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OFFON

CALERES, INC.

(CAL)
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CALERES : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

06/09/2021 | 02:56pm EDT

OVERVIEW

We experienced a strong recovery in the first quarter of 2021, recording sequential net sales and earnings growth, and stronger gross margins and balance sheet. Our upward trajectory was driven in large part by an outstanding performance in our Famous Footwear business, as we continue to leverage our enhanced omni-channel capabilities and capitalize on our direct-to-consumer model.


In the first quarter of last year, our financial results had been significantly
impacted by the coronavirus ("COVID-19") pandemic, including the temporary
closure of all of our retail stores from mid-March through the end of the
quarter.  We did experience sequential improvement in sales in the second half
of 2020, driven by the reopening of our retail stores, and continued solid
growth of our e-commerce business.  During the first quarter of 2021, as the
vaccine became widely distributed and state and local governments continued to
ease restrictions, consumer sentiment and spending began to improve.  The
domestic economy and the retail industry have begun to recover, as reflected in
our strong financial results.   The additional stimulus measures approved by the
federal government also provided a boost in consumer spending.  These factors
strengthened demand for our products in the first quarter of 2021, which
contributed to strong growth in our net sales and operating earnings.

Financial Highlights

Following is a summary of the financial highlights for the first quarter of 2021:

Consolidated net sales increased $241.4 million, or 60.8%, to $638.6 million in

the first quarter of 2021, compared to $397.2 million in the first quarter of

2020. The sales increase was primarily driven by our Famous Footwear segment,

which experienced sequential improvement in store traffic and conversion rates,

contributing to the sales increase of $206.8 million, or 108.2%. Net sales in

? our Brand Portfolio segment also increased by $33.1 million, or 15.2%, compared

to the first quarter of 2020. We continued to leverage our enhanced digital

platform to grow e-commerce sales in both segments during the first quarter of

2021. Consolidated net sales from our owned e-commerce websites increased

21.4% compared to the first quarter of 2020. On a consolidated basis, our

direct-to-consumer sales represented 74.5% of consolidated net sales for the

   first quarter of 2021, compared to 64.3% in the first quarter of 2020.


   Consolidated gross profit increased $153.0 million, or 125.5%, to $274.9

million in the first quarter of 2021, compared to $121.9 million in the first

? quarter of 2020. Our gross profit margin increased to 43.0% in the first

quarter of 2021, compared to 30.7% in the first quarter of 2020. Our gross

profit margin in the first quarter of 2020 was negatively impacted by

incremental inventory markdowns of $33.4 million, as further described below.

Consolidated operating earnings increased $444.1 million to $17.9 million in

? the first quarter of 2021, compared to an operating loss of $426.2 million in

the first quarter of 2020.

Consolidated net earnings attributable to Caleres, Inc. were $6.2 million, or

? $0.16 per diluted share, in the first quarter of 2021, compared to a net loss

of $345.8 million, or $8.95 per diluted share, in the first quarter of 2020.

The following items should be considered in evaluating the comparability of our first quarter results in 2021 and 2020:

Brand Portfolio - business exits - During the first quarter of 2021, we

incurred costs totaling $13.5 million ($11.9 million on an after-tax basis, or

? $0.31 per diluted share), related to the closure of all but two Naturalizer

retail stores in North America. In the first quarter of 2020, we incurred

costs of $1.6 million ($1.2 million on an after-tax basis, or $0.03 per diluted

share) in connection with our decision to exit the Fergie brand.

Blowfish Malibu mandatory purchase obligation - As further discussed in Note 5

and Note 14 to the condensed consolidated financial statements, the Blowfish

Malibu noncontrolling interest is subject to a mandatory purchase obligation

after a three-year period following the 2018 acquisition, based on an earnings

? multiple formula. During the first quarter of 2021, we recorded a fair value

adjustment of $6.4 million ($4.7 million on an after-tax basis, or $0.13 per

diluted share), compared to $3.2 million ($2.4 million on an after-tax basis,

or $0.06 per diluted share) in the first quarter of 2020. The fair value

adjustments are recorded as interest expense, net in the condensed consolidated

   statements of earnings (loss).




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Impairment of goodwill and intangible assets - During the first quarter of

2020, we recorded non-cash impairment charges totaling $262.7 million ($218.5

million on an after-tax basis, or $5.66 per diluted share), including $240.3

? million of impairment associated with goodwill as a result of the unfavorable

business climate and our lower stock price and market capitalization, and $22.4

million associated with our Allen Edmonds and Via Spiga indefinite-lived trade

names. Refer to Note 8 to the condensed consolidated financial statements for

further discussion.

COVID-19-related expenses - During the first quarter of 2020, we incurred $93.6

? million ($73.3 million on an after-tax basis, or $1.90 per diluted share) in

costs associated with the economic impacts of the COVID-19 pandemic and related

impacts on our business and industry. The $93.6 million was comprised of:

Impairment charges associated with property and equipment and lease right-of

? use assets of $34.6 million, presented within restructuring and other special

charges;

? Inventory markdowns of $33.4 million, presented within cost of goods sold;

? Expenses associated with factory order cancellations of $14.3 million,

presented within restructuring and other special charges;

? Provision for expected credit losses of $8.5 million, presented within

restructuring and other special charges; and

Other special charges of $2.8 million, primarily including severance and

? incremental facility costs such as deep cleaning and supplies, presented within

   restructuring and other special charges on the condensed consolidated
   statements of earnings (loss).



Metrics Used in the Evaluation of Our Business

The following are a couple of key metrics by which we evaluate our business and make strategic decisions:

Same-store sales


The same-store sales metric is a metric commonly used in the retail industry to
evaluate the revenue generated for stores that have been open for more than
a year, though other retailers may calculate the metric differently.  Management
uses the same-store sales metric as a measure of an individual store's success
to determine whether it is performing in line with expectations.  Our same-store
sales metric is a daily-weighted calculation for the period, which includes
sales for stores that have been open for at least 13 months.  In addition, in
order to be included in the same-store sales metric, a store must be open in the
current period as well as the corresponding day(s) of the comparable retail
calendar in the prior year.  Accordingly, closed stores (whether temporary or
permanent closures) are excluded from the same-store sales metric for each day
of the closure.  Relocated stores are treated as new stores and therefore
excluded from the calculation.  E-commerce sales for those websites that
function as an extension of a retail chain are included in the same-store sales
calculation.  We believe the same-store sales metric is useful to shareholders
and investors in assessing our retail sales performance of existing locations
with comparable prior year sales, separate from the impact of store openings or
store closures.

Beginning in mid-March 2020, all of our Famous Footwear and Brand Portfolio
stores in North America were temporarily closed and we began a phased reopening
of retail stores in mid-May.  Our same-store sales calculation excludes the
impact of both permanent and temporary store closures.  Accordingly, for the
first quarter of 2020, our same-store sales calculation is impacted more heavily
by our e-commerce sales penetration, which was higher than in prior periods,
given the strong growth in that channel and the fact that our e-commerce sites
continued to operate throughout the first quarter of 2020.

Sales per square foot

The sales per square foot metric is commonly used in the retail industry to calculate the efficiency of sales based upon the square footage in a store.

 Management uses the sales per square foot metric as a measure of an individual
store's success to determine whether it is performing in line with expectations.
The sales per square foot metric is calculated by dividing total retail store
sales, excluding e-commerce sales, by the total square footage of the retail
store base at the end of each month of the respective period.  This metric was
adversely impacted by the temporary retail store closures during a portion of
the first quarter of 2020 and therefore, the metric is not comparable to the
first quarter of 2021.

Outlook

While we experienced a slow start to the first quarter of 2021 related to the
lingering impacts of the COVID-19 pandemic, we ended the quarter with strong
financial results as we executed on our strategy, including merchandising,
marketing and the consumer experience.  We



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expect continued strength at Famous Footwear to be combined with improving performance at the Brand Portfolio segment as we progress through the year.

 Throughout the remainder of 2021, we will remain focused on building the
momentum at Famous Footwear, leveraging our enhanced direct-to-consumer
capabilities to drive e-commerce sales growth, utilizing our data-derived
consumer insights to drive greater consumer alignment and engagement, and
maintaining our balanced and disciplined approach to cost control and capital
spending.  As we continue to align our inventory levels with consumer demand, we
will also remain focused on the ongoing global supply chain disruptions by
optimizing and maximizing our current inventory and emphasizing trending brands
and styles.

Following are the consolidated results and the results by segment:



CONSOLIDATED RESULTS




                                                                             Thirteen Weeks Ended
                                                                     May 1, 2021              May 2, 2020
                                                                                 % of                      % of
($ millions)                                                                Net Sales                 Net Sales
Net sales                                                       $  638.6        100.0 %  $   397.2        100.0 %
Cost of goods sold                                                 363.7         57.0 %      275.3         69.3 %
Gross profit                                                       274.9         43.0 %      121.9         30.7 %
Selling and administrative expenses                                243.5         38.1 %      225.2         56.7 %
Impairment of goodwill and intangible assets                           -            - %      262.7         66.1 %
Restructuring and other special charges, net                        13.5   
      2.1 %       60.2         15.2 %
Operating earnings (loss)                                           17.9          2.8 %    (426.2)      (107.3) %
Interest expense, net                                             (11.8)        (1.8) %      (9.5)        (2.4) %
Other income, net                                                    3.8          0.6 %        3.6          0.9 %
Earnings (loss) before income taxes                                  9.9          1.6 %    (432.1)      (108.8) %
Income tax (provision) benefit                                     (3.5)        (0.6) %       85.9         21.6 %
Net earnings (loss)                                                  6.4          1.0 %    (346.2)       (87.2) %
Net earnings (loss) attributable to noncontrolling interests         0.2          0.0 %      (0.4)        (0.1) %
Net earnings (loss) attributable to Caleres, Inc.               $    6.2   
      1.0 %  $ (345.8)       (87.1) %




Net Sales

Net sales increased $241.4 million, or 60.8%, to $638.6 million for the first
quarter of 2021, compared to $397.2 million for the first quarter of 2020.  Our
Famous Footwear segment experienced a sales increase of $206.8 million, or
108.2% during the first quarter of 2021, with net sales of $398.1 million
exceeding our pre-pandemic first quarter 2019 sales level, achieving the highest
net sales in a first quarter in our history.  Our strong performance was
attributable to a number of factors, including positive consumer sentiment
attributable to the widespread availability of the COVID-19 vaccine and easing
of government restrictions, as well as the second round of government stimulus.
 We believe that these factors led to a significant improvement in retail store
traffic and conversion rates.  Net sales for our Brand Portfolio segment
increased $33.1 million, or 15.2% during the first quarter of 2021.  While Brand
Portfolio net sales improved over last year, they remain below pre-pandemic
levels, due in part to the brand exits announced in late 2019 and early 2020 and
the closure of all but two Naturalizer retail stores in North America. Our
e-commerce and logistics capabilities helped drive a 21.4% increase in
e-commerce sales on our owned websites during the first quarter of 2021, with
consolidated e-commerce penetration representing approximately 26% of net sales.

On a consolidated basis, our direct-to-consumer sales represented 74.5% of total net sales for the first quarter of 2021. Our casual, athletic and sport categories of footwear continued to be the strongest performers during the quarter, and demand for dress footwear is beginning to build.

Gross Profit

Gross profit increased $153.0 million, or 125.5%, to $274.9 million for the
first quarter of 2021, compared to $121.9 million for the first quarter of 2020,
due in part to higher net sales.  In addition, we were able to reduce
promotional activity at Famous Footwear due to our well-positioned inventory and
strong sell-throughs.  Furthermore, our gross profit in the first quarter of
2020 was impacted by higher incremental cost of goods sold primarily due to
$33.4 million in inventory markdowns reflecting the difficult retail environment
driven by the COVID pandemic, as well as $1.6 million in inventory markdowns
related to the decision to exit our Fergie brand.  As a percentage of net sales,
gross profit increased to 43.0% for the first quarter of 2021, compared to 30.7%
for the first quarter of 2020.

We classify certain warehousing, distribution, sourcing and other inventory procurement costs in selling and administrative expenses. Accordingly, our gross profit and selling and administrative expense rates, as a percentage of net sales, may not be comparable to other companies.



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Selling and Administrative Expenses


Selling and administrative expenses increased $18.3 million, or 8.1%, to $243.5
million for the first quarter of 2021, compared to $225.2 million for the first
quarter of 2020.  The increase was primarily due to higher salaries in the first
quarter of 2021, combined with higher expenses related to our incentive
compensation plans.  In the first quarter of 2020, in response to our retail
stores being shut down at the onset of the pandemic we took steps to reduce
expense, including workforce reductions, furloughs for a significant portion of
our retail store associates and temporary salary reductions for most remaining
employees.  Logistics and other variable expenses were also higher in the first
quarter of 2021 to support higher sales volume.  As a percentage of net sales,
selling and administrative expenses decreased to 38.1% for the first quarter of
2021, from 56.7% for the first quarter of 2020.

Impairment of Goodwill and Intangible Assets

During the first quarter of 2020, we incurred impairment charges of $262.7
million ($218.5 million on an after-tax basis), including $240.3 million
associated with goodwill and $22.4 million associated with the indefinite-lived
Allen Edmonds and Via Spiga trade names.  There were no corresponding charges
for the first quarter of 2021.   Refer to Note 5 and Note 8 to the condensed
consolidated financial statements for further discussion of these charges.

Restructuring and Other Special Charges, Net

We incurred restructuring and other special charges of $13.5 million ($11.9
million on an after-tax basis, or $0.31 per diluted share), reflecting expenses
associated with the decision to close all Naturalizer retail stores in North
America with the exception of two Naturalizer flagship retail stores in the
United States.  Restructuring and other special charges of $60.2 million ($47.7
million on an after-tax basis, or $1.24 per diluted share) were incurred in the
first quarter of 2020 related to the unfavorable business climate, driven by the
impact of the COVID-19 pandemic on our business operations.  These charges were
primarily for impairment associated with retail store furniture and fixtures and
lease right-of-use assets and liabilities associated with factory order
cancellations.  Refer to Note 5 to the condensed consolidated financial
statements for further discussion of these charges.

Operating Earnings (Loss)

Operating earnings increased $444.1 million to $17.9 million for the first
quarter of 2021, compared to an operating loss of $426.2 million for the first
quarter of 2020, primarily reflecting higher net sales, gross profit and lower
restructuring and impairment charges.  As a percentage of net sales, operating
earnings were 2.8% for the first quarter of 2021, compared to an operating loss
of 107.3% for the first quarter of 2020.

Interest Expense, Net


Interest expense, net increased $2.3 million, or 24.4%, to $11.8 million for the
first quarter of 2021, compared to $9.5 million for the first quarter of 2020,
reflecting the fair value adjustment to the Blowfish Malibu mandatory purchase
obligation of $6.4 million in the first quarter of 2021, compared to $3.2
million in the first quarter of 2020.  The increase associated with the
mandatory purchase obligation was partially offset by lower average borrowings
under our revolving credit agreement.  We continued to make debt reduction a
priority during the first quarter of 2021, repaying $50.0 million during the
first quarter of 2021 and ending the quarter with $200.0 million of borrowings
under our revolving credit facility.

Other Income, Net

Other income, net increased $0.2 million, or 6.8%, to $3.8 million for the first
quarter of 2021, compared to $3.6 million for the first quarter of 2020.  Refer
to Note 13 of the condensed consolidated financial statements for further detail
regarding the components of net periodic benefit income.

Income Tax Benefit (Provision)


Our effective tax rate can vary considerably from period to period, depending on
a number of factors.  Our consolidated effective tax rate was 35.5% for the
first quarter of 2021, compared to 19.9% for the first quarter of 2020.  Our
higher tax rate for the thirteen weeks ended May 1, 2021 primarily reflects the
non-deductibility of losses at our Canadian division, which were driven by
exit-related costs associated with Naturalizer retail stores.  The rate was
partially offset by discrete tax benefits totaling $1.2 million.  During the
first quarter of 2020, our effective tax rate was impacted by several discrete
tax items, including the non-deductibility of a portion of the Company's
intangible asset impairment charges, the provision of a valuation allowance
related to net deferred tax assets of its Canadian business division and the
incremental tax provision related to share-based compensation.

Net Earnings (Loss) Attributable to Caleres, Inc.

Net earnings attributable to Caleres, Inc. were $6.2 million for the first quarter of 2021, compared to a net loss of $345.8 million for the first quarter of 2020, respectively, as a result of the factors described above.



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  Table of Contents

FAMOUS FOOTWEAR


                                                             Thirteen Weeks Ended
                                                    May 1, 2021                May 2, 2020
                                                                 % of                       % of
($ millions, except sales per square foot)                  Net Sales      
           Net Sales
Net sales                                     $    398.1        100.0 %  $    191.3        100.0 %
Cost of goods sold                                 218.3         54.8 %       122.2         63.9 %
Gross profit                                       179.8         45.2 %  $     69.1         36.1 %
Selling and administrative expenses                131.9         33.2 %       120.6         63.0 %
Restructuring and other special charges,
net                                                    -            - %        16.0          8.4 %
Operating earnings (loss)                     $     47.9         12.0 %  $   (67.5)       (35.3) %

Key Metrics
Same-store sales % change                            3.3 %                     12.6 %
Same-store sales $ change                     $      6.2                 $     21.8
Sales change from new and closed stores,
net                                           $    200.2                 $ 

(182.7)

Impact of changes in Canadian exchange
rate on sales                                 $      0.4                 $ 

(0.0)


Sales per square foot, excluding
e-commerce (thirteen weeks ended)             $       55                 $ 

22

Sales per square foot, excluding
e-commerce (trailing twelve months)           $      193                 $ 

195

Square footage (thousand sq. ft.)                  6,043                   
  6,198

Stores opened                                          4                          -
Stores closed                                          7                         15
Ending stores                                        913                        934




Net Sales

Net sales increased $206.8 million, or 108.2%, to $398.1 million for the first
quarter of 2021, compared to $191.3 million for the first quarter of 2020, and
also exceeded our pre-pandemic first quarter 2019 sales level.  Our strong
performance during the first quarter of 2021 was attributable to a number of
factors.  Consumer confidence increased during the quarter as a result of the
widespread availability of the COVID-19 vaccine and the easing of government
restrictions, which led to a significant improvement in retail store traffic and
conversion rates.  In addition, the second round of government stimulus
positively impacted net sales for the quarter.  We also continue to experience
strong growth in our e-commerce business, which increased approximately 17% for
the first quarter of 2021.  E-commerce penetration was approximately 16% of net
sales in the first quarter of 2021, compared to approximately 28% in the first
quarter of 2020 when our retail stores were closed for approximately half of the
quarter.  We opened four stores and closed seven stores during the first quarter
of 2021, resulting in 913 stores and total square footage of 6.0 million at the
end of the first quarter of 2021, compared to 934 stores and total square
footage of 6.2 million at the end of the first quarter of 2020.  Sales to
members of our customer loyalty program, Famously You Rewards ("Rewards"),
continue to account for a majority of the segment's sales, with approximately
81% of our net sales made to program members in the first quarter of 2021,
compared to 79% in the first quarter of 2020.

Gross Profit

Gross profit increased $110.7 million, or 160.3%, to $179.8 million for the
first quarter of 2021, compared to $69.1 million for the first quarter of 2020,
driven by the sales increase. As a percentage of net sales, our gross profit
increased to 45.2% for the first quarter of 2021, compared to 36.1% for the
first quarter of 2020.  Due to our well-positioned inventory and strong
sell-throughs, we reduced promotional activity.  As a result, both our retail
stores and e-commerce business experienced higher gross margins than the first
quarter of 2020.  In addition, our gross margin in the first quarter of 2020 was
impacted by $6.0 million in incremental inventory markdowns, reflecting the
difficult retail environment in 2020 driven by the pandemic.

Selling and Administrative Expenses


Selling and administrative expenses increased $11.3 million, or 9.4%, to $131.9
million for the first quarter of 2021, compared to $120.6 million for the first
quarter of 2020.  The increase was primarily due to higher salaries in the first
quarter of 2021, as well as an increase in logistics and other variable expenses
to support the higher sales volume.  In addition, in the first quarter of  2020,
in response to our retail stores being shut down at the onset of the pandemic,
we took steps to reduce expense, including workforce reductions, furloughs for a
significant portion of our retail store associates and temporary salary
reductions for most remaining employees. As a percentage of net sales, selling
and administrative expenses decreased to 33.2% for the first quarter of 2021,
compared to 63.0% for the first quarter of 2020.

Restructuring and Other Special Charges, Net


Restructuring and other special charges were $16.0 million for the first quarter
of 2020, consisting primarily of impairment charges on furniture and fixtures in
our retail stores and lease right-of use assets reflecting the impact of
COVID-19 on our business operations.  Refer



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to Note 5 to the condensed consolidated financial statements for additional information related to these charges. There were no corresponding charges during the first quarter of 2021.

Operating Earnings (Loss)


Our record sales performance also led to significant improvement in our
operating earnings.  Operating earnings (loss) increased $115.4 million
to operating earnings of $47.9 million for the first quarter of 2021, compared
to an operating loss of $67.5 million for the first quarter of 2020.  As
a percentage of net sales, operating earnings were 12.0% for the first quarter
of 2021, compared to an operating loss of 35.3% for the first quarter of 2020.

BRAND PORTFOLIO


                                                         Thirteen Weeks Ended
                                                May 1, 2021               May 2, 2020
                                                             % of                      % of
($ millions, except sales per square
foot)                                                   Net Sales                 Net Sales
Net sales                                  $   250.3        100.0 %  $   217.2        100.0 %
Cost of goods sold                             156.3         62.4 %      163.8         75.4 %
Gross profit                                    94.0         37.6 %       53.4         24.6 %
Selling and administrative expenses             83.3         33.3 %       92.6         42.6 %
Impairment of goodwill and intangible
assets                                             -            - %      262.7        120.9 %
Restructuring and other special
charges, net                                    13.5          5.4 %       43.8         20.2 %
Operating loss                             $   (2.8)        (1.1) %  $ (345.7)      (159.2) %

Key Metrics
Direct-to-consumer (% of net sales) (1)           31 %                      29 %
Change in wholesale net sales ($)          $    14.9                 $  

(91.1)

Unfilled order position at end of
period                                     $   264.5                 $   188.3

Same-store sales % change                        5.1 %                  (24.8) %
Same-store sales $ change                  $     1.3                 $   (9.6)
Sales change from new and closed
stores, net                                $    16.5                 $  

(23.1)

Impact of changes in Canadian exchange
rate on retail sales                       $     0.4                 $   

(0.1)


Sales per square foot, excluding
e-commerce (thirteen weeks ended)          $     188                 $     

31

Sales per square foot, excluding
e-commerce (trailing twelve months)        $     336                 $    

328

Square footage (thousands sq. ft.)               138                      
356

Stores opened                                      1                         -
Stores closed                                     76                        19
Ending stores                                     95                       203

Direct-to-consumer includes sales of our retail stores and e-commerce sites (1) and sales through our customers' websites that we fulfill on a drop-ship

    basis.


Net Sales

Net sales increased $33.1 million, or 15.2%, to $250.3 million for the first
quarter of 2021, compared to $217.2 million for the first quarter of 2020.  Net
sales improved over last year, yet remain below pre-pandemic levels.  We
experienced a rebound in demand for sport and casual product, and demand for
dress footwear is also beginning to build.  During the first quarter of 2021, we
experienced strong sales growth from our Sam Edelman, Blowfish, Vionic and Ryka
brands, which carry a large assortment of athletic and casual styles.

In the first quarter of 2021, we closed the remaining 73 Naturalizer stores in
North America scheduled for closure as part of our strategic realignment of the
Naturalizer retail store operations.  We will remain focused on growing the
brand's e-commerce business through naturalizer.com, our retail partners and
their websites, and the two flagship stores in the United States and four stores
in China that we continue to operate.

In total, we closed 76 stores during the first quarter of 2021, including 73
stores in conjunction with the Naturalizer retail store exit described above,
and opened one store, resulting in a total of 95 stores and total square footage
of 0.1 million at the end of the first quarter of 2021, compared to 203 stores
and total square footage of 0.4 million at the end of the first quarter of 2020.
 On a trailing twelve-month basis, sales per square foot, excluding e-commerce
sales, increased to $336 for the twelve months ended May 1, 2021, compared
to
$328 for the twelve



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months ended May 2, 2020. E-commerce sales continued to grow as a percentage of the business during the first quarter, and we expect this trend to continue.


Our unfilled order position for our wholesale sales increased $76.2 million, or
40.5%, to $264.5 million at May 1, 2021, compared to $188.3 million at May 2,
2020.  The increase in our backlog order levels reflects increased demand for
product as our wholesale customers placed more orders than last year due to the
economic impact of the COVID-19 pandemic in the first quarter of 2020.  We have
experienced global supply chain disruptions to our receipt of inventory due to
port congestion and reduced shipping vessel and container availability.  We
expect this to continue into the third quarter of 2021.

Gross Profit


Gross profit increased $40.6 million, or 76.1%, to $94.0 million for the first
quarter of 2021, compared to $53.4 million for the first quarter of 2020, due in
part to higher net sales.  Our gross profit in 2021 was adversely impacted by
the exit of the Naturalizer retail stores, as deeper discounts were provided to
clear remaining inventory.  However, our gross profit in the first quarter of
2020 was impacted by higher incremental cost of goods sold primarily due to
$27.5 million in inventory markdowns reflecting the difficult retail environment
driven by the COVID pandemic, as well as $1.6 million in inventory markdowns
related to the decision to exit our Fergie brand.  As a percentage of net sales,
our gross profit increased to 37.6% for the first quarter of 2021, compared
to 24.6% for the first quarter of 2020.

Selling and Administrative Expenses


Selling and administrative expenses decreased $9.3 million, or 10.0%, to $83.3
million for the first quarter of 2021, compared to $92.6 million for the first
quarter of 2020.  The decrease was driven by lower logistics, retail facilities
and salaries expense primarily associated with the Naturalizer retail store
closures, partially offset by higher marketing expenses.  As a percentage of net
sales, selling and administrative expenses decreased to 33.3% for the first
quarter of 2021, compared to 42.6% for the first quarter of 2020.

Impairment of Goodwill and Intangible Assets

During the first quarter of 2020, we incurred impairment charges of $262.7
million, including $240.3 million associated with goodwill and $22.4 million
associated with intangible assets, including $12.2 million for the Allen Edmonds
trade name and $10.2 million for the Via Spiga trade name.  There were no
corresponding charges in the first quarter of 2021. Refer to Note 5 and
Note 8 to the condensed consolidated financial statements for further discussion
of these charges.

Restructuring and Other Special Charges, Net


Restructuring and other special charges were $13.5 million for the first quarter
of 2021, reflecting expenses associated with the decision to close all but two
flagship Naturalizer retail stores in the U.S.  These costs primarily represent
lease termination and other store closure costs, including employee severance.

In the first quarter of 2020, we recorded restructuring and other special charges of $43.8 million, reflecting expenses associated with the impact of COVID-19 on our business operations, primarily impairment charges on store furniture and fixtures and lease right-of-use assets of $19.3 million and liabilities due to our factories for order cancellations of $14.3 million.

Refer to Note 5 to the condensed consolidated financial statements for additional information related to these charges.

Operating Loss


Operating loss decreased $342.9 million to $2.8 million for the first quarter of
2021, compared to $345.7 million for the first quarter of 2020 as a result of
the factors described above.  As a percentage of net sales, the operating loss
was 1.1% for the first quarter of 2021, compared to 159.2% in the first quarter
of 2020.

ELIMINATIONS AND OTHER


                                                                Thirteen Weeks Ended
                                                        May 1, 2021              May 2, 2020
                                                                    % of                     % of
($ millions)                                                   Net Sales                Net Sales
Net sales                                          $  (9.8)        100.0 %  $ (11.3)        100.0 %
Cost of goods sold                                   (10.9)        110.9 %    (10.7)         94.8 %
Gross profit                                            1.1       (10.9) %     (0.6)          5.2 %
Selling and administrative expenses                    28.3      (289.0) %      11.9      (105.9) %
Restructuring and other special charges, net              -            - % 
     0.4        (3.2) %
Operating loss                                     $ (27.2)        278.1 %  $ (12.9)        114.3 %






                                       32

  Table of Contents

The Eliminations and Other category includes the elimination of intersegment
sales and profit, unallocated corporate administrative expenses, and other costs
and recoveries.

The net sales elimination of $9.8 million for the first quarter of 2021 is $1.5
million, or 13.6%, lower than the first quarter of 2020, reflecting  a decrease
in product sold from our Brand Portfolio segment to Famous Footwear.

Selling and administrative expenses increased $16.4 million, to $28.3 million in
the first quarter of 2021, compared to $11.9 million for the first quarter of
2020.  The increase was primarily driven by higher expenses for our cash-based
incentive compensation plan for certain employees and higher expenses associated
with our cash-based director compensation plans, reflecting growth in our stock
price during the first quarter of 2021 compared to a decline during the first
quarter of 2020.

Restructuring and other special charges were $0.4 million for the first quarter
of 2020, with no corresponding costs in the first quarter of 2021.  The expenses
incurred during the first quarter of 2020 were associated with workforce
reductions as we sought to minimize our expense structure during the COVID-19
pandemic, as well as incremental expenses associated with deep cleaning our
facilities and related supplies.  Refer to Note 5 to the condensed consolidated
financial statements for additional information related to these charges.

LIQUIDITY AND CAPITAL RESOURCES

Borrowings


($ millions)                                     May 1, 2021      May 2, 2020      January 30, 2021
Borrowings under revolving credit agreement    $       200.0    $       438.5    $            250.0
Long-term debt                                         199.0            198.5                 198.9
Total debt (1)                                 $       399.0    $       637.0    $            448.9

Total debt excludes the Blowfish Malibu mandatory purchase obligation, which (1) was valued at $45.5 million, $18.4 million and $39.1 million as of May 1,

2021, May 2, 2020 and January 30, 2021, respectively.



Total debt obligations of $399.0 million at May 1, 2021 decreased $238.0
million, from $637.0 million at May 2, 2020, and decreased $49.9 million,
from $448.9 million at January 30, 2021.  The decreases from both May 2,
2020 and January 30, 2021 reflect continued progress toward reducing the
borrowings under our Credit Agreement.  We reduced the borrowings under our
revolving credit facility by $50.0 million, ending the first quarter of 2021
with an outstanding balance of $200.0 million.  Net interest expense for
the first quarter of 2021 increased $2.3 million to $11.8 million, compared to
$9.5 million for the first quarter of 2020.  The increase is primarily
attributable to the fair value adjustment for the mandatory purchase obligation
associated with the Blowfish Malibu acquisition, as further discussed in Note 5
and Note 14 to the condensed consolidated financial statements, partially offset
by lower average borrowings under our revolving credit agreement.

Credit Agreement


As further discussed in Note 10 to the condensed consolidated financial
statements, the Company maintains a revolving credit facility for working
capital needs.  On April 14, 2020, we entered into a Fourth Amendment to Fourth
Amended and Restated Credit Agreement (as so amended, the "Credit Agreement")
which, among other modifications, increased the amount available under the
revolving credit facility by $100.0 million to an aggregate amount of up to
$600.0 million, subject to borrowing base restrictions, and may be further
increased by up to $150.0 million. Interest on the borrowings is at variable
rates based on the London Interbank Offered Rate ("LIBOR") (with a floor of 1.0%
imposed by the Credit Agreement) or the prime rate, plus a spread.  The Credit
Agreement increased the spread applied to the LIBOR or prime rate by a total of
75 basis points and increased the unused line fee by 5 basis points.  At May 1,
2021, we had $200.0 million in borrowings and $12.5 million in letters of credit
outstanding under the Credit Agreement.  Total borrowing availability was $211.3
million at May 1, 2021.  We were in compliance with all covenants and
restrictions under the Credit Agreement as of May 1, 2021.

$200 Million Senior Notes

On July 27, 2015, we issued $200.0 million aggregate principal amount of Senior Notes due on August 15, 2023 (the "Senior Notes"). The Senior Notes bear interest at 6.25%, which is payable on February 15 and August 15 of each year.

 We may redeem some or all of the Senior Notes at a redemption price (expressed
as a percentage of principal amount) of 101.563% if redeemed prior to August 15,
2021 and 100.000% if redeemed after August 15, 2021, plus any accrued and unpaid
interest and Additional Interest (as defined in the Senior Notes indenture).

The Senior Notes also contain covenants and restrictions that limit certain activities including, among other things, levels of indebtedness,



                                       33

  Table of Contents

payments of dividends, the guarantee or pledge of assets, certain investments,
common stock repurchases, mergers and acquisitions and sales of assets.  As of
May 1, 2021, we were in compliance with all covenants and restrictions relating
to the Senior Notes.

Supplemental Guarantor Financial Information


The Senior Notes are fully and unconditionally and jointly and severally
guaranteed on a senior unsecured basis by all of its existing and future
subsidiaries that are guarantors under the Company's Credit Agreement.  The
guarantors are 100% owned by Caleres, Inc. ("Parent").  On October 31, 2018,
Vionic was joined to the Credit Agreement as a guarantor.  After giving effect
to the joinder, the Company is the lead borrower, and Sidney Rich
Associates, Inc., BG Retail, LLC, Allen Edmonds and Vionic are each co-borrowers
and guarantors under the Credit Agreement.  The following tables present
summarized financial information for the Parent and guarantors on a combined
basis after elimination of intercompany transactions between entities
and amounts related to investments in any subsidiary that is a non-guarantor:


($ millions)                May 1, 2021    January 30, 2021
Current assets            $       684.1   $           686.3
Non-current assets                993.0             1,029.5
Current liabilities               795.6               818.4
Non-current liabilities           713.6               740.0





                                               Thirteen Weeks
                                                    Ended
($ millions)                                     May 1, 2021
Net sales (1)                                 $           584.8
Gross profit                                              254.7
Operating earnings                                         13.9
Net earnings                                               10.5
Net earnings attributable to Caleres, Inc.                 10.5


(1) Intercompany activity with the non-guarantor entities for the thirteen weeks

ended May 1, 2021 was not material.

Working Capital and Cash Flow




                                                             Thirteen Weeks Ended
($ millions)                                             May 1, 2021         May 2, 2020       Change
Net cash provided by operating activities             $         70.3     $           0.7    $    69.6
Net cash used for investing activities                         (3.9)               (4.5)          0.6
Net cash (used for) provided by financing
activities                                                    (56.6)               146.5      (203.1)
Effect of exchange rate changes on cash and cash
equivalents                                                      0.1               (0.2)          0.3
Increase in cash and cash equivalents                 $          9.9     $ 
       142.5    $ (132.6)



Reasons for the major variances in cash provided (used) in the table above are as follows:

Cash provided by operating activities was $69.6 million higher in the three months ended May 1, 2021 as compared to the three months ended May 2, 2020, primarily reflecting the following factors:

? An increase in net earnings, after consideration of non-cash items, in the

three months ended May 1, 2021, compared to the comparable period in 2020; and

A decrease in prepaid expenses and other current and noncurrent assets in the

? three months ended May 1, 2021, compared to an increase in the three months

ended May 2, 2020, due in part to a higher income tax receivable as of May 2,

2020; and

A larger decrease in inventory for the three months ended May 1, 2021, compared

? to the three months ended May 2, 2020 driven by higher sales, the liquidation

of inventory from the Naturalizer retail store closings and supply chain

disruptions; partially offset by

? A decrease in accrued expenses and other liabilities for the three months ended

May 1, 2021, compared to an increase in the three months ended May 2, 2020; and

? A smaller increase in accounts payable in the three months ended May 1, 2021,

   compared to the three months ended May 2, 2020.




                                       34

  Table of Contents
Supply chain financing:  Certain of our suppliers are given the opportunity to
sell receivables from us related to products we've purchased to participating
financial institutions at a rate that leverages our credit rating, which may be
more beneficial to the suppliers than the rate they can obtain based upon their
own credit rating. We negotiate payment and other terms with our suppliers,
regardless of whether the supplier participates in the program, and our
responsibility is limited to making payment based on the terms originally
negotiated with the supplier.  These liabilities continue to be presented as
accounts payable in our condensed consolidated balance sheets, with changes
reflected within cash flows from operating activities when settled.  As of May
1, 2021, we had $55.0 million of accounts payable subject to supply chain
financing arrangements.  There was an immaterial amount of accounts payable
subject to supply chain financing arrangements at May 2, 2020.

Cash used for investing activities was $0.6 million lower in the three months
ended May 1, 2021 as compared to the three months ended May 2, 2020, reflecting
slightly lower capital expenditures in the three months ended May 1, 2021.  In
2021, we expect our purchases of property and equipment and capitalized software
to between $20 million and $30 million, as compared to $22.1 million in 2020.

Cash used for financing activities was $203.1 million higher for the three
months ended May 1, 2021 as compared to the three months ended May 2, 2020,
primarily due to $50.0 million of net repayments under our revolving credit
agreement in the three months ended May 1, 2021, compared to net borrowings of
$163.5 million in the comparable period in 2020.  In addition, we did not
repurchase any shares under our share repurchase programs during the three
months ended May 1, 2021, compared to $12.9 million in the three months ended
May 2, 2020.

A summary of key financial data and ratios at the dates indicated is as follows:


                                                    May 1, 2021      May 2,

2020 January 30, 2021 Operating working capital ($ millions) (1) $ 126.3 $ 343.2 $

            191.8
Current ratio (2)                                        0.87:1           0.94:1                  0.86:1
Debt-to-capital ratio (3)                                  65.9 %           69.1 %                  68.8 %


Operating working capital has been computed as total current assets, (1) excluding cash, less total current liabilities, excluding borrowings under

revolving credit agreement and lease obligations.

(2) The current ratio has been computed by dividing total current assets by total

current liabilities.

The debt-to-capital ratio has been computed by dividing total debt by total (3) capitalization. Total debt is defined as long-term debt and borrowings under

the Credit Agreement. Total capitalization is defined as total debt and total

equity.



Operating working capital at May 1, 2021 was $126.3 million, which was $216.9
million lower than at May 2, 2020 and $65.5 million lower than at January 30,
2021.  Our current ratio was 0.87 to 1 as of May 1, 2021, compared to 0.94 to 1
at May 2, 2020 and 0.86:1 at January 30, 2021.  The decrease in both operating
working capital and the current ratio from May 2, 2020 primarily reflects lower
inventories driven by higher sales in the three months ended May 1, 2021 and
ongoing logistics delays, as well as the reclassification of the mandatory
purchase obligation to current liabilities, reflecting the anticipated
settlement in the third quarter of 2021.  The decrease in operating working
capital from January 30, 2021 primarily reflects lower inventories and a
decrease in lease obligations, partially offset by higher trade accounts
payable.  Our debt-to-capital ratio was 65.9% as of May 1, 2021, compared to
69.1% as of May 2, 2020 and 68.8% at January 30, 2021.  The decrease in our
debt-to-capital ratio from May 2, 2020 and January 30, 2021 primarily reflects
lower borrowings or our revolving credit facility at May 1, 2021.  We believe
our cash flows from operations, as well as $211.3 million in borrowing
availability under the Credit Agreement, provide ample liquidity to meet
the Company's working capital needs for the foreseeable future.

We declared and paid dividends of $0.07 per share in the first quarter of both
2021 and 2020.  The declaration and payment of any future dividend is at the
discretion of the Board of Directors and will depend on our results of
operations, financial condition, business conditions and other factors deemed
relevant by our Board of Directors.  However, we presently expect that dividends
will continue to be paid.

CONTRACTUAL OBLIGATIONS

Our contractual obligations primarily consist of purchase obligations, operating
lease commitments, long-term debt, interest on long-term debt, minimum license
commitments, financial instruments, mandatory purchase obligation associated
with the acquisition of Blowfish Malibu, one-time transition tax for the
mandatory deemed repatriation of cumulative foreign earnings, obligations for
our supplemental executive retirement plan and other postretirement benefits and
obligations.



                                       35

  Table of Contents

Except for these items and changes within the normal course of business
(primarily changes in purchase obligations, which fluctuate throughout the year
as a result of the seasonal nature of our operations, changes in borrowings
under our revolving credit agreement, changes in the mandatory purchase
obligation associated with the acquisition of Blowfish Malibu and changes in
operating lease commitments as a result of new stores, store closures and lease
renewals), there have been no other significant changes to the contractual
obligations identified in our Annual Report on Form 10-K for the year ended
January 30, 2021.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES


No material changes have occurred related to critical accounting policies and
estimates since the end of the most recent fiscal year.  For further information
on the Company's critical accounting policies and estimates, see Part II, Item 7
of our Annual Report on Form 10-K for the year ended January 30, 2021.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Recently issued accounting pronouncements and their impact on the Company are described in Note 2 to the condensed consolidated financial statements.

FORWARD-LOOKING STATEMENTS

This Form 10-Q contains certain forward-looking statements and expectations
regarding the Company's future performance and the performance of its brands.
Such statements are subject to various risks and uncertainties that could cause
actual results to differ materially.  These risks include (i) the coronavirus
pandemic and its adverse impact on our business operations, store traffic and
financial condition (ii) changing consumer demands, which may be influenced by
consumers' disposable income, which in turn can be influenced by general
economic conditions and other factors; (iii) rapidly changing consumer
preferences and purchasing patterns and fashion trends; (iv) intense competition
within the footwear industry; (v) customer concentration and increased
consolidation in the retail industry; (vi) foreign currency fluctuations; (vii)
impairment charges resulting from a long-term decline in our stock price; (viii)
political and economic conditions or other threats to the continued and
uninterrupted flow of inventory from China and other countries, where the
company relies heavily on third-party manufacturing facilities for a significant
amount of its inventory; (ix) cybersecurity threats or other major disruption to
the company's information technology systems; (x) the ability to accurately
forecast sales and manage inventory levels; (xi) a disruption in the company's
distribution centers; (xii) the ability to recruit and retain senior management
and other key associates; (xiii) the ability to maintain relationships with
current suppliers; (xiv) the ability to secure/exit leases on favorable terms;
(xv) transitional challenges with acquisitions and divestitures;  (xvi) changes
to tax laws, policies and treaties; (xvii) compliance with applicable laws and
standards with respect to labor, trade and product safety issues; and (xviii)
the ability to attract, retain, and maintain good relationships with licensors
and protect our intellectual property rights.  The Company's reports to the
Securities and Exchange Commission contain detailed information relating to such
factors, including, without limitation, the information under the caption "Risk
Factors" in Part I, Item 1A of the Company's Annual Report on Form 10-K for
the year ended January 30, 2021, which information is incorporated by reference
herein and updated by the Company's Quarterly Reports on Form 10-Q.  The Company
does not undertake any obligation or plan to update these forward-looking
statements, even though its situation may change.

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Financials (USD)
Sales 2022 2 718 M - -
Net income 2022 71,3 M - -
Net Debt 2022 - - -
P/E ratio 2022 14,4x
Yield 2022 0,99%
Capitalization 1 083 M 1 083 M -
Capi. / Sales 2022 0,40x
Capi. / Sales 2023 0,39x
Nbr of Employees 6 650
Free-Float 79,1%
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Managers and Directors
NameTitle
Diane M. Sullivan Chairman & Chief Executive Officer
John W. Schmidt President
Kenneth H. Hannah Chief Financial Officer & Senior Vice President
Willis D. Hill Chief Information Officer & Senior Vice President
Steve W. Korn Independent Director
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