Note 1 - Basis of Presentation

3 Months Ended

May 02, 2020

Notes to Financial Statements

Business Description and Basis of Presentation [Text Block]

Note 1 Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q of the United States Securities and Exchange Commission (“SEC”) and reflect all adjustments and accruals of a normal recurring nature, which management believes are necessary to present fairly the financial position, results of operations, comprehensive income and cash flows of Caleres, Inc. ("the Company").  These statements, however, do not include all information and footnotes necessary for a complete presentation of the Company's consolidated financial position, results of operations, comprehensive income and cash flows in conformity with accounting principles generally accepted in the United States.  The condensed consolidated financial statements include the accounts of the Company and its wholly-owned and majority-owned subsidiaries, after the elimination of intercompany accounts and transactions.

The Company’s business is seasonal in nature due to consumer spending patterns, with higher back-to-school and holiday season sales.  Traditionally, the third fiscal quarter accounts for a substantial portion of the Company’s earnings for the year. Interim results may not necessarily be indicative of results which may be expected for any other interim period or for the year as a whole, particularly given the impact of the coronavirus pandemic on the results of operations for the thirteen weeks ended May 2, 2020, as further discussed below. 

Certain prior period amounts in the condensed consolidated financial statements and footnotes have been reclassified to conform to the current period presentation.  These reclassifications did not affect net (loss) earnings attributable to Caleres, Inc.

The accompanying condensed consolidated financial statements and footnotes should be read in conjunction with the consolidated financial statements and footnotes included in the Company's Annual Report on Form 10-K for the year ended February 1, 2020.

COVID-19 Pandemic

In March 2020, the World Health Organization declared that the outbreak of the coronavirus ("COVID-19") was a global pandemic.  On  March 19, 2020, the Company announced the temporary closure of all retail stores throughout the United States and Canada.  While the Company's e-commerce business continued to serve customers during the retail store closures, the Company experienced a significant loss in sales and earnings.  In addition, many of the Company's wholesale partners also closed their retail stores and canceled orders.  On May 13, 2020, the Company announced it had begun a phased reopening of its Famous Footwear and Brand Portfolio retail stores.  As of the date of this filing, approximately 60% of the Company's retail stores are open and the Company anticipates the vast majority of its stores to begin in-store service by the end of June.  During the store closures, the Company leveraged the strength in its brands and the investments made in its e-commerce platform to quickly shift to a digital-only business.  At the end of April, the Company implemented a contactless curbside pickup option at several retail locations throughout the country and has continued to expand this service during the beginning of the second quarter.

The Company took decisive actions to manage its resources conservatively to mitigate the adverse impact of the pandemic.  These actions included reductions in the workforce, associate furloughs for a significant portion of the workforce, salary reductions for most remaining associates, and a reduction in the cash retainers for the Board of Directors; reducing inventory purchases; reducing marketing expenses; and minimizing costs associated with the closed retail facilities.  In addition, as a precautionary measure to increase its cash position and preserve financial flexibility given the uncertainty in the United States and global markets resulting from COVID-19, the Company increased the borrowings on its revolving credit facility in March 2020 to $440.0 million.  In April, the Company entered into an amendment to its Fourth Amended and Restated Credit Agreement to increase its borrowing capacity, as further discussed in Note 10 to the condensed consolidated financial statements.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security ("CARES") Act was enacted.  The CARES Act includes a provision that allows the Company to defer the employer portion of social security payroll tax payments that would have been paid between the enactment date and December 31, 2020, with 50% payable by December 31, 2021 and 50% payable by December 31, 2022.  As of May 2, 2020, the Company has deferred $0.2 million of employer social security payroll taxes, which are recorded in other liabilities on the condensed consolidated balance sheets.