted share) related to the strategic realignment of the Naturalizer retail store operations. These costs primarily represented lease termination and other store closure costs, including employee severance, for the 73 stores that were closed during the first quarter of 2021. These charges are presented in restructuring and special charges on the condensed consolidated statements of earnings (loss) within the Brand Portfolio segment for the twenty-six weeks ended July 31, 2021. As of July 31, 2021, reserves of $3.3 million were included on the condensed consolidated balance sheets.
During the twenty-six weeks ended August 1, 2020, the Company incurred costs of $1.6 million ($1.2 million on an after-tax basis, or $0.03 per diluted share) related to the decision to exit the Fergie brand. These charges, which represented inventory markdowns required to reduce the value of inventory to net realizable value, are presented in cost of goods sold on the condensed consolidated statements of earnings (loss) within the Brand Portfolio segment for the twenty-six weeks ended August 1, 2020.
COVID-19-Related Expenses
During the thirteen weeks ended August 1, 2020, the Company incurred costs associated with the COVID-19 pandemic and related impacts on the Company’s business, totaling $5.4 million ($4.7 million on an after-tax basis, or $0.13 per diluted share). These costs were primarily for employee severance and related costs, as well as the cost of supplies and deep cleaning of the Company'sCompany’s facilities. Of the $5.4 million reflected as restructuring and other special charges, $4.5 million is reflected in the Brand Portfolio segment, $0.6 million is reflected in the Famous Footwear segment and $0.3 million is reflected within the Eliminations and Other category. As of August 1, 2020, restructuring reserves of $2.7 million were included in other accrued expenses on the condensed consolidated balance sheets.
14
Vionic Integration-Related Costs
During the thirteen weeks ended August 3, 2019, the Company incurred integration-related costs associated with the acquisition of Vionic in October 2018, primarily for severance, totaling $0.6 million ($0.5 million on an after-tax basis, or $0.01 per diluted share). Of the $0.6 million in costs, which are presented as restructuring and other special charges, net in the condensed consolidated statements of earnings (loss), $0.6 million are reflected within the Eliminations and Other category, with an immaterial amount reflected in the Brand Portfolio segment. During the twenty-six weeks ended August 3, 2019, the Company incurred integration-related costs, primarily for severance, totaling $0.9 million ($0.7 million on an after-tax basis, or $0.02 per diluted share). Of the $0.9 million in costs, which are presented as restructuring and other special charges, net in the condensed consolidated statements of earnings (loss), $0.8 million are reflected within the Eliminations and Other category and $0.1 million are included in the Brand Portfolio segment. There were 0 corresponding costs in the twenty-six weeks ended August 1, 2020. The integration of Vionic is expected to be completed by the end of fiscal 2020. Accordingly, the Company anticipates additional integration-related costs for the second half of 2020.
| 6 Business Segment Information |
Following is a summary of certain key financial measures for the Company’s business segments for the periods ended July 31, 2021 and August 1, 2020 and August 3, 2019:2020:
($ thousands) | Famous Footwear | Brand Portfolio | Eliminations and Other | Total | ||||||||||||
Thirteen Weeks Ended August 1, 2020 | ||||||||||||||||
Net sales | $ | 333,935 | $ | 183,622 | $ | (16,109 | ) | $ | 501,448 | |||||||
Intersegment sales (1) | 0 | 16,109 | 0 | 16,109 | ||||||||||||
Operating earnings (loss) | 1,045 | (14,111 | ) | (11,074 | ) | (24,140 | ) | |||||||||
Segment assets | 885,168 | 952,028 | 275,198 | 2,112,394 | ||||||||||||
Thirteen Weeks Ended August 3, 2019 | ||||||||||||||||
Net sales | $ | 419,841 | $ | 359,575 | $ | (26,931 | ) | $ | 752,485 | |||||||
Intersegment sales (1) | 0 | 26,931 | 0 | 26,931 | ||||||||||||
Operating earnings (loss) | 31,542 | 13,898 | (7,636 | ) | 37,804 | |||||||||||
Segment assets | 1,095,457 | 1,427,002 | 121,934 | 2,644,393 | ||||||||||||
Twenty-Six Weeks Ended August 1, 2020 | ||||||||||||||||
Net sales | $ | 525,187 | $ | 400,860 | $ | (27,415 | ) | $ | 898,632 | |||||||
Intersegment sales (1) | 0 | 27,415 | 0 | 27,415 | ||||||||||||
Operating loss | (66,495 | ) | (359,860 | ) | (23,995 | ) | (450,350 | ) | ||||||||
Twenty-Six Weeks Ended August 3, 2019 | ||||||||||||||||
Net sales | $ | 772,006 | $ | 700,625 | $ | (42,392 | ) | $ | 1,430,239 | |||||||
Intersegment sales (1) | 0 | 42,392 | 0 | 42,392 | ||||||||||||
Operating earnings (loss) | 42,355 | 26,827 | (14,509 | ) | 54,673 |
(1) Included in net sales in the Brand Portfolio segment and eliminated in the Eliminations and Other category
| | | | | | | | | | | | |
| | Famous | | Brand | | Eliminations | | | | |||
($ thousands) |
| Footwear |
| Portfolio |
| and Other |
| Total | ||||
Thirteen Weeks Ended July 31, 2021 | |
| | |
| | |
| | |
| |
Net sales | | $ | 453,649 | | $ | 239,013 | | $ | (17,131) | | $ | 675,531 |
Intersegment sales (1) | |
| — | | | 17,131 | | | — | |
| 17,131 |
Operating earnings | |
| 85,498 | |
| 16,554 | |
| (39,260) | |
| 62,792 |
Segment assets | |
| 799,324 | |
| 838,236 | |
| 195,338 | |
| 1,832,898 |
| |
|
| |
|
| |
|
| |
|
|
Thirteen Weeks Ended August 1, 2020 | |
|
| |
|
| |
|
| |
|
|
Net sales | | $ | 333,935 | | $ | 183,622 | | $ | (16,109) | | $ | 501,448 |
Intersegment sales (1) | |
| — | |
| 16,109 | |
| — | |
| 16,109 |
Operating earnings (loss) | |
| 1,045 | |
| (14,111) | |
| (11,074) | |
| (24,140) |
Segment assets | |
| 885,168 | |
| 952,028 | |
| 275,198 | |
| 2,112,394 |
| |
|
| |
|
| |
|
| |
|
|
Twenty-Six Weeks Ended July 31, 2021 | |
| | |
| | |
| | |
| |
Net sales | | $ | 851,754 | | $ | 489,318 | | $ | (26,905) | | $ | 1,314,167 |
Intersegment sales (1) | |
| — | |
| 26,905 | |
| — | |
| 26,905 |
Operating earnings | |
| 133,371 | |
| 13,733 | |
| (66,442) | |
| 80,662 |
| |
|
| |
|
| |
|
| |
|
|
Twenty-Six Weeks Ended August 1, 2020 | |
|
| |
|
| |
|
| |
|
|
Net sales | | $ | 525,187 | | $ | 400,860 | | $ | (27,415) | | $ | 898,632 |
Intersegment sales (1) | |
| — | |
| 27,415 | |
| — | |
| 27,415 |
Operating loss | |
| (66,495) | |
| (359,860) | |
| (23,995) | |
| (450,350) |
(1) | Included in net sales in the Brand Portfolio segment and eliminated in the Eliminations and Other category. |
The Eliminations and Other category includes corporate assets, administrative expenses and other costs and recoveries, which are not allocated to the operating segments, as well as the elimination of intersegment sales and profit.
Following is a reconciliation of operating earnings (loss) to earnings to (loss) earnings before income taxes:
Thirteen Weeks Ended | Twenty-Six Weeks Ended | |||||||||||||||||||||||||||
| | | | | | | | | | | | | ||||||||||||||||
|
| Thirteen Weeks Ended | | Twenty-Six Weeks Ended | ||||||||||||||||||||||||
($ thousands) | August 1, 2020 | August 3, 2019 | August 1, 2020 | August 3, 2019 |
| July 31, 2021 |
| August 1, 2020 |
| July 31, 2021 |
| August 1, 2020 | ||||||||||||||||
Operating (loss) earnings | $ | (24,140 | ) | $ | 37,804 | $ | (450,350 | ) | $ | 54,673 | ||||||||||||||||||
Operating earnings (loss) | | $ | 62,792 | | $ | (24,140) | | $ | 80,662 | | $ | (450,350) | ||||||||||||||||
Interest expense, net | (13,387 | ) | (7,389 | ) | (22,866 | ) | (14,729 | ) | |
| (11,941) | |
| (13,387) | |
| (23,734) | |
| (22,866) | ||||||||
Other income, net | 3,672 | 2,650 | 7,257 | 5,269 | |
| 3,860 | |
| 3,672 | |
| 7,688 | |
| 7,257 | ||||||||||||
(Loss) earnings before income taxes | $ | (33,855 | ) | $ | 33,065 | $ | (465,959 | ) | $ | 45,213 | ||||||||||||||||||
Earnings (loss) before income taxes | | $ | 54,711 | | $ | (33,855) | | $ | 64,616 | | $ | (465,959) |
| Note 7 Inventories |
The Company'sCompany’s net inventory balance was comprised of the following:
| | | | | | | | | | ||||||||||||
($ thousands) | August 1, 2020 | August 3, 2019 | February 1, 2020 |
| July 31, 2021 |
| August 1, 2020 |
| January 30, 2021 | ||||||||||||
Raw materials | $ | 16,494 | $ | 18,785 | $ | 18,455 | | $ | 14,886 | | $ | 16,494 | | $ | 14,592 | ||||||
Work-in-process | 158 | 446 | 454 | |
| 394 | |
| 158 | |
| 349 | |||||||||
Finished goods | 558,178 | 772,833 | 599,497 | |
| 550,232 | |
| 558,178 | |
| 473,014 | |||||||||
Inventories, net | $ | 574,830 | $ | 792,064 | $ | 618,406 | | $ | 565,512 | | $ | 574,830 | | $ | 487,955 |
15
| Note 8 Goodwill and Intangible Assets |
Goodwill and intangible assets were as follows:
| | | | | | | | | | ||||||||||||
($ thousands) | August 1, 2020 | August 3, 2019 | February 1, 2020 |
| July 31, 2021 |
| August 1, 2020 |
| January 30, 2021 | ||||||||||||
Intangible Assets |
| |
|
| |
|
| |
| ||||||||||||
Famous Footwear | $ | 2,800 | $ | 2,800 | $ | 2,800 | | $ | 2,800 | | $ | 2,800 | | $ | 2,800 | ||||||
Brand Portfolio | 365,888 | 388,288 | 388,288 | |
| 342,083 | |
| 365,888 | |
| 342,083 | |||||||||
Total intangible assets | 368,688 | 391,088 | 391,088 | |
| 344,883 | |
| 368,688 | |
| 344,883 | |||||||||
Accumulated amortization | (103,283 | ) | (90,253 | ) | (96,784 | ) | |
| (116,062) | |
| (103,283) | |
| (109,768) | ||||||
Total intangible assets, net | 265,405 | 300,835 | 294,304 | |
| 228,821 | |
| 265,405 | |
| 235,115 | |||||||||
Goodwill | |
|
| |
|
| |
|
| ||||||||||||
Brand Portfolio | 4,956 | 245,275 | 245,275 | ||||||||||||||||||
Brand Portfolio (1) | |
| 4,956 | |
| 4,956 | |
| 4,956 | ||||||||||||
Total goodwill | 4,956 | 245,275 | 245,275 | |
| 4,956 | |
| 4,956 | |
| 4,956 | |||||||||
Goodwill and intangible assets, net | $ | 270,361 | $ | 546,110 | $ | 539,579 | | $ | 233,777 | | $ | 270,361 | | $ | 240,071 |
(1) | The carrying amount of goodwill as of July 31, 2021, August 1, 2020 and January 30, 2021 is presented net of accumulated impairment charges of $415.7 million. |
The Company'sCompany’s intangible assets as of July 31, 2021, August 1, 2020, August 3, 2019 and February 1, 2020January 30, 2021 were as follows:
($ thousands) | August 1, 2020 | |||||||||||||||||||
Estimated Useful Lives (In Years) | Cost Basis | Accumulated Amortization | Impairment | Net Carrying Value | ||||||||||||||||
Trademarks | 15 - 40 | $ | 288,788 | $ | 96,835 | $ | — | $ | 191,953 | |||||||||||
Trademarks | Indefinite | 58,100 | (1) | — | 22,400 | 35,700 | ||||||||||||||
Customer relationships | 15 - 16 | 44,200 | 6,448 | — | 37,752 | |||||||||||||||
$ | 391,088 | $ | 103,283 | $ | 22,400 | $ | 265,405 |
August 3, 2019 | ||||||||||||||||||||
Estimated Useful Lives (In Years) | Cost Basis | Accumulated Amortization | Impairment | Net Carrying Value | ||||||||||||||||
Trademarks | 15 - 40 | $ | 288,788 | $ | 86,894 | $ | — | $ | 201,894 | |||||||||||
Trademarks | Indefinite | 58,100 | (1) | — | 0 | 58,100 | ||||||||||||||
Customer relationships | 15 - 16 | 44,200 | 3,359 | — | 40,841 | |||||||||||||||
$ | 391,088 | $ | 90,253 | $ | 0 | $ | 300,835 |
February 1, 2020 | ||||||||||||||||||||
Estimated Useful Lives (In Years) | Cost Basis | Accumulated Amortization | Impairment | Net Carrying Value | ||||||||||||||||
Trademarks | 15 - 40 | $ | 288,788 | $ | 91,827 | $ | — | $ | 196,961 | |||||||||||
Trademarks | Indefinite | 58,100 | (1) | — | 0 | 58,100 | ||||||||||||||
Customer relationships | 15 - 16 | 44,200 | 4,957 | — | 39,243 | |||||||||||||||
$ | 391,088 | $ | 96,784 | $ | 0 | $ | 294,304 |
(1) Cost basis for indefinite-lived trademarks has been reduced by $60.0 million in impairment charges recognized in 2018 related to the Allen Edmonds tradename.
| | | | | | | | | | | | | | |
($ thousands) |
| July 31, 2021 | ||||||||||||
|
| Estimated Useful Lives |
| | |
| Accumulated |
| Accumulated |
| | | ||
| | (In Years) | | Cost Basis (2) | | Amortization | | Impairment | | Net Carrying Value | ||||
Trade names |
| 2 - 40 | | $ | 299,488 | | $ | 107,000 | | $ | 10,200 | | $ | 182,288 |
Trade names |
| Indefinite | |
| 107,400 | |
| — | |
| 92,000 | |
| 15,400 |
Customer relationships |
| 15 - 16 |
|
| 44,200 |
|
| 9,062 |
|
| 4,005 |
|
| 31,133 |
| | | | $ | 451,088 | | $ | 116,062 | | $ | 106,205 | | $ | 228,821 |
| | | | | | | | | | | | | | |
|
| August 1, 2020 | ||||||||||||
|
| Estimated Useful Lives |
| | |
| Accumulated |
| Accumulated |
| | | ||
| | (In Years) | | Cost Basis (2) | | Amortization | | Impairment | | Net Carrying Value | ||||
Trade names |
| 2 - 40 | | $ | 299,488 | | $ | 96,835 | | $ | 10,200 | | $ | 192,453 |
Trade names |
| Indefinite | |
| 107,400 | |
| — | |
| 72,200 | |
| 35,200 |
Customer relationships |
| 15 - 16 |
|
| 44,200 |
|
| 6,448 |
|
| — |
|
| 37,752 |
| | | | $ | 451,088 | | $ | 103,283 | | $ | 82,400 | | $ | 265,405 |
| | | | | | | | | | | | | | |
|
| January 30, 2021 | ||||||||||||
|
| Estimated Useful Lives |
| | |
| Accumulated |
| Accumulated |
| | | ||
| | (In Years) | | Cost Basis (2) | | Amortization | | Impairment | | Net Carrying Value | ||||
Trade names |
| 2 - 40 | | $ | 299,488 | | $ | 101,919 | | $ | 10,200 | | $ | 187,369 |
Trade names |
| Indefinite | |
| 107,400 | |
| — | |
| 92,000 | |
| 15,400 |
Customer relationships |
| 15 - 16 |
|
| 44,200 |
|
| 7,849 |
|
| 4,005 |
|
| 32,346 |
| | | | $ | 451,088 | | $ | 109,768 | | $ | 106,205 | | $ | 235,115 |
(2) | The Via Spiga trade name was reclassified from indefinite-lived trade names to definite-lived trade names. The remaining carrying value of $0.1 million as of July 31, 2021 will be fully amortized by the end of fiscal 2021. |
Amortization expense related to intangible assets was $3.3$3.1 million and $3.2$3.3 million for the thirteen weeks ended July 31, 2021 and August 1, 2020, respectively, and August 3, 2019, respectively,$6.3 and $6.5 million for both the twenty-six weeks ended July 31, 2021 and August 1,2020, and August 3, 2019. respectively. The Company estimates that amortization expense related to intangible assets will be approximately $13.1$12.6 million in 2020, $12.92021, $12.1 million in 2021, $12.52022, $11.9 million in 2022, $12.22023, and $11.0 million in 20232024 and $11.4 million in 2024.2025.
16
Goodwill is tested for impairment at least annually, or more frequently if events or circumstances indicate it might be impaired, using either the qualitative assessment or a quantitative fair value-based test. During the first quarter of 2020, as a result of the significant decline in the Company'sCompany’s share price and market capitalization and the impact of COVID-19COVID-19 on the Company'sCompany’s business operations, the Company determined that an interim assessment of goodwill was required. A quantitative assessment was performed for all reporting units as of May 2, 2020. The assessment indicated that the carrying value of the goodwill associated with the Brand Portfolio and Vionic reporting units was impaired, resulting in total goodwill impairment charges of $240.3 million. The Company recorded 0 goodwill impairment charges during the thirteentwenty-six weeks ended July 31, 2021 or the thirteen weeks ended August 1, 2020 or August 3, 2019.
2020.
Indefinite-lived intangible assets are tested for impairment as of the first day of the fourth quarter of each fiscal year unless events or circumstances indicate an interim test is required. As a result of the triggering event from the economic impacts of COVID-19,COVID-19, an interim assessment was performed as of May 2, 2020. The indefinite-lived intangible asset impairment review resulted in total impairment charges of $22.4 million forduring the thirteen weeks ended May 2,first quarter of 2020, including $12.2 million associated with the indefinite-lived Allen Edmonds trademarktrade name and $10.2 million of impairment associated with the indefinite-lived Via Spiga trademark.trade name. The carrying value of the Via Spiga trademarktrade name of $0.5 million will beis being amortized over approximately two years. In addition to the interim assessment, the Company tested the indefinite-lived intangible assets as of the first day of the fourth fiscal quarter. As a result of the impairment indicator for Allen Edmonds, the Company also tested the definite-lived Allen Edmonds customer relationships intangible asset. Those assessments resulted in additional impairment totaling $23.8 million, consisting of $19.8 million associated with the Allen Edmonds trade name and $4.0 million associated with the Allen Edmonds customer relationships intangible asset. The Company recorded 0 impairment charges during the thirteentwenty-six weeks ended July 31, 2021 or the thirteen weeks ended August 1, 2020 or August 3, 2019.2020.
| Note 9 Leases |
The Company leases all of its retail locations, a manufacturing facility, and certain manufacturing facilities, office locations, distribution centers and equipment. At contract inception, leases are evaluated and classified as either operating or finance leases. Leases with an initial term of 12 months or less are not recorded on the balance sheet.
Lease right-of-use assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term. The majority of the Company’s leases do not provide an implicit rate and therefore, the Company uses an incremental borrowing rate based on information available at the commencement date to determine the present value of future payments. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Variable lease payments are expensed as incurred.
The Company regularly analyzes the results of all of its stores and assesses the viability of underperforming stores to determine whether events or circumstances exist that indicate the stores should be closed or whether the carrying amount of their long-lived assets may not be recoverable. After allowing for an appropriate start-up period and consideration of any unusual nonrecurring events, or favorable trends, property and equipment at stores and the lease right-of-use assets indicated as impaired are written down to fair value as calculated using a discounted cash flow method. The Company recorded 0 asset impairment charges duringfair value of the thirteen weeks ended August 1, 2020, with $1.8 million of charges recorded in the thirteen weeks ended August 3, 2019. lease right-of-use assets is determined utilizing projected cash flows for each store location, discounted using a risk-adjusted discount rate, subject to a market floor based on current market lease rates. The Company recorded asset impairment charges primarily related to underperforming retail stores, of $0.4 million during the thirteen weeks ended July 31, 2021. The Company did 0t record any impairment charges during the thirteen weeks ended August 1, 2020. The Company recorded asset impairment charges of $2.3 million and $35.2 million and $3.0 million in during the twenty-six weeks ended July 31, 2021 and August 1, 2020,and August 3, 2019, respectively. The impairment charges recorded in the thirteen and twenty-six weeks ended July 31, 2021 are related to underperforming retail stores. The impairment charges recorded in the twenty-six weeks ended August 1, 2020,, including $20.4 million associated with operating lease right-of-use assets and $14.8 million associated with property and equipment, reflect the impact of the COVID-19COVID-19 pandemic on the Company'sCompany’s retail operations and estimates of remaining cash flows for each store. Refer to Note 5 and Note 1514 to the condensed consolidated financial statements for further discussion on these impairment charges.
As a result of the temporary store closures during the first half of 2020 associated with the COVID-19COVID-19 pandemic, the Company is negotiating with landlordscertain leases were amended to modify payment terms for certain leases.provide rent abatements and/or deferral of lease payments. Deferred payments for these leases arecontinue to be reflected in lease obligations on the condensed consolidated balance sheets. As further discussed in Note 2 to the condensed consolidated financial statements, underUnder relief provided by the FASB, entities may could make a policy election to account for theCOVID-19 related lease concessions as if the enforceable rights existed under the original contract, accounting for them as variable rent rather than lease modifications. During the second quarter of 2020, theThe Company made a policy election to account for rent abatements as variable rentrent. Accordingly, during the thirteen and twenty-six weeks ended July 31, 2021, the Company recorded $2.0$0.3 million and $1.6 million, respectively, in lease concessions as a reduction of rent expense within selling and administrative expenses in the condensed consolidated statements of earnings (loss). The Company recorded $2.0 million in lease concessions during the thirteen and twenty-six weeks ended August 1, 2020. Rent deferralsconcessions for leases that were extended in connection with the rent concession will continue to bewere recognized consistent with the originalas a lease agreement.modification.
17
During the twenty-six weeks ended August 1, 2020,July 31, 2021, the Company entered into new or amended leases that resulted in the recognition of right-of-use assets and lease obligations of $38.6$45.5 million on the condensed consolidated balance sheets. As of August 1, 2020,July 31, 2021, the Company has entered into lease commitments for two2 retail locations for which the leases have not yet commenced. The Company anticipates that theboth leases for all new retail locations will begin in the currentnext fiscal year. Upon commencement, right-of-use assets and lease liabilities of approximately $2.6$1.3 million will be recorded in the next fiscal year on the condensed consolidated balance sheets.
The components of lease expense for the thirteen and twenty-six weeks ended July 31, 2021 and August 1, 2020and August 3, 2019 were as follows:
Thirteen Weeks Ended | ||||||||||||||
| | | | | | | ||||||||
| | Thirteen Weeks Ended | ||||||||||||
($ thousands) | August 1, 2020 | August 3, 2019 | | July 31, 2021 |
| August 1, 2020 | ||||||||
Operating lease expense | $ | 41,088 | $ | 45,851 |
| $ | 37,121 |
| $ | 41,088 | ||||
Variable lease expense | 12,007 | 11,299 | |
| 8,513 | |
| 12,007 | ||||||
Short-term lease expense | 1,385 | 962 | |
| 708 | |
| 1,385 | ||||||
Sublease income | (28 | ) | (74 | ) | |
| (29) | |
| (28) | ||||
Total lease expense | $ | 54,452 | $ | 58,038 | | $ | 46,313 | | $ | 54,452 |
Twenty-Six Weeks Ended | ||||||||||||||
| | | | | | | ||||||||
| | Twenty-Six Weeks Ended | ||||||||||||
($ thousands) | August 1, 2020 | August 3, 2019 | | July 31, 2021 |
| August 1, 2020 | ||||||||
Operating lease expense | $ | 86,338 | $ | 92,312 |
| $ | 77,698 |
| $ | 86,338 | ||||
Variable lease expense | 23,331 | 23,483 | |
| 20,003 | |
| 23,331 | ||||||
Short-term lease expense | 2,097 | 2,077 | |
| 1,273 | |
| 2,097 | ||||||
Sublease income | (47 | ) | (147 | ) | |
| (58) | |
| (47) | ||||
Total lease expense | $ | 111,719 | $ | 117,725 | | $ | 98,916 | | $ | 111,719 |
Supplemental cash flow information related to leases is as follows:
Twenty-Six Weeks Ended | ||||||||||||||
| | | | | | | ||||||||
| | Twenty-Six Weeks Ended | ||||||||||||
($ thousands) | August 1, 2020 | August 3, 2019 |
| July 31, 2021 |
| August 1, 2020 | ||||||||
Cash paid for lease liabilities | $ | 43,150 | $ | 88,803 | ||||||||||
Cash paid for lease liabilities (1) | | $ | 104,384 | | $ | 43,150 | ||||||||
Cash received from sublease income | 47 | 147 | |
| 58 | |
| 47 |
(1) | Cash paid for lease liabilities for the twenty-six weeks ended July 31, 2021 includes payment of certain lease payments deferred in 2020, as described above, as well as lease termination costs associated with the Naturalizer retail store closings, as further discussed in Note |
Note 10 Long-term and Short-term Financing Arrangements
Credit Agreement
The Company maintains a revolving credit facility for working capital needs. On December 18,2014, the Company and certain of its subsidiaries (the “Loan Parties”) entered into a Fourth Amended and Restated Credit Agreement ("the Former Credit Agreement"), which was further amended on July 20,2015 to release all of the Company’s subsidiaries that were borrowers under or that guaranteed the Former Credit Agreement other than Sidney Rich Associates, Inc. and BG Retail, LLC. Allen Edmonds and Vionic were joined to the Agreement as guarantors on December 13,2016 and October 31,2018, respectively. After giving effect to the joinders, theThe Company is the lead borrower, and Sidney Rich Associates, Inc., BG Retail, LLC, Allen Edmonds, LLC, Vionic Group, LLC and Vionic International, LLC are each co-borrowers and guarantors under the Former Credit Agreement.guarantors. On January 18,2019, the Loan Parties entered into a Third Amendment to Fourth Amended and Restated Credit Agreement to extend the maturity date to January 18,2024 and change the borrowing capacity under the Former Credit Agreement from an aggregate amount of up to $600.0 million to an aggregate amount of up to $500.0 million, with the option to increase by up to $250.0 million. On April 14, 2020, the Company entered into a Fourth Amendment to Fourth Amended and Restated Credit Agreement (as so amended, the "Credit Agreement") which, among other modifications, increased the amount available under the revolving credit facility by $100.0 million to an aggregate amount of up to $600.0 million, subject to borrowing base restrictions, and may be further increased by up to $150.0 million. The Credit Agreement increased the spread applied to the LIBOR or prime rate by a total of 75 basis points and increased the unused line fee by 5 basis points.
Borrowing availability under the Credit Agreement is limited to the lesser of the total commitments and the borrowing base ("Loan Cap"), which is based on stated percentages of the sum of eligible accounts receivable, eligible inventory and eligible credit card receivables, as defined, less applicable reserves. Under the Credit Agreement, the Loan Parties’ obligations are secured by a first-priorityfirst-priority security interest in all accounts receivable, inventory and certain other collateral.
18
Interest on borrowings is at variable rates based on the London Interbank Offered Rate (“LIBOR”) (with a floor of 1.0% imposed by the Credit Agreement) or the prime rate, as defined in the Credit Agreement, plus a spread. The interest rate and fees for letters of credit vary based upon the level of excess availability under the Credit Agreement. There is an unused line fee payable on the unused portion under the facility and a letter of credit fee payable on the outstanding face amount under letters of credit.
The Credit Agreement limits the Company’s ability to create, incur, assume or permit to exist additional indebtedness and liens, make investments or specified payments, give guarantees, pay dividends, make capital expenditures and merge or acquire or sell assets. In addition, if excess availability falls below the greater of 10.0% of the lesser of the Loan Cap and $40.0 million for three consecutive business days, and the fixed charge coverage ratio is less than 1.0 to 1.0, the Company would be in default under the Credit Agreement and certain additional covenants would be triggered.
The Credit Agreement contains customary events of default, including, without limitation, payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to similar obligations, certain events of bankruptcy and insolvency, judgment defaults and the failure of any guaranty or security document supporting the agreement to be in full force and effect. If an event of default occurs, the collateral agent may assume dominion and control over the Company’s cash (a “cash dominion event”) until such event of default is cured or waived or the excess availability exceeds such amount for 30 consecutive days, provided that a cash dominion event shall be deemed continuing (even if an event of default is no longer continuing and/or excess availability exceeds the required amount for 30 consecutive business days) after a cash dominion event has occurred and been discontinued on two occasions in any 12-month12-month period. The Credit Agreement also contains certain other covenants and restrictions. The Company was in compliance with all covenants and restrictions under the Credit Agreement as of August 1, 2020.
July 31, 2021.
At August 1, 2020,July 31, 2021, the Company had $350.0$100.0 million of borrowings outstanding and $11.1$12.5 million in letters of credit outstanding under the Credit Agreement. Total additional borrowing availability was $166.6$364.5 million at August 1, 2020.July 31, 2021.
$200 Million Senior Notes
On July 27,2015, the Company issued $200.0 million aggregate principal amount of 6.25% Senior Notes due on August 15, 2023 (the "Senior Notes"). The Senior Notes bear interest at 6.25%, which is payable on February 15 and August 15 of each year. The Senior Notes are guaranteed on a senior unsecured basis by each of the Company'sCompany’s subsidiaries that is a borrower or guarantor under the Credit Agreement. Interest on
The Company may redeem some or all of the Senior Notes is payable on February 15 and at a redemption price (expressed as a percentage of principal amount) of 101.563% if redeemed prior to August 15, of each year. The2021 and 100.000% if redeemed after August 15, 2021, plus accrued and unpaid interest and Additional Interest (as defined in the Senior Notes will matureindenture). During the thirteen weeks ended July 31, 2021, the Company determined that it would redeem a portion of its Senior Notes on August 15,2023.
16, 2021. Accordingly, the Company classified $100.0 million aggregate principal amount of its Senior Notes as a current liability. On August 16, 2021, the Company redeemed $100.0 million of Senior Notes at 100.000% using borrowings under the revolving credit agreement.
If the Company experiences specific kinds of changes of control, it would be required to offer to purchase the Senior Notes at a purchase price equal to 101% of the principal amount, plus accrued and unpaid interest and Additional Interest, if any, to, but not including, the date of repurchase. The Senior Notes also contain certain other covenants and restrictions that limit certain activities including, among other things, levels of indebtedness, payments of dividends, the guarantee or pledge of assets, certain investments, common stock repurchases, mergers and acquisitions and sales of assets. As of August 1, 2020,July 31, 2021, the Company was in compliance with all covenants and restrictions relating to the Senior Notes.
19
| Note 11 Shareholders’ Equity |
Accumulated Other Comprehensive Loss
The following table sets forth the changes in accumulated other comprehensive loss (OCL) by component for the periods ended July 31, 2021 and August 1, 2020 and August 3, 2019:2020:
($ thousands) | Foreign Currency Translation | Pension and Other Postretirement Transactions (1) | Derivative Financial Instrument Transactions (2) | Accumulated Other Comprehensive (Loss) Income | ||||||||||||
Balance at May 2, 2020 | $ | (2,111 | ) | $ | (31,105 | ) | $ | 0 | $ | (33,216 | ) | |||||
Other comprehensive income before reclassifications | 721 | 0 | 0 | 721 | ||||||||||||
Reclassifications: | ||||||||||||||||
Amounts reclassified from accumulated other comprehensive loss | 0 | 810 | 0 | 810 | ||||||||||||
Tax provision (3) | 0 | 248 | 0 | 248 | ||||||||||||
Net reclassifications | 0 | 1,058 | 0 | 1,058 | ||||||||||||
Other comprehensive income | 721 | 1,058 | 0 | 1,779 | ||||||||||||
Balance at August 1, 2020 | $ | (1,390 | ) | $ | (30,047 | ) | $ | 0 | $ | (31,437 | ) | |||||
Balance at May 4, 2019 | $ | (908 | ) | $ | (30,660 | ) | $ | (305 | ) | $ | (31,873 | ) | ||||
Other comprehensive income (loss) before reclassifications | 12 | 0 | (75 | ) | (63 | ) | ||||||||||
Reclassifications: | ||||||||||||||||
Amounts reclassified from accumulated other comprehensive loss | 0 | 622 | 87 | 709 | ||||||||||||
Tax benefit | 0 | (161 | ) | (17 | ) | (178 | ) | |||||||||
Net reclassifications | 0 | 461 | 70 | 531 | ||||||||||||
Other comprehensive income (loss) | 12 | 461 | (5 | ) | 468 | |||||||||||
Balance at August 3, 2019 | $ | (896 | ) | $ | (30,199 | ) | $ | (310 | ) | $ | (31,405 | ) | ||||
Balance at February 1, 2020 | $ | (580 | ) | $ | (31,171 | ) | $ | (92 | ) | $ | (31,843 | ) | ||||
Other comprehensive (loss) income before reclassifications | (810 | ) | 0 | 87 | (723 | ) | ||||||||||
Reclassifications: | — | |||||||||||||||
Amounts reclassified from accumulated other comprehensive loss | 0 | 1,504 | 6 | 1,510 | ||||||||||||
Tax benefit (3) | 0 | (380 | ) | (1 | ) | (381 | ) | |||||||||
Net reclassifications | 0 | 1,124 | 5 | 1,129 | ||||||||||||
Other comprehensive (loss) income | (810 | ) | 1,124 | 92 | 406 | |||||||||||
Balance at August 1, 2020 | $ | (1,390 | ) | $ | (30,047 | ) | $ | 0 | $ | (31,437 | ) | |||||
Balance at February 2, 2019 | $ | 62 | $ | (31,055 | ) | $ | (608 | ) | $ | (31,601 | ) | |||||
Other comprehensive (loss) income before reclassifications | (958 | ) | 0 | 94 | (864 | ) | ||||||||||
Reclassifications: | ||||||||||||||||
Amounts reclassified from accumulated other comprehensive loss | 0 | 1,155 | 258 | 1,413 | ||||||||||||
Tax benefit | 0 | (299 | ) | (54 | ) | (353 | ) | |||||||||
Net reclassifications | 0 | 856 | 204 | 1,060 | ||||||||||||
Other comprehensive (loss) income | (958 | ) | 856 | 298 | 196 | |||||||||||
Balance at August 3, 2019 | $ | (896 | ) | $ | (30,199 | ) | $ | (310 | ) | $ | (31,405 | ) |
| | | | | | | | | | | | |
|
| | |
| Pension and |
| Derivative |
| | | ||
| | | | | Other | | Financial | | Accumulated | |||
| | Foreign | | Postretirement | | Instrument | | Other | ||||
| | Currency | | Transactions | | Transactions | | Comprehensive | ||||
($ thousands) | | Translation | | (1) | | (2) | | (Loss) Income | ||||
Balance at May 1, 2021 | | $ | (277) | | $ | (8,659) | | $ | — | | $ | (8,936) |
Other comprehensive income before reclassifications | | | 17 | | | — | | | — | | | 17 |
Reclassifications: | |
| | |
| | |
| | |
| |
Amounts reclassified from accumulated other comprehensive loss | | | — | | | 432 | | | — | | | 432 |
Tax benefit |
| | — |
| | (85) |
| | — |
| | (85) |
Net reclassifications |
| | — |
| | 347 |
| | — |
| | 347 |
Other comprehensive income |
| | 17 |
| | 347 |
| | — |
| | 364 |
Balance at July 31, 2021 | | $ | (260) | | $ | (8,312) | | $ | — | | $ | (8,572) |
| | | | | | | | | | | | |
Balance at May 2, 2020 | | $ | (2,111) | | $ | (31,105) | | $ | — | | $ | (33,216) |
Other comprehensive income before reclassifications | |
| 721 | |
| — | |
| — | |
| 721 |
Reclassifications: | |
|
| |
|
| |
|
| |
|
|
Amounts reclassified from accumulated other comprehensive loss | |
| — | |
| 810 | |
| — | |
| 810 |
Tax provision (3) | |
| — | |
| 248 | |
| — | |
| 248 |
Net reclassifications | |
| — | |
| 1,058 | |
| — | |
| 1,058 |
Other comprehensive income | |
| 721 | |
| 1,058 | |
| — | |
| 1,779 |
Balance at August 1, 2020 | | $ | (1,390) | | $ | (30,047) | | $ | — | | $ | (31,437) |
| | | | | | | | | | | | |
Balance at January 30, 2021 | | $ | (111) | | $ | (9,025) | | $ | — | | $ | (9,136) |
Other comprehensive loss before reclassifications | |
| (149) | |
| — | |
| — | |
| (149) |
Reclassifications: | |
| | |
|
| |
|
| |
|
|
Amounts reclassified from accumulated other comprehensive loss | |
| — | |
| 895 | |
| — | |
| 895 |
Tax benefit | |
| — | |
| (182) | |
| — | |
| (182) |
Net reclassifications | |
| — | |
| 713 | |
| — | |
| 713 |
Other comprehensive (loss) income | |
| (149) | |
| 713 | |
| — | |
| 564 |
Balance at July 31, 2021 | | $ | (260) | | $ | (8,312) | | $ | — | | $ | (8,572) |
| | | | | | | | | | | | |
Balance at February 1, 2020 | | $ | (580) | | $ | (31,171) | | $ | (92) | | $ | (31,843) |
Other comprehensive (loss) income before reclassifications | |
| (810) | |
| — | |
| 87 | |
| (723) |
Reclassifications: | |
|
| |
|
| |
|
| |
|
|
Amounts reclassified from accumulated other comprehensive loss | |
| — | |
| 1,504 | |
| 6 | |
| 1,510 |
Tax benefit (3) | |
| — | |
| (380) | |
| (1) | |
| (381) |
Net reclassifications | |
| — | |
| 1,124 | |
| 5 | |
| 1,129 |
Other comprehensive (loss) income | |
| (810) | |
| 1,124 | |
| 92 | |
| 406 |
Balance at August 1, 2020 | | $ | (1,390) | | $ | (30,047) | | $ | — | | $ | (31,437) |
(1) |
| Amounts reclassified are included in other income, net. Refer to Note 13 to the condensed consolidated financial statements for additional information related to pension and other postretirement benefits. |
(2) |
| Amounts reclassified are included in net sales, costs of goods sold and selling and administrative expenses. Refer to Note |
(3) | Includes approximately $0.5 million of expenserelated to a valuation allowance on net deferred taxes, including those related to other comprehensive income, for the |
20
| Note 12 Share-Based Compensation |
The Company recognized share-based compensation expense of $2.1 million$3.0 and $3.2$2.1 million during the thirteen weeks and $5.4 million and $4.4 million and $6.5 million during the twenty-six weeks ended July 31, 2021 and August 1, 2020, and August 3, 2019, respectively.
The Company had net (repurchases) issuances of (30,538)(25,408) and 17,5603,400 shares of common stock during the thirteen weeks ended July 31, 2021 and August 1, 2020,and August 3, 2019, respectively, for restricted stock grants, stock performance awards issued to employees stock options exercised and common and restricted stock grants issued to non-employee directors, net of forfeitures and shares withheld to satisfy the tax withholding requirement. During the twenty-six weeks ended July 31, 2021 and August 1, 2020, and August 3, 2019, the Company issued 383,583had net issuances of 301,860 and 364,843417,521 shares of common stock, respectively, related to the share-based plans.
Restricted Stock
The following table summarizes restricted stock activity for the periods ended July 31, 2021 and August 1, 2020 2020:
| | | | | | | | | | | | |
| | Thirteen Weeks Ended | | | | Thirteen Weeks Ended | ||||||
| | July 31, 2021 | | | | August 1, 2020 | ||||||
| | | | | Weighted- | | | | | | | Weighted- |
| | Total Number | | | Average | | | | Total Number | | | Average |
| | of Restricted | | | Grant Date | | | | of Restricted | | | Grant Date |
|
| Shares |
| | Fair Value |
| |
| Shares |
| | Fair Value |
May 1, 2021 | | 1,428,844 | | $ | 14.04 | | May 2, 2020 | | 1,421,743 | | $ | 18.20 |
Granted | | 6,410 | | | 27.50 | | Granted | | 12,748 | | | 10.59 |
Forfeited | | (22,375) | | | 13.51 | | Forfeited | | (35,225) | | | 20.73 |
Vested |
| (32,633) |
| | 15.95 |
| Vested |
| (38,664) |
| | 27.37 |
July 31, 2021 |
| 1,380,246 | | $ | 14.05 | | August 1, 2020 |
| 1,360,602 | | $ | 17.81 |
| | | | | | | | | | | | |
| | Twenty-Six Weeks Ended | | | | Twenty-Six Weeks Ended | ||||||
|
| July 31, 2021 |
| |
| August 1, 2020 | ||||||
| | | | Weighted- | | | | | | Weighted- | ||
| | Total Number | | Average | | | | Total Number | | Average | ||
| | of Restricted | | Grant Date | | | | of Restricted | | Grant Date | ||
| | Shares |
| | Fair Value | | | | Shares | | Fair Value | |
January 30, 2021 |
| 1,397,227 | | $ | 16.74 | | February 1, 2020 |
| 1,271,795 | | $ | 26.77 |
Granted |
| 568,916 | |
| 18.73 | | Granted |
| 563,431 | |
| 5.92 |
Forfeited |
| (68,875) | |
| 15.45 | | Forfeited |
| (67,912) | |
| 23.21 |
Vested |
| (517,022) | |
| 26.26 | | Vested |
| (406,712) | |
| 28.28 |
July 31, 2021 |
| 1,380,246 | | $ | 14.05 | | August 1, 2020 |
| 1,360,602 | | $ | 17.81 |
Of the 6,410 restricted shares granted during the thirteen weeks ended July 31, 2021, 4,910 shares have a cliff-vesting term of one year and August 3, 2019:
Thirteen Weeks Ended | Thirteen Weeks Ended | ||||||||||||||||
August 1, 2020 | August 3, 2019 | ||||||||||||||||
Total Number of Restricted Shares | Weighted- Average Grant Date Fair Value | Total Number of Restricted Shares | Weighted- Average Grant Date Fair Value | ||||||||||||||
May 2, 2020 | 1,421,743 | $ | 18.20 | May 4, 2019 | 1,420,428 | $ | 27.43 | ||||||||||
Granted | 12,748 | 10.59 | Granted | 52,684 | 19.38 | ||||||||||||
Forfeited | (35,225 | ) | 20.73 | Forfeited | (36,000 | ) | 28.33 | ||||||||||
Vested | (38,664 | ) | 27.37 | Vested | (3,642 | ) | 34.33 | ||||||||||
August 1, 2020 | 1,360,602 | $ | 17.81 | August 3, 2019 | 1,433,470 | $ | 27.09 |
Twenty-Six Weeks Ended | Twenty-Six Weeks Ended | ||||||||||||||||
August 1, 2020 | August 3, 2019 | ||||||||||||||||
Total Number of Restricted Shares | Weighted- Average Grant Date Fair Value | Total Number of Restricted Shares | Weighted- Average Grant Date Fair Value | ||||||||||||||
February 1, 2020 | 1,271,795 | $ | 26.77 | February 2, 2019 | 1,249,223 | $ | 29.17 | ||||||||||
Granted | 563,431 | 5.92 | Granted | 450,234 | 22.95 | ||||||||||||
Forfeited | (67,912 | ) | 23.21 | Forfeited | (57,425 | ) | 28.77 | ||||||||||
Vested | (406,712 | ) | 28.28 | Vested | (208,562 | ) | 30.13 | ||||||||||
August 1, 2020 | 1,360,602 | $ | 17.81 | August 3, 2019 | 1,433,470 | $ | 27.09 |
1,500 shares have a graded-vesting term of three years, with 50% vesting after two years and 50% after three years. Of the 568,916 restricted shares granted during the twenty-six weeks ended July 31, 2021, 4,910 shares have a cliff-vesting term of one year, 20,000 shares have a cliff-vesting term of two years and 544,006 shares have a graded-vesting term of three years, with 50% vesting after two years and 50% after three years. All of the restricted shares granted during the thirteen weeks ended August 1, 2020 have a cliff-vesting term of one year. Of the 563,431 restricted shares granted during the twenty-six weeks ended August 1, 2020,, 12,748 shares have a cliff-vesting term of one year and 550,683 shares have a graded-vesting term of three years and 12,748 shares have a cliff-vesting term of one year. Of the 52,684 restricted shares granted during the thirteen weeks ended August 3, 2019, 39,770 shares have a graded-vesting term of three years, with 50% vesting after two years and 50% vesting after three years, and 12,914 shares have a cliff-vesting term of one year. Of the 450,234 restricted shares granted during the twenty-six weeks ended August 3, 2019, 437,320 shares have a graded-vesting term of three years, with 50% vesting after two years and 50% vesting after three years, and 12,914 shares have a cliff-vesting term of one year. years. Share-based compensation expense for graded-vesting grants is recognized ratably over the respective vesting periods.
Performance Share Awards
During the twenty-six weeks ended August 1, 2020 and thirteen weeks ended August 3, 2019, the Company granted 0 performance share awards. During the twenty-six weeks ended August 3, 2019,July 31, 2021, the Company granted performance share awards for a targeted 180,000175,500 shares, with a weighted-average grant date fair value of $23.42.$18.63 in connection with the 2020 performance award. There were 0 performance-based share awards granted by the Company during the thirteen weeks ended July 31, 2021 or for the twenty-six weeks ended August 1, 2020. Vesting of performance-based awards is generally dependent upon the financial performance of the Company and the attainment of certain financial goals during the three-yearthree-year period following the grant. At the end of the vesting period, the employee will have earned an amount of shares or units between 0% and 200% of the targeted award, depending on the achievement of the specified financial goals for the service period.
21
Compensation expense is recognized based on the fair value of the award and the anticipated number of shares or units to be awarded for each tranche in accordance with the vesting schedule of the units over the three-yearthree-year service period. Subsequent to quarter-end,
During the twenty-six weeks ended July 31, 2021, the Company granted long-term incentive awards payable in cash for the 2021-2023 performance shareperiod, with a target value of $6.5 million and a maximum value of $13.0 million. These awards, forwhich vest after a targeted 87,750 shares. These performance share awardsthree-year period, are baseddependent upon the attainment of certain financial goals of the Company for each of the second halfthree years and individual achievement of strategic initiatives over the cumulative period of the award. The estimated value of the award, which is reflected within other liabilities on the condensed consolidated balance sheets, is being accrued over the three-year performance period. There were 0 long-term incentive awards granted by the Company during the thirteen weeks ended July 31, 2021 or during the twenty-six weeks ended August 1, 2020.
Restricted Stock Units for Non-Employee Directors
Equity-based grants may be made to non-employee directors in the form of restricted stock units ("RSUs") payable in cash or common stock at no cost to the non-employee director. The RSUs earn dividend equivalents at the same rate as dividends on the Company'sCompany’s common stock. The dividend equivalents, which vest immediately, are automatically re-invested in additional RSUs. Expense related to the initial grant of RSUs is recognized ratably over the vesting period based upon the fair value of the RSUs. The RSUs payable in cash are remeasured at the end of each period. Expense for the dividend equivalents is recognized at fair value when the dividend equivalents are granted. The Company granted 106,22240,729 and 53,215106,222 RSUs to non-employee directors, including 4,2381,449 and 1,5594,238 for dividend equivalents, during the thirteen weeks ended July 31, 2021 and August 1, 2020,and August 3, 2019, respectively, with weighted-average grant date fair values of $10.50$27.48 and $19.38,$10.50, respectively. The Company granted 114,53142,441 and 54,329114,531 RSUs to non-employee directors, including 12,5483,161 and 2,67312,548 for dividend equivalents, during the twenty-six weeks ended July 31, 2021 and August 1, 2020,and August 3, 2019, respectively, with weighted-average grant date fair values of $27.21 and $10.02, and $19.50, respectively.
| Note 13 Retirement and Other Benefit Plans |
The following table sets forth the components of net periodic benefit income for the Company, including domestic and Canadian plans:
Pension Benefits | Other Postretirement Benefits | |||||||||||||||||||||||||||
Thirteen Weeks Ended | Thirteen Weeks Ended | |||||||||||||||||||||||||||
| | | | | | | | | | | | | ||||||||||||||||
| | Pension Benefits | | Other Postretirement Benefits | ||||||||||||||||||||||||
|
| Thirteen Weeks Ended |
| Thirteen Weeks Ended | ||||||||||||||||||||||||
($ thousands) | August 1, 2020 | August 3, 2019 | August 1, 2020 | August 3, 2019 | | July 31, 2021 |
| August 1, 2020 |
| July 31, 2021 |
| August 1, 2020 | ||||||||||||||||
Service cost | $ | 2,247 | $ | 1,755 | $ | 0 | $ | 0 | | $ | 1,801 | | $ | 2,247 | | $ | 0 | | $ | 0 | ||||||||
Interest cost | 3,128 | 3,680 | 11 | 15 | |
| 2,806 | |
| 3,128 | |
| 10 | |
| 11 | ||||||||||||
Expected return on assets | (7,432 | ) | (6,967 | ) | 0 | 0 | |
| (7,108) | |
| (7,432) | |
| 0 | |
| 0 | ||||||||||
Amortization of: | |
| | |
|
| |
| | |
|
| ||||||||||||||||
Actuarial loss (gain) | 1,183 | 1,024 | (16 | ) | (24 | ) | |
| 592 | |
| 1,183 | |
| (28) | |
| (16) | ||||||||||
Prior service income | (357 | ) | (378 | ) | 0 | 0 | |
| (132) | |
| (357) | |
| 0 | |
| 0 | ||||||||||
Settlement cost | 222 | 0 | 0 | 0 | |
| — | |
| 222 | |
| 0 | |
| 0 | ||||||||||||
Curtailment gain | (189 | ) | 0 | 0 | 0 | |
| — | |
| (189) | |
| 0 | |
| 0 | |||||||||||
Total net periodic benefit income | $ | (1,198 | ) | $ | (886 | ) | $ | (5 | ) | $ | (9 | ) | | $ | (2,041) | | $ | (1,198) | | $ | (18) | | $ | (5) |
Pension Benefits | Other Postretirement Benefits | |||||||||||||||||||||||||||
Twenty-Six Weeks Ended | Twenty-Six Weeks Ended | |||||||||||||||||||||||||||
| | | | | | | | | | | | | ||||||||||||||||
| | Pension Benefits | | Other Postretirement Benefits | ||||||||||||||||||||||||
|
| Twenty-Six Weeks Ended |
| Twenty-Six Weeks Ended | ||||||||||||||||||||||||
($ thousands) | August 1, 2020 | August 3, 2019 | August 1, 2020 | August 3, 2019 |
| July 31, 2021 |
| August 1, 2020 |
| July 31, 2021 |
| August 1, 2020 | ||||||||||||||||
Service cost | $ | 4,407 | $ | 3,609 | $ | 0 | $ | 0 | | $ | 3,743 | | $ | 4,407 | | $ | — | | $ | — | ||||||||
Interest cost | 6,282 | 7,405 | 21 | 30 | |
| 5,619 | |
| 6,282 | |
| 20 | |
| 30 | ||||||||||||
Expected return on assets | (14,875 | ) | (13,859 | ) | 0 | 0 | |
| (14,222) | |
| (14,875) | |
| — | |
| — | ||||||||||
Amortization of: | | | | | |
| | | | | |
| ||||||||||||||||
Actuarial loss (gain) | 2,266 | 1,952 | (55 | ) | (54 | ) | |
| 1,207 | |
| 2,266 | |
| (55) | |
| (54) | ||||||||||
Prior service income | (707 | ) | (743 | ) | 0 | 0 | |
| (257) | |
| (707) | |
| — | |
| — | ||||||||||
Settlement cost | 222 | 0 | 0 | 0 | |
| — | |
| 222 | |
| — | |
| — | ||||||||||||
Curtailment gain | (189 | ) | 0 | 0 | 0 | |
| — | |
| (189) | |
| — | |
| — | |||||||||||
Total net periodic benefit income | $ | (2,594 | ) | $ | (1,636 | ) | $ | (34 | ) | $ | (24 | ) | | $ | (3,910) | | $ | (2,594) | | $ | (35) | | $ | (24) |
The non-service cost components of net periodic benefit income are included in other income, net in the condensed consolidated statements of earnings (loss). Service cost is included in selling and administrative expenses.
22
|
|
In the normal course of business, the Company’s financial results are impacted by currency rate movements in foreign currency denominated assets, liabilities and cash flows as it makes a portion of its purchases and sales in local currencies. The Company has established policies and business practices that are intended to mitigate a portion of the effect of these exposures. The Company uses derivative financial instruments, primarily forward contracts, to manage its currency exposures. These derivative financial instruments are viewed as risk management tools and are not used for trading or speculative purposes. Derivatives entered into by the Company are designated as cash flow hedges of forecasted foreign currency transactions.
Derivative financial instruments expose the Company to credit and market risk. The market risk associated with these instruments resulting from currency exchange movements is expected to offset the market risk of the underlying transactions being hedged. The Company does not believe there is a significant risk of loss in the event of non-performance by the counterparties associated with these instruments because these transactions are executed with major international financial institutions. Credit risk is managed through the continuous monitoring of exposures to such counterparties.
The Company’s hedging strategy allows for the use of forward contracts as cash flow hedging instruments, which are recorded in the Company's condensed consolidated balance sheets at fair value. The effective portion of gains and losses resulting from changes in the fair value of these hedge instruments are deferred in accumulated other comprehensive loss and reclassified to earnings in the period that the hedged transaction is recognized in earnings.
The Company had no forward contracts as of August 1, 2020. As of August 3, 2019, and February 1, 2020, the Company had forward contracts maturing through May 2020. The contract amounts in the following table represent the net notional amount of all purchase and sale contracts of a foreign currency.
(U.S. $ equivalent in thousands) | August 1, 2020 | August 3, 2019 | February 1, 2020 | |||||||||
Financial Instruments | ||||||||||||
U.S. dollars (purchased by the Company’s Canadian division with Canadian dollars) | $ | 0 | $ | 9,630 | $ | 3,963 | ||||||
Euro | 0 | 5,718 | 1,251 | |||||||||
Chinese yuan | 0 | 3,643 | 2,355 | |||||||||
New Taiwanese dollars | 0 | 329 | 0 | |||||||||
Other currencies | 0 | 250 | 69 | |||||||||
Total financial instruments | $ | 0 | $ | 19,570 | $ | 7,638 |
The classification and fair values of derivative instruments designated as hedging instruments included within the condensed consolidated balance sheets as of August 1, 2020, August 3, 2019 and February 1, 2020 are as follows:
Asset Derivatives | Liability Derivatives | |||||||||
($ thousands) | Balance Sheet Location | Fair Value | Balance Sheet Location | Fair Value | ||||||
Foreign Exchange Forward Contracts | ||||||||||
August 1, 2020 | Prepaid expenses and other current assets | 0 | Other accrued expenses | 0 | ||||||
August 3, 2019 | Prepaid expenses and other current assets | 60 | Other accrued expenses | 418 | ||||||
February 1, 2020 | Prepaid expenses and other current assets | 0 | Other accrued expenses | 103 |
For the thirteen and twenty-six weeks ended August 1, 2020 and August 3, 2019, the effect of derivative instruments in cash flow hedging relationships on the condensed consolidated statements of earnings (loss) was as follows:
Thirteen Weeks Ended | ||||||||||||||||
($ thousands) | August 1, 2020 | August 3, 2019 | ||||||||||||||
Foreign Exchange Forward Contracts: Income Statement Classification Gains (Losses) - Realized | Gain (Loss) Recognized in OCL on Derivatives | Gain (Loss) Reclassified from Accumulated OCL into Earnings | (Loss) Gain Recognized in OCL on Derivatives | Loss Reclassified from Accumulated OCL into Earnings | ||||||||||||
Net sales | $ | 0 | $ | 0 | $ | (22 | ) | $ | (5 | ) | ||||||
Cost of goods sold | 0 | 0 | 63 | (16 | ) | |||||||||||
Selling and administrative expenses | 0 | 0 | (150 | ) | (66 | ) |
Twenty-Six Weeks Ended | ||||||||||||||||
($ thousands) | August 1, 2020 | August 3, 2019 | ||||||||||||||
Foreign Exchange Forward Contracts: Income Statement Classification Gains (Losses) - Realized | Gain Recognized in OCL on Derivatives | Loss Reclassified from Accumulated OCL into Earnings | (Loss) Gain Recognized in OCL on Derivatives | Loss Reclassified from Accumulated OCL into Earnings | ||||||||||||
Net sales | $ | 23 | $ | 0 | $ | (121 | ) | $ | (5 | ) | ||||||
Cost of goods sold | 60 | 0 | 352 | (38 | ) | |||||||||||
Selling and administrative expenses | 33 | (6 | ) | (115 | ) | (215 | ) |
Additional information related to the Company’s derivative financial instruments are disclosed within Note 15 to the condensed consolidated financial statements.
| 14 Fair Value Measurements |
Fair Value Hierarchy
Fair value measurement disclosure requirements specify a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptions other market participants would use based upon market data obtained from independent sources (“observable inputs”) or reflect the Company’s own assumptions of market participant valuation (“unobservable inputs”). In accordance with the fair value guidance, the inputs to valuation techniques used to measure fair value are categorized into three levels based on the reliability of the inputs as follows:
| Level 1 – Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities; |
| Level 2 – Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly; and |
| Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. |
In determining fair value, the Company uses valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company also considers counterparty credit risk in its assessment of fair value. Classification of the financial or non-financial asset or liability within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.
Measurement of Fair Value
The Company measures fair value as an exit price, the price to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date, using the procedures described below for all financial and non-financial assets and liabilities measured at fair value.
Money Market Funds
The Company has cash equivalents consisting of short-term money market funds backed by U.S. Treasury securities. The primary objective of these investing activities is to preserve the Company’s capital for the purpose of funding operations, and it does not enter into money market funds for trading or speculative purposes. The fair value is based on unadjusted quoted market prices for the funds in active markets with sufficient volume and frequency (Level 1)1).
Non-Qualified Deferred Compensation Plan Assets and Liabilities
The Company maintains a non-qualified deferred compensation plan (the “Deferred Compensation Plan”) for the benefit of certain management employees. The investment funds offered to the participants generally correspond to the funds offered in the Company’s 401(k)401(k) plan, and the account balance fluctuates with the investment returns on those funds. The Deferred Compensation Plan permits the deferral of up to 50% of base salary and 100% of compensation received under the Company’s annual incentive plan. The deferrals are held in a separate trust, which has been established by the Company to administer the Deferred Compensation Plan. The assets of the trust are subject to the claims of the Company’s creditors in the event that the Company becomes insolvent. Consequently, the trust qualifies as a grantor trust for income tax purposes (i.e., a “Rabbi Trust”). The liabilities of the Deferred Compensation Plan are presented in other accrued expenses and the assets held by the trust are classified within prepaid expenses and other current assets in the accompanying condensed consolidated balance sheets. Changes in deferred compensation plan assets and liabilities are charged to selling and administrative expenses. The fair value is based on unadjusted quoted market prices for the funds in active markets with sufficient volume and frequency (Level 1)1).
Deferred Compensation Plan for Non-Employee Directors
Non-employee directors are eligible to participate in a deferred compensation plan with deferred amounts valued as if invested in the Company’s common stock through the use of phantom stock units (“PSUs”). Under the plan, each participating director’s account is credited with the number of PSUs equal to the number of shares of the Company’s common stock that the participant could purchase or receive with the amount of the deferred compensation, based upon the average of the high and low prices of the Company’s common stock on the last trading day of the fiscal quarter when the cash compensation was earned. Dividend equivalents are paid on PSUs at the same rate as dividends on the Company’s common stock and are re-invested in additional PSUs at the next fiscal quarter-end. The liabilities of the plan are based on the fair value of the outstanding PSUs and are presented in other accrued expenses (current portion) or other liabilities in the accompanying condensed consolidated balance sheets. Gains and losses resulting from changes in the fair value of the PSUs are presented in selling and administrative expenses in the Company’s condensed consolidated statements of earnings (loss). The fair value of each PSU
23
is based on an unadjusted quoted market price for the Company’s common stock in an active market with sufficient volume and frequency on each measurement date (Level 1)1).
Restricted Stock Units for Non-Employee Directors
Under the Company’s incentive compensation plans, cash-equivalent restricted stock units (“RSUs”) of the Company were previously granted at no cost to non-employee directors. These cash-equivalent RSUs are subject to a vesting requirement (usually one year), earn dividend-equivalent units, and are settled in cash on the date the director terminates service or such earlier date as a director may elect, subject to restrictions, based on the then current fair value of the Company’s common stock. The fair value of each cash-equivalent RSU is based on an unadjusted quoted market price for the Company’s common stock in an active market with sufficient volume and frequency on each measurement date (Level 1)1). Additional information related to RSUs for non-employee directors is disclosed in Note 12 to the condensed consolidated financial statements.
Derivative Financial Instruments
The Company uses derivative financial instruments, primarily foreign exchange contracts, to reduce its exposure to market risks from changes in foreign exchange rates. These foreign exchange contracts are measured at fair value using quoted forward foreign exchange prices from counterparties corroborated by market-based pricing (Level 2). Additional information related to the Company’s derivative financial instruments is disclosed in Note 14 to the condensed consolidated financial statements.
Mandatory Purchase Obligation
The Company recorded a mandatory purchase obligation of the noncontrolling interest in conjunction with the acquisition of Blowfish Malibu in July of 2018. The fair value of the mandatory purchase obligation is based on the earnings formula specified in the purchase agreement (Level 3)3). Accretion ofFair value adjustments on the mandatory purchase obligation and fair value adjustments are recorded as interest expense. During the thirteen and twenty-six weeks ended July 31, 2021 and August 1, 2020,, the Company recorded fair value adjustments of $7.1 million and $6.6 million, respectively. During the twenty-six weeks ended July 31, 2021 and August 1, 2020, the Company recorded fair value adjustments of $13.5 million and $9.8 million, respectively. Accretion and remeasurement adjustments of $0.4 million and $0.5 million were recorded during the thirteen and twenty-six weeks ended August 3, 2019, respectively. The earnings projections and discount rate utilized in the estimate of the fair value of the mandatory purchase obligation require management judgment and are the assumptions to which the fair value calculation is the most sensitive. Refer to further discussion of the mandatory purchase obligation in Note 5 to the condensed consolidated financial statements.
The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis at July 31, 2021, August 1, 2020, August 3, 2019 and FebruaryJanuary 30, 2021. During the twenty-six weeks ended July 31, 2021 and August 1, 2020,. there were 0 transfers into or out of Level 3.
Fair Value Measurements | ||||||||||||||||||||||||||||
| | | | | | | | | | | | | ||||||||||||||||
|
| Fair Value Measurements | ||||||||||||||||||||||||||
($ thousands) | Total | Level 1 | Level 2 | Level 3 |
| Total |
| Level 1 |
| Level 2 |
| Level 3 | ||||||||||||||||
Asset (Liability) | | |
| | |
| | |
| | |
| ||||||||||||||||
July 31, 2021: | | |
| | |
| | |
| | |
| ||||||||||||||||
Cash equivalents – money market funds | | $ | 4,000 | | $ | 4,000 | | $ | 0 | | $ | 0 | ||||||||||||||||
Non-qualified deferred compensation plan assets | |
| 8,361 | |
| 8,361 | |
| 0 | | | 0 | ||||||||||||||||
Non-qualified deferred compensation plan liabilities | |
| (8,361) | |
| (8,361) | |
| 0 | | | 0 | ||||||||||||||||
Deferred compensation plan liabilities for non-employee directors | |
| (1,991) | |
| (1,991) | |
| 0 | | | 0 | ||||||||||||||||
Restricted stock units for non-employee directors | |
| (2,735) | |
| (2,735) | |
| 0 | | | 0 | ||||||||||||||||
Mandatory purchase obligation - Blowfish Malibu | |
| (52,639) | |
| 0 | |
| 0 | | | (52,639) | ||||||||||||||||
August 1, 2020: | | |
| | |
| | |
| | |
| ||||||||||||||||
Cash equivalents – money market funds | $ | 99,001 | $ | 99,001 | $ | 0 | $ | 0 | | $ | 99,001 | | $ | 99,001 | | $ | 0 | | $ | 0 | ||||||||
Non-qualified deferred compensation plan assets | 7,690 | 7,690 | 0 | 0 | | | 7,690 | | | 7,690 | | | 0 | | | 0 | ||||||||||||
Non-qualified deferred compensation plan liabilities | (7,690 | ) | (7,690 | ) | 0 | 0 | |
| (7,690) | |
| (7,690) | |
| 0 | | | 0 | ||||||||||
Deferred compensation plan liabilities for non-employee directors | (780 | ) | (780 | ) | 0 | 0 | |
| (780) | |
| (780) | |
| 0 | | | 0 | ||||||||||
Restricted stock units for non-employee directors | (686 | ) | (686 | ) | 0 | 0 | |
| (686) | |
| (686) | |
| 0 | | | 0 | ||||||||||
Mandatory purchase obligation - Blowfish Malibu | (25,022 | ) | 0 | 0 | (25,022 | ) | |
| (25,022) | |
| 0 | |
| 0 | | | (25,022) | ||||||||||
August 3, 2019: | ||||||||||||||||||||||||||||
Non-qualified deferred compensation plan assets | $ | 7,949 | $ | 7,949 | $ | 0 | $ | 0 | ||||||||||||||||||||
Non-qualified deferred compensation plan liabilities | (7,949 | ) | (7,949 | ) | 0 | 0 | ||||||||||||||||||||||
Deferred compensation plan liabilities for non-employee directors | (1,407 | ) | (1,407 | ) | 0 | 0 | ||||||||||||||||||||||
Restricted stock units for non-employee directors | (2,309 | ) | (2,309 | ) | 0 | 0 | ||||||||||||||||||||||
Derivative financial instruments, net | (358 | ) | 0 | (358 | ) | 0 | ||||||||||||||||||||||
Mandatory purchase obligation - Blowfish Malibu | (9,772 | ) | 0 | 0 | (9,772 | ) | ||||||||||||||||||||||
February 1, 2020: | ||||||||||||||||||||||||||||
January 30, 2021: | | |
| | |
| | |
| | |
| ||||||||||||||||
Cash equivalents – money market funds | $ | 18,001 | $ | 18,001 | $ | 0 | $ | 0 | | $ | 45,000 | | $ | 45,000 | | $ | 0 | | $ | 0 | ||||||||
Non-qualified deferred compensation plan assets | 8,004 | 8,004 | 0 | 0 | |
| 7,918 | |
| 7,918 | |
| 0 | | | 0 | ||||||||||||
Non-qualified deferred compensation plan liabilities | (8,004 | ) | (8,004 | ) | 0 | 0 | |
| (7,918) | |
| (7,918) | |
| 0 | | | 0 | ||||||||||
Deferred compensation plan liabilities for non-employee directors | (1,536 | ) | (1,536 | ) | 0 | 0 | |
| (989) | |
| (989) | |
| 0 | | | 0 | ||||||||||
Restricted stock units for non-employee directors | (2,572 | ) | (2,572 | ) | 0 | 0 | |
| (1,661) | |
| (1,661) | |
| 0 | | | 0 | ||||||||||
Derivative financial instruments, net | (103 | ) | 0 | (103 | ) | 0 | ||||||||||||||||||||||
Mandatory purchase obligation - Blowfish Malibu | (15,200 | ) | 0 | 0 | (15,200 | ) | |
| (39,134) | |
| 0 | |
| 0 | | | (39,134) |
Impairment Charges
The Company assesses the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors the Company considers important that could trigger an impairment review include underperformance relative to historical or projected future operating results, a significant change in the manner of the use of the asset, or a negative industry or economic trend. When the Company determines that the carrying value of long-lived assets may not be recoverable based upon the existence
24
of one or more of the aforementioned factors, impairment is measured based on a projected discounted cash flow method. Certain factors, such as estimated store sales and expenses, used for this nonrecurring fair value measurement are considered Level 3 inputs as defined by FASB ASC Topic 820, Fair Value Measurement. Long-lived assets held and used with a carrying amount of $551.8 million and $684.9 million at July 31, 2021 and $673.1 million at August 1, 2020,and August 3, 2019, respectively, were assessed for indicators of impairment and written down to their fair value. This assessment resulted in the following impairment charges, primarily for operating lease right-of-use assets, leasehold improvements and furniture and fixtures in the Company'sCompany’s retail stores. Higher impairment charges were recorded in the twenty-six weeks ended August 1, 2020, reflecting the deteriorating economic conditions driven in part by the COVID-19COVID-19 pandemic, as further discussed in Note 5 and Note 9 to the condensed consolidated financial statements.
Thirteen Weeks Ended | Twenty-Six Weeks Ended | |||||||||||||||||||||||||||
| | | | | | | | | | | | | ||||||||||||||||
| | Thirteen Weeks Ended | | Twenty-Six Weeks Ended | ||||||||||||||||||||||||
($ thousands) | August 1, 2020 | August 3, 2019 | August 1, 2020 | August 3, 2019 |
| July 31, 2021 |
| August 1, 2020 |
| July 31, 2021 |
| August 1, 2020 | ||||||||||||||||
Impairment Charges | ||||||||||||||||||||||||||||
Long-Lived Asset Impairment Charges |
| |
|
| |
|
| |
|
| |
| ||||||||||||||||
Famous Footwear | $ | 0 | $ | 341 | $ | 14,896 | $ | 741 | | $ | 400 | | $ | — | | $ | 800 | | $ | 14,896 | ||||||||
Brand Portfolio | 0 | 1,419 | 20,326 | 2,213 | |
| — | |
| — | |
| 1,488 | |
| 20,326 | ||||||||||||
Total impairment charges | $ | 0 | $ | 1,760 | $ | 35,222 | $ | 2,954 | ||||||||||||||||||||
Total long-lived asset impairment charges | | $ | 400 | | $ | — | | $ | 2,288 | | $ | 35,222 |
Fair Value of the Company’s Other Financial Instruments
The fair values of cash and cash equivalents (excluding money market funds discussed above), receivables and trade accounts payable approximate their carrying values due to the short-term nature of these instruments.
The carrying amounts and fair values of the Company'sCompany’s other financial instruments subject to fair value disclosures are as follows:
August 1, 2020 | August 3, 2019 | February 1, 2020 | ||||||||||||||||||||||||||||||||||||||||
Carrying | Fair | Carrying | Fair | Carrying | Fair | |||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||
|
| July 31, 2021 |
| August 1, 2020 |
| January 30, 2021 | ||||||||||||||||||||||||||||||||||||
| | Carrying | | | | | Carrying | | | | | Carrying | | | | |||||||||||||||||||||||||||
($ thousands) | Value(1) | Value | Value(1) | Value | Value(1) | Value |
| Value (1) |
| Fair Value |
| Value (1) |
| Fair Value |
| Value (1) |
| Fair Value | ||||||||||||||||||||||||
Borrowings under revolving credit agreement | $ | 350,000 | $ | 350,000 | $ | 300,000 | $ | 300,000 | $ | 275,000 | $ | 275,000 | | $ | 100,000 | | $ | 100,000 | | $ | 350,000 | | $ | 350,000 | | $ | 250,000 | | $ | 250,000 | ||||||||||||
Current portion of long-term debt | | | 100,000 | | | 100,000 | | | — | | | — | | | — | | | — | ||||||||||||||||||||||||
Long-term debt | 200,000 | 174,000 | 200,000 | 205,500 | 200,000 | 205,000 | |
| 100,000 | |
| 100,000 | |
| 200,000 | |
| 174,000 | |
| 200,000 | |
| 201,000 | ||||||||||||||||||
Total debt | $ | 550,000 | $ | 524,000 | $ | 500,000 | $ | 505,500 | $ | 475,000 | $ | 480,000 | | $ | 300,000 | | $ | 300,000 | | $ | 550,000 | | $ | 524,000 | | $ | 450,000 | | $ | 451,000 |
(1) | Excludes unamortized debt issuance costs and debt discount |
(1) Excludes unamortized debt issuance costs and debt discount
|
|
Note 15 Income Taxes
The Company’s consolidated effective tax rate can vary considerably from period to period, depending on a number of factors. The Company’s consolidated effective tax rates were 9.4%a provision of 30.3% and 23.7%a benefit of 9.4% for the thirteen weeks ended July 31, 2021 and August 1, 2020, respectively. The higher tax rate for the thirteen weeks ended July 31, 2021 was driven by discrete tax adjustments totaling $2.9 million, inclusive of $3.3 million of incremental valuation allowances on the Company’s deferred tax assets, as the Company is in a full valuation allowance position for federal, state and August 3, 2019, respectively.certain international jurisdictions. During the thirteen weeks ended August 1, 2020,, the Company's effective tax rate was impacted by several discrete tax items totaling $2.7 million, including the non-deductibility of losses at the Company’s Canadian business division. Offsetting this impact was a tax benefit of approximately $5.2 million associated with the provision in the CARES Act, thatwhich permits entitiesthe Company to carryback net operatingcarry back 2020 losses to tax years with a higher federal corporate tax rate.
The effective tax rate was also impacted by a discrete tax provision of $2.7 million, primarily for the provision of valuation allowances related to certain state and Canada deferred tax assets. If these discrete tax items had not been recognized, the Company's effective tax rate would have been 17.3% for the thirteen weeks ended August 1, 2020. There were no discrete tax items recognized during the thirteen weeks ended August 3, 2019.
For the twenty-six weeks ended August 1, 2020, the Company'sCompany’s consolidated effective tax rate was 19.1%,a provision of 31.1% for the twenty-six weeks ended July 31, 2021, compared to 24.1%a benefit of 19.1% for the twenty-six weeks ended August 3, 2019.1, 2020. The higher tax rate for the twenty-six weeks ended July 31, 2021 primarily reflects the incremental valuation allowances recorded in the second quarter, as described above, and the non-deductibility of losses at the Company’s Canadian business division, which were driven by exit-related costs associated with Naturalizer retail stores during the first quarter. The Company's effective tax rate for the twenty-six weeks ended August 1, 2020 was impacted by several discrete tax items, including the non-deductibility of a portion of the Company's intangible asset impairment charges, the provision of a valuation allowance related to certain
25
state and Canada deferred tax assets, and the incremental tax provision related to share-based compensation during the six months ended August 1,vesting of stock awards. Offsetting these impacts was a benefit associated with the CARES ACT, which permits the Company to carry back 2020. During the six months ended August 3, 2019, the Company's effective losses to years with a higher federal tax rate was impacted by a discrete tax provision of $0.1 million related to share-based compensation. If these discrete taxes had not been recognized during the first half of 2020 and 2019, the Company's effective tax rates would have been 25.0% and 23.9%, respectively.
rate.
As of August 1, 2020, noJuly 31, 2021, 0 deferred taxes have been provided on the accumulated unremitted earnings of the Company’s foreign subsidiaries that are not subject to United States income tax, beyond the amounts recorded for the one-timeone-time transition tax for the mandatory deemed repatriation of cumulative foreign earnings, as required by the Tax Cuts and Jobs Act. The Company periodically evaluates its foreign investment opportunities and plans, as well as its foreign working capital needs, to determine the level of investment required and, accordingly, determines the level of foreign earnings that is considered indefinitely reinvested. Based upon that evaluation, earnings of the Company’s foreign subsidiaries that are not otherwise subject to United States taxation are considered to be indefinitely reinvested, and accordingly, deferred taxes have not been provided. If changes occur in future investment opportunities and plans, those changes will be reflected when known and may result in providing residual United States deferred taxes on unremitted foreign earnings.
|
|
Note 16 Commitments and Contingencies
Environmental Remediation
Prior operations included numerous manufacturing and other facilities for which the Company may have responsibility under various environmental laws for the remediation of conditions that may be identified in the future. The Company is involved in environmental remediation and ongoing compliance activities at several sites and has been notified that it is or may be a potentially responsible party at several other sites.
Redfield
The Company is remediating, under the oversight of Colorado authorities, the groundwater and indoor air at its owned facility in Colorado (the “Redfield site” or, when referring to remediation activities at or under the facility, the “on-site remediation”) and residential neighborhoods adjacent to and near the property (the “off-site remediation”) that have been affected by solvents previously used at the facility. The on-site remediation calls for the operation of a pump and treat system (which prevents migration of contaminated groundwater off the property) as the final remedy for the site, subject to monitoring and periodic review of the on-site conditions and other remedial technologies that may be developed in the future. In 2016, the Company submitted a revised plan to address on-site conditions, including direct treatment of source areas, and received approval from the oversight authorities to begin implementing the revised plan.
As the treatment of the on-site source areas progresses, the Company expects to convert the pump and treat system to a passive treatment barrier system. Off-site groundwater concentrations have been reducing over time since installation of the pump and treat system in 2000 and injection of clean water beginning in 2003. However, localized areas of contaminated bedrock just beyond the property line continue to impact off-site groundwater. The modified work plan for addressing this condition includes converting the off-site bioremediation system into a monitoring well network and employing different remediation methods in these recalcitrant areas. In accordance with the work plan, a pilot test was conducted of certain groundwater remediation methods and the results of that test were used to develop more detailed plans for remedial activities in the off-site areas, which were approved by the authorities and are being implemented in a phased manner. The results of groundwater monitoring are being used to evaluate the effectiveness of these activities. The Company continues to implement the expanded remedy work plan that was approved by the oversight authorities in 2015. Based on the progress of the direct remedial action of on-site conditions, the Company has submitted a request to the oversight authorities for permission to convert the perimeter pump and treat active remediation system to a passive one. During the fourth quarter of In 2019, a final response was received from the oversight authorities, which will allowis allowing the Company to proceed with implementation of the revised plan.
The Company continues to work with outside experts and the oversight authorities on the off-site work plan.
The cumulative expenditures for both on-site and off-site remediation through August 1, 2020July 31, 2021 were $31.7$32.1 million. The Company has recovered a portion of these expenditures from insurers and other third parties. The reserve for the anticipated future remediation activities at August 1, 2020July 31, 2021 is $9.5$9.9 million, of which $8.7$9.0 million is recorded within other liabilities and $0.8$0.9 million is recorded within other accrued expenses. Of the total $9.5$9.9 million reserve, $5.0$5.1 million is for off-site remediation and $4.5$4.8 million is for on-site remediation. The liability for the on-site remediation was discounted at 4.8%. On an undiscounted basis, the on-site remediation liability would be $13.8$13.6 million as of August 1, 2020. July 31, 2021. The Company expects to spend approximately $0.5 million in 2020,2$0.1021, $0.1 million in each of the following four years and $12.9$12.7 million in the aggregate thereafter related to the on-site remediation.
Other
Various federal and state authorities have identified the Company as a potentially responsible party for remediation at certain other sites. However, the Company does not currently believe that its liability for such sites, if any, would be material.
26
The Company continues to evaluate its remediation plans in conjunction with its environmental consultants and records its best estimate of remediation liabilities. However, future actions and the associated costs are subject to oversight and approval of various governmental authorities. Accordingly, the ultimate costs may vary, and it is possible costs may exceed the recorded amounts.
Litigation
The Company is involved in legal proceedings and litigation arising in the ordinary course of business. In the opinion of management, the outcome of such ordinary course of business proceedings and litigation currently pending is not expected to have a material adverse effect on the Company’s results of operations or financial position. Legal costs associated with litigation are generally expensed as incurred.
27
|
ITEM 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
OVERVIEW
We experienced better-than-anticipated consumer demand in the second quarter of 2021, recording sequential net sales growth and significant gross margin improvement. We also achieved the highest second quarter operating earnings in our history. We experienced consistently strong sales performance throughout the quarter at Famous Footwear, which contributed to the segment’s highest second quarter net sales in its history.
In March 2020, the World Health Organization declared the outbreakfirst half of last year, our financial results were negatively impacted by the coronavirus ("COVID-19"(“COVID-19”) a global pandemic. On March 19, 2020, we announcedpandemic, including the temporary closure of all of our Famous Footwear and Brand Portfolio retail stores beginning in North America,mid-March, with a phased re-opening beginning in mid-May. We did experience sequential improvement in sales in the second half of 2020, driven by the reopening of our retail stores, and they remained closed for an averagecontinued solid growth of 10 weeks duringour e-commerce business. During the first half of 2020. While our e-commerce businesses2021, as the vaccines became widely distributed and governments continued to operate during the temporaryease restrictions, consumer sentiment and spending improved, which contributed to higher store closurestraffic and contributed strong sales increases, we experienced a significant decline in sales and earnings during the first half of 2020. In addition, many of our wholesale partners also temporarily closed their retail stores and canceled orders during this time. In mid-May, we began a phased reopening of our Famous Footwear and Brand Portfolio retail stores and substantially all of our retail store locations were reopened by the end of June. Our stores opened with enhanced health and safety procedures, contactless shopping options and, in many cases, reduced operating hours. During the period of temporary store closures, we leveraged the strength of our brands and the investment in our e-commerce platform to quickly shift to a digital-only business, resulting in significant growth in our e-commerce business during the first half of 2020. net sales and operating earnings.
Despite the ongoing economic impacts of the pandemic,While we have remained focused on managing expenses and working capital to strengthen our business. We have taken decisive actions to mitigate the adverse impact of COVID-19 during the first half of 2020, including the following:
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| |
In addition, as a precautionary measure to increase our cash position and preserve financial flexibility given the uncertainty in the United States and global markets resulting from COVID-19, we increased the borrowings on our revolving credit facility in March 2020 to $440.0 million. We also entered into an amendment to our Fourth Amended and Restated Credit Agreement in April to increase its borrowing capacity, as further discussed in Note 10 to the condensed consolidated financial statements. During the second quarter of 2020,2021, we repaid $88.5 millioncontinue to experience global supply chain disruptions as a result of the borrowings underpandemic. These disruptions have caused a delay in the revolving credit facilityreceipt of inventory due to port congestion, reduced shipping vessel and have $350.0 million outstandingcontainer availability, and factory shutdowns as a result of August 1, 2020.
The impactthe resurgence of COVID-19 oninfections, as well as an increase in inbound freight costs. We are actively working with our business operations, includingsuppliers to minimize these disruptions, but we anticipate higher inbound freight costs in the depthsecond half of 2021 and beyond. The extent and duration of the pandemicthese supply chain disruptions and its impact on overall consumer confidence and spending, as well as the need to cease or limit operations if subsequent outbreaks occur, cannot be reasonably estimated at this time. We continue to experience ongoing business disruption and there is uncertainty regarding the impact that COVID-19 will have on our business, results of operations, financial condition and cash flows for the fiscal year ending January 30, 2021.
higher freight costs are uncertain.
Financial Highlights
We are pleased with the Company's performance in the second quarter of 2020 despite ongoing pressures from the global pandemic. We advanced a number of our strategic objectives during the quarter that are helping to drive our recovery, including growth in our e-commerce sales platform and prudent management of expenses and working capital. We continue to see strong demand for our sport and casual styles, aligning with the prevailing stay-at-home, work-from-home environment. Within both our Famous Footwear and Brand Portfolio segments, where we have substantial offerings of these product categories, we continue to expand our product selection to capitalize on the acceleration in these consumer trends. The followingFollowing is a summary of the financial highlights for the second quarter of 2020:
2021:
|
|
| Consolidated gross profit |
● | Consolidated operating earnings increased $86.9 million to |
|
|
● | Consolidated net earnings attributable to |
|
|
The following items should be considered in evaluating the comparability of our second quarter results in 20202021 and 2019:
2020:
| Blowfish Malibu mandatory purchase obligation – As further discussed in Note 5 and Note |
28
● | Deferred tax valuation allowances – During the second quarter of |
| COVID-19-related expenses – During the second quarter of 2020, we incurred $5.4 million ($4.7 million on an after-tax basis, or $0.13 per diluted share) in costs associated with the economic impacts of the COVID-19 pandemic, for severance and related costs, as well as the cost of supplies and deep cleaning our facilities. |
Metrics Used in the Evaluation of Our Business
The following are a couple of key metrics by which we evaluate our business and make strategic decisions:
Same-store sales
The same-store sales metric is a metric commonly used in the retail industry to evaluate the revenue generated for stores that have been open for more than a year, though other retailers may calculate the metric differently. Management uses the same-store sales metric as a measure of an individual store'sstore’s success to determine whether it is performing in line with expectations. Our same-store sales metric is a daily-weighted calculation for the period, which includes sales for stores that have been open for at least 13 months. In addition, in order to be included in the same-store sales metric, a store must be open in the current period as well as the corresponding day(s) of the comparable retail calendar in the prior year. Accordingly, closed stores (whether temporary or permanent closures) are excluded from the same-store sales metric for each day of the closure. Relocated stores are treated as new stores and therefore excluded from the calculation. E-commerce sales for those websites that function as an extension of a retail chain are included in the same-store sales calculation. We believe the same-store sales metric is useful to shareholders and investors in assessing our retail sales performance of existing locations with comparable prior year sales, separate from the impact of store openings or store closures.
Beginning in mid-March 2020, all of our Famous Footwear and Brand Portfolio stores in North America were temporarily closed and we began a phased reopening of retail stores in mid-May. Our same-store sales calculation excludes the impact of these closed stores, both permanent and temporary store closures. Accordingly, for both the thirteen and twenty-six weeks ended August 1,second quarter of 2020, our same-store sales calculation weightswas impacted more heavily by our e-commerce sales more heavilypenetration, which was higher than in prior periods, given the strong growth in that channel and the fact that our e-commerce sites continued to operate throughout the year.second quarter of 2020.
Sales per square foot
The sales per square foot metric is commonly used in the retail industry to calculate the efficiency of sales based upon the square footage in a store. Management uses the sales per square foot metric as a measure of an individual store'sstore’s success to determine whether it is performing in line with expectations. The sales per square foot metric is calculated by dividing total retail store sales, excluding e-commerce sales, by the total square footage of the retail store base at the end of each month of the respective period. This metric was adversely impacted by the temporary retail store closures during a portion of both the first and second quartersquarter of 2020 and therefore, the metric is not comparable to the thirteensecond quarter of 2021.
Outlook
We continued to execute at a high level during the second quarter of 2021, achieving another significant sequential increase in net sales and twenty-six weeks ended August 3, 2019.
Outlook
While wedelivering operating earnings in excess of pre-pandemic levels. The new COVID-19 variants and the impact of the pandemic on the global supply chain have caused uncertainty in the macro environment. We are actively working with our suppliers to minimize these disruptions, but expect the inflationary economy and the increase in inbound freight costs to impact our financial results in the second half of 2020 to continue to be unpredictable, we are managing our business for the long-term, while maintaining the flexibility to adapt to challenges that may arise for2021. Throughout the remainder of 2021, we will remain focused on building upon our strong performance at Famous Footwear, driving inventory efficiencies, and continuing to create a strong emotional connection with our consumers. We believe we are well-positioned to navigate through the year. Our back-to-school selling season has started off more slowly than in typical years given delayed startssupply chain disruptions, responding to the school yearvariables within our control, to improve financial results in the Brand Portfolio segment. We will continue to leverage our core competencies and the shiftexecute on our long-term strategic priorities to virtual learning across much of the United States. Rather than peak selling over a small number of weeks, we anticipate the back-to-school selling season to have fewer peak selling weeks, but to extend deeper into the fall. We believeenhance long-term value for our diverse portfolio of iconic brands that are well-aligned with consumer trends, advanced capabilities and improving capital structure will lead us through the recovery, and position the Company to embrace rapidly changing consumer behaviors and capitalize on the increasingly dynamic marketplace.shareholders.
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Following are the consolidated results and the results by segment:
CONSOLIDATED RESULTS
Thirteen Weeks Ended | Twenty-Six Weeks Ended | |||||||||||||||||||||||||||||||
August 1, 2020 | August 3, 2019 | August 1, 2020 | August 3, 2019 | |||||||||||||||||||||||||||||
($ millions) | % of Net Sales | % of Net Sales | % of Net Sales | % of Net Sales | ||||||||||||||||||||||||||||
Net sales | $ | 501.4 | 100.0 | % | $ | 752.5 | 100.0 | % | $ | 898.6 | 100.0 | % | $ | 1,430.2 | 100.0 | % | ||||||||||||||||
Cost of goods sold | 318.8 | 63.6 | % | 446.6 | 59.3 | % | 594.1 | 66.1 | % | 844.4 | 59.0 | % | ||||||||||||||||||||
Gross profit | 182.6 | 36.4 | % | 305.9 | 40.7 | % | 304.5 | 33.9 | % | 585.8 | 41.0 | % | ||||||||||||||||||||
Selling and administrative expenses | 201.3 | 40.1 | % | 267.5 | 35.6 | % | 426.6 | 47.5 | % | 529.6 | 37.0 | % | ||||||||||||||||||||
Impairment of goodwill and intangible assets | — | — | — | — | 262.7 | 29.2 | % | — | — | |||||||||||||||||||||||
Restructuring and other special charges, net | 5.4 | 1.1 | % | 0.6 | 0.1 | % | 65.6 | 7.3 | % | 1.5 | 0.1 | % | ||||||||||||||||||||
Operating (loss) earnings | (24.1 | ) | (4.8 | )% | 37.8 | 5.0 | % | (450.4 | ) | (50.1 | )% | 54.7 | 3.8 | % | ||||||||||||||||||
Interest expense, net | (13.5 | ) | (2.7 | )% | (7.4 | ) | (1.0 | )% | (22.9 | ) | (2.6 | )% | (14.7 | ) | (1.0 | )% | ||||||||||||||||
Other income, net | 3.7 | 0.7 | % | 2.7 | 0.4 | % | 7.3 | 0.8 | % | 5.2 | 0.4 | % | ||||||||||||||||||||
(Loss) earnings before income taxes | (33.9 | ) | (6.8 | )% | 33.1 | 4.4 | % | (466.0 | ) | (51.9 | )% | 45.2 | 3.2 | % | ||||||||||||||||||
Income tax benefit (provision) | 3.2 | 0.7 | % | (7.9 | ) | (1.0 | )% | 89.1 | 10.0 | % | (10.9 | ) | (0.8 | )% | ||||||||||||||||||
Net (loss) earnings | (30.7 | ) | (6.1 | )% | 25.2 | 3.4 | % | (376.9 | ) | (41.9 | )% | 34.3 | 2.4 | % | ||||||||||||||||||
Net earnings (loss) attributable to noncontrolling interests | 0.0 | 0.0 | % | (0.1 | ) | (0.0 | )% | (0.3 | ) | (0.0 | )% | (0.1 | ) | (0.0 | )% | |||||||||||||||||
Net (loss) earnings attributable to Caleres, Inc. | $ | (30.7 | ) | (6.1 | )% | $ | 25.3 | 3.4 | % | $ | (376.6 | ) | (41.9 | )% | $ | 34.4 | 2.4 | % |
| | | | | | | | | | | | | | | | | | | | | | |
|
| Thirteen Weeks Ended | | | Twenty-Six Weeks Ended |
| ||||||||||||||||
|
| July 31, 2021 |
| August 1, 2020 |
|
| July 31, 2021 |
| August 1, 2020 |
| ||||||||||||
| | | | | % of | | | | | % of | | | | | | % of | | | | | % of | |
($ millions) |
|
| |
| Net Sales |
|
| |
| Net Sales |
|
|
| |
| Net Sales |
|
| |
| Net Sales |
|
Net sales | | $ | 675.5 |
| 100.0 | % | $ | 501.4 |
| 100.0 | % | | $ | 1,314.2 |
| 100.0 | % | $ | 898.6 |
| 100.0 | % |
Cost of goods sold | |
| 353.2 |
| 52.3 | % |
| 318.8 |
| 63.6 | % | |
| 717.0 |
| 54.6 | % |
| 594.1 |
| 66.1 | % |
Gross profit | |
| 322.3 |
| 47.7 | % |
| 182.6 |
| 36.4 | % | |
| 597.2 |
| 45.4 | % |
| 304.5 |
| 33.9 | % |
Selling and administrative expenses | |
| 259.5 |
| 38.4 | % |
| 201.3 |
| 40.1 | % | |
| 503.0 |
| 38.3 | % |
| 426.6 |
| 47.5 | % |
Impairment of goodwill and intangible assets | |
| — |
| — | |
| — |
| — | | |
| — |
| — | % |
| 262.7 |
| 29.2 | % |
Restructuring and other special charges, net | |
| — |
| — | % |
| 5.4 |
| 1.1 | % | |
| 13.5 |
| 1.0 | % |
| 65.6 |
| 7.3 | % |
Operating earnings (loss) | |
| 62.8 |
| 9.3 | % |
| (24.1) |
| (4.8) | % | |
| 80.7 |
| 6.1 | % |
| (450.4) |
| (50.1) | % |
Interest expense, net | |
| (12.0) |
| (1.7) | % |
| (13.5) |
| (2.7) | % | |
| (23.8) |
| (1.8) | % |
| (22.9) |
| (2.6) | % |
Other income, net | |
| 3.9 |
| 0.5 | % |
| 3.7 |
| 0.7 | % | |
| 7.7 |
| 0.6 | % |
| 7.3 |
| 0.8 | % |
Earnings (loss) before income taxes | |
| 54.7 |
| 8.1 | % |
| (33.9) |
| (6.8) | % | |
| 64.6 |
| 4.9 | % |
| (466.0) |
| (51.9) | % |
Income tax (provision) benefit | |
| (16.5) |
| (2.5) | % |
| 3.2 |
| 0.7 | % | |
| (20.1) |
| (1.5) | % |
| 89.1 |
| 10.0 | % |
Net earnings (loss) | |
| 38.2 |
| 5.6 | % |
| (30.7) | | (6.1) | % | |
| 44.5 |
| 3.4 | % |
| (376.9) | | (41.9) | % |
Net earnings (loss) attributable to noncontrolling interests | |
| 0.8 |
| 0.1 | % |
| 0.0 |
| 0.0 | % | |
| 1.0 |
| 0.1 | % |
| (0.3) |
| (0.0) | % |
Net earnings (loss) attributable to Caleres, Inc. | | $ | 37.4 |
| 5.5 | % | $ | (30.7) |
| (6.1) | % | | $ | 43.5 |
| 3.3 | % | $ | (376.6) |
| (41.9) | % |
Net Sales
Net sales decreased $251.1increased $174.1 million, or 33.4%34.7%, to $675.5 million for the second quarter of 2021, compared to $501.4 million for the second quarter of 2020,2020. Our Famous Footwear segment continued to experience strong consumer demand, with net sales increasing $119.7 million, or 35.8%, compared to $752.5the second quarter of 2020. Famous Footwear’s net sales of $453.6 million were sequentially higher than the first quarter of 2021 and the highest second quarter net sales in our history. Net sales for our Brand Portfolio segment increased $55.4 million, or 30.2% during the second quarter of 2021. While Brand Portfolio net sales improved over last year, they remain below pre-pandemic levels, due in part to the brand exits announced in late 2019 and early 2020 and the closure of all but two Naturalizer retail stores in North America. On a consolidated basis, our direct-to-consumer sales represented 79% of total net sales for the second quarter of 2019. The COVID-19 pandemic resulted in the temporary closure of all of our retail stores in mid-March, as well as the closure of stores operated by our wholesale customers. In mid-May,2021. Our casual, athletic and sport footwear categories continued to resonate with consumers, and we began a phased reopening of retail stores in areas where restrictions had been relaxed or lifted. Substantially all retail store locations were open by the end of June with reduced operating hours, enhanced health and safety procedures and contactless shopping options. Our Brand Portfolio segment experienced astrong sales decline of $176.0 million, or 48.9%, during the second quarter of 2020, while sales at our Famous Footwear segment decreased $85.9 million, or 20.5%. However, the consumer's shift to online purchasing accelerated during the second quarter of 2020, driving strong growth in e-commerce net sales. Our prior investments in e-commerce and logistics capabilities has positioned us to capitalize on the accelerating shift to online purchasing, driving consolidated e-commerce-related sales to increase more than 30 percent during the second quarter of 2020, with consolidated e-commerce penetration rising to approximately 34 percent of net sales.
sandals.
Net sales decreased $531.6increased $415.6 million, or 37.2%46.2%, to $1,314.2 million for the six months ended July 31, 2021, compared to $898.6 million for the six months ended August 1, 2020, compared2020. Our strong performance was attributable to $1,430.2a number of factors, including positive consumer sentiment attributable to the widespread availability of the COVID-19 vaccines and easing of government restrictions, as well as additional government stimulus measures. We believe that these factors led to a significant improvement in retail store traffic. Our Famous Footwear segment experienced a net sales increase of $326.6 million, or 62.2%, for the six months ended August 3, 2019. The temporary closure of all of our retail stores on March 19, 2020 due to the COVID-19 pandemic, as well as the closure of stores operated by our wholesale customers, resulted in a $299.7 million, or 42.8%, decrease inJuly 31, 2021, with record-setting net sales for ourof $851.8 million. Our Brand Portfolio segment and a $246.8reported an $88.4 million, or 32.0% decrease in net sales for our Famous Footwear segment. With the closure of our retail stores, our e-commerce business experienced a strong22.1%, increase in net sales, for the first half of 2020. As a result of the pandemic, many schools across the country are beginning the fall semester in a virtual learning environment. Accordingly, we have experienced a slower start towith strong sales growth from our back-to-school selling season. We anticipate the back-to-school demand in 2020 will extend longer than a typical year, where demand is more concentrated over a few weeks.
Sam Edelman, Blowfish, Vionic and Allen Edmonds brands.
Gross Profit
Gross profit decreased $123.3increased $139.7 million, or 40.3%76.5%, to $322.3 million for the second quarter of 2021, compared to $182.6 million for the second quarter of 2020, compared to $305.9 million for the second quarter of 2019, primarily as a result of lowerreflecting higher net sales reflecting the difficult retail environment driven by the COVID-19 pandemic.and a higher gross profit rate. As a percentage of net sales, gross profit decreasedincreased to 47.7% for the second quarter of 2021, compared to 36.4% for the second quarter of 2020, compared to 40.7% for the second quarter of 2019, primarily reflecting a margin decline at our Famous Footwear segment due to a higher mix of e-commerce sales and the promotional actions taken to drive sales volume and manage inventory levels in this uncertain environment. Our e-commerce sales generally result in lower margins than traditional retail sales as a result of the incremental shipping and handling required. The mix of retail versus wholesale net sales increased to 70% and 30% in the second quarter of 2020, compared to 61% and 39%, respectively, in the second quarter of 2019.promotional activity driven by strong consumer demand.
Gross profit decreased $281.3increased $292.7 million, or 48.0%96.1%, to $304.5$597.2 million for the six months ended August 1, 2020,July 31, 2021, compared to $585.8$304.5 million for the six months ended August 3, 2019,1, 2020, primarily reflecting lowerdue to higher net sales and a reduction in promotional activity at Famous Footwear. For the six months ended August 1, 2020, our gross profit was impacted by higher incremental cost of goods sold in the first half of 2020 driven byprimarily due to $33.4 million ($25.6 million on an after-tax basis, or $0.71 per diluted share) in inventory markdowns reflecting the difficult retail environment driven by the COVID-19 pandemic, andas well as $1.6 million in inventory markdowns related to the decision during the first quarter of 2020 to exit theour Fergie brand. Cost of goods sold in the six months ended August 3, 2019 included $7.2 million related to the amortization of the inventory adjustment required by purchase accounting for our acquisition of Vionic and incremental markdowns related to the Carlos brand exit. As a percentage of net sales, gross profit decreasedincreased to 45.4% for the six months ended July 31, 2021, compared to 33.9% for the six months ended August 1, 2020, compared to 41.0% for the six months ended August 3, 2019. The gross profit rate primarily reflects a decline at the Famous Footwear segment due to the promotional environment and higher e-commerce sales. The mix of retail versus wholesale net sales increased to 63% and 37% in the six months ended August 1, 2020, compared to 60% and 40%, respectively, in the six months ended August 3, 2019.
2020.
We classify certain warehousing, distribution, sourcing and other inventory procurement costs in selling and administrative expenses. Accordingly, our gross profit and selling and administrative expense rates, as a percentage of net sales, may not be comparable to other companies.
30
Selling and Administrative Expenses
Selling and administrative expenses decreased $66.2increased $58.2 million, or 24.7%28.9%, to $259.5 million for the second quarter of 2021, compared to $201.3 million for the second quarter of 2020, compared2020. The increase was primarily due to $267.5 millionhigher expenses associated with our cash-based incentive compensation plan for certain employees and higher salary expenses in the second quarter of 2019. The decrease was primarily driven by2021. Salary expenses were lower salaries expense attributableduring the second quarter of 2020 as a result of the actions taken to mitigate the impact of COVID-19 on our financial results. In response to the temporary closure of our retail stores at the onset of the pandemic in the first quarter of 2020, we took steps to reduce expenses, including workforce reductions in our workforce, associateand furloughs for a significant portion of our workforce, andretail store associates, as well as temporary salary reductions for most remaining employees, throughoutwhich continued through the end of the second quarter;quarter of 2020. Marketing and advertising expenses were also higher in the second quarter of 2021, which were partially offset by lower variablerent and facilities expenses, primarily associated with the Naturalizer retail store closures; and lower marketing and logistics expenses.closures. As a percentage of net sales, selling and administrative expenses increaseddecreased to 38.4% for the second quarter of 2021, from 40.1% for the second quarter of 2020, from 35.6% for the second quarter of 2019, reflecting the deleveraging of expenses over a smaller sales base.
2020.
Selling and administrative expenses decreased $103.0increased $76.4 million, or 19.5%17.9%, to $503.0 million for the six months ended July 31, 2021, compared to $426.6 million for the six months ended August 1, 2020, compared to $529.6 million2020. The increase for the six months ended July 31, 2021 was primarily due to higher expenses for our cash-based incentive compensation plan for certain employees and higher salary expenses. As discussed above, salary expenses were lower during the six months ended August 3, 2019. The decrease was primarily driven by lower salaries and benefits expense; lower variable expenses associated with1, 2020 as a result of the temporary retail store closures; and lower marketing, travel and logistics expenses.actions taken to mitigate the impact of COVID-19 on our financial results. As a percentage of net sales, selling and administrative expenses increaseddecreased to 38.3% for the second quarter of 2021, from 47.5% for the second quarter of 2020, reflecting better leveraging of expenses over higher net sales.
Impairment of Goodwill and Intangible Assets
During the six months ended August 1, 2020, from 37.0% for the six months ended August 3, 2019, reflecting the deleveraging of expenses over a smaller sales base.
Restructuring and Other Special Charges, Net
We incurred restructuring and other special charges of $5.4 million ($4.7 million on an after-tax basis, or $0.13$0.13 per diluted share) in the second quarter of 2020, primarily for severance, as well as supplies and deep cleaning of our facilities, driven by the impact of the COVID-19 pandemic on our business operations. Restructuring and other specialThere were no corresponding charges of $0.6 million ($0.5 million on an after-tax basis, or $0.01 per diluted share) were incurred in the second quarter of 2019 associated with integration-related costs for Vionic.2021. Refer to Note 5 to the condensed consolidated financial statements for further discussion of these charges.
We incurred restructuring and other special charges of $13.5 million ($11.9 million on an after-tax basis, or $0.31 per diluted share) during the six months ended July 31, 2021, reflecting expenses associated with the decision to close all Naturalizer retail stores in North America with the exception of two Naturalizer flagship retail stores in the United States. During the six months ended August 1, 2020, we incurred restructuring and other special charges of $65.6 million ($52.5 million on an after-tax basis, or $1.46 $1.46 per diluted share) for the six months ended August 1, 2020 related to the unfavorable business climate, driven by the impact of the COVID-19 pandemic on our business operations. These charges were primarily for impairment associated with lease right-of useright-of-use assets and retail store furniture and fixtures, liabilities associated with factory order cancellations and severance. Restructuring and other special charges of $1.5 million ($1.1 million on an after-tax basis, or $0.03 per diluted share) were incurred for the six months ended August 3, 2019, associated with the exit of our Carlos brand and integration-related costs for Vionic. The integration of Vionic is ongoing and additional costs are anticipated during the second half of 2020. The integration is expected to be complete by the end of our fiscal 2020. Accordingly, we anticipate additional integration-related costs for the second half of 2020. Refer to Note 5 to the condensed consolidated financial statements for further discussion of these charges.
Operating (Loss) Earnings (Loss)
Operating (loss) earnings decreased $61.9increased $86.9 million to $62.8 million for the second quarter of 2021, compared to an operating loss of $24.1 million for thesecond quarter of 2020, compared to operating earnings of $37.8 million for the second quarter of 2019, primarily reflecting lowerhigher net sales partially offset by lower selling and administrative expenses as a result of the actions we took to mitigate the impact of COVID-19 on our financial results.gross profit. As a percentage of net sales, the operating loss was 4.8% for thesecond quarter of 2020, compared to operating earnings of5.0%were 9.3% for the second quarter of 2019.
2021, compared to an operating loss of 4.8% for the second quarter of 2020.
Operating (loss) earnings decreased $505.1increased $531.0 million to $80.7 million for the six months ended July 31, 2021, compared to an operating loss of $450.4 million for the six months ended August 1, 2020, compared to operating earnings of $54.7 million for the six months ended August 3, 2019, primarily reflecting lowerhigher net sales and gross profit, lower impairment charges and better leveraging of expenses over a higher impairment and restructuring charges described above.net sales base. As a percentage of net sales, operating earnings were 6.1% for the six months ended July 31, 2021, compared to an operating loss wasof 50.1% for the six months ended August 1, 2020, compared to operating earnings of3.8% for the six months ended August 3, 2019.
2020.
Interest Expense, Net
Interest expense, net increased $6.1decreased $1.5 million, or 81.2%11.0%, to $12.0 million for the second quarter of 2021, compared to $13.5 million for the second quarter of 2020, comparedreflecting lower average borrowings under our revolving credit agreement. We continued to $7.4 million formake debt reduction a priority during the second quarter of 2019,2021, repaying $100.0 million of borrowings under our revolving credit facility, ending the quarter with $100.0 million of revolver borrowings. This decrease was partially offset by a $0.5 million increase in the fair value adjustment to the
31
Blowfish Malibu mandatory purchase obligation, to $7.1 million in the second quarter of 2021, compared to $6.6 million in the second quarter of 2020, reflecting continued sales and earnings growth of the Blowfish Malibu brand.
Interest expense, net increased $0.9 million, or 3.8%, to $23.8 million for the six months ended July 31, 2021, compared to $22.9 million for the six months ended August 1, 2020, reflecting a $3.7 million increase in the fair value adjustment to the Blowfish Malibu mandatory purchase obligation, of $6.6to $13.5 million for the six months ended July 31, 2021, from $9.8 million in the second quarter of 2020,six months ended August 1, 2020. The increase associated with the mandatory purchase obligation was partially offset by lower average borrowings under our revolving credit agreement. We have continued to repayutilize our strong cash generation to reduce the incremental borrowings from March 2020 that were used to preserve financial flexibility duringat the onset of the pandemic, withreducing the borrowings under our revolving credit agreement from $440.0 million in March 2020 to $100.0 million at July 31, 2021.
Other Income, Net
Other income, net repaymentsincreased $0.2 million, or 5.1%, to $3.9 million for the second quarter of $88.52021, compared to $3.7 million duringfor the second quarter of 2020. Refer to Note 15 to13 of the condensed consolidated financial statements for further discussiondetail regarding the mandatory purchase obligation.
Interest expense,components of net increased $8.2 million, or 55.2%, to $22.9 million for the six months ended August 1, 2020, compared to $14.7 million for the six months ended August 3, 2019, reflecting the fair value adjustment to the Blowfish Malibu mandatory purchase obligation of $9.8 million in the six months ended August 1, 2020, partially offset by lower average borrowings under our revolving credit agreement. Refer to Note 15 to the condensed consolidated financial statements for further discussion regarding the mandatory purchase obligation.
Other Income, Netperiodic benefit income.
Other income, net increased $1.0$0.4 million, or 38.6%5.9%, to $3.7$7.7 million for the second quarter of 2020,six months ended July 31, 2021, compared to $2.7 million for the second quarter of 2019, driven by a lower discount rate and a higher expected return on assets for our domestic pension plan.
Other income, net increased $2.1 million, or 37.7%, to $7.3 million for the six months ended August 1, 2020, compared to $5.2 million for the six months ended August 3, 2019 reflecting a higher expected return on assets and lower discount rate on our domestic pension plan.2020. Refer to Note 13 toof the condensed consolidated financial statements for additional information related to our retirement plans.
further detail regarding the components of net periodic benefit income.
Income Tax Benefit (Provision) Benefit
Our effective tax rate can vary considerably from period to period, depending on a number of factors. Our consolidated effective tax rate was 30.3% for the second quarter of 2021, compared to 9.4% for the second quarter of 2020, compared to 23.7%2020. Our higher tax rate for the second quarter of 2019. Our effective tax rate2021 was impacteddriven by certain discrete tax expenses totaling $2.7adjustments of $2.9 million, includinginclusive of $3.3 million of incremental valuation allowances related to certainfor our deferred tax assets, as we are in a full valuation allowance position for federal, state and Canada deferred tax assets. If these discrete tax items had not been recognized duringcertain international jurisdictions. During the second quarter of 2020, our effective tax rate would have been 17.3%. Ourwas impacted by several discrete tax benefit foritems totaling $2.7 million, including the second quarternon-deductibility of 2020 also includeslosses at our Canadian business division. Offsetting this impact was a benefit associated with the CARES Act, which permits the Company to carry back 2020 losses to years with a higher federal tax rate. There were no discrete
For the six months ended July 31, 2021, our consolidated effective tax items recognized duringrate was 31.1%, compared to 19.1% for the six months ended August 1, 2020. Our higher tax rate for the six months ended July 31, 2021 primarily reflects the incremental valuation allowances recorded in the second quarter, as described above, and the non-deductibility of 2019.
Forlosses at our Canadian business division, which were driven by exit-related costs associated with Naturalizer retail stores during the first quarter. Our effective tax rate for the six months ended August 1, 2020 our consolidated effective tax rate was 19.1%, compared to 24.1% for the six months ended August 3, 2019. Our effective tax rate was impacted by several discrete tax items, including the non-deductibility of a portion of our intangible asset impairment charges, the provision of a valuation allowance related to certain state and Canada deferred tax assets, and the incremental tax provision related to the vesting of stock awards duringawards. Offsetting these impacts was a benefit associated with the six months ended August 1,CARES ACT, which permits the Company to carry back 2020 comparedlosses to years with a discretehigher federal tax provision of $0.1 million in the six months ended August 3, 2019 related to share-based compensation. If these discrete tax items had not been recognized during the first half of 2020 and 2019, our effective tax rates would have been 25.0% and 23.9%, respectively.
rate.
Net Earnings (Loss) Earnings Attributable to Caleres, Inc.
Net lossesearnings attributable to Caleres, Inc. were $37.4 million and $43.5 for the second quarter and six months ended July 31, 2021, respectively, compared to net losses of $30.7 million and $376.6 million for the second quarter and six months ended August 1, 2020, respectively, compared to net earnings of $25.3 million and $34.4 million for the second quarter and six months ended August 3, 2019, respectively, as a result of the factors described above.
32
FAMOUS FOOTWEAR
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($ millions, except sales per square foot) | % of Net Sales | % of Net Sales | % of Net Sales | % of Net Sales |
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Operating Results | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net sales | $ | 333.9 | 100.0 | % | $ | 419.8 | 100.0 | % | $ | 525.2 | 100.0 | % | $ | 772.0 | 100.0 | % | | $ | 453.6 | | 100.0 | % | $ | 333.9 | | 100.0 | % | | $ | 851.8 | | 100.0 | % | $ | 525.2 | | 100.0 | % | ||||||||||||||||
Cost of goods sold | 214.7 | 64.3 | % | 237.5 | 56.6 | % | 337.0 | 64.2 | % | 437.0 | 56.6 | % | | | 226.2 | | 49.9 | % | | 214.7 | | 64.3 | % | | | 444.6 | | 52.2 | % | | 337.0 | | 64.2 | % | ||||||||||||||||||||
Gross profit | 119.2 | 35.7 | % | $ | 182.3 | 43.4 | % | 188.2 | 35.8 | % | $ | 335.0 | 43.4 | % | | | 227.4 | | 50.1 | % | $ | 119.2 | | 35.7 | % | | | 407.2 | | 47.8 | % | $ | 188.2 | | 35.8 | % | ||||||||||||||||||
Selling and administrative expenses | 117.6 | 35.2 | % | 150.8 | 35.9 | % | 238.1 | 45.3 | % | 292.6 | 37.9 | % | | | 141.9 | | 31.3 | % | | 117.6 | | 35.2 | % | | | 273.8 | | 32.1 | % | | 238.1 | | 45.3 | % | ||||||||||||||||||||
Restructuring and other special charges, net | 0.6 | 0.2 | % | — | — | 16.6 | 3.2 | % | — | — | | | — | | — | % | | 0.6 | | 0.2 | % | | | — | | — | % | | 16.6 | | 3.2 | % | ||||||||||||||||||||||
Operating earnings (loss) | $ | 1.0 | 0.3 | % | $ | 31.5 | 7.5 | % | $ | (66.5 | ) | (12.7 | )% | $ | 42.4 | 5.5 | % | | $ | 85.5 | | 18.8 | % | $ | 1.0 | | 0.3 | % | | $ | 133.4 | | 15.7 | % | $ | (66.5) | | (12.7) | % | |||||||||||||||
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Key Metrics | | |
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Same-store sales % change | 14.7 | % | 1.5 | % | 13.9 | % | 0.4 | % | | | (1.1) | % |
| | | 14.7 | % |
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| | | 13.9 | % |
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Same-store sales $ change | $ | 42.7 | $ | 6.3 | $ | 64.5 | $ | 2.9 | | $ | (3.6) | |
| | $ | 42.7 | |
| | $ | 2.6 | |
| | $ | 64.5 | |
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Sales change from new and closed stores, net | $ | (128.5 | ) | $ | (15.8 | ) | $ | (311.2 | ) | $ | (23.3 | ) | | $ | 122.6 | |
| | $ | (128.5) | |
| | $ | 322.8 | |
| | $ | (311.2) | |
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Impact of changes in Canadian exchange rate on sales | $ | (0.1 | ) | $ | (0.2 | ) | $ | (0.1 | ) | $ | (0.5 | ) | | $ | 0.7 | |
| | $ | (0.1) | |
| | $ | 1.2 | |
| | $ | (0.1) | |
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Sales per square foot, excluding e-commerce (thirteen and twenty-six weeks ended) | $ | 40 | $ | 60 | $ | 62 | $ | 109 | | $ | 67 | |
| | $ | 40 | |
| | $ | 122 | |
| | $ | 62 | |
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Sales per square foot, excluding e-commerce (trailing twelve months) | $ | 176 | $ | 219 | $ | 176 | $ | 219 | | $ | 219 | |
| | $ | 176 | |
| | $ | 219 | |
| | $ | 176 | |
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Square footage (thousand sq. ft.) | 6,210 | 6,427 | 6,210 | 6,427 | |
| 6,022 | |
| | | 6,210 | |
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| 6,022 | |
| | | 6,210 | |
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Stores opened | 3 | 3 | 3 | 7 | |
| 4 | |
| | | 3 | |
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| 8 | |
| | | 3 | |
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Stores closed | 1 | 15 | 16 | 26 | |
| 5 | |
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| 12 | |
| | | 16 | |
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Ending stores | 936 | 973 | 936 | 973 | |
| 912 | |
| | | 936 | |
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| 912 | |
| | | 936 | |
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Net Sales
Famous Footwear achieved net sales of $453.6 million, which was the highest second quarter net sales in our history. Net sales decreased $85.9increased $119.7 million, or 20.5%35.8%, compared to $333.9 million forthe second quarter of 2020. With the increase in COVID-19 vaccination rates, we have experienced strong growth in our retail store traffic and consistently strong sales performance throughout the quarter. This trend led to higher in-store sales but a decline in e-commerce penetration in the second quarter of 2021, to approximately 11% of net sales, compared to approximately 25% in the second quarter of 2020 comparedwhen our retail stores were closed for a portion of the quarter. Our casual, athletic and sport categories of footwear continue to $419.8 million forresonate with customers, and we also experienced strong growth in sandals. During the second quarter of 2019. The sales decrease was driven by the temporary closure2021, we opened four stores and closed five stores, resulting in 912 stores and total square footage of all Famous Footwear stores due to the COVID-19 pandemic that continued from the first quarter of 2020. In mid-May, we began a phased reopening of retail stores in areas where restrictions were relaxed or lifted and by6.0 million at the end of June, substantially all stores were reopened. Despite the store closures, Famous Footwear continued to serve customers through its e-commerce business, which generated a 148% increase in e-commerce sales for the second quarter of 2020. We continued2021, compared to experience strong sales of athletics and casual styles, particularly as the consumer adjusted to their work-from-home environment and limited social gatherings. As a result of the pandemic, many schools across the country have delayed the start of the school year or are beginning the fall semester in a virtual learning environment. Accordingly, we have experienced a slower start to our back-to-school selling season. We anticipate the back-to-school demand in 2020 will extend longer than a typical year, where demand is more concentrated over a few weeks. We opened three stores and permanently closed one store during the second quarter of 2020, resulting in 936 stores and total square footage of 6.2 million at the end of the second quarter of 2020, compared to 973 stores and total square footage of 6.4 million at the end of the second quarter of 2019.2020. Sales to members of our customer loyalty program, Famously You Rewards ("Rewards"), continue to account for a majority of the segment'ssegment’s sales, with approximately 79%78% of our net sales made to program members in the second quarter of 2020,2021, compared to 77%79% in the second quarter of 2019. 2020.
Net sales decreased $246.8increased $326.6 million, or 32.0%62.2%, to $851.8 million for the six months ended July 31, 2021, compared to $525.2 million for the six months ended August 1, 2020, compared to $772.0 million for2020. Our strong performance during the six months ended August 3, 2019. TheJuly 31, 2021 was attributable to a number of factors. Consumer confidence improved during the six months ended July 31, 2021 as a result of the widespread availability of the COVID-19 vaccines and the easing of government restrictions, which led to a significant increase in retail store traffic and conversion rates. Additional government stimulus measures also positively impacted net sales. E-commerce penetration was approximately 13% of net sales decrease was driven byin the same factors described for the second quarter of 2020 above. We experienced strong growthsix months ended July 31, 2021, compared to approximately 26% in our e-commerce business, which increased 111% for the six months ended August 1, 2020. We opened three2020 when our retail stores were temporarily closed from mid-March, with a phased reopening beginning in May. Our casual, athletic and permanently closed 16 stores duringsport categories of footwear continued to be the strongest performers. During the six months ended August 1, 2020.
July 31, 2021, we opened eight stores and closed 12 stores.
Gross Profit
Gross profit decreased $63.1increased $108.2 million, or 34.6%90.9%, to $227.4 million for the second quarter of 2021, compared to $119.2 million for the second quarter of 2020, compared to $182.3 million for the second quarter of 2019, reflecting the difficult retail environment driven by the COVID-19 pandemic.sales increase and a higher gross profit rate. As a percentage of net sales, our gross profit decreasedincreased to 50.1% for the second quarter of 2021, compared to 35.7% for the second quarter of 2020, compared2020. Due to 43.4% forour well-positioned inventory and strong sell-throughs, we reduced promotional activity, resulting in higher gross margins in both our retail stores and e-commerce business during the second quarter of 2019, driven by increased promotional activity to drive sales volume and higher freight expenses associated with the strong growth in our e-commerce business.
2021.
Gross profit decreased $146.8increased $219.0 million, or 43.8%116.3%, to $407.2 million for the six months ended July 31, 2021, compared to $188.2 million for the six months ended August 1, 2020, compared to $335.0 million for the six months ended August 3, 2019 reflecting lowerboth higher net sales and an incremental $6.0 million in inventory markdowns in the first quarter as a result of the difficult retail environment driven by the COVID-19 pandemic.gross profit rate. As a percentage of net sales, our gross profit decreased
33
increased to 47.8% for the six months ended July 31, 2021, compared to 35.8% for the six months ended August 1, 2020, compared to 43.4% forreflecting a reduction in promotional activity driven by our well-positioned inventory and strong consumer demand. In addition, our gross profit margin in the six months ended August 3, 2019,1, 2020 was adversely impacted by $6.0 million in incremental inventory markdowns, reflecting the difficult retail environment in 2020 driven by the impact of increased promotional activity to drive sales volume, higher freight expenses associated with the growth in e-commerce business and the incremental inventory markdowns.
pandemic.
Selling and Administrative Expenses
Selling and administrative expenses decreased $33.2increased $24.3 million, or 22.0%20.8%, to $141.9 million for the second quarter of 2021, compared to $117.6 million for the second quarter of 2020, compared2020. The increase was primarily due to $150.8 million forhigher salaries in the second quarter of 2019. The decrease was primarily driven by2021, as well as an increase in marketing expenses. Salary expenses were lower salaries expense attributable toin the second quarter of 2020, reflecting the actions taken at the onset of the pandemic, including workforce reductions, in our workforce, associate furloughs for a significant portion of our retail store workforce during the period ofassociates and temporary store closures, and salary reductions for most remaining employees throughout the second quarter of 2020. As a result of our strategic efforts to mitigate the impact of COVID-19, we also reduced expenses related to our retail facilities, as well as marketing and logistics expenses.employees. As a percentage of net sales, selling and administrative expenses decreased to 31.3% for the second quarter of 2021, compared to 35.2% for the second quarter of 2020, compared to 35.9% for the second quarterreflecting better leveraging of 2019.
expenses over a higher net sales base.
Selling and administrative expenses decreased $54.5increased $35.7 million, or 18.6%15.0%, to $273.8 million for the six months ended July 31, 2021, compared to $238.1 million for the six months ended August 1, 2020, compared2020. The increase was primarily due to $292.6 million forhigher salaries and higher variable expenses, including logistics, to support the increase in sales volume in the six months ended August 3, 2019. The decrease was primarily driven by lower salaries expense attributableJuly 31, 2021. In addition, strategic actions were taken to the actions we took duringreduce expenses in the first and second quartershalf of 2020 to mitigate the impact of COVID-19 during the period of retail store closures, as well as lower variable expenses associated with the temporary retail store closures.closures. As a percentage of net sales, selling and administrative expenses increaseddecreased to 32.1% for the six months ended July 31, 2021, compared to 45.3% for the six months ended August 1, 2020, compared to 37.9% for the six months ended August 3, 2019.
reflecting better leveraging of our expenses over higher net sales.
Restructuring and Other Special Charges, Net
Restructuring and other special charges were $0.6 million infor the second quarter of 2020, consisting primarily of severance expense. Restructuringseverance. For the six months ended August 1, 2020, restructuring and other special charges were $16.6 million, for the six months ended August 1, 2020, consisting primarily of impairment charges on furniture and fixtures in our retail stores and lease right-of-useright-of use assets reflecting the impact of COVID-19 on our business operations. There were no corresponding charges for the three or six months ended August 3, 2019. Refer to Note 5 to the condensed consolidated financial statements for additional information related to these charges. There were no corresponding charges during the three or six months ended July 31, 2021.
Operating Earnings (Loss)
Operating earnings decreased $30.5increased $84.5 million to operating earnings of $85.5 million for the second quarter of 2021, compared to $1.0 million for thesecond quarter of 2020, compared to $31.5 million for thesecond quarter of 2019, reflecting the factors described above.2020. As a percentage of net sales, operating earnings decreasedwere 18.8% for the second quarter of 2021, compared to 0.3% for thesecond quarter of 2020, compared2020.
Operating earnings (loss) increased $199.9 million to 7.5%operating earnings of $133.4 million for thesecond quarter of 2019.
Operating (loss) earnings decreased $108.9 million six months ended July 31, 2021, compared to an operating loss of $66.5 million for the six months ended August 1, 2020, compared to operating earnings of $42.4 million for the six months ended August 3, 2019, reflecting the factors described above.2020. As a percentage of net sales, operating earnings were 15.7% for the second quarter of 2021, compared to an operating loss wasof 12.7% for thesix months ended August 3, 2019, comparedto operating earnings second quarter of 5.5% for the six months ended August 3, 2019.2020.
34
BRAND PORTFOLIO
Thirteen Weeks Ended | Twenty-Six Weeks Ended | |||||||||||||||||||||||||||||||
August 1, 2020 | August 3, 2019 | August 1, 2020 | August 3, 2019 | |||||||||||||||||||||||||||||
($ millions, except sales per square foot) | % of Net Sales | % of Net Sales | % of Net Sales | % of Net Sales | ||||||||||||||||||||||||||||
Operating Results | ||||||||||||||||||||||||||||||||
Net sales | $ | 183.6 | 100.0 | % | $ | 359.6 | 100.0 | % | $ | 400.9 | 100.0 | % | $ | 700.6 | 100.0 | % | ||||||||||||||||
Cost of goods sold | 119.6 | 65.1 | % | 234.8 | 65.3 | % | 283.5 | 70.7 | % | 448.9 | 64.1 | % | ||||||||||||||||||||
Gross profit | 64.0 | 34.9 | % | 124.8 | 34.7 | % | 117.4 | 29.3 | % | 251.7 | 35.9 | % | ||||||||||||||||||||
Selling and administrative expenses | 73.5 | 40.1 | % | 110.9 | 30.8 | % | 166.2 | 41.5 | % | 224.3 | 32.0 | % | ||||||||||||||||||||
Impairment of goodwill and intangible assets | — | — | — | — | 262.7 | 65.5 | % | — | — | |||||||||||||||||||||||
Restructuring and other special charges, net | 4.6 | 2.5 | % | 0.0 | 0.0 | % | 48.4 | 12.1 | % | 0.6 | 0.1 | % | ||||||||||||||||||||
Operating (loss) earnings | $ | (14.1 | ) | (7.7 | )% | $ | 13.9 | 3.9 | % | $ | (359.9 | ) | (89.8 | )% | $ | 26.8 | 3.8 | % | ||||||||||||||
Key Metrics | ||||||||||||||||||||||||||||||||
Direct-to-consumer (% of net sales) (1) | 38 | % | 24 | % | 33 | % | 26 | % | ||||||||||||||||||||||||
Wholesale/retail sales mix (%) | 82%/18% | 83%/17% | 84%/16% | 82%/18% | ||||||||||||||||||||||||||||
Change in wholesale net sales ($) | $ | (146.3 | ) | $ | 59.2 | $ | (237.3 | ) | $ | 123.5 | ||||||||||||||||||||||
Unfilled order position at end of period | $ | 195.2 | $ | 290.1 | ||||||||||||||||||||||||||||
Same-store sales % change | (24.7 | )% | (9.3 | )% | (24.7 | )% | (8.9 | )% | ||||||||||||||||||||||||
Same-store sales $ change | $ | (8.1 | ) | $ | (6.0 | ) | $ | (17.6 | ) | $ | (11.5 | ) | ||||||||||||||||||||
Sales change from new and closed stores, net | $ | (21.5 | ) | $ | 1.6 | $ | (44.6 | ) | $ | 0.7 | ||||||||||||||||||||||
Impact of changes in Canadian exchange rate on retail sales | $ | (0.1 | ) | $ | (0.2 | ) | $ | (0.2 | ) | $ | (0.6 | ) | ||||||||||||||||||||
Sales per square foot, excluding e-commerce (thirteen and twenty-six weeks ended) | $ | 20 | $ | 97 | $ | 51 | $ | 190 | ||||||||||||||||||||||||
Sales per square foot, excluding e-commerce (trailing twelve months) | $ | 251 | $ | 398 | $ | 251 | $ | 398 | ||||||||||||||||||||||||
Square footage (thousands sq. ft.) | 355 | 398 | 355 | 398 | ||||||||||||||||||||||||||||
Stores opened | — | 1 | — | 3 | ||||||||||||||||||||||||||||
Stores closed | 1 | — | 20 | 1 | ||||||||||||||||||||||||||||
Ending stores | 202 | 231 | 202 | 231 |
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| | Thirteen Weeks Ended | | | Twenty-Six Weeks Ended | | ||||||||||||||||
| | July 31, 2021 |
| August 1, 2020 |
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| Net Sales |
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| Net Sales |
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Net sales | | $ | 239.0 | | 100.0 | % | $ | 183.6 | | 100.0 | % | | $ | 489.3 | | 100.0 | % | $ | 400.9 | | 100.0 | % |
Cost of goods sold | | | 144.1 | | 60.3 | % | | 119.6 | | 65.1 | % | | | 300.4 | | 61.4 | % | | 283.5 | | 70.7 | % |
Gross profit | | | 94.9 | | 39.7 | % | | 64.0 | | 34.9 | % | | | 188.9 | | 38.6 | % | | 117.4 | | 29.3 | % |
Selling and administrative expenses | | | 78.3 | | 32.8 | % | | 73.5 | | 40.1 | % | | | 161.7 | | 33.0 | % | | 166.2 | | 41.5 | % |
Impairment of goodwill and intangible assets | | | — | | — | | | — | | — | | | | — | | — | % | | 262.7 | | 65.5 | % |
Restructuring and other special charges, net | | | — | | — | % | | 4.6 | | 2.5 | % | | | 13.5 | | 2.8 | % | | 48.4 | | 12.1 | % |
Operating earnings (loss) | | $ | 16.6 | | 6.9 | % | $ | (14.1) | | (7.7) | % | | $ | 13.7 | | 2.8 | % | $ | (359.9) | | (89.8) | % |
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Key Metrics | | |
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Direct-to-consumer (% of net sales) (1) | | | 34 | % |
| | | 38 | % |
| | | | 33 | % |
| | | 33 | % |
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Change in wholesale net sales ($) | | $ | 34.9 | |
| | $ | (146.3) | |
| | | $ | 49.7 | |
| | $ | (237.3) | |
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Unfilled order position at end of period | | $ | 328.7 | |
| | $ | 195.2 | |
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Same-store sales % change | | | 16.3 | % |
| | | (24.7) | % |
| | | | 10.2 | % |
| | | (24.7) | % |
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Same-store sales $ change | | $ | 3.4 | |
| | $ | (8.1) | |
| | | $ | 4.7 | |
| | $ | (17.6) | |
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Sales change from new and closed stores, net | | $ | 17.0 | |
| | $ | (21.5) | |
| | | $ | 33.5 | |
| | $ | (44.6) | |
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Impact of changes in Canadian exchange rate on retail sales | | $ | 0.1 | |
| | $ | (0.1) | |
| | | $ | 0.5 | |
| | $ | (0.2) | |
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Sales per square foot, excluding e-commerce (thirteen and twenty-six weeks ended) | | $ | 244 | | | | $ | 20 | | | | | $ | 433 | | | | $ | 51 | | | |
Sales per square foot, excluding e-commerce (trailing twelve months) | | $ | 561 | |
| | $ | 251 | |
| | | $ | 561 | |
| | $ | 251 | |
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Square footage (thousands sq. ft.) | | | 125 | |
| | | 355 | |
| | | | 125 | |
| | | 355 | |
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Stores opened | | | 1 | |
| | | — | |
| | | | 2 | |
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Stores closed | | | 9 | |
| | | 1 | |
| | | | 85 | |
| | | 20 | |
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Ending stores | | | 87 | |
| | | 202 | |
| | | | 87 | |
| | | 202 | |
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(1) | Direct-to-consumer includes sales of our retail stores and e-commerce sites and sales through our |
Net Sales
Net sales decreased $176.0increased $55.4 million, or 48.9%30.2%, to $239.0 million for the second quarter of 2021, compared to $183.6 million for thesecond quarter of 2020,2020. While net sales improved compared to $359.6 million forthe second quarter of 2019. The sales decrease was driven by a reduction in wholesale shipments as a result of the temporary store closures of the majority of our wholesale customers during the first half of the second quarter and a shift in timing of the shipments of new orders as customers worked to align their inventory levels to expected consumer demand. Our retail stores were also temporarily closed through the middle of the second quarter. E-commerce sales continued to grow as a percentage of the business during the second quarter, and we expect this trend to continue. Sport and casual footwear were our strongest categories for the second quarter, aligning with the consumer's stay-at-home, work-from-home environment, and we continued to expand our product offerings to capture the recent acceleration in these styles. We permanently closed one store during the second quarter of 2020, sales volume still remains below pre-pandemic levels, due in part to the brand exits announced in late 2019 and early 2020 and the closure of all but two Naturalizer retail stores in North America. During the second quarter of 2021, we experienced strong sales growth from our Sam Edelman, Vionic, Blowfish Malibu, and Ryka brands, which carry a large assortment of athletic and casual styles. In addition, sales from our Allen Edmonds brand have strengthened, reflecting the increased assortment of casual styles, as well as improving consumer demand for dress footwear. Net sales in the second quarter of 2021 were adversely impacted by the delayed receipt of inventory due to supply chain disruptions, including port congestion and reduced shipping vessel and container availability. During the second quarter of 2021, we closed nine stores and opened one store, resulting in a total of 87 stores and total square footage of 0.1 million at the end of the second quarter of 2021, compared to 202 stores and total square footage of 0.4 million at the end of the second quarter of 2020,2020.
Net sales increased $88.4 million, or 22.1%, to $489.3 for the six months ended July 31, 2021, compared to 231$400.9 million for the six months ended August 1, 2020, reflecting the factors described above. During the six months ended July 31, 2021, we experienced strong sales growth from our Sam Edelman, Blowfish Malibu, Vionic and Allen Edmonds brands.
In the first quarter of 2021, we closed the remaining 73 Naturalizer stores in North America that were scheduled for closure as part of our strategic realignment of the Naturalizer retail store operations. We remain focused on growing the brand’s e-commerce business through naturalizer.com, our retail partners and their websites, and the two flagship stores in the United States and two stores in China that we continue to operate. Including the Naturalizer closures, we closed 85 stores and total square footage of 0.4 million atopened two stores during the end of the second quarter of 2019.six months ended July 31, 2021. On a trailing twelve-month basis, sales per square foot, excluding e-commerce sales, decreasedincreased to $561 for the twelve months ended July 31, 2021, compared to $251 for the twelve months ended August 1, 2020, compared to $398 for the twelve months ended August 3, 2019.
Net sales decreased $299.7 million, or 42.8%, to $400.9 million for thesix months ended August 1, 2020, compared to $700.6 million forthe six months ended August 3, 2019. The sales decrease was driven by a reduction in wholesale shipments as many of our wholesale customers canceled orders and temporarily closed their stores for several weeks during the first half of 2020. Our retail stores were also temporarily closed beginning in mid-March, with a phased reopening beginning in mid-May. Substantially all of our stores reopened by the end of June, with the majority of the stores operating at reduced hours.
E-commerce sales continue to grow as a percentage of the business, with strong growth in the first half of 2020 driven by the pandemic. During the six months ended August 1, 2020, we permanently closed 20 stores.
35
Our unfilled order position for our wholesale sales decreased $94.9increased $133.5 million, or 32.7%68.4%, to $328.7 million at July 31, 2021, compared to $195.2 million at August 1, 2020, compared to $290.1 million at August 3, 2019.2020. The decreaseincrease in our backlog order levels reflects fewer orders fromincreased demand for product as our wholesale customers driven byhave placed more orders than last year due to the economic impact of the COVID-19 pandemic as well asin the ongoing shift to e-commerce shipping directly from us to the consumer either via the retailers' websites or our own.second quarter of 2020. In addition, manythe global supply chain disruptions have caused a delay in the receipt of our wholesale customers canceled orders during the first half of 2020inventory due to port congestion, reduced shipping vessel and container availability, and factory shutdowns as a direct result of the pandemic on their business.
resurgence of COVID-19 infections. We are actively working with our suppliers to minimize these disruptions, but expect the disruptions to continue in the second half of 2021.
Gross Profit
Gross profit decreased $60.8increased $30.9 million, or 48.7%48.3%, to $94.9 million for the second quarter of 2021, compared to $64.0 million for the second quarter of 2020, compared to $124.8 million for the second quarter of 2019, primarily due to lowerreflecting higher net sales reflecting the difficult retail environment driven by the COVID-19 pandemic.and a higher gross profit rate. As a percentage of net sales, our gross profit increased to 39.7% for the second quarter of 2021, compared to 34.9% for the second quarter of 2020, compared to 34.7% forreflecting more full price selling across our portfolio of brands driven by strong consumer demand. In connection with the supply chain disruptions described earlier and the related capacity shortages, our freight costs are rising. Though the impact was not significant during the second quarter, we anticipate higher inbound freight costs in the second half of 2019.
2021, which may impact our gross profit if we are unable to mitigate or recover these additional costs.
Gross profit decreased $134.3increased $71.5 million, or 53.4%60.9%, to $188.9 million for the six months ended July 31, 2021, compared to $117.4 million for the six months ended August 1, 2020, compareddue to $251.7 million for the six months ended August 3, 2019, primarily reflecting lowerhigher net sales and higher incremental cost of goods soldimproved gross profit rate. Our gross profit in the six months ended August 1, 2020 drivenwas impacted by higher incremental cost of goods sold primarily due to $27.5 million in inventory markdowns in the first quarter reflecting the difficult retail environment driven by the COVID-19COVID pandemic, as well as $1.6 million in inventory markdowns related to the decision during the first quarter of 2020 to exit our Fergie brand. As a percentage of net sales, our gross profit decreasedincreased to 38.6% for the six months ended July 31, 2021, compared to 29.3% for the six months ended August 1, 2020, compared to 35.9% for the six months ended August 3, 2019, primarily reflecting the incremental markdowns described above.2020.
Selling and Administrative Expenses
Selling and administrative expenses decreased $37.4increased $4.8 million, or 33.7%6.5%, to $78.3 million for the second quarter of 2021, compared to $73.5 million for the second quarter of 2020, compared2020. The increase was driven by higher salaries, due in part to $110.9 million forthe furloughs and temporary salary reductions in the second quarter of 2019. The decrease was primarily driven2020 to mitigate the impact of COVID-19 on our financial results, and higher marketing expenses, partially offset by lower salaries expense attributable to reductions in force, associate furloughs for a significant portion of our workforcerent and salary reductions for most remaining employees throughoutfacilities expenses, primarily associated with the second quarter of 2020. The decrease also reflects lower marketing expense and a decrease in variable expenses as a result of the temporary store closures and declining store base.count. As a percentage of net sales, selling and administrative expenses increaseddecreased to 32.8% for the second quarter of 2021, compared to 40.1% for the second quarter of 2020, compared to 30.8% for the second quarter of 2019.
2020.
Selling and administrative expenses decreased $58.1$4.5 million, or 25.9%2.7%, to $161.7 million for the six months ended July 31, 2021, compared to $166.2 million for the six months ended August 1, 2020, compared to $224.3 million for the six months ended August 3, 2019.2020. The decrease was primarily driven by lower salaries expense reflecting the strategic actions taken during the first half of 2020 to mitigate the impact of COVID-19, and lower logistics and other variable expensesretail facilities costs, primarily associated with the retaillower store closures, includingcount, partially offset by higher marketing expense.expenses. As a percentage of net sales, selling and administrative expenses increaseddecreased to 33.0% for the six months ended July 31, 2021, compared to 41.5% for the six months ended August 1, 2020, compared to 32.0% for the six months ended August 3, 2019.2020.
During the first quarter of the deterioration of general economic conditions and the resulting decline in our share price and market capitalization,2020, we incurred impairment charges of $262.7 million, during the first quarter of 2020, including $240.3 million associated with goodwill and $22.4 million associated with intangible assets, including $12.2 million for the indefinite-lived Allen Edmonds trade name and $10.2 million for the Via Spiga trademarks.trade name. There were no corresponding charges in the second quarter of 2020 or for the thirteen weekssix months ended August 1, 2020 or the twenty-six weeks ended August 3, 2019.July 31, 2021. Refer to Note 5 and Note 8 to the condensed consolidated financial statements for further discussion of these charges.
Restructuring and Other Special Charges, Net
Restructuring and other special charges of $4.6 million were recorded during the second quarter of 2020, primarily for severance expense, with no corresponding charges for the second quarter of 2019.2021. Restructuring and other special charges of $13.5 million were $48.4 million forrecorded during the six months ended July 31, 2021, reflecting expenses associated with the decision to close all but two flagship Naturalizer retail stores in the United States. These costs primarily represented lease termination and other store closure costs, including employee severance. For the six months ended August 1, 2020, we recorded restructuring and other special charges of $48.4 million, reflecting expenses associated with the impact of COVID-19 on our business operations, primarily impairment charges on store furniture and fixtures and lease right-of-use assets, liabilities due to our factories for order cancellations and severance expense. Restructuring and other special charges were $0.6 million for the six months ended August 3, 2019, primarily related to the integration of Vionic.severance. Refer to Note 5 to the condensed consolidated financial statements for additional information related to these charges.
Operating (Loss) Earnings (Loss)
Operating earnings (loss) for the second quarter of 2021 exceeded pre-pandemic levels. Operating earnings decreased $28.0increased $30.7 million to $16.6 million for the second quarter of 2021, compared to an operating loss of $14.1 million for thesecond quarter of 2020, compared to operating earnings of $13.9 million for thesecond quarter of 2019 as a result of the factors described above. As a percentage of net sales, the operating loss was 7.7%earnings were 6.9% for thesecond quarter of 2020,2021, compared to an operating loss of 7.7% in the second quarter of 2020.
36
Operating earnings (loss) increased $373.6 millionto operating earnings of3.9% in $13.7 million for thesecond quarter of 2019.
Operating (loss) earnings decreased $386.7 million six months ended July 31, 2021, compared to an operatinga net loss of $359.9 million for thesix months ended August 1, 2020, compared to operating earnings of $26.8 million for thesix months ended August 3, 2019 as a result of the factors described above. As a percentage of net sales, operating earnings were 2.8% for the six months ended July 31, 2021, compared to an operating loss wasof 89.8% for thesix months ended August 1, 2020, compared to operating earnings of3.8%in thesix months ended August 3, 2019.2020.
ELIMINATIONS AND OTHER
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Thirteen Weeks Ended | | | Twenty-Six Weeks Ended | | ||||||||||||||||||
| | July 31, 2021 |
| | August 1, 2020 |
|
| July 31, 2021 |
| | August 1, 2020 | | ||||||||||||
| | | | | % of | | | | | | % of | | | | | | % of | | | | | | % of | |
($ millions) |
| | |
| Net Sales |
| | | |
| Net Sales |
|
| | |
| Net Sales |
| | | |
| Net Sales |
|
Net sales | | $ | (17.1) | | 100.0 | % | | $ | (16.1) | | 100.0 | % | | $ | (26.9) | | 100.0 | % | | $ | (27.4) | | 100.0 | % |
Cost of goods sold | | | (17.1) | | 100.0 | % | | | (15.6) | | 96.7 | % | | | (28.0) | | 103.9 | % | | | (26.3) | | 95.9 | % |
Gross profit | | | — | | — | % | | | (0.5) | | 3.3 | % | | | 1.1 | | (3.9) | % | | | (1.1) | | 4.1 | % |
Selling and administrative expenses | | | 39.3 | | (229.2) | % | | | 10.3 | | (63.7) | % | | | 67.5 | | (250.9) | % | | | 22.3 | | (81.1) | % |
Restructuring and other special charges, net | | | — | | — | % | | | 0.3 | | (1.7) | % | | | — | | — | % | | | 0.6 | | (2.3) | % |
Operating loss | | $ | (39.3) | | 229.2 | % | | $ | (11.1) | | 68.7 | % | | $ | (66.4) | | 247.0 | % | | $ | (24.0) | | 87.5 | % |
|
Thirteen Weeks Ended | Twenty-Six Weeks Ended | |||||||||||||||||||||||||||||||
August 1, 2020 | August 3, 2019 | August 1, 2020 | August 3, 2019 | |||||||||||||||||||||||||||||
($ millions) | % of Net Sales | % of Net Sales | % of Net Sales | % of Net Sales | ||||||||||||||||||||||||||||
Operating Results | ||||||||||||||||||||||||||||||||
Net sales | $ | (16.1 | ) | 100.0 | % | $ | (26.9 | ) | 100.0 | % | $ | (27.4 | ) | 100.0 | % | $ | (42.4 | ) | 100.0 | % | ||||||||||||
Cost of goods sold | (15.6 | ) | 96.7 | % | (25.7 | ) | 95.6 | % | (26.3 | ) | 95.9 | % | (41.5 | ) | 97.8 | % | ||||||||||||||||
Gross profit | (0.5 | ) | 3.3 | % | (1.2 | ) | 4.4 | % | (1.1 | ) | 4.1 | % | (0.9 | ) | 2.2 | % | ||||||||||||||||
Selling and administrative expenses | 10.3 | (63.7 | )% | 5.8 | (21.8 | )% | 22.3 | (81.1 | )% | 12.8 | (30.0 | )% | ||||||||||||||||||||
Restructuring and other special charges, net | 0.3 | (1.7 | )% | 0.6 | (2.2 | )% | 0.6 | (2.3 | )% | 0.8 | (2.0 | )% | ||||||||||||||||||||
Operating loss | $ | (11.1 | ) | 68.7 | % | $ | (7.6 | ) | 28.4 | % | $ | (24.0 | ) | 87.5 | % | $ | (14.5 | ) | 34.2 | % |
The Eliminations and Other category includes the elimination of intersegment sales and profit, unallocated corporate administrative expenses, and other costs and recoveries.
The net sales elimination of $16.1$17.1 million for the second quarter of 20202021 is $10.8$1.0 million, or 40.2%6.3%, lowerhigher than the second quarter of 2019.2020, reflecting an increase in product sold from our Brand Portfolio segment to Famous Footwear The net sales elimination of $27.4$26.9 million for the six months ended August 1, 2020July 31, 2021 is $15.0$0.5 million, or 35.3%1.9%, lower than the six months ended August 3, 2019. Both net sales elimination decreases reflect1, 2020, reflecting a decrease in product sold from our Brand Portfolio segment to Famous Footwear.
Selling and administrative expenses increased $4.5$29.0 million, or 75.4%, to $10.3$39.3 million in the second quarter of 2020,2021, compared to $5.8$10.3 million for the second quarter of 2019.2020. The increase was primarily driven by lower income fromhigher expenses for our cash-equivalent restricted stock units granted to directors, reflecting a smaller decline in the stock price compared to the second quarter of 2019.cash-based incentive compensation plan for certain employees. Selling and administrative expenses increased $9.5$45.2 million, or 74.3%,to $67.5 million in the six months ended July 31, 2021, compared to $22.3 million for the six months ended August 1, 2020, reflecting higher expenses for our cash-based incentive compensation plan for certain employees and higher expenses associated with our cash-based director compensation plans, reflecting growth in our stock price during the six months ended July 31, 2021, compared to a decline in the six months ended August 1, 2020, compared to $12.8 million for the six months ended August 3, 2019. The increase was primarily driven by higher consulting expenses.
2020.
Restructuring and other special charges of $0.3 million and $0.6 million for the three and six months ended August 1, 2020, respectively, were comprised primarily of expenses associated with employeeworkforce reductions as we sought to minimize our expense structure during the COVID-19 pandemic, combined withas well as incremental expenses associated with deep cleaning our facilities and related supplies. DuringThere were no corresponding expenses for the three and six months ended August 3, 2019, restructuring and other special charges of $0.6 million and $0.8 million, respectively, were incurred for Vionic integration-related costs.July 31, 2021. Refer to Note 5 to the condensed consolidated financial statements for additional information related to these charges.
37
LIQUIDITY AND CAPITAL RESOURCES
Borrowings
($ millions) | August 1, 2020 | August 3, 2019 | February 1, 2020 | |||||||||
Borrowings under revolving credit agreement | $ | 350.0 | $ | 300.0 | $ | 275.0 | ||||||
Long-term debt | 198.6 | 198.2 | 198.4 | |||||||||
Total debt | $ | 548.6 | $ | 498.2 | $ | 473.4 |
| | | | | | | | | |
($ millions) |
| July 31, 2021 |
| August 1, 2020 |
| January 30, 2021 | |||
Borrowings under revolving credit agreement | | $ | 100.0 | | $ | 350.0 | | $ | 250.0 |
Current portion of long-term debt | | | 99.5 | | | — | | | — |
Long-term debt | | | 99.5 | | | 198.6 | | | 198.9 |
Total debt (1) | | $ | 299.0 | | $ | 548.6 | | $ | 448.9 |
(1) | As presented here, total debt excludes the Blowfish Malibu mandatory purchase obligation, which was valued at $52.6 million, $25.0 million and $39.1 million as of July 31, 2021, August 1, 2020 and January 30, 2021, respectively. |
Total debt obligations of $299.1 million at July 31, 2021 decreased $249.5 million, from $548.6 million at August 1, 2020, increased $50.4and decreased $149.8 million, from $498.2$448.9 million at August 3, 2019, and increased $75.2 million, from $473.4 million at February 1, 2020.January 30, 2021. The increasesdecreases from both August 3, 2019 and February 1, 2020 and January 30, 2021 reflect netcontinued progress toward reducing the borrowings under our Credit Agreement taken as a precautionary measurerevolving credit agreement. We reduced the borrowings under our revolving credit facility by $100.0 million during the firstsecond quarter of 20202021, ending the quarter with an outstanding balance of $100.0 million. We have continued to increaseutilize our strong cash position andgeneration to reduce the incremental borrowings that were used to preserve financial flexibility givenat the uncertaintyonset of the impact of COVID-19 onpandemic, reducing the borrowings under our business and the timing of recovery of the retail environment once all of our retail stores are reopened.revolving credit agreement from $440.0 million in March 2020 to $100.0 million at July 31, 2021. Net interest expense for the second quarter of 2020 increased $6.12021 decreased $1.5 million to $13.5$12.0 million, compared to $7.4$13.5 million for the second quarter of 2020. The increasedecrease is primarily attributable to lower average borrowings under our revolving credit agreement, partially offset by a $0.5 million increase in the fair value adjustment for the mandatory purchase obligation associated with the Blowfish Malibu acquisition, as further discussed in Note 155 and Note 14 to the condensed consolidated financial statements, partially offset by lower average borrowings under our revolving credit agreement. statements.
Credit Agreement
As further discussed in Note 10 to the condensed consolidated financial statements, the Company maintains a revolving credit facility for working capital needs. On April 14, 2020, we entered into a Fourth Amendment to Fourth Amended and Restated Credit Agreement ("Amendment"(as so amended, the "Credit Agreement") which, among other modifications, increased the amount available under the revolving credit facility by $100.0 million to an aggregate amount of up to $600.0 million, subject to borrowing base restrictions, and may be further increased by up to $150.0 million. Interest on the borrowings is at variable rates based on the London Interbank Offered Rate ("LIBOR") (with a floor of 1.0% imposed by the Amendment)Credit Agreement) or the prime rate, plus a spread. The AmendmentCredit Agreement increased the spread applied to the LIBOR or prime rate by a total of 75 basis points and increased the unused line fee by 5 basis points. At August 1, 2020,July 31, 2021, we had $350.0$100.0 million in borrowings and $11.1$12.5 million in letters of credit outstanding under the Credit Agreement. Total borrowing availability was $166.6$364.5 million at August 1, 2020.July 31, 2021. We were in compliance with all covenants and restrictions under the Credit Agreement as of August 1, 2020.July 31, 2021.
During the second half of 2021, we plan to continue to prioritize debt reduction. We are currently in the process of renegotiating and renewing the terms of our revolving credit facility to better reflect our improved capital structure.
$200 Million Senior Notes
On July 27, 2015, we issued $200.0 million aggregate principal amount of Senior Notes due on August 15, 2023 (the "Senior Notes"). The Senior Notes bear interest at 6.25%, which is payable on February 15 and August 15 of each year. We may redeem some or all of the Senior Notes at various redemption prices. The Senior Notes also contain covenants and restrictions that limit certain activities including, among other things, levels of indebtedness, payments of dividends, the guarantee or pledge of assets, certain investments, common stock repurchases, mergers and acquisitions and sales of assets. As of August 1, 2020,July 31, 2021, we were in compliance with all covenants and restrictions relating to the Senior Notes.
We may redeem some or all of the Senior Notes at a redemption price (expressed as a percentage of principal amount) of 101.563% if redeemed prior to August 15, 2021 and 100.000% if redeemed after August 15, 2021, plus any accrued and unpaid interest and Additional Interest (as defined in the Senior Notes indenture). During the second quarter of 2021, we determined that we would redeem a portion of our Senior Notes on August 16, 2021. Accordingly, we classified $100.0 million aggregate principal amount of Senior Notes as a current liability. On August 16, 2021, we redeemed $100.0 million of Senior Notes at 100.000%, shifting the higher interest debt to borrowings under the revolving credit agreement.
Supplemental Guarantor Financial Information
The Senior Notes are fully and unconditionally and jointly and severally guaranteed on a senior unsecured basis by all of its existing and future subsidiaries that are guarantors under the Company's revolving credit facility ("Company’s Credit Agreement").Agreement. The guarantors are 100% owned by Caleres, Inc. ("Parent").
38
On October 31, 2018, Vionic was joined to the Credit Agreement as a guarantor. After giving effect to the joinder, the Company is the lead borrower, and Sidney Rich Associates, Inc., BG Retail, LLC, Allen Edmonds, LLC, Vionic Group, LLC and Vionic International, LLC are each co-borrowers and guarantors under the Credit Agreement. During the second quarter of 2020, we adopted SEC Release No. 33-10762 and Release No. 34-88307, Financial Disclosures About Guarantors and Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralize a Registrant's Securities, as further discussed in Note 2 to the condensed consolidated financial statements. The following tables present summarized financial information for the Parent and guarantors on a combined basis after elimination of intercompany transactions between entities and amounts related to investments in any subsidiary that is a non-guarantor:
| | | | | | |
($ millions) | | July 31, 2021 | | January 30, 2021 | ||
Current assets | | $ | 724.0 | | $ | 686.3 |
Non-current assets | |
| 974.3 |
| | 1,029.5 |
Current liabilities | |
| 904.1 |
| | 818.4 |
Non-current liabilities | |
| 594.1 |
| | 740.0 |
| | | |
|
| Twenty-Six Weeks | |
| | Ended | |
($ millions) | | July 31, 2021 | |
Net sales (1) | | $ | 1,253.6 |
Gross profit | |
| 555.8 |
Operating earnings | |
| 60.7 |
Net earnings | |
| 42.7 |
Net earnings attributable to Caleres, Inc. | |
| 42.7 |
($ millions) | August 1, 2020 | February 1, 2020 | ||||||
Current assets | $ | 847.5 | $ | 783.6 | ||||
Non-current assets | 1,092.3 | 1,402.4 | ||||||
Current liabilities | 950.2 | 781.8 | ||||||
Non-current liabilities | 823.4 | 901.8 |
(1) | Intercompany activity with the non-guarantor entities for the twenty-six weeks ended July 31, 2021 was not material. |
Twenty-Six Weeks Ended | ||||
($ millions) | August 1, 2020 | |||
Net sales (1) | $ | 825.3 | ||
Gross profit | 278.0 | |||
Operating loss | (403.9 | ) | ||
Net loss | (336.3 | ) | ||
Net loss attributable to Caleres, Inc. | (336.3 | ) |
(1) Intercompany activity with the non-guarantor entities for the twenty-six weeks ended August 1, 2020 was not material.
Working Capital and Cash Flow
Twenty-Six Weeks Ended | ||||||||||||
($ millions) | August 1, 2020 | August 3, 2019 | Change | |||||||||
Net cash provided by operating activities | $ | 67.5 | $ | 116.6 | $ | (49.1 | ) | |||||
Net cash used for investing activities | (8.6 | ) | (30.2 | ) | 21.6 | |||||||
Net cash provided by (used for) financing activities | 44.5 | (74.0 | ) | 118.5 | ||||||||
Effect of exchange rate changes on cash and cash equivalents | (0.1 | ) | 0.1 | (0.2 | ) | |||||||
Increase in cash and cash equivalents | $ | 103.3 | $ | 12.4 | $ | 90.9 |
| | | | | | | | | |
| | Twenty-Six Weeks Ended | | | |||||
($ millions) |
| July 31, 2021 |
| August 1, 2020 |
| Change | |||
Net cash provided by operating activities | | $ | 135.5 | | $ | 67.5 | | $ | 68.0 |
Net cash used for investing activities | | | (9.4) | | | (8.6) | | | (0.8) |
Net cash (used for) provided by financing activities | | | (159.7) | | | 44.5 | | | (204.2) |
Effect of exchange rate changes on cash and cash equivalents | | | — | | ��� | (0.1) | | | 0.1 |
(Decrease) increase in cash and cash equivalents | | $ | (33.6) | | $ | 103.3 | | $ | (136.9) |
Reasons for the major variances in cash provided (used) in the table above are as follows:
Cash provided by operating activities was $49.1$68.0 million lowerhigher in the six months ended August 1, 2020July 31, 2021 as compared to the six months ended August 3, 2019,1, 2020, primarily reflecting the following factors:
|
|
|
A |
● | An increase in inventory during the six months ended July 31, 2021, compared to |
● | A smaller increase in |
Supply chain financing: Certain of our suppliers are given the opportunity to sell receivables from us related to products that we’ve purchased to participating financial institutions at a rate that leverages our credit rating, which may be more beneficial to the suppliers than the rate they can obtain based upon their own credit rating. We negotiate payment and other terms with our suppliers, regardless of whether the supplier participates in the program, and our responsibility is limited to making payment based on the terms originally negotiated with the supplier. These liabilities continue to be presented as accounts payable in our condensed consolidated balance sheets, with changes reflected within cash flows from operating activities when settled. As of July 31, 2021, we had $48.0 million of accounts payable subject to supply
39
chain financing arrangements. There was an immaterial amount of accounts payable subject to supply chain financing arrangements at August 1, 2020.
Cash used for investing activities was $21.6$0.8 million lower inhigher for the six months ended August 1, 2020July 31, 2021 as compared to the six months ended August 3, 2019,1, 2020, reflecting lowerslightly higher capital expenditures in the six months ended August 1, 2020 as a result of the stepsJuly 31, 2021. In 2021, we took to reduce and/or defer capital expenditures to preserve financial flexibility during the pandemic. In 2020, we expect to reduce our purchases of property and equipment and capitalized software to between $15$20 million and $25$30 million, as compared to $50.2$22.1 million in 2019. However, we may consider further reductions in capital expenditures for 2020, depending on the duration and severity of the impact of the COVID-19 pandemic on our business and financial results.
2020.
Cash provided byused for financing activities was $118.5$204.2 million higher for the six months ended August 1, 2020July 31, 2021 as compared to the six months ended August 3, 2019,1, 2020, primarily due to $75.0$150.0 million of net borrowings underrepayments on our revolving credit agreement in the six months ended August 1, 2020,July 31, 2021, compared to net repaymentsborrowings of $35.0$75.0 million in the comparable period in 2019.
2020. In addition, we did not repurchase any shares under our share repurchase programs during the three months ended July 31, 2021, compared to $23.3 million in the three months ended August 1, 2020.
A summary of key financial data and ratios at the dates indicated is as follows:
August 1, 2020 | August 3, 2019 | February 1, 2020 | ||||||||||
Working capital ($ millions) (1) | $ | (87.9 | ) | $ | (28.3 | ) | $ | 31.3 | ||||
Current ratio (2) | 0.91:1 | 0.97:1 | 1.04:1 | |||||||||
Debt-to-capital ratio (3) | 69.1 | % | 44.4 | % | 42.2 | % |
| | | | | | | | | | | |
|
| July 31, 2021 |
| August 1, 2020 | |
| January 30, 2021 |
| |||
Operating working capital ($ millions) (1) | | $ | 100.4 | | $ | 284.9 | | | $ | 191.8 | |
Current ratio (2) | | | 0.82:1 | | | 0.91:1 | | | | 0.86:1 | |
Debt-to-capital ratio (3) | | | 54.9 | % | | 69.1 | % | | | 68.8 | % |
(1) |
|
|
(2) |
| The current ratio has been computed by dividing total current assets by total current liabilities. |
(3) |
| The debt-to-capital ratio has been computed by dividing total debt by total capitalization. Total debt is defined as long-term debt (including the current portion) and borrowings under |
WorkingOperating working capital at August 1, 2020July 31, 2021 was a deficit of $87.9$100.4 million, which was $59.6 million and $119.2$184.5 million lower than at August 3, 2019 and February 1, 2020 respectively.and $91.4 million lower than at January 30, 2021. Our current ratio was 0.910.82 to 1 as of August 1, 2020,July 31, 2021, compared to 0.970.91 to 1 at August 3, 20191, 2020 and 1.04:0.86:1 at February 1, 2020.January 30, 2021. The decrease in both operating working capital and the current ratio from August 3, 2019 and February 1, 2020 primarily reflects lower inventories driven by disciplined inventory management during the first half of 2020,higher accounts payable at July 31, 2021, as well as the reclassification of the mandatory purchase obligation to current liabilities, reflecting the anticipated settlement in the third quarter of 2021. The decrease in operating working capital from January 30, 2021 primarily reflects higher current lease obligations.trade accounts payable and accrued expenses combined with an increase in the mandatory purchase obligation, partially offset by higher inventory. Our debt-to-capital ratio was 54.9% as of July 31, 2021, compared to 69.1% as of August 1, 2020, compared to 44.4% as of August 3, 2019 and 42.2% at February 1, 2020.68.8% at January 30, 2021. The increasedecrease in our debt-to-capital ratio from August 3, 20191, 2020 and February 1, 2020January 30, 2021 primarily reflects lower shareholders' equity due to the impact of the net loss in the first half of 2020 and higher borrowings on our revolving credit facility. Our liquidity ratios reflect higher borrowings under our revolving credit agreement, which we expect to continue to repay during the second half of 2020. However, the Credit Agreement provides liquidity through January 18, 2024.facility at July 31, 2021. We believe our current cash flows from operations, as well as more than $166$364.5 million in borrowing availability under the Credit Agreement, provide ample liquidity to meet the Company'sCompany’s working capital needs for the foreseeable future.
We declared and paid dividends of $0.07 per share in both the second quarter of 2020both 2021 and 2019.2020. The declaration and payment of any future dividend is at the discretion of the Board of Directors and will depend on our results of operations, financial condition, business conditions and other factors deemed relevant by our Board of Directors. However, we presently expect that dividends will continue to be paid.
As discussed above, as a precautionary measure to increase our cash position and preserve financial flexibility given the uncertainty of the COVID-19 pandemic on our operations, we expanded the borrowing capacity on our Credit Agreement in April 2020. We have also focused on managing costs, reducing both capital expenditures and inventory levels. We anticipate that our solid financial position will allow us to make continued progress towards repaying our outstanding borrowings under our Credit Agreement.
CONTRACTUAL OBLIGATIONS |
Our contractual obligations primarily consist of purchase obligations, operating lease commitments, long-term debt (including the current portion), interest on long-term debt, minimum license commitments, financial instruments, mandatory purchase obligation associated with the acquisition of Blowfish Malibu, one-time transition tax for the mandatory deemed repatriation of cumulative foreign earnings, obligations for our supplemental executive retirement plan and other postretirement benefits and obligations.
During the first half of 2020, we deferred certain vendor and landlord payments, as discussed in Note 9 to the condensed consolidated financial statements, and as of August 1, 2020, we have accrued liabilities for factory order cancellations, as further described in Note 5 to the condensed consolidated financial statements. These obligations are expected to be settled within the next year. Except for these items and changes within the normal course of business (primarily changes in purchase obligations, which fluctuate throughout the year as a result of the seasonal nature of our operations, changes in borrowings under our revolving credit agreement, changes in the mandatory purchase obligation associated with the acquisition of Blowfish Malibu and changes in operating lease commitments as a result of new stores, store closures and lease renewals), there have been no other significant changes to the contractual obligations identified in our Annual Report on Form 10-K for the year ended February 1, 2020.January 30, 2021.
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CRITICAL ACCOUNTING POLICIES AND ESTIMATES |
No material changes have occurred related to critical accounting policies and estimates since the end of the most recent fiscal year other than the adoption of ASC 326, as further described in Note 2 to the condensed consolidated financial statements.year. For further information on the Company'sCompany’s critical accounting policies and estimates, see Part II, Item 7 of our Annual Report on Form 10-K for the year ended February 1, 2020. January 30, 2021.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS |
Recently issued accounting pronouncements and their impact on the Company are described in Note 2 to the condensed consolidated financial statements.
INFLATION
inflation we have experienced have not had a significant effect on our net sales or operating earnings for the three and six months ended July 31, 2021. While we have historically been able to offset our product cost increases by increasing prices, negotiating costs, or changing suppliers, we may not be able to offset price increases in the future, which may have an adverse effect on our results of operations and financial condition.
FORWARD-LOOKING STATEMENTS |
This Form 10-Q contains certain forward-looking statements and expectations regarding the Company’s future performance and the performance of its brands. Such statements are subject to various risks and uncertainties that could cause actual results to differ materially. These risks include (i) the recent coronavirus outbreakpandemic and its adverse impact on our business operations, store traffic and financial condition;condition (ii) changing consumer demands, which may be influenced by consumers' disposable income, which in turn can be influenced by general economic conditions;conditions and other factors; (iii) rapidly changing consumer preferences and purchasing patterns and fashion trends; (iv) intense competition within the footwear industry; (v) customer concentration and increased consolidation in the retail industry; (vi) foreign currency fluctuations; (vii) impairment charges resulting from a long-term decline in our stock price; (iv) rapidly changing fashion trends and purchasing patterns; (v) intense competition within the footwear industry; (vi)(viii) political and economic conditions or other threats to the continued and uninterrupted flow of inventory from China and other countries, where the Companycompany relies heavily on third-party manufacturing facilities for a significant amount of its inventory; (vii) imposition of tariffs; (viii)(ix) cybersecurity threats or other major disruption to the company’s information technology systems; (x) the ability to accurately forecast sales and manage inventory levels; (ix) cybersecurity threats or other major disruption to the Company’s information technology systems; (x) customer concentration and increased consolidation in the retail industry; (xi) transitional challenges with acquisitions; (xii) a disruption in the Company’scompany’s distribution centers; (xiii) foreign currency fluctuations; (xiv) changes to tax laws, policies and treaties; (xv)(xii) the ability to recruit and retain senior management and other key associates; (xiii) the ability to maintain relationships with current suppliers; (xiv) the ability to secure/exit leases on favorable terms; (xv) transitional challenges with acquisitions and divestitures; (xvi) changes to tax laws, policies and treaties; (xvii) compliance with applicable laws and standards with respect to labor, trade and product safety issues; (xvii) the ability to maintain relationships with current suppliers;and (xviii) the ability to attract, retain, and maintain good relationships with licensors and protect our intellectual property rights; and (xix) the ability to secure/exit leases on favorable terms.rights. The Company'sCompany’s reports to the Securities and Exchange Commission contain detailed information relating to such factors, including, without limitation, the information under the caption “Risk Factors” in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended February 1, 2020,January 30, 2021, which information is incorporated by reference herein and updated by the Company’s Quarterly Reports on Form 10-Q. The Company does not undertake any obligation or plan to update these forward-looking statements, even though its situation may change.
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
No material changes have taken place in the quantitative and qualitative information about market risk since the end of the most recent fiscal year. For further information, see Part II, Item 7A of the Company'sCompany’s Annual Report on Form 10-K for the year ended February 1, 2020. January 30, 2021.
ITEM 4 CONTROLS AND PROCEDURES
|
Evaluation of Disclosure Controls and Procedures
It is the Chief Executive Officer'sOfficer’s and Chief Financial Officer'sOfficer’s ultimate responsibility to ensure we maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Commission'sCommission’s rules and forms and is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our disclosure controls and
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procedures include mandatory communication of material events, automated accounting processing and reporting, management review of monthly, quarterly and annual results, an established system of internal controls and ongoing monitoring by our internal auditors.
A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Furthermore, the design of a control system must reflect the fact there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to errors or fraud may occur and not be detected. Our disclosure controls and procedures are designed to provide a reasonable level of assurance that their objectives are achieved. As of August 1, 2020,July 31, 2021, management of the Company, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based upon and as of the date of that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded our disclosure controls and procedures were effective at the reasonable assurance level.
Based on the evaluation of internal control over financial reporting, the Chief Executive Officer and Chief Financial Officer have concluded that there have been no changes in the Company’s internal controls over financial reporting during the quarter ended August 1, 2020July 31, 2021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II OTHER INFORMATION
|
ITEM 1 LEGAL PROCEEDINGS |
We are involved in legal proceedings and litigation arising in the ordinary course of business. In the opinion of management, the outcome of such ordinary course of business proceedings and litigation currently pending will not have a material adverse effect on our results of operations or financial position. All legal costs associated with litigation are expensed as incurred.
Information regarding Legal Proceedings is set forth within Note 1716 to the condensed consolidated financial statements and incorporated by reference herein.
ITEM 1A RISK FACTORS |
There have been no material changes that have occurred related to our risk factors since the end of the most recent fiscal year. For further information, see Part I, Item 1A of our Annual Report on Form 10-K for the year ended February 1, 2020. January 30, 2021.
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The following table provides information relating to our repurchases of common stock during the second quarter of 2020:2021:
Fiscal Period | Total Number of Shares Purchased (1) | Average Price Paid per Share (1) | Total Number Purchased as Part of Publicly Announced Program (2) | Maximum Number of Shares that May Yet be Purchased Under the Program (2) | ||||||||||||
May 3, 2020 - May 30, 2020 | 561,709 | $ | 6.76 | 561,709 | 3,481,014 | |||||||||||
May 31, 2020 - July 4, 2020 | 537,586 | 8.27 | 529,525 | 2,951,489 | ||||||||||||
July 5, 2020 - August 1, 2020 | 300,000 | 7.46 | 300,000 | 2,651,489 | ||||||||||||
Total | 1,399,295 | $ | 7.49 | 1,391,234 | 2,651,489 |
| | | | | | | | | |
| | | | | | | Total Number | | Maximum Number |
| | | | | | | Purchased as Part | | of Shares that May |
| | Total Number of | | | | | of Publicly | | Yet be Purchased |
| | Shares | | Average Price Paid | | Announced | | Under the | |
Fiscal Period |
| Purchased (1) |
| | per Share (1) |
| Program (2) |
| Program (2) |
May 2, 2021 - May 29, 2021 |
| — | | $ | — |
| — |
| 2,651,489 |
|
| | |
| |
| |
| |
May 30, 2021 - July 3, 2021 |
| 9,443 | |
| 26.61 |
| — |
| 2,651,489 |
|
|
| |
|
|
|
|
|
|
July 4, 2021 - July 31, 2021 |
| — | |
| — |
| — |
| 2,651,489 |
|
|
| |
|
|
|
|
|
|
Total |
| 9,443 | | $ | 26.61 |
| — |
| 2,651,489 |
(1) |
| Includes shares purchased as part of our publicly announced stock repurchase programs and shares that were tendered by employees related to certain share-based awards. The employee shares were tendered in satisfaction of the exercise price of stock options and/or to satisfy tax withholding amounts for non-qualified stock options, restricted stock and stock performance awards. |
(2) |
| On December 14, 2018, the Board of Directors approved a stock repurchase program ("2018 Program") authorizing the repurchase of 2,500,000 shares of our outstanding common stock. In addition, on September 2, 2019, the Board of Directors approved a stock repurchase program ("2019 Program") authorizing the repurchase of an additional 5,000,000 shares of our outstanding common stock. We can use the repurchase programs to repurchase shares on the open market or in private transactions from time to time, depending on market conditions. The |
ITEM 3 DEFAULTS UPON SENIOR SECURITIES |
None.
ITEM 4 MINE SAFETY DISCLOSURES |
Not applicable.
ITEM 5 OTHER INFORMATION |
None.
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ITEM 6 EXHIBITS
|
Exhibit
|
|
|
3.1 |
| |
3.2 |
| |
22 | ||
31.1 | † | |
31.2 | † | |
32.1 | † | |
101.INS | † | iXBRL Instance Document |
101.SCH
|
† | iXBRL Taxonomy Extension Schema Document |
101.CAL | † | iXBRL Taxonomy Extension Calculation Linkbase Document |
101.LAB | † | iXBRL Taxonomy Extension Label Linkbase Document |
101.PRE | † | iXBRL Taxonomy Presentation Linkbase Document |
101.DEF | † | iXBRL Taxonomy Definition Linkbase Document |
104 | † | Cover Page Interactive Data File, formatted in iXBRL and contained in Exhibit 101. |
† | Denotes exhibit is filed with this Form 10-Q. |
† Denotes exhibit is filed with this Form 10-Q.
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Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| CALERES, INC. | |
| ||
Date: September | /s/ Kenneth H. Hannah | |
Kenneth H. Hannah Senior Vice President and Chief Financial Officer on behalf of the Registrant and as the
Principal Financial Officer |
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