What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-06-06 compared with 2022-12-06 · 171 added, 267 removed, 116 unchanged (79% of the section changed)

ITEM 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

We delivered another period of strong financial and operational results for the third quarter, with record quarterly net sales and solid earnings.

Our results underscore the strength and versatility of our portfolio of brands, highlight the significant progress we’ve made on our enterprise-wide strategic initiatives and demonstrate the portfolio’s enhanced resilience during periods of macroeconomic uncertainty.

We are particularly pleased with the performance of our Brand Portfolio segment, which utilized our diverse portfolio of brands to meet the robust consumer demand and deliver year-over-year improvement in nearly all key financial metrics.

During the third quarter of 2022, we also continued to execute on our capital return program and returned $24.1 million to shareholders through dividends and share repurchases.

Financial Highlights

Following is a summary of the financial highlights for the third quarter of 2022:

● Consolidated net sales increased $14.1 million, or 1.8%, to $798.3 million in the third quarter of 2022, compared to $784.2 million in the third quarter of 2021.

Our Famous Footwear segment continued its strong performance with net sales of $482.0 million.

Net sales of our Brand Portfolio segment increased $22.7 million, or 7.6%, compared to the third quarter of 2021.

On a consolidated basis, our direct-to-consumer sales represented approximately 74% of consolidated net sales for the third quarter of 2022, compared to 73% in the third quarter of 2021.

● Consolidated gross profit increased $4.5 million, or 1.3%, to $339.9 million in the third quarter of 2022, compared to $335.4 million in the third quarter of 2021.

Our gross profit margin decreased slightly to 42.6% in the third quarter of 2022, compared to 42.8% in the third quarter of 2021.

● Consolidated operating earnings decreased $27.5 million to $53.8 million in the third quarter of 2022, compared to $81.3 million in the third quarter of 2021.

● Consolidated net earnings attributable to Caleres, Inc.

were $39.2 million, or $1.08 per diluted share, in the third quarter of 2022, compared to $59.6 million, or $1.54 per diluted share, in the third quarter of 2021.

The following items should be considered in evaluating the comparability of our third quarter results in 2022 and 2021:

● Organizational changes – During the third quarter of 2022, we incurred costs of $2.9 million ($2.7 million on an after-tax basis, or $0.07 per diluted share) related to a CFO transition at our corporate headquarters, with no corresponding costs for the third quarter of 2021.

Refer to Note 5 to the condensed consolidated financial statements for further discussion of these charges.

● Blowfish Malibu mandatory purchase obligation – As further discussed in Note 5 and Note 14 to the condensed consolidated financial statements, the remaining interest in Blowfish Malibu was subject to a mandatory purchase obligation after a three-year period following the 2018 acquisition, based on an earnings multiple formula.

During the third quarter of 2021, we recorded a fair value adjustment of $1.9 million ($1.4 million on an after-tax basis, or $0.04 per diluted share).

The fair value adjustment was recorded as interest expense, net in the condensed consolidated statement of earnings.

There were no corresponding charges in the third quarter of 2022.

The purchase obligation was settled for $54.6 million on November 4, 2021.

Business Overview

We are a global footwear company that operates retail stores and e-commerce websites, and designs, develops, sources, manufactures and distributes footwear for people of all ages.

Our mission is to inspire people to feel great...feet first.

We offer the consumer a diversified portfolio of leading footwear brands built on deep consumer insights, generating unwavering consumer loyalty and trust.

As both a retailer and a wholesaler, we have a perspective on the marketplace that enables us to serve consumers from different vantage points.

We believe our diversified business model provides us with synergies by spanning consumer segments, categories and distribution channels.

A combination of thoughtful planning and rigorous execution is key to our success in optimizing our business and portfolio of brands.

Known Trends Impacting Our Business

Inflationary pressures, including higher product costs, higher parcel freight costs, wage inflation and the rising interest rate environment, continued to impact our financial results during the third quarter of 2022.

The price increases we began implementing in the second half of 2021 have mitigated the majority of the inflationary pressures related to product costs.

Macroeconomic factors, such as inflationary pressures and volatility in interest rates, also impact a number of accounting estimates, including impairment calculations, the value of inventory measured using the LIFO method, and other estimates that utilize fair value.

These macroeconomic factors could result in incremental volatility in certain valuations and provisions required in the Company’s financial statements.

In addition, ongoing general inflation and macroeconomic challenges continue to impact consumer sentiment and may result in lower consumer spending and a more promotional environment in the fourth quarter of 2022 and beyond.

Macroeconomic Environment

Macroeconomic factors, including, among others, inflation, the rising interest rate environment, increasing real estate costs and higher consumer debt levels, continued to impact consumer discretionary spending and our financial results during the first quarter of 2023.

We experienced a decline in consumer traffic in our retail stores during the first quarter of 2023, contributing to a decrease in our net sales.

While we believe that the structural changes we’ve implemented in the last few years enables the Company to be successful in a variety of different operating environments, changes in macro-level consumer spending trends may continue to adversely impact our financial results in the future.

As a result of these macroeconomic factors, we began initiating expense reduction initiatives in the first quarter of 2023, that are expected to result in savings in fiscal 2023.

These actions, which will continue in the second quarter, include eliminating open corporate positions, reducing non-merchandise procurement costs and realizing synergies in the Brand Portfolio segment.

We have also experienced lower freight costs in the first quarter of 2023, and expect that trend to continue for the remainder of fiscal 2023.

Financial Highlights

Highlights of our consolidated and segment results are as follows:

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($ millions, except per share amounts)

April 29, 2023

April 30, 2022

Consolidated net sales

Famous Footwear segment net sales

Famous Footwear comparable sales % change

Brand Portfolio segment net sales

Operating earnings

Diluted earnings per share

(1) n/m – not meaningful

Metrics Used in the Evaluation of Our Business

The following are a couple of key metrics by which we evaluate our business and make strategic decisions:

Same-store sales

The same-store sales metric is a metric commonly used in the retail industry to evaluate the revenue generated for stores that have been open for more than a year, though other retailers may calculate the metric differently.

Management uses the same-store sales metric as a measure of an individual store’s success to determine whether it is performing in line with expectations.

Our same-store sales metric is a daily-weighted calculation for the period, which includes sales for stores that have been open for at least 13 months.

In addition, in order to be included in the same-store sales metric, a store must be open in the current period as well as the corresponding day(s) of the comparable retail calendar in the prior year.

Accordingly, closed stores are excluded from the same-store sales metric for each day of the closure.

The following are a few key metrics by which we evaluate our business, identify trends and make strategic decisions:

Comparable sales

The comparable sales metric is a metric commonly used in the retail industry to evaluate the revenue generated for stores that have been open for more than a year, though other retailers may calculate the metric differently.

Management uses the comparable sales metric as a measure of an individual store’s success to determine whether it is performing in line with expectations.

Our comparable sales metric is a daily-weighted calculation for the period, which includes sales for stores that have been open for at least 13 months.

In addition, in order to be included in the comparable sales metric, a store must be open in the current period as well as the corresponding day(s) of the comparable retail calendar in the prior year.

Accordingly, closed stores are excluded from the comparable sales metric for each day of the closure.

Relocated stores are treated as new stores and therefore excluded from the calculation.

E-commerce sales for those websites that function as an extension of a retail chain are included in the same-store sales calculation.

We believe the same-store sales metric is useful to shareholders and investors in assessing our retail sales performance of existing locations with comparable prior year sales, separate from the impact of store openings or store closures.

E-commerce sales for those websites that function as an extension of a retail chain are included in the comparable sales calculation.

We believe the comparable 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.

Sales per square foot

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Management uses the sales per square foot metric as a measure of an individual store’s success to determine whether it is performing in line with expectations.

The sales per square foot metric is calculated by dividing total retail store sales, excluding e-commerce sales, by the total square footage of the retail store base at the end of each month of the respective period.

We are sharply focused on the rapidly evolving market landscape and recognize that the uncertainty about the macro environment and the mounting threat of recessionary pressures could begin to dampen consumer spending habits.

We have experienced a slower start to our holiday season sales trends, which may continue through the remainder of the fourth quarter of 2022.

However, we believe our core competencies in brand building, product creation, marketing and logistics will enable us to navigate the challenging market environment.

In addition, we believe we are well-positioned to capitalize on opportunities across a broad spectrum of consumer segments by leveraging our diverse portfolio of brands.

In addition to maintaining our quarterly dividend, we plan to prioritize using available cash to reduce our revolver borrowings and increase overall liquidity.

The sales per square foot metric is calculated by dividing total retail store sales, excluding e-commerce sales and the retail operations of our joint venture in China, by the total square footage of the retail store base at the end of each month of the respective period.

Dire ct-to-consumer sales

Direct-to-consumer sales includes sales from our retail stores, our company-owned websites and sales through our customers’ websites that we fulfill on a drop-ship basis.

While we take an omni-channel approach to reach consumers, we believe that our direct-to-consumer channels reinforce the image of our brands and strengthens our connection with the end consumer.

In addition, direct-to-consumer sales generally result in a higher gross margin for the Company as compared to wholesale sales.

As a result, management monitors trends in direct-to-consumer sales as a percentage of our Brand Portfolio segment and total consolidated net sales.

RESULTS OF OPERATIONS

Following are the consolidated results and the results by segment:

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Thirteen Weeks Ended

Thirty-Nine Weeks Ended

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

April 29, 2023

April 30, 2022

Cost of goods sold

Selling and administrative expenses

Restructuring and other special charges, net

Operating earnings

Interest expense, net

Loss on early extinguishment of debt

Other income, net

1 unchanged sentence

Income tax provision

Net (loss) earnings attributable to noncontrolling interests

Net earnings (loss) attributable to noncontrolling interests

Net earnings attributable to Caleres, Inc.

Net sales increased $14.1 million, or 1.8%, to $798.3 million for the third quarter of 2022, compared to $784.2 million for the third quarter of 2021.

Net sales for our Brand Portfolio segment increased $22.7 million, or 7.6% during the third quarter of 2022, compared to the third quarter of 2021, led by strong performances by our Naturalizer, Sam Edelman, Franco Sarto and LifeStride brands.

Net sales for our Famous Footwear segment remained strong, but decreased $12.7 million, or 2.6%, in the third quarter of 2022 compared to the record-setting third

quarter of 2021, with same-store sales down 0.8%.

On a consolidated basis, our direct-to-consumer sales represented approximately 74% of total net sales for the third quarter of 2022.

We remain focused on maximizing the vertical opportunity between the Famous Footwear and Brand Portfolio segments, with LifeStride and Dr.

Scholl’s representing two of Famous Footwear’s top 15 best-selling footwear brands during the quarter.

Net sales increased $173.4 million, or 8.3%, to $2,271.7 million for the nine months ended October 29, 2022, compared to $2,098.3 million for the nine months ended October 30, 2021.

Net sales for our Brand Portfolio segment increased $223.2 million, or 28.3% during the first nine months of 2022, compared to the first nine months of 2021, driven by strong sales growth from nearly all of our brands.

Our Famous Footwear segment’s sales momentum continued.

However, net sales for Famous Footwear decreased $43.6 million, or 3.2%, in the first nine months of 2022 compared to the exceptionally strong first nine months of 2021, with same stores sales decreasing 2.5%.

On a consolidated basis, our direct-to-consumer sales represented approximately 71% of total net sales for the nine months ended October 29, 2022.

Gross profit increased $4.5 million, or 1.3%, to $339.9 million for the third quarter of 2022, compared to $335.4 million for the third quarter of 2021, reflecting higher net sales.

As a percentage of net sales, gross profit decreased slightly to 42.6% for the third quarter of 2022, compared to 42.8% for the third quarter of 2021, reflecting a decrease in the gross profit margin of our Famous Footwear segment, an increase in the gross profit margin of our Brand Portfolio segment and a higher mix of retail compared to wholesale sales.

The decline in the Famous Footwear segment’s gross profit margin was driven by more normalized pricing and an increase in promotional activity.

The improvement in the gross profit margin of our Brand Portfolio segment reflects higher average wholesale prices, growth in higher margin sales from the direct-to-consumer channel and a favorable brand mix.

Gross profit increased $71.2 million, or 7.6%, to $1,003.7 million for the nine months ended October 29, 2022, compared to $932.5 million for the nine months ended October 30, 2021, reflecting higher net sales.

As a percentage of net sales, gross profit decreased slightly to 44.2% for the nine months ended October 29, 2022, compared to 44.4% for the nine months ended October 30, 2021.

Net sales decreased $72.4 million, or 9.8%, to $662.7 million for the first quarter of 2023, compared to $735.1 million for the first quarter of 2022.

Net sales of our Brand Portfolio segment decreased $40.2 million, or 11.0% during the first quarter of 2023, compared to the first quarter of 2022.

We experienced strong demand during the first quarter of 2022, as our wholesale customers aggressively replenished their inventory levels following improvements to the supply chain delays that were experienced throughout 2021.

For the first quarter of 2023, the challenging macroeconomic environment resulted in many of our wholesale customers more tightly managing inventory levels and moderating purchases, which contributed to the decrease in wholesale net sales compared to the prior year.

In addition, while our fashion brands trended better, and casual and dress were our top performing categories, brands with a larger assortment of canvas sneakers experienced larger sales declines.

Net sales for Famous Footwear decreased $35.3 million, or 9.2%, in the first quarter of 2023 compared to the first quarter of 2022, with comparable sales down 8.5%.

Macroeconomic factors continued to impact consumer sentiment, resulting in declines in customer traffic in our retail stores, contributing to the net sales decrease.

Due to the late arrival of warmer spring weather in certain parts of the country, we experienced a slower start to our sandal business this year.

On a consolidated basis, our direct-to-consumer sales represented approximately 68% of total net sales for the first quarter of 2023, compared to 65% in the first quarter of 2022.

We remain focused on maximizing the vertical opportunity between the Famous Footwear and Brand Portfolio segments, with LifeStride, Dr.

Scholl’s and Naturalizer representing three of Famous Footwear’s top 15 best-selling footwear brands during the quarter.

Gross profit decreased $24.3 million, or 7.4%, to $302.7 million for the first quarter of 2023, compared to $327.0 million for the first quarter of 2022.

As a percentage of net sales, gross profit increased to 45.7% for the first quarter of 2023, compared to 44.5% for the first quarter of 2022, driven by an increase in the gross margin of our Brand Portfolio segment.

Our gross profit rate for Brand Portfolio reflected higher average prices, due in part to an increase in the mix of our higher margin brands and lower inbound freight costs as supply chain operations

have normalized.

This increase was partially offset by a decline in gross margin in our Famous Footwear segment.

Due to supply chain constraints and higher demand in 2021 and the first quarter of 2022, there were fewer product markdowns required and minimal clearance selling.

In the first quarter of 2023, our Famous Footwear segment experienced a higher mix of clearance product sold, in line with historical levels.

We classify certain warehousing, distribution, sourcing and other inventory procurement costs in selling and administrative expenses.

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Selling and Administrative Expenses

Selling and administrative expenses increased $29.1 million, or 11.4%, to $283.2 million for the third quarter of 2022, compared to $254.1 million for the third quarter of 2021.

The increase was driven by higher salary and benefits expenses, higher expenses associated with our cash-based incentive compensation plans and higher retail facilities costs.

As a percentage of net sales, selling and administrative expenses increased to 35.5% for the third quarter of 2022, from 32.4% for the third quarter of 2021, reflecting leveraging of expenses on higher net sales.

Selling and administrative expenses increased $55.3 million, or 7.3%, to $812.3 million for the nine months ended October 29, 2022, compared to $757.0 million for the nine months ended October 30, 2021.

The increase primarily reflects higher salary and benefits expenses and higher marketing expenses.

As a percentage of net sales, selling and administrative expenses decreased to 35.8% for the nine months ended October 29, 2022, from 36.1% for the nine months ended October 30, 2021, reflecting leveraging of expenses on higher net sales.

Restructuring and Other Special Charges, Net

We incurred restructuring and other special charges of $2.9 million ($2.7 million on an after-tax basis, or $0.07 per diluted share) during the third quarter and nine months ended October 29, 2022, related to a CFO transition at our corporate headquarters.

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 strategic realignment of the Naturalizer retail store operations.

Refer to Note 5 to the condensed consolidated financial statements for further discussion of these charges.

Selling and administrative expenses decreased $7.7 million, or 3.0%, to $253.1 million for the first quarter of 2023, compared to $260.8 million for the first quarter of 2022.

The decrease was driven by lower cash and stock-based incentive costs and lower warehouse costs, partially offset by higher marketing expenses and retail facilities costs.

As a percentage of net sales, selling and administrative expenses increased to 38.2% for the first quarter of 2023, from 35.5% for the first quarter of 2022, reflecting deleveraging of expenses on lower net sales.

Operating Earnings

Operating earnings decreased $27.5 million to $53.8 million for the third quarter of 2022, compared to $81.3 million for the third quarter of 2021, primarily reflecting higher selling and administrative expenses and restructuring and other special charges, as described above.

As a percentage of net sales, operating earnings were 6.7% for the third quarter of 2022, compared to 10.4% for the third quarter of 2021.

Operating earnings increased $26.5 million to $188.5 million for the nine months ended October 29, 2022, compared to $162.0 million for the nine months ended October 30, 2021, primarily reflecting higher net sales and gross profit.

As a percentage of net sales, operating earnings were 8.3% for the nine months ended October 29, 2022, compared to 7.7% for the nine months ended October 30, 2021.

Operating earnings decreased $16.6 million to $49.6 million for the first quarter of 2023, compared to $66.2 million for the first quarter of 2022, reflecting the factors described above.

As a percentage of net sales, operating earnings were 7.5% for the first quarter of 2023, compared to 9.0% for the first quarter of 2022.

Interest Expense, Net

Interest expense, net decreased $1.1 million, or 21.0%, to $4.0 million for the third quarter of 2022, compared to $5.1 million for the third quarter of 2021, primarily due to the non-recurrence of the $1.9 million fair value adjustment to the Blowfish Malibu mandatory purchase obligation recorded in the third quarter of 2021, partially offset by higher interest expense on the revolving credit facility.

The purchase obligation was settled for $54.6 million on November 4, 2021.

In addition, we redeemed our $200 million aggregate principal of senior notes in the second half of 2021.

By retiring our senior notes, we shifted debt to our revolving credit agreement, which reduced our interest expense by approximately $1.8 million compared to the third quarter of 2021.

These decreases were partially offset by an increase in interest expense under our revolving credit agreement attributable to higher average borrowings and higher interest rates.

While the reduction in our total interest expense is expected to continue, the interest on our revolving credit facility is based on a variable interest rate.

Therefore, our interest expense will continue to be adversely affected by rising interest rates.

Interest expense, net decreased $19.9 million, or 69.1%, to $8.9 million for the nine months ended October 29, 2022, compared to $28.8 million for the nine months ended October 30, 2021, primarily due to the non-recurrence of the $15.4 million fair value adjustment to the Blowfish Malibu mandatory purchase obligation in the nine months ended October 30, 2021.

In addition, after retiring our senior notes, the shift of our higher-rate debt to the lower-rate borrowings under our revolving credit agreement reduced our interest expense by approximately $8.1 million compared to the nine months ended October 30, 2021.

These decreases were partially offset by an increase in interest expense our revolving credit agreement attributable to higher average borrowings and higher interest rates.

Loss on Early Extinguishment of Debt

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 its maturity and the amendment of our revolving credit facility.

Refer to Note 10 to the condensed consolidated financial statements for further discussion.

There were no corresponding charges for the nine months ended October 29, 2022.

Interest expense, net increased $3.3 million, or 145.0%, to $5.6 million for the first quarter of 2023, compared to $2.3 million for the first quarter of 2022, reflecting higher interest expense on the revolving credit facility attributable to higher interest rates, partially offset by slightly lower average borrowings.

The interest on our revolving credit facility is based on a variable interest rate, which has resulted in higher interest expense in the current rising interest rate environment.

Our interest expense in 2023 will continue to be impacted by higher interest rates.

Other Income, Net

Other income, net decreased $0.8 million, or 22.0%, to $3.0 million for the third quarter of 2022, compared to $3.8 million for the third quarter of 2021, which reflects a reduction of certain components of net periodic benefit income associated with our pension plans.

Other income, net decreased $1.9 million, or 16.4%, to $9.6 million for the nine months ended October 29, 2022, compared to $11.5 million for the nine months ended October 30, 2021, primarily attributable to certain components of net periodic benefit income associated with our pension plans, including interest cost, amortization of actuarial loss and settlement cost.

Refer to Note 13 of the condensed consolidated financial statements for further detail regarding the components of net periodic benefit income.

Other income, net decreased $1.9 million, or 56.4%, to $1.5 million for the first quarter of 2023, compared to $3.4 million for the first quarter of 2022, which reflects a reduction of certain components of net periodic benefit income associated with our pension plans.

Refer to Note 13 to the condensed consolidated financial statements for additional information regarding our retirement plans.

Income Tax Provision

Our effective tax rate can vary considerably from period to period, depending on a number of factors.

Our consolidated effective tax rate was 26.2% for the third quarter of 2022, compared to 24.9% for the third quarter of 2021.

The higher effective tax rate for the third quarter of 2022 was driven by an increase in permanent adjustments, primarily due to the non-deductible portion of executive compensation.

Our consolidated effective tax rate was 25.7% for the nine months ended October 29, 2022, compared to 27.7% for the nine months ended October 30, 2021.

The higher effective tax rate for the nine months ended October 30, 2021 primarily reflects the incremental valuation allowances for our deferred tax assets for certain jurisdictions, as well as the non-deductibility of losses at our Canadian division, which were driven by exit-related costs associated with our Naturalizer retail stores in the first quarter of 2021.

Our consolidated effective tax rate was 23.5% for the first quarter of 2023, compared to 25.7% for the first quarter of 2022.

The lower effective tax rate for the first quarter of 2023 was driven by discrete tax benefits of approximately $0.6 million in the first quarter of 2023 related to our stock-based compensation.

Net Earnings Attributable to Caleres, Inc.

Net earnings attributable to Caleres, Inc.

were $39.2 million and $140.9 million for the three and nine months ended October 29, 2022, respectively, compared to net earnings of $59.6 million and $103.2 million for the three and nine months ended October 30, 2021, respectively, as a result of the factors described above.

were $34.7 million for the first quarter of 2023, compared to $50.5 million for the first quarter of 2022, as a result of the factors described above.

FAMOUS FOOTWEAR

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October 30, 2021

October 29, 2022

October 30, 2021

April 29, 2023

April 30, 2022

($ millions, except sales per square foot)

% of Net Sales

Cost of goods sold

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Operating earnings

Same-store sales % change

Same-store sales $ change

Comparable sales % change

Comparable sales $ change

Sales change from new and closed stores, net (1)

Impact of changes in Canadian exchange rate on sales

Sales per square foot, excluding e-commerce (thirteen and thirty-nine weeks ended)

Sales per square foot, excluding e-commerce (thirteen weeks ended)

Sales per square foot, excluding e-commerce (trailing twelve months)

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Ending stores

Net sales of $482.0 million in the third quarter of 2022 decreased $12.7 million, or 2.6%, compared to the record setting third quarter of 2021.

Despite the decrease in net sales, we continued to perform at a high level during the third quarter of 2022, led by a solid back-to-school season.

Although the back-to-school season started slowly in the second quarter, we experienced strong consumer demand in August and September, especially in children’s footwear.

We experienced improvement in our non-athletic footwear categories, and while demand slowed for our athletics footwear, it continues to be one of our top-selling categories.

Our sales decline was more pronounced in the northern United States due in part to unseasonably warm weather.

Same-store sales decreased 0.8% compared to the third quarter of 2021.

During the third quarter of 2022, we opened four stores and closed nine stores, resulting in 876 stores and total square footage of 5.8 million at the end of the third quarter of 2022, compared to 905 stores and total square footage of 6.0 million at the end of the third quarter of 2021.

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 77% of our net sales made to program members in the third quarter of 2022, compared to 78% in the third quarter of 2021.

Net sales of $1,302.8 million in the nine months ended October 29, 2022 decreased $43.6 million, or 3.2%, compared to the nine months ended October 30, 2021, as our same-store sales declined 2.5%.

Athletics and casual continue to be our top-selling categories.

We remain focused on maximizing the vertical opportunity between the Famous Footwear and Brand Portfolio segments, with LifeStride and Dr.

Scholl’s representing two of Famous Footwear’s top 15 best-selling footwear brands for the nine months ended October 29, 2022.

Gross profit decreased $19.9 million, or 8.4%, to $215.6 million for the third quarter of 2022, compared to $235.5 million for the third quarter of 2021.

As a percentage of net sales, our gross profit decreased to 44.7% for the third quarter of 2022, compared to 47.6% for the third quarter of 2021, reflecting more normalized retail pricing and an increase in promotional activity compared to the third quarter of 2021, when inventories were low due to supply chain constraints.

Our gross profit margin continues to exceed pre-pandemic levels.

Gross profit decreased $24.3 million, or 3.8%, to $618.4 million for the nine months ended October 29, 2022, compared to $642.7 million for the nine months ended October 30, 2021, primarily due to the decrease in net sales.

As a percentage of net sales, our gross profit decreased slightly to 47.5% for the nine months ended October 29, 2022, compared to 47.7% for the nine months ended October 30, 2021.

Net sales of $349.2 million in the first quarter of 2023 decreased $35.3 million, or 9.2% compared to the first quarter of 2022.

Comparable sales decreased 8.5% compared to the first quarter of 2022.

A challenging macroeconomic environment led to sales declines in both our retail stores and e-commerce business.

In addition, a late start to spring weather in many parts of the country led to a soft start to the sandal season.

Our kids category, which is a key differentiator for Famous Footwear, outperformed the rest of our categories as families prioritized purchases of children’s footwear.

During the first quarter of 2023, we opened two stores and closed nine stores, resulting in 866 stores and total square footage of 5.7 million at the end of the first quarter of 2023, compared to 887 stores and total square footage of 5.9 million at the end of the first quarter of 2022.

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 79% of our net sales made to program members in both the first quarter of 2023 and 2022.

Gross profit decreased $30.1 million, or 15.9%, to $159.1 million for the first quarter of 2023, compared to $189.2 million for the first quarter of 2022.

As a percentage of net sales, our gross profit decreased to 45.6% for the first quarter of 2023, compared to 49.2% for the first quarter of 2022.

Due to supply chain constraints and higher demand in 2021 and the first quarter of 2022, there were fewer product markdowns required and minimal clearance selling.

In the first quarter of 2023, our Famous Footwear segment experienced a higher mix of clearance product sold, in line with historical levels.

Selling and Administrative Expenses

Selling and administrative expenses increased $8.2 million, or 5.6%, to $156.3 million for the third quarter of 2022, compared to $148.1 million for the third quarter of 2021.

The increase was driven by higher salary and benefits expenses due in part to wage inflation and higher

facilities costs.

As a percentage of net sales, selling and administrative expenses increased to 32.4% for the third quarter of 2022, compared to 29.9% for the third quarter of 2021.

Selling and administrative expenses increased $24.9 million, or 5.9%, to $446.9 million for the nine months ended October 29, 2022, compared to $422.0 million for the nine months ended October 30, 2021.

The increase was primarily due to higher salary and benefits expenses, higher logistics and facilities costs and higher advertising expense.

As a percentage of net sales, selling and administrative expenses increased to 34.3% for the nine months ended October 29, 2022, compared to 31.3% for the nine months ended October 30, 2021.

Selling and administrative expenses increased $2.5 million, or 1.8%, to $142.0 million for the first quarter of 2023, compared to $139.5 million for the first quarter of 2022.

The increase was driven by higher retail facilities costs, primarily attributable to higher rent expense resulting from inflationary pressures and higher depreciation expense driven by our investment in prototype stores and store renovations during 2022 and the first quarter of 2023.

We also experienced higher marketing expense, primarily associated with initiatives to enhance consumer experience.

These increases were partially offset by lower warehouse costs and cash-based incentive compensation.

As a percentage of net sales, selling and administrative expenses increased to 40.7% for the first quarter of 2023, compared to 36.3% for the first quarter of 2022.

Operating Earnings

Operating earnings decreased $28.1 million to $59.3 million for the third quarter of 2022, compared to $87.4 million for the third quarter of 2021, reflecting both lower sales and gross margins and higher operating expenses, as described above.

As a percentage of net sales, operating earnings were 12.3% for the third quarter of 2022, compared to 17.7% for the third quarter of 2021.

Operating earnings decreased $49.2 million to $171.5 million for the nine months ended October 29, 2022, compared to $220.7 million for the nine months ended October 30, 2021, primarily reflecting lower sales and higher operating expenses, as described above.

As a percentage of net sales, operating earnings were 13.2% for the nine months ended October 29, 2022, compared to 16.4% for the nine months ended October 30, 2021.

Operating earnings decreased $32.6 million to $17.1 million for the first quarter of 2023, compared to $49.7 million for the first quarter of 2022, reflecting lower sales and gross profit and higher operating expenses, as described above.

As a percentage of net sales, operating earnings were 4.9% for the first quarter of 2023, compared to 12.9% for the first quarter of 2022.

BRAND PORTFOLIO

Thirteen Weeks Ended

Thirty-Nine Weeks Ended

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

April 29, 2023

April 30, 2022

($ millions, except sales per square foot)

1 unchanged sentence

Selling and administrative expenses

Restructuring and other special charges, net

Operating earnings

1 unchanged sentence

Change in wholesale net sales ($)

Change in retail net sales ($)

Unfilled order position at end of period

Same-store sales % change

Same-store sales $ change

Sales change from new and closed stores, net

Impact of changes in Canadian exchange rate on retail sales

Sales per square foot, excluding e-commerce (thirteen and thirty-nine weeks ended)

Sales per square foot, excluding e-commerce (trailing twelve months)

Sales per square foot, excluding e-commerce (2)

Square footage (thousands sq.

North America stores:

Stores opened

Stores closed

Ending stores

Ending stores - North America

Ending stores - China

Ending stores - Total Brand Portfolio

(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.

Net sales of $323.2 million in the third quarter of 2022 increased $22.7 million, or 7.6%, compared to the third quarter of 2021, reflecting strong consumer demand for many of our brands.

The net sales increase was broad-based across nearly all of our brands, with our Naturalizer, Sam Edelman, Franco Sarto and LifeStride brands being the most significant contributors.

In addition to sales increases in our wholesale business, our digital business also experienced significant growth during the quarter.

The lead times required on inventory purchases have significantly improved compared to 2021, which has enabled earlier inventory receipts and a more efficient flow of product to our customers.

During the third quarter of 2022, we opened seven stores and closed three stores, resulting in a total of 89 stores and total square footage of 0.1 million at the end of the third quarter of 2022, compared to 90 stores and total square footage of 0.1 million at the end of the third quarter of 2021.

Net sales increased $223.2 million, or 28.3%, to $1,013.0 million for the nine months ended October 29, 2022, compared to $789.8 million for the nine months ended October 30, 2021, reflecting strong sales growth from nearly all of our brands, with our Sam Edelman, Naturalizer, LifeStride, Franco Sarto and Allen Edmonds brands being the most significant contributors.

During 2022, we have experienced a shift in consumer preference from sport and casual products to the fashion and lifestyle categories.

In the first quarter of 2021, we completed the strategic realignment of our Naturalizer retail business and permanently closed the remaining 73 Naturalizer stores in North America that were scheduled for closure.

We have continued to focus on growing the brand’s e-commerce business through naturalizer.com, as well as our retail partners and their websites.

On a trailing twelve-month basis, sales per square foot, excluding e-commerce sales, increased to $1,047 for the twelve months ended October 29, 2022, compared to $756 for the twelve months ended October 30, 2021.

With the closure of nearly all of our Naturalizer retail stores, the majority of the retail stores in our Brand Portfolio segment are for our Allen Edmonds brand, which have higher retail price points than the Naturalizer brand.

Our unfilled order position for our wholesale sales decreased $93.9 million, or 24.7%, to $286.8 million at October 29, 2022, compared to $380.7 million at October 30, 2021.

(2) These metrics exclude the retail operations of our joint venture in China.

Refer to Note 1 to the condensed consolidated financial statements for further discussion of the joint venture.

Net sales of $325.5 million in the first quarter of 2023 decreased $40.2 million, or 11.0%, compared to the record-setting first quarter of 2022.

In addition, while our fashion brands trended better, and casual and dress were our top performing categories, brands with a larger assortment of casual sneakers experienced larger sales declines.

During the first quarter of 2023, we opened one store and closed two stores in the United States resulting in a total of 62 stores and total square footage of 0.1 million, compared to 66 stores and total square footage of 0.1 million at the end of the first quarter of 2022.

In addition, we continued to expand our retail store presence in China by opening two new stores, resulting in a total of 31 stores compared to 17 stores at the end of the first quarter of 2022.

Our unfilled order position for our wholesale sales decreased $128.6 million, or 32.0%, to $272.9 million at April 29, 2023, compared to $401.5 million at April 30, 2022.

The decrease in our backlog order levels compared to last year primarily reflects more conservative buying by our wholesale customers as they manage their inventory levels in response to consumer sentiment.

Gross profit increased $23.5 million, or 23.7%, to $122.4 million for the third quarter of 2022, compared to $98.9 million for the third quarter of 2021, primarily reflecting higher net sales and a higher gross margin rate.

As a percentage of net sales, our gross profit increased to 37.9% for the third quarter of 2022, compared to 32.9% for the third quarter of 2021, primarily reflecting higher average wholesale prices, growth in higher margin sales from the direct-to-consumer channel and a favorable brand mix, partially offset by a higher provision for inventory markdowns.

Gross profit increased $98.0 million, or 34.1%, to $385.8 million for the nine months ended October 29, 2022, compared to $287.8 million for the nine months ended October 30, 2021, reflecting higher net sales.

As a percentage of net sales, our gross profit increased to 38.1% for the nine months ended October 29, 2022, compared to 36.4% for the nine months ended October 30, 2021.

While we have experienced inflationary pressures related to product costs and inbound freight through the nine months ended October 29, 2022, we have been able to successfully offset the majority of these impacts through price increases.

We anticipate inflationary pressures to continue throughout 2022 and will continue to focus on mitigating the impact.

Gross profit increased $4.6 million, or 3.3%, to $143.9 million for the first quarter of 2023, compared to $139.3 million for the first quarter of 2022, primarily reflecting a higher gross margin rate.

As a percentage of net sales, our gross profit increased significantly to 44.2% for the first quarter of 2023, compared to 38.1% for the first quarter of 2022, reflecting higher average prices and lower inbound freight costs as our supply chain normalized.

Selling and Administrative Expenses

Selling and administrative expenses increased $12.6 million, or 14.3%, to $100.1 million for the third quarter of 2022, compared to $87.5 million for the third quarter of 2021.

The increase was primarily due to higher variable salary expenses and wage inflation, higher marketing expenses and higher facilities costs.

As a percentage of net sales, selling and administrative expenses increased to 31.0% for the third quarter of 2022, compared to 29.1% for the third quarter of 2021.

Selling and administrative expenses increased $43.5 million, or 17.5%, to $292.7 million for the nine months ended October 29, 2022, compared to $249.2 million for the nine months ended October 30, 2021.

The increase was driven by higher variable salary expenses and higher marketing expenses.

As a percentage of net sales, selling and administrative expenses decreased to 28.9% for the nine months ended October 29, 2022, compared to 31.5% for the nine months ended October 30, 2021, reflecting better leveraging of expenses over a higher net sales base.

Restructuring and Other Special Charges, Net

We incurred restructuring and other special charges of $13.5 million during the nine months ended October 30, 2021 for expenses associated with the strategic realignment of our Naturalizer retail store operations.

Refer to Note 5 to the condensed consolidated financial statements for additional information related to these charges.

There were no corresponding charges during the three or nine months ended October 29, 2022.

Selling and administrative expenses increased $3.2 million, or 3.3%, to $101.2 million for the first quarter of 2023, compared to $98.0 million for the first quarter of 2022.

The increase was primarily due to higher marketing expenses to drive sales growth and higher warehouse costs, partially offset by lower salary and benefits expenses.

As a percentage of net sales, selling and administrative expenses increased to 31.1% for the first quarter of 2023, compared to 26.8% for the first quarter of 2022.

Operating Earnings

Operating earnings increased to $22.3 million for the third quarter of 2022, from $11.4 million for the third quarter of 2021, as a result of the factors described above.

As a percentage of net sales, operating earnings were 6.9% for the third quarter of 2022, compared to 3.8% in the third quarter of 2021.

Operating earnings increased to $93.1 million for the nine months ended October 29, 2022, from $25.1 million for the nine months ended October 30, 2021, as a result of the factors described above.

As a percentage of net sales, operating earnings were 9.2% for the nine months ended October 29, 2022, compared to 3.2% in the nine months ended October 30, 2021.

Operating earnings increased to $42.7 million for the first quarter of 2023, from $41.3 million for the first quarter of 2022, as a result of the factors described above.

As a percentage of net sales, operating earnings were 13.1% for the first quarter of 2023, compared to 11.3% in the first quarter of 2022.

ELIMINATIONS AND OTHER

Thirteen Weeks Ended

Thirty-Nine Weeks Ended

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

April 29, 2023

April 30, 2022

Cost of goods sold

Selling and administrative expenses

Restructuring and other special charges, net

Operating loss

The Eliminations and Other category includes the elimination of intersegment sales and profit, unallocated corporate administrative expenses, and other costs and recoveries.

The net sales elimination of $6.9 million for the third quarter of 2022 is $4.1 million, or 37.1%, lower than the third quarter of 2021 reflecting a decrease in product sold from our Brand Portfolio segment to Famous Footwear.

The net sales elimination of $44.2 million for the nine months ended October 29, 2022 is $6.3 million, or 16.5%, higher than the nine months ended October 30, 2022 reflecting an increase in product sold from our Brand Portfolio segment to Famous Footwear.

Selling and administrative expenses increased $8.3 million, to $26.7 million in the third quarter of 2022, compared to $18.4 million for the third quarter of 2021.

The increase primarily reflects higher expenses for our cash-based incentive compensation plans.

In 2021, our financial results exceeded the targets established for our annual incentive plans earlier in the year, which resulted in a larger portion of the anticipated plan payouts recorded as expense in the first half of 2021 rather than in the third quarter.

For 2022, anticipated incentive plan payouts are being recognized more ratably during the year.

Selling and administrative expenses decreased $13.3 million, to $72.6 million for the nine months ended October 29, 2022, compared to $85.9 million for the nine months ended October 30, 2021.

The decrease primarily reflects lower expenses for our cash-based incentive compensation plans reflecting the shift in timing of the achievement of our financial performance targets, as described above, as well as lower expenses associated with certain other employee benefits.

Restructuring and other special charges of $2.9 million for the three and nine months ended October 29, 2022 were associated with a CFO transition at our corporate headquarters.

Refer to Note 5 to the condensed consolidated financial statements for additional information related to these charges.

There were no corresponding charges for the nine months ended October 30, 2021.

The net sales elimination of $11.9 million for the first quarter of 2023 is $3.2 million, or 21.1%, lower than the first quarter of 2022, reflecting a decrease in product sold from our Brand Portfolio segment to Famous Footwear.

Selling and administrative expenses decreased $13.5 million, to $9.8 million in the first quarter of 2023, compared to $23.3 million for the first quarter of 2022.

The decrease primarily reflects lower expenses related to our cash and stock-based incentive compensation plans.

LIQUIDITY AND CAPITAL RESOURCES

October 29, 2022

October 30, 2021

January 29, 2022

Borrowings under revolving credit agreement

Current portion of long-term debt

(1) As presented here, total debt as of October 30, 2021 excludes the Blowfish Malibu mandatory purchase obligation, which was valued at $54.6 million.

The mandatory purchase obligation of $54.6 million was paid on November 4, 2021, as further discussed in Note 14 to the condensed consolidated financial statements.

Total debt obligations of $364.5 million at October 29, 2022 increased $89.9 million, from $274.6 million at October 30, 2021, and increased $74.5 million, from $290.0 million at January 29, 2022.

The increase in total debt from October 30, 2021 and January 29, 2022 is due primarily to $63.2 million of repurchases of our common stock.

In August 2021, we redeemed $100.0 million aggregate principal amount of our senior notes and on January 3, 2022, we redeemed the remaining $100.0 million of senior notes.

We shifted this debt to borrowings under the revolving credit facility, which has resulted in significant interest expense savings for the Company.

While this reduction in interest expense is expected to continue, the interest on our revolving credit facility is based on a variable interest rate, which has resulted in higher interest expense in the current rising interest rate environment.

Our interest expense will continue to be adversely affected by rising interest rates.

Net interest expense for the third quarter of 2022 decreased $1.1 million to $4.0 million, compared to $5.1 million for the third quarter of 2021.

The decrease is primarily attributable to the non-recurrence of the $1.9 million fair value adjustment to the Blowfish Malibu mandatory purchase obligation recorded in the third quarter of 2021.

The Blowfish Malibu mandatory purchase obligation of $54.6 million was paid on November 4, 2021, as further discussed in Note 5 and Note 14 to the condensed consolidated financial statements.

In addition, as discussed above, the redemption of all outstanding senior notes in 2021 also contributed to the decrease in interest expense in the third quarter of 2022.

These decreases were partially offset by higher average borrowings under our revolving credit agreement.

Total debt obligations of $291.5 million at April 29, 2023 decreased $13.5 million, from $305.0 million at April 30, 2022, and decreased $16.0 million, from $307.5 million at January 28, 2023.

Net interest expense for the first quarter of 2023 increased $3.3 million to $5.6 million, compared to $2.3 million for the first quarter of 2022, due to higher interest rates.

This increase was partially offset by slightly lower average borrowings under our revolving credit agreement.

The interest on our revolving credit facility is based on a variable rate, which has resulted in higher interest expense in the current rising interest rate environment.

Our interest expense in 2023 will continue to be adversely affected by the elevated interest rates.

Credit Agreement

As further discussed in Note 10 to the condensed consolidated financial statements, the Company maintains a revolving credit facility for working capital needs.

On 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, extended the maturity date of the credit facility from January 18, 2024, to October 5, 2026 and decreased 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 increased by up to $250.0 million.

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.

The Credit Agreement decreased the spread applied to the LIBOR or prime rate by a total of 75 basis points.

At October 29, 2022, we had $364.5 million in borrowings and $10.1 million in letters of credit outstanding under the Credit Agreement.

Total borrowing availability was $125.4 million at October 29, 2022.

We were in compliance with all covenants and restrictions under the Credit Agreement as of October 29, 2022.

On July 27, 2015, we issued $200.0 million aggregate principal amount of senior notes due in 2023 (the "Senior Notes").

The Senior Notes were guaranteed on a senior unsecured basis by each of the subsidiaries of Caleres, Inc.

that is an obligor under the Credit Agreement, and bore interest of 6.25%, which was payable on February 15 and August 15 of each year.

On August 16, 2021, we redeemed $100.0 million of the Senior Notes at 100.0%.

In addition, on January 3, 2022, we redeemed the remaining $100.0 million of Senior Notes at 100.0%.

Refer to further discussion regarding the Senior Notes in Note 10 to the condensed consolidated financial statements.

On October 5, 2021, we entered into a Fifth Amendment to Fourth Amended and Restated Credit Agreement (“Fifth Amendment”) that, among other modifications, extended the maturity date of the credit facility from January 18, 2024, to October 5, 2026 and decreased 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 increased by up to $250.0 million.

Interest on the borrowings was 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 Fifth Amendment), plus a spread.

The Fifth Amendment decreased the spread applied to the LIBOR or prime rate by a total of 75 basis points.

On April 27, 2023, the Company entered into a Sixth Amendment to Fourth Amended and Restated Credit agreement (as so amended, the “Credit Agreement”) to transition the borrowings on the revolving credit facility from bearing interest based on LIBOR to a term secured overnight financing rate (“SOFR”).

At April 29, 2023, we had $291.5 million in borrowings and $10.6 million in letters of credit outstanding under the Credit Agreement.

Total borrowing availability was $197.9 million at April 29, 2023.

We were in compliance with all covenants and restrictions under the Credit Agreement as of April 29, 2023.

Working Capital and Cash Flow

Thirty-Nine Weeks Ended

October 29, 2022

October 30, 2021

Thirteen Weeks Ended

April 29, 2023

April 30, 2022

Net cash provided by operating activities

Net cash used for investing activities

Net cash provided by (used for) financing activities

Net cash used for financing activities

Effect of exchange rate changes on cash and cash equivalents

Increase (decrease) in cash and cash equivalents

Increase in cash and cash equivalents

Reasons for the major variances in cash provided (used) in the table above are as follows:

Cash provided by operating activities was $143.4 million lower in the nine months ended October 29, 2022 as compared to the nine months ended October 30, 2021, primarily reflecting the following factors:

● A decrease in trade accounts payable during the nine months ended October 29, 2022, compared to an increase during the nine months ended October 30, 2021, due in part to the earlier receipt of fall product in 2022 and the earlier settlement of the related accounts payable;

● A decrease in accrued expenses and other liabilities during the nine months ended October 29, 2022, compared to an increase during the nine months ended October 30, 2021 due in part to higher accruals for incentive compensation payments in 2021, reflecting operating results that exceeded the targets established for the annual incentive plan;

Cash provided by operating activities was $17.8 million higher in the thirteen weeks ended April 29, 2023 as compared to the thirteen weeks ended April 30, 2022, primarily reflecting the following factors:

● A decrease in inventory during the thirteen weeks ended April 29, 2023, compared to an increase during the thirteen weeks ended April 30, 2022, due in part to lower in-transit inventory levels as the supply chain has normalized;

● A smaller increase in accounts receivable during the thirteen weeks ended April 29, 2023 primarily attributable to lower wholesale sales, compared to the thirteen weeks ended April 30, 2022;

partially offset by

● Higher net earnings in the nine months ended October 29, 2022, compared to the nine months ended October 30, 2021.

Supply chain financing :

Certain of our suppliers are given the opportunity to sell receivables from us related to products that we have purchased to participating financial institutions at a rate that leverages our credit rating, which may be more beneficial to the suppliers than the rate they can obtain based upon their own credit rating.

We negotiate payment and other terms with our suppliers, regardless of whether the supplier participates in the program, and our responsibility is limited to making payment based on the terms originally negotiated with the supplier.

These liabilities continue to be presented as accounts payable in our condensed consolidated balance sheets, with changes reflected within cash flows from operating activities when settled.

As of October 29, 2022 and October 30, 2021, we had $17.8 million and $64.0 million, respectively, of accounts payable subject to supply chain financing arrangements.

Cash used for investing activities was $30.8 million higher for the nine months ended October 29, 2022 as compared to the nine months ended October 30, 2021, reflecting higher capital expenditures.

● A smaller increase in net income taxes payable during the thirteen weeks ended April 29, 2023, compared to the thirteen weeks ended April 20, 2022;

● A smaller increase in trade accounts payable during the thirteen weeks ended April 29, 2023, reflecting lower inventory purchases compared to the thirteen weeks ended April 30, 2022,

● A larger decrease in accrued expenses and other liabilities during the thirteen weeks ended April 29, 2023, compared to the thirteen weeks ended April 30, 2022;

● Lower net earnings in the thirteen weeks ended April 29, 2023, compared to the thirteen weeks ended April 30, 2022.

Cash used for investing activities was $5.2 million lower for the thirteen weeks ended April 29, 2023 as compared to the thirteen weeks ended April 30, 2022, reflecting lower capital expenditures.

In 2023, we expect our purchases of property and equipment and capitalized software to be between $55 million and $65 million, as compared to $64.0 million in 2022.

In the first quarter of 2022, we tested a new prototype Famous Footwear store that offers an enhanced shopping experience, highlights our leading assortment of trending brands and elevates those brands in an energetic and exciting manner.

We have also continued to invest in refreshing our Famous Footwear stores in the first nine months of 2022.

We have experienced strong financial performance from the recently converted prototype stores.

Accordingly, we plan to invest in additional prototype stores and store renovations during the fourth quarter of 2022 and into 2023, which we believe will enhance our brand image and further differentiate our store experience from that of our competitors.

Cash provided by financing activities was $190.5 million higher for the nine months ended October 29, 2022 as compared to the nine months ended October 30, 2021, primarily due to net borrowings on our revolving credit agreement of $74.5 in the nine months ended October 29, 2022, compared to net repayments of $75.0 million in the comparable period in 2021.

In addition, we repurchased $63.2 million of our common stock under our share repurchase programs during the nine months ended October 29, 2022, with no corresponding share repurchases during the nine months ended October 30, 2021.

Cash used for financing activities was $24.1 million higher for the thirteen weeks ended April 29, 2023 as compared to the thirteen weeks ended April 30, 2022, primarily due to net repayments on our revolving credit agreement of $16.0 million in the thirteen weeks ended April 29, 2023, compared to net borrowings of $15.0 million in the comparable period in 2022.

In addition, the issuance of common stock under share-based plans was $6.4 million higher in the thirteen weeks ended April 29, 2023, compared to the thirteen weeks ended April 30, 2022.

These increases were partially offset by $14.7 million of repurchases of our common stock under our share repurchase programs during the thirteen weeks ended April 30, 2022, with no corresponding share repurchases during the thirteen weeks ended April 29, 2023.

A summary of key financial data and ratios at the dates indicated is as follows:

October 29, 2022

October 30, 2021

April 29, 2023

April 30, 2022

January 28, 2023

4 unchanged sentences

(2) The current ratio has been computed by dividing total current assets by total current liabilities.

(3) The debt-to-capital ratio has been computed by dividing total debt by total capitalization.

Total debt is defined as the current portion of long-term debt and borrowings under revolving credit agreement.

(3) The debt-to-capital ratio has been computed by dividing the borrowings under our revolving credit agreement by total capitalization.

Total capitalization is defined as total debt and total equity .

Working capital at October 29, 2022 was ($117.8) million, which was $89.6 million and $71.3 million higher than at October 30, 2021 and January 29, 2022, respectively.

The increase in working capital from October 30, 2021 primarily reflects higher inventory, the redemption of our senior notes, lower trade accounts payable and the settlement of the Blowfish Malibu mandatory purchase obligation in the fourth quarter of 2021, partially offset by higher borrowings under the revolving credit agreement.

The increase in working capital from January 29, 2022 primarily reflects higher inventories and accounts receivable and lower trade accounts payable, partially offset by higher borrowings under the revolving credit agreement.

Our current ratio was 0.89 to 1 as of October 29, 2022, compared to 0.81:1 at October 30, 2021 and 0.82:1 at January 29, 2022.

Our debt-to-capital ratio was 47.3% as of October 29, 2022, consistent with October 30, 2021 and January 29, 2022.

We declared and paid dividends of $0.07 per share in the third quarter of both 2022 and 2021.

Working capital at April 29, 2023 was ($58.4) million, which was $77.8 million and $21.3 million higher than at April 30, 2022 and January 28, 2023, respectively.

The increase in working capital from April 30, 2022 primarily reflects lower trade accounts payable and accrued expenses, partially offset by lower inventory.

The increase in working capital from January 28, 2023 primarily reflects lower accrued expenses, partially offset by higher trade accounts payable.

Our current ratio was 0.93:1 as of April 29, 2023, compared to 0.87:1 at April 30, 2022 and 0.91:1 at January 28, 2023.

Our debt-to-capital ratio was 39.2% as of April 29, 2023, compared to 46.0% as of April 30, 2022 and 41.9% at January 28, 2023.

We declared and paid dividends of $0.07 per share in the first quarter of both 2023 and 2022.

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.

11 unchanged sentences

Such statements are subject to various risks and uncertainties that could cause actual results to differ materially.

These risks include (i) supply chain disruptions and inflationary pressures;

(ii) the coronavirus pandemic and its adverse impact on our business operations and financial condition;

These risks include (i) inflationary pressures;

(ii) supply chain disruptions;

(iii) changing consumer demands, which may be influenced by general economic conditions and other factors;

10 unchanged sentences

(xiv) the ability to maintain relationships with current suppliers;

transitional challenges with acquisitions and divestitures;

(xv) transitional challenges with acquisitions and divestitures;

(xvi) changes to tax laws, policies and treaties;

7 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.

What changed 10-Q

Item 2. Management’s Discussion and Analysis