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What happened

Shares of Caleres (NYSE: CAL) were moving higher today after the footwear retailer topped profit expectations in its second-quarter earnings report, showing it’s managing the challenging macro environment better than expected.

As of 2:16 p.m. ET, the stock was up 16.5% on the news.

So what

In a difficult environment, the Famous Footwear parent said revenue fell 5.8% to $695.5 million, missing estimates of $704.9 million.

Sales at Famous Footwear were down 5.1%, while the brand portfolio segment declined 7.2%. Direct-to-consumer sales represented 74% of net sales, showing it’s successfully pivoted away from the wholesale channel. Despite the year-over-year decline, its results improved on a sequential basis.

Gross margin declined from 45.6% to 45.2%, and selling, general, and administrative expenses as a percentage of revenue rose from 36.3% to 37.5%, reflecting the revenue decline.

Inventory declined 14.3% from a year ago, which should help improve margins, and it reduced credit facility borrowings by $47.5 million from the previous quarter, shoring up its balance sheet.

On the bottom line, the company reported adjusted earnings per share of $0.95, which was down from $1.38 in the year-ago quarter, but better than estimates of $0.88.

CEO Jay Schmidt said, “The Caleres team performed at a high level during the second quarter, delivering a strong consolidated operating margin and exceeding adjusted earnings per share expectations despite a choppy macro environment.

Now what

Looking ahead, the company reiterated its adjusted earnings per share (EPS) guidance of $4.10 to $4.30, compared to estimates of $4.13, and expected revenue to be down 3% to 5%. For the third quarter, it expects adjusted EPS of $1.30 to $1.35, ahead of the consensus of $1.29. It also said it reduced its debt-to-EBITDA ratio to less than 1.

While the report was far from flawless, investors seemed to excuse the sales decline due to the macro environment. Caleres is also priced as a value stock, trading at a forward P/E of just 7, which helps explain the stock’s jump today.

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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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