cal caleres investor day 2015
TRANSCRIPT
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Investor DayOctober 29, 2015
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Under the private securities litigation reform act of 1995This presentation contains certain forward-looking statements andexpectations regarding the company’s future performance and brands. Such statements are subject to various risks and uncertainties that could cause actual results to differ materially. These riskconsumer demands, which may be influenced by consumers' disposable income, which in turn can be influenced by general ecorapidly changing fashion trends and purchasing patterns; (iii) intense competitionwithin the footwear industry; (iv) political andecother threats to the continued and uninterrupted flow of inventory from China and other countries, where the Company relies hmanufacturing facilities for a significant amount of its inventory; (v) the ability to accurately forecast sales and managecybersecurity threats or other major disruption to the Company’s information technology systems; (vii) customer concentconsolidation in the retail industry; (viii) a disruption in the Company’s distributioncenters; (ix) the ability to recruit and retain seother key associates; (x) foreign currency fluctuations; (xi) compliance with applicable laws and standards with respect to labsafety issues; (xii) the ability to secure/exit leases on favorable terms; (xiii) the ability to attract, retain, andmaintain goodrelationshprotect intellectual property rights; and (xiv) the ability to maintain relationships with current suppliers. The company's reports
Exchange Commissioncontain detailed information relating to such factors, including, without limitation, the information under thin Item 1A of the company’s Annual Report on Form 10-K for the year ended January 31, 2015, which information is incorporatedbyupdated by the company’s Quarterly Reports on Form 10-Q. The company does not undertake any obligation or plan to update tstatements, even though its situation may change. In this presentation, the company’s financial results are provided both in accoaccepted accounting principles (GAAP) and using certain non-GAAP financial measures. In particular, the company provides hfuture, operating earnings and earnings per diluted share adjusted to exclude certain gains, charges and recoveries, which aremeasures. These results are included as a complement to results provided in accordance with GAAP because management belifinancial measures help identify underlying trends in the company’s business and provide useful information to both managemexcluding certain items that may not be indicative of the company’s core operating results. These measures should not be considesuperior to GAAP results. Reconciliations to the applicable GAAP financial measures have been included in this presentation.document, unless otherwise noted, relatedto diluted earnings per common share attributable to Caleres, Inc. shareholders, are presdiluted share, respectively.
Safe harbor statement
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Agenda
Opening Remarks
Financials
Famous Footwear
Brand Portfolio
Sam Edelman
Q&A
Diane SullivanCEO, President and
Ken HannahSenior Vice Presiden
Rick AusickPresident
Jay Schmidt
President
Sam EdelmanPresident
Executive Team
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1) Excludes Shoes.com; 2) FY’15 adjusted diluted EPS assumes 3Q’15 at $0.78 Street estimate
$1.24B
$0.94
~$2.61B
$1.95to $2.00
FY’15 expectations
Sales1
3%Adj. EPS
24%Sales1
+3%Adj. EPS2
+13% to 16%
1H’15 FY’15
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Established in
18782014 Revenue
$2.6BMore Than
1,200Retail Stores
+20Brand Portfolio
Brands
3 TARGETED PLATFOR
Who we are
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Our transition
Fit to Feet Fit to Gender Fit to Personality Fit to Lifesty
18791878
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MISSIONInspire people to
Feel good… Feet First!
VALUESPassion
AccountabilityCuriosityCreativity
Caring
BRAND ETHOBe ferocious about
BUSINESS STRATEGYWe build a diverse portfolio
of global brandswith broad appeal
REASON TO BELIEVWe leverage over 135 years of e
to provide the right fit for thetimes, personality and lifes
Our vision
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Our brand identity
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Drive material change in company’s financial performanceFocused on consistent, profitable and sustainable adjusted EPS growth
LEANER, STRONGER AND MORE PROFITABLE COMPANY
INVEST FOR ORGANIC
2011 2012 2013 2014
$0.70
$1.13$1.41
$1.72$1.
$2.29B $2.39B $2.45B $2.53BNet Sales2
1) FY’15 adjusted diluted EPS assumes 3Q’15 at $0.78 Street estimate; 2) Excludes discontinued operations, exited brands and businesses
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Drive material change in company’s financial performanceFocused on consistent, profitable and sustainable adjusted EPS growth
LEANER, STRONGER AND MORE PROFITABLE COMPANY
2011 2012 2013 2014
$0.70
$1.13$1.41
$1.72
Net Sales1
Sold AND 1
Closed Sun Prairie DC
Licensed and exitedunaligned brands
Closed Sikeston DC
Accelerated closure ofunderperforming
stores
Exited Etienne Aigner
Sold Avia and Nevados
Sold China factories
Exited Vera Wang
Sold Shoes.com
1) Excludes discontinued operations, exited brands and businesses
$2.29B $2.39B $2.45B $2.53B
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• Incubators/new brands:Launched and/or developingDVF, George Brown, Bzeesand Vince Men’s
• Acquisition: AcquiredFranco Sarto brand
• Stores: Opened 100 Famous
Footwear, four Sam Edelmanand nine Naturalizer stores
• Brand development:Engaged brand developmentconsultants on key growthopportunities
• Global supply chain: Identifiedopportunities to drive efficienciesand reduce COGs
• Omi-channel: Utilized technologyto interact with consumers on theirterms, delivering a seamlessconsumer experience regardless ofchannel
• Consumer fulfillment: Working toimprove speed, flexibility andcapacity, to meet evolvingconsumer needs
• Cyber-security: Improvedcapabilities of protecting, detectingand recovering
• Key competenCreated two dteams and elevand innovation
• Elevated talenpositions: Retatalent
• Performance m
• Corporate rebmind-shift in aculture, and coamplify perfor
Simultaneously invested for organic growthKey strategic investments in 2014 and 2015
Investments in Brands Investments in Infrastructure Investmen
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Higher ambitionRefining our strategic approach and investing in our next phase of growth
Brown Shoe Company(2011 to 2015)
Focus on three consumer platformsKeep our portfolio relevant
Invest in avenues of growthRefocusing resources
Drive profit growth Achieve financial targets
Consumer centric cultureListen with intent, respond with speed
CALERES(2015 to 2020)
Portfolio managementKeep our portfolio and brands re
Dial-up growthFocus on financial performance and m
Consumer engagementBecome great brand storytelle
Elevate culture and talenBe a magnet for talent
FOCUSED ON CONSISTENT, PROFITABLE AND SUSTAINABLE GRO
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Higher ambitionRefining our strategic approach and investing in our next phase of growth
• Continuously manage portfolio toimprove relevance and maximize both performance and profit outcome
• Align and focus brand efforts todeliver the promise of brands andconsumer platforms
• Operate a scalable, efficient and cost-effective infrastructure
•Fulfill our
★
5★
promise to consumers by assuring consistent fit, feel anddesign of the products
• Continuously invest in strategicpriorities
• Proactively pursue strategic,financially accretive acquisitions toadd distinctive brands
1) Portfolio
ManagementKeep portfolio and brands relevant
• Accelerate growth of key brandassets
• Increase e-commerce businessacross the portfolio
• Grow share of wallet throughproduct adjacencies and extensions
• Increase speed to market andresponsiveness to consumer needs
•Simplify processes and provideleadership timely information (andanalysis) that drives efficient andeffective decision-making
• Manage real estate portfolio to better connect with consumersegments resulting in improvedproductivity and profitability
2) Dial-Up GrowthFocus on financial performance
and macro trends
• Create, curate and distributecompelling brand content toeffectively communicate withcustomers in the online marketplace
• Re-energize and reinvent existingloyalty frameworks to buildenhanced interactions and drivegreater brand affinity
• Identify and target with highestprofitability consumer groups
• Move from product design marketingmessage to brand stories andstorytelling
• Incorporate ★5★ consumer reviewsand net promoter surveys forconsumer feedback
3) Consumer
EngagementBecome great brand storytellers
• Unite,towar
• Implemprocesconne
• Develreallocgrowth
•Elevatcompeevolvi
4)
B
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~$2.61B
$1.95to $2.00
Focused on consistent, profitableand sustainable adjusted EPS growth
INVEST TO GROW
20152
DRIVE GROWTH AND D
Sales
3% to 4%CAGR
2
$2.29B
$0.70
Sales EPSSales EPS
20111
LEANER, STRONGER AND MORE PROFITABLE COMPANY
1) FY’11 sales exclude discontinued operations, exited brands and businesses; 2) FY’15 adjusted diluted EPS assumes 3Q’15 at $0.78 Street estimate
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KenSenioand C
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FY’Gu
Metric FY’15
Consolidated net sales ~$2.61B
Famous Footwear same-store-salesFamous Footwear reported sales
Up low-single digitsFlat, due to sale of Shoes.com
Brand Portfolio net sales Up mid-single digits
Gross margin Up 15 to 20 bps
SG&A Less than or equal to 35.4% of sales
Net interest expense ~$16M
Effective tax rate 28% to 30%Adjusted diluted EPS $1.95 to $2.00
Depreciation and amortization ~$53M
Capital expenditures ~$75M
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Delivering consistent, profitable, sustainable growth
Maintaining financial flexibility to execute plans
Investing in infrastructure to enhance performance
Creating a compelling consumer experience
Offering differentiated product and distinctive brands
BusMo
1.
2.3.4.
5.
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Delivering consistent, profitable, sustainable growth
BusMo
1.
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Focused on three platforms a
with market trends− Family
−Healthy Living
−Contemporary Fashion
Total sales growing at +3% Cexcluding exited brands
− Famous Footwear growing a
−Brand Portfolio growing at +
Healthy Living growing at +
Contemporary Fashion grow
1) FY’11 sales exclude discontinued operations, exited brands and businesses
Increasing sales trends
$2.29B~$2.61B
20111 2015
LEANER, STRONGER ANDMORE PROFITABLE COMPANY
INVEST FORORGANIC GROWTH
Sales Sales
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1) FY’11 sales exclude discontinued operations, exited brands and businesses
$2.29B~$2.61B
3% to 4%CAGR
Increasing sales trends
2015 2020
LEANER, STRONGER ANDMORE PROFITABLE COMPANY
INVEST FOR ORGANIC GROWTH
20111
Sales Sales Sales
Famous Footwe
grow at 2% to 3% Brand Portfolio
grow at 4% to 6%
−Healthy Livinglow-single dig
−Contemporarymid-single to l
digit rate
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2.5%
+5%
Increasing operating earnings
LEANER, STRONGER ANDMORE PROFITABLE COMPANY
INVEST FORORGANIC GROWTH
20111 2015 Gross margin expansion
Improvement in SG&A lever Exited ~$150M of unaligned
and businesses
Invested in brands, infrastruand people
−Developed new incubator brlicenses and acquired Franco
− Identified global supply initenhanced omni-channel capmeet consumer needs
− Improving key competencietalent to drive performanceOperating
MarginOperating
Margin
1) Excludes restructuring and other special charges – see non-GAAP reconciliation
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8%
Increasing operating earnings
LEANER, STRONGER ANDMORE PROFITABLE COMPANY
INVEST FOR ORGANIC GROWTH
2015 2020
OperatingMargin
OperatingMargin
OperatingMargin
Portfolio manag
−
Keep our portf brands relevan
Dial-up growth
− Focus on finanperformance amacro trends
Consumer engag
−Become great bstorytellers
Elevate culture a
−Be a magnet fo
2.5%
+5%
1) Excludes restructuring and other special charges – see non-GAAP reconciliation
20111
d f bl
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Focused on consistent, profitableand sustainable EPS growth
SalesSales EPSSales EPS
$2.29B~$2.61B
3% toCA
$0.70
$1.95
to $2.00
INVEST TO GROW
20152
DRIVE GROWTH AND D
220111
LEANER, STRONGER, AND MORE PROFITABLE COMPANY
1) FY’11 sales exclude discontinued operations, exited brands and businesses; 2) FY’15 adjusted diluted EPS assumes 3Q’15 at $0.78 Street estimate
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Delivering consistent, profitable, sustainable growth
Maintaining financial flexibility to execute plans
BusMo
1.
2.
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$344M
+$680M
Debt-to-capital ratio do−
Refinanced senior no Lowered rate and
−Credit upgrades S&P to BB and Mo
Liquidity doubled sinc
−No current borrowincredit facility
−Generating operating
Priorities for cash− Invest to drive organ
−Opportunistic M&A
−Continuation of divid
− Share repurchases to
49%
~25%
2011 20112015 2015
Maintaining financial flexibility
Liquidity Debt-to-Capital
Ratio
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Delivering consistent, profitable, sustainable growth
Maintaining financial flexibility to execute plans
Investing in infrastructure to enhance performanceBusMo
1.
2.3.
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MaterialManagement
GlobalSourcing
Design and
DevelopmentProcesses
AcceleratedCalendars
Purc
OrdDeli
Optimize cost, speed and flexibility
Investing in future growthGlobal supply chain initiative
Enhance materialsmanagement
Implement rapidreplenishment
Consolidate factory baseacross brand families
Streamline costingand pricing
Standardize planningacross brands
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Before Aft
Direct to consumer in 6 days Speed Direct to consu
Separate facilitiesfor retail and wholesale
Flexibility Business agno
Meet volume projections Capacity Support gr
2015 20162014
Tejon Modernization
Lebanon Expansion andPeChino Modernization
Investing in future growthConsumer fulfillment initiative
Modernize aging equipment indistribution centers
Improve throughput to meet everchanging consumer expectations
Increase capacity across distributionnetwork to support growth
Focused on consistent profitable
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Focused on consistent, profitableand sustainable EPS growth
SalesSales EPSSales EPS
$2.29B~$2.61B
3% toCA
$0.70
$1.95
to $2.00
INVEST TO GROW
20152
DRIVE GROWTH AND D
220111
LEANER, STRONGER AND MORE PROFITABLE COMPANY
1) FY’11 sales exclude discontinued operations, exited brands and businesses; 2) FY’15 adjusted diluted EPS assumes 3Q’15 at $0.78 Street estimate
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Delivering consistent, profitable, sustainable growth
Maintaining financial flexibility to execute plans
Investing in infrastructure to enhance performance
Creating a compelling consumer experience
Offering differentiated product and distinctive brands
BusMo
1.
2.3.4.
5.
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RicPresiFamo
S i f d
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Staying focused
Working to find high-value consum
Raising the bar on successful storFinding accretion opportunities when
Developing e-commerce and omni-channel capabour consumers however they choose to shop
Consistent,profitable and
sustainablegrowth
ConsumerEngagement
Real Estate
Omni-Channel
C
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Identified high-value consumer segment...
has strong emotional connection to footwearand is predisposed to shop with us
Shop more
often
Buy morepairs
Spend more
per pair
More loyal
Greater
lifetime value
Consumer engagement
C t
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Identified 1M in our existing• We know who they are
• We know what they buy
• We know how they shop
• And we’re going to grow our shar
+30M targeted high-value con
Consumer engagementIdentified high-value consumers
R l t t tf li
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Direct correlation between stowith greater concentrations ohigh-value consumers and...
• Higher volume
• Higher sales per sq. ft.
• Higher gross margin
• Higher operating profit
• Better traffic trends
Real estate portfolioIdentified stores with greater concentrations of high-value consumers
R l t t tf li
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Scoring new locations for potenhigh-value consumers
• Represent ~25% of stores opening in
• On track to have ~50% of new storewith greater penetration of high-va
Proactively looked at top 50 DMAlocations with more high-value c
• Seeking space in these locations
Adding 15 to 25 net new stores aover next five years
• Expect 50% of new stores in marketgreater penetration of high-value co
Real estate portfolio Adding new stores and amplifying sales productivity
E o e e a d o i ha el
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Installed WiFiin all doors
Developed mobilecheckout capability
Communicate viamobile in-store
More meaningfulsocial mediarelationship
Improve mobilee-commerce
E-commerce and omni-channelInvesting to reach digitally savvy and dependent consumers
Consumer engagement
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Strong positions in covetedcategories and brands
Adjusting assortments to providemore comprehensive offering
Engaging highdigital environ
Messaging tailemotion
Revamping program to providemore meaningful interaction for
earning and using points
Continued robust and successfule-mail program
Making more conducive to drive high-valueconsumers’ emotional triggers
New selling model encourages Associates to make aconnection, with stronger interaction
Investing in endless aisle opportunity and moreentertaining experience
Know how to reach these
Testing variety of marketing initiintensifying digital market
Aggressively deploying initiativeprofitable sales and gain m
ASSORTMENT DIREWARDS
STORES REACH
Consumer engagementTaking aggressive efforts to acquire and retain high-value consumers
Famous Footwear growth expectations
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Famous Footwear growth expectations
$1.5B~$1.6B
+2% to 3%
LEANER, STRONGER AND MORE PROFITABLE COMPANY
INVEST FOR ORGANIC
2011 2015 2020
Sales Sales Sales
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JayPresiBrand
Delivered consistent profitable and sustainable sales g
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Contemporary Fashion Sales Healthy Living Sales
Delivered consistent, profitable and sustainable sales g
$0.90B$0.83B$0.92B $0.98B
~
Sales exclude discontinued operations, exited brands and businesses
LEANER, STRONGER AND MORE PROFITABLE COMPANY
INVEST FOR ORGANIC
2011 2012 2013 2014
While editing to an aligned Brand Portfolio
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While editing to an aligned Brand Portfolio
HEALTHY LIVING CONTEMPORARY
Across channels and price points
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Across channels and price points
$65 (sandals) to $200 (boots)
$150 (shoes) to $595 (boo
$155 (shoes) to $425 (boo
$175 to $595
$79 (shoes) to $225 (boots)
$175 to $595
Specialty &Independent High-
Mid-TierDepartment
Store
E-commerce
Across channels and price points
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Across channels and price points
DepartmentStore
SpecialIndepe
$79 (shoes) to $209 (boots)
$25 (shoes) to $200 (boots)
$50 (shoes) to $100 (boots)
$50 to $85
Mass Mid-Tier
E-commerce
$69 (shoes) to $225 (boots)
$59 (sandals) to $199 (boots)
As we amplify our brand storytelling
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As we amplify our brand storytelling
And move forward
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NEW
BRANDS
Diane von FurstenbergGeorge Brown
IMPROVE
RELEVANCY
Naturalizer, Franco Sarto
Ongoing branding agency work
INCREA
S
Analyzin
Target ne
DIGITAL
COMPETENCY
E-commerce, brandstorytelling, consumer
engagement
MAINTAIN
ENTREPRENEURIAL SPIRIT
Unique position: diverse portfolio
Brand dedicated leaders
LEV
RELAT
Strengthekey
CONNECTING
Driving retail, fueling wholesaleand improving speed,
flexibility and cost structure
And move forward
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SamPresid
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Power of six core styles
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Power of six core styles
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Retail
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World Trade Center renderings
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g
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Investor DayOctober 29, 2015
Non-GAAP reconciliation
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Diluted Earnings Per Share 2015 Guidance
2011 2012 2013 2014 Low High
GAAP earnings $0.56 $0.64 $0.88 $1.89 $1.80 $1.85
Charges/Other Items
ASG acquisition and integration-related costs 0.16 0.01 0.00 0.00 0.00 0.00Loss on debt extinguishment 0.02 0.00 0.00 0.01 0.15 0.15
Organizational changes 0.00 0.03 0.00 0.03 0.00 0.00
Portfolio realignment
Brand exits and cost reductions 0.28 0.37 0.15 0.00 0.00 0.00
Non-cash impairments/dispositions 0.00 0.08 0.38 0.00 0.00 0.00
Gain on sale of subsidiary (0.32) 0.00 0.00 (0.23) 0.00 0.00
Tax on dividend of international subsidiary 0.00 0.00 0.00 0.02 0.00 0.00
Total charges/other items 0.14 0.49 0.53 (0.17) 0.15 0.15
Adjusted earnings $0.70 $1.13 $1.41 $1.72 $1.95 $2.00
Net Sales($ Thousands) 2011 2012 2013 2014 1H '14 1H '15GAAP net sales $2,434,766 $2,477,796 $2,513,113 $2,571,709 $1,227,039 $1,240,117Exited brands (145,312) (86,379) (64,767) (45,841) (23,094) 0
Adjusted net sales $2,289,454 $2,391,417 $2,448,346 $2,525,868 $1,203,945 $1,240,117
Operating Earnings($ Thousands) 2011GAAP operating earnings $30,532Restructuring and other special charges 29,800
Adjusted operating earnings $60,332