Good afternoon. My name is Jennifer and I'll be your conference operator today. At this time, I would like to welcome everyone to the First Quarter 2016 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. And I would like to turn the conference over to Peggy Reilly Tharp.

Thank you. Good afternoon. I’m Peggy Reilly Tharp, Vice President of Investor Relations for Caleres. And I'd like to thank you for joining us on our first quarter 2016 earnings call webcast. A press release with detailed financial tables and slides are both 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 the various risk factors, including, but not limited to, the factors disclosed in the Company’s Form 10-K and other filings with the U.S. 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 on the call at any time. Joining us on the call today are Diane Sullivan, CEO, President and Chairman, Ken Hannah, Chief Financial Officer and Rick Ausick, President of Famous Footwear. And I'd now turn the call over to Diane Sullivan.

Thanks, Peggy and good afternoon, everyone and thanks very much for joining us for a review of our first quarter results as we delivered EPS of $0.41. During the quarter, we continued to invest for the long-term success and growth of our Company, including adding two new retail stores and the development of our two new contemporary fashion brands. Excluding these strategic investments it is important to note that EPS for the first quarter would have exceeded street expectations and last year’s results. In addition we delivered continued improvement in gross margins of 111 basis points, while maintaining our solid balance sheet and reducing our inventory position by more than 2%. Cash was up in the quarter, reflecting strong operating cash flow and solid inventory management. We were able to deliver these results on top of a strong 2015, despite overall softness in retail. Our first quarter performance demonstrates the strength of our Company’s proven ability to react to changing dynamics and drive bottom-line growth. There are a number of factors that play right now in the marketplace as we all know, including tailwinds in lifestyle athletics, lackluster brick and mortar traffic and a shift to non-store channels. All combined with an expansion of buy now and wear now consumer behavior. In the first quarter these challenging opportunities were compounded by an industry-wide inventory hangover from the fourth quarter, and unseasonably cold spring. Thanks to our teams’ agility and their focus, we were able to deliver good performance, reduce inventory and gain market share in a difficult environment. Let's turn first to Famous Footwear, where same-store sales were up 1% in the quarter, not surprisingly as weather declined, so did comp sales. We saw a very strong February followed by a flat March and a decline in April. Predictably sandals…

Thank you, Diane, and good afternoon everyone. Today, we reported first quarter net sales of $584.7 million, down 2.9% reflecting planned reductions in lower margin categories for some of our Healthy Living brands. Consolidated gross margin for the first quarter was 42.4% of sales, up 111 basis points year-over-year as we exited those lower margin categories, improved our overall product costs and saw a reduction in our markdowns. Total SG&A expense in the first quarter was 37.5% of sales and up less than $1 million, reflecting the timing of investments for the long-term growth, partially offset by a reduction in corporate expense. These investments in the quarter included five new retail stores for our Sam Edelman brand, bringing the total to 11, and the continued development of our DVF and George Brown brands. We also opened 10 new Famous Footwear stores in the quarter and operated three more stores year-over-year. Depreciation and amortization was $13.1 million for the first quarter, up 4% on an increased store base. Net interest expense for the first quarter was $3.4 million, down nearly 20% year-over-year as we benefitted from the refinancing of our senior notes in the second quarter of last year. For the quarter, our corporate tax rate was 29.6% versus 25.9% in the first quarter of last year. As a reminder, last year’s rate included a discreet tax benefit related to the conversion of one of our legal entities to an LLC. Net earnings in the first quarter of this year including the aforementioned investments in the business were $17.8 million versus $19.3 million in the first quarter of 2015, and earnings per share were $0.41 and $0.44 respectively. Capital expenditures were $18.2 million for the first quarter reflecting the continued investment associated with our consumer fulfillment initiative, which is on schedule…

Hi thanks guys. This is Matt on for Scott. I just want to start off here really strong gross margins in wholesale are there any dynamics in place to see similar growth in any other quarter this year?

Yes Hi Matt it is Diane. And yes I would certainly say so, I think the way the teams have really managed our inventory position, we think that’s going to continue throughout the year. We have exited some categories of businesses that were low margin for us, and I think that certainly is going continue going forward. We’ve been really smart around how we’ve managed product costs and a little early, a little too early to say too much yet, but that supply chain worked up we’ve been -- we started late last year we really think it’s going to help maintain some of the momentum there. So, overall very-very positive and as you know Matt in this kind of environment it’s really all the balance of all those things to really make sure that we improve the profitability.

Okay. And then another one for you is, how is Famous planning the Boot business for fall and do you guys anticipate changing the receipt schedule at all?

Yes I’ll let Rick talk about that.

Yes, the Boot business is planned probably flat to low single-digits right now and that can change based on quality of selling right, so if we sell at higher prices our sales could be higher than that, if not there might be lower, but that’s what the plan is based on what we know pretty significant shift in content in the sense of less higher shaft boots and more booties product so that’s part of the mix change. And I don't think, at this point of time we haven't seen anything that would tell us we could change our receipt flow as we know it.

Okay. And if I could just squeeze one more in, the share buybacks first time in a while you guys have done that, is that recognition of the unattractive M&A environment right now and is there anything we could expect going forward in terms of further share buybacks?

No, I think that's the Company realizing what the current valuation that -- it’s a pretty good buy and so we're in the market we bought 450,000 shares and would expect that to continue just as part of our capital allocation policy.

Your next question is from Steve Marotta with CL King & Associates.

Diane or Rick can you comment on quarter-to-date comps?

We could. Oh, you want us to, okay. The quarter-to-date we’re down mid single-digits, but I guess I've put some warning in there, that includes, the calendar shift of Memorial Day right. So, we're -- we got that behind us where we weren’t promotional, didn’t have the activity, that's coming up this week, we don't have that in our mix shift. Obviously we prefer not to be down mid single-digits, this has just gotten better every week through the quarter and the last seven-eight days as we've seen the weather is more normal and particularly in the Northeast and Upper Mid West, our business has actually taken a nicely turn, so we actually believe that it won't have a impact on our second quarter low single-digit sales for the second quarter.

You're planning comps up low single-digits for the second quarter, is that what I understand?

Yes, sir.

Diane can you comment a little bit about the open-to-buy dollars in the wholesale channel for the second half, we're hearing a lot of chatter about that based on what's happening in the spring, that there is some constraint there?

Yes -- and we had I think we're shadowed that during our last call Steve, even when we talked about guidance for the year of 2 to 2.10 originally and what we've been hearing is pretty consistent, the open-to-buy dollars and the initial receipt plans are down depending on the brands, not down at all, to down maybe 10%, and retailers want to make sure that they're driving inventory productivity and with the shift of how the consumer is shopping, there's much more reliance on drop ship and they're are looking to chase goods in season. So, I think it really always comes back to making sure you've got great product that the customer loves and when I think about the work that the teams have done in the first quarter and looking at the share gains that we've picked up and how we've managed inventory, we fully intend to be a winner in the back half of the year and continue to move the business forward. But it's not easy, as you know it’s a bit jog fight everyday to make sure that we're getting our fair share. I think the other thing that is probably worth mentioning on and tagging on to your question is that you think about our brands and kind of where they sit in the market and right now it’s a tailwind against the Lifestyle Athletic piece and the unseasonably cold weather, and spring and so much of our business being in sandals, we really think again if that opens up, all of that will normalize a little bit more and we would expect that our business would continue to progressively improve throughout the year.

And if I could just squeeze one more in, when did the revamped mobile site launch and just wondering when you will anniversary that and can you talk a little bit about the capabilities that it brought you and how it's driven sales?

Just to clarify Steve, what we did is redesigned the mobile commerce site, so this is when you go into your phone and type in famousfootwear.com, that's what we redesigned. So -- but we have always had it it's been there for years and what we've done in the last nine months is go back and make sure we were able to have better functionality, better navigation, better search, better change the cart process and have made that easier and the checkout easier and all that has been progressed overtime over the last nine months, at different stages there last week we finished the last piece of it. So, today we believe we have a highly functional, highly easily used mobile commerce site. We have a mobile app, that's a different conversation, the mobile app obviously uses the mobile commerce site for the transactional piece of the business but it's really there for our rewards buyers, rewards to customers to use in concert with their rewards points and things like that, so it's really about the mobile commerce site, back to the conversation that you know that have the more than half of the traffic coming into our entire company, is coming through the mobile phone, through smartphones. So, that piece of it, we need to make sure is functioning at a high level.

And your next question comes from the line of Jeff Stein with Northcoast Research.

A question with regard to the wholesale business, it seemed to me that you need to be up kind of mid single-digit the rest of the way and given the scenario you kind of described with very weak open-to-buy, how do you get to 5% for the balance of the year?

What we said for the year was that we were going to be flat to down to low single-digit so it’s kind of what we worked Jeff as part of the guidance. And one thing to note, if you take out those planned exists in Healthy Living we were only down 1.6 in the first quarter and down 1.2 on the Contemporary Fashion side, so we expect to continue to see steady improvement through consecutive really throughout the next couple of quarters. With Contemporary Fashion really being the one Jeff that's going to be the outperformer not only unlike what it's really done over the last couple of years. You could almost think about it as Contemporary Fashion being up mid single-digits for the year and the Healthy Living business as being down low to mid and all-in it really comes to flat that’s kind of how you probably should think about it.

Okay, how is Sam Edelman, what was the best performing brand in Contemporary during the first quarter and…?

It was interesting, first of all the one that as you could expect that was very good was the Vince brand and not surprisingly with the Lifestyle Athletic being so important those -- so we have a very-very successfully thinker of business within the Vince business and that was just took off to the point that it almost represented 50% of our total retail business during the first quarter for that business. So that was significantly up our Via business was up, Franco was up, Rykä was up, and so overall, we think pretty good. Our Sam business had terrific retail performance, we really started gaining market share in the quarter and we opened four stores we're going to have 11 opened but I think now we feel by the end of the year. So, he is not immune to what's going on in the environment particularly with the sandal sales being tough, but he is really managing the balance of his coring of new items in his business, we're seeing the consumer really responding very well to new items. So all-in just never ever completely happy with things for given the first quarter and the environment and everything that was going on and I think the teams managed quite well.

Okay, so Sam Edelman, we should assume that was down for the quarter?

Yes.

Okay. What about your wholesale mix to the authorized channel, I presume with just the blood of inventory out there that guys like TJ Maxx and Ross Stores and probably even DSW are kind of chopping at the bid right now and in a great place, did that distort your mix appreciatively during the first quarter and how do you see you will kind of sell into that channel for the balance of the year, is that kind of a fall back plan to help you make your top-line numbers?

I mean because our inventories are lean, we're down 4%, 4.1% Jeff that actually -- that's really not going to be the case. Here for sure in the first quarter they were -- that channel and they will continue look for authorized products, but for some of our brands it was a positive because we did have some inventory and we filled those for others we didn’t, so I don’t' I think it's going to have a material impact for us as we move throughout the year. I think it's going to be pretty much a similar balance in total.

And one more real quick Diane and this one would be for Rick, the impact of the dot.com business on Famous Footwear's gross margins in the quarter maybe Rick you can tell us what percent of sales dot.com accounted during the first quarter compared to prior year?

Yes, it was about 5% of our total business, it has historically been in the 3% to 3.5% range and I think last year it was probably about 3.5. So it grew significantly obviously 80%. The margin impact, our total margins were off basically 40 something basis points that is pretty much is all attributable to the impact of the business at the dot.com. Mix of two things it's also shipping, shipping is in that because that would be gross margin we're talking about and then there is also a slight deterioration on the merchandised margins as we've been able to now move more sales and clearance products side of our store because we have the ability to ship from store to satisfy that customer. And we look at that as being somewhat a positive in the sense it won't be good for those to sit in the store and not sell and it will turn our clearance faster, so about 40 basis points or so Jeff not the entire -- basically the entire decline was because of that but that is the two components.

Your next question comes from the line of Laurent Vasilescu with Macquarie.

I want to follow-up on the core to the accomplished theme as could you have easier year-over-year comparisons over to for 2Q last year Famous was flat, can you remind us how the comps did last year in May, June and July?

Yes I can, excuse me one second, last year right 2015, May was up low single-digits, June was flat and July was down low single-digits, so yes they got progressively worse through the quarter and we just went through the hardest part for the first three weeks of May.

Okay that's good to hear. And then can you talk about the impact of the Memorial Day shift for the quarter-to-date?

For quarter-to-date you know it's probably -- it's probably half of what we are down would be relatable to the quarter-to-date the shift. And some of those sales are actually going to fall into June since our quarter ends on Saturday, so last Sunday and Monday which were part of the event which were last working in May will fall into June. But I think when we get the whole thing done on I think it's going to be about half of where we are at, so we will be down call it low single-digits as we go into the first week of June against a down month and get the rest of the quarter being basically down on a comp basis. So that is why give the -- so that is why we are relatively calm because we can still get our low single-digit comp number for the quarter.

And then there were some comments about weather, could we -- are you seeing any positive comps in other parts of the country where weather is not an issue?

Yes, very much so and the weather it was kind of -- is really odd okay, because if you look at first quarter our business in the Northeast Upper Midwest was very good February and early March and really poor end of April into the first part of May. Our first part of May that I am referencing in our comp trend is being driven down greatly by the weather in the Northeast this year versus last year. And so as that's gotten better is the New York, Boston Philly, Washington has gotten better weather in the last five or ten days the trend has reversed enormously. So, -- but we showed a first quarter increase in the Northeast because the weather -- the business was so strong in February and March when they really had some poor weather a year ago and was better this year. So, it is this kind of significance in timing of sales that we have to relate to because I think this shift the business quite a bit in first quarter and early May and we expect to get a lot of that business back, we're getting a lot of that business back today and we expect that to continue over the next several weeks.

And lastly sort of on the Contemporary Fashion side, the performance year-over-year last year it was kind of lumpy by quarter, how should we think about the second quarter for Contemporary Fashion?

Oh, I think we're tracking about it being up high single-digits all right that for the second quarter.

Your next question comes from the line of Jill Nelson with Johnson Rice.

I guess just a follow-up on the last question, so you could talk about overall branded portfolio revenues kind of are there any big swings in quarter-by-quarter just how you're looking on future orders and then things of that nature?

It was really kind of all over the Board the mix in terms of the performance in the quarter there were some brands that were up substantially, there were businesses like Dr. Scholl's and Naturalizer where we knew that they were going to plan down. So it was kind of all-in as you heard Contemporary Fashion 1.2 and without those exits 1.6 on Healthy Living. You kind of have to balance all of that because you can’t always look at it just on a quarterly basis, right you've really got to continue to sort of view through the entire season, yes look at the retail performance and sell throughs and the inventory at retail and when we look at the performance of our brands at retail and you run through them it's clear that we've gained market share as a total company out there in the first quarter through [SED] and the [POX] channels that we monitor. So, it was really and I wish I could draw a line for you and say that it is going to be naturally sustained going forward it isn't, but we're confident as I said I think a little earlier that towards the end of the year, so that's way to probably describe it that we really see Contemporary Fashion really ending up in up mid single-digits and our Healthy Living business being down somewhat in low to mid single-digits so all in factor the guidance of flat to down low-single.

Okay. And then if you could just refresh us on the product exits I believe you started to call them out in the fourth quarter of last year?

Yes, we do it was -- right no problem happy to do it. It was at Wal-Mart a fairly sizeable category at Wal-Mart we were getting out as they were transitioning to lower price points and was really not a place where we wanted to play so that was, that was the really, that was the big one. And then in our Naturalizer business we had some sort of old -- what low margin border stitched sandal business that we really needed to evolve and we exited that business too. So those are really the two big ones and again all-in if we came back we would have been down just 1.6 on Healthy Living without those.

So we should begin to lap those fourth quarter?

Yes, yes, no problem.

Your next question comes from the line of Christopher Svezia with Susquehanna.

Hi everyone it's Jon Elias on for Chris. Thanks for taking my question.

Hi Jon.

Hi Diane, with respect to the brands are you seeing any incremental pressure from any specific channels, is it department stores?

I would say I think the pressure is everywhere Jon really when you think about it doesn't matter really what channel it is, I think everyone is looking for inventory productivity, period over now the consumer is shifting in terms of how they're buying from brick and mortar, online, so everybody is trying to figure out how they get the most inventory productivity possible, so, I think everybody's goal is kind of the same and in terms of the pressure, I see it really across the board and it really depends on the brand and the channel, but there's no particular one area that's concerning.

And then can you just please update us on how Canvas is performing and maybe what your expectations are for back-to-school?

Yes.

Yes Canvas is as I said is doing fine we're actually now kind of expanding that category to talk about, Lifestyle Athletic, because I think it's gone beyond the Canvas to a degree, but the Canvas business is performing at low double-digits for the quarter and we think that'll continue but that whole Lifestyle business is more robust than that, that actually it would be a bigger part of our assortment going forward too.

And your next question comes from Eddie Plank with Jefferies.

Ken, a nice pickup in the gross margin, and I think someone called that out earlier, I'm guessing why might not the outlook be more robust than 15 to 25 basis points, it sounds like the Brand portfolio gross margin is improving nicely, is there an offset of Famous, I mean how should we think about that?

No, I mean I think if you look at it in context, the one thing to keep in mind is, in the 111 basis points improvement, 90 of that comes from Famous, even though Famous was down 50 basis points just because of the mix their overall margins are higher than the Company average, where the Branded is lower and so I think as we sit here today the mix impact, we believe we're going to be able to see similar trends across the business for the rest of the year, I think it really comes down to the mix piece and how much growth do we get on the branded business and what is that overall impact, so we took the total up and I think as we get further into the year, we'd be looking to adjust that accordingly, so we're very happy with the teams’ ability to really manage product cost, manage inventory, really manage the markdowns and allowances as we've seen initial orders come down. We have seen the associated benefit and reduced allowances and things like that, so I think we're very encouraged based on what we've seen today and we reflected that in an overall increase in the guidance but I think the current retail environment would suggest that we don't want to get to far ahead of ourself here.

And maybe could you just talk a little bit about what's happening with the SG&A in the Brand portfolio? Because I don't think first quarter is your highest operating margin quarter but it looks like the SG&A went up meaningfully there, any kind of thought?

Well, we did open four new stores at Sam, and there was five opened year-to-date and so those carry some pretty big SG&A increases ahead of really the sales and consumers that flow to that business and Diane mentioned earlier Sam at retail, is the same-store sales on the few stores that you had opened was very positive, high single-digits and so we believe that these are investments that are part of securing a long-term growth but they do happen ahead of the sales. We also as we've talked about in the last couple of quarters we're developing two new brands, George Brown, the men's business and then also DVF and so those teams and the ramp-up of product development come ahead of really seeing the revenue. So, when you go through and look at the SG&A excluding those investments, the team has done a great job of really managing their overall expense and the revenue really leverages those expenses in that business, so, you're seeing directly the impact of decisions we made to invest in that area.

And maybe just last one for Diane, can you share anything on what you're seeing in the DVF line, I mean I know it's still fairly early days, but any early reads there?

I think it's been so far so good, it's not a lot of business out there right now yet, so we're -- and about 200 doors growing and as we move into the back half of the year but so far the sell throughs has been very good, and we're kind of -- we're actually quite excited about a new appointment they make, that had a little bit turnover at the design level and they have a new gentlemen coming in John [Dussinger] who's got a fantastic track-record, and along with the new President that they hired that, we really think as that all stabilizes too it really is helpful in terms of generating even more momentum in our footwear business, but so far so good, but pretty small and really not material to the total yet.

And your next question comes from Jeff Stein with Northcoast Research.

Yes a couple of follow-ups first of all Diane wondering, currency was not mentioned and I know that was a factor that hurt the fourth quarter by about 4 million bucks, so was there any effect in Q1?

Yes very small, not too much Jeff, [5 and 8] million something like that.

Okay. And I know you guys don’t talk about quarterly results specifically but it sounds to me like we're probably looking at a similar type of pattern for the second quarter maybe just a tad better with most of the improvement coming in the back half of the year?

Yes I think that's fair to say.

Okay. And then final question is on supply chain, I mean given the fact that everybody all the retailers want the product on demand immediately now and they don’t want to hold inventory, I mean, it seems to me that's speed and agility are just becoming so much more important to your business and wondering where you're at in terms of being able to deliver product to your customers more quickly and whether or not that part of your supply chain investment is in a position to pay off in the back half of the year or is that more 2017-'18?

Fantastic question and you are so right with this current environment and with the initial orders down speed is really going to be very critical and happy to say that when we started this project I would say the middle of last year, so it's about a year and we piloted really a speed to market program in the first quarter of this year Jeff with actually our Sam and our LifeStride businesses and then we kind of tested it with the number of our other businesses and basically if we have a shoe in the market, we can reorder that and have it at retail in about 45 days, probably I would just say 45 to 50 days let me make sure I am getting to the right range there, so we're looking at -- in that assumed that you have all the materials there is no changes to the shoe in all of that, but we think speeding up that supply chain is going to be a critical part of the future it's almost going to be a necessary capability that we need to have and I think you should expect to see it be more material it is very early yet but a more material part of our business in 2017. But it is a very important part of what we're focused on right now.

Where would you have been a year ago at this time Diane in terms of your ability to deliver in terms of days out?

Well we weren't doing that kind of rapid replenishment a year ago, so a normal shoe that might have been in the market was probably 120 days out and we're talking about cutting that in half.

Okay.

So.

And so you're doing it on Sam and LifeStride, when will you be in a position to deliver on other brands?

Well we piloted this first quarter started it with Sam and LifeStride we did test it in a few of our other brands. I think we're going to be -- it's also about our factory partnerships and working all of that through too, so this is not just because we want to do it, it happens, we have got really work with some of our strategic partners in the Far East so we're working our way through all of that as well. So I would say 2017 I couldn’t tell you any more than that today until we really work our way through in getting a better understanding of what the total impact is going to be, but the spirit of what you're talking about we feel we're totally [supporting] on that and we think that's a critical part of our future?

We have no further questions in queue at this time and I would like to turn the conference back over to our presenters.

Thank you very much everyone for joining us this afternoon. We wish everybody a wonderful Memorial Day weekend and we look forward to seeing those of you that we can during our Market Week in a couple of weeks, so take care.

Thank you for your participation. This does conclude today's conference call and you may now disconnect.