Good morning. And welcome to the Caleres First Quarter Earnings Conference Call. My name is Glug 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 will turn the call over to Logan Bonacorsi, Vice President of Investor Relations. Please go ahead ma'am.

Good morning. I would like to thank you for joining our first quarter 2021 earnings call and webcast. A press release with detailed financial tables, as well as our quarterly slide presentation is available at caleres.com. Please be aware, 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 US 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, Chairman and CEO; Ken Hannah, Senior Vice President and CFO and Jay Schmidt, President. 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 Glug and good morning, everyone. We appreciate you joining us today at this new time and capping off what we know is a busy earnings week in the footwear space. Well, I think we've all begun to see that the consumer has emerged and are ready to spend on items and experiences across the board. They're reconnecting with family, spending time with friends, traveling, returning to office in some capacity, and are celebrating all of life's occasions, both large and small. I'm pleased to report that Caleres delivered strong results during the first quarter, making significant progress across a number of our strategic initiatives and is driving forward with our goals to take advantage of this new and exciting phase of the current market cycle. For the quarter just ended, Caleres exceeded first quarter 2019 earnings levels, drove sequential sales and operating earnings improvement, generated stronger growth margins and turned in an improved working capital and expense position. Overall, our consolidated revenue for the first quarter was $639 million, representing a nearly 12% improvement from the fourth quarter of 2020 and a modest 6% decline from the first quarter of '19. Our adjusted earnings per share for the period reach $0.60, up $0.57 sequentially, and surpassing first quarter 2019 levels by $0.24. Adjusted gross margins for the company also improved rising 70 basis points from the first quarter of 2019. Ken will provide further detail on these metrics in just a few moments. We also continue to generate significant levels of cash, particularly as our Famous Footwear business accelerated meaningfully in the quarter second half. And we put that test to good use paying down an additional $50 million of debt during the period. As a reminder, we have proactively reduced our total debt by approximately $240 million since…

Thank you, Diane and good morning, everyone. I'm very encouraged by our first quarter results where the team's exceeded 2019 earnings levels, improved our gross margins, and maintained and improved working capital and expense position. I'm pleased to report that in addition to the strong performance on the operating side of the house, we also continue to advance our ongoing efforts to strengthen our financial foundation. As we've stated in previous periods, our top priority for cash remains debt reduction, and we've made excellent progress towards that objective in the quarter. In total, we paid down an additional $50 million in debt during the period, and believe we are well positioned for further reductions as the year progresses. We believe this ongoing effort to in effect swap debt for equity will drive greater value for our shareholders in future periods. I will remind you that our senior notes are callable at par in August of this year. As a result, it's important to note that the incremental reductions after the second quarter of 2021 will go to reduce our higher cost senior notes, which net-net over the course of the year will drive a further reduction in our interest expense. In addition, during the first quarter, we continue to return capital to shareholders through our recurring dividend, which as you all well know, we maintain through the depths of the pandemic. We believe this is emblematic of our firm commitment to rewarding our shareholders for their strong and ongoing support of our business and their confidence in our long-term prospects for value creation and growth. This morning, we announced that our Board of Directors approved our 393rd consecutive quarterly dividend, which will be paid on June 30 of 2021 to shareholders of record as of June 11. Now let's look…

[Operator Instructions] Our first question comes from Laura Champine from Loop Capital.

Thanks for taking my question. Great result and margins, the one area that picked up more than we thought it would was the unallocated expense line. Is that just corporate expense? And what drove the significant increase on that line?

Yes, Laura. So our record setting performance and the timing of that as a much larger percentage of our earnings in the first quarter. And so as we mentioned, we've exceeded our plans and expectations. So that's incremental, stock based performance and share base plan expense.

Okay, got it. Is there any update you can provide on the potential sale of your headquarter's building?

We've -- we went through a process; it's been formerly put on the market. I guess that all went out about a week ago.

A week and half ago, yes.

Officially and we are going through the process of providing folks tours of the property and providing information.

Got it and any sense you can give on what the asking price might be there?

No, I think we'll see what the bids come in, we should have an idea by the end of the second quarter, kind of what that might be, and then we'll qualify the appropriate buyers and try to move forward at the same time where Diane and I are looking at opportunities here in the market for a new headquarters. So there's lots of work going on, obviously we're hoping to take advantage of what is a highly desirable piece of property right here in the heart of Clayton.

It'll be the best of both worlds, Laura, if we can, if we -- when we get it all complete, because it'll be --- will enhance our ability to sort of reduce our footprint here where we don't really need all the space and at the same time, create a new workspace of the future somewhere else. So I think it's very exciting on so many fronts on that. So keep your fingers crossed.

Got it. And then if I could just go back to the stock-based comp on the unallocated, is that a level that we should continue to see throughout the year? Or is this just a one quarter step up?

No, I mean, if you go back and again, we're comparing to 2019 levels, which there was very little of that accrued. And so it's a little bit of timing throughout the year, obviously, with $0.60 of earnings in the first quarter, when you compare that to prior years, that's quite a bit higher. So that's a little bit of just timing in terms of how that expense would hit throughout the year. And then the incremental is the part that for the year, that would be above our baseline plans.

Got it and if it's basically gone up by $50 million on that one line year-on-year. Is that all bonus accrual or are there some other --

That all add is bonus accrual, both stock and deferred comp as well as profit sharing accrual.

Our next question comes from Steven Marotta with CL King & Associates.

Good morning, Diane and Ken, congrats on a great first quarter. Diane I can't resist the urge to ask, as far as quarter to date goes, hat are you seeing during the month of May? How did that differ, say from the last few weeks of April?

Well, we fully expect that Famous' sales to be very close to 2019 levels. And we honestly haven't seen that much of a shift in the last couple of weeks. So right now all continues to look encouraging.

That's great. And maybe comment a little bit on the branded, I can take a guess. But the branded portfolio's order book, obviously there's a bit of a lag between what would be realized, say at Famous on a retail unit basis and then what would be realized at branded portfolio but on the other hand, maybe there's a tad bit more optimism on the part of wholesale accounts over the last four to six weeks.

Right, I'll give you a little perspective, and then I'll ask Jay to comment too. Obviously, going into this year, most of our retail partners did not plan to see the kind of consumer demand levels is where they're at today. And most were planning in the down kind of 15% to 20%. And as we've seen consumer come back with a vengeance, particularly in the month of late March and April, we've seen most of our retail partners looking for additional inventory, we planned as you could tell with our inventory levels to turn be as productive as possible and make sure we were still chasing demand. But our order book, and for our second quarter right now looks about like where we had expected it to be. We still have the supply chain challenges with late goods here and there. But believe that again, back it as we turn the corner, the back half of the year, our expectation is that we're going to return to 2019 operating earnings levels. But, Jay, maybe a little bit on what you're seeing on the demand side.

Yes, for sure. As Diane mentioned, we are seeing a lot more optimism for it. And we are chasing goods within that timeframe for them. But certainly we've seen sales continue strongly, particularly in the sandal category, which is great to see.

And Jay, Hello, thank you for that. Ken, I think Ken mentioned as far as the supply chain goes and forgive me I missed the timing of it. You alluded to when you thought it would be a little bit more freed up more, not that kind of backlog. Did you say by the end of summer, or by the end of the third quarter? I didn't get that.

Yes, we didn't say specifically. We just -- we're just highlighting that it continues to be delayed. And certainly as we go through the -- probably the most uncertain thing around the second quarter is really when will everyone actually go back-to-school, and then from a Famous perspective well we have enough of the goods come in to really support what we believe is going to be a great back-to-school season and obviously in the second quarter the last couple of weeks in historical years has been a big piece of that. So obviously, we're waiting to see when everyone will actually go back-to-school and start and how that will impact Q2 versus Q3. Where -- I think with everything that we've seen that the delays do not get resolved in the second quarter, they likely go into the third quarter. And the teams have done a great job managing through that but certainly we're trying to take the inventory we have and do the best we can with it and Jay's working with the teams to try to move things around to support the demand, but it's really about an opportunity is to get back-to-school is as good as it could be how far will the supply chain be caught up to be able to support it. And that's really the uncertain aspect of kind of our view on Q2.

Yes, no, I completely get that. That is a huge timing issue across the industry. And I'll take the balance of my questions offline. Thank you all

There are no further questions in queue. At this time, I'll turn the call over to Diane Sullivan for closing comments.

Thanks everybody for joining us and have a wonderful Memorial Day weekend and we will see you in August, if not before. Take care.

This concludes today's conference call. Thank you for participating. You may now disconnect.