Strategic Realignment to Drive Digital Growth
In an effort to continue to improve future profitability and allow greater focus on high-growth, digital channels, the company has commenced a strategic realignment of the Naturalizer retail locations in the U.S. and Canada. In addition to the store closures, Caleres will right-size the back-office infrastructure to better align with the reduced store footprint, shift talent to amplify our digital presence, capture consumers where they want to shop and reallocate capital to further enhance our ecommerce platform and capabilities.
"Like the rest of the industry we have seen a structural shift in the shopping behavior of the consumer – a change that has been further accelerated by the global health crisis," said Sullivan. "With a larger percentage of Naturalizer's sales originating online, now is the opportune time to shed the legacy stores and evolve it to be more profitable. We are confident this step will better align the brand with the Naturalizer consumer of the future and position the brand for growth and further success."
The company plans to close approximately 133 Naturalizer stores by the end of fiscal year 2020. The company expects pre-tax charges in the fourth quarter of 2020 of between $20 million and $25 million. Once complete, Caleres expects an annual pre-tax benefit of between $10 million and $12 million.
"Caleres is adjusting rapidly to the current and evolving market environment and I am excited about the value-creating potential of the business going forward," said Sullivan. "The actions we have taken in recent months to fortify our financial position; leverage our digital investments to capitalize on shifting consumer behaviors; further align our merchandise mix to reflect ever-changing consumer desires; and right-size our cost structure and capital budget provide a strong and durable foundation upon which to build and grow. Moving forward, we plan to drive innovation in our brands, lean into our consumer insights, enhance our already significant digital capabilities still further, and continuously strengthen and hone our portfolio to expand greater cash generation and value creation in the future."