CLAYTON — Shoe seller Caleres rebounded from a pandemic crisis with its most profitable year in decades last year. Executives say 2022 could be even better.
They told investors last week they could improve on last year’s record sales and beat 2021’s record earnings per share by up to 13%, nearly doubling their pre-pandemic peak.
“We’ve seen a sea change in the earning power of the organization,” said CEO Diane Sullivan.
It’s a new look for the former Brown Shoe Co., which has long struggled to increase its bottom line. But investments in online sales and key brands have helped it survive and thrive on pandemic footwear trends, and analysts say they are in the right place to ride the next wave. And at least for now, the economy is working with them: Supply chain issues have allowed retailers to cut discounts and make more money on their sales, and Sullivan says she thinks that’s is here to stay.
Just over a decade ago, Caleres, which changed its name in 2015, was still recovering from the Great Recession.
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But the lean years brought new leadership with a new strategy: the company eliminated struggling brands, closed underperforming stores and put a renewed emphasis on bestsellers. As the numbers grew, the company invested in new distribution and logistics centers and recruited new talent to grow its online business. “We could see that we were going to have to ship direct to consumers,” Sullivan, the CEO, said in an interview Friday.
The pandemic threatened to throw a big wrench in the plan. The company laid off hundreds of people at its Clayton headquarters and wrote off a tenth of its assets. It lost more in the first quarter of 2020 than it gained in the previous five years combined.
Then investments in logistics began to pay off: online sales jumped 40% as unprecedented government stimulus measures swept through the economy. People started looking for more comfortable shoes for hanging around the house and more athletic shoes for going out – the wheelhouses of Famous Footwear. Nikes and Birkenstocks flew off the shelves.
Last year was even better: even when people returned to stores, a good portion of online earnings remained stuck. Inventory shortages caused by supply chain issues have allowed Caleres to abandon the usual buy one, get one promotions, maximizing profits amid extraordinary consumer demand. The final tally for the year was $137 million, or $3.55 per share, the company said Tuesday.
Sullivan said the good times have endured: Famous Footwear sales are holding up as people continue to buy running shoes and Crocs. And with more people returning to the office and to social events as the pandemic recedes, the pandemic-hit dress shoe brands — Allen Edmonds, Sam Edelman and Naturalizer — could hit their stride.
Analysts found much of the story compelling. Many people returning to the office might look at their old shoes and want an upgrade, said Jason Long, founder of local consultancy Eye on Retail.
Burt Flickinger III, who heads the consultancy Strategic Resource Group, said there would also be a crash of weddings, rehearsal dinners, baptisms and some of the first graduations in three years. “They’re going to need more shoes for that,” he said.
Americans have also gained weight during the pandemic. They’ll want running shoes to get back in shape and comfortable shoes while they wait, Flickinger said.
The big question is whether Caleres will be able to continue selling shoes without resorting to the old discount strategy.
Sullivan thinks so. Stores have reduced their offerings to focus on bestsellers. And after the past two years, she doubts anyone in footwear wants to recoup big markdowns.
Long, the St. Louis consultant, said the momentum could hold, at least for a while. Given all the news about supply chain shortages and inflation, people aren’t looking for discounts as much, he said.
But Flickinger dismissed the idea. Inflation is already getting too high for consumers, he said, and shoe companies like Caleres will be forced to adapt.
“Their prices are going to have to come down,” he said. “Or the consumer will radically shift to places with better prices.”