Caleres (CAL) Q4 2017 Earnings Conference Call Transcript

Caleres (CAL 1.18%)
Q4 2017 Earnings Conference Call
March 13, 2018 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good afternoon. My name is Sarah, and I will be your conference operator today. At this time, I would like to welcome everyone to the 2017 Caleres Earnings Call. [Operator instructions] It is now my pleasure to introduce today's speaker, Ms.

Peggy Reilly Tharp. Ms. Reilly Tharp, the floor is yours.

Peggy Reilly Tharp -- Vice President, Investor Relations

Thank you. Good afternoon. I'm Peggy Reilly Tharp, vice president, investor relations for Caleres, and I'd like to thank you for joining our fourth-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 statements.

Copies of these reports are available online. The company undertakes no obligation to update any information discussed in this call at any time. Joining the call today are Diane Sullivan, CEO, president, and chairman; Ken Hannah, chief financial officer; and Rick Ausick, president, Famous Footwear. And I would now like to turn the call over to Diane Sullivan.

Diane Sullivan -- Chairman, President, and Chief Executive Officer

Thanks, Peggy, and good afternoon, everyone, and thanks so much for joining us today to talk about what was just an outstanding year by any measure. In addition to an excellent year, we also had a fantastic quarter. And thanks to our team's perseverance and agility, we delivered these great results in the midst of what is a very well-documented change in consumer landscape. Just to give you a few of our 2017 highlights.

Sales were up 8% for the year and up nearly 10% in the quarter. Adjusted gross margin improved 85 basis points over last year and was up 54 basis points in the quarter. SG&A expense was well-managed overall in 2017, and we leveraged our spend particularly well in the fourth quarter. Adjusted earnings per share for 2017 were up 8%, to $2.16, coming in at the middle of the range we guided to last March and maintained throughout the year.

Famous Footwear comp sales were up 1.4% for the year and were up 2.8% for the quarter. Our brand portfolio shipped more than 46 million pairs of shoes in 2017 and they had a record-setting shipping month in January. Sam Edelman sales crossed the $200 million mark this year and our Allen Edmonds acquisition that we acquired last -- late last year remains very much on track. And with respect to our balance sheet, we reduced our inventory position by 2.8% and maintained our flexible balance sheet and our cash-flow strengths, as we completely paid down the $110 million in borrowings for Allen Edmonds and also made great progress in our 2017 focus areas.

Last year, we focused on areas that we believe were critical to the long-term health of the company and will drive both near- and longer-term outcomes as well as making sure they help us to maintain our consumer focus. These four key areas included our initiatives around speed to market, speed to consumer, digital, and the diversification of our portfolio of brands. For 2018, we plan to maintain and amplify the focus on some of these areas and expand the scope for others. And I thought it would be important to just take a few minutes to highlight some of our accomplishments and, importantly, our expectations for 2018.

First of all, our speed-to-market program delivered against our internal targets in 2017 and helped us respond to consumer demand for newness and freshness throughout the year. Our speed programs accounted for approximately 15% of our source pairs in 2017 and enabled us to react to trends in the marketplace like sport-inspired styles and to be proactive in testing new designs. These efforts also allowed us to focus on the styles we believe in and then expand across the marketplace as needed to address consumer demand with additional colors, different materials, and other enhancements. Our work around simplifying and streamlining for speed will continue in 2018, and our efforts are expected to drive even greater visibility into the entire supply chain and allow us to have more productive inventory on the floor.

For 2017, our speed-to-consumer initiatives were focused around Famous Footwear, and we made significant strides in accelerating the time it takes to get product into our consumers' hands or on their doorstep with approximately 70% of shipments in consumers' hands within three days. To further accelerate time to consumer, we launched Buy Online Pick up in Store in the second quarter this year. This program also helped offset some of the margin pressure related to Famous.com orders and helped drive our fourth-quarter gross margins up 58 basis points at Famous Footwear. In 2018, our speed-to-consumer efforts are going to be focused around our brand portfolio.

The shift in consumer shopping patterns is not surprisingly impacting wholesale distribution and fulfillment. And as a result, we need to become more efficient in processing smaller order quantities on a more frequent basis and we also need to be able to react to increased demand for loose-pair processing on the brand portfolio side of our business. In 2018, we will be strategically shifting to in-house fulfillment for our brand portfolio, which will result in some additional expense. However, we have no plans to stay still in the midst of this changing consumer landscape, and we're always trying to look to the future.

So similar to our modernization and expansion work that we completed in '16 at our Lebanon distribution center, this shift to in-house fulfillment for our brand portfolio will provide us the flexibility to adapt to the changing needs of our retail partners and consumers. And third, from a digital perspective, we saw gains in e-commerce sales in 2017. Famous Footwear e-commerce-related sales were up 14% and represented 10% of total Famous sales. For our brand portfolio, e-commerce-related sales accounted for 28% of '17 sales, and they were up 47% over last year.

In total, e-commerce-related sales were up 34% in 2017, and these transactions now comprise 17% of total consolidated sales. Not surprisingly, this is the fastest-growing area of opportunity for every brand here at Caleres. We're also moving to a new e-commerce platform in 2018 as we continue to expand our direct in e-commerce proficiency. This platform will work in conjunction with the content-management system we implemented at the end of 2017.

Together, these will enable us to more rapidly react to evolving consumer expectations online and assist us in our efforts in acquiring and retaining consumers. Our Famous and brand portfolio teams will be able to manage website content much more dynamically. What took us two weeks last year will now take us close to two days to make those changes on our sites. Finally, last year, we talked about the diversification of our portfolio of brands through our acquisition of Allen Edmonds, and we remain focused on this exciting addition to our company in '18.

This year, we plan to begin transitioning the brand's consumer-facing activities to St. Louis to leverage our infrastructure and to take maximum advantage of our extensive consumer-direct experience here at Caleres. At Allen Edmonds, we'll also be investing capital into improving manufacturing and also focus our attention on consumer acquisition and retention so that we enhance both the online and the in-store experience, as each of these areas are critical to the continued growth of the brand. In total, we expect to pay critical attention to our speed, digital, and diversification efforts in 2018.

We also expect to leverage our 2017 successes to deliver adjusted earnings per share of $2.40 to $2.50 in 2018 as we continue to benefit from the foundational strength of the diversified portfolio of brands that we have here at Caleres. And with that, I'd like to now turn the call over to Ken to give you some detail around the financial performance.

Ken Hannah -- Chief Financial Officer

Thank you, Diane, and good afternoon, everyone. I'd like to begin by echoing Diane's remarks about our strong performance in 2017. Once again, we maintained our earnings-per-share guidance throughout the year and delivered against our original expectations put forth last March. For the fourth quarter, earnings per diluted share came in at $0.47 on a reported basis and $0.48 on an adjusted basis, up 45.5% year over year.

While there was only a $0.01 difference in the reported and adjusted numbers, I'd like to walk you through the components. First of all, we completed some restructuring in the fourth quarter of 2017, primarily in Famous Footwear field operations, where we reduced the number of regions down to four from eight and eliminated 11 districts to align with shifting consumer shopping trends. This proactive effort resulted in a pre-tax charge of $942,000, or approximately $0.02 after tax. Secondly, due to the Tax Cuts and Jobs Act, we revalued our deferred-tax assets and liabilities and accounted for the tax on unrepatriated cash, earnings, and profit.

When combined, these items resulted in a $0.01 benefit to our fourth-quarter diluted earnings per share. Finally, as a reminder, while the 53rd week delivered additional sales of $23.4 million in 2017, it did not drive any benefit to earnings per share. This is due to the additional wholesale and corporate expenses without related sales. For the full year, reported earnings per diluted share came in at $2.02.

Including the aforementioned fourth-quarter items and the $0.13 of previously recorded charges related to the acquisition, integration, and reorganization of the company's men's brands, adjusted earnings per share was $2.16 and up 8% over 2016. Consolidated sales for the fourth quarter of $702.5 million were up 9.8%. For the full year, consolidated sales of $2,785,600,000 were up 8% versus 2016. At Famous Footwear, fourth-quarter sales of $393.1 million were up 7% over 2016 and included $19.7 million of revenue related to the 53rd week.

For the fourth quarter, same-store sales were up 2.8% on a 52-week basis. For the full year, total sales of Famous Footwear of $1,637,600,000 were up 3% while comp sales were up 1.4% on a 52-week basis. For our brand portfolio, fourth-quarter sales of $309.4 million were up 13.8% versus the prior year, including $3.7 million of retail sales attributable to the 53rd week. As a reminder, the fourth quarter of 2016 included approximately six weeks of contribution from Allen Edmonds while this year's fourth quarter included 14 weeks of revenue.

Excluding Allen Edmonds sales from both periods, the brand portfolio sales were up approximately 5% in the fourth quarter. For 2017, brand portfolio sales crossed the $1 billion mark, coming in at $1,148,000,000, up 16% year over year. As we turn to gross profit, which came in at $293.4 million in the fourth quarter, up 12.5%, gross margin of 41.8% improved 97 basis points over the fourth quarter of 2016 on a reported basis. As a reminder, fourth-quarter 2016 gross profit included $2.8 million of costs associated with the acquisition of Allen Edmonds and the restructuring of our brand portfolio.

Excluding that amount, fourth-quarter 2017 gross margin increased 54 basis points year over year. For the full year, consolidated gross profit was $1,168,600,000 and up 10% year over year on a reported basis and up 10.2% on an adjusted basis. Consolidated gross margin was also up on both a reported and adjusted basis in 2017 with a year-over-year improvement of 78 and 85 basis points, respectively. For Famous Footwear, gross margin was up 58 basis points in the fourth quarter, a continuation of a trend from the third quarter and a reversal from the first half of the year.

For 2017, Famous Footwear gross margin of 44.2% was up slightly over 2016. Brand portfolio fourth-quarter gross margin was up 173 basis points, as reported, and up 71 basis points on an adjusted basis. For 2017, the brand portfolio team delivered full-year gross margin of 38.7% on a reported basis and adjusted gross margin of 39.1%, with both metrics up more than 200 basis points. SG&A expense for the fourth quarter of 2017 was up 7.9% year over year, primarily due to the addition of a full fourth quarter of Allen Edmonds expense and brand portfolio and the addition of a 53rd week at Famous Footwear.

Despite these increases, we leveraged SG&A expense in the fourth quarter, coming in at 37.3% of sales, down 68 basis points versus the prior-year fourth quarter. For the full year, SG&A expense was up 10.4%, mainly reflecting the addition of Allen Edmonds. Our depreciation and amortization of $15.9 million was up 1.4% in the fourth quarter versus the same period in 2016, primarily due to our acquisition of Allen Edmonds and the expansion of our Lebanon distribution center. For the full year, depreciation and amortization of $64.1 million was up 14.1% versus the prior year.

Net interest expense for the fourth quarter was $4.1 million, which was flat versus the fourth quarter of last year. For the full year, net interest expense was $17.3 million and up from $13.7 million, as we were borrowed against our revolving credit facility for most of 2017 to finance the December 2016 acquisition of Allen Edmonds. Our tax rate for fiscal 2017 was 28.9% on a GAAP basis and 29.8% on an adjusted basis. Of note, our reported tax rate over the past four years has averaged approximately 28% while our average adjusted tax rate for the same time frame was slightly higher, at approximately 29%, and we expect that rate to come down to between 25% to 26% in 2018.

Our capital expenditures were $51.2 million for 2017, down 14.1% year over year, reflecting the completion of our Lebanon distribution center and as we opened fewer retail stores during the year. Now turning to our balance sheet. We ended the year with cash and equivalents of $64 million, up 15.8%, and paid down the remaining borrowings against our revolving credit facility, which were used to finance the December 2016 acquisition of Allen Edmonds. Our consolidated inventory position at the end of the year was $569.4 million.

For our brand portfolio, inventory was down more than 5% year over year, excluding Allen Edmonds. At Famous Footwear, we ended the year with inventory down 2.4% year over year. We ended 2017 with 1,026 Famous Footwear doors after opening 34 and closing 63 doors. For our brand portfolio, we opened 15 doors in 2017 and closed 13, leaving us with 236 stores at year-end.

Before we begin Q&A, I'd like to provide our initial fiscal 2018 guidance, which was presented in today's earnings release. Consolidated net sales of approximately $2.8 billion with same-store sales at Famous Footwear up low single digits and net sales for the brand portfolio segment up low single digits. Our gross margin is expected to be up approximately 5 to 10 basis points, and we expect to leverage our SG&A expense as a percentage of sales 5 to 10 basis points. Interest expense is approximately $16 million and our effective tax rate of between 25% and 26%, down from a four-year historical average of approximately 28% on a GAAP basis and 29% on a non-GAAP due to the Tax Cuts and Jobs Act.

And our earnings per diluted share of between $2.40 and $2.50, up 11% to 16% over 2017, including an expected benefit of approximately $0.13 per share due to our lower effective tax rate and excluding approximately $0.07 to $0.08 of the remaining Allen Edmonds transition cost that Diane discussed earlier. Additionally, if the reduced tax rate related to the Tax Cuts and Jobs Act had been in effect for all of 2017, we believe our adjusted 2017 diluted earnings per share would have been $0.11 higher, or approximately $2.27. Based on our 2018 guidance, this would equate to a 6% to 10% increase in earnings per share year over year on an apples-to-apples basis. Finally, this guidance includes, as usual, a number of store openings and closings, and these details can be found on the earnings slides available at caleres.com.

As a reminder, last year included a 53rd week, which increased brand portfolio sales by $3.7 million and Famous Footwear sales by $19.7 million that had an immaterial impact on our 2017 earnings. Overall, 2017 was a great year for Caleres. And once again, we expect to deliver consistent, profitable and sustainable growth in 2018. And with that, I'd like to turn the call back over to the operator for Q&A.

Questions and Answers:

Operator

[Operator instructions] Your first question comes from the line of Steve Marotta with C.L. King & Associates.

Steve Marotta -- C.L. King & Associates -- Senior Vice President

Good evening, everybody. Congratulations on a great quarter and a great year.

Diane Sullivan -- Chairman, President, and Chief Executive Officer

Thank you.

Steve Marotta -- C.L. King & Associates -- Senior Vice President

A couple of quick questions. A lot of consumer companies that we're seeing reporting earnings and offering initial guidance for the coming year are plowing back some of the benefits associated with the new tax plan into SG&A and demand-creation activities. Given the leverage that you're showing on the SG&A line, it looks like that you're not doing that. Could you talk a little bit about the calculus that went into your decision-making on basically uses of funds associated with the tax benefit in the current year?

Ken Hannah -- Chief Financial Officer

Yes, sure, Steve. This is Ken. I think in the past, in order to deliver the earnings that we've delivered, we've continued to invest in our business. And we do not expect 2018 to be any different.

I think when we looked at it on an incremental basis, the incremental expense that was coming through our SG&A was really tied to acquisitions and customer acquisition, and that looks like it's an incremental $4 million to $5 million.

Steve Marotta -- C.L. King & Associates -- Senior Vice President

OK. From a CAPEX and a D&A estimate standpoint for '18, could you just go over that?

Ken Hannah -- Chief Financial Officer

Yes, the expectation is that the CAPEX will be approximately $50 million.

Steve Marotta -- C.L. King & Associates -- Senior Vice President

And D&A?

Ken Hannah -- Chief Financial Officer

The D&A should be pretty consistent with '17.

Steve Marotta -- C.L. King & Associates -- Senior Vice President

OK, that's fair enough. And is there any cadence from an EPS standpoint in first half versus second half? Are there any SG&A costs in particular that you would expect to be slashed from quarter to quarter?

Ken Hannah -- Chief Financial Officer

That's a good question. I think for the most part, unlike last year, when we had the addition of Allen Edmonds coming in and we spent a lot of time talking about how that was going to be calendarized, our 2018 earnings are much more consistent with the guidance that we provided quarter to quarter. The only expense to be noted is, Diane mentioned, we are in-sourcing our wholesale distribution warehouse, and there is some expense in the first couple of quarters of the year associated with that, a couple of million dollars.

Steve Marotta -- C.L. King & Associates -- Senior Vice President

OK. And lastly, can you talk a little bit about product and how you see the -- specifically from a category standpoint, obviously, sneakers, as well as fashion sneakers, continue to do well. And as you look out through spring and then fall as in the Famous Footwear as well as branded portfolio, maybe just talk a little bit about product. And that would wrap it up for me.

Thank you.

Diane Sullivan -- Chairman, President, and Chief Executive Officer

OK, Steve. It's Diane. A couple of things on product. We're seeing, actually, early reads on spring look pretty -- quite good, I would say.

I'll talk about the brand side first, and then Rick and I can share the duty on the Famous side. But as you would expect, we're seeing anything that's sport-related continues to be very strong, not only in sneakers but also in trainers. And actually, even sport sandals right now look to be very strong. Any foot-bed kind of product is great.

Jute wraps are good, hybrid concepts are great out there, where they're lightweight. So there's -- when you turn to fall and you think about boots, boots are -- people are kind of planning them to be relatively flat to where they were last year. No one's really finished on the way they're really thinking about what direction they're taking. But I would say that there are a number of actually pretty interesting key items across the landscape that seem to be driving a lot of volume right now.

And it seems to be interesting the consumer. And as we look at our retail selling right now seems quite good on a lot of the areas that we had hoped for. And I think the same thing is true at Famous too. I mean, across the board with respect to athletic and sport and sneaker, I mean, has been -- continues to be great.

Just different brands are coming up in terms of the importance, I think, in that, Rick, right?

Rick Ausick -- President, Famous Footwear

Yes, I think, again, pretty consistent with what Diane said. Finding -- as we refresh, we've been at this for a while. So I think our strategy has been to refresh with color, refresh with material, make sure the brands that we have represented, we have appropriate inventories position where again, not everybody is a winner, some things are getting lesser and some things are getting more, so making sure inventory's in a position to take advantage of that. I feel pretty good about how we are positioned at this moment in time in the quarter.

Probably need a little less cold and snow weather in the Northeast to really see how much we can do. But outside of that, the other parts of the country are showing pretty good returns on those businesses today, Steve. And we think that'll continue. We think we'll have a -- they'll still be strong for first quarter and into second and third.

Steve Marotta -- C.L. King & Associates -- Senior Vice President

Very helpful. Thank you.

Operator

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

Laurent Vasilescu -- Macquarie Group -- Director

Thank you. Good afternoon, and congrats on great results. I wanted to ask about Allen Edmonds. I think last year, in the fourth quarter, it generated about $24 million.

I was curious to know how much the brand generated for this quarter, for the full quarter. And then any indication on how much it contributed to the EBIT line?

Ken Hannah -- Chief Financial Officer

Yes, I mean, we're not going to get into the specifics around brand by brand. I think as we had talked earlier in the year, it was low 40s in the first quarter and kind of ramped to the -- ended up in excess of 50 in the fourth quarter and was accretive to our overall earnings per share.

Laurent Vasilescu -- Macquarie Group -- Director

OK, very helpful. And I think for November -- turning to Famous Footwear. I think November comps were running mid-single digits as of November 21. Can you provide clarity on how much the comps performed by month for the fourth quarter?

Ken Hannah -- Chief Financial Officer

Sure. We're pretty consistent, actually, Laurent. They're all in that mid-single-digit range pretty much across the board. So with December being the biggest, November being second, and January being the slow -- the lowest percent but all within a couple of tenths.

They weren't that -- there's not much difference. It was pretty evenly spread.

Laurent Vasilescu -- Macquarie Group -- Director

That's great to hear. And then turning to the full-year guidance on gross margin. The gross margin guided up 5 to 10 bps. It's a little lower than the growth rates given your historical trends.

Can you talk about the puts and takes for this guide?

Ken Hannah -- Chief Financial Officer

Well, I think that when we looked over the last three or four years, I mean, we're up almost 200 basis points. And so as we look into kind of the 2018 time frame, we think we're going to continue to see improvements there. I think we're just a little bit more conservative in terms of our expectations.

Laurent Vasilescu -- Macquarie Group -- Director

Gotcha. OK, thank you very much. Best of luck.

Diane Sullivan -- Chairman, President, and Chief Executive Officer

Thanks, Laurent.

Operator

Your next question comes from the line of Scott Krasik with Buckingham Research.

Scott Krasik -- Buckingham Research -- Analyst

Hey, everyone, congratulations.

Diane Sullivan -- Chairman, President, and Chief Executive Officer

Thanks. Good afternoon.

Scott Krasik -- Buckingham Research -- Analyst

Hi. Just going back to your comment, Diane, you had a record shipping month in January. I'm wondering, does that -- is that a reflection of retailers are sort of lean after Christmas or are they just excited about a couple of your specific brands? How would you characterize that?

Diane Sullivan -- Chairman, President, and Chief Executive Officer

I think it's a combination of a couple of things. I think they're very excited by a couple of our brands. I think the work that we've been doing around our speed-to-market projects, again, has us really coming back in on items that are strong performance, so we were able to really drive that really nicely. So I think it's a combination of a number of things, Scott.

So it was a phenomenal month, though, for sure. The teams did a great job.

Scott Krasik -- Buckingham Research -- Analyst

Your guidance for the branded side of the business is low single digits. You just did 5% in the fourth quarter. What would be the hindrance to growing, let's say, mid-single digits this year? And do you think you'll grow faster in the first half of the year or the second half of the year?

Diane Sullivan -- Chairman, President, and Chief Executive Officer

Well, Excel and Edmonds for the full year were basically flat all in. So we showed a nice pop in the fourth quarter. So I want to see us continue to drive that trend. And so I thought mid-single digits made -- or low single digits made a whole lot of sense as we're coming out of the gate and we'll see how we perform as the quarter and the seasons go.

So -- but I think it's prudent to chase a little bit because I'm sure you're hearing from most retailers, they really like to chase goods. Those initial orders do not come in upfront, so it's -- to get those 5% increases it's not a simple task. So we want to make sure we're very thoughtful in the way that we guide.

Scott Krasik -- Buckingham Research -- Analyst

Sure. And then the in-house fulfillment on the branded side. So you were just using a 3P facility?

Diane Sullivan -- Chairman, President, and Chief Executive Officer

Yes.

Scott Krasik -- Buckingham Research -- Analyst

What happened there?

Diane Sullivan -- Chairman, President, and Chief Executive Officer

Yes. Nothing. It was really -- we made the decision, I would say, the middle of last year that we just decided it was -- will be much more prudent long term for us to bring it in-house. And it was -- we had already finished and completed the work at Lebanon.

It made a whole lot of sense. We looked at our ability to be able to service the customer, frankly, in the time and at the class that we -- how we saw things projected out in the next couple of years. And we have a terrific team of logistics folks that are here at the company and we felt it was time to do so. And it was going to be better for the shareholder if we did that.

Scott Krasik -- Buckingham Research -- Analyst

Good.

Ken Hannah -- Chief Financial Officer

Just a little bit of color there. I think as we completed the Tejon and Lebanon and really looked at that entire network, I think what we were wanting to make sure is that we could capture the productivity gains in our wholesale distribution center. And so I think our third-party actually had performed well and it was really just as it becomes more and more a strategic piece of getting goods to the consumer, we felt like we really needed to have complete control over that. So we had selected a site in the fourth quarter and have begun transitioning goods.

And there will be some duplicate costs in the first half of the year as we are shipping out of both locations, but this is something that we've done before and have a lot of confidence in and just believe it's the right thing to do as part of moving forward for the consumer.

Scott Krasik -- Buckingham Research -- Analyst

No, that's great. And then just lastly. Rick, you alluded to you'd like a little more weather to sort of test exactly what's working and what's not. So as you go into Easter here, do you think you've sort of missed some sales? Do you expect some big weeks ahead of you? How do you feel as of now?

Rick Ausick -- President, Famous Footwear

Yes, I mean, it's always tricky. You never quite feel like you get everything back. But I think with three of these big storms in 10 days, it obviously has a multiplier effect on the customer in the sense that it wasn't like one event and two days later, everything's back to normal. It was one event, lights are still out, oh, here comes the next one, here comes the next one.

So I think we had a -- I just don't think we know yet. Where we have kind of normalized conditions, our business is pretty good and the stuff we -- the items that we believe are the things that are going to drive our business are performing very well. So you just need to have a little bit more of that. And obviously, the New York, Philly, Boston market, those are all top 10 markets for us.

So that's an important part of the country to be out of commission at any time. So -- and again, we're not looking at making excuses for first quarter. I think it'll come. We're just trying to get in the spring-break time all those kind of things, so I think that will help us, too, because it feels like, at least in my airport visits, more people are leaving those cold places and going to my warm place in Arizona than I've ever seen in my life in the last few years.

So I think there's a lot of that happening, too

Scott Krasik -- Buckingham Research -- Analyst

Well, thanks. Good luck and good luck, Rick.

Rick Ausick -- President, Famous Footwear

Thanks, Scott.

Operator

Your next question comes from the line of Chris Svezia with Wedbush.

Chris Svezia -- Wedbush -- Analyst

Good afternoon, and thanks for taking my questions. I guess, first, just wanted to go on the branded portfolio side of the business, can you just walk through some of the drivers and more specifically, as you think about 2018, low single digit, could you just walk through what you're seeing between Naturalizer, Edmonds, Sam Edelman, etc.? Just sort of give us the lay of land on what's going on with some of the brands from the growth perspective or lack thereof maybe?

Diane Sullivan -- Chairman, President, and Chief Executive Officer

Yes, sure. I mean, I think, generally speaking, Chris, we feel terrific about where our portfolio is. There's always people that are winning a little bit more than others. But given, if you look at the overall market landscape, we are clearly gaining market share, and you can see it in the data that we look at quarter by quarter and month by month.

But let me give you a little bit of a sense of the brands. I mean, first of all, our Naturalizer business, you should almost think about sort of our lead portfolio assets on the brand side. Naturalizer, Sam, Allen Edmonds, those three big brands that have retail businesses. They have an omnichannel business.

Those -- all three of those businesses, again, we have done well this year, we believe are going to continue to do well and really show some really nice growth next year. Sam Edelman is now in the top 10 in NPD. Naturalizer moved up five points. They're roughly number 14 on NPD.

The stores comped an 8% comp in the fourth quarter of this year. So we're feeling like all the work that we've been doing, frankly, and it's been some time coming, but we feel that that's all starting to come together, and we're actually even going to be looking at the development of -- with the new Naturalizer concept that we actually are planning on testing this year. So those three big brands, Naturalizer, Sam, and Allen Edmonds, very good. And LifeStride continues to -- that fighter brand that we have out there that got really great price-value relationship out there, has been doing extremely well.

So those are all great. We also think there's a number of brands that are really powered by the sport category. So whether it's Vince or Bzees or Scholl's or Rykä, all of those again are showing like very, very dynamic trends. So we feel very good about where those are.

We have a little bit of headwind still with Walmart that hasn't completely gone away yet. And we're repositioning Via Spiga, but it's such a relatively small business in the scheme of it all, that it's not really material to our overall earnings power for the company. So generally, we really feel that we've got all of our brands positioned in a very good way. And right now, the momentum is looking, looking pretty good.

But you know it because you've seen it and have lived it, too. We have to earn it every single day. And our teams work hard to make sure in a zero-sum game, actually, our market share, in this particular segment, is going down. We've really got to work hard to gain even more.

So -- but overall, we feel quite good about the direction.

Chris Svezia -- Wedbush -- Analyst

And the 8% comp, Diane, just -- is that just for Naturalizer, or is that all the branded portfolio stores?

Diane Sullivan -- Chairman, President, and Chief Executive Officer

That was the Naturalizer fourth-quarter comp.

Chris Svezia -- Wedbush -- Analyst

OK, all right. And rapid replenishment, 15% of the inventory or buys or purchases, what is that supposed to be in 2018? And any color about how -- when you step back and look at the branded portfolio, I know you're making the best but how do you think about the margin profile -- the EBIT margin profile of that segment based on some of the supply chain initiatives and, perhaps, replenishment?

Diane Sullivan -- Chairman, President, and Chief Executive Officer

Yes. Well, again, I think it's we're all -- it's actually just -- we're now being -- starting to be able to really see the real benefit. It's -- we're just being able to try to quantify this in terms of how well we can drive retail sales, how well the margin assistance that gives us because of the sell-through and not the givebacks that you would normally have and the dilution you would have. So we think as we do more and more and more of that, Chris, that not only will the velocity of retail improve, our gross margins are going to improve, and ultimately, the EBIT margins along with it.

We want to make sure, though, that we're now getting to the point where we got to be smart now about where we do that. It just isn't going to -- it's not going to be -- have equal impact no matter where you do it. You got to pick the right brands and the right categories. So now, we're kind of in the place where we're trying to really refine our thought process around that and really direct our teams against the things that we think are going to get the best return on investment.

So it's really in '18. It's less about how much, it's really about even learning more about how to quantify the impact of this and get even more of a return on it.

Chris Svezia -- Wedbush -- Analyst

OK. OK. But I mean, it's fair to say it's increasing from 15%?

Diane Sullivan -- Chairman, President, and Chief Executive Officer

Yes, it'll increase. Where it'll land, who knows? I think we want to -- we don't want to force the number. I mean, I think, we're at that point now with our teams. We're trying to do what's the right thing as opposed to force a number.

And we're trying to calibrate that, what's right about what that total should look like.

Chris Svezia -- Wedbush -- Analyst

OK. And Ken, a question for you. Just any impact as it relates to the calendar, the 53rd week and the impacts? How we think about maybe the Famous business? It's probably Q1, Q2, hurts a little Q3, Q4. Just how should we be thinking about that from a modeling perfective? Is it in the sales number or it's an account number? Just any color around that.

Ken Hannah -- Chief Financial Officer

Yes, there's a little bit in the sales number, and I'll let Rick give some specific color. I think you've got Easter coming into Q1. You've got some shifts into Q2 from Q3. And so you see a little more of an impact in the first half of the year.

But I'll let Rick kind of give you the color since he's lived this 53rd-week thing --

Rick Ausick -- President, Famous Footwear

One too many times, actually. The -- if you look at the shifts, the big shifts are between second and third quarter. So second quarter is impacted on a top line around $20 million positive. Third quarter is obviously about $25 million the other direction.

And the same thing, fourth quarter is about $20 million, $25 million the other direction. First quarter is about $11 million positive. And those are just a matter of the net effect of what week comes in and what week goes out. So it's nothing more than that, Chris.

Chris Svezia -- Wedbush -- Analyst

OK. And last thing. Rick, I guess, is this your last conference call?

Rick Ausick -- President, Famous Footwear

You never know.

Diane Sullivan -- Chairman, President, and Chief Executive Officer

No, not necessarily. Maybe, maybe not.

Rick Ausick -- President, Famous Footwear

We'll see how first quarter is and I'll let you know.

Chris Svezia -- Wedbush -- Analyst

All right. All the best and talk to you soon. Thanks.

Diane Sullivan -- Chairman, President, and Chief Executive Officer

Thank you, Chris.

Rick Ausick -- President, Famous Footwear

Thank you.

Operator

Your next question comes from the line of Sam Poser with Susquehanna.

Sam Poser -- Susquehanna -- Analyst

Well, thank you for taking my questions. Just to clarify, can you give us what the Healthy Living and Contemporary Fashion breakdown is by sales for the fourth quarter?

Ken Hannah -- Chief Financial Officer

No. I mean, I -- since we got the Allen Edmonds numbers in there, it's not really as relevant. I think we ended up up in Healthy Living and, excluding the Allen Edmonds and Contemporary Fashion, I think it was just up slightly but we don't kind of really even break it out like that anymore.

Sam Poser -- Susquehanna -- Analyst

OK. And then just that $20 million that moves from Q3 to Q2, I mean, that's going to be meaningful, Ken, for the flow of earnings in the quarters because you're going to leverage -- you're going to get that incremental sales and then you're going to lose more in the -- could you give us sort of what -- how you see the EPS impact of that shift?

Ken Hannah -- Chief Financial Officer

Yes, I think it impacts Famous and then it's almost equally offsetting in the brand portfolio. And I think, as we look at the two segments, I mean, we're at that 50-50 contribution. And so we've got some incremental benefit in Q2 at Famous. And then in the brand portfolio in the first half, we do have some incremental investments that we're making in customer acquisition.

And as we mentioned earlier, we've got a couple of million dollars of expense associated with bringing the warehouse in-house. So when you net it all out, it actually ends up being pretty consistent from an earnings standpoint but for the incremental expense in the first half with the warehouse.

Sam Poser -- Susquehanna -- Analyst

I got you. All right. So basically, you're adding, what, $2 million to $5 million in SG&A in Q -- in the first half of the year to the brand portfolio and then things sort of flow. And then -- but then you're going to have a shift of leverage in Famous Footwear?

Ken Hannah -- Chief Financial Officer

That's right. And in the back half, then you'll see the benefits associated with those investments in the brand portfolio segment then offsetting what was a shift forward in the first half at Famous Footwear. So when we looked at it, if you just take kind of a midpoint of the guidance and you kind of look across it, it isn't all that different quarter to quarter, but for a couple of million dollars a quarter of investment in the first half.

Sam Poser -- Susquehanna -- Analyst

Got you. And then with -- you had a -- Sam is doing very well and Naturalizer seems to be doing very well. Can you talk about how the other brands there are doing because it was noticeable to us when we visited out at [Inaudible] that basically those two brands were sort of -- seem to be operating on sort of a little bit of a faster pace relative to even like a Franco Sarto and so on.

Diane Sullivan -- Chairman, President, and Chief Executive Officer

Yes. Well, they're -- Naturalizer, Sam, and Allen Edmonds, again, all terrific growth this last year and all in a great trend. I mentioned that there are a couple of brands also that really, because they're powered in a lot of ways by the sport growth, they've also performed extremely well. So Vince continues to be a great performer.

Bzees is growing really nicely. Rykä is growing nicely. Scholl's because of this mix we have upside opportunity there. More pressure on a brand like Via Spiga, where they're not known in that sport category and we also are repositioning that business but it's so immaterial to the total, Sam, it's not a huge impact, which is why I talk about all the others.

And the Franco business is looking very good as we go into 2018. We have -- it's because it didn't really have any of the sport category. So it was fundamentally mostly just fashion categories, they hadn't really converted as quickly. So as we started to begin to do that, get more product that is frankly resonating with the consumer.

So less seasonal because we were very heavily dependent on boots. We're trying to make sure that we're more sort of shoe-focused, I guess, and not seasonal-category focused to try to get that on the right path, which seems to be working right now. So all in, very excited about the total portfolio of brands. And most importantly, as the big brands, the ones that really are sizable, have the omnichannel, have the retail, have wholesale distribution are really performing out in an outstanding manner.

Sam Poser -- Susquehanna -- Analyst

Thank you very much and continued success.

Diane Sullivan -- Chairman, President, and Chief Executive Officer

Thanks, Sam. Appreciate it.

Rick Ausick -- President, Famous Footwear

Thanks, Sam.

Operator

You have a question from the line of Scott Krasik with Buckingham Research.

Scott Krasik -- Buckingham Research -- Analyst

Thanks. Just a quick follow-up. Rick, the $25 million negative shift in 4Q, that doesn't take into account the almost $20 million for the 53rd week you have to lap as well. Is that correct?

Rick Ausick -- President, Famous Footwear

Sure. Yes, it does. Yes. Yes.

Scott Krasik -- Buckingham Research -- Analyst

OK. OK. All right. Thanks, guys.

Diane Sullivan -- Chairman, President, and Chief Executive Officer

OK.

Operator

At this time, we are out of time for questions. I will turn the call over to Ms. Diane Sullivan for any closing remarks.

Diane Sullivan -- Chairman, President, and Chief Executive Officer

Thank you very much for joining us this afternoon. We are excited about the potential for the company and looking forward to speaking with you again in May, if not sooner. Thanks. Take care.

Operator

This does conclude today's conference call. You may now disconnect.

Duration: 49 minutes

Call Participants:

Peggy Reilly Tharp -- Vice President, Investor Relations

Diane Sullivan -- Chairman, President, and Chief Executive Officer

Ken Hannah -- Chief Financial Officer

Steve Marotta -- C.L. King & Associates -- Senior Vice President

Rick Ausick -- President, Famous Footwear

Laurent Vasilescu -- Macquarie Group -- Director

Scott Krasik -- Buckingham Research -- Analyst

Chris Svezia -- Wedbush -- Analyst

Sam Poser -- Susquehanna -- Analyst

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