Caleres, Inc. (CAL) Q1 2017 Earnings Report, Transcript and Summary

Good afternoon. My name is Ben and I will be your conference operator today. At this time, I would like to welcome everyone to the Q1 2017 Caleres Earnings Call. [Operator Instructions] I will now turn the call over to Peggy Reilly Tharp. Ma’am, you may begin your conference.

Thank you. Good afternoon. I’m Peggy Reilly Tharp, Vice President of Investor Relations for Caleres. And I would like to thank you for joining us for our first quarter 2017 earnings call and 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 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 statement. Copies of these reports are available online. Company undertakes no obligation to update any information discussed in this call at any time. And with that, I’d like to turn the call over to Diane Sullivan, CEO, President and Chairman.

Good afternoon and thank you for joining us. As always, Ken Hannah, our Chief Financial Officer and Rick Ausick our President of Famous Footwear are here with us today and ready to answer any questions. But I am going to start by saying that we are really off to a good start and tracking well for 2017 despite all the continued noise in the industry. As you saw, in our release today, we reported a total sales increase of 8%, a solid first quarter with Famous Footwear, brand portfolio and Allen Edmonds all contributing. Before we get into more specific segment details, I’d like to provide updates for just a few key areas, which I believe are leading indicators for 2017. First of all, as we have maintained our investments in our companywide omni-channel efforts, we have continued to see meaningful growth in e-commerce sales. For the first quarter, total e-commerce sales, including famous.com and all brand portfolio e-commerce related sales, represented 14.1% of consolidated sales versus 10.3% in the first quarter of last year. Next, we saw adjusted diluting earnings per share for the quarter coming at $0.40 with contribution more balanced between Famous Footwear and our brand portfolio. As we continue to grow our portfolio, we expect to maintain this more balanced division of our earnings. Additionally, our Allen Edmonds integration is on track and we expect the bulk of our transition efforts to wrap up by the end of this year, with synergies being built incrementally in the second half. As part of this work, we are accelerating Allen Edmonds’ new product launches in the fall of ‘17 and expanding the brand assortment for spring of ‘18. We have remained on plan since we acquired the brand in December and are very, very pleased with its acquisition today. Finally, before moving into segment specifics, I would like to discuss our speed initiatives. This program enables us to be more agile and to more rapidly ship with changing consumer trends. For example, as consumers have shifted towards more sport-inspired product, we have been able to rapidly ramp up and meet their demand. In the first quarter, sport-inspired product grew to 22% of our business from 18% last year. On the Famous side, our speed initiative has allowed us to reduce the number of days it takes to get product from our distribution centers to our consumers, with approximately 90% of our first quarter orders in consumers’ hands within 3 days. In May, we began offering buy online, pickup in store with a complete rollout across all doors expected by the end of June. And this effort leverages on our successful ship from store rollout in the third quarter of 2015. So now, let’s a take a few minutes to talk a little bit more about Famous Footwear. As discussed on our year end call, February was tough as expected. However, we saw improvement as the quarter progressed. Total sales were up 0.5%, while same-store sales were down 0.6% with an improved conversion rate across both brick-and-mortar and dotcom. You know what’s worked in the past is really what’s continuing to work and the lifestyle athletic remains strong with court inspired and inspired by running products doing very well. Sandals had a tough quarter. However, we were able to reduce inventory in this category in the first quarter, while delivering improved gross margin. We also saw sandal sales pick up nicely as the quarter progressed. Overall, gross margin at Famous Footwear for the first quarter reflected increased famous.com sales resulting in higher shipping costs. We had several initiatives in place to help reduce the cost to ship, including continued refinement of our in-store fulfillment sourcing logic and as mentioned, our launch of buy online, pickup in store. We also expect to see benefits in the back half of 2017 as our new distribution center continues to scale and reach full efficiency. For operating earnings, we will continue to see pressure at Famous throughout the first half of the year. As we ramp up our Lebanon distribution center expansion and continued to operate more doors year-over-year, resulting in increased rent and facilities expense. However, we expect the pressure in the first half to slowly normalize as we move through the year. As a reminder, while we expect to close a total of 70 Famous Footwear doors this year, the majority of these will close after the back-to-school selling season. For our brand portfolio, we saw improvement across all key metrics with growth in sales and growth in operating margin. Thanks to our diverse portfolio of brands. For sales, we saw an increase of 20.4%, including Allen Edmonds and more modest growth of 1.1% on an organic basis. Our best performing brands in addition to Allen Edmonds and the outstanding performance of Sam Edelman included Vince, LifeStride and Rykä with sport inspired categories really continuing to excel. Brand portfolio adjusted gross margin of 40.1% was up 415 basis points with the majority of our brands contributing, including Allen Edmonds. Similarly, adjusted operating margin of 6.5% was up 211 basis points. Throughout the quarter, the brand portfolio team maintained its focus on expense control in an effort to continue to deliver improved margins. So as I said earlier in the call, the first quarter provided us with a really solid start to the year and we remain very confident, proactive and feel like we are right on track. Despite all of the continued noise in the industry and no matter what changes are in store for retail in 2017, we are going to remain forward-looking and proactively managing outcomes to deliver overall shareholder value. Our performance in the first quarter is clearly an early indicator for 2017. Now, before I turn the call over to Ken, I’d like to update you on our annual meeting, which was held this morning in St. Louis. In addition to declaring our 377th consecutive quarterly dividend, we also welcomed our two newest board members, Wenda Harris Millard and Brenda Freeman to Caleres. Wenda is Vice Chairman of MediaLink and Brenda is Chief Marketing Officer for MagicLeap. With their strong marketing and digital backgrounds, we know both are going to bring those additional consumer insights to our Board of Directors, which is especially important as we continue to focus on staying agile and responsive to changing consumer shopping patterns. And with that, I’d like to now turn the call over to Ken.

Thank you, Diane and good afternoon everyone. While Diane has already covered some of our first quarter results, I would like to drill down into some more specifics. For the quarter, we delivered diluted earnings per share of $0.40, adjusted to exclude $0.05 related to the acquisition, integration and reorganization of our men’s brands. Consolidated sales for the first quarter of $631.5 million were up 8%, including $42.5 billion of Allen Edmonds sales. For the first quarter, e-commerce sales represented 14.1% of total sales, up from 10.3% last year as Diane previously mentioned. For our brand portfolio, first quarter sales of $265 billion were up 20.4% versus the prior year and as mentioned, included our first complete quarter of contribution from Allen Edmonds. e-commerce related sales increased to 25.8% of total Brand Portfolio sales in the first quarter, up from 19.9% last year. At Famous Footwear, first quarter sales of $366.5 million are up 0.5% over 2016, while same-store sales were down 0.6%. Famous.com sales comprised 5.7% of total Famous Footwear first quarter sales, up from 4.6% last year. Now let’s turn to consolidated gross profit, which came in at $270.9 million in the first quarter. Gross margin of 43.4% improved 100 basis points, excluding the $3 million of expected Allen Edmonds inventory adjustment amortization costs. Brand Portfolio drove strong contributions to the gross margin in the first quarter and delivered 415 basis points of improvement on an adjusted basis. Excluding Allen Edmonds, organic gross margin was up more than 200 basis points versus the first quarter of 2016. This performance was primarily driven by improved volumes and reduced closeouts. For Famous Footwear gross margin was down 51 basis points for the quarter, primarily reflecting shipping expense related to the continued strong sales growth at Famous.com. SG&A expense for the first quarter of 2017 was up 11.4% year-over-year, including Allen Edmonds. For our Brand Portfolio, SG&A spend was flat year-over-year, excluding Allen Edmonds. For Famous Footwear, SG&A expense increased 3.1% as we operated nine more doors year-over-year in the first quarter, including three high volume destination doors and we will operate six more doors year-over-year in the second quarter. We also saw increased depreciation related to the ramp up of our Lebanon distribution center expansion in the first quarter, which will continue throughout the remainder of the year. In total, first quarter consolidated depreciation and amortization of $15.7 million was up 20.2% over 2016, including Allen Edmonds and the Lebanon distribution center. Net interest expense for the first quarter was $4.8 million, up from $3.4 million last year as we borrowed against our revolving credit facility to finance the acquisition of Allen Edmonds in December of 2016. We will continue to see higher year-over-year interest expense related to our increased revolver balance throughout the remainder of the year. Our tax rate for the first quarter was 28.8% on a GAAP basis and 30.5% on an adjusted basis. First quarter capital expenditures of $12.4 billion were down 32% year-over-year as we wrapped up the investment in our Lebanon distribution center expansion in the fourth quarter of last year. Now turning to the balance sheet, we ended the quarter with cash and equivalents of $71.8 million, up 29.8% from the end of 2016, even as we paid down acquisition related borrowings against our revolving credit facility. At the end of the first quarter revolving borrowings of $85 million or 22.7%, down from the $110 million at the end of last year. And as we previously communicated, we expect to completely the pay off the revolver by the end of this year. At the end of the first quarter, our consolidated inventory position of $565.1 million was down 3.5% from the end of 2016 and up 15.8% versus the first quarter of 2016, including Allen Edmonds. At Famous Footwear, we ended the quarter with year-over-year inventory down 0.8% per store on a dollar basis. For our Brand Portfolio, year-over-year inventory was up more than 60%, including Allen Edmonds and up approximately 20%, excluding Allen Edmonds. For our Brand Portfolio, we have continued to invest in inventory to support our growing drop-ship businesses. As retail continues to ship online, we remain focused on staying agile and responsive to the changing consumer shopping patterns. Our solid performance in the first quarter reflects our continued execution, including our 8% sales growth and 100 basis point improvement in adjusted gross margin. We also maintain the strength and flexibility of our balance sheet in the first quarter, even as we paid down another $25 million of revolver borrowings related to our Allen Edmonds acquisition. In the first quarter, we also saw a 12.9% increase in free cash flow, which was defined as operating cash flow minus capital expenditures. Importantly, we delivered $0.40 of adjusted earnings per share despite the highly promotional and challenging retail environment. And while we are pleased with our first quarter performance, we remain realistic regarding the challenges facing retail as consumer shopping patterns continue to shift rapidly. So before we begin the Q&A, I would like to remind everyone of our fiscal 2017 guidance, which is not changed since we first issued it back in mid-March. Consolidated net sales of $2.7 billion to $2.8 billion, same-store sales at Famous Footwear up low single-digits, net sales for the Brand Portfolio segment up in the high teens, including Allen Edmonds. Gross margin up 45 basis points to 55 basis points, SG&A expense as a percent of sales up 30 basis points to 40 basis points and effective tax rate of between 31% and 33% and adjusted earnings per diluted share between $2.10 and $2.20, excluding approximately $0.06 of expected acquisition, integration and reorganization costs in the first half of the year related to the Allen Edmonds acquisition. This guidance includes the closing of 70 Famous Footwear stores and the opening of 40 new doors as part of our normal lease renewal process, the closing of 11 Naturalizer stores and opening of four new locations, the opening of 10 new stores for Allen Edmonds and one for Sam Edelman. Depreciation and amortization of approximately $60 million, capital expenditures of approximately $55 million and an additional $12 million of operating expense related to the 53rd week in 2017. Additionally, I would like to once again stress that we expect our 2017 earnings to be weighted more heavily to the back half. This is due to a continued shift in the seasonality of our Brand Portfolio shipments and the expected benefits from our investments in Allen Edmonds and our Lebanon distribution center will build incrementally as the year progresses. As a result, we expect the second quarter will look a lot like the first quarter with earnings flat to [ph] down on a year-over-year basis. And with that, I would like to turn the call back over to the operator for Q&A.

[Operator Instructions] Your first question comes from Laurent Vasilescu from Macquarie.

Thank you very much. Good afternoon. I want to ask about the comment about February being really tough, could you give a little bit color by month how the quarter shaped up in Famous Footwear?

February bad, March better, April, really good, they are pretty similar what everybody had talked to you. I know that you have heard from other people in that context.

And in the context of quarter-to-date, pretty good?

Yes.

Okay. And then also on – could you guys parse out the change year-over-year for Healthy Living and Contemporary?

It should be on the slide.

Okay, thank you. I am sorry about that. And then maybe just one more question, if I may. And thank you for providing Allen Edmonds revenues and also, I just have to do the math by giving us the gross margin, SG&A x-Allen Edmonds. But on the revenues for the $42 million, that’s a little bit higher than I thought it would be for the first quarter, how do we think about the progression of Allen Edmonds contribution to the top line over the next quarter, should it build and if you could, could you give us maybe some kind of idea of what it should be for the full year?

Yes. So we have – where we have laid it out it builds throughout the year. So we would expect that second quarter would be a little bit higher than the first, third quarter would be a little bit higher than the second and then fourth quarter would be the highest of the four. So – I mean I think it’s pretty consistent in terms of the way it builds throughout the year, which is one of the reasons why we keep wanting to make sure people understand that the contribution, not only do you get the volume benefit of the growth in the back half, but then you also start to see the synergies associated with the acquisition, because we will have in all the financials and a lot of the integration get done in the first half of the year.

Okay, thank you very much and best of luck.

Thanks, Laurent.

Your next question comes from the line of Jay Sole with Morgan Stanley.

Great, thank you. Diane, I thought it was interesting that in the brand portfolio, e-commerce sales now account for 26% of the total. Can you talk about what part of that total business is represented by the company’s own stores and then what part is really through third-party brick-and-mortar and then what part is through third-party websites at this point?

Yes, it’s been – it’s actually – I am glad you are asking the question, Jay, because it’s a very interesting part of our business right now and it continues to gain steam really across the board, whether it’s any of our own websites as part of famous.com or any of our branded websites. And also really all the businesses that we are selling to, that have dotcoms sites as well and our ability to be able to drop ship and the fact that we carry the inventory, it really makes a huge difference. So when you take a look at how we would parse it out as it relates to the brand portfolio in total, our drop ship business represents – I am looking here, brand portfolio total would be about 25% of it. The dotcoms that we have is, let’s say, excuse me, 61% on the brand portfolio, all the drop ships and then 39% of it would come from our dotcom businesses.

I see what you are saying. So in other words, the 26% represents the company’s owned websites, but then also the drop ship business to like – a Macy’s dotcom for example?

Yes, yes.

Got it, okay. Maybe can you also talk about – give us a little bit more detail about what effect the ramp of the Lebanon, Tennessee, distribution center had on sales and margins in the quarter? Obviously, we know about the extra expense. But just on maybe how it helped sales and that kind of thing?

Yes. I would say so far really that has – we are going to see that kind of an impact as we move through the rest of the year, Jay, first quarter, not so much so, but as we move into the back half of the year, that’s where we really see the benefit from the investment in that distribution facility.

Yes, it certainly did not hurt sales. So, I think it’s mostly if you just take the calendarization of Famous sales throughout the year, the depreciation is flat and consistent month-to-month, quarter-to-quarter. And so obviously, the productivity is ramping and we are very pleased with the performance of that center. Just unfortunately, when you turn it on, you take the full depreciation over the life of the investment consistently. So as the business grows throughout the year, then obviously it has less of an impact on the overall financial performance of the segment.

Okay, got it. And maybe Diane, can you just walk us through the highlights from the quarter for Naturalizer, Sam Edelman and Dr. Scholl’s?

Sure. Actually, Sam Edelman had just an absolutely outstanding quarter this quarter. He is certainly hitting I think all of the trends exactly right. And so our performance, both in terms of shipments, Jay, as well as our sell-through at retail has been very strong. We also kicked off a digital campaign in the – late in the month of April. That’s continuing into May and into early June, and the response that we’ve been seeing in terms of total impressions and click-through rates. And actually, we’ll have to give you more of an update at the end of second quarter, but we really think that that’s going to have a meaningful impact on driving traffic, not only to its stores and websites and really, basically, a sell-through of the branded multiple channel, so right now, feeling really very good about his business. Naturalizer had a very, very solid performance this quarter. If I would sort of break that up a little bit and look at the components of it, I would tell you that wholesale is definitely showing strength. They are seeing growth in every product category. They introduced a lot of new sport product, all those new modern icon products that we had talked about last year, is really starting to retail, so – and their ability – they really had a pretty sizable dotcom business already and good drop ship business. So they’ve been able to continue to build the momentum there. But I would say, maybe the real new news there is sport. The sport introduction has been really fueling the growth, and their operating margin productivity has been improving pretty consistently over the last number of quarters too. So, we feel pretty good about where Naturalizer is. And Dr. Scholl’s, x-Wal-Mart is fantastic. With Wal-Mart, we are still struggling. It now is really – as they are rationalizing the space in Wal-Mart, now in Canada, we are fighting a fight there. But in terms of all other channels again because Dr. Scholl’s has some tremendously successful sport product, they have been growing their mid-tier and better channels. And we are just trying to get to that point where that tipping point for the mid-tier and upper outweighs really that Wal-Mart business. So, we can add the growth to the top line there. But the team has been doing a fantastic job continuing to drive great sell-through and they have been – the whole brand portfolio has done a nice job in terms of managing the expenses to drive very, very good operating margins.

Got it. Thanks so much.

Okay.

And your next question comes from Scott Krasik from Buckingham.

Thanks. Hey, good job. Congrats.

Thank you, Scott.

Thanks, Scott.

One brand you didn’t mention and it’s in a little bit of a unique situation. I am just wondering about Vince, I think this is probably the first time ever you have a business that might be bigger than the entire enterprise value of the company. And I am just wondering strategically, how that works going forward?

Well, thanks for asking the question. I mean, first of all, we still remain extremely excited about the Vince brand and obviously, the footwear business. Our footwear business is still growing at high single, low double-digit increases and we are trying to keep pace with the success of it and we are working on it very closely, Scott, with Brandon and we know Brandon’s got a game plan in place for how he’s going to figure out how to turn, I guess, the Vince apparel business around. He has hired a new designer there. And I think everybody is very confident that with some time that will correct itself. But in the meantime, we are staying focused on driving our footwear business and we have not seen one bit of slowdown in the demand for that product. So I think it’s not a brand issue right now. It’s a bit of a – on the apparel side a bit of an operating and financial issue.

Okay. And then I jumped on the call late. But Rick, can you maybe talk about some of the big brands, what – how the athletic pieces are doing? I mean I know you are bringing in some new brands. So what that means for opportunity or room for the existing brands?

Yes. I mean, the branded business is pretty – the athletic-branded business is kind of what you would expect happening to court – people that have court product. And we have talked about that in the – earlier on in the call that, that business is still very, very good. Where we have lifestyle running product, if you will, that product is really good. We haven’t – we have not received any of the Under Armour athletic shoes. We have had socks and sandals in the stores for a few months and those have performed nicely. And frankly, in those two categories, we haven’t seen any erosion in our competitive set with those products at all. So that was a nice surprise. Our expectation is that we will do fairly well with the product – with the new products at back-to-school. Again – and another – I think we will have some shoes in the store by the end of June probably. So we will start having some read on how that would actually work. But we are optimistic and we think we have planned it correctly as far as how we have invested and what we disinvested in to make that all happen.

And then I know you historically talked about sort of a leverage point being more like 1.5% on the comp. It seems like the SG&A has been growing faster than that for a few quarters. So I am just wondering how you think about SG&A growth and leverage in Famous?

Well, I think that’s typically been our leverage point. I think as we work through the rest of the year and we get – we have fewer stores operating in the back half towards the end of the year. That would probably end up being true. It’s not true today because our costs are higher, but we are trying to mitigate some of those with closing stores appropriately and having some opportunity to leverage and work on our expense side on the shipping piece of the .com business. So those two things happened the way we see, I think we will be back where that 1.5% each point or so would be the leverage point.

Okay, thanks and good luck.

Thanks Scott.

Your next question is from Jeff Stein with Northcoast.

Good afternoon guys. First a question for Rick, wondering Rick if you are at all concerned or factored into your planning the closings of some of your major department store competitors JCPenney, Macy’s and so forth?

We watch it closely, Jeff. I think we have tried to be thoughtful about that. I think it’s hard to do. The timing is different on all those things. So they are actually kind of pinpointed. But it will be one of those things that will – it’s going to happen whether or not, right. They are going to close those stores and they will be aggressive on liquidating. But with the rash of them all whether it’s some of the sports athletic guys who have stores closing in places whether it’s the payless situation, whether it’s any situation, there is a lot going on. It’s hard to pin it. We think we have accounted for that. Time will tell.

Okay. And a question for Ken on the Brand Portfolio, you have seen quite a few quarters now a significant gross margin improvement and another – again, another 200 basis points, which is terrific on an organic basis, so I guess kind of where are we on the curve, how much more do you have to go in your view and will that continued to be a driver for the balance of this year and into next year, I guess how far do you think you can take it?

I mean I am well aware of the work that we have been doing across the entire supply chain. And Diane mentioned with the speed project and the work we have been doing on materials. So we have been very pleased with the benefits that we have been able to reap from that. And I think that supply chain, I think we still have some opportunity there. Our total year guidance increased – tries to take into consideration the improvements that we see and we continue to look at that. We know that improving that overall cost structure is – has been very beneficial to the overall profitability of the Brand Portfolio and the ability for it to start to get up to deliver the earnings that we have seen at Famous. So I think we are looking at $17 million or so of the contribution from the branded business and $20 million from Famous. And so a big piece of that is the benefits that we have received there. So we think it’s going to continue through – throughout the year. And then obviously, as we start lapping it year-over-year and it gets harder and harder, but team is doing a lot of good work to continue to try to figure out ways to make the supply chain more efficient and lower the overall cost to provide that product.

And Ken wondering if you take a look at your retail customers and the Brand Portfolio group, wondering how tight the inventory supply chain is. If you look at weeks of supply of the products that you sell, is that, I mean at what pace is it declining and given the fact that it looks like your organic inventory growth is up 20%, is that – how would you kind of parse that out in terms of fashion product versus replenishment product?

Yes. So I think to answer your question, one of the things that the teams have all been focused on is not only what we ship into our partners, but the sell-through at retail. So I think, we have got a pretty good handle and we are not seeing any – any inventory really building up at retail. And we saw a pretty significant reduction in those initial orders a year ago, first quarter and it’s just been pretty steady since then. The shift and Jay was asking earlier about the online business. And when we look at both our e-commerce business and the replenishment business and there is also what we are doing to drop-ship for a lot of our partners shoes that are sold on their sites. So there is a little bit of our inventory that we have had to invest in to be able to support the growth in just e-comm in general. So when we look at weeks of supply, I don’t see it – I don’t see it building. I think it’s been pretty steady, except for the big reduction that we saw in the first quarter of last year.

Got it. And final question I have would be with respect to your e-commerce business, which is up about 400 basis points in the aggregate year-over-year and clearly there was some gross margin pressure, but when you look at it all the way down to the operating profit line, how should we be thinking about the impact on your EBIT margins as your e-commerce business continues to grow?

It’s interesting. We have been having a lot of conversation around this and when you look at across the branded business, the .com profitability, because you are really leveraging your broader wholesale business. It’s actually accretive on the branded side. So we are able to continue to see the profitability of that road in spite of that higher penetration. And I think that’s been a nice – a nice contribution to our bottom line. So we have been looking at it to make sure that the penetration is not going to be something that’s going to be creating a lot of headwind on the branded side. And I think because of the base that we have had in our core wholesale business and we have been able to layer that growth on top with – with an incremental benefit. And so it is proving to be accretive. And so, we are pretty proud of the margins that we are able to deliver in that e-comm business.

That’s great. Would the same be true on the Famous Footwear side?

Yes. Famous, it’s the profitability has continued to improve. I think it was up almost 300 basis points just in the first quarter. It’s not because you have all the cost of the brick-and-mortar and then you have that shipping cost to get it the consumer, which turns out to be an impact to their gross margin. So it’s dilutive today and most of that is directly associated with the cost to get it to the consumer. I think that’s why some of the initiatives there Rick and his team have been working on and being able to, whether it’s bundled shipments, whether it is the ability to go through and offer our consumers the opportunity to pick the product up in-store when they are ordering online, those are all things that continue to reduce that shipping cost that we have been talking about as we continue to grow that business.

Thank you.

And your next question comes from Will Gaertner from Susquehanna.

Hi guys. Thanks for taking my question. I just wanted to know when you guys – I think you said organic – your organic inventory growth is 20% this quarter, is that correct?

Yes.

And when do you guys expect inventories to come back in line with sales?

Well, I think that if you were to go through and dissect that inventory, it’s in a couple of the brands that it’s in line with kind of what we have seen in terms of those brands sells. And so I think we are obviously monitoring it. The margins continue to be improving. And so I think with that growth in inventory is – it’s aligned to what we would expect to see in the coming quarters in terms of the growth and sales of those brands.

Got it. And just another question on traffic, at Famous, did you guys comment on that at all?

No, we didn’t. I think overall traffic and Rick, if you would like to go, give specifics. I think our overall traffic was up. And continued traffic down in-store and up online and then I think in our prepared remarks, we commented that conversion – both conversion at in-store and online was both up, so…

That’s the story. Yes.

Great. Thank you.

[Operator Instructions] Your next question is from Steve Marotta from CLK & Associates.

Good evening everybody.

Good evening Steve.

A little bit about initiatives plan to drive traffic in the back-to-school season, obviously product would be what people come to the store for, but are there going to be additional marketing days, are there digital advertising that will occur, what do you do to drive traffic to the stores during the important back-to-school season? And as a follow-up to, given the slight comp at Famous in the first quarter, what gives you confidence that the year will increase in the low single-digit range?

Well, I will take the first one last, I will take the last one first whatever it is. Anyway, the confidence I think is really the fact that categories that we have invested in are where those categories have drove a lot of business in the first quarter. And as that – they become a bigger piece of our assortment, we expect that to continue. So therefore, just mix changes, continues to change as we get to back-to-school. So we feel very comfortable that that business drove the bulk of whatever increases we had in the first quarter, gets bigger in our assortment. So I think that’s why we feel confidence Steve and the addition of a new brand in our stores that should help. As far as what we are going to do to drive traffic, I am not sure I am going to comment on that for obvious reasons since it’s only May, whatever today is. And we are preparing all that. But yes, we have digital plans, online plans, e-mail plans, all the things that we think are the – social media plans, we found some real opportunities on the social media side, so all those things are part of our mix. We don’t, right now aren’t intending to do anything dramatically different promotionally, but we will see. There might be – that will be a piece of what happens when we see what’s going on competitively, but we are believing that we have the right product. We think we are going to market it strongly to those customers that we think are our target customers and we believe they will buy from us.

And Ken, can you remind us of the synergies associated with the Allen Edmonds and how that will piece in the third quarter and fourth quarter?

I don’t think we had commented specifically on those. But I think from an integration standpoint, we are going through the financial integration in the SAP, now that’s progressing nicely and should be wrapped up here in the second quarter. And so then we will start to get some of the benefits of having everything on one financial platform in the back half. But it’s really just as we continue to bring them into – able to leverage our policies and processes and then that’s where we start to see that improvement in the back half. And there is also a big piece of their business that comes in the back half as well. And I think as Laurent was asking about kind of the calendarization of that, I mean it grows throughout the year with the fourth quarter being the biggest quarter.

Great. Thank you very much.

There are no other questions on the phone line at this time.

Thank you very much for joining us this afternoon. And we look forward to seeing most of you who are going to be in New York next week and on our second quarter call in August. Thank you very much.

This concludes today’s conference. We thank you for your participation. You may now disconnect.