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 retailers and consumers a diversified portfolio of leading footwear brands. Outfitted in our brands, customers can step confidently into every aspect of their lives. 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, elevated interest rates, increased real estate costs, higher consumer debt levels, the end to the student loan repayment pause, and lingering fears of a recession continued to impact consumer discretionary spending and our financial results during the first quarter of 2024. We continued to experience lighter consumer traffic in our retail stores during the first quarter, resulting in lower net sales. While we believe that the structural changes we have implemented in the last few years, as well as our diversified model and operational discipline, enable the Company to drive value in a variety of market conditions, changes in macro-level consumer spending trends may continue to adversely impact our financial results in the future. We believe our focus on cost control and our commitment to execute our clearly defined strategic initiatives have positioned us for sustainable, long-term growth.
Financial Highlights
Highlights of our consolidated and segment results for the first quarter of 2024 and 2023 are as follows:
Thirteen Weeks Ended
($ millions, except per share amounts)
May 4, 2024
April 29, 2023
Change (1)
Consolidated net sales
$659.2
$662.7
($3.5)
(0.5)
%
Famous Footwear segment net sales
$349.6
$349.2
$0.4
0.1
%
Famous Footwear comparable sales % change
(2.3)
%
(8.5)
%
n/m
n/m
Brand Portfolio segment net sales
$317.2
$325.5
($8.3)
(2.6)
%
Gross profit
$309.1
$302.7
$6.4
2.1
%
Gross margin
46.9
%
45.7
%
n/m
122 bps
Operating earnings
$42.8
$49.6
($6.8)
(13.8)
%
Diluted earnings per share
$0.88
$0.97
($0.09)
(9.3)
%
(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. In fiscal years with 53 weeks, the 53 rd week of comparable sales is included in the calculation. In the following year, the prior fiscal year period is shifted by one week to compare similar calendar weeks. 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.
24
Table of Contents
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 in North America 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
May 4, 2024
April 29, 2023
% of
% of
($ millions)
Net Sales
Net Sales
Net sales
$
659.2
100.0
%
$
662.7
100.0
%
Cost of goods sold
350.1
53.1
%
360.0
54.3
%
Gross profit
309.1
46.9
%
302.7
45.7
%
Selling and administrative expenses
266.3
40.4
%
253.1
38.2
%
Operating earnings
42.8
6.5
%
49.6
7.5
%
Interest expense, net
(3.8)
(0.6)
%
(5.6)
(0.8)
%
Other income, net
1.0
0.2
%
1.5
0.2
%
Earnings before income taxes
40.0
6.1
%
45.5
6.9
%
Income tax provision
(9.2)
(1.4)
%
(10.7)
(1.7)
%
Net earnings
30.8
4.7
%
34.8
5.2
%
Net (loss) earnings attributable to noncontrolling interests
(0.1)
(0.0)
%
0.1
0.0
%
Net earnings attributable to Caleres, Inc.
$
30.9
4.7
%
$
34.7
5.2
%
Net Sales
Net sales decreased $3.5 million, or 0.5%, to $659.2 million for the first quarter of 2024, compared to $662.7 million for the first quarter of 2023, driven by an $8.3 million, or 2.6%, decline in net sales for our Brand Portfolio segment due primarily to lower wholesale sales. While we continue to experience weakness in dress footwear and seasonal fashion categories, including sandals and boots, our fashion sneakers and casual footwear categories both experienced gains in the first quarter of 2024 compared to 2023. The decrease in the Brand Portfolio segment net sales was partially offset by an increase in net sales in the Famous Footwear segment of $0.4 million, or 0.1% during the first quarter of 2024. Our kids business continued to perform well during the first quarter, while seasonal sandals and boots underperformed. We also experienced growth in sales from our owned e-commerce businesses, which increased approximately 9.4% on a consolidated basis compared to the first quarter of 2023. Our direct-to-consumer sales represented approximately 69% of consolidated net sales for the first quarter of 2024, compared to 68% in the first quarter of 2023. We remain focused on maximizing the vertical opportunity between the Famous Footwear and Brand Portfolio segments, with Dr. Scholl’s, LifeStride, Naturalizer and Blowfish Malibu representing four of Famous Footwear’s top 20 best-selling footwear brands during the quarter.
Gross Profit
Gross profit increased $6.4 million, or 2.1%, to $309.1 million for the first quarter of 2024, compared to $302.7 million for the first quarter of 2023. As a percentage of net sales, gross profit increased to 46.9% for the first quarter of 2024, compared to 45.7% for the first quarter of 2023, driven by significant improvement in the Brand Portfolio segment gross margin. The increase reflects higher merchandise margins, growth in e-commerce sales from our owned brands and lower sales allowances and discounts. The gross margin in the Famous Footwear
25
Table of Contents
segment also improved in the quarter, driven by lower inbound freight costs for our inventory, lower outbound shipping costs, due in part to growth in store fulfillment of e-commerce orders (buy online, pick up in store), and lower inventory shrinkage.
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 increased $13.2 million, or 5.2%, to $266.3 million for the first quarter of 2024, compared to $253.1 million for the first quarter of 2023. The increase was driven by higher marketing expenses for certain brands, including Sam Edelman and Naturalizer, higher expenses associated with the expansion of our international business and higher information technology and consulting expense associated with the implementation of our cloud-based enterprise resource planning platform. As a percentage of net sales, selling and administrative expenses increased to 40.4% for the first quarter of 2024, from 38.2% for the first quarter of 2023.
Operating Earnings
Operating earnings decreased $6.8 million to $42.8 million for the first quarter of 2024, compared to $49.6 million for the first quarter of 2023, reflecting the factors described above. As a percentage of net sales, operating earnings were 6.5% for the first quarter of 2024, compared to 7.5% for the first quarter of 2023.
Interest Expense, Net
Interest expense, net decreased $1.8 million, or 32.8%, to $3.8 million for the first quarter of 2024, compared to $5.6 million for the first quarter of 2023. The decrease reflects lower average borrowings on the revolving credit facility, partially offset by higher weighted-average interest rates. The interest on our revolving credit facility is based on a variable rate, which adversely impacts our interest expense in the current elevated interest rate environment. While our interest expense for the remainder of 2024 will continue to be negatively impacted by the elevated interest rates, we expect to continue to reduce the borrowings under our revolving credit agreement to mitigate the impact of the high interest rate environment.
Other Income, Net
Other income, net decreased $0.5 million, or 33.5%, to $1.0 million for the first quarter of 2024, compared to $1.5 million for the first quarter of 2023, primarily attributable to higher amortization of the actuarial loss related to our pension plans. Refer to Note 12 of the condensed consolidated financial statements for further information. These decreases were partially offset by non-operating income associated with logistics services, which the Company began providing in the second half of 2023.
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 23.0% for the first quarter of 2024, compared to 23.5% for the first quarter of 2023.
In 2021, the Organization for Economic Cooperation and Development (OECD) released Pillar Two Global Anti-Base Erosion model rules, designed to ensure large corporations are taxed at a minimum rate of 15% in all countries of operation. The OECD continues to release guidance and countries are implementing legislation to adopt the rules, which became effective on January 1, 2024. The United States has not yet enacted legislation implementing Pillar Two. We are continuing to evaluate the Pillar Two rules and their potential impact on future periods, but we do not expect the rules to have a material impact on our effective tax rate.
Net Earnings Attributable to Caleres, Inc.
Net earnings attributable to Caleres, Inc. was $30.9 million for the first quarter of 2024, compared to $34.7 million for the first quarter of 2023, as a result of the factors described above.
26
Table of Contents
FAMOUS FOOTWEAR
Thirteen Weeks Ended
May 4, 2024
April 29, 2023
% of
% of
($ millions, except sales per square foot)
Net Sales
Net Sales
Net sales
$
349.6
100.0
%
$
349.2
100.0
%
Cost of goods sold
188.6
53.9
%
190.1
54.4
%
Gross profit
161.0
46.1
%
$
159.1
45.6
%
Selling and administrative expenses
144.1
41.3
%
142.0
40.7
%
Operating earnings
$
16.9
4.8
%
$
17.1
4.9
%
Key Metrics
Comparable sales % change
(2.3)
%
(8.5)
%
Comparable sales $ change
$
(8.0)
$
(31.8)
Sales change from new and closed stores, net
$
8.4
$
(3.0)
Impact of changes in Canadian exchange rate on sales
$
(0.0)
$
(0.5)
Sales per square foot, excluding e-commerce (thirteen weeks ended)
$
54
$
54
Sales per square foot, excluding e-commerce (trailing twelve months)
$
246
$
250
Square footage (thousand sq. ft.)
5,622
5,702
Stores opened
3
2
Stores closed
8
9
Ending stores
855
866
Net Sales
Net sales of $349.6 million in the first quarter of 2024 increased $0.4 million, or 0.1%, compared to the first quarter of 2023. Comparable sales, which reflects the calendar shift due to the 53 rd week in 2023, decreased 2.3% driven by a decline in consumer traffic in our retail stores. Despite the continued challenging retail environment, our e-commerce sales improved in the first quarter of 2024. E-commerce penetration was approximately 13% of net sales in the first quarter of 2024 compared to 12% in the first quarter of 2023. Our kids category, which is a key differentiator for Famous Footwear, continued to perform well by once again exceeding last year’s volume, while sales of seasonal footwear categories, including sandals and boots, were challenged.
We opened three stores and closed eight stores during the first quarter of 2024, resulting in 855 stores and total square footage of 5.6 million at the end of the quarter, compared to 866 stores and total square footage of 5.7 million at the end of the first quarter of 2023. During the quarter, we also converted 10 stores to the new FLAIR (Famous Localized and Immersive Retail) concept, which has been successful in driving sales growth. Sales to members of our customer loyalty program, Famously You Rewards ("Rewards"), continue to account for a majority of the segment’s sales, with approximately 78% of our net sales made to program members in the first quarter of 2024, compared to 79% in the first quarter of 2023.
Gross Profit
Gross profit increased $1.9 million, or 1.2%, to $161.0 million for the first quarter of 2024, compared to $159.1 million for the first quarter of 2023, driven by lower inbound freight costs for our inventory, lower outbound shipping costs, due in part to growth in our store fulfillment of e-commerce orders (buy online, pick up in store), and lower inventory shrinkage. As a percentage of net sales, our gross profit increased to 46.1% for the first quarter of 2024, from 45.6% for the first quarter of 2023.
Selling and Administrative Expenses
Selling and administrative expenses increased $2.1 million, or 1.5%, to $144.1 million for the first quarter of 2024, compared to $142.0 million for the first quarter of 2023. The increase was driven by higher facilities costs and salary and benefits expenses, partially offset by lower marketing expense. As a percentage of net sales, selling and administrative expenses increased to 41.3% for the first quarter of 2024, compared to 40.7% for the first quarter of 2023.
27
Table of Contents
Operating Earnings
Operating earnings decreased slightly to $16.9 million for the first quarter of 2024, compared to $17.1 million for the first quarter of 2023, primarily reflecting the factors described above. As a percentage of net sales, operating earnings declined slightly to 4.8% for the first quarter of 2024, compared to 4.9% for the first quarter of 2023.
BRAND PORTFOLIO
Thirteen Weeks Ended
May 4, 2024
April 29, 2023
% of
% of
($ millions)
Net Sales
Net Sales
Net sales
$
317.2
100.0
%
$
325.5
100.0
%
Cost of goods sold
169.4
53.4
%
181.6
55.8
%
Gross profit
147.8
46.6
%
143.9
44.2
%
Selling and administrative expenses
106.4
33.5
%
101.2
31.1
%
Operating earnings
$
41.4
13.1
%
$
42.7
13.1
%
Key Metrics
Direct-to-consumer (% of net sales) (1)
33
%
32
%
Change in wholesale net sales ($)
$
(13.1)
$
(42.2)
Change in retail net sales ($)
$
4.8
$
2.0
Unfilled order position at end of period
$
257.0
$
272.9
North America stores:
Stores opened
—
1
Stores closed
1
2
Ending stores - North America
61
62
Ending stores - East Asia
38
31
Ending stores - Total Brand Portfolio
99
93
(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
Net sales of $317.2 million in the first quarter of 2024 decreased $8.3 million, or 2.6%, compared to the first quarter of 2023. Lower wholesale sales were partially offset by growth in sales from our owned e-commerce business, which increased approximately 8.6% compared to the first quarter of 2023. While we continue to experience weakness in dress footwear and seasonal fashion categories, including sandals and boots, our fashion sneakers and casual footwear categories both experienced gains in the first quarter of 2024 compared to 2023. We have increased the penetration of the fashion sneakers and casual footwear categories to our total product assortment to align our inventory with consumer demand and we believe we are currently well-positioned in these categories. Our brands with a heavy sneaker concentration, such as Vionic, Dr. Scholl’s and Vince, performed better in the first quarter than brands with a higher mix of dress footwear. During the first quarter of 2024, we closed one store in the United States, resulting in a total of 61 stores, compared to 62 stores at the end of the first quarter of 2023. In addition, we continued to expand our retail store presence in East Asia by opening two new Sam Edelman stores in the first quarter of 2024, resulting in a total of 38 stores, compared to 31 stores at the end of the first quarter of 2023.
Our unfilled order position for our wholesale sales decreased $15.9 million, or 5.8%, to $257.0 million at May 4, 2024, compared to $272.9 million at April 29, 2023. The decrease in our backlog order levels compared to last year reflects more conservative buying by our wholesale customers as they manage their inventory levels and the dynamic nature of inventory buying, which includes periodic replenishment orders and shipping directly to the end consumer purchasing from our wholesale customers’ websites.
Gross Profit
Gross profit increased $3.9 million, or 2.7%, to $147.8 million for the first quarter of 2024, compared to $143.9 million for the first quarter of 2023. As a percentage of net sales, our gross profit increased to 46.6% for the first quarter of 2024, compared to 44.2% for the first quarter of 2023, reflecting higher merchandise margins and a higher mix of retail sales, including e-commerce sales from our owned brands and sales from our branded retail stores, both of which have higher gross margins than our wholesale sales. In addition, our wholesale margins benefited from lower sales allowances and discounts in the quarter.
28
Table of Contents
Selling and Administrative Expenses
Selling and administrative expenses increased $5.2 million, or 5.1%, to $106.4 million for the first quarter of 2024, compared to $101.2 million for the first quarter of 2023. The increase was primarily due to higher marketing expenses for certain brands, including Sam Edelman and Naturalizer, higher expenses associated with the expansion of our international business and higher distribution expenses. As a percentage of net sales, selling and administrative expenses increased to 33.5% for the first quarter of 2024, compared to 31.1% for the first quarter of 2023.
Operating Earnings
Operating earnings decreased to $41.4 million for the first quarter of 2024, from $42.7 million for the first quarter of 2023, as a result of the factors described above. As a percentage of net sales, operating earnings were 13.1% for both the first quarter of 2024 and 2023.
ELIMINATIONS AND OTHER
Thirteen Weeks Ended
May 4, 2024
April 29, 2023
% of
% of
($ millions)
Net Sales
Net Sales
Net sales
$
(7.6)
100.0
%
$
(11.9)
100.0
%
Cost of goods sold
(7.9)
103.7
%
(11.6)
97.5
%
Gross profit
0.3
(3.7)
%
(0.3)
2.5
%
Selling and administrative expenses
15.8
(208.9)
%
9.8
(82.4)
%
Operating loss
$
(15.5)
205.2
%
$
(10.1)
84.9
%
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 $7.6 million for the first quarter of 2024 is $4.3 million, or 36.6%, lower than the first quarter of 2023 reflecting a decrease in product sold from our Brand Portfolio segment to Famous Footwear.
Selling and administrative expenses increased $6.0 million, to $15.8 million in the first quarter of 2024, compared to $9.8 million for the first quarter of 2023. The increase primarily reflects higher information technology and consulting expenses associated with the implementation of our cloud-based enterprise resource planning platform and higher expenses for our restricted stock units granted to non-employee directors, reflecting a larger increase in our stock price compared to the first quarter of 2023.
LIQUIDITY AND CAPITAL RESOURCES
Borrowings
Total debt obligations of $191.0 million at May 4, 2024 decreased $100.5 million, from $291.5 million at April 29, 2023, and increased $9.0 million, from $182.0 million at February 3, 2024. Net interest expense for the first quarter of 2024 decreased $1.8 million to $3.8 million, compared to $5.6 million for the first quarter of 2023, primarily due to lower average borrowings on our revolving credit facility. This decrease was partially offset by higher weighted-average interest rates. The interest on our revolving credit facility is based on a variable rate, which adversely impacts our interest expense in the current elevated interest rate environment. While our interest expense for the remainder of 2024 will continue to be negatively impacted by the elevated interest rates, we expect to continue to reduce the borrowings under our revolving credit agreement to mitigate the impact of the high interest rate environment.
Credit Agreement
As further discussed in Note 9 to the condensed consolidated financial statements, the Company maintains a revolving credit facility for working capital needs that matures on October 5, 2026. The aggregate amount available under the revolving credit facility is 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 SOFR, or the prime rate (as defined in the Credit Agreement), plus a spread.
At May 4, 2024, we had $191.0 million in borrowings and $9.4 million in letters of credit outstanding under the Credit Agreement. Total borrowing availability was $299.6 million at May 4, 2024. We were in compliance with all covenants and restrictions under the Credit Agreement as of May 4, 2024.
29
Table of Contents
Working Capital and Cash Flow
Thirteen Weeks Ended
($ millions)
May 4, 2024
April 29, 2023
Change
Net cash provided by operating activities
$
36.1
$
37.5
$
(1.4)
Net cash used for investing activities
(10.3)
(6.5)
(3.8)
Net cash used for financing activities
(16.4)
(28.5)
12.1
Increase in cash and cash equivalents
$
9.4
$
2.5
$
6.9
Reasons for the major variances in cash provided in the table above are as follows:
Cash provided by operating activities was $1.4 million lower in the thirteen weeks ended May 4, 2024 as compared to the thirteen weeks ended April 29, 2023, primarily reflecting the following factors:
● A smaller increase in trade accounts payable during the thirteen weeks ended May 4, 2024, compared to the thirteen weeks ended April 29, 2023, reflecting lower inventory purchases,
● A smaller decrease in inventory during the thirteen weeks ended May 4, 2024, compared to the thirteen weeks ended April 29, 2023, reflecting more normalized inventory purchasing and receipt flow.
● A larger increase in accounts receivable during the thirteen weeks ended May 4, 2024, compared to the thirteen weeks ended April 29, 2023; and
● Lower net earnings in the thirteen weeks ended May 4, 2024, compared to the thirteen weeks ended April 29, 2023, partially offset by
● A smaller decrease in accrued expenses and other liabilities during the thirteen weeks ended May 4, 2024, compared to the thirteen weeks ended April 29, 2023.
We are in the process of undergoing a multi-year cloud-based ERP implementation. We are funding the first phase of the implementation, which is scheduled to go live in the second quarter of 2024, with cash provided by operating activities.
Cash used for investing activities was $3.8 million higher for the thirteen weeks ended May 4, 2024 as compared to the thirteen weeks ended April 29, 2023, reflecting higher capital expenditures, due in part to the Famous Footwear store remodels to the new FLAIR concept. We expect purchases of property and equipment and capitalized software to be between $60 million and $70 million in 2024, compared to $49.6 million in 2023.
Cash used for financing activities was $12.1 million lower for the thirteen weeks ended May 4, 2024 as compared to the thirteen weeks ended April 29, 2023, primarily due to net borrowings on our revolving credit agreement of $9.0 million in the thirteen weeks ended May 4, 2024, compared to net repayments of $16.0 million in the comparable period in 2023. In addition, the issuance of common stock under share-based plans was $2.2 million lower in the thirteen weeks ended May 4, 2024, compared to the thirteen weeks ended April 29, 2023. These decreases were partially offset by $15.1 million in repurchases of our common stock under our share repurchase programs during the three months ended May 4, 2024, compared to no repurchases during the three months ended April 29, 2023.
A summary of key financial data and ratios at the dates indicated is as follows:
May 4, 2024
April 29, 2023
February 3, 2024
Working capital ($ millions) (1)
$
41.0
$
(58.4)
$
46.0
Current ratio (2)
1.05:1
0.93:1
1.06:1
Debt-to-capital ratio (3)
24.9
%
39.2
%
24.3
%
(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 May 4, 2024 was a $41.0 million, which was an improvement of $99.4 million from April 29, 2023 and a $5.0 million decrease from February 3, 2024. The increase in working capital from April 29, 2023 primarily reflects lower borrowings under our
30
Table of Contents
revolving credit agreement. The decrease in working capital from February 3, 2024 primarily reflects higher trade accounts payable and lower inventory, partially offset by higher accounts receivable and lower accrued expenses. Our current ratio was 1.05:1 as of May 4, 2024, compared to 0.93:1 at April 29, 2023 and 1.06:1 at February 3, 2024. Our debt-to-capital ratio was 24.9% as of May 4, 2024, compared to 39.2% as of April 29, 2023 and 24.3% at February 3, 2024.
We declared and paid dividends of $0.07 per share in the first quarter of both 2024 and 2023. 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 February 3, 2024.
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. These risks include (i) changing consumer demands, which may be influenced by general economic conditions and other factors; (ii) inflationary pressures and supply chain disruptions; (iii) rapidly changing consumer preferences and purchasing patterns and fashion trends; (iv) the ability to maintain relationships with current suppliers; (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) transitional challenges with acquisitions and divestitures; (xv) changes to tax laws, policies and treaties; (xvi) commitments and shareholder expectations relating to environmental, social and governance ("ESG") considerations (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 February 3, 2024, 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 February 3, 2024.
31
Table of Contents
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.