Item 2. Management’s Discussion and Analysis
ITEM 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
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
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:
Thirteen Weeks Ended
($ millions, except per share amounts)
April 29, 2023
April 30, 2022
Change (1)
Consolidated net sales
$662.7
$735.1
($72.4)
(9.8)
%
Famous Footwear segment net sales
$349.2
$384.5
($35.3)
(9.2)
%
Famous Footwear comparable sales % change
(8.5)
%
(4.0)
%
n/m
n/m
Brand Portfolio segment net sales
$325.5
$365.7
($40.2)
(11.0)
%
Gross profit
$302.7
$327.0
($24.3)
(7.4)
%
Gross margin
45.7
%
44.5
%
n/m
119 bps
Operating earnings
$49.6
$66.2
($16.6)
(25.1)
%
Diluted earnings per share
$0.97
$1.32
($0.35)
(26.5)
%
(1) n/m – not meaningful
Metrics Used in the Evaluation of Our Business
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 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.
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Sales per square foot
The sales per square foot metric is commonly used in the retail industry to calculate the efficiency of sales based upon the square footage in a store. Management uses the sales per square foot metric as a measure of an individual store’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 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:
CONSOLIDATED RESULTS
Thirteen Weeks Ended
April 29, 2023
April 30, 2022
% of
% of
($ millions)
Net Sales
Net Sales
Net sales
$
662.7
100.0
%
$
735.1
100.0
%
Cost of goods sold
360.0
54.3
%
408.1
55.5
%
Gross profit
302.7
45.7
%
327.0
44.5
%
Selling and administrative expenses
253.1
38.2
%
260.8
35.5
%
Operating earnings
49.6
7.5
%
66.2
9.0
%
Interest expense, net
(5.6)
(0.8)
%
(2.3)
(0.3)
%
Other income, net
1.5
0.2
%
3.4
0.5
%
Earnings before income taxes
45.5
6.9
%
67.3
9.2
%
Income tax provision
(10.7)
(1.7)
%
(17.3)
(2.4)
%
Net earnings
34.8
5.2
%
50.0
6.8
%
Net earnings (loss) attributable to noncontrolling interests
0.1
0.0
%
(0.5)
(0.1)
%
Net earnings attributable to Caleres, Inc.
$
34.7
5.2
%
$
50.5
6.9
%
Net Sales
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
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
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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. Accordingly, our gross profit and selling and administrative expense rates, as a percentage of net sales, may not be comparable to other companies.
Selling and Administrative Expenses
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 $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 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 $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 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 $34.7 million for the first quarter of 2023, compared to $50.5 million for the first quarter of 2022, as a result of the factors described above.
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FAMOUS FOOTWEAR
Thirteen Weeks Ended
April 29, 2023
April 30, 2022
($ millions, except sales per square foot)
% of Net Sales
% of Net Sales
Net sales
$
349.2
100.0
%
$
384.5
100.0
%
Cost of goods sold
190.1
54.4
%
195.3
50.8
%
Gross profit
159.1
45.6
%
$
189.2
49.2
%
Selling and administrative expenses
142.0
40.7
%
139.5
36.3
%
Operating earnings
$
17.1
4.9
%
$
49.7
12.9
%
Key Metrics
Comparable sales % change
(8.5)
%
(4.0)
%
Comparable sales $ change
$
(31.8)
$
(15.6)
Sales change from new and closed stores, net (1)
$
(3.0)
$
2.0
Impact of changes in Canadian exchange rate on sales
$
(0.5)
$
(0.0)
Sales per square foot, excluding e-commerce (thirteen weeks ended)
$
54
$
57
Sales per square foot, excluding e-commerce (trailing twelve months)
$
250
$
251
Square footage (thousand sq. ft.)
5,702
5,870
Stores opened
2
—
Stores closed
9
7
Ending stores
866
887
Net Sales
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
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 $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 $32.6 million to $17.1 million for the first quarter of 2023, compared to $49.7 million for the first quarter of 2022, reflecting lower sales and gross profit and higher operating expenses, as described above. As a percentage of net sales, operating earnings were 4.9% for the first quarter of 2023, compared to 12.9% for the first quarter of 2022.
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BRAND PORTFOLIO
Thirteen Weeks Ended
April 29, 2023
April 30, 2022
% of
% of
($ millions, except sales per square foot)
Net Sales
Net Sales
Net sales
$
325.5
100.0
%
$
365.7
100.0
%
Cost of goods sold
181.6
55.8
%
226.4
61.9
%
Gross profit
143.9
44.2
%
139.3
38.1
%
Selling and administrative expenses
101.2
31.1
%
98.0
26.8
%
Operating earnings
$
42.7
13.1
%
$
41.3
11.3
%
Key Metrics
Direct-to-consumer (% of net sales) (1)
32
%
26
%
Change in wholesale net sales ($)
$
(42.2)
$
104.2
Change in retail net sales ($)
$
2.0
$
11.2
Unfilled order position at end of period
$
272.9
$
401.5
Sales per square foot, excluding e-commerce (2)
$
280
$
269
Square footage (thousands sq. ft.) (2)
101
108
North America stores:
Stores opened
1
—
Stores closed
2
4
Ending stores - North America
62
66
Ending stores - China
31
17
Ending stores - Total Brand Portfolio
93
83
(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.
(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
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. 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 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
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.
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Selling and Administrative Expenses
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 $42.7 million for the first quarter of 2023, from $41.3 million for the first quarter of 2022, as a result of the factors described above. As a percentage of net sales, operating earnings were 13.1% for the first quarter of 2023, compared to 11.3% in the first quarter of 2022.
ELIMINATIONS AND OTHER
Thirteen Weeks Ended
April 29, 2023
April 30, 2022
% of
% of
($ millions)
Net Sales
Net Sales
Net sales
$
(11.9)
100.0
%
$
(15.1)
100.0
%
Cost of goods sold
(11.6)
97.5
%
(13.6)
89.8
%
Gross profit
(0.3)
2.5
%
(1.5)
10.2
%
Selling and administrative expenses
9.8
(82.4)
%
23.3
(154.0)
%
Operating loss
$
(10.1)
84.9
%
$
(24.8)
164.2
%
The Eliminations and Other category includes the elimination of intersegment sales and profit, unallocated corporate administrative expenses, and other costs and recoveries.
The net sales elimination of $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.
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LIQUIDITY AND CAPITAL RESOURCES
Borrowings
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 (“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 $197.9 million at April 29, 2023. We were in compliance with all covenants and restrictions under the Credit Agreement as of April 29, 2023.
Working Capital and Cash Flow
Thirteen Weeks Ended
($ millions)
April 29, 2023
April 30, 2022
Change
Net cash provided by operating activities
$
37.5
$
19.7
$
17.8
Net cash used for investing activities
(6.5)
(11.7)
5.2
Net cash used for financing activities
(28.5)
(4.4)
(24.1)
Effect of exchange rate changes on cash and cash equivalents
(0.0)
(0.0)
0.0
Increase in cash and cash equivalents
$
2.5
$
3.6
$
(1.1)
Reasons for the major variances in cash provided (used) in the table above are as follows:
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; and
● 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
● 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; and
● Lower net earnings in the thirteen weeks ended April 29, 2023, compared to the thirteen weeks ended April 30, 2022.
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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.
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 $14.7 million of repurchases of our common stock under our share repurchase programs during the thirteen weeks ended April 30, 2022, with no corresponding share repurchases during the thirteen weeks ended April 29, 2023.
A summary of key financial data and ratios at the dates indicated is as follows:
April 29, 2023
April 30, 2022
January 28, 2023
Working capital ($ millions) (1)
$
(58.4)
$
(136.2)
$
(79.7)
Current ratio (2)
0.93:1
0.87:1
0.91:1
Debt-to-capital ratio (3)
39.2
%
46.0
%
41.9
%
(1) Working capital has been computed as total current assets less total current liabilities.
(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 the borrowings under our revolving credit agreement by total capitalization. Total capitalization is defined as total debt and total equity .
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. However, we presently expect that dividends will continue to be paid.
We have various contractual or other obligations, including borrowings under our revolving credit facility, operating lease commitments, one-time transition tax for the mandatory deemed repatriation of cumulative foreign earnings and obligations for our supplemental executive retirement plan and other postretirement benefits. We also have purchase obligations to purchase inventory, assets and other goods and services. We believe our operating cash flows are sufficient to meet our material cash requirements for at least the next 12 months.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
No material changes have occurred related to critical accounting policies and estimates since the end of the most recent fiscal year. For further information on the Company’s critical accounting policies and estimates, see Part II, Item 7 of our Annual Report on Form 10-K for the year ended January 28, 2023.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Recently issued accounting pronouncements, if any, and their impact on the Company are described in Note 2 to the condensed consolidated financial statements.
FORWARD-LOOKING STATEMENTS
This Form 10-Q contains certain forward-looking statements and expectations regarding the Company’s future performance and the performance of its brands. Such statements are subject to various risks and uncertainties that could cause actual results to differ materially.
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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; (iv) rapidly changing consumer preferences and purchasing patterns and fashion trends; (v) customer concentration and increased consolidation in the retail industry; (vi) intense competition within the footwear industry; (vii) foreign currency fluctuations; (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; (ix) cybersecurity threats or other major disruption to the Company’s information technology systems; (x) the ability to accurately forecast sales and manage inventory levels; (xi) a disruption in the Company’s distribution centers; (xii) the ability to recruit and retain senior management and other key associates; (xiii) the ability to secure/exit leases on favorable terms; (xiv) the ability to maintain relationships with current suppliers; (xv) transitional challenges with acquisitions and divestitures; (xvi) changes to tax laws, policies and treaties; (xvii) compliance with applicable laws and standards with respect to labor, trade and product safety issues; and (xviii) the ability to attract, retain, and maintain good relationships with licensors and protect our intellectual property rights. The Company’s reports to the Securities and Exchange Commission contain detailed information relating to such factors, including, without limitation, the information under the caption “Risk Factors” in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended January 28, 2023, which information is incorporated by reference herein and updated by the Company’s Quarterly Reports on Form 10-Q. The Company does not undertake any obligation or plan to update these forward-looking statements, even though its situation may change.
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
No material changes have taken place in the quantitative and qualitative information about market risk since the end of the most recent fiscal year. For further information, see Part II, Item 7A of the Company’s Annual Report on Form 10-K for the year ended January 28, 2023.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.