Caleres, Inc. (NYSE:CAL) Q4 2017 Earnings Conference Call Transcript

Mar 13, 2018 • 04:30 pm ET

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Caleres, Inc. (NYSE:CAL) Q4 2017 Earnings Conference Call Transcript

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Presentation
Executive
Diane Sullivan

we completely paid down the $110 million in borrowings for Allen Edmonds and also made great progress in our 2017 focus areas.

Last year, we focused on areas that we believe were critical to the long-term health of the company and will drive both near and longer term outcomes, as well as making sure they help us to maintain our consumer focus. These four key areas included our initiatives around speed-to-market, speed-to-consumer, digital, and the diversification of our portfolio of brands. For 2018, we plan to maintain and amplify the focus on some of these areas and expand the scope for others. And I thought it would be important to just take a few minutes to highlight some of our accomplishments and importantly, our expectations for 2018.

First of all, our speed-to-market program delivered against our internal targets in 2017 and helped us respond to consumer demand for newness and freshness throughout the year. Our speed programs accounted for approximately 15% of our source payers in 2017, and enabled us to react to trends in the marketplace like sport-inspired styles and to be proactive in testing new designs. These efforts also allowed us to focus on the styles we believe in and then expand across the marketplace as needed to address consumer demand with additional colors, different materials and other enhancements. Our work around simplifying and streamlining for speed will continue in 2018, and our efforts are expected to drive even greater visibility into the entire supply chain and allow us to have more productive inventory on the floor.

For 2017, our speed-to-consumer initiatives were focused around Famous Footwear and we made significant strides in accelerating the time it takes to get product into our consumers hands or on their doorstep, with approximately 70% of shipments in consumers hands within three days. To further accelerate time-to-consumer, we launched Buy Online, Pickup in Store in the second quarter this year. This program also helped offset some of the margin pressure related to Famous.com orders and helped drive our fourth quarter gross margin up 58 basis points at Famous Footwear.

In 2018, our speed-to-consumer efforts are going to be focused around our brand portfolio. The shift in consumer shopping patterns is not surprisingly, impacting wholesale distribution and fulfillment. And as a result, we need to become more efficient in processing smaller order quantities on a more frequent basis and we also need to be able to react to increased demand for loose pair processing on the brand portfolio side of our business. In 2018, we will be strategically shifting to in-house fulfillment for our brand portfolio, which will result in some additional expense. However, we have no plans to stay still in the midst of this changing consumer landscape and we're always trying to look to the future. So similar to our modernization and expansion work that we completed in '16 at our Lebanon distribution center, this shift to in-house fulfillment for our brand portfolio will provide us the flexibility to adapt