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Footwear company Caleres (NYSE:CAL) fell short of analysts’ expectations in Q2 CY2024, with revenue down 1.8% year on year to $683.3 million. It made a non-GAAP profit of $0.85 per share, down from its profit of $0.98 per share in the same quarter last year.
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Caleres (CAL) Q2 CY2024 Highlights:
- Revenue: $683.3 million vs analyst estimates of $723.8 million (5.6% miss)
- EPS (non-GAAP): $0.85 vs analyst expectations of $1.22 (30.3% miss)
- EPS (non-GAAP) guidance for the full year is $4.08 at the midpoint, missing analyst estimates by 7.8%
- Gross Margin (GAAP): 45.5%, in line with the same quarter last year
- EBITDA Margin: 8.4%, down from 9.4% in the same quarter last year
- Free Cash Flow Margin: 9.9%, down from 11.3% in the same quarter last year
- Market Capitalization: $1.31 billion
The owner of Dr. Scholl's, Caleres (NYSE:CAL) is a footwear company offering a range of styles.
FootwearBefore the advent of the internet, styles changed, but consumers mainly bought shoes by visiting local brick-and-mortar shoe, department, and specialty stores. Today, not only do styles change more frequently as fads travel through social media and the internet but consumers are also shifting the way they buy their goods, favoring omnichannel and e-commerce experiences. Some footwear companies have made concerted efforts to adapt while those who are slower to move may fall behind.
Sales GrowthA company’s long-term performance is an indicator of its overall business quality. While any business can experience short-term success, top-performing ones enjoy sustained growth for multiple years. Over the last five years, Caleres’s sales were flat. This shows demand was soft and is a tough starting point for our analysis.
Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. Caleres’s recent history shows its demand has stayed suppressed as its revenue has declined by 2.3% annually over the last two years.
This quarter, Caleres missed Wall Street’s estimates and reported a rather uninspiring 1.8% year-on-year revenue decline, generating $683.3 million of revenue. Looking ahead, Wall Street expects sales to grow 3.6% over the next 12 months, an acceleration from this quarter.
Cash Is KingIf you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
Caleres has shown weak cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 5.5%, subpar for a consumer discretionary business.
Caleres’s free cash flow clocked in at $67.62 million in Q2, equivalent to a 9.9% margin. The company’s cash profitability regressed as it was 1.4 percentage points lower than in the same quarter last year, but it’s still above its two-year average. We wouldn’t read too much into this quarter’s decline because investment needs can be seasonal, leading to short-term swings. Long-term trends are more important.
Over the next year, analysts predict Caleres’s cash conversion will slightly fall. Their consensus estimates imply its free cash flow margin of 5% for the last 12 months will decrease to 3.5%.
Key Takeaways from Caleres’s Q2 Results We struggled to find many strong positives in these results. Its revenue unfortunately missed and its EPS fell short of Wall Street’s estimates. Guidance was also underwhelming, which means that Wall Street analysts will be reducing their projections. Overall, this quarter could have been better. The stock traded down 14.1% to $32 immediately following the results.
