2018 ANNUAL REPORT
DEAR SHAREHOLDERS,
In 2018, we once again made significant progress against our corporate strategy. We continued to move Caleres forward, to ensure the company can effectively compete and win in the new and changing consumer environment. Our vision to be a powerful portfolio of footwear brands, and the strategic underpinnings of what makes us Caleres, remain relevant and unchanged. A few of our most important accomplishments for 2018 include…
— At Brand Portfolio, we delivered share gains ahead of market rate across our top women’s brands. Our Sam Edelman brand delivered its best year ever and expanded its reach to even more consumers. At Naturalizer, our team’s disciplined and hard work over the past two years really paid off, and they delivered product that was true to the brand and relevant to the consumer.
— We acquired two new consumer brands. Vionic is a dual gender brand based on proprietary technology with strong consumer loyalty, great upside for growth, and the leadership to support it. We also added Blowfish Malibu, a smaller brand with a casual California lifestyle point of view. With the addition of Vionic, I am happy to report we now own six of the top 25 women’s brands in the footwear market.
— We continued to drive growth through our speed-to-market strategy. The brand teams are becoming more proficient in using these capabilities, which is evident in our market share gains. A combination of great product, and our ability to rapidly replenish key styles in-season, will remain an essential differentiator for us going forward.
2018 CALERES ANNUAL REPORT As we turn the page to 2019, our theme for this year is to starve our distractions and feed our focus, and this has been embraced across the entire organization. We know the market is expected to be dynamic once again this year, and we need to leverage the investments we’ve already made and remain focused on superior execution and operational excellence to deliver against our expectations.
At Brand Portfolio, we will extend our winning results. We will intensify our consumer focus and take more actions to drive even more growth, and we have an array of internal and external resources to help us deliver a successful outcome.
We will also drive investment in our digital capabilities in 2019, to help deliver even more insight into our consumers and to drive higher sales. We will be out first, when it comes to product design, development and relevance, and we will rapidly respond to emerging trends in-season, by maximizing our existing speed-to-market strategy.
At Famous Footwear, we intend to continue to innovate and — We successfully completed the transition to our to deliver consistent, sustainable growth once again in 2019. in-house distribution center. The decision to own Cash from Famous Footwear operations fuels investments these fulfillment capabilities positions us with across the entire company, and these funds are important to significant agility to meet the rapidly changing the continued long-term growth of Caleres. needs of our consumers. The new center is up and running, and we expect to complete the automation We plan to deepen our relationships with both our vendor of this facility in the first half of 2019. partners and our consumers in 2019. By working with our vendors, we will drive an improved flow of new product this — Our Brand Portfolio delivered approximately year and elevate our product assortment, which will drive half of total adjusted operating earnings for 2018, growth and give our consumers the iconic brands they love. and you can expect to see this share grow. We will further deepen our relationship with our consumers — We continued to invest in and upgrade our through the introduction of our refreshed and rebranded digital capabilities across the enterprise in Rewards program, Famously You Rewards. To extend this 2018, including preparations to launch a new connection, and to reach our consumers no matter where e-commerce platform. This will benefit all they are, we are also launching a new e-commerce platform of our brands, including Famous Footwear. designed around the consumer in 2019.
— Famous Footwear delivered its seventh consecutive We are evolving our overall marketing effort and are year of same-store-sales improvement in 2018, focused on presenting a relevant message that resonates which was up 1.5 percent. The team did a great with consumers across all mediums. We have already added job managing SG&A expense last year, and also new leadership, engaged a new agency and are exploring did their best to manage gross margin pressure, new opportunities to differentiate Famous Footwear even despite the highly promotional marketplace and further in the highly competitive marketplace, especially the continued growth of our e-commerce business. during back-to-school.
— We took decisive action at our Allen Edmonds For 2019, we must execute what is right in front of us and brand to reduce the level of promotional activity what we have committed to with excellence. I remain for 2019, in order to strengthen brand equity for convinced our direction is sound and, while we are proud the long-term. Consequently, we were required to of what we have accomplished as a team, we are picking record a non-cash accounting impairment in 2018. up both our pace and our focus in 2019. This does not reflect a change in our assessment of Allen Edmonds, its brand equity or consumer appeal. We reduced our cost structure, matched production capacity to new business expectations, and are encouraged by the positive results we are Diane M. Sullivan already seeing from these actions. CEO, President and Chairman of the Board
2018 CALERES ANNUAL REPORT 2018 CALERES ANNUAL REPORT financial 2018 TRENDS AND HIGHLIGHTS