Caleres Delivers Q2 Earnings Beat On Solid Famous Footwear Performance

Caleres Inc (NYSE: CAL) reported its second-quarter EPS ahead of expectations and reiterated its fiscal year 2019 guidance. With the stock multiples near historic lows, shares could rally on the earnings beat and reconfirmed outlook, according to Wedbush.

The Analyst

Wedbush’s Christopher Svezia maintained an Outperform rating on Caleres with a price target of $27.

The Thesis

Caleres’ fundamental story seems to be unfolding in-line with “our investment thesis,” with Famous Footwear’s comparables and margins accelerating significantly above Street expectations, Svezia said in the note.

Famous Footwear’s comparables grew 1.5%, against flat expectations. Comp accelerated throughout the quarter, “with Nike inflecting positive and a successful clearance of declining legacy platforms,” the Svezia said.

The company’s revamped rewards program not only added more members, but also improved retention. Gross margins contracted by 80 bps to 40.7%, on sales mix and Famous Footwear’s clearance of legacy platforms. Adj EPS came in at 62 cents, substantially higher than the consensus estimate of 58 cents.

In the fourth quarter, the company could also benefit from “lapping the dilution at Vionic and higher margins at Allen Edmonds,” Svezia wrote.

He added that management’s fiscal 2019 outlook appears achievable and that the company should be able to mostly offset the “evolving tariff situation.”

Price Action

Shares of Caleres traded higher by 22.38% to $18.65 at time of publishing.

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