ITEM 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
−Removed: We experienced better-than-anticipated consumer demand in the second quarter of 2021, recording sequential net sales growth and significant gross margin improvement.
−Removed: We also achieved the highest second quarter operating earnings in our history.
−Removed: 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.
−Removed: In the first half of last year, our financial results were negatively impacted by the coronavirus (“COVID-19”) pandemic, including the temporary closure of all of our retail stores beginning in mid-March, with a phased re-opening beginning in mid-May.
−Removed: We did experience sequential improvement in sales in the second half of 2020, driven by the reopening of our retail stores, and continued solid growth of our e-commerce business.
−Removed: During the first half of 2021, as the vaccines became widely distributed and governments continued to ease restrictions, consumer sentiment and spending improved, which contributed to higher store traffic and strong growth in our net sales and operating earnings.
−Removed: While we achieved strong financial results for the second quarter of 2021, we continue to experience global supply chain disruptions as a result of the pandemic.
−Removed: These disruptions have caused a delay in the receipt of inventory due to port congestion, reduced shipping vessel and container availability, and factory shutdowns as a result of the resurgence of COVID-19 infections, as well as an increase in inbound freight costs.
−Removed: We are actively working with our suppliers to minimize these disruptions, but we anticipate higher inbound freight costs in the second half of 2021 and beyond.
−Removed: The extent and duration of these supply chain disruptions and higher freight costs are uncertain.
+Added: We achieved exceptional financial results in the third quarter of 2021, driven by a successful back-to-school season and strong consumer demand.
+Added: We recorded sequential net sales growth and strong gross margins, and achieved the highest third quarter operating earnings in our history.
+Added: Our strong performance was driven by our Famous Footwear segment, which reported a 26.5% increase in same-store sales and an operating margin of 17.7%, which was the highest third quarter operating margin in its history.
+Added: Our Brand Portfolio segment also contributed to our strong results in the third quarter of 2021, with a 12.3% increase in net sales and a 55.8% increase in operating earnings compared to the third quarter of 2020.
+Added: Our financial results were negatively impacted in 2020 by the coronavirus (“COVID-19”) pandemic, including the temporary closure of all of our retail stores beginning in mid-March, with a phased re-opening beginning in mid-May.
+Added: We experienced sequential improvement in sales in the latter part of 2020, driven by the reopening of our retail stores, and continued solid growth of our e-commerce business.
+Added: During the first nine months of 2021, as the vaccines became widely distributed and governments continued to ease restrictions, consumer sentiment and spending improved, which contributed to higher store traffic and strong growth in our net sales and operating earnings.
Financial Highlights
−Removed: Following is a summary of the financial highlights for the second quarter of 2021:
−Removed: ● Strong consumer demand led to a consolidated net sales increase of $174.1 million, or 34.7%, to $675.5 million in the second quarter of 2021, compared to $501.4 million in the second quarter of 2020.
−Removed: The sales increase was broad-based and across both segments.
−Removed: Our Famous Footwear segment contributed a net sales increase of $119.7 million, or 35.8%.
−Removed: Net sales in our Brand Portfolio segment increased by $55.4 million, or 30.2%, compared to the second quarter of 2020.
−Removed: On a consolidated basis, our direct-to-consumer sales represented 79% of consolidated net sales for the second quarter of 2021, compared to 80% in the second quarter of 2020.
−Removed: ● Consolidated gross profit increased $139.7 million, or 76.5%, to $322.3 million in the second quarter of 2021, compared to $182.6 million in the second quarter of 2020.
−Removed: Our gross profit margin increased significantly to 47.7% in the second quarter of 2021, compared to 36.4% in the second quarter of 2020, reflecting a decline in promotional activity driven by strong consumer demand.
−Removed: ● Consolidated operating earnings increased $86.9 million to $62.8 million in the second quarter of 2021, compared to an operating loss of $24.1 million in the second quarter of 2020.
+Added: Following is a summary of the financial highlights for the third quarter of 2021:
+Added: ● Consolidated net sales increased $136.7 million, or 21.1%, to $784.2 million in the third quarter of 2021, compared to $647.5 million in the third quarter of 2020.
+Added: Our Famous Footwear segment’s net sales of $494.7 million were the highest quarterly net sales in its history.
+Added: Net sales in our Brand Portfolio segment increased $32.9 million, or 12.3%, compared to the third quarter of 2020.
+Added: On a consolidated basis, our direct-to-consumer sales represented approximately 73% of consolidated net sales for the third quarter of 2021, compared to 71% in the third quarter of 2020.
+Added: ● Consolidated gross profit increased $78.4 million, or 30.5%, to $335.4 million in the third quarter of 2021, compared to $257.0 million in the third quarter of 2020.
+Added: Our gross profit margin increased to 42.8% in the third quarter of 2021, compared to 39.7% in the third quarter of 2020, reflecting a decline in promotional activity driven by strong consumer demand, partially offset by higher inbound freight costs.
+Added: ● Consolidated operating earnings increased $61.2 million to $81.3 million in the third quarter of 2021, compared to $20.1 million in the third quarter of 2020.
● Consolidated net earnings attributable to Caleres, Inc.
−Removed: were $37.4 million, or $0.97 per diluted share, in the second quarter of 2021, compared to a net loss of $30.7 million, or $0.83 per diluted share, in the second quarter of 2020.
−Removed: The following items should be considered in evaluating the comparability of our second quarter results in 2021 and 2020:
−Removed: ● Blowfish Malibu mandatory purchase obligation – As further discussed in Note 5 and Note 14 to the condensed consolidated financial statements, the Blowfish Malibu noncontrolling interest is subject to a mandatory purchase obligation after a three-year period following the 2018 acquisition, based on an earnings multiple formula.
−Removed: During the second quarter of 2021, we recorded a fair value adjustment of $7.1 million ($5.3 million on an after-tax basis, or $0.14 per diluted share), compared to $6.6 million ($4.9 million on an after-tax basis, or $0.13 per diluted share) in the second quarter of 2020.
+Added: were $59.6 million, or $1.54 per diluted share, in the third quarter of 2021, compared to $14.4 million, or $0.38 per diluted share, in the third quarter of 2020.
+Added: The following items should be considered in evaluating the comparability of our third quarter results in 2021 and 2020:
+Added: ● Blowfish Malibu mandatory purchase obligation – As further discussed in Note 5 and Note 14 to the condensed consolidated financial statements, the Blowfish Malibu noncontrolling interest was subject to a mandatory purchase obligation after a three-year period following the 2018 acquisition, based on an earnings multiple formula.
+Added: During the third quarter of 2021, we recorded a final fair value adjustment of $1.9 million ($1.4 million on an after-tax basis, or $0.04 per diluted share), compared to an adjustment of $5.1 million ($3.8 million on an after-tax basis, or $0.10 per diluted share) in the third quarter of 2020.
The fair value adjustments are recorded as interest expense, net in the condensed consolidated statements of earnings (loss).
−Removed: The three-year period following the acquisition ended on July 31, 2021, and we expect to settle the purchase obligation in the third quarter of 2021, utilizing borrowings under our revolving credit agreement.
−Removed: ● Deferred tax valuation allowances – During the second quarter of 2021, we recorded incremental net deferred tax valuation allowances totaling $3.3 million ($0.08 per diluted share), as we are in a full valuation allowance position for federal, state and certain international jurisdictions.
+Added: The purchase obligation was settled for $54.6 million on November 4, 2021, subsequent to the end of the third quarter, utilizing borrowings under our revolving credit agreement.
+Added: ● Loss on early extinguishment of debt – During the third quarter of 2021, we incurred a loss of $0.6 million ($0.5 million on an after-tax basis, or $0.01 per diluted share) related to the redemption of $100 million of our Senior Notes in August 2021, prior to maturity, and the amendment of our revolving credit facility prior to its maturity.
Refer to Note 10 to the condensed consolidated financial statements for further discussion.
−Removed: ● 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.
+Added: Recent Developments – Supply Chain Disruptions
+Added: While we achieved strong financial results for the third quarter of 2021, we continue to experience global supply chain disruptions, including a delay in the receipt of inventory due to port congestion, reduced shipping vessel and container availability, and factory closures, as well as higher inbound freight costs, all of which resulted in incremental freight expenses and lower gross profit of approximately $11.5 million for the Brand Portfolio segment during the third quarter of 2021.
+Added: We are actively working to minimize the impact of these disruptions by diversifying and leveraging our sourcing model, but we anticipate higher inbound freight costs in the fourth quarter of 2021 and into 2022.
+Added: As of October 30, 2021, our Brand Portfolio segment has over $100 million of inventory in transit that is not yet available to sell.
+Added: Depending on the timing of receipt of this inventory, it is possible that certain customers may cancel their orders or demand price concessions for the late receipts.
+Added: If we are unable to sell this in-transit inventory, we may have to liquidate it through other less profitable channels, which may negatively impact our gross margins.
+Added: In addition, the supply chain delays and inflationary cost pressures we are currently experiencing may limit our ability to meet incremental consumer demand and may negatively impact net sales during the fourth quarter of 2021 and into 2022.
+Added: The extent and duration of these supply chain disruptions and higher freight costs are uncertain.
+Added: However, we are actively working to mitigate these cost pressures and recover a portion of the increased costs through price increases.
Metrics Used in the Evaluation of Our Business
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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.
−Removed: Accordingly, closed stores (whether temporary or permanent closures) are excluded from the same-store sales metric for each day of the closure.
+Added: Accordingly, closed stores (including the temporary store closures for a portion of 2020 for all of our Famous Footwear and Brand Portfolio stores in North America) 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.
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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.
−Removed: 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.
−Removed: Our same-store sales calculation excludes the impact of both permanent and temporary store closures.
−Removed: Accordingly, for the second quarter of 2020, our same-store sales calculation was impacted more heavily by our e-commerce sales penetration, 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 second quarter of 2020.
Sales per square foot
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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.
−Removed: This metric was adversely impacted by the temporary retail store closures during a portion of the second quarter of 2020 and therefore, the metric is not comparable to the second quarter of 2021.
−Removed: We continued to execute at a high level during the second quarter of 2021, achieving another significant sequential increase in net sales and delivering operating earnings in excess of pre-pandemic levels.
−Removed: The new COVID-19 variants and the impact of the pandemic on the global supply chain have caused uncertainty in the macro environment.
−Removed: 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 2021.
−Removed: 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.
−Removed: We believe we are well-positioned to navigate through the supply chain disruptions, responding to the variables within our control, to improve financial results in the Brand Portfolio segment.
−Removed: We will continue to leverage our core competencies and execute on our long-term strategic priorities to enhance long-term value for our shareholders.
+Added: This metric was adversely impacted by the temporary retail store closures during a portion of the nine months ended October 31, 2020 and therefore, the metric is not comparable to the nine months ended October 30, 2021.
+Added: While the global supply chain disruptions have caused uncertainty in the macro environment, we are actively working with our suppliers to help offset the impacts to our business and financial performance.
+Added: Although we believe we are well-positioned to navigate through the supply chain disruptions by responding to the variables within our control, including actively working to mitigate cost pressures through price increases, we expect the inflationary economy and the increase in inbound freight costs to impact our financial results in the fourth quarter of 2021.
+Added: As we ship spring 2022 orders, we anticipate the price increases currently being implemented will mitigate the impact of the higher freight costs.
+Added: We continued to make excellent progress toward our balance sheet initiatives during the third quarter of 2021, including redeeming $100.0 million aggregate principal amount of our Senior Notes and securing more advantageous terms on the revolving credit agreement.
+Added: We believe these actions, in addition to redeeming the remaining $100.0 million of Senior Notes in the fourth quarter, will result in approximately a $12 million decline in annual interest expense.
+Added: We will continue to leverage our core competencies and execute on our short and long-term strategic priorities to enhance long-term value for our shareholders.
Following are the consolidated results and the results by segment:
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Thirteen Weeks Ended
−Removed: Twenty-Six Weeks Ended
−Removed: July 31, 2021
−Removed: August 1, 2020
−Removed: July 31, 2021
−Removed: August 1, 2020
+Added: Thirty-Nine Weeks Ended
+Added: October 30, 2021
+Added: October 31, 2020
+Added: October 30, 2021
+Added: October 31, 2020
Cost of goods sold
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Interest expense, net
+Added: Loss on early extinguishment of debt
Other income, net
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Net earnings (loss) attributable to Caleres, Inc.
−Removed: Net sales increased $174.1 million, or 34.7%, to $675.5 million for the second quarter of 2021, compared to $501.4 million for the second quarter of 2020.
−Removed: Our Famous Footwear segment continued to experience strong consumer demand, with net sales increasing $119.7 million, or 35.8%, compared to the second quarter of 2020.
−Removed: 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.
−Removed: Net sales for our Brand Portfolio segment increased $55.4 million, or 30.2% during the second quarter of 2021.
−Removed: 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.
−Removed: On a consolidated basis, our direct-to-consumer sales represented 79% of total net sales for the second quarter of 2021.
−Removed: Our casual, athletic and sport footwear categories continued to resonate with consumers, and we experienced strong sales growth in sandals.
−Removed: Net sales increased $415.6 million, or 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.
−Removed: Our strong performance was attributable to a 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.
−Removed: We believe that these factors led to a significant improvement in retail store traffic.
−Removed: Our Famous Footwear segment experienced a net sales increase of $326.6 million, or 62.2%, for the six months ended July 31, 2021, with record-setting net sales of $851.8 million.
−Removed: Our Brand Portfolio segment reported an $88.4 million, or 22.1%, increase in net sales, with strong sales growth from our Sam Edelman, Blowfish, Vionic and Allen Edmonds brands.
−Removed: Gross profit increased $139.7 million, or 76.5%, to $322.3 million for the second quarter of 2021, compared to $182.6 million for the second quarter of 2020, reflecting higher net sales and a higher gross profit rate.
−Removed: As a percentage of net sales, gross profit increased to 47.7% for the second quarter of 2021, compared to 36.4% for the second quarter of 2020, reflecting a decline in promotional activity driven by strong consumer demand.
−Removed: Gross profit increased $292.7 million, or 96.1%, to $597.2 million for the six months ended July 31, 2021, compared to $304.5 million for the six months ended August 1, 2020, primarily due to higher net sales and a reduction in promotional activity at Famous Footwear.
−Removed: For the six months ended August 1, 2020, our gross profit was impacted by higher incremental cost of goods sold primarily due to $33.4 million in inventory markdowns reflecting the difficult retail environment driven by the COVID-19 pandemic, as well as $1.6 million in inventory markdowns related to the decision to exit our Fergie brand.
−Removed: As a percentage of net sales, gross profit increased to 45.4% for the six months ended July 31, 2021, compared to 33.9% for the six months ended August 1, 2020.
+Added: Net sales increased $136.7 million, or 21.1%, to $784.2 million for the third quarter of 2021, compared to $647.5 million for the third quarter of 2020.
+Added: Our Famous Footwear segment had an extremely successful back-to-school season and continued to benefit from strong consumer demand throughout the quarter, achieving the highest quarterly net sales in the segment’s history, with net sales increasing $103.0 million, or 26.3%, compared to the third quarter of 2020.
+Added: Net sales for our Brand Portfolio segment increased $32.9 million, or 12.3% during the third quarter of 2021, compared to the third quarter of 2020.
+Added: 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 related closure of all but two Naturalizer retail stores in North America.
+Added: On a consolidated basis, our direct-to-consumer sales represented approximately 73% of total net sales for the third quarter of 2021.
+Added: Our casual, athletic and sport footwear categories continue to perform well, sandals experienced strong growth during the third quarter of 2021, and demand for the dress category continues to improve, as more people return to the workplace.
+Added: Net sales increased $552.2 million, or 35.7%, to $2,098.3 million for the nine months ended October 30, 2021, compared to $1,546.1 million for the nine months ended October 31, 2020.
+Added: As COVID-19 vaccines became more widely available and government restrictions eased, we experienced strong growth in consumer demand during the nine months ended October 30, 2021, which has led to a significant increase in retail store traffic and conversion rates.
+Added: Our Famous Footwear segment experienced a net sales increase of $429.5 million, or 46.8%, for the nine months ended October 30, 2021, with net sales of $1,346.4 million.
+Added: Our Brand Portfolio segment reported a $121.4 million, or 18.2%, increase in net sales, with strong sales growth from our Sam Edelman, Blowfish, Vionic and Allen Edmonds brands.
+Added: Gross profit increased $78.4 million, or 30.5%, to $335.4 million for the third quarter of 2021, compared to $257.0 million for the third quarter of 2020, reflecting higher net sales and a higher gross profit rate.
+Added: As a percentage of net sales, gross profit increased to 42.8% for the third quarter of 2021, compared to 39.7% for the third quarter of 2020, reflecting a significant decline in promotional activity in our Famous Footwear segment driven by strong consumer demand, partially offset by an adverse impact of approximately $11.5 million of incremental cost of goods sold in our Brand Portfolio segment associated with supply chain disruptions and related vessel and container shortages.
+Added: As discussed above, we anticipate the higher inbound freight costs to continue in the fourth quarter of 2021 and into 2022, which may continue to impact our gross profit if we are unable to mitigate or fully recover these additional costs through price increases.
+Added: Gross profit increased $371.0 million, or 66.1%, to $932.5 million for the nine months ended October 30, 2021, compared to $561.5 million for the nine months ended October 31, 2020, primarily due to higher net sales and a reduction in promotional activity at Famous Footwear.
+Added: For the nine months ended October 31, 2020, our gross profit was impacted by higher incremental cost of goods sold primarily due to $33.4 million in inventory markdowns reflecting the difficult retail environment driven by the COVID-19 pandemic, as well as $1.6 million in inventory markdowns related to the decision to exit our Fergie brand.
+Added: As a percentage of net sales, gross profit increased to 44.4% for the nine months ended October 30, 2021, compared to 36.3% for the nine months ended October 31, 2020.
We classify certain warehousing, distribution, sourcing and other inventory procurement costs in selling and administrative expenses.
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Selling and Administrative Expenses
−Removed: Selling and administrative expenses increased $58.2 million, or 28.9%, to $259.5 million for the second quarter of 2021, compared to $201.3 million for the second quarter of 2020.
−Removed: The increase was primarily due to higher expenses associated with our cash-based incentive compensation plan for certain employees and higher salary expenses in the second quarter of 2021.
−Removed: Salary expenses were lower during the second quarter of 2020 as a result of the actions taken to mitigate the impact of COVID-19 on our financial results.
−Removed: 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 and furloughs for a significant portion of our retail store associates, as well as temporary salary reductions for most remaining employees, which continued through the end of the second quarter of 2020.
−Removed: Marketing and advertising expenses were also higher in the second quarter of 2021, which were partially offset by lower rent and facilities expenses, primarily associated with the Naturalizer retail store closures.
−Removed: As a percentage of net sales, selling and administrative expenses decreased to 38.4% for the second quarter of 2021, from 40.1% for the second quarter of 2020.
−Removed: Selling and administrative expenses increased $76.4 million, or 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.
−Removed: 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.
−Removed: As discussed above, salary expenses were lower during the six months ended August 1, 2020 as a result of the actions taken to mitigate the impact of COVID-19 on our financial results.
−Removed: As a percentage of net sales, selling and administrative expenses decreased 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.
+Added: Selling and administrative expenses increased $17.2 million, or 7.2%, to $254.1 million for the third quarter of 2021, compared to $236.9 million for the third quarter of 2020.
+Added: The increase was primarily due to higher marketing expenses, due in part to the return to television advertising for our Famous Footwear segment;
+Added: higher salary expenses and higher expenses associated with our cash and stock-based incentive compensation plan for certain employees.
+Added: This increase was partially offset by lower rent and facilities expenses, primarily associated with the Naturalizer retail store closures.
+Added: Salary expenses were lower in the third quarter of 2020, primarily attributable to the steps taken in the first quarter of 2020 to reduce expenses, including workforce reductions, and reduced hours at our retail stores .
+Added: As a percentage of net sales, selling and administrative expenses decreased to 32.4% for the third quarter of 2021, from 36.6% for the third quarter of 2020, reflecting better leveraging of expenses over higher net sales.
+Added: Selling and administrative expenses increased $93.5 million, or 14.1%, to $757.0 million for the nine months ended October 30, 2021, compared to $663.5 million for the nine months ended October 31, 2020.
+Added: The increase for the nine months ended October 30, 2021 was primarily due to higher expenses for our cash-based incentive compensation plans for certain employees, and higher salary and marketing expenses.
+Added: Salary expenses were lower during the nine months ended October 31, 2020 as a result of the actions taken to mitigate the impact of the pandemic on our financial results.
+Added: As a percentage of net sales, selling and administrative expenses decreased to 36.1% for the nine months ended October 30, 2021, from 42.9% for the nine months ended October 31, 2020, reflecting better leveraging of expenses over higher net sales.
Impairment of Goodwill and Intangible Assets
−Removed: During the six months ended August 1, 2020, we recorded non-cash impairment charges of $262.7 million ($218.5 million on an after-tax basis), including $240.3 million associated with goodwill and $22.4 million associated with the indefinite-lived Allen Edmonds and Via Spiga trade names.
−Removed: There were no corresponding charges for the six months ended July 31, 2021.
−Removed: Refer to Note 5 and Note 8 to the condensed consolidated financial statements for further discussion of these charges.
−Removed: Restructuring and Other Special Charges, Net
−Removed: We incurred restructuring and other special charges of $5.4 million ($4.7 million on an after-tax basis, or $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.
−Removed: There were no corresponding charges in the second quarter of 2021.
+Added: During the nine months ended October 31, 2020, we recorded non-cash impairment charges of $262.7 million ($218.5 million on an after-tax basis), including $240.3 million associated with goodwill and $22.4 million associated with the indefinite-lived Allen Edmonds and Via Spiga trade names.
+Added: There were no corresponding charges for the nine months ended October 30, 2021.
Refer to Note 8 to the condensed consolidated financial statements for further discussion of these charges.
−Removed: 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.
−Removed: 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 per diluted share) related to the unfavorable business climate, driven by the impact of the COVID-19 pandemic on our business operations.
+Added: Restructuring and Other Special Charges, Net
+Added: 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 nine months ended October 30, 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.
+Added: During the nine months ended October 31, 2020, we incurred restructuring and other special charges of $65.6 million ($52.5 million on an after-tax basis) related to the unfavorable business climate, driven by the impact of the pandemic on our business operations.
These charges were primarily for impairment associated with lease right-of-use assets and retail store furniture and fixtures, liabilities associated with factory order cancellations and severance.
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Operating Earnings (Loss)
−Removed: Operating earnings increased $86.9 million to $62.8 million for the second quarter of 2021, compared to an operating loss of $24.1 million for the second quarter of 2020, primarily reflecting higher net sales and gross profit.
−Removed: As a percentage of net sales, operating earnings were 9.3% for the second quarter of 2021, compared to an operating loss of 4.8% for the second quarter of 2020.
−Removed: Operating earnings increased $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, primarily reflecting higher net sales and gross profit, lower impairment charges and better leveraging of expenses over a higher net sales base.
−Removed: As a percentage of net sales, operating earnings were 6.1% for the six months ended July 31, 2021, compared to an operating loss of 50.1% for the six months ended August 1, 2020.
+Added: Operating earnings increased $61.2 million to $81.3 million for the third quarter of 2021, compared to $20.1 million for the third quarter of 2020, primarily reflecting higher net sales and gross profit.
+Added: As a percentage of net sales, operating earnings were 10.4% for the third quarter of 2021, compared to 3.1% for the third quarter of 2020.
+Added: Operating earnings increased $592.3 million to $162.0 million for the nine months ended October 30, 2021, compared to an operating loss of $430.3 million for the nine months ended October 31, 2020, primarily reflecting higher net sales and gross profit, lower impairment charges and better leveraging of expenses over a higher net sales base.
+Added: As a percentage of net sales, operating earnings were 7.7% for the nine months ended October 30, 2021, compared to an operating loss of 27.8% for the nine months ended October 31, 2020.
Interest Expense, Net
−Removed: Interest expense, net decreased $1.5 million, or 11.0%, to $12.0 million for the second quarter of 2021, compared to $13.5 million for the second quarter of 2020, reflecting lower average borrowings under our revolving credit agreement.
−Removed: We continued to make debt reduction a priority during the second quarter of 2021, repaying $100.0 million of borrowings under our revolving credit facility, ending the quarter with $100.0 million of revolver borrowings.
−Removed: This decrease was partially offset by a $0.5 million increase in the fair value adjustment to the
−Removed: 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.
−Removed: 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, to $13.5 million for the six months ended July 31, 2021, from $9.8 million in the six months ended August 1, 2020.
−Removed: The increase associated with the mandatory purchase obligation was partially offset by lower average borrowings under our revolving credit agreement.
−Removed: We have continued to utilize our strong cash generation to reduce the incremental borrowings that were used to preserve financial flexibility at the onset of the pandemic, reducing the borrowings under our revolving credit agreement from $440.0 million in March 2020 to $100.0 million at July 31, 2021.
+Added: Interest expense, net decreased $5.8 million, or 53.4%, to $5.1 million for the third quarter of 2021, compared to $10.9 million for the third quarter of 2020, primarily due to a lower fair value adjustment to the Blowfish Malibu mandatory purchase obligation.
+Added: We recognized a final fair value adjustment of $1.9 million in the third quarter of 2021, compared to an adjustment of $5.1 million in the third quarter of 2020.
+Added: The adjustment during the third quarter of 2021 reflects the settlement of the purchase of the remaining interest in Blowfish Malibu.
+Added: The purchase obligation of $54.6 million was paid on November 4, 2021.
+Added: The decrease in interest expense also reflects lower average borrowings under our revolving credit agreement and a $100.0 million reduction in our outstanding Senior Notes in August 2021, as further discussed below.
+Added: Interest expense, net decreased $4.9 million, or 14.7%, to $28.8 million for the nine months ended October 30, 2021, compared to $33.7 million for the nine months ended October 31, 2020, primarily due to lower average borrowings under our revolving credit agreement and a reduction in our outstanding Senior Notes.
+Added: We continued to utilize our strong cash generation to reduce the incremental borrowings that were used to preserve financial flexibility at the onset of the pandemic, reducing the borrowings under our revolving credit agreement from $440.0 million in March 2020 to $175.0 million at October 30, 2021.
+Added: In addition, we redeemed $100.0 million of our Senior Notes in August 2021, shifting this higher interest debt to borrowings under our revolving credit agreement.
+Added: We also notified our bondholders on November 18, 2021 that we would be redeeming the remaining $100.0 million of our Senior Notes in January 2022.
+Added: We believe these actions will result in approximately a $12 million decline in annual interest expense in 2022.
+Added: Loss on Early Extinguishment of Debt
+Added: The loss on early extinguishment of debt was $0.6 million for the three and nine months ended October 30, 2021, reflecting the redemption of $100 million of Senior Notes prior to maturity and the amendment of our revolving credit facility.
+Added: Refer to Note 10 to the condensed consolidated financial statements for further discussion.
Other Income, Net
−Removed: Other income, net increased $0.2 million, or 5.1%, to $3.9 million for the second quarter of 2021, compared to $3.7 million for the second quarter of 2020.
+Added: Other income, net decreased $1.7 million, or 29.6%, to $3.8 million for the third quarter of 2021, compared to $5.5 million for the third quarter of 2020, which reflects a reduction of certain components of net periodic benefit income in 2021, as compared to 2020.
Refer to Note 13 of the condensed consolidated financial statements for further detail regarding the components of net periodic benefit income.
−Removed: Other income, net increased $0.4 million, or 5.9%, to $7.7 million for six months ended July 31, 2021, compared to $7.3 million for the six months ended August 1, 2020.
+Added: Other income, net decreased $1.2 million, or 9.3%, to $11.5 million for nine months ended October 30, 2021, compared to $12.7 million for the nine months ended October 31, 2020, which reflects a reduction of certain components of net periodic benefit income in 2021, as compared to 2020.
Refer to Note 13 of the condensed consolidated financial statements for further detail regarding the components of net periodic benefit income.
1 unchanged sentence
Our effective tax rate can vary considerably from period to period, depending on a number of factors.
−Removed: Our consolidated effective tax rate was 30.3% for the second quarter of 2021, compared to 9.4% for the second quarter of 2020.
−Removed: Our higher tax rate for the second quarter of 2021 was driven by discrete tax adjustments of $2.9 million, inclusive of $3.3 million of incremental valuation allowances for our deferred tax assets, as we are in a full valuation allowance position for federal, state and certain international jurisdictions.
−Removed: During the second quarter of 2020, our effective tax rate was impacted by several discrete tax items totaling $2.7 million, including the non-deductibility of losses at our Canadian business division.
−Removed: 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.
−Removed: For the six months ended July 31, 2021, our consolidated effective tax rate was 31.1%, compared to 19.1% for the six months ended August 1, 2020.
−Removed: 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 losses at our Canadian business division, which were driven by exit-related costs associated with Naturalizer retail stores during the first quarter.
−Removed: Our effective tax rate for the six months ended August 1, 2020 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.
−Removed: Offsetting these impacts 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.
+Added: Our consolidated effective tax rate was a provision of 24.9% for the third quarter of 2021, compared to a benefit of 1.9% for the third quarter of 2020.
+Added: The lower effective tax rate for the third quarter of 2020 reflects the impact of a higher anticipated full year tax benefit, driven by the impact of the CARES Act, which permitted us to carry back 2020 losses to years with a higher federal tax rate, and the mix of projected earnings between international and domestic jurisdictions.
+Added: For the nine months ended October 30, 2021, our consolidated effective tax rate was 27.7%, compared to 19.8% for the nine months ended October 31, 2020.
+Added: Our higher tax rate for the nine months ended October 30, 2021 primarily reflects strong domestic earnings and incremental valuation allowances for our deferred tax assets for certain jurisdictions.
+Added: The rate also reflects the non-deductibility of losses at our Canadian business division, which were driven by exit-related costs associated with Naturalizer retail stores during the first quarter.
+Added: Our effective tax rate for the nine months ended October 31, 2020 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 Canadian deferred tax assets, and the incremental tax provision related to the vesting of stock awards.
+Added: Offsetting these impacts was a benefit associated with the CARES Act, which permitted the Company to carry back 2020 losses to years with a higher federal tax rate.
Net Earnings (Loss) Attributable to Caleres, Inc.
Net earnings attributable to Caleres, Inc.
−Removed: 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, as a result of the factors described above.
+Added: were $59.6 million and $103.2 for the third quarter and nine months ended October 30, 2021, respectively, compared to net earnings of $14.4 million and net losses of $362.1 million for the third quarter and nine months ended October 31, 2020, respectively, as a result of the factors described above.
FAMOUS FOOTWEAR
Thirteen Weeks Ended
−Removed: Twenty-Six Weeks Ended
−Removed: July 31, 2021
−Removed: August 1, 2020
−Removed: July 31, 2021
−Removed: August 1, 2020
+Added: Thirty-Nine Weeks Ended
+Added: October 30, 2021
+Added: October 31, 2020
+Added: October 30, 2021
+Added: October 31, 2020
($ millions, except sales per square foot)
7 unchanged sentences
Impact of changes in Canadian exchange rate on sales
−Removed: Sales per square foot, excluding e-commerce (thirteen and twenty-six weeks ended)
+Added: Sales per square foot, excluding e-commerce (thirteen and thirty-nine weeks ended)
Sales per square foot, excluding e-commerce (trailing twelve months)
3 unchanged sentences
Ending stores
−Removed: Famous Footwear achieved net sales of $453.6 million, which was the highest second quarter net sales in our history.
−Removed: Net sales increased $119.7 million, or 35.8%, compared to the second quarter of 2020.
−Removed: 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.
−Removed: 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 when our retail stores were closed for a portion of the quarter.
−Removed: Our casual, athletic and sport categories of footwear continue to resonate with customers, and we also experienced strong growth in sandals.
−Removed: During the second quarter of 2021, we opened four stores and closed five stores, resulting in 912 stores and total square footage of 6.0 million at the end of the second quarter of 2021, compared to 936 stores and total square footage of 6.2 million at the end of the second quarter of 2020.
−Removed: Sales to members of our customer loyalty program, Famously You Rewards ("Rewards"), continue to account for a majority of the segment’s sales, with approximately 78% of our net sales made to program members in the second quarter of 2021, compared to 79% in the second quarter of 2020.
−Removed: Net sales increased $326.6 million, or 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.
−Removed: Our strong performance during the six months ended July 31, 2021 was attributable to a number of factors.
−Removed: 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.
−Removed: Additional government stimulus measures also positively impacted net sales.
−Removed: E-commerce penetration was approximately 13% of net sales in the six months ended July 31, 2021, compared to approximately 26% in the six months ended August 1, 2020 when our retail stores were temporarily closed from mid-March, with a phased reopening beginning in May.
+Added: Net sales of $494.7 million in the third quarter of 2021 increased $103.0 million, or 26.3%, compared to the third quarter of 2020.
+Added: We achieved the highest quarterly net sales in our history, driven by an extremely successful back-to-school season.
+Added: Even after the back-to-school season concluded, sales momentum continued, driven by strong growth from brick-and-mortar as consumers returned to in-store shopping.
+Added: E-commerce penetration in the third quarter of 2021 was approximately 13% of net sales, compared to approximately 17% in the third quarter of 2020 when retail store traffic was negatively impacted by the pandemic.
+Added: Although supply chain disruptions led to a delay in inventory receipts, our athletic, casual and sandals categories of footwear performed very well during the quarter.
+Added: During the third quarter of 2021, we opened one store and closed eight stores, resulting in 905 stores and total square footage of 6.0 million at the end of the third quarter of 2021, compared to 925 stores and total square footage of 6.1 million at the end of the third quarter of 2020.
+Added: Sales to members of our customer loyalty program, Famously You Rewards ("Rewards"), continue to account for a majority of the segment’s sales, with approximately 78% of our net sales made to program members in the third quarter of 2021, compared to 80% in the third quarter of 2020.
+Added: Net sales of $1,346.4 million for the nine months ended October 30, 2021 increased $429.5 million, or 46.8%, compared to $916.9 million for the nine months ended October 31, 2020.
+Added: Our strong performance during the nine months ended October 30, 2021 was attributable to a number of factors.
+Added: As COVID-19 vaccines became more widely available and government restrictions eased, we experienced strong growth in consumer demand, which led to a significant increase in retail store traffic and conversion rates during the nine months ended October 30, 2021.
+Added: E-commerce penetration has remained strong in 2021 at approximately 13% of net sales in the nine months ended October 30, 2021, compared to approximately 22% in the nine months ended October 31, 2020 when our retail stores were temporarily closed from mid-March, with a phased reopening beginning in May.
+Added: While supply chain disruptions have resulted in delays and lower receipts, our well-positioned inventory drove our record-setting results.
Our casual, athletic and sport categories of footwear continued to be the strongest performers.
−Removed: D uring the six months ended July 31, 2021, we opened eight stores and closed 12 stores.
−Removed: Gross profit increased $108.2 million, or 90.9%, to $227.4 million for the second quarter of 2021, compared to $119.2 million for the second quarter of 2020, driven by the sales increase and a higher gross profit rate.
−Removed: As a percentage of net sales, our gross profit increased to 50.1% for the second quarter of 2021, compared to 35.7% for the second quarter of 2020.
−Removed: Due to our 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 2021.
−Removed: Gross profit increased $219.0 million, or 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, reflecting both higher net sales and gross profit rate.
−Removed: As a percentage of net sales, our gross profit
−Removed: increased to 47.8% for the six months ended July 31, 2021, compared to 35.8% for the six months ended August 1, 2020, reflecting a reduction in promotional activity driven by our well-positioned inventory and strong consumer demand.
−Removed: In addition, our gross profit margin in the six months ended August 1, 2020 was adversely impacted by $6.0 million in incremental inventory markdowns, reflecting the difficult retail environment in 2020 driven by the pandemic.
+Added: D uring the nine months ended October 30, 2021, we opened nine stores and closed 20 stores.
+Added: Gross profit increased $75.5 million, or 47.2%, to $235.5 million for the third quarter of 2021, compared to $160.0 million for the third quarter of 2020, driven by the sales increase and a higher gross profit rate.
+Added: As a percentage of net sales, our gross profit increased to 47.6% for the third quarter of 2021, compared to 40.9% for the third quarter of 2020.
+Added: Due to strong consumer demand and having the right level of inventory for our key brands and styles, we significantly reduced promotional activity, resulting in higher gross margins in both our retail stores and e-commerce business during the third quarter of 2021.
+Added: Gross profit increased $294.4 million, or 84.5%, to $642.7 million for the nine months ended October 30, 2021, compared to $348.3 million for the nine months ended October 31, 2020, reflecting both higher net sales and gross profit rate.
+Added: As a percentage of net sales, our gross
+Added: profit increased to 47.7% for the nine months ended October 30, 2021, compared to 38.0% for the nine months ended October 31, 2020, reflecting a reduction in promotional activity driven by strong consumer demand and our well-positioned inventory.
+Added: In addition, our gross profit margin in the nine months ended October 31, 2020 was adversely impacted by $6.0 million in incremental inventory markdowns, reflecting the difficult retail environment in 2020 driven by the pandemic.
Selling and Administrative Expenses
−Removed: Selling and administrative expenses increased $24.3 million, or 20.8%, to $141.9 million for the second quarter of 2021, compared to $117.6 million for the second quarter of 2020.
−Removed: The increase was primarily due to higher salaries in the second quarter of 2021, as well as an increase in marketing expenses.
−Removed: Salary expenses were lower in the second quarter of 2020, reflecting the actions taken at the onset of the pandemic, including workforce reductions, furloughs for a significant portion of our retail store associates and temporary salary reductions for most remaining employees.
−Removed: 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, reflecting better leveraging of expenses over a higher net sales base.
−Removed: Selling and administrative expenses increased $35.7 million, or 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.
−Removed: The increase was primarily due to higher salaries and higher variable expenses, including logistics, to support the increase in sales volume in the six months ended July 31, 2021.
−Removed: In addition, strategic actions were taken to reduce expenses in the first half of 2020 to mitigate the impact of COVID-19 during the period of retail store closures.
−Removed: As a percentage of net sales, selling and administrative expenses decreased to 32.1% for the six months ended July 31, 2021, compared to 45.3% for the six months ended August 1, 2020, reflecting better leveraging of our expenses over higher net sales.
+Added: Selling and administrative expenses increased $15.9 million, or 12.1%, to $148.1 million for the third quarter of 2021, compared to $132.2 million for the third quarter of 2020.
+Added: The increase was primarily due to higher payroll in the third quarter of 2021 associated with our retail store associates, as well as an increase in marketing expenses, as we resumed our television advertising campaigns.
+Added: Salary expenses were lower in the third quarter of 2020, primarily attributable to reduced hours at our retail stores.
+Added: As a percentage of net sales, selling and administrative expenses decreased to 29.9% for the third quarter of 2021, compared to 33.8% for the third quarter of 2020, reflecting better leveraging of expenses over a higher net sales base.
+Added: Selling and administrative expenses increased $51.6 million, or 13.9%, to $422.0 million for the nine months ended October 30, 2021, compared to $370.4 million for the nine months ended October 31, 2020.
+Added: The increase was primarily due to higher payroll expenses associated with our retail store associates.
+Added: Salary expenses were lower in the nine months ended October 31, 2020 as a result of our retail stores being temporarily closed for a portion of 2020.
+Added: Variable expenses, including marketing and logistics, were also higher, reflecting the increase in sales volume in the nine months ended October 30, 2021.
+Added: In addition, strategic actions were taken to reduce expenses in the first nine months of 2020, particularly to mitigate the impact of the pandemic during the period of retail store closures in the first half of the year.
+Added: As a percentage of net sales, selling and administrative expenses decreased to 31.3% for the nine months ended October 30, 2021, compared to 40.4% for the nine months ended October 31, 2020, reflecting better leveraging of our expenses over higher net sales.
Restructuring and Other Special Charges, Net
−Removed: Restructuring and other special charges were $0.6 million for the second quarter of 2020, consisting primarily of severance.
−Removed: For the six months ended August 1, 2020, restructuring and other special charges were $16.6 million, consisting primarily of impairment charges on furniture and fixtures in our retail stores and lease right-of use assets reflecting the impact of COVID-19 on our business operations.
+Added: Restructuring and other special charges were $16.6 million for the nine months ended October 31, 2020, consisting primarily of impairment charges on furniture and fixtures in our retail stores and lease right-of use assets reflecting the impact of the pandemic on our business operations.
Refer to Note 5 to the condensed consolidated financial statements for additional information related to these charges.
−Removed: There were no corresponding charges during the three or six months ended July 31, 2021.
+Added: There were no corresponding charges during the three months ended October 31, 2020 or nine months ended October 30, 2021.
Operating Earnings (Loss)
−Removed: Operating earnings increased $84.5 million to operating earnings of $85.5 million for the second quarter of 2021, compared to $1.0 million for the second quarter of 2020.
−Removed: As a percentage of net sales, operating earnings were 18.8% for the second quarter of 2021, compared to 0.3% for the second quarter of 2020.
−Removed: Operating earnings (loss) increased $199.9 million to operating earnings of $133.4 million for the six months ended July 31, 2021, compared to an operating loss of $66.5 million for the six months ended August 1, 2020.
−Removed: As a percentage of net sales, operating earnings were 15.7% for the second quarter of 2021, compared to an operating loss of 12.7% for the second quarter of 2020.
+Added: Operating earnings increased $59.6 million to operating earnings of $87.4 million for the third quarter of 2021, compared to $27.8 million for the third quarter of 2020.
+Added: Our operating earnings for the third quarter of 2021 exceeded our full year 2019 operating earnings.
+Added: As a percentage of net sales, operating earnings were 17.7% for the third quarter of 2021, compared to 7.1% for the third quarter of 2020.
+Added: Operating earnings (loss) increased $259.4 million to operating earnings of $220.7 million for the nine months ended October 30, 2021, compared to an operating loss of $38.7 million for the nine months ended October 31, 2020.
+Added: As a percentage of net sales, operating earnings were 16.4% for the nine months ended October 30, 2021, compared to an operating loss of 4.2% for the nine months ended October 31, 2020.
BRAND PORTFOLIO
Thirteen Weeks Ended
−Removed: Twenty-Six Weeks Ended
−Removed: July 31, 2021
−Removed: August 1, 2020
−Removed: July 31, 2021
−Removed: August 1, 2020
+Added: Thirty-Nine Weeks Ended
+Added: October 30, 2021
+Added: October 31, 2020
+Added: October 30, 2021
+Added: October 31, 2020
($ millions, except sales per square foot)
11 unchanged sentences
Impact of changes in Canadian exchange rate on retail sales
−Removed: Sales per square foot, excluding e-commerce (thirteen and twenty-six weeks ended)
+Added: Sales per square foot, excluding e-commerce (thirteen and thirty-nine weeks ended)
Sales per square foot, excluding e-commerce (trailing twelve months)
4 unchanged sentences
(1) Direct-to-consumer includes sales of our retail stores and e-commerce sites and sales through our customers’ websites that we fulfill on a drop-ship basis.
−Removed: Net sales increased $55.4 million, or 30.2%, to $239.0 million for the second quarter of 2021, compared to $183.6 million for the second quarter of 2020.
−Removed: While net sales improved compared to 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: Net sales increased $88.4 million, or 22.1%, to $489.3 for the six months ended July 31, 2021, compared to $400.9 million for the six months ended August 1, 2020, reflecting the factors described above.
−Removed: During the six months ended July 31, 2021, we experienced strong sales growth from our Sam Edelman, Blowfish Malibu, Vionic and Allen Edmonds brands.
+Added: Net sales increased $32.9 million, or 12.3%, to $300.5 million for the third quarter of 2021, compared to $267.6 million for the third quarter of 2020.
+Added: We continued to experience strong sales growth from our Blowfish Malibu, Sam Edelman, Allen Edmonds and Vionic brands, which carry a large assortment of athletic and casual styles.
+Added: Both Sam Edelman and Allen Edmonds reported growth in the dress shoe category, as more people return to the workplace and attend special occasion events.
+Added: While the segment experienced sequential sales improvement, our net sales in the third quarter of 2021 continued to be adversely impacted by the delayed receipt of inventory due to supply chain disruptions, including port congestion and factory closures.
+Added: During the third quarter of 2021, we closed one store and opened four stores, resulting in a total of 90 stores and total square footage of 0.1 million at the end of the third quarter of 2021, compared to 197 stores and total square footage of 0.3 million at the end of the third quarter of 2020.
+Added: Net sales increased $121.4 million, or 18.2%, to $789.8 for the nine months ended October 30, 2021, compared to $668.4 million for the nine months ended October 31, 2020, reflecting the same factors as described above.
+Added: During the nine months ended October 30, 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.
−Removed: 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.
−Removed: Including the Naturalizer closures, we closed 85 stores and opened two stores during the six months ended July 31, 2021.
−Removed: On a trailing twelve-month basis, sales per square foot, excluding e-commerce sales, increased to $561 for the twelve months ended July 31, 2021, compared to $251 for the twelve months ended August 1, 2020.
−Removed: Our unfilled order position for our wholesale sales increased $133.5 million, or 68.4%, to $328.7 million at July 31, 2021, compared to $195.2 million at August 1, 2020.
−Removed: The increase in our backlog order levels reflects increased demand for product as our wholesale customers have placed more orders than last year due to the economic impact of the COVID-19 pandemic in the second quarter of 2020.
−Removed: In addition, the global supply chain disruptions have caused a delay in the receipt of inventory due to port congestion, reduced shipping vessel and container availability, and factory shutdowns as a result of the resurgence of COVID-19 infections.
−Removed: We are actively working with our suppliers to minimize these disruptions, but expect the disruptions to continue in the second half of 2021.
−Removed: Gross profit increased $30.9 million, or 48.3%, to $94.9 million for the second quarter of 2021, compared to $64.0 million for the second quarter of 2020, reflecting higher net sales and a higher gross profit rate.
−Removed: 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, reflecting more full price selling across our portfolio of brands driven by strong consumer demand.
−Removed: In connection with the supply chain disruptions described earlier and the related capacity shortages, our freight costs are rising.
−Removed: Though the impact was not significant during the second quarter, we anticipate higher inbound freight costs in the second half of 2021, which may impact our gross profit if we are unable to mitigate or recover these additional costs.
−Removed: Gross profit increased $71.5 million, or 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, due to higher net sales and improved gross profit rate.
−Removed: Our gross profit in the six months ended August 1, 2020 was impacted by higher incremental cost of goods sold primarily due to $27.5 million in inventory markdowns reflecting the difficult retail environment driven by the COVID pandemic, as well as $1.6 million in inventory markdowns related to the decision to exit our Fergie brand.
−Removed: As a percentage of net sales, our gross profit increased to 38.6% for the six months ended July 31, 2021, compared to 29.3% for the six months ended August 1, 2020.
+Added: 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 three stores in China that we continue to operate.
+Added: Including the Naturalizer closures, we closed 86 stores and opened six stores during the nine months ended October 30, 2021.
+Added: On a trailing twelve-month basis, sales per square foot, excluding e-commerce sales, increased to $756 for the twelve months ended October 30, 2021, compared to $190 for the twelve months ended October 31, 2020.
+Added: Our unfilled order position for our wholesale sales increased $146.0 million, or 62.2%, to $380.7 million at October 30, 2021, compared to $234.7 million at October 31, 2020.
+Added: The increase in our backlog order levels reflects increased consumer demand trends.
+Added: In addition, the
+Added: global supply chain disruptions have caused a delay in the receipt of inventory due to port congestion, reduced shipping vessel and container availability.
+Added: We are actively working to diversify and leverage our sourcing model to help offset the impact of these supply chain challenges, but expect the disruptions to continue into 2022.
+Added: Gross profit increased $4.6 million, or 4.9%, to $98.9 million for the third quarter of 2021, compared to $94.3 million for the third quarter of 2020, reflecting higher net sales, partially offset by a lower gross profit rate.
+Added: As a percentage of net sales, our gross profit decreased to 32.9% for the third quarter of 2021, compared to 35.2% for the third quarter of 2020, reflecting higher inbound freight costs.
+Added: In connection with the supply chain disruptions described earlier, our freight costs have risen significantly.
+Added: We anticipate the higher inbound freight costs to continue into 2022, which may continue to impact our gross profit if we are unable to mitigate or fully recover these additional costs from price increases.
+Added: Gross profit increased $76.1 million, or 35.9%, to $287.8 million for the nine months ended October 30, 2021, compared to $211.7 million for the nine months ended October 31, 2020, due to higher net sales and improved gross profit rate.
+Added: Our gross profit in the nine months ended October 31, 2020 was impacted by higher incremental cost of goods sold primarily due to $27.5 million in inventory markdowns reflecting the difficult retail environment driven by the pandemic, as well as $1.6 million in inventory markdowns related to the decision to exit our Fergie brand.
+Added: As a percentage of net sales, our gross profit increased to 36.4% for the nine months ended October 30, 2021, compared to 31.7% for the nine months ended October 31, 2020.
Selling and Administrative Expenses
−Removed: Selling and administrative expenses increased $4.8 million, or 6.5%, to $78.3 million for the second quarter of 2021, compared to $73.5 million for the second quarter of 2020.
−Removed: The increase was driven by higher salaries, due in part to the furloughs and temporary salary reductions in the second quarter of 2020 to mitigate the impact of COVID-19 on our financial results, and higher marketing expenses, partially offset by lower rent and facilities expenses, primarily associated with the lower store count.
−Removed: As a percentage of net sales, selling and administrative expenses decreased to 32.8% for the second quarter of 2021, compared to 40.1% for the second quarter of 2020.
−Removed: Selling and administrative expenses decreased $4.5 million, or 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.
−Removed: The decrease was driven by lower retail facilities costs, primarily associated with the lower store count, partially offset by higher marketing expenses.
−Removed: As a percentage of net sales, selling and administrative expenses decreased to 33.0% for the six months ended July 31, 2021, compared to 41.5% for the six months ended August 1, 2020.
+Added: Selling and administrative expenses increased $0.5 million, or 0.6%, to $87.5 million for the third quarter of 2021, compared to $87.0 million for the third quarter of 2020.
+Added: The increase was driven by higher salary and marketing expenses, partially offset by lower rent and facilities expenses, primarily due to the lower store count.
+Added: As a percentage of net sales, selling and administrative expenses decreased to 29.1% for the third quarter of 2021, compared to 32.5% for the third quarter of 2020.
+Added: Selling and administrative expenses decreased $4.0 million, or 1.6%, to $249.2 million for the nine months ended October 30, 2021, compared to $253.2 million for the nine months ended October 31, 2020.
+Added: The decrease was driven by lower retail facilities costs, primarily due to the lower store count, partially offset by higher marketing expenses.
+Added: As a percentage of net sales, selling and administrative expenses decreased to 31.5% for the nine months ended October 30, 2021, compared to 37.9% for the nine months ended October 31, 2020.
Impairment of Goodwill and Intangible Assets
During the first quarter of 2020, we incurred impairment charges of $262.7 million, including $240.3 million associated with goodwill and $22.4 million associated with intangible assets, including $12.2 million for the Allen Edmonds trade name and $10.2 million for the Via Spiga trade name.
−Removed: There were no corresponding charges in the second quarter of 2020 or for the six months ended July 31, 2021.
−Removed: Refer to Note 5 and Note 8 to the condensed consolidated financial statements for further discussion of these charges.
+Added: There were no corresponding charges in the third quarter of 2020 or for the nine months ended October 30, 2021.
+Added: Refer to Note 8 to the condensed consolidated financial statements for further discussion of these charges.
Restructuring and Other Special Charges, Net
−Removed: 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 2021.
−Removed: Restructuring and other special charges of $13.5 million were recorded 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.
+Added: Restructuring and other special charges of $13.5 million were recorded during the nine months ended October 30, 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.
−Removed: 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.
+Added: For the nine months ended October 31, 2020, we recorded restructuring and other special charges of $48.4 million, reflecting expenses associated with the impact of the pandemic 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.
Refer to Note 5 to the condensed consolidated financial statements for additional information related to these charges.
Operating Earnings (Loss)
−Removed: Operating earnings (loss) for the second quarter of 2021 exceeded pre-pandemic levels.
−Removed: Operating earnings increased $30.7 million to $16.6 million for the second quarter of 2021, compared to an operating loss of $14.1 million for the second quarter of 2020, as a result of the factors described above.
−Removed: As a percentage of net sales, operating earnings were 6.9% for the second quarter of 2021, compared to an operating loss of 7.7% in the second quarter of 2020.
−Removed: Operating earnings (loss) increased $373.6 million to operating earnings of $13.7 million for the six months ended July 31, 2021, compared to a net loss of $359.9 million for the six months ended August 1, 2020, as a result of the factors described above.
−Removed: As a percentage of net sales, operating earnings were 2.8% for the six months ended July 31, 2021, compared to an operating loss of 89.8% for the six months ended August 1, 2020.
+Added: Operating earnings increased $4.1 million to $11.4 million for the third quarter of 2021, compared to $7.3 million for the third quarter of 2020, as a result of the factors described above.
+Added: As a percentage of net sales, operating earnings were 3.8% for the third quarter of 2021, compared to 2.7% in the third quarter of 2020.
+Added: Operating earnings (loss) increased $377.7 million to operating earnings of $25.1 million for the nine months ended October 30, 2021, compared to an operating loss of $352.6 million for the nine months ended October 31, 2020, as a result of the factors described above.
+Added: As a percentage of net sales, operating earnings were 3.2% for the nine months ended October 30, 2021, compared to an operating loss of 52.7% for the nine months ended October 31, 2020.
ELIMINATIONS AND OTHER
Thirteen Weeks Ended
−Removed: Twenty-Six Weeks Ended
−Removed: July 31, 2021
−Removed: August 1, 2020
−Removed: July 31, 2021
−Removed: August 1, 2020
+Added: Thirty-Nine Weeks Ended
+Added: October 30, 2021
+Added: October 31, 2020
+Added: October 30, 2021
+Added: October 31, 2020
Cost of goods sold
3 unchanged sentences
The Eliminations and Other category includes the elimination of intersegment sales and profit, unallocated corporate administrative expenses, and other costs and recoveries.
−Removed: The net sales elimination of $17.1 million for the second quarter of 2021 is $1.0 million, or 6.3%, higher than the second quarter of 2020, reflecting an increase in product sold from our Brand Portfolio segment to Famous Footwear The net sales elimination of $26.9 million for the six months ended July 31, 2021 is $0.5 million, or 1.9%, lower than the six months ended August 1, 2020, reflecting a decrease in product sold from our Brand Portfolio segment to Famous Footwear.
−Removed: Selling and administrative expenses increased $29.0 million, to $39.3 million in the second quarter of 2021, compared to $10.3 million for the second quarter of 2020.
−Removed: The increase was primarily driven by higher expenses for our cash-based incentive compensation plan for certain employees.
−Removed: Selling and administrative expenses increased $45.2 million, 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.
−Removed: 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 associated with workforce reductions as we sought to minimize our expense structure during the COVID-19 pandemic, as well as incremental expenses associated with deep cleaning our facilities and related supplies.
−Removed: There were no corresponding expenses for the six months ended July 31, 2021.
+Added: The net sales elimination of $11.0 million for the third quarter of 2021 is $0.8 million, or 6.7%, lower than the third quarter of 2020, reflecting a decrease in product sold from our Brand Portfolio segment to Famous Footwear.
+Added: The net sales elimination of $37.9 million for the nine months ended October 30, 2021 is $1.3 million, or 3.3%, lower than the nine months ended October 31, 2020, reflecting a decrease in product sold from our Brand Portfolio segment to Famous Footwear.
+Added: Selling and administrative expenses increased $0.7 million, to $18.4 million in the third quarter of 2021, compared to $17.7 million for the third quarter of 2020.
+Added: The increase primarily reflects higher expenses for our cash and stock-based incentive compensation plans for certain employees.
+Added: Selling and administrative expenses increased $45.9 million, to $85.9 million in the nine months ended October 30, 2021, compared to $40.0 million for the nine months ended October 31, 2020, reflecting higher expenses for our cash and stock-based incentive compensation plans for certain employees and higher expenses associated with certain cash-based director compensation plans that are variable based on our stock price.
+Added: The increase in the cash-based director compensation plans reflects growth in our stock price during the nine months ended October 30, 2021, compared to a decline in the nine months ended October 31, 2020.
+Added: Restructuring and other special charges of $0.6 million for the nine months ended October 31, 2020 were associated with workforce reductions as we sought to minimize our expense structure during the pandemic, as well as incremental expenses associated with deep cleaning our facilities and related supplies.
Refer to Note 5 to the condensed consolidated financial statements for additional information related to these charges.
+Added: There were no corresponding expenses for the nine months ended October 30, 2021.
LIQUIDITY AND CAPITAL RESOURCES
−Removed: July 31, 2021
−Removed: August 1, 2020
+Added: October 30, 2021
+Added: October 31, 2020
January 30, 2021
3 unchanged sentences
Total debt (1)
−Removed: (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.
−Removed: Total debt obligations of $299.1 million at July 31, 2021 decreased $249.5 million, from $548.6 million at August 1, 2020, and decreased $149.8 million, from $448.9 million at January 30, 2021.
−Removed: The decreases from both August 1, 2020 and January 30, 2021 reflect continued progress toward reducing the borrowings under our revolving credit agreement.
−Removed: We reduced the borrowings under our revolving credit facility by $100.0 million during the second quarter of 2021, ending the quarter with an outstanding balance of $100.0 million.
−Removed: We have continued to utilize our strong cash generation to reduce the incremental borrowings that were used to preserve financial flexibility at the onset of the pandemic, reducing the borrowings under our revolving credit agreement from $440.0 million in March 2020 to $100.0 million at July 31, 2021.
−Removed: Net interest expense for the second quarter of 2021 decreased $1.5 million to $12.0 million, compared to $13.5 million for the second quarter of 2020.
−Removed: The decrease 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 5 and Note 14 to the condensed consolidated financial statements.
+Added: (1) As presented here, total debt excludes the Blowfish Malibu mandatory purchase obligation, which was valued at $54.6 million, $30.1 million and $39.1 million as of October 30, 2021, October 31, 2020 and January 30, 2021, respectively.
+Added: The mandatory purchase obligation of $54.6 million was paid on November 4, 2021.
+Added: Total debt obligations of $274.6 million at October 30, 2021 decreased $224.1 million, from $498.7 million at October 31, 2020, and decreased $174.3 million, from $448.9 million at January 30, 2021.
+Added: The decreases from both October 31, 2020 and January 30, 2021 reflect continued progress toward reducing our debt levels.
+Added: In August 2021, we redeemed $100.0 million aggregate principal amount of our Senior Notes using borrowings under the revolving credit agreement.
+Added: Due to this redemption, borrowings under our revolving credit facility increased by $75.0 million during the third quarter of 2021, ending the quarter with an outstanding balance of $175.0 million.
+Added: We continued to utilize our strong cash generation to reduce the incremental borrowings that were used to preserve financial flexibility at the onset of the pandemic, reducing the borrowings under our revolving credit agreement from $440.0 million in March 2020 to $175.0 million at October 30, 2021.
+Added: Net interest expense for the third quarter of 2021 decreased $5.8 million to $5.1 million, compared to $10.9 million for the third quarter of 2020.
+Added: The decrease is primarily attributable to a $3.2 million decrease in the fair value adjustment for the mandatory purchase obligation associated with the Blowfish Malibu acquisition, as further discussed in Note 5 and Note 14 to the condensed consolidated financial statements.
+Added: In addition, the redemption of $100.0 million of our Senior Notes in August 2021 and lower average borrowings under our revolving credit agreement contributed to the decrease in interest expense.
+Added: As further discussed below, we notified the holders of the Senior Notes that we will be redeeming the remaining $100.0 million aggregate principal amount of Senior Notes in January 2022.
+Added: The extinguishment of Senior Notes will result in a reduction of annual interest expense of approximately $12 million.
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.
−Removed: On April 14, 2020, we 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.
−Removed: 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 Credit Agreement) or the prime rate, plus a spread.
−Removed: 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.
−Removed: At July 31, 2021, we had $100.0 million in borrowings and $12.5 million in letters of credit outstanding under the Credit Agreement.
−Removed: Total borrowing availability was $364.5 million at July 31, 2021.
−Removed: We were in compliance with all covenants and restrictions under the Credit Agreement as of July 31, 2021.
−Removed: During the second half of 2021, we plan to continue to prioritize debt reduction.
−Removed: We are currently in the process of renegotiating and renewing the terms of our revolving credit facility to better reflect our improved capital structure.
−Removed: $200 Million Senior Notes
+Added: On October 5, 2021, we entered into a Fifth Amendment to Fourth Amended and Restated Credit Agreement (as so amended, the “Credit Agreement”) which, among other modifications, extends the maturity date of the credit facility from January 18, 2024, to October 5, 2026, and decreases the amount available under the revolving credit facility by $100.0 million to an aggregate amount of up to $500.0 million, subject to borrowing base restrictions, and may be further increased by up to $250.0 million.
+Added: Interest on the borrowings is at variable rates based on the London Interbank Offered Rate ("LIBOR") (with a floor of 0.0%), or the prime rate (as defined in the Credit Agreement), plus a spread.
+Added: The Credit Agreement decreased the spread applied to the LIBOR or prime rate by a total of 75 basis points.
+Added: At October 30, 2021, we had $175.0 million in borrowings and $12.5 million in letters of credit outstanding under the Credit Agreement.
+Added: Total borrowing availability was $312.5 million at October 30, 2021.
+Added: We were in compliance with all covenants and restrictions under the Credit Agreement as of October 30, 2021.
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.
+Added: On August 16, 2021, we redeemed $100.0 million of the Senior Notes at 100.0%, shifting this higher interest debt to borrowings under the revolving credit agreement.
+Added: Additionally, during the third quarter of 2021, we determined that we would redeem the remaining $100.0 million aggregate principal amount of Senior Notes in the fourth quarter of 2021.
+Added: On November 18, 2021, we notified the holders of our Senior Notes that we would be redeeming the remaining $100.0 million in January 2022.
The Senior Notes 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.
−Removed: As of July 31, 2021, we were in compliance with all covenants and restrictions relating to the Senior Notes.
−Removed: 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).
−Removed: During the second quarter of 2021, we determined that we would redeem a portion of our Senior Notes on August 16, 2021.
−Removed: Accordingly, we classified $100.0 million aggregate principal amount of Senior Notes as a current liability.
−Removed: 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.
+Added: As of October 30, 2021, we were in compliance with all covenants and restrictions relating to the Senior Notes.
Supplemental Guarantor Financial Information
5 unchanged sentences
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:
−Removed: July 31, 2021
+Added: October 30, 2021
January 30, 2021
3 unchanged sentences
Non-current liabilities
−Removed: Twenty-Six Weeks
+Added: Thirty-Nine Weeks
( $ millions )
−Removed: July 31, 2021
+Added: October 30, 2021
Net sales (1)
1 unchanged sentence
Net earnings attributable to Caleres, Inc.
−Removed: (1) Intercompany activity with the non-guarantor entities for the twenty-six weeks ended July 31, 2021 was not material.
+Added: (1) Intercompany activity with the non-guarantor entities for the thirty-nine weeks ended October 30, 2021 was not material.
Working Capital and Cash Flow
−Removed: Twenty-Six Weeks Ended
−Removed: July 31, 2021
−Removed: August 1, 2020
+Added: Thirty-Nine Weeks Ended
+Added: October 30, 2021
+Added: October 31, 2020
Net cash provided by operating activities
Net cash used for investing activities
−Removed: Net cash (used for) provided by financing activities
+Added: Net cash used for financing activities
Effect of exchange rate changes on cash and cash equivalents
1 unchanged sentence
Reasons for the major variances in cash provided (used) in the table above are as follows:
−Removed: Cash provided by operating activities was $68.0 million higher in the six months ended July 31, 2021 as compared to the six months ended August 1, 2020, primarily reflecting the following factors:
−Removed: ● An increase in net earnings, after consideration of non-cash items, in the six months ended July 31, 2021, compared to the comparable period in 2020, primarily driven by the strong financial results of our Famous Footwear segment;
−Removed: ● A larger increase in accounts payable in the six months ended July 31, 2021, compared to the six months ended August 1, 2020;
+Added: Cash provided by operating activities was $87.9 million higher in the nine months ended October 30, 2021 as compared to the nine months ended October 31, 2020, primarily reflecting the following factors:
+Added: ● An increase in net earnings, after consideration of non-cash items, in the nine months ended October 30, 2021, compared to the comparable period in 2020, primarily driven by the strong consumer demand and positive financial results of our Famous Footwear segment;
+Added: ● A larger increase in accounts payable in the nine months ended October 30, 2021, compared to the nine months ended October 31, 2020;
partially offset by
−Removed: ● An increase in inventory during the six months ended July 31, 2021, compared to a decrease during the six months ended August 1, 2020;
−Removed: ● A smaller increase in accrued expenses and other liabilities during the six months ended July 31, 2021 compared to the three months ended August 1, 2020.
+Added: ● An increase in inventory during the nine months ended October 30, 2021, primarily reflecting the increase in our in-transit inventory due to supply chain disruptions, compared to a decrease during the nine months ended October 31, 2020;
+Added: ● A smaller increase in accrued expenses and other liabilities during the nine months ended October 30, 2021 compared to the nine months ended October 31, 2020.
Supply chain financing :
−Removed: 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.
+Added: 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
+Added: 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.
−Removed: As of July 31, 2021, we had $48.0 million of accounts payable subject to supply
−Removed: chain financing arrangements.
−Removed: There was an immaterial amount of accounts payable subject to supply chain financing arrangements at August 1, 2020.
−Removed: Cash used for investing activities was $0.8 million higher for the six months ended July 31, 2021 as compared to the six months ended August 1, 2020, reflecting slightly higher capital expenditures in the six months ended July 31, 2021.
−Removed: In 2021, we expect our purchases of property and equipment and capitalized software to between $20 million and $30 million, as compared to $22.1 million in 2020.
−Removed: Cash used for financing activities was $204.2 million higher for the six months ended July 31, 2021 as compared to the six months ended August 1, 2020, primarily due to $150.0 million of net repayments on our revolving credit agreement in the six months ended July 31, 2021, compared to net borrowings of $75.0 million in the comparable period in 2020.
−Removed: 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.
+Added: As of October 30, 2021 and October 31, 2020, we had $64.0 million and $17.9 million, respectively, of accounts payable subject to supply chain financing arrangements.
+Added: Cash used for investing activities was $0.9 million lower for the nine months ended October 30, 2021 as compared to the nine months ended October 31, 2020, reflecting slightly lower capital expenditures in the nine months ended October 30, 2021.
+Added: In 2021, we expect our purchases of property and equipment and capitalized software to be between $20 million and $30 million, as compared to $22.1 million in 2020.
+Added: Cash used for financing activities was $181.5 million higher for the nine months ended October 30, 2021 as compared to the nine months ended October 31, 2020, primarily due to the redemption of $100.0 million of senior notes and $75.0 million of net repayments on our revolving credit agreement in the nine months ended October 30, 2021, compared to net borrowings of $25.0 million in the comparable period in 2020.
+Added: In addition, we did not repurchase any shares under our share repurchase programs during the nine months ended October 30, 2021, compared to $23.3 million in the nine months ended October 31, 2020.
A summary of key financial data and ratios at the dates indicated is as follows:
−Removed: July 31, 2021
−Removed: August 1, 2020
+Added: October 30, 2021
+Added: October 31, 2020
January 30, 2021
7 unchanged sentences
Total capitalization is defined as total debt and total equity .
−Removed: Operating working capital at July 31, 2021 was $100.4 million, which was $184.5 million lower than at August 1, 2020 and $91.4 million lower than at January 30, 2021.
−Removed: Our current ratio was 0.82 to 1 as of July 31, 2021, compared to 0.91 to 1 at August 1, 2020 and 0.86:1 at January 30, 2021.
−Removed: The decrease in both operating working capital and the current ratio from August 1, 2020 primarily reflects 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.
−Removed: The decrease in operating working capital from January 30, 2021 primarily reflects higher trade accounts payable and accrued expenses combined with an increase in the mandatory purchase obligation, partially offset by higher inventory.
−Removed: Our debt-to-capital ratio was 54.9% as of July 31, 2021, compared to 69.1% as of August 1, 2020 and 68.8% at January 30, 2021.
−Removed: The decrease in our debt-to-capital ratio from August 1, 2020 and January 30, 2021 primarily reflects lower borrowings on our revolving credit facility at July 31, 2021.
−Removed: We believe our cash flows from operations, as well as $364.5 million in borrowing availability under the Credit Agreement, provide ample liquidity to meet the Company’s working capital needs for the foreseeable future.
−Removed: We declared and paid dividends of $0.07 per share in the second quarter of both 2021 and 2020.
+Added: Operating working capital at October 30, 2021 was $120.6 million, which was $123.5 million lower than at October 31, 2020 and $71.2 million lower than at January 30, 2021.
+Added: Our current ratio was 0.81 to 1 as of October 30, 2021, compared to 0.91 to 1 at October 31, 2020 and 0.86:1 at January 30, 2021.
+Added: The decreases in operating working capital and the current ratio from both October 31, 2020 and January 30, 2021 primarily reflects higher trade accounts payable and accrued expenses, and an increase in the Blowfish Malibu mandatory purchase obligation attributable to strong growth in the brand, partially offset by higher inventory.
+Added: Our debt-to-capital ratio was 47.3% as of October 30, 2021, compared to 65.6% as of October 31, 2020 and 68.8% at January 30, 2021.
+Added: The decrease in our debt-to-capital ratio from October 31, 2020 and January 30, 2021 primarily reflects lower borrowings on our revolving credit facility and a lower outstanding amount of senior notes at October 30, 2021.
+Added: We believe the cash provided by our operations, as well as $312.5 million in borrowing availability under the Credit Agreement, provide ample liquidity to meet the Company’s working capital needs for the foreseeable future.
+Added: In addition, the amendment to the revolving credit facility agreement increased the amount by which the Credit Agreement may be further increased from $150.0 million to $250.0 million.
+Added: We declared and paid dividends of $0.07 per share in the third quarter of both 2021 and 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.
1 unchanged sentence
CONTRACTUAL OBLIGATIONS
−Removed: 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.
−Removed: 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 January 30, 2021.
+Added: Our contractual obligations primarily consist of purchase obligations, operating lease commitments, the current portion of our long-term debt and related interest, 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.
+Added: As further discussed in Note 10 to the condensed consolidated financial statements, during the third quarter of 2021, we redeemed $100.0 million of Senior Notes.
+Added: We also made the decision during the third quarter of 2021 to redeem the remaining $100.0 million of Senior Notes during the fourth quarter of 2021, prior to the maturity date of August 15, 2023, and have presented those notes as a current liability on the condensed consolidated balance sheet as of October 30, 2021.
+Added: As discussed in Note 5 to the condensed consolidated financial statements, on November 4, 2021, we paid the mandatory purchase obligation totaling $54.6 million, which was associated with the acquisition of Blowfish Malibu in July 2018.
+Added: 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 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 January 30, 2021.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
3 unchanged sentences
Recently issued accounting pronouncements and their impact on the Company are described in Note 2 to the condensed consolidated financial statements.
−Removed: We have recently experienced inflationary pressures on our product costs.
−Removed: We believe that the rates of 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.
+Added: We have experienced inflationary pressures on our product costs for most of 2021.
+Added: We believe that the rates of inflation we have experienced have not had a significant effect on our net sales or operating earnings for the three and nine months ended October 30, 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.
+Added: However, we are actively working to mitigate these cost pressures and recover a portion of the increased costs through price increases.
FORWARD-LOOKING STATEMENTS
1 unchanged sentence
Such statements are subject to various risks and uncertainties that could cause actual results to differ materially.
−Removed: These risks include (i) the coronavirus pandemic and its adverse impact on our business operations, store traffic and financial condition (ii) changing consumer demands, which may be influenced by consumers' disposable income, which in turn can be influenced by general economic conditions and other factors;
−Removed: (iii) rapidly changing consumer preferences and purchasing patterns and fashion trends;
−Removed: (iv) intense competition within the footwear industry;
−Removed: (v) customer concentration and increased consolidation in the retail industry;
−Removed: (vi) foreign currency fluctuations;
−Removed: (vii) impairment charges resulting from a long-term decline in our stock price;
−Removed: (viii) political and economic conditions or other threats to the continued and uninterrupted flow of inventory from China and other countries, where the company relies heavily on third-party manufacturing facilities for a significant amount of its inventory;
+Added: These risks include (i) economic conditions, supply chain disruptions and other threats to the continued and uninterrupted flow of inventory from China and other countries, where the company relies heavily on third-party manufacturing facilities for a significant amount of its inventory;
+Added: (ii) the coronavirus pandemic and its adverse impact on our business operations, store traffic and financial condition;
+Added: (iii) changing consumer demands, which may be influenced by consumers' disposable income, which in turn can be influenced by general economic conditions and other factors;
+Added: (iv) rapidly changing consumer preferences and purchasing patterns and fashion trends;
+Added: (v) intense competition within the footwear industry;
+Added: (vi) customer concentration and increased consolidation in the retail industry;
+Added: (vii) foreign currency fluctuations;
+Added: (viii) impairment charges resulting from a long-term decline in our stock price;
(ix) cybersecurity threats or other major disruption to the company’s information technology systems;
14 unchanged sentences
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.