Summary of Caleres Conference Call Company Overview - **Company**: Caleres - **Industry**: Footwear - **Key Executives Present**: Jay Schmidt (President and CEO), Jack Calandra (CFO), Liz Dunn (SVP of Corporate Development and Strategic Communications) [1][2] Key Financial Metrics - **Revenue**: Direct-to-consumer sales account for over 70% of total revenue - **Brand Portfolio Segment**: Represents 45% of total revenue - **International Operations**: Active in 68 countries with significant growth opportunities [3][4] Q2 Accomplishments - **Performance**: Strong performance in lead brands and direct-to-consumer channels, with double-digit growth in international markets - **Famous Footwear**: Elevated brands performed well during the back-to-school season [3][4] Strategic Initiatives - **Sourcing Migration**: Reduced sourcing from China to below 15% by the second half of the year - **Cost Savings**: Achieved $15 million in annualized structural savings, with half expected in the second half of the year - **Acquisition**: Completed the acquisition of Stuart Weitzman in August, focusing on integration and transition [4][5][8] Second Half Outlook - **Guidance**: Annual guidance suspended due to tariff uncertainties; however, Q3 expectations include a +1% comp in August, with low single-digit declines anticipated in September and October - **Gross Margin**: Expected to decline by approximately 240 basis points in Q3 due to tariffs, with improvement anticipated in Q4 as mitigating actions take effect [5][6][7] Market Trends - **Footwear Market**: Driven by newness and brand demand; consumers favor authentic and differentiated brands - **Lead Brands**: Continued strong performance from Sam Edelman, Allen Edmonds, Naturalizer, and Vionic, with ongoing investments in marketing and product development [11][14][17] Brand Portfolio Insights - **Premium Brands**: Strong growth in licensed brands like Vince and Veronica Beard, with Stuart Weitzman expected to enhance the portfolio - **Direct-to-Consumer**: Digital sales represent 30% of the brand portfolio, with a focus on omnichannel strategies [20][26][28] Inventory Management - **Famous Footwear**: Well-managed inventory with a tighter relationship between inventory levels and sales; challenges in the Brand Portfolio segment due to high initial inventory levels [24][25] Competitive Advantages - **Kids' Business**: Represents over 20% of total sales, with growth opportunities through stronger brand alignment - **Store Base**: Approximately 830 stores expected by year-end, with a focus on optimizing store performance and expanding the FLAIR format [36][38] Tariff Strategy - **Mitigation Actions**: Multi-pronged strategy to address tariff impacts, including sourcing adjustments, factory negotiations, and selective price increases - **Tariff Impact**: Anticipated gross margin impact from tariffs, with efforts to offset through SG&A opportunities [41][42] Conclusion - **Future Outlook**: Caleres is focused on leveraging its brand portfolio, optimizing operations, and navigating market challenges while maintaining a strong consumer focus [42]

Core Insights - Caleres, Inc. is considered one of the most undervalued retail stocks, with fiscal Q2 2025 results showing consolidated sales of $658.5 million, a decrease of 3.6% year-over-year [1] - The Brand Portfolio sales also experienced a decline of 3.5%, while the company gained market share in women's fashion footwear despite a tariff impact of approximately $10 million [2] - Famous Footwear sales fell by 4.9%, with comparable sales down 3.4% [2] Financial Performance - Consolidated sales for Q2 2025 were reported at $658.5 million, reflecting a 3.6% decrease compared to the previous year [1] - Brand Portfolio sales decreased by 3.5%, indicating challenges in this segment [1] - Famous Footwear sales declined by 4.9%, with comparable sales down 3.4%, highlighting a struggle in maintaining sales momentum [2] Market Position - The company has seen gains in the women's fashion footwear market share, suggesting a potential area of strength despite overall sales declines [2] - Management noted a tariff impact of around $10 million, which may have influenced sales performance [2] Analyst Perspective - Following the earnings release, KeyBanc analyst Ashley Owens maintained a Hold rating on Caleres, Inc. without assigning a price target, indicating a cautious outlook [3] - The company operates as a global footwear retailer through its Brand Portfolio and Famous Footwear segments, focusing on sourcing, designing, and distributing footwear for all ages [3]

Core Insights - Caleres will participate in the 2025 Global Consumer & Retail Conference starting October 8 in New York, hosted by Telsey Advisory Group and Santander Corporate & Investment Banking [1][2] Company Overview - Caleres is a market-leading portfolio of global footwear brands, including Famous Footwear, Sam Edelman, Stuart Weitzman, Allen Edmonds, Naturalizer, and Vionic, with nearly 1,000 retail stores and a strong online presence [3] Financial Performance - For the second quarter of 2025, Caleres reported consolidated sales of $658.5 million, a decrease of 3.6% compared to the previous year, with Brand Portfolio sales down 3.5% due to tariff impacts and a decline in Famous Footwear sales by 4.9% [5]

PART I FINANCIAL INFORMATION This section presents the Company's unaudited financial statements and management's discussion and analysis [ITEM 1 Financial Statements (Unaudited)](index=3&type=section&id=ITEM%201%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of earnings, comprehensive income, cash flows, and shareholders' equity, along with detailed notes explaining the basis of presentation, significant accounting policies, and specific financial line items for the periods ended August 2, 2025, and August 3, 2024 [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of the Company's financial position, detailing assets, liabilities, and equity at specific reporting dates Condensed Consolidated Balance Sheets | ($ thousands) | August 2, 2025 | August 3, 2024 | February 1, 2025 | | :-------------- | :------------- | :------------- | :--------------- | | **Assets** | | | | | Cash and cash equivalents | $ 191,494 | $ 51,753 | $ 29,636 | | Total current assets | 1,099,418 | 939,700 | 836,509 | | Total assets | $ 2,152,228 | $ 2,019,985 | $ 1,894,754 | | **Liabilities and Equity** | | | | | Borrowings under revolving credit agreement | $ 387,500 | $ 146,500 | $ 219,500 | | Total current liabilities | 1,015,087 | 860,423 | 757,933 | | Total equity | 621,944 | 613,484 | 605,949 | | Total liabilities and equity | $ 2,152,228 | $ 2,019,985 | $ 1,894,754 | - Cash and cash equivalents **significantly increased** to **$191.5 million** as of August 2, 2025, from **$51.8 million** on August 3, 2024, and **$29.6 million** on February 1, 2025, primarily due to increased borrowings to fund the Stuart Weitzman acquisition[4](index=4&type=chunk) - Total current assets rose to **$1,099.4 million** as of August 2, 2025, from **$939.7 million** on August 3, 2024, and **$836.5 million** on February 1, 2025[4](index=4&type=chunk) - Borrowings under the revolving credit agreement increased to **$387.5 million** as of August 2, 2025, from **$146.5 million** on August 3, 2024, reflecting funding for the Stuart Weitzman acquisition[4](index=4&type=chunk) [Condensed Consolidated Statements of Earnings](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Earnings) This section presents the Company's financial performance over specific periods, detailing net sales, gross profit, operating earnings, and earnings per share Condensed Consolidated Statements of Earnings | ($ thousands, except per share amounts) | Thirteen Weeks Ended Aug 2, 2025 | Thirteen Weeks Ended Aug 3, 2024 | Twenty-Six Weeks Ended Aug 2, 2025 | Twenty-Six Weeks Ended Aug 3, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :--------------------------------- | :------------------------------- | | Net sales | $ 658,519 | $ 683,317 | $ 1,272,740 | $ 1,342,515 | | Gross profit | 285,795 | 310,878 | 564,489 | 619,973 | | Operating earnings | 9,292 | 42,529 | 20,876 | 85,288 | | Net earnings attributable to Caleres, Inc. | $ 6,713 | $ 29,958 | $ 13,656 | $ 60,898 | | Basic EPS | $ 0.20 | $ 0.85 | $ 0.40 | $ 1.73 | | Diluted EPS | $ 0.20 | $ 0.85 | $ 0.40 | $ 1.73 | - Net sales decreased by **3.6%** for the thirteen weeks ended August 2, 2025, and by **5.2%** for the twenty-six weeks ended August 2, 2025, compared to the prior year periods[5](index=5&type=chunk) - Operating earnings saw a **significant decline**, dropping by **78.2%** for the thirteen weeks and **75.5%** for the twenty-six weeks ended August 2, 2025, primarily due to lower net sales, reduced gross profit, and increased restructuring charges[5](index=5&type=chunk) - Diluted EPS decreased from **$0.85** to **$0.20** for the thirteen weeks and from **$1.73** to **$0.40** for the twenty-six weeks ended August 2, 2025, reflecting the overall decline in profitability[5](index=5&type=chunk) [Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This section outlines comprehensive income, including net earnings and other comprehensive earnings from non-owner sources Condensed Consolidated Statements of Comprehensive Income | ($ thousands) | Thirteen Weeks Ended Aug 2, 2025 | Thirteen Weeks Ended Aug 3, 2024 | Twenty-Six Weeks Ended Aug 2, 2025 | Twenty-Six Weeks Ended Aug 3, 2024 | | :-------------- | :------------------------------- | :------------------------------- | :--------------------------------- | :------------------------------- | | Net earnings | $ 7,061 | $ 30,273 | $ 13,006 | $ 61,071 | | Other comprehensive earnings, net of tax | 18 | 4,530 | 6,915 | 4,841 | | Comprehensive income | 7,079 | 34,803 | 19,921 | 65,912 | | Comprehensive income attributable to Caleres, Inc. | $ 6,656 | $ 34,606 | $ 20,448 | $ 65,929 | - Comprehensive income attributable to Caleres, Inc. **decreased significantly** to **$6.7 million** for the thirteen weeks ended August 2, 2025, from **$34.6 million** in the prior year, and to **$20.4 million** for the twenty-six weeks, from **$65.9 million** in the prior year[7](index=7&type=chunk) - Other comprehensive earnings, net of tax, **decreased substantially** for the thirteen-week period (from **$4,530k** to **$18k**) but **increased** for the twenty-six-week period (from **$4,841k** to **$6,915k**), primarily driven by foreign currency translation adjustments and pension/postretirement benefit adjustments[7](index=7&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section details cash flows from operating, investing, and financing activities over specific periods Condensed Consolidated Statements of Cash Flows | ($ thousands) | Twenty-Six Weeks Ended Aug 2, 2025 | Twenty-Six Weeks Ended Aug 3, 2024 | | :-------------- | :--------------------------------- | :------------------------------- | | Net cash provided by operating activities | $ 41,646 | $ 115,696 | | Net cash used for investing activities | (34,072) | (21,808) | | Net cash provided by (used for) financing activities | 154,221 | (63,426) | | Increase in cash and cash equivalents | 161,858 | 30,395 | | Cash and cash equivalents at end of period | $ 191,494 | $ 51,753 | - Net cash provided by operating activities decreased by **$74.0 million** to **$41.6 million** for the twenty-six weeks ended August 2, 2025, compared to **$115.7 million** in the prior year, mainly due to a smaller increase in trade accounts payable, lower net earnings, and a larger increase in inventory[9](index=9&type=chunk)[162](index=162&type=chunk) - Net cash provided by financing activities **significantly increased** to **$154.2 million** for the twenty-six weeks ended August 2, 2025, from a net cash outflow of **$63.4 million** in the prior year, primarily driven by net borrowings on the revolving credit agreement to fund the Stuart Weitzman acquisition[9](index=9&type=chunk)[164](index=164&type=chunk) - Cash and cash equivalents at the end of the period **increased substantially** to **$191.5 million**, up from **$51.8 million** in the prior year, reflecting the increased financing activities[9](index=9&type=chunk) [Condensed Consolidated Statements of Shareholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Equity) This section presents changes in shareholders' equity, including retained earnings and other comprehensive loss Condensed Consolidated Statements of Shareholders' Equity | ($ thousands) | August 2, 2025 | August 3, 2024 | February 1, 2025 | | :-------------- | :------------- | :------------- | :--------------- | | Total Caleres, Inc. shareholders' equity | $ 613,296 | $ 606,062 | $ 599,024 | | Noncontrolling interests | 8,648 | 7,422 | 6,925 | | Total equity | $ 621,944 | $ 613,484 | $ 605,949 | - Total Caleres, Inc. shareholders' equity increased to **$613.3 million** as of August 2, 2025, from **$606.1 million** on August 3, 2024, and **$599.0 million** on February 1, 2025[10](index=10&type=chunk) - Retained earnings increased to **$446.3 million** as of August 2, 2025, from **$451.3 million** on August 3, 2024, and **$442.4 million** on February 1, 2025, reflecting net earnings and dividend payments[10](index=10&type=chunk) - Accumulated other comprehensive loss improved slightly to **$(27.2) million** as of August 2, 2025, from **$(29.5) million** on August 3, 2024, and **$(34.0) million** on February 1, 2025[10](index=10&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and additional information supporting the financial statements [Note 1 Basis of Presentation and General](index=8&type=section&id=Note%201%20Basis%20of%20Presentation%20and%20General) This note describes financial statement presentation, accounting policies, and business context, including acquisitions - The Company's business is seasonal, with historically higher earnings in the third fiscal quarter, though recent years show a more equal distribution[13](index=13&type=chunk) - The Company consolidates CLT Brand Solutions, a **50/50** joint venture with Brand Investment Holding Limited for selling footwear in China, on a one-month lag[16](index=16&type=chunk) CLT Brand Solutions Net Sales and Operating Earnings (Loss) | ($ thousands) | Thirteen Weeks Ended Aug 2, 2025 | Thirteen Weeks Ended Aug 3, 2024 | Twenty-Six Weeks Ended Aug 2, 2025 | Twenty-Six Weeks Ended Aug 3, 2024 | | :-------------- | :------------------------------- | :------------------------------- | :--------------------------------- | :------------------------------- | | Net sales | $ 13,374 | $ 10,098 | $ 20,584 | $ 15,820 | | Operating earnings (loss) | 700 | 688 | (1,296) | 388 | - The Company completed the acquisition of Stuart Weitzman from Tapestry, Inc. on August 4, 2025, for **$120.2 million** (net purchase price **$108.7 million**), which will be included in the Brand Portfolio segment starting Q3 2025[21](index=21&type=chunk) [Note 2 Impact of New Accounting Pronouncements](index=10&type=section&id=Note%202%20Impact%20of%20New%20Accounting%20Pronouncements) This note discusses the potential impact of recently issued accounting standards on financial statements - ASU 2023-09 (Income Taxes) is effective for the Company in fiscal year 2025 and is not expected to have a material impact on financial statement disclosures[22](index=22&type=chunk) - ASU 2024-03 (Disaggregation of Income Statement Expenses) is effective for annual disclosures in fiscal year 2027 and interim periods beginning Q1 2028; the Company is currently evaluating its impact[23](index=23&type=chunk) [Note 3 Revenues](index=11&type=section&id=Note%203%20Revenues) This note disaggregates net sales by channel and segment, with information on loyalty programs and credit losses Disaggregation of Revenues (Thirteen Weeks Ended) | ($ thousands) | August 2, 2025 | August 3, 2024 | | :-------------- | :------------- | :------------- | | Retail stores | $ 364,422 | $ 387,656 | | E-commerce - Company websites | 109,292 | 103,170 | | E-commerce - wholesale drop-ship | 23,166 | 22,520 | | Wholesale - e-commerce | 44,895 | 51,515 | | Wholesale - landed | 103,130 | 92,457 | | Wholesale - first cost | 11,740 | 22,598 | | Licensing and royalty | 1,724 | 3,261 | | Net sales | $ 658,519 | $ 683,317 | Disaggregation of Revenues (Twenty-Six Weeks Ended) | ($ thousands) | August 2, 2025 | August 3, 2024 | | :-------------- | :------------- | :------------- | | Retail stores | $ 662,972 | $ 709,274 | | E-commerce - Company websites | 209,782 | 205,654 | | E-commerce - wholesale drop-ship | 52,798 | 51,542 | | Wholesale - e-commerce | 108,002 | 119,302 | | Wholesale - landed | 213,693 | 211,997 | | Wholesale - first cost | 21,558 | 38,334 | | Licensing and royalty | 3,643 | 6,126 | | Net sales | $ 1,272,740 | $ 1,342,515 | - The loyalty programs liability increased by **$10.7 million** due to points earned and decreased by **$8.9 million** due to expirations and redemptions during the twenty-six weeks ended August 2, 2025[35](index=35&type=chunk) Allowance for Expected Credit Losses Activity (Twenty-Six Weeks Ended) | ($ thousands) | August 2, 2025 | August 3, 2024 | | :-------------- | :------------- | :------------- | | Balance, beginning of period | $ 8,323 | $ 8,820 | | Adjustment for expected credit losses | 2,322 | (769) | | Uncollectible account recoveries, net | 16 | 316 | | Balance, end of period | $ 10,661 | $ 8,367 | [Note 4 Earnings Per Share](index=14&type=section&id=Note%204%20Earnings%20Per%20Share) This note details basic and diluted earnings per share calculations, including share repurchases Earnings Per Share (Thirteen Weeks Ended) | ($ thousands, except per share amounts) | August 2, 2025 | August 3, 2024 | | :-------------------------------------- | :------------- | :------------- | | Net earnings attributable to Caleres, Inc. | $ 6,713 | $ 29,958 | | Basic EPS | $ 0.20 | $ 0.85 | | Diluted EPS | $ 0.20 | $ 0.85 | Earnings Per Share (Twenty-Six Weeks Ended) | ($ thousands, except per share amounts) | August 2, 2025 | August 3, 2024 | | :-------------------------------------- | :------------- | :------------- | | Net earnings attributable to Caleres, Inc. | $ 13,656 | $ 60,898 | | Basic EPS | $ 0.40 | $ 1.73 | | Diluted EPS | $ 0.40 | $ 1.73 | - The Company repurchased **300,000** shares during the twenty-six weeks ended August 2, 2025, and **416,000** shares during the twenty-six weeks ended August 3, 2024, under its share repurchase program[38](index=38&type=chunk) - An immaterial amount of excise taxes were incurred on share repurchases during the twenty-six weeks ended August 2, 2025, and August 3, 2024, as per the Inflation Reduction Act of 2022[39](index=39&type=chunk) [Note 5 Restructuring and Other Special Charges](index=15&type=section&id=Note%205%20Restructuring%20and%20Other%20Special%20Charges) This note outlines restructuring and special charges, including severance and acquisition-related expenses - The Company incurred **$4.5 million** (**$3.3 million** after-tax, or **$0.10** per diluted share) in severance and related costs for expense reduction initiatives during the thirteen weeks ended August 2, 2025[40](index=40&type=chunk) - Legal and other related costs for the Stuart Weitzman acquisition amounted to **$2.3 million** (**$1.7 million** after-tax, or **$0.05** per diluted share) for the thirteen weeks and **$2.9 million** (**$2.1 million** after-tax, or **$0.06** per diluted share) for the twenty-six weeks ended August 2, 2025[41](index=41&type=chunk) [Note 6 Business Segment Information](index=17&type=section&id=Note%206%20Business%20Segment%20Information) This note presents financial information by operating segments, detailing net sales and operating earnings Segment Net Sales and Operating Earnings (Thirteen Weeks Ended) | ($ thousands) | Famous Footwear | Brand Portfolio | Eliminations and Other | Total | | :-------------- | :-------------- | :-------------- | :--------------------- | :---- | | Net sales (Aug 2, 2025) | $ 399,593 | $ 275,620 | $ (16,694) | $ 658,519 | | Operating earnings (loss) (Aug 2, 2025) | $ 18,551 | $ 6,649 | $ (15,908) | $ 9,292 | | Net sales (Aug 3, 2024) | $ 420,289 | $ 285,497 | $ (22,469) | $ 683,317 | | Operating earnings (loss) (Aug 3, 2024) | $ 34,384 | $ 23,620 | $ (15,475) | $ 42,529 | Segment Net Sales and Operating Earnings (Twenty-Six Weeks Ended) | ($ thousands) | Famous Footwear | Brand Portfolio | Eliminations and Other | Total | | :-------------- | :-------------- | :-------------- | :--------------------- | :---- | | Net sales (Aug 2, 2025) | $ 727,269 | $ 571,015 | $ (25,544) | $ 1,272,740 | | Operating earnings (loss) (Aug 2, 2025) | $ 23,525 | $ 24,064 | $ (26,713) | $ 20,876 | | Net sales (Aug 3, 2024) | $ 769,841 | $ 602,708 | $ (30,034) | $ 1,342,515 | | Operating earnings (loss) (Aug 3, 2024) | $ 51,240 | $ 65,045 | $ (30,997) | $ 85,288 | - Famous Footwear's operating earnings decreased by **$15.8 million** (**46%**) for the thirteen weeks and **$27.7 million** (**54%**) for the twenty-six weeks ended August 2, 2025, compared to the prior year[43](index=43&type=chunk)[44](index=44&type=chunk) - Brand Portfolio's operating earnings decreased by **$16.9 million** (**71%**) for the thirteen weeks and **$41.0 million** (**63%**) for the twenty-six weeks ended August 2, 2025, compared to the prior year[43](index=43&type=chunk)[44](index=44&type=chunk) [Note 7 Inventories](index=19&type=section&id=Note%207%20Inventories) This note provides a breakdown of inventory composition, including raw materials, work-in-process, and finished goods Inventory Composition ($ thousands) | Category | August 2, 2025 | August 3, 2024 | February 1, 2025 | | :-------------- | :------------- | :------------- | :--------------- | | Raw materials | $ 15,700 | $ 13,964 | $ 14,352 | | Work-in-process | 751 | 606 | 644 | | Finished goods | 676,831 | 646,576 | 550,245 | | Inventories, net | $ 693,282 | $ 661,146 | $ 565,241 | - Net inventories increased to **$693.3 million** as of August 2, 2025, from **$661.1 million** on August 3, 2024, and **$565.2 million** on February 1, 2025, primarily driven by an increase in finished goods[47](index=47&type=chunk) [Note 8 Goodwill and Intangible Assets](index=19&type=section&id=Note%208%20Goodwill%20and%20Intangible%20Assets) This note details goodwill and intangible assets, including amortization expense and impairment assessments Goodwill and Intangible Assets, Net ($ thousands) | Category | August 2, 2025 | August 3, 2024 | February 1, 2025 | | :-------------- | :------------- | :------------- | :--------------- | | Total intangible assets, net | $ 181,800 | $ 192,836 | $ 187,318 | | Total goodwill | 4,956 | 4,956 | 4,956 | | Goodwill and intangible assets, net | $ 186,756 | $ 197,792 | $ 192,274 | - Total intangible assets, net, decreased to **$181.8 million** as of August 2, 2025, from **$192.8 million** on August 3, 2024, primarily due to accumulated amortization[48](index=48&type=chunk) - Amortization expense for intangible assets was **$2.8 million** for both thirteen-week periods and **$5.5 million** for both twenty-six-week periods[50](index=50&type=chunk) - No goodwill or indefinite-lived intangible asset impairment charges were recorded during the twenty-six weeks ended August 2, 2025, or August 3, 2024[51](index=51&type=chunk)[52](index=52&type=chunk) [Note 9 Leases](index=20&type=section&id=Note%209%20Leases) This note provides information on lease arrangements, including lease expense, right-of-use assets, and obligations - The Company recorded asset impairment charges of **$0.7 million** and **$0.8 million** during the twenty-six weeks ended August 2, 2025, and August 3, 2024, respectively, primarily related to underperforming retail stores[56](index=56&type=chunk) - New or amended leases resulted in the recognition of **$58.6 million** in right-of-use assets and lease obligations during the twenty-six weeks ended August 2, 2025[57](index=57&type=chunk) Lease Expense ($ thousands) | Category | Thirteen Weeks Ended Aug 2, 2025 | Thirteen Weeks Ended Aug 3, 2024 | Twenty-Six Weeks Ended Aug 2, 2025 | Twenty-Six Weeks Ended Aug 3, 2024 | | :-------------- | :------------------------------- | :------------------------------- | :--------------------------------- | :------------------------------- | | Operating lease expense | $ 41,712 | $ 40,251 | $ 82,289 | $ 80,273 | | Variable lease expense | 10,060 | 10,871 | 21,791 | 21,606 | | Short-term lease expense | 362 | 362 | 506 | 669 | | Total lease expense | $ 52,134 | $ 51,484 | $ 104,586 | $ 102,548 | [Note 10 Financing Arrangements](index=21&type=section&id=Note%2010%20Financing%20Arrangements) This note describes credit facilities, outstanding borrowings, and compliance with financial covenants - The Company amended its revolving credit facility on June 27, 2025, increasing the available amount by **$200.0 million** to **$700.0 million** and extending the maturity to June 27, 2030[60](index=60&type=chunk) - As of August 2, 2025, the Company had **$387.5 million** in borrowings outstanding and **$230.8 million** in additional borrowing availability under the credit agreement[65](index=65&type=chunk) - Borrowings under the revolving credit agreement were used to fund the Stuart Weitzman acquisition, which closed on August 4, 2025[65](index=65&type=chunk) - The Company was in compliance with all covenants and restrictions under the Credit Agreement as of August 2, 2025[64](index=64&type=chunk) [Note 11 Shareholders' Equity](index=24&type=section&id=Note%2011%20Shareholders'%20Equity) This note details changes in shareholders' equity components, particularly accumulated other comprehensive loss Changes in Accumulated Other Comprehensive Loss (OCL) ($ thousands) | Component | Balance at May 3, 2025 | Other comprehensive loss before reclassifications | Net reclassifications | Balance at August 2, 2025 | | :-------------- | :--------------------- | :------------------------------------------------ | :-------------------- | :------------------------ | | Foreign Currency Translation | $ (28) | $ (1,075) | $ — | $ (1,103) | | Pension and Other Postretirement Benefits | $ (27,145) | $ — | $ 1,018 | $ (26,127) | | Total OCL | $ (27,173) | $ (1,075) | $ 1,018 | $ (27,230) | - Accumulated other comprehensive loss slightly increased from **$(27.173) million** at May 3, 2025, to **$(27.230) million** at August 2, 2025, primarily due to foreign currency translation adjustments, partially offset by pension and other postretirement benefit adjustments[67](index=67&type=chunk) [Note 12 Share-Based Compensation](index=24&type=section&id=Note%2012%20Share-Based%20Compensation) This note outlines share-based compensation plans, including expense recognition and awards granted - Share-based compensation expense was **$4.1 million** for the thirteen weeks and **$6.9 million** for the twenty-six weeks ended August 2, 2025[68](index=68&type=chunk) - The Company granted **50,852** restricted shares during the thirteen weeks and **798,915** restricted shares during the twenty-six weeks ended August 2, 2025, with graded vesting over three years[70](index=70&type=chunk) - No performance share awards were granted during the twenty-six weeks ended August 2, 2025, but long-term incentive awards payable in cash were granted with a target value of **$6.7 million** for the 2025-2027 performance period[71](index=71&type=chunk)[72](index=72&type=chunk) - **75,035** RSUs were granted to non-employee directors during the thirteen weeks ended August 2, 2025, including dividend equivalents, with a weighted-average grant date fair value of **$13.18**[75](index=75&type=chunk) [Note 13 Retirement and Other Benefit Plans](index=27&type=section&id=Note%2013%20Retirement%20and%20Other%20Benefit%20Plans) This note provides details on pension and other postretirement benefit plans, including net periodic benefit expense Net Periodic Benefit Expense (Income) ($ thousands) | Component | Pension Benefits (13 Weeks Ended Aug 2, 2025) | Other Postretirement Benefits (13 Weeks Ended Aug 2, 2025) | Pension Benefits (26 Weeks Ended Aug 2, 2025) | Other Postretirement Benefits (26 Weeks Ended Aug 2, 2025) | | :-------------- | :-------------------------------------------- | :--------------------------------------------------------- | :-------------------------------------------- | :--------------------------------------------------------- | | Service cost | $ 1,115 | $ — | $ 2,339 | $ — | | Interest cost | 3,623 | 11 | 7,244 | 24 | | Expected return on assets | (5,561) | — | (11,117) | — | | Amortization of actuarial loss (gain) | 1,378 | (19) | 2,856 | (39) | | Amortization of prior service cost | 12 | — | 19 | — | | Total net periodic benefit expense (income) | $ 567 | $ (8) | $ 1,341 | $ (15) | - Total net periodic pension benefit expense increased to **$567k** for the thirteen weeks and **$1,341k** for the twenty-six weeks ended August 2, 2025, compared to **$491k** and **$902k** in the prior year periods, respectively[76](index=76&type=chunk) - Other postretirement benefits showed a net income of **$(8)k** for the thirteen weeks and **$(15)k** for the twenty-six weeks ended August 2, 2025[76](index=76&type=chunk) [Note 14 Fair Value Measurements](index=27&type=section&id=Note%2014%20Fair%20Value%20Measurements) This note explains the fair value measurement hierarchy and details assets and liabilities measured at fair value - The Company uses a fair value hierarchy (Level 1, 2, 3) to categorize valuation techniques based on input observability[78](index=78&type=chunk)[83](index=83&type=chunk) - Non-qualified deferred compensation plan assets and liabilities, non-qualified restoration plan assets and liabilities, and deferred compensation plan liabilities for non-employee directors are measured at fair value using Level 1 inputs (quoted market prices)[80](index=80&type=chunk)[81](index=81&type=chunk)[85](index=85&type=chunk)[86](index=86&type=chunk) Fair Value Measurements (August 2, 2025) | ($ thousands) | Total | Level 1 | Level 2 | Level 3 | | :-------------- | :---- | :------ | :------ | :------ | | Non-qualified deferred compensation plan assets | $ 11,603 | 11,603 | $ — | $ — | | Non-qualified deferred compensation plan liabilities | (11,603) | (11,603) | — | — | | Non-qualified restoration plan assets | 453 | 453 | — | — | | Non-qualified restoration plan liabilities | (453) | (453) | — | — | | Deferred compensation plan liabilities for non-employee directors | (784) | (784) | — | — | | Restricted stock units for non-employee directors | (820) | (820) | — | — | Long-Lived Asset Impairment Charges ($ thousands) | Segment | Thirteen Weeks Ended Aug 2, 2025 | Thirteen Weeks Ended Aug 3, 2024 | Twenty-Six Weeks Ended Aug 2, 2025 | Twenty-Six Weeks Ended Aug 3, 2024 | | :-------------- | :------------------------------- | :------------------------------- | :--------------------------------- | :------------------------------- | | Famous Footwear | $ 420 | $ 305 | $ 697 | $ 500 | | Brand Portfolio | 5 | 250 | 5 | 300 | | Total | $ 425 | $ 555 | $ 702 | $ 800 | [Note 15 Income Taxes](index=31&type=section&id=Note%2015%20Income%20Taxes) This note details effective tax rates, significant tax benefits, and deferred tax considerations - The consolidated effective tax rate was a benefit of **22.0%** for the thirteen weeks and **8.8%** for the twenty-six weeks ended August 2, 2025, compared to a provision of **25.0%** and **24.0%** for the prior year periods, respectively[93](index=93&type=chunk) - The lower effective tax rate for the current periods was primarily due to a discrete tax benefit of **$2.5 million** from the resolution of the remaining transition tax for mandatory deemed repatriation of foreign earnings[93](index=93&type=chunk) - No deferred taxes have been provided on accumulated unremitted earnings of foreign subsidiaries considered indefinitely reinvested[94](index=94&type=chunk) [Note 16 Commitments and Contingencies](index=31&type=section&id=Note%2016%20Commitments%20and%20Contingencies) This note describes environmental remediation commitments and other legal contingencies - The Company is involved in environmental remediation activities at its Redfield site in Colorado, with cumulative expenditures of **$35.0 million** through August 2, 2025[96](index=96&type=chunk)[98](index=98&type=chunk) - The reserve for anticipated future remediation activities at Redfield is **$8.9 million** as of August 2, 2025, with **$4.5 million** for off-site and **$4.4 million** for on-site remediation[98](index=98&type=chunk) - The Company expects to spend approximately **$0.1 million** in 2025, **$0.1 million** in each of the following four years, and **$12.0 million** thereafter for on-site remediation[98](index=98&type=chunk) - Management believes the outcome of ordinary course legal proceedings and litigation will not have a material adverse effect on the Company's results of operations or financial position[101](index=101&type=chunk) [ITEM 2 Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&type=section&id=ITEM%202%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial performance, condition, and results of operations for the second quarter and first six months of fiscal year 2025, discussing key trends, financial highlights, segment performance, liquidity, and capital resources [OVERVIEW](index=34&type=section&id=OVERVIEW) This section summarizes the Company's business, key financial results, macroeconomic impacts, and acquisitions - The Company is a global footwear company operating retail stores, e-commerce websites, and designing, developing, sourcing, manufacturing, and distributing footwear[103](index=103&type=chunk) - Macroeconomic factors, including lighter consumer traffic and tariff volatility, negatively impacted Q2 2025 financial results, with tariffs estimated to have a **$10 million** negative impact on net sales due to factory order cancellations and delayed receipts[104](index=104&type=chunk) - Restructuring actions in Q2 2025 are expected to decrease selling and administrative expenses by approximately **$15 million** on an annualized basis[104](index=104&type=chunk) - The Company's liquidity position remains strong with **$191.5 million** in cash and cash equivalents and **$230.8 million** in excess availability on its revolving credit agreement as of August 2, 2025[105](index=105&type=chunk) - The acquisition of Stuart Weitzman was completed on August 4, 2025, for **$120.2 million**, funded by the revolving credit agreement, strengthening the Company's position in luxury footwear[106](index=106&type=chunk) [Financial Highlights](index=35&type=section&id=Financial%20Highlights) This section presents a concise summary of the Company's key consolidated financial performance metrics Consolidated Financial Highlights (Thirteen Weeks Ended) | Metric | August 2, 2025 | August 3, 2024 | Change ($) | Change (%) | | :-------------- | :------------- | :------------- | :--------- | :--------- | | Consolidated net sales | $658.5 | $683.3 | ($24.8) | (3.6)% | | Famous Footwear segment net sales | $399.6 | $420.3 | ($20.7) | (4.9)% | | Famous Footwear comparable sales % change | (3.4)% | (2.9)% | n/m | n/m | | Brand Portfolio segment net sales | $275.6 | $285.5 | ($9.9) | (3.5)% | | Gross profit | $285.8 | $310.9 | ($25.1) | (8.1)% | | Gross margin | 43.4 % | 45.5 % | n/m | (210 bps) | | Operating earnings | $9.3 | $42.5 | ($33.2) | (78.2)% | | Diluted earnings per share | $0.20 | $0.85 | ($0.65) | (76.5)% | - Consolidated net sales decreased by **3.6%** to **$658.5 million**, and operating earnings plummeted by **78.2%** to **$9.3 million** for the second quarter of 2025[107](index=107&type=chunk) - Gross margin declined by **210 basis points** to **43.4%** in Q2 2025, primarily due to lower merchandise margins from tariffs and higher inventory markdowns[107](index=107&type=chunk) [Metrics Used in the Evaluation of Our Business](index=35&type=section&id=Metrics%20Used%20in%20the%20Evaluation%20of%20Our%20Business) This section defines key operational and financial metrics used by management to assess business performance - Comparable sales measure revenue for stores open over a year, including e-commerce sales that extend a retail chain, and are used to assess existing store performance[108](index=108&type=chunk) - Sales per square foot evaluate sales efficiency based on retail store square footage in North America, excluding e-commerce and the China joint venture[109](index=109&type=chunk) - Direct-to-consumer sales, including retail stores, company websites, and drop-ship sales, are monitored for their higher gross margin and ability to reinforce brand image and consumer connection[110](index=110&type=chunk) [CONSOLIDATED RESULTS](index=36&type=section&id=CONSOLIDATED%20RESULTS) This section analyzes overall financial performance, including net sales, gross profit, operating earnings, and net earnings Consolidated Results Summary ($ millions) | Metric | 13 Weeks Ended Aug 2, 2025 | % of Net Sales | 13 Weeks Ended Aug 3, 2024 | % of Net Sales | 26 Weeks Ended Aug 2, 2025 | % of Net Sales | 26 Weeks Ended Aug 3, 2024 | % of Net Sales | | :-------------- | :------------------------- | :------------- | :------------------------- | :------------- | :------------------------- | :------------- | :------------------------- | :------------- | | Net sales | $ 658.5 | 100.0 % | $ 683.3 | 100.0 % | $ 1,272.7 | 100.0 % | $ 1,342.5 | 100.0 % | | Gross profit | 285.8 | 43.4 % | 310.9 | 45.5 % | 564.5 | 44.4 % | 620.0 | 46.2 % | | Selling and administrative expenses | 269.7 | 40.9 % | 268.4 | 39.3 % | 536.2 | 42.1 % | 534.7 | 39.8 % | | Restructuring and other special charges, net | 6.8 | 1.1 % | — | — % | 7.4 | 0.6 % | — | — % | | Operating earnings | 9.3 | 1.4 % | 42.5 | 6.2 % | 20.9 | 1.7 % | 85.3 | 6.4 % | | Net earnings attributable to Caleres, Inc. | $ 6.7 | 1.0 % | $ 30.0 | 4.4 % | $ 13.7 | 1.1 % | $ 60.9 | 4.5 % | - Consolidated net sales decreased by **$24.8 million** (**3.6%**) for the second quarter and **$69.8 million** (**5.2%**) for the first six months of 2025, with declines in both Famous Footwear and Brand Portfolio segments[113](index=113&type=chunk)[114](index=114&type=chunk) - Gross profit decreased by **$25.1 million** (**8.1%**) for the second quarter and **$55.5 million** (**8.9%**) for the first six months of 2025, with gross margin declining due to tariffs, higher inventory markdowns, and increased freight costs[115](index=115&type=chunk)[116](index=116&type=chunk) - Selling and administrative expenses increased slightly, but as a percentage of net sales, they rose to **40.9%** (Q2) and **42.1%** (YTD) due to deleveraging on lower sales, higher retail facilities costs, and increased marketing/IT expenses[118](index=118&type=chunk)[119](index=119&type=chunk) - Operating earnings **significantly decreased** by **$33.2 million** (**78.2%**) for the second quarter and **$64.4 million** (**75.5%**) for the first six months of 2025, primarily due to lower sales, reduced gross profit, and restructuring charges[121](index=121&type=chunk)[122](index=122&type=chunk) - Interest expense, net, increased by **$1.2 million** (**36.3%**) for the second quarter and **$1.2 million** (**16.8%**) for the first six months of 2025, reflecting higher average borrowings on the revolving credit facility, particularly for the Stuart Weitzman acquisition[123](index=123&type=chunk) - The effective tax rate was a benefit of **22.0%** for Q2 2025 and **8.8%** for the first six months, driven by a **$2.5 million** discrete tax benefit related to foreign earnings repatriation[125](index=125&type=chunk) [FAMOUS FOOTWEAR](index=40&type=section&id=FAMOUS%20FOOTWEAR) This section analyzes Famous Footwear segment performance, detailing net sales, operating earnings, and comparable sales Famous Footwear Segment Performance ($ millions, except sales per square foot) | Metric | 13 Weeks Ended Aug 2, 2025 | % of Net Sales | 13 Weeks Ended Aug 3, 2024 | % of Net Sales | 26 Weeks Ended Aug 2, 2025 | % of Net Sales | 26 Weeks Ended Aug 3, 2024 | % of Net Sales | | :-------------- | :------------------------- | :------------- | :------------------------- | :------------- | :------------------------- | :------------- | :------------------------- | :------------- | | Net sales | $ 399.6 | 100.0 % | $ 420.3 | 100.0 % | $ 727.3 | 100.0 % | $ 769.8 | 100.0 % | | Gross profit | 174.7 | 43.7 % | 189.3 | 45.0 % | 323.1 | 44.4 % | 350.3 | 45.5 % | | Selling and administrative expenses | 156.0 | 39.1 % | 154.9 | 36.8 % | 299.5 | 41.2 % | 299.1 | 38.8 % | | Operating earnings | $ 18.6 | 4.6 % | $ 34.4 | 8.2 % | $ 23.5 | 3.2 % | $ 51.2 | 6.7 % | | Comparable sales % change | (3.4)% | | (2.9)% | | (3.9)% | | (2.6)% | | | Ending stores | 830 | | 855 | | 830 | | 855 | | - Famous Footwear net sales decreased by **4.9%** for Q2 2025 and **5.5%** for the first six months, with comparable sales declining **3.4%** and **3.9%** respectively, primarily due to reduced consumer traffic[130](index=130&type=chunk)[132](index=132&type=chunk) - E-commerce sales penetration increased to **14%** of net sales in Q2 2025, and the launch of the Jordan brand contributed to a strong back-to-school season[130](index=130&type=chunk) - Gross profit margin decreased to **43.7%** for Q2 2025 and **44.4%** for the first six months, driven by higher promotional activity and increased freight costs[133](index=133&type=chunk)[134](index=134&type=chunk) - Operating earnings decreased by **$15.8 million** (**46%**) for Q2 2025 and **$27.7 million** (**54%**) for the first six months, reflecting lower sales, reduced gross profit, and increased selling and administrative expenses[138](index=138&type=chunk)[139](index=139&type=chunk) - The segment ended Q2 2025 with **830** stores, having opened **2** and closed **7** during the quarter, and converted **21** stores to the FLAIR concept during the first half of 2025, which continue to outperform traditional stores[131](index=131&type=chunk)[132](index=132&type=chunk)[135](index=135&type=chunk) [BRAND PORTFOLIO](index=42&type=section&id=BRAND%20PORTFOLIO) This section analyzes Brand Portfolio segment performance, detailing net sales, operating earnings, and direct-to-consumer sales Brand Portfolio Segment Performance ($ millions) | Metric | 13 Weeks Ended Aug 2, 2025 | % of Net Sales | 13 Weeks Ended Aug 3, 2024 | % of Net Sales | 26 Weeks Ended Aug 2, 2025 | % of Net Sales | 26 Weeks Ended Aug 3, 2024 | % of Net Sales | | :-------------- | :------------------------- | :------------- | :------------------------- | :------------- | :------------------------- | :------------- | :------------------------- | :------------- | | Net sales | $ 275.6 | 100.0 % | $ 285.5 | 100.0 % | $ 571.0 | 100.0 % | $ 602.7 | 100.0 % | | Gross profit | 111.1 | 40.3 % | 121.9 | 42.7 % | 240.3 | 42.1 % | 269.7 | 44.7 % | | Selling and administrative expenses | 102.6 | 37.2 % | 98.3 | 34.4 % | 214.5 | 37.6 % | 204.7 | 33.9 % | | Operating earnings | $ 6.7 | 2.4 % | $ 23.6 | 8.3 % | $ 24.0 | 4.3 % | $ 65.0 | 10.8 % | | Direct-to-consumer (% of net sales) | 36 % | | 33 % | | 35 % | | 33 % | | | Unfilled order position at end of period | $ 244.2 | | $ 251.6 | | | | | | - Brand Portfolio net sales decreased by **3.5%** for Q2 2025 and **5.3%** for the first six months, primarily due to soft consumer demand and cautious wholesale buying, with tariffs negatively impacting Q2 net sales by an estimated **$10 million**[141](index=141&type=chunk)[142](index=142&type=chunk) - Direct-to-consumer sales increased to **36%** of net sales in Q2 2025, up from **33%** in the prior year[141](index=141&type=chunk) - Gross profit margin decreased to **40.3%** for Q2 2025 and **42.1%** for the first six months, driven by tariff impacts, higher inventory markdowns, and costs associated with moving inventory out of China[144](index=144&type=chunk)[145](index=145&type=chunk)[146](index=146&type=chunk) - Operating earnings decreased to **$6.7 million** for Q2 2025 (from **$23.6 million**) and **$24.0 million** for the first six months (from **$65.0 million**), reflecting lower sales, reduced gross profit, and increased selling and administrative expenses[150](index=150&type=chunk)[151](index=151&type=chunk) - The segment expanded its international presence, with **118** stores in East Asia and **145** international franchise locations as of August 2, 2025[141](index=141&type=chunk) [ELIMINATIONS AND OTHER](index=43&type=section&id=ELIMINATIONS%20AND%20OTHER) This section explains the financial impact of intersegment eliminations and unallocated corporate expenses Eliminations and Other Operating Loss ($ millions) | Metric | 13 Weeks Ended Aug 2, 2025 | % of Net Sales | 13 Weeks Ended Aug 3, 2024 | % of Net Sales | 26 Weeks Ended Aug 2, 2025 | % of Net Sales | 26 Weeks Ended Aug 3, 2024 | % of Net Sales | | :-------------- | :------------------------- | :------------- | :------------------------- | :------------- | :------------------------- | :------------- | :------------------------- | :------------- | | Net sales | $ (16.7) | 100.0 % | $ (22.5) | 100.0 % | $ (25.5) | 100.0 % | $ (30.0) | 100.0 % | | Operating loss | $ (15.9) | 95.2 % | $ (15.5) | 68.9 % | $ (26.7) | 104.8 % | $ (31.0) | 103.2 % | - Net sales elimination decreased by **$5.8 million** (**25.8%**) for Q2 2025 and **$4.5 million** (**14.9%**) for the first six months, reflecting a decrease in intersegment product sales from Brand Portfolio to Famous Footwear[153](index=153&type=chunk) - Selling and administrative expenses decreased by **$4.1 million** for Q2 2025 and **$8.7 million** for the first six months, primarily due to lower expenses related to cash and share-based incentive compensation[154](index=154&type=chunk)[155](index=155&type=chunk) - Restructuring and other special charges of **$4.8 million** for Q2 2025 and **$5.5 million** for the first six months were recorded for expense reduction initiatives and Stuart Weitzman acquisition costs[156](index=156&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=45&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This section discusses cash flow, debt obligations, borrowing capacity, and working capital, highlighting funds - Total debt obligations increased by **$241.0 million** to **$387.5 million** at August 2, 2025, from **$146.5 million** at August 3, 2024, primarily to fund the Stuart Weitzman acquisition[158](index=158&type=chunk) - The Company had **$230.8 million** in additional borrowing availability under its **$700.0 million** revolving credit facility as of August 2, 2025, and was in compliance with all covenants[157](index=157&type=chunk)[159](index=159&type=chunk) Cash Flow Summary ($ millions) | ($ millions) | August 2, 2025 | August 3, 2024 | Change ($) | | :----------- | :------------- | :------------- | :--------- | | Net cash provided by operating activities | $ 41.7 | $ 115.7 | $ (74.0) | | Net cash used for investing activities | (34.1) | (21.8) | (12.3) | | Net cash provided by (used for) financing activities | 154.2 | (63.4) | 217.6 | | Increase in cash and cash equivalents | $ 161.9 | $ 30.4 | $ 131.5 | - Working capital increased by **$5.0 million** from August 3, 2024, to **$84.3 million** at August 2, 2025, driven by higher cash, lower trade accounts payable, and higher inventory, partially offset by increased borrowings[167](index=167&type=chunk) - The debt-to-capital ratio increased to **38.4%** as of August 2, 2025, from **19.3%** at August 3, 2024[167](index=167&type=chunk) - The Company declared and paid dividends of **$0.07** per share in Q2 2025 and expects to continue dividend payments[168](index=168&type=chunk) [CRITICAL ACCOUNTING POLICIES AND ESTIMATES](index=46&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) This section confirms no material changes to critical accounting policies and estimates since the last fiscal year - No material changes have occurred related to critical accounting policies and estimates since the end of the most recent fiscal year (February 1, 2025)[170](index=170&type=chunk) [RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS](index=46&type=section&id=RECENTLY%20ISSUED%20ACCOUNTING%20PRONOUNCEMENTS) This section refers to detailed information on new accounting pronouncements in the financial statements notes - Information on recently issued accounting pronouncements and their impact is detailed in Note 2 to the condensed consolidated financial statements[171](index=171&type=chunk) [FORWARD-LOOKING STATEMENTS](index=47&type=section&id=FORWARD-LOOKING%20STATEMENTS) This section cautions about forward-looking statements, outlining risks and uncertainties affecting future results - The report contains forward-looking statements subject to various risks and uncertainties, including changes in trade policies, consumer demands, inflation, supply chain disruptions, and intense competition[172](index=172&type=chunk) - The Company does not undertake any obligation to update these forward-looking statements[172](index=172&type=chunk) [ITEM 3 Quantitative and Qualitative Disclosures About Market Risk](index=47&type=section&id=ITEM%203%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that there have been no material changes in quantitative and qualitative disclosures about market risk since the end of the most recent fiscal year - No material changes have occurred in the quantitative and qualitative information about market risk since the end of the most recent fiscal year (February 1, 2025)[173](index=173&type=chunk) [ITEM 4 Controls and Procedures](index=47&type=section&id=ITEM%204%20Controls%20and%20Procedures) This section details the evaluation of the Company's disclosure controls and procedures, concluding that they were effective at a reasonable assurance level as of August 2, 2025, with no material changes to internal controls over financial reporting during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective at the reasonable assurance level as of August 2, 2025[175](index=175&type=chunk) - No changes in internal controls over financial reporting materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting during the quarter ended August 2, 2025[177](index=177&type=chunk) PART II OTHER INFORMATION This section provides additional information not in financial statements, covering legal, risks, equity, and exhibits [ITEM 1 Legal Proceedings](index=49&type=section&id=ITEM%201%20Legal%20Proceedings) This section states that the Company is involved in ordinary course legal proceedings and litigation, but management does not expect their outcome to have a material adverse effect on financial results or position - Management believes the outcome of legal proceedings and litigation arising in the ordinary course of business will not have a material adverse effect on the Company's results of operations or financial position[178](index=178&type=chunk) [ITEM 1A Risk Factors](index=49&type=section&id=ITEM%201A%20Risk%20Factors) This section highlights material changes to risk factors, specifically emphasizing the adverse impact of changes in U.S. and international trade policies, including tariffs, on the Company's business, results of operations, and financial condition - Changes in U.S. and international trade policies, including tariffs, trade restrictions, and retaliatory actions, may adversely impact the Company's business, results of operations, and financial condition[181](index=181&type=chunk) - Tariffs negatively impacted net sales and gross margins in the Brand Portfolio segment during Q2 2025, and the uncertainty surrounding future tariff policies poses a **significant risk**[181](index=181&type=chunk) - The Company is implementing strategies to mitigate tariff effects, such as shifting production and negotiating with suppliers, but there is no assurance these measures will be successful[181](index=181&type=chunk) [ITEM 2 Unregistered Sales of Equity Securities and Use of Proceeds](index=50&type=section&id=ITEM%202%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section provides information on common stock repurchases during the second quarter of 2025, noting that no shares were repurchased under the publicly announced program during the thirteen weeks ended August 2, 2025, but 300,000 shares were repurchased during the twenty-six weeks Common Stock Repurchases (Second Quarter 2025) | Fiscal Period | Total Number of Shares Purchased | Average Price Paid per Share | | :---------------------- | :------------------------------- | :--------------------------- | | May 4, 2025 - May 31, 2025 | 14,739 | $ 16.49 | | June 1, 2025 - July 5, 2025 | 1,535 | $ 13.30 | | July 6, 2025 - August 2, 2025 | — | — | | Total | 16,274 | $ 16.19 | - No shares were repurchased under the 2022 Program during the thirteen weeks ended August 2, 2025, but **300,000** shares were repurchased during the twenty-six weeks ended August 2, 2025[184](index=184&type=chunk) - As of August 2, 2025, **3,366,055** shares remained authorized for repurchase under the 2022 Program[184](index=184&type=chunk) [ITEM 3 Defaults Upon Senior Securities](index=50&type=section&id=ITEM%203%20Defaults%20Upon%20Senior%20Securities) This section indicates that there were no defaults upon senior securities - There were no defaults upon senior securities[185](index=185&type=chunk) [ITEM 4 Mine Safety Disclosures](index=50&type=section&id=ITEM%204%20Mine%20Safety%20Disclosures) This section states that mine safety disclosures are not applicable to the Company - Mine safety disclosures are not applicable to the Company[186](index=186&type=chunk) [ITEM 5 Other Information](index=50&type=section&id=ITEM%205%20Other%20Information) This section reports on Director and Section 16 Officer trading arrangements, specifically noting the termination of a Rule 10b5-1 plan by Daniel Friedman, Chief Sourcing Officer, on July 8, 2025 - Daniel Friedman, Chief Sourcing Officer, terminated a Rule 10b5-1 plan on July 8, 2025, which had provided for the sale of up to **16,782** shares[187](index=187&type=chunk) - No other director or Section 16 officer adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the thirteen weeks ended August 2, 2025[188](index=188&type=chunk) [ITEM 6 Exhibits](index=51&type=section&id=ITEM%206%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including agreements related to the Stuart Weitzman acquisition, corporate governance documents, credit agreements, and certifications - Key exhibits include the Sale and Purchase Agreement for Stuart Weitzman, the Seventh Amendment to the Fourth Amended and Restated Credit Agreement, and certifications from the CEO and CFO[189](index=189&type=chunk) [Signature](index=52&type=section&id=Signature) This section contains the signature of the Company's Principal Financial Officer, Jack P. Calandra, certifying the filing of the report - The report was signed by Jack P. Calandra, Senior Vice President and Chief Financial Officer, on September 9, 2025[193](index=193&type=chunk)

Core Insights - Stuart Weitzman New York has launched its Fall 2025 Campaign featuring new global ambassadors Emma Chamberlain, Ilana Glazer, and Ashley Graham, celebrating the essence of New York City [1][3] - The campaign highlights the expanded VINNIE Sculptural Collection, which includes new styles such as a 100-mm wrap-up pump and 85-mm zip-up knee-high boot, building on the success of the original 50-mm slingback [3] Company Overview - Stuart Weitzman New York is a luxury footwear brand under the Caleres portfolio, known for its artisanal craftsmanship and focus on empowering women [7] - The brand has been in operation since 1986 and has expanded its product range to include handbags, men's footwear, and eyewear while maintaining its commitment to quality and design [7] Campaign Details - The Fall 2025 Campaign features a backdrop of iconic New York City locations, showcasing the new VINNIE Sculptural Collection, which emphasizes minimalist designs that reflect the brand's sophisticated aesthetic [3] - The campaign is supported by a creative team including fashion photographer Ned Rogers and stylist Gabriella Karefa-Johnson, enhancing the brand's visual identity [5] Ambassador Profiles - Emma Chamberlain is a social media influencer and entrepreneur with over 26 million followers, known for her impact on fashion and culture [6] - Ilana Glazer is a comedian and actress recognized for her role in "Broad City" and her advocacy for democracy through her organization, Generator Collective [6] - Ashley Graham is a supermodel and entrepreneur with a career spanning 24 years, known for challenging industry norms and making her Broadway debut [6]

Core Insights - Caleres, Inc. reported second-quarter fiscal 2025 results with net sales of $658.5 million, a 3.6% year-over-year decline, but exceeding the Zacks Consensus Estimate of $651 million. Adjusted earnings per share were 35 cents, missing the estimate of 51 cents and down from 85 cents in the same quarter last year [1][3][11] Financial Performance - Gross profit decreased 8.1% year over year to $285.8 million, with gross margin contracting 210 basis points to 43.4%, attributed to tariff-related expenses, selective promotions, and increased markdown provisions [4][11] - SG&A expenses rose 0.5% year over year to $269.7 million, increasing as a percentage of net sales by 170 basis points to 41% due to sales deleverage. Adjusted EBITDA fell 44% to $32.1 million, with the adjusted EBITDA margin decreasing 350 basis points to 4.9% [5][11] Segment Performance - The Famous Footwear segment's net sales declined 4.9% to $399.6 million, surpassing the consensus estimate of $395 million, with comparable sales down 3.4%. The segment gained market share in shoe chains and the kids' category [6][8] - The Brand Portfolio's sales decreased 3.5% to $275.6 million, exceeding the consensus estimate of $271 million, with comparable sales up 3.9%. The segment gained market share in women's fashion footwear [8][11] Strategic Initiatives - The company completed $15 million in structural cost savings initiatives and finalized the acquisition of Stuart Weitzman, enhancing its premium, direct-to-consumer, and international focus [2][12] - Direct-to-consumer sales accounted for approximately 75% of overall quarterly sales [9] Financial Health - Caleres ended the quarter with $191.5 million in cash and cash equivalents and $387.5 million in borrowings under its revolving credit agreement. Total shareholders' equity was $621.9 million [12] Outlook - The company will continue to withhold annual guidance amid ongoing uncertainty, with gross margin pressure in the Brand Portfolio expected to persist through year-end. For the third quarter, a similar decline in Brand Portfolio gross margin (excluding Stuart Weitzman) is anticipated, with improvements expected in the fourth quarter [13]

Core Viewpoint - Caleres, Inc. reported disappointing earnings and faces challenges in maintaining consistent revenue growth despite a slight revenue beat [2][3][6] Financial Performance - The company reported earnings per share (EPS) of $0.35, missing the Zacks Consensus Estimate of $0.51 by 31.37% [2][6] - Revenue for the quarter was $658.52 million, slightly above the estimated $656.5 million, but down from $683.32 million in the same quarter last year [3][6] - Over the past four quarters, Caleres has only exceeded consensus revenue estimates once, indicating difficulties in revenue consistency [3] Valuation Metrics - Caleres has a price-to-earnings (P/E) ratio of 5.43, suggesting a low valuation relative to its earnings [4][6] - The price-to-sales ratio is 0.18, indicating modest market valuation of its sales [4] - The enterprise value to sales ratio is 0.48, valuing the company at less than half of its sales when considering its enterprise value [4] Financial Health - The debt-to-equity ratio stands at 1.40, indicating significant reliance on debt in its capital structure [5][6] - The current ratio is 1.10, suggesting a slightly higher level of current assets compared to current liabilities, which may indicate short-term financial health [5] - Caleres' earnings yield is 18.41%, providing a measure of return on investment for shareholders despite recent earnings challenges [5]

Group 1 - The core investment strategy of Quipus Capital focuses on long-only investment, evaluating companies from an operational and buy-and-hold perspective rather than market-driven dynamics [1] - Quipus Capital emphasizes understanding the long-term earnings power of companies and the competitive dynamics within their industries [1] - The majority of recommendations from Quipus Capital will be holds, indicating a cautious approach to market conditions and a belief that only a small fraction of companies should be considered for purchase at any given time [1] Group 2 - The articles produced by Quipus Capital aim to provide valuable information for future investors while maintaining a healthy skepticism towards a generally bullish market [1]

Financial Data and Key Metrics Changes - The company reported second quarter sales of $658.5 million, a decline of 3.6% year over year, with sales trends improving sequentially in both segments [24][10] - Adjusted earnings per share were $0.35, down from $0.85 in the previous year [30] - Consolidated gross margin was 43.4%, down 20 basis points compared to last year, driven by lower margins in both segments [26] Business Segment Data and Key Metrics Changes - Brand Portfolio sales declined 3.5%, with lead brands growing about 1% in North America and 3.6% globally [25][11] - Famous Footwear sales were down 4.9%, with comparable sales declining 3.4% [25][19] - The Brand Portfolio experienced gross margin pressure due to tariffs and markdown reserves, while Famous Footwear's gross margin was 43.7%, down 130 basis points [26][27] Market Data and Key Metrics Changes - International sales increased by double digits, and the company gained market share in women's fashion footwear [6][11] - E-commerce sales for Famous Footwear were up double digits, particularly in May and July [19] - The company gained 0.6 points of kids market share in shoe chains during the quarter [22] Company Strategy and Development Direction - The company completed structural cost savings initiatives expected to deliver annualized savings of $15 million, with half of that coming this year [7] - The acquisition of Stuart Weitzman was completed, adding a new lead brand to the portfolio, with a focus on operational efficiency and profitability post-transition [8][9] - Strategic focuses include ongoing tariff mitigation, expense and capital discipline, and integrating Stuart Weitzman while fueling lead brands and Famous Footwear [23] Management's Comments on Operating Environment and Future Outlook - Management noted headwinds due to market uncertainty but highlighted improved sales trends and market share gains [5] - The tariff environment remains uncertain, with expectations of continued gross margin pressure in the second half of the year [17][33] - Management expressed confidence in executing strategic plans to improve financial performance and drive shareholder value [23] Other Important Information - The company expects to finalize purchase accounting for Stuart Weitzman and provide more information on its impact in the next earnings call [35] - Inventory at quarter end was $693 million, up 4.9% year over year, with a 2% increase in Famous and an 8.6% increase in Brand Portfolio [31] Q&A Session Summary Question: Can you provide insights on August performance and any shifts in the women's business? - Management noted improved traffic and conversion in brick-and-mortar stores, with flat average unit retails (AURs) [38] - The product assortment shift positively impacted sales, particularly with the launch of Jordan [39] Question: What are the expectations for gross margins moving forward? - Management anticipates less headwind from promotions in the back half of the year, with continued pressure from tariffs [41][42] Question: What is the expected impact of the Stuart Weitzman acquisition on sales and EBIT? - Management is not providing specific details at this time, as purchase accounting is still being finalized [46][47] Question: How is the consumer health of Famous Footwear and Brand Portfolio customers? - Management observed that consumers continue to prefer highly demanded national brands, with strong performance in back-to-school sales [60][61] Question: What mitigation tactics for tariffs are being employed? - The company is selectively passing through price increases and negotiating with factory partners for cost savings [64][66]

Financial Performance - Q2 2025 - Sales decreased to $659 million, a 3.6% decrease compared to $683 million in 2Q24[19, 16] - Adjusted Earnings Per Share (EPS) decreased to $0.35, compared to $0.85 in 2Q24[19, 16] - Gross margin was 43.4%, down 210 bps compared to 2Q24[19] - Inventory increased by 5% compared to 2Q24[19] - Adjusted EBITDA was $163 million[19] Segment Performance - **Famous Footwear:** Sales were $400 million, down 4.9% year-over-year, with comparable sales down 3.4%[26] Gross margin was 43.7%, down 130 bps year-over-year[26] - **Brand Portfolio:** Sales were $276 million, down 3.5% compared to 2Q24, including a $10 million impact from tariffs[21] Gross margin was 40.3%, down 240 bps compared to 2Q24[22] Outlook - Famous Footwear expects comparable sales to be up 1% in August, down low-single digits in September and October[30] - The Brand Portfolio expects Q3 gross margin to be down similar to Q2, with Q4 trends improving as mitigation strategies benefit[30] Strategic Initiatives - The company achieved $15 million in annualized, structural savings[14] - The company is partnering with a consulting firm to explore additional structural cost savings across the portfolio[30]