Caleres is banking on its owned brands and the millennial family for its continued growth over the next few years.
At its investor day on Thursday, the St. Louis-based footwear company gave an update into each of its business units and laid out its three-year strategic plan.
This new roadmap focuses on four pillars including growing its brand portfolio segment to make up about 50 percent of the company’s revenue by 2026; deepening Famous Footwear’s connections to the millennial family and leveraging its dominance in the kid’s market; leaning into the company’s “One Caleres” model that drives synergies and vertical integration across brands; and delivering net sales growth of 3 percent to 5 percent over the next three years.
With these goals in mind, here are five things to know from Caleres’ 2023 investor day.
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Owned Brand Portfolio Growth
During the day’s presentation, Caleres CFO Jack Calandra laid out what this three-year plan means financially for the company. The executive noted that Caleres expects the bulk of its sales and operating profit growth over the next three years to come from the brand portfolio, which is powered by its Sam Edelman, Vionic, Allen Edmonds and Naturalizer labels.
In the company’s three-year plan, Calandra said Caleres plans to grow its owned brands through wholesale business with deeper penetration in the channel. “This is a sizable opportunity for brands where we are underpenetrated, such as Allen Edmonds, and where we see brand extension opportunities like Sam Edelman,” Calandra said. “We will also accelerate direct-to-consumer through owned retail and e-commerce.”
Growth outside of the U.S. market is also on the horizon for some of the company’s brands. “We believe Sam Edelman has a big opportunity to build on its relatively small international business,” Calandra noted.
Category expansion within the portfolio, and further penetration of owned brands at Famous Footwear is also a priority. (This mirrors a similar strategy underway at Designer Brands-owned DSW.)
Calandra added that he expects these strategies to drive $275 million in incremental sales by 2026. Overall, the company forecasts net sales across the company of $3.21 billion by 2026, up from $2.97 billion in net sales in 2022.
Allen Edmonds to Open More Stores
In the company’s most recent earnings statement released in August, Caleres noted that Allen Edmonds delivered its 10th consecutive quarter of growth in Q2. According to company CEO Jay Schmidt, improvement at the men’s brand was broad-based across all channels, with sales up mid-single digits compared to the second quarter last year.
“We saw strength in our direct channels, with brick-and-mortar up 5 percent and e-commerce up 13 percent, driven by increased traffic and conversion,” he said at the time. “I am pleased to note that we’ve seen significant increases in the brand’s average unit retails compared to pre-pandemic levels. There’s a lot to be excited about at Allen Edmonds.”
In his investor day presentation, Keith Duplain, president of Caleres’ brand portfolio-St. Louis Group, said that the company will open 20 new Allen Edmonds stores over the next four years.
Duplain also noted that the men’s brand will be tested in new markets like Canada and in “opportunity markets” like Las Vegas, Seattle, and Pittsburgh. “We’re aiming for a cleaner distribution and reduced promotion for the brand with an overall 40 percent increase in [average retail unit],” he said.
Sam Edelman to Expand Internationally as It Marks Anniversary
The label, which is set to celebrate its 20th anniversary in 2024, has some big moves in the works – the biggest of which is Sam Edelman’s international expansion.
According to Mr. Edelman, who was interviewed during the investor day by CEO Jay Schmidt, the brand has grown overseas “significantly” since 2019, with international sales at the label expected to increase 30 percent year-over-year in 2023, with an additional 15 percent growth in the segment in 2024.
As of now, the label is sold in 33 countries, with over 10 additional regions expected to open by 2026. One of the more successful international markets for Sam Edelman is China. Mr. Edelman noted that the brand has 55 stores in China with plans to have 150 in the next few years. “We’ve also opened in Israel, Mexico City and many other places across the world,” Edelman said. “A freestanding store is also coming to Dubai. I believe that the global expansion of Sam Edelman is huge.”
The brand’s shop-in-shops are also important for Caleres. This year, the company expanded Sam Edelman’s shop-in-shop program with the addition of two key markets. According to the namesake, the brand now has more than 25 shops around the U.S. — with ambitions of opening over 100 shop-in-shops in the coming years.
In terms of product, the brand will be placing more of an emphasis on athletic sneakers moving forward. According to the company, sneakers currently represent 6 percent of Sam Edelman’s merchandise mix but sees an opportunity to double it over the next three years. In the spring 2024, Sam Edelman will launch 11 new styles in the athletic sneaker category.
Sam Edelman is also relaunching its Sam & Libby brand at Famous Footwear and select retailers nationwide staring March 4, 2024. The brand is aiming its focus toward shoe chain retails and will exit mass market, the company noted.
Famous Footwear’s Focus on the Millennial Family
For the future success of Famous Footwear, Caleres drilled down on its target consumer – the Millennial mom (the company calls her “Christina”) and her family. According to Caleres, “Christina” accounts for 30 percent of its total consumer base and is 65 percent more valuable over the average Famous Footwear customer.
Caleres noted that the best way to acquire this customer is through its kids’ shoe selection. This kid’s first and new year-long approach, Caleres aims to grow its leadership position in the kids’ shoe market, which accounts for 20 percent of the retailer’s current business.
This customer acquisition plans to be done by “meeting the customer where they are,” which is in an omni-channel way across online, social media and in-store. The company also plans to expand its “Flair” store design, which first launched in 2021, across more of its Famous Footwear fleet. These stores feature larger displays, tech-enabled touchscreens, and an “enhanced” layout showcasing trends and newness from high-demand brands.
“We believe our current position as a retailer of choice for the millennial family and our unparalleled position in kids footwear sets us up to win going forward,” Schmidt said.
Future M&A Possibilities
Caleres – which acquired Allen Edmonds in 2016, Vionic and a majority interest in Blowfish Malibu in 2018 – is not saying no to future merger and acquisition moves.
CEO Jay Schmidt said on Thursday that the company will consider “accretive” opportunities that are focused on white spaces in its portfolio, specifically men’s companies, Gen-Z focused labels or international brands.
“The emphasis here is on accretive,” Schmidt said. “We have significantly raised the bar in profitability of our brand portfolio and are planning for continued margin expansion. Any M&A would need to support that objective and be of sufficient scale to make a difference.”
