Caleres Inc Q1 FY2020 Earnings Call

Good afternoon and welcome to the Caleres First Quarter Earnings Conference Call. My name is Erika and I will be your conference coordinator. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Operator Instructions. As a reminder, this conference is being recorded. At this time, I would like to turn the call over to Logan Bonacorsi, Vice President of Investor Relations. Please go ahead, ma’am.

Good afternoon. I would like to thank you for joining our first quarter 2020 earnings call and webcast. A press release with detailed financial tables as well as our quarterly slide presentation are available at caleres.com. Please be aware that today's discussion contains forward-looking statements which are subject to a number of risks and uncertainties. Actual results may differ materially due to various risk factors, including but not limited to the factors disclosed in the company's Form 10-K and other filings with the U.S. Securities and Exchange Commission. Please refer to today's press release and our SEC filings for more information on risk factors and other factors which could impact forward-looking statements. Copies of these reports are available online. The company undertakes no obligation to update any information discussed in this call at any time. Joining me on the call today is Diane Sullivan, CEO, President, Chairman; and Ken Hannah, Senior Vice President and CFO. We will begin the call with brief prepared remarks and thereafter we will be happy to take your questions. I would now like to turn the call over to Diane. Diane?

Thanks Logan and good afternoon everyone. Before we begin, I think it's important to acknowledge the profound changes that have occurred in the world and in the marketplace in the three short months since our last earnings call on March 12. The acceleration of the COVID-19 pandemic launched the world into unfamiliar territory causing extreme economic disruption and uncertainty. These changes have had varying degrees of effects on people, regions, and businesses from the way we interact with one another to the way we work. More recently, we have seen a period of social unrest in the United States as horrible acts of brutality have highlighted the racial injustice that persists, which has led to protests across the country. As we stand against the injustice so many are speaking out against, it is also my sincerest hope that you, your families, and your loved ones remain healthy and safe during this time period. I would also like to take a moment to recognize and acknowledge all of our Caleres associates around the world for their drive, focus, and dedication during this very challenging period in our history. From the outset, our people adapted seamlessly, shifting to new ways of performing their daily jobs, while at the same time supporting the broader effort of manufacturing much-needed supply for the healthcare community, and of course taking the required yet sometimes difficult steps to ensure the company is well positioned for the future. As you well know, the first quarter for us began in a much different manner than it ended. We started fiscal year 2020 with a strong foundation, grounded by our strategic priorities, supported by our financial flexibility, and well positioned for growth. As we discussed in early March, we were seeing good momentum in our Famous Footwear business, which continued to benefit from strong performances from its premium and iconic brands, growth in the Kids category and improved consumer engagement and retention in our rewards program. And while we're managing through supply chain challenges in the brand portfolio, we were encouraged by the trends and outlook for 2020. As the health crisis accelerated in early March, we immediately shifted enacting a two-pronged approach of safeguarding our people, our customers, and our communities, while at the same time taking action to protect the long-term viability of our business. By March 19, we had temporarily closed our entire fleet of retail stores and shifted our focus to the e-commerce portion of our business that would remain operational during this time period. In addition, we established a virtual workplace and empowered the vast majority of our associates to work from home during this period. At the same time, we took aggressive action to ensure that the organization was equipped to weather the severe economic shutdown and emerge ready to compete as the economy recovered. We moved very quickly to limit our cash outflows, proactively working with our partners to significantly reduce inventory receipts, to extend payment terms, to scale back all non-essential operating expenses, and reduce our planned capital expenditures. In addition, as our stores were closing, we proactively drew down approximately $168 million from our revolving credit facility. We subsequently boosted our liquidity position by exercising a portion of the accordion feature thus increasing the borrowing capacity under that facility. We also made difficult decisions regarding our workforce. We permanently eliminated certain positions, furloughed others and implemented companywide salary reductions for the remaining associates in order to preserve essential liquidity during the most severe stages of the economic shutdown. Now, looking at the first quarter, as expected, our results were materially impacted by COVID-19. Our business was on track as we entered the crisis with comparable store sales at Famous Footwear up nearly 13% year-over-year, and positive signs and improvement in our wholesale business. However, in mid-March, stores were closed and wholesale customers halted deliveries and delayed or canceled orders as they grappled with their own store closures and deterioration in consumer demand. And while we had made significant progress in recent periods expanding our e-commerce business, it was only able to replace a small portion of the sales lost from our entire store fleet and our partner stores being closed for the back half of the quarter. So despite these significant headwinds, we responded with speed and agility, leveraging our omnichannel capabilities and leaning into our enhanced digital business to connect and serve our consumers. During the period of store closures, we experienced a triple-digit increase in our Famous Footwear e-commerce business as their top brands in sport and casual product offerings resonated with consumers who required more casual styles to fit their new stay-at-home reality. And to support the growth in our digital business, we effectively utilized our expansive network of temporarily closed stores as sourcing points for delivery and adapted our buy-online pick-up-in-store capability to include a contactless curbside pickup option at certain locations. Currently, we’re offering this service at approximately 375 locations across the Famous Footwear fleet with the expectation that we’ll expand to more than 600 stores in the next couple of weeks. Now, I'd like to spend a few minutes talking about our experience with our store reopenings to date. As previously announced in early May, we began welcoming back our furloughed store associates, with nearly 95% of our store managers returning to lead this effort and initiated our first stage of in-store service. To date, we have successfully resumed in-store operations at 553 Famous Footwear locations, representing approximately 60% of the store fleet and 33 Allen Edmonds and 36 Naturalizer locations. We expect to have nearly 85% of our stores open by late June with the remaining stores primarily located in the regions heavily impacted by COVID-19 reopening when it is safe to do so. Looking at the current period, the phased restart has gone smoothly. We’re taking advantage of our expanded capabilities and complementary mix of services and are seeing sales at newly reopened Famous Footwear stores coming in well above last year's levels. While it’s too soon to call a trend, we’re encouraged and believe this positive response is due to the fact that our Famous stores have great brands at great value and are known for always having styles that are currently experiencing heightened demand. In addition, the majority of our stores are off-mall and ideally situated for physical distancing, which provides our consumers with the level of comfort, safety, and experience they prefer. Our branded portfolio stores that have reopened are experiencing sales trends above our internal expectations, and our wholesale partners have begun to reopen their locations and place some new orders for delivery. We’re working closely with our key retail partners to ensure we’re liquidating Spring inventory very aggressively and that we’re set up well for fall. In addition, looking at the first few weeks of the second quarter, our e-commerce businesses have continued to outpace our expectations even as stores have reopened with strong increases at both Famous Footwear and our branded e-commerce sites. During the first several weeks of May, our Famous Footwear e-commerce sales have increased more than 200% with our internal branded sites up nearly 40% compared to last year. Notably quarter-to-date, we've seen improved traffic and conversion rates at key branded sites in our portfolio. But before I hand the call over to Ken for a deeper dive on our results, I want to share why I’m confident in our future and our ability to move through this crisis and emerge even stronger. First, we have the capabilities to capitalize on consumers' increasing preference to transact digitally, having made critical investments in our digital and fulfillment capabilities and platforms. Second, we’re known for iconic brands that consumers trust, whether owned or sold through Famous Footwear. Consumers now more than ever before are searching for brands that they know and trust, to give them the style, fit and value they desire. And we’re capitalizing on this across our portfolio of brands. Third, we possess a diversified offering of lifestyle brands, deeply rooted in comfort, casual and athletic. This is very much aligned with the categories desired most by our customers, and provides strategic and comprehensive access to a large and growing component of the footwear market. And finally, we have a strong capital structure that gives us the ability to invest in innovation and drive our long-term strategy while returning value to shareholders through dividends and share repurchases. As I reflect on this extraordinary period in our history, I believe we've managed through the early stages of this crisis effectively and aggressively, cutting costs and preserving cash. While we’re encouraged by the early signs of improvement, consumer demand is hard to predict, and there is still a great deal of uncertainty in the broader economy. However, we’re resilient, resourceful and we possess sought-after brands and businesses known for comfort and style. As we progress through the year, we will continue to be laser focused on protecting our people, maintaining a strong balance sheet, tightly managing supply and demand, while also strengthening the business through the advancement of our long-term strategic objectives. So we’re well prepared to capitalize on the rebound when it comes. When we entered the pandemic, my message to the company was that we would operate with a sense of urgency, with compassion, and with our eyes wide open to the reality of the changing environment. We will continue to operate this way as we move from protect and prepare, and should begin to restart and rebound, accelerating our decision making, product development, innovation and communication. And with that, I'd like to now turn the call over to Ken for a financial review. Ken?

Thank you, Diane and good afternoon, everyone. I'd like to echo Diane's sentiment and thank our team for their commitment to our business during this tumultuous period. I'm very proud of our organization's ability to adapt swiftly, work efficiently and focus on strengthening the business for the rebound. Early in the quarter, we quickly shifted our priorities to ensure we had the financial flexibility to navigate through a prolonged crisis. We took a series of deliberate steps to reduce costs and preserve cash, while at the same time putting a comprehensive action plan in place to evolve our strategy to position our company to maximize sales and profitability as the business resumed. We immediately preserved cash, aligning our workforce and related expenses to meet the needs of a significantly lower demand environment. We reduced inventory levels aggressively by reducing or delaying product receipts and extending payment terms. We began negotiations to modify leases, including the deferral and abatement of certain lease payments and eliminated or deferred all non-essential capital projects, leading to a 40% reduction in our planned 2020 capital expenditure budget. We strengthened our financial flexibility by exercising a portion of the accordion feature on our asset-based revolving credit facility, increasing the borrowing capacity to $600 million. Combined, our efforts enabled us to end the quarter with $187.7 million in cash, slightly above the levels when stores closed in mid-March. Now moving on to a review of our first quarter financials. Our GAAP results included $7.65 per share in charges and were primarily a result of the unfavorable business climate and our lower stock price and market cap during the period. The majority of the charges are non-cash and were triggered by the impact of COVID-19 on our business as it caused us to reassess the carrying value of the assets on our balance sheet. These costs include $5.66 per share in non-cash goodwill and intangible asset impairment charges, $1.90 per share related to COVID-19 expenses including factory order cancellations, lease impairment charges, inventory markdowns, customer credit losses, employee severance among others, $0.06 per share related to fair value adjustment of our Blowfish purchase obligation and $0.03 per share in brand exit costs associated with our decision to not renew the Fergie license. You can find our GAAP results and a reconciliation table of our GAAP results to adjusted in our press release. In total for the first quarter, our net sales were $397.2 million, compared to $677.8 million in the first quarter of fiscal 2019. Famous Footwear total sales were $191.3 million, down 45.7% from the first quarter of fiscal 2019. Same-store sales at Famous Footwear rose 12.8% through mid-March and were up 12.6% for the entire quarter driven by strength in e-commerce. As a reminder, our comparable store sales calculation removes closed stores from both periods. Our branded portfolio sales were $217.2 million, a decrease of 36.3% for the quarter impacted by wholesale cancellations and branded store closures during the final seven weeks of the first quarter. Our adjusted gross margin was 39.5% compared to an adjusted gross margin of 42.3% in the first quarter of fiscal 2019. The 280 basis point decline was driven by a larger mix of e-commerce sales at Famous Footwear and the resulting shipping costs associated with that business. This activity along with the delay and cancellation of inventory receipts enabled us to end the quarter with inventory down 9.7% versus Q1 last year. Famous Footwear had an adjusted gross profit margin of 39.2%, which compares to an adjusted gross margin of 43.4% in the 2019 first quarter. Again, the margin decline was driven by higher shipping costs associated with a larger mix of e-commerce related business in the quarter. Our Branded Portfolio had an adjusted gross margin of 38% compared to an adjusted gross margin of 39.3% in the fiscal 2019 first quarter, driven by the promotional nature of retail selling post-store closures. Our consolidated SG&A expense was $225.2 million representing a decline of approximately $37 million compared to the first quarter of last year. This reflected lower corporate and store payroll expense as well as the initial benefits of expense reductions. While we work with landlords to defer certain payments, we expensed the full amount of rent in accordance with GAAP irrespective of the payment schedules. Our lower sales and gross margin were more than offset by improvements in SG&A and led to an adjusted operating loss of $68.3 million. This compares to adjusted operating income of $24.9 million in the fiscal 2019 first quarter. At Famous Footwear, the adjusted operating loss was $45.6 million and at Brand Portfolio, the operating loss was $10.1 million. The company's adjusted net loss was $50.4 million, or a loss of $1.30 per diluted share. This compares to adjusted net income of $15 million or $0.36 per diluted share last year. Now turning to the balance sheet, we ended the first quarter with $187.7 million in cash and approximately $438.5 million of borrowings under our revolving credit facility. As a reminder, we exercised a portion of our accordion, which increased our capacity from $500 million to $600 million and we have no significant debt maturities until 2023. As I mentioned earlier, our inventory at quarter-end was down 9.7% and included a 3.8% decline at Famous Footwear and an 18% decline in the Brand Portfolio. Looking ahead, we will maintain stringent control over the flow of inventory to ensure alignment with our demand. Net cash provided by operating activities was $728,000 with capital expenditures totaling $4.5 million. During the quarter, we returned approximately $16 million to shareholders through share buybacks and dividends, investing $12.9 million in cash to fund the repurchase of 1.5 million shares of our common stock and $2.8 million to fund our quarterly dividends. While we considered it prudent to shore up liquidity and protect our cash position to ensure that we were positioned to withstand even a protracted market disruption, we expect to turn our focus to debt reduction. We expect deleveraging to be the most value-creating use of cash in future periods given the volatility in the marketplace. At the same time, we anticipate complementing our debt reduction efforts with a continuation of our long-standing quarterly dividend and opportunistically repurchasing shares. Given the rapidly evolving nature of the COVID-19 pandemic and the recent nationwide protests, we continue to plan for multiple scenarios, while remaining intensely focused on the disciplined management of inventory and expense. However, due to the ongoing business disruption and substantial uncertainty, we're not providing guidance for fiscal 2020. In order to ensure Caleres is positioned to compete in this market landscape going forward, we must be agile, streamlined and ready to pivot in this dynamic environment. We believe the lessons learned, the progress that has been made and the plans we have in place will transform the way we operate going forward. During the period of closures, we closely analyzed the expected performance of every store across the fleet, and are accelerating the closure of approximately 160 brick-and-mortar locations across our specialty retail and Famous Footwear stores in 2020 and 2021. Going forward, we’re monitoring traffic and profitability levels across our markets as our stores reopen, and we'll take actions to ensure that our fleet is right-sized for how this pandemic has accelerated the shift to digital. Additionally, we’re constantly reviewing our portfolio of brands to align with changing consumer preferences and lifestyles and will eliminate those that aren’t performing in this environment. To that end, we've made the decision to exit Fergie as well as several private brands and certain lower-margin businesses in the portfolio. Given this, we have taken steps to align the size of the organization and our resources with the new level of consumer demand. These decisions, while difficult, allow us to focus our resources on the areas of the business that we'll expect will yield the highest return. We also expect to benefit from quicker decision making as we operate a leaner and more efficient organization. Caleres has faced numerous challenges over its long and storied history. And while each instance has required a different approach, we have evolved, we have overcome, and we have found new ways to create value for our shareholders. With that foundation and drive, we believe that we will come through this period a stronger, more successful company. And with that, I'd like to turn the call over to the operator for questions.

Operator Instructions. And your first question comes from Rick Patel with Needham & Company.

Thank you. Good afternoon and hope everyone is well.

Hi, Rick.

Hi, Rick. Thank you very much, you as well.

Thanks, Diane. I have two questions related to the stores that have reopened so far. First, I appreciate it's all very fluid right now, but can you give us context on how much comps are up in those stores that have reopened? And second, can you talk about e-commerce in those markets where stores have reopened? Have you seen the strength in that channel continue or have you seen it decelerate with consumers increasingly going back to stores?

Yes. Rick, here's what I would say: we've actually seen both brick-and-mortar and our e-commerce business accelerate at Famous Footwear. Not only are we comping positively in brick-and-mortar in May, we also have a very, very strong performance in our e-commerce business as well. We have not seen that shift or decline yet. Now, I say that again, you said it well: very fluid, early days and we only have roughly 60% of our fleet open. So we're cautious. But we like the early signs of what we're seeing now. As it gets later into June, and once we open the last roughly 25% of our stores in some of these markets that are harder hit, we'll have to see how it all reveals itself. But so far, I think we feel pretty good about the work that the teams have done to this point in time. But as I said, we're staying very focused and knowing that this is a marathon and we've got to make sure we’re really on this every day.

I appreciate that, and can you tie that into how you're thinking about inventory? So I guess as we think about this across Famous and the brands, first on Famous, how are you approaching inventories for the fall? Any pockets that you're looking to invest in versus de-emphasize? And then similarly for the Brand Portfolio, any color on the fall order book and how that would shape your inventory decisions for the fall?

Yes, sure. On Famous Footwear, first it would be exactly what you would expect it to be. I think the strength in the performance categories in sport, lifestyle and casual and easy-wearing footwear is where the market really is. And actually, a little bit more recently, we’re seeing our ability to really sell some flat sandals. Going into fall we're going to continue to support those iconic brands that have been doing so well for us up to this point in time and make sure we continue to invest there and basically not invest in more of the traditional casual and dress side of the equation. So the teams are looking at that every single week to make sure we're calibrating it correctly. And frankly, we want to use this opportunity as a way to try to increase turn as well at Famous. On the Brand Portfolio side, we have a little less visibility right now on consumer demand because very few stores are open. I would say the system is just starting to move. So we’re taking a very conservative approach there because we've generally heard that most of the marketplaces are thinking about planning the back half of their business down 30% to 40%. So we're making sure that we keep our inventories in line with that, and that we're also pivoting where we need to on certain brands to make sure we're focused on the categories of business where we believe the consumer is going to be. With respect to the order book, given that initial look at the back half being potentially down 30% to 40%, our order book is in good position to support that level of sales. But again, very fluid — we're looking at it every day and reacting.

Yes, Rick, I'll just add a little bit of color to Diane’s comments. I know when we talk about comp stores and we only have 60% of our store base open, it's kind of hard to model that into what the second quarter might look like. And as we're looking at that, your question on the order book, I think we're currently looking at when those fall orders might ship and one of the things that we're working through right now is it looks like everyone will try to extend the spring season as long as they can, which means that it will probably delay when we would ship for fall. Normally on the Brand Portfolio, we're shipping at the end of July for the first part of fall. It looks like that is going to be shifted every bit of 30 days out. So as we look at the second quarter, we're not expecting the overall sales to be all that different than what we experienced in Q1. Obviously, with stores closed for the first couple of weeks of May and then now opening as we get to 85% of our store fleet open, there's still a big number of those that are in places like New York and California that likely won't open until even further into the quarter.

I appreciate it. Thanks very much.

Your next question is from Steven Marotta with CL King & Associates.

Good afternoon. Diane, Ken and Logan. I want to talk a little bit about back-to-school and how you're planning for it specifically for Famous from a buy standpoint, from an inventory standpoint, from a merchandising standpoint. I know you mentioned everyone's seemingly elongating Spring. Do you think that will work for you for back-to-school as an aside? I think I’m hearing that it seems that kids are going to go back-to-school this fall. That's been in the air a little bit. If you've heard anything different too, that'd be helpful. If you could just talk about the season, that would be great.

All right, Steve. No problem. I think everybody is really hoping that kids are going back-to-school, for sure. That is what I've been hearing from everybody beyond just the audience from a business perspective. But we think the best indication of how we're going to do back-to-school is really our trend right now, because the segments of the business and the brands and everything that's driving our business currently, along with the strength in our kids business, we think it’s going to carry in nicely through the second quarter and into the third quarter. So I would say that first, and the second thing in terms of county-by-county and school districts, we really haven't heard too much yet about what their status is, but our Famous store teams and marketing teams are monitoring that and will be managing that and adjusting as we go forward. We've heard all sides of that — that some people are going back early, and then skipping fall break and out at Thanksgiving. There are others that may go just on time or late. So it's very, but it's nothing definitive, it's anecdotal. We're just going to continue to watch that, monitor and react. We're encouraged, we believe we've got the right inventory levels to do the business that we'd like to do. And we think it's in the right brands in the right style. Also, the teams did a nice job of moving a lot of our media to digital given this uncertainty and the difficulty in TV buying without knowing the timeframe. So we feel like we've got a terrific plan and the right assortment. We're looking forward to it.

Sure. You mentioned the curbside pickup option, and that was in about 375 stores and is expected to expand to more than 600. Can you talk a little bit about whether that is additive or at least what it replaces? If you can quantify that in some manner, that would be really helpful.

Yes, it's sort of hard to know whether it's additive. We believe, given the fact that no stores were open, the curbside offering certainly enhanced access to customers as opposed to shipping only. Customers could go to the store and pick it up. To some degree it replaced home shipping. We'll have to see as stores stay open and what that mix looks like—how many will come and do curbside versus go into the store versus have it shipped directly to their home. It's difficult at this moment to know exactly what that's going to look like. But for sure it's an important part of the mix of how consumers want to shop in the future. We will make sure we not only have it in the 600 or so stores we expect to offer it in Famous, but we'll look to see in other places in our portfolio where else we would want to do that as well.

Very helpful. Thank you.

All right, thanks Steve.

Thanks Steve.

Your next question is from Chris Svezia with Wedbush.

Hi.

Hi, Chris.

Hi, Chris, how are you?

Hi guys, I'm well, how are you all? Hope you're doing good. A couple things. One, can you go back and clarify — you said sales not much different versus the first quarter. I just want to be clear: are you talking about total company sales? And are you talking percentage decline versus the prior year? Second, when you talked about the Famous Footwear comp being positive, you're just talking about those stores that are open, obviously, correct?

Total company.

Yes, of course. That would be the 60% that are open now.

Fair to say — I know you are not going to give a percentage — but that it's notably in excess of how you were trending prior to Famous stores closing, so 13% plus is that fair?

It’s trending more than Q1 was.

What percentage of Famous is now e-commerce? What was it last year and how has the base changed?

Last year we were around 10% for the full year. In the first quarter this year, given the store closures, it's about 28% of our business, so it's pretty substantial.

You said in the second quarter it accelerated to north of 200% in May for Famous e-commerce, correct?

Yes, we did.

On the Brand Portfolio side, what percentage is e-commerce — your company-owned websites versus retail e-commerce?

Our e-commerce-related businesses were about 36% in the quarter for our Brand Portfolio. Since the end of the quarter, we've seen acceleration across branded dot-com sites, wholesale dropship, and other e-commerce channels like Amazon. We've seen increases in new consumers, traffic is up, and revenue has been driven by improved conversion. There have been fairly small decreases in order value; early on some brands were sensitive to discounting, but overall we're seeing positive momentum in the branded sites.

On margin, regarding the Brand Portfolio: with timing shifts and shipment delays and potential pushouts, is there potentially more intense margin pressure in Q2 as you clean inventory out relative to Q1? How should we think about that?

Given the inventory moves — cancellations, push-outs and the like — we've had those conversations and believe we've accurately reflected what we needed to in Q1 and the reserves we've taken. It will be ongoing as we continue to liquidate inventory over the next month or two. Everyone is trying to work together to get to the other side of this, and I think we've got it fairly accurately reflected in our Q1 results.

Just two final ones: Ken, on the $262 million impairment, what was that for — is that for Allen Edmonds and Vionic? And on SG&A, how should we think about that given branded portfolio assumptions and a potential 30% plus decline in the back half?

One of the things we had to do was complete impairment testing in Q1 given the market environment and the stock price. We wrote down goodwill related to what was left of Vionic and Allen Edmonds, and we also reviewed indefinite-lived intangibles such as trade names for Allen Edmonds and other brands like Via Spiga and Franco Sarto; those that were indefinite-lived and impacted by the shutdown and reduction in sales and earnings were written down. That was part of the required test as we closed out Q1. On SG&A, the first quarter was down $37 million year-over-year as we did a full quarter of the actions we took. We expect that to be closer to $50 million in the second quarter year-over-year. For the back half, how expenses unfold will depend on demand: if demand is stronger than we're assuming, we'll be able to continue booking savings; if it drops, we may take another look. Right now we're really focused on the second quarter.

Got it, okay. I'll drop out. Thanks very much and all the best.

Thank you, Chris.

Thanks, I appreciate it.

Our next question is from Sam Poser with Susquehanna.

Good afternoon, hope everybody's great and safe and healthy and thank you for taking my questions. I've got a few follow-ups. The first one is going to be about comparable store sales. Ken, can you tell us what the all-stores comp was for the quarter? We model the negative and we don't know exactly how many stores were closed. Can you tell us sort of what the all-in comp was including e-commerce and stores that were closed so we can appropriately model next year and have a feel for what's happening versus the stores that were opened last year? That would be great — thank you.

All right. So let me try to answer your question just based on our total sales. When we look at our total sales at Famous Footwear, whether the store is open or not, we had the first two weeks with very few stores open, so there was zero sales coming out of those stores during that period.

In Q1, starting Q1 where you were?

The $191 million in Q1 — your total sales in Q1 were down for Famous Footwear by 45.7%.

They were down 45.7%, can we assume that your comp was down in that range? Is it a 50% comp down for the quarter? Or is it a 30% or a 38% comp down? What's the real all-in comp including e-commerce, last year to this year?

E-commerce was up 70% in the quarter, and in total for the quarter Famous Footwear sales were down 45.7%. In terms of decoupling comps across stores open versus closed, we don't report the business that way on an all-in comp basis that includes closed stores. So I'm not sure there's an apples-to-apples metric to provide for the exact all-in comp you're asking for.

You don't have to decouple. For example, other companies reported an all-in comp including stores that were closed. How should we think about where you were in Q1 given you had 60% open now? I'm trying to model appropriately.

I'll take it offline, Sam. I don't even know how to answer your question in the format you're asking because we don't look at the business that way in our reporting.

All right. How many stores did you close during the quarter and how many stores do you plan to close in Q2? How many are closed permanently and won't reopen anymore?

In the quarter, if you look at Schedule Five attached to the results, we operated 934 stores this year and 985 stores last year. So that reflects the net changes year-over-year. There were 15 stores that were closed outside of the COVID shutdown during the period, which accounts for part of the decline. In addition, over the next two years we're accelerating the closure of approximately 160 locations across the company. Some of those are stores that were closed as part of COVID and won't reopen; others were on month-to-month and others are part of Brand Portfolio decisions.

So you closed 15 stores in the quarter to get from 985 to 934?

That's right.

And do you plan to open any stores in the back half of the year?

We've got somewhere around 14 that are on the schedule for the back half. Nothing really in the first half.

Okay. At Famous, within the e-commerce platform, how many customers shopping online were new to Famous — can you give us an idea of what percentage were new versus repeat?

It was pretty interesting, Sam. It was close to half of the people that shopped online during the period were new customers and about half were repeat, which was rather interesting and quite a bit higher than usual.

And did you sign those folks up for the loyalty program or how many of those do you think will stick around?

I'm sure we did sign many of them up. We track those conversions and we'll continue to work to retain new customers.

Lastly, to what degree are you narrowing the assortment at Famous, and are you going to need to use Famous to help move Brand Portfolio product you wouldn't have otherwise? Are you narrowing the assortment materially?

I would say we're narrowing the assortment a little, removing some extraneous brands particularly in the casual and dress side where demand is lower, such as men's dress. We want to make sure we have the right inventory against the big drivers and the key brands. We did have a special section on the Famous Footwear site where we have been clearing some Brand Portfolio goods as well and that has performed. We've been trying a lot of new approaches to access customers and liquidate goods — curbside being one example — and if things work we'll continue them.

Thank you. Right, trying to just sell. Okay, thank you so much and good luck, stay safe.

Thanks and appreciate it.

Your next question is from Laura Champine with Loop Capital.

Hi, thanks for taking my question. Just some clarification. Ken, you commented that you expect the Brand Portfolio to be down 30% to 40% in the back half and I take it that's specific to the Brand Portfolio and not what you would plan for Famous Footwear. Also, for the current quarter, you commented sales could end up about in the same ballpark as the year-on-year decline in Q1. Was that comment directed at the Brand Portfolio or was that consolidated?

No, that's all-in, consolidated.

And the down 30% to 40% for the back half — that's branded portfolio specific, correct?

Yes, that was the branded portfolio.

Yes, I had talked about that as the way we were seeing most of our retail partners planning fall. That's kind of what they've been thinking about in the last couple of weeks. As we see more of these stores reopening and get a better sense of how the business is going to respond, that might be adjusted, but it's a fairly conservative planning assumption.

When we look at the store closures you mentioned are accelerating, are these stores being accelerated to closure in the sense that they will not reopen and are being permanently shuttered?

When we looked at the next two years through the end of 2021, we identified about 160 stores that we would accelerate closing. Some of those are stores that were closed as part of COVID that we won't reopen after things return to normal, some were on month-to-month, and a number are within the Brand Portfolio tied to Naturalizer where we made final decisions on timing over the next two years.

Got it, thank you.

Thanks, Laura.

Thanks, Laura.

There are no further questions in queue and at this time, I'll turn the call back over to Diane Sullivan for any closing remarks.

Yes, I'd like to thank everyone for their interest in Caleres and we look forward to seeing everybody on our next conference call. Thank you and be safe.

Ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may now disconnect.