Caleres(CAL) - 2026 Q1 - Quarterly Report

PART I FINANCIAL INFORMATION This section presents Caleres, Inc.'s unaudited condensed consolidated financial statements and management's discussion and analysis ITEM 1 FINANCIAL STATEMENTS (Unaudited) This section presents the unaudited condensed consolidated financial statements for Caleres, Inc., including the balance sheets, statements of earnings, comprehensive income, cash flows, and shareholders' equity, along with detailed notes explaining the basis of presentation, accounting policies, and specific financial items Condensed Consolidated Balance Sheets This statement provides a snapshot of the company's financial position, detailing assets, liabilities, and equity | Metric ($ thousands) | May 3, 2025 | May 4, 2024 | Change ($ thousands) | Change (%) | | :------------------- | :---------- | :---------- | :------------------- | :--------- | | Total Assets | 1,907,696 | 1,861,110 | 46,586 | 2.5% | | Total Current Assets | 846,392 | 805,336 | 41,056 | 5.1% | | Inventories, net | 573,615 | 530,570 | 43,045 | 8.1% | | Cash and cash equivalents | 33,139 | 30,709 | 2,430 | 7.9% | | Total Liabilities | 1,294,792 | 1,284,081 | 10,711 | 0.8% | | Total Current Liabilities | 770,256 | 764,365 | 5,891 | 0.8% | | Borrowings under revolving credit agreement | 258,500 | 191,000 | 67,500 | 35.3% | | Total Equity | 612,904 | 577,029 | 35,875 | 6.2% | Condensed Consolidated Statements of Earnings This statement reports the company's financial performance over a period, showing revenues, expenses, and net earnings | Metric ($ thousands, except per share amounts) | Thirteen Weeks Ended May 3, 2025 | Thirteen Weeks Ended May 4, 2024 | Change ($ thousands) | Change (%) | | :--------------------------------------------- | :------------------------------- | :------------------------------- | :------------------- | :--------- | | Net sales | 614,221 | 659,198 | (44,977) | (6.8)% | | Gross profit | 278,694 | 309,095 | (30,401) | (9.8)% | | Gross margin | 45.4% | 46.9% | (1.5 ppt) | | | Selling and administrative expenses | 266,483 | 266,337 | 146 | 0.1% | | Operating earnings | 11,584 | 42,758 | (31,174) | (72.9)% | | Net earnings attributable to Caleres, Inc. | 6,943 | 30,939 | (23,996) | (77.6)% | | Diluted earnings per common share | $0.21 | $0.88 | ($0.67) | (76.1)% | Condensed Consolidated Statements of Comprehensive Income This statement presents net earnings and other comprehensive income items, reflecting changes in equity from non-owner sources | Metric ($ thousands) | Thirteen Weeks Ended May 3, 2025 | Thirteen Weeks Ended May 4, 2024 | Change ($ thousands) | Change (%) | | :------------------- | :------------------------------- | :------------------------------- | :------------------- | :--------- | | Net earnings | 5,946 | 30,798 | (24,852) | (80.7)% | | Foreign currency translation adjustment | 5,808 | (830) | 6,638 | N/A | | Pension and other postretirement benefits adjustments | 1,088 | 1,140 | (52) | (4.6)% | | Other comprehensive loss, net of tax | 6,896 | 310 | 6,586 | 2124.5% | | Comprehensive income attributable to Caleres, Inc. | 13,792 | 31,322 | (17,530) | (56.0)% | Condensed Consolidated Statements of Cash Flows This statement details cash inflows and outflows from operating, investing, and financing activities over a period | Metric ($ thousands) | Thirteen Weeks Ended May 3, 2025 | Thirteen Weeks Ended May 4, 2024 | Change ($ thousands) | | :------------------- | :------------------------------- | :------------------------------- | :------------------- | | Net cash (used for) provided by operating activities | (5,657) | 36,074 | (41,731) | | Net cash used for investing activities | (21,146) | (10,326) | (10,820) | | Net cash provided by (used for) financing activities | 30,277 | (16,359) | 46,636 | | Increase in cash and cash equivalents | 3,503 | 9,351 | (5,848) | | Cash and cash equivalents at end of period | 33,139 | 30,709 | 2,430 | Condensed Consolidated Statements of Shareholders' Equity This statement outlines changes in the company's equity components, including net earnings, dividends, and stock repurchases | Metric ($ thousands) | May 3, 2025 | May 4, 2024 | Change ($ thousands) | Change (%) | | :------------------- | :---------- | :---------- | :------------------- | :--------- | | Total Equity | 612,904 | 577,029 | 35,875 | 6.2% | | Net earnings (loss) | 5,946 | 30,798 | (24,852) | (80.7)% | | Dividends paid | (2,362) | (2,442) | 80 | (3.3)% | | Acquisition of treasury stock | (5,051) | (15,070) | 10,019 | (66.5)% | | Contributions by noncontrolling interests | 1,750 | — | 1,750 | N/A | Notes to Condensed Consolidated Financial Statements These notes provide essential details and explanations supporting the condensed consolidated financial statements, clarifying accounting policies and specific items Note 1 Basis of Presentation and General This note outlines the basis for preparing the unaudited condensed consolidated financial statements, including the consolidation of subsidiaries, the seasonal nature of the business, and the use of estimates. It also details the accounting for noncontrolling interests, the supplier finance program, and the classification of property held for sale - The company's business is seasonal, with historically higher earnings in the third fiscal quarter, though recent years show a more even distribution. Interim results may not predict full-year outcomes[16] - The company consolidates CLT Brand Solutions, a 50/50 joint venture in China with Brand Investment Holding, on a one-month lag. Capital contributions to CLT were $3.5 million in Q1 2025, including $1.8 million from Brand Investment Holding, compared to no contributions in Q1 2024[19] CLT Brand Solutions ($ thousands) | CLT Brand Solutions ($ thousands) | Thirteen Weeks Ended May 3, 2025 | Thirteen Weeks Ended May 4, 2024 | Change ($ thousands) | Change (%) | | :-------------------------------- | :------------------------------- | :------------------------------- | :------------------- | :--------- | | Net sales | 7,210 | 5,722 | 1,488 | 26.0% | | Operating loss | (1,996) | (300) | (1,696) | 565.3% | - The company operates a voluntary supplier finance program, with $11.8 million of accounts payable subject to the program as of May 3, 2025, a decrease from $16.0 million a year prior[21][23] - The main portion of the corporate headquarters campus in Clayton, Missouri, has been classified as property and equipment held for sale as of May 3, 2025, following agreements to sell components of the campus[24] Note 2 Impact of New Accounting Pronouncements The company is evaluating the impact of recently issued accounting pronouncements, including ASU 2023-09 (Income Taxes) and ASU 2024-03 (Disaggregation of Income Statement Expenses). ASU 2023-09 is effective in fiscal year 2025 and is not expected to have a material impact, while ASU 2024-03 is effective for fiscal year 2027 annual disclosures and its impact is still being evaluated - ASU 2023-09 (Income Taxes) expands disclosure requirements for rate reconciliation and income taxes paid by jurisdiction, effective for the company in fiscal year 2025, with no material impact expected[25] - ASU 2024-03 (Disaggregation of Income Statement Expenses) requires new tabular disclosures for certain income expenses, effective for the company's annual disclosures in fiscal year 2027, and its impact is currently being evaluated[26] Note 3 Revenues Net sales decreased by 6.8% to $614.2 million for the thirteen weeks ended May 3, 2025, compared to the prior year, with declines across both Famous Footwear and Brand Portfolio segments. The note provides a detailed disaggregation of revenue by segment and source, along with information on contract balances Revenue Source ($ thousands) | Revenue Source ($ thousands) | Thirteen Weeks Ended May 3, 2025 | Thirteen Weeks Ended May 4, 2024 | Change ($ thousands) | Change (%) | | :--------------------------- | :------------------------------- | :------------------------------- | :------------------- | :--------- | | Total direct-to-consumer sales | 428,672 | 453,124 | (24,452) | (5.4)% | | Wholesale - e-commerce | 63,107 | 67,787 | (4,680) | (6.9)% | | Wholesale - landed | 110,563 | 119,539 | (8,976) | (7.5)% | | Wholesale - first cost | 9,818 | 15,736 | (5,918) | (37.6)% | | Licensing and royalty | 1,919 | 2,865 | (946) | (33.0)% | | Net sales (Total) | 614,221 | 659,198 | (44,977) | (6.8)% | - The loyalty programs liability increased by $6.3 million due to points earned and decreased by $5.5 million due to expirations and redemptions during the thirteen weeks ended May 3, 2025[38] Contract Balance ($ thousands) | Contract Balance ($ thousands) | May 3, 2025 | May 4, 2024 | Change ($ thousands) | Change (%) | | :----------------------------- | :---------- | :---------- | :------------------- | :--------- | | Customer allowances and discounts | 15,135 | 17,090 | (1,955) | (11.4)% | | Loyalty programs liability | 8,568 | 8,350 | 218 | 2.6% | | Returns reserve | 15,861 | 15,100 | 761 | 5.0% | | Gift card liability | 5,876 | 5,841 | 35 | 0.6% | | Allowance for expected credit losses | 10,264 | 8,101 | 2,163 | 26.7% | Note 4 Earnings Per Share Basic and diluted earnings per common share attributable to Caleres, Inc. shareholders decreased significantly to $0.21 for the thirteen weeks ended May 3, 2025, from $0.88 in the prior year. The company repurchased 300,000 shares during the period, incurring an immaterial amount of excise taxes under the Inflation Reduction Act Earnings Per Share ($ thousands, except per share amounts) | Metric ($ thousands, except per share amounts) | Thirteen Weeks Ended May 3, 2025 | Thirteen Weeks Ended May 4, 2024 | Change ($ thousands) | Change (%) | | :--------------------------------------------- | :------------------------------- | :------------------------------- | :------------------- | :--------- | | Net earnings attributable to Caleres, Inc. | 6,943 | 30,939 | (23,996) | (77.6)% | | Basic earnings per common share | $0.21 | $0.88 | ($0.67) | (76.1)% | | Diluted earnings per common share | $0.21 | $0.88 | ($0.67) | (76.1)% | | Shares repurchased | 300,000 | 416,000 | (116,000) | (27.9)% | Note 5 Restructuring and Other Special Charges The company incurred $0.6 million in restructuring and other special charges during the first quarter of 2025, primarily for legal and related costs associated with the pending acquisition of Stuart Weitzman, expected to close in summer 2025. No such charges were incurred in the prior year - The company signed a definitive agreement to acquire Stuart Weitzman from Tapestry, Inc. for $105 million, expected to close in summer 2025, and incurred $0.6 million in related legal and other costs in Q1 2025[43][44] Note 6 Business Segment Information The company's operating earnings significantly decreased across both Famous Footwear and Brand Portfolio segments for the thirteen weeks ended May 3, 2025, compared to the prior year, reflecting overall lower net sales and gross profit Segment Performance ($ thousands) | Segment Performance ($ thousands) | Thirteen Weeks Ended May 3, 2025 | Thirteen Weeks Ended May 4, 2024 | Change ($ thousands) | Change (%) | | :-------------------------------- | :------------------------------- | :------------------------------- | :------------------- | :--------- | | Famous Footwear | | | | | | Net sales | 327,676 | 349,553 | (21,877) | (6.3)% | | Gross Profit | 148,441 | 161,005 | (12,564) | (7.8)% | | Operating earnings | 4,974 | 16,855 | (11,881) | (70.5)% | | Segment assets | 877,642 | 868,729 | 8,913 | 1.0% | | Brand Portfolio | | | | | | Net sales | 295,395 | 317,211 | (21,816) | (6.9)% | | Gross Profit | 129,287 | 147,812 | (18,525) | (12.5)% | | Operating earnings | 17,415 | 41,425 | (24,010) | (57.9)% | | Segment assets | 861,984 | 827,645 | 34,339 | 4.1% | | Total Operating Earnings | 11,584 | 42,758 | (31,174) | (72.9)% | Note 7 Inventories The company's net inventory balance increased to $573.6 million as of May 3, 2025, up 8.1% from $530.6 million a year prior, primarily driven by an increase in finished goods Inventory Component ($ thousands) | Inventory Component ($ thousands) | May 3, 2025 | May 4, 2024 | Change ($ thousands) | Change (%) | | :-------------------------------- | :---------- | :---------- | :------------------- | :--------- | | Raw materials | 14,736 | 13,521 | 1,215 | 9.0% | | Work-in-process | 617 | 608 | 9 | 1.5% | | Finished goods | 558,262 | 516,441 | 41,821 | 8.1% | | Inventories, net | 573,615 | 530,570 | 43,045 | 8.1% | Note 8 Goodwill and Intangible Assets Net goodwill and intangible assets decreased to $189.5 million as of May 3, 2025, from $200.6 million a year prior, primarily due to accumulated amortization of intangible assets. No goodwill or indefinite-lived intangible asset impairment charges were recorded during the period Asset Category ($ thousands) | Asset Category ($ thousands) | May 3, 2025 | May 4, 2024 | Change ($ thousands) | Change (%) | | :--------------------------- | :---------- | :---------- | :------------------- | :--------- | | Total intangible assets, net | 184,559 | 195,595 | (11,036) | (5.6)% | | Total goodwill | 4,956 | 4,956 | 0 | 0.0% | | Goodwill and intangible assets, net | 189,515 | 200,551 | (11,036) | (5.5)% | | Accumulated amortization | (160,324) | (149,288) | (11,036) | 7.4% | - Amortization expense for intangible assets was $2.8 million for both the thirteen weeks ended May 3, 2025, and May 4, 2024. The company estimates future amortization expense to be approximately $11.0 million in 2025 and 2026[52] - No goodwill or indefinite-lived intangible asset impairment charges were recorded during the thirteen weeks ended May 3, 2025, or May 4, 2024[53][54] Note 9 Leases Total lease expense increased to $52.5 million for the thirteen weeks ended May 3, 2025, from $51.1 million in the prior year, with cash paid for lease liabilities also increasing. The company recognized $30.3 million in new right-of-use assets and lease obligations from new or amended leases Lease Expense ($ thousands) | Lease Expense ($ thousands) | Thirteen Weeks Ended May 3, 2025 | Thirteen Weeks Ended May 4, 2024 | Change ($ thousands) | Change (%) | | :-------------------------- | :------------------------------- | :------------------------------- | :------------------- | :--------- | | Operating lease expense | 40,577 | 40,023 | 554 | 1.4% | | Variable lease expense | 11,731 | 10,735 | 996 | 9.3% | | Short-term lease expense | 144 | 307 | (163) | (53.1)% | | Total lease expense | 52,452 | 51,065 | 1,387 | 2.7% | - Cash paid for lease liabilities increased to $51.2 million for the thirteen weeks ended May 3, 2025, from $42.2 million in the prior year[61] - The company recognized $30.3 million in right-of-use assets and lease obligations from new or amended leases during the thirteen weeks ended May 3, 2025[60] Note 10 Financing Arrangements The company's borrowings under its revolving credit facility increased to $258.5 million as of May 3, 2025, from $191.0 million a year prior, with $233.4 million in additional borrowing availability. The company expects to refinance its revolving credit facility in 2025 ahead of its October 2026 maturity - Borrowings under the revolving credit agreement increased to $258.5 million as of May 3, 2025, from $191.0 million as of May 4, 2024, an increase of $67.5 million[6][68] - Total additional borrowing availability was $233.4 million as of May 3, 2025[68] - The company expects to refinance its revolving credit facility in 2025, prior to its October 2026 maturity[106][141] Note 11 Shareholders' Equity The accumulated other comprehensive loss decreased to $(27.2) million as of May 3, 2025, from $(34.1) million a year prior, primarily due to a positive foreign currency translation adjustment Accumulated Other Comprehensive Loss ($ thousands) | Component ($ thousands) | May 3, 2025 | May 4, 2024 | Change ($ thousands) | Change (%) | | :---------------------- | :---------- | :---------- | :------------------- | :--------- | | Foreign Currency Translation | (28) | (1,855) | 1,827 | (98.5)% | | Pension and Other Postretirement Benefits | (27,145) | (32,266) | 5,121 | (15.9)% | | Accumulated Other Comprehensive Loss | (27,173) | (34,121) | 6,948 | (20.4)% | Note 12 Share-Based Compensation Share-based compensation expense decreased to $2.8 million for the thirteen weeks ended May 3, 2025, from $3.7 million in the prior year. The company granted 748,063 restricted shares and long-term incentive awards payable in cash with a target value of $6.7 million during the current period Share-based Compensation Expense ($ thousands) | Metric ($ thousands) | Thirteen Weeks Ended May 3, 2025 | Thirteen Weeks Ended May 4, 2024 | Change ($ thousands) | Change (%) | | :------------------- | :------------------------------- | :------------------------------- | :------------------- | :--------- | | Share-based compensation expense | 2,843 | 3,710 | (867) | (23.4)% | - The company granted 748,063 restricted shares with a graded vesting term of three years during the thirteen weeks ended May 3, 2025, compared to 303,285 shares in the prior year[73] - Long-term incentive awards payable in cash for the 2025-2027 performance period were granted with a target value of $6.7 million and a maximum value of $13.4 million[75] Note 13 Retirement and Other Benefit Plans Total net periodic benefit expense for pension and other postretirement benefits increased to $773 thousand for the thirteen weeks ended May 3, 2025, from $411 thousand in the prior year, primarily due to higher service and interest costs, partially offset by expected return on assets Net Periodic Benefit Expense (Income) ($ thousands) | Component ($ thousands) | Thirteen Weeks Ended May 3, 2025 | Thirteen Weeks Ended May 4, 2024 | Change ($ thousands) | Change (%) | | :---------------------- | :------------------------------- | :------------------------------- | :------------------- | :--------- | | Service cost | 1,224 | 1,192 | 32 | 2.7% | | Interest cost | 3,621 | 3,732 | (111) | (3.0)% | | Expected return on assets | (5,556) | (6,076) | 520 | (8.6)% | | Amortization of actuarial loss (gain) | 1,477 | 1,539 | (62) | (4.0)% | | Total net periodic benefit expense (income) | 773 | 411 | 362 | 88.1% | Note 14 Fair Value Measurements The company measures various assets and liabilities at fair value on a recurring basis, primarily using Level 1 inputs. Long-lived asset impairment charges totaled $277 thousand for the thirteen weeks ended May 3, 2025, mainly in the Famous Footwear segment - All recurring fair value measurements for non-qualified deferred compensation plan assets/liabilities, non-qualified restoration plan assets/liabilities, and non-employee director deferred compensation/RSUs are based on Level 1 inputs (quoted prices in active markets)[89] Impairment Charges ($ thousands) | Impairment Charges ($ thousands) | Thirteen Weeks Ended May 3, 2025 | Thirteen Weeks Ended May 4, 2024 | Change ($ thousands) | Change (%) | | :------------------------------- | :------------------------------- | :------------------------------- | :------------------- | :--------- | | Famous Footwear | 277 | 195 | 82 | 42.1% | | Brand Portfolio | — | 50 | (50) | (100.0)% | | Total long-lived asset impairment charges | 277 | 245 | 32 | 13.1% | - The fair values of cash and cash equivalents, receivables, trade accounts payable, and borrowings under the revolving credit agreement approximate their carrying values due to their short-term nature (Level 1)[91] Note 15 Income Taxes The consolidated effective tax rate increased to 29.8% for the thirteen weeks ended May 3, 2025, from 23.0% in the prior year, primarily due to a discrete tax provision related to share-based compensation. The company continues to evaluate the potential impact of Pillar Two rules but does not expect a material impact Effective Tax Rate | Metric | Thirteen Weeks Ended May 3, 2025 | Thirteen Weeks Ended May 4, 2024 | Change (ppt) | | :----- | :------------------------------- | :------------------------------- | :----------- | | Effective Tax Rate | 29.8% | 23.0% | 6.8 | - The higher effective tax rate in Q1 2025 was driven by a discrete tax provision of approximately $0.3 million related to share-based compensation, compared to a discrete tax benefit of $0.8 million in Q1 2024[93] - The company does not expect the OECD's Pillar Two Global Anti-Base Erosion model rules, effective January 1, 2024, to have a material impact on its tax provision or effective tax rate[124] Note 16 Commitments and Contingencies The company is involved in environmental remediation activities at its Redfield site, with cumulative expenditures of $34.9 million through May 3, 2025, and a reserve of $9.1 million for anticipated future activities. The company also faces ordinary course litigation, not expected to have a material adverse effect - Cumulative expenditures for environmental remediation at the Redfield site reached $34.9 million through May 3, 2025[98] Environmental Remediation Reserve ($ thousands) | Environmental Remediation Reserve ($ thousands) | May 3, 2025 | | :---------------------------------------------- | :---------- | | Total reserve for anticipated future remediation | 9,100 | | - Off-site remediation | 4,700 | | - On-site remediation | 4,400 | - The company expects to spend approximately $0.1 million in 2025 and each of the following four years, and $11.7 million thereafter, for on-site remediation[98] - Management believes the outcome of current legal proceedings and litigation will not have a material adverse effect on the company's results of operations or financial position[102] ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's perspective on the company's financial condition and results of operations for the first quarter of 2025, highlighting key trends, segment performance, liquidity, and capital resources. It discusses the impact of macroeconomic factors, the Stuart Weitzman acquisition, and strategic initiatives OVERVIEW This overview summarizes Caleres, Inc.'s business, the Stuart Weitzman acquisition, macroeconomic impacts, and liquidity position - Caleres, Inc. is a global footwear company operating retail stores, e-commerce websites, and designing, developing, sourcing, manufacturing, and distributing footwear[103] - The company signed an agreement to acquire Stuart Weitzman for $105 million, expected to close in summer 2025, aiming to grow its Brand Portfolio segment with more global and direct-to-consumer reach[104] - Macroeconomic factors, including recent tariff announcements and lighter consumer traffic, negatively impacted Q1 2025 financial results, leading to lower net sales[105] - The company's liquidity position remains strong with $33.1 million in cash and cash equivalents and $233.4 million in excess borrowing availability as of May 3, 2025[106] Financial Highlight ($ millions, except per share) | Financial Highlight ($ millions, except per share) | Thirteen Weeks Ended May 3, 2025 | Thirteen Weeks Ended May 4, 2024 | Change ($ millions) | Change (%) | | :----------------------------------------------- | :------------------------------- | :------------------------------- | :------------------ | :--------- | | Consolidated net sales | $614.2 | $659.2 | ($45.0) | (6.8)% | | Famous Footwear segment net sales | $327.7 | $349.6 | ($21.9) | (6.3)% | | Brand Portfolio segment net sales | $295.4 | $317.2 | ($21.8) | (6.9)% | | Gross profit | $278.7 | $309.1 | ($30.4) | (9.8)% | | Gross margin | 45.4% | 46.9% | (152 bps) | | | Operating earnings | $11.6 | $42.8 | ($31.2) | (72.9)% | | Diluted earnings per share | $0.21 | $0.88 | ($0.67) | (76.1)% | - Direct-to-consumer sales represented approximately 70% of consolidated net sales in Q1 2025, up from 69% in Q1 2024, and generally result in higher gross margins[111][114] CONSOLIDATED RESULTS This section details consolidated financial performance, including net sales, gross profit, operating earnings, and effective tax rate Consolidated Results ($ millions) | Metric ($ millions) | Thirteen Weeks Ended May 3, 2025 | Thirteen Weeks Ended May 4, 2024 | Change ($ millions) | Change (%) | | :------------------ | :------------------------------- | :------------------------------- | :------------------ | :--------- | | Net sales | $614.2 | $659.2 | ($45.0) | (6.8)% | | Cost of goods sold | $335.5 | $350.1 | ($14.6) | (4.2)% | | Gross profit | $278.7 | $309.1 | ($30.4) | (9.8)% | | Gross margin | 45.4% | 46.9% | (1.5 ppt) | | | Selling and administrative expenses | $266.5 | $266.3 | $0.2 | 0.1% | | Operating earnings | $11.6 | $42.8 | ($31.2) | (72.9)% | | Net earnings attributable to Caleres, Inc. | $6.9 | $30.9 | ($24.0) | (77.6)% | - Gross margin decreased due to lower merchandise margins, incremental costs from canceling and moving inventory out of China after tariff escalation, higher inventory markdowns, and increased freight costs from a higher mix of e-commerce sales[115] - Selling and administrative expenses increased slightly due to growth in international business, higher facilities costs (including depreciation from Famous Footwear store renovations to FLAIR concept), and increased IT expenses, partially offset by lower advertising and marketing[117] - The effective tax rate increased to 29.8% in Q1 2025 from 23.0% in Q1 2024, driven by a discrete tax provision related to share-based compensation[123] FAMOUS FOOTWEAR This segment experienced declines in net sales and operating earnings, despite increased e-commerce penetration and FLAIR store outperformance Famous Footwear Segment Performance ($ millions, except %) | Metric ($ millions, except %) | Thirteen Weeks Ended May 3, 2025 | Thirteen Weeks Ended May 4, 2024 | Change ($ millions) | Change (%) | | :---------------------------- | :------------------------------- | :------------------------------- | :------------------ | :--------- | | Net sales | $327.7 | $349.6 | ($21.9) | (6.3)% | | Comparable sales % change | (4.6)% | (2.3)% | (2.3 ppt) | | | Gross profit | $148.4 | $161.0 | ($12.6) | (7.8)% | | Gross margin | 45.3% | 46.1% | (0.8 ppt) | | | Selling and administrative expenses | $143.4 | $144.1 | ($0.7) | (0.5)% | | Operating earnings | $5.0 | $16.9 | ($11.9) | (70.5)% | - E-commerce sales penetration increased to 14% of net sales in Q1 2025, up from 13% in Q1 2024, despite an overall decline in traffic. The kids category continued to outperform[127] - The segment closed 11 stores in Q1 2025, ending with 835 stores. Sales to Famously You Rewards members accounted for 79% of net sales, up from 78% in Q1 2024[128] - 10 stores were converted to the new FLAIR concept in Q1 2025, bringing the total to 44 FLAIR stores, which continue to outperform traditional stores[130] BRAND PORTFOLIO This segment saw decreased net sales and operating earnings, with increased direct-to-consumer sales and expanded international presence Brand Portfolio Segment Performance ($ millions, except %) | Metric ($ millions, except %) | Thirteen Weeks Ended May 3, 2025 | Thirteen Weeks Ended May 4, 2024 | Change ($ millions) | Change (%) | | :---------------------------- | :------------------------------- | :------------------------------- | :------------------ | :--------- | | Net sales | $295.4 | $317.2 | ($21.8) | (6.9)% | | Gross profit | $129.3 | $147.8 | ($18.5) | (12.5)% | | Gross margin | 43.8% | 46.6% | (2.8 ppt) | | | Selling and administrative expenses | $111.9 | $106.4 | $5.5 | 5.2% | | Operating earnings | $17.4 | $41.4 | ($24.0) | (57.9)% | - Direct-to-consumer sales represented 35% of net sales in Q1 2025, up from 33% in Q1 2024[133] - The segment expanded its international presence, with 54 stores in East Asia (up from 38) and 116 international franchise locations (up from 103) as of May 3, 2025[133] - Unfilled wholesale order position increased by 2.6% to $263.6 million as of May 3, 2025[134] - Selling and administrative expenses increased due to international business growth, higher provision for expected credit losses, and increased salary and benefits, partially offset by lower marketing[136] ELIMINATIONS AND OTHER This section details intersegment eliminations and other charges, including restructuring costs for the Stuart Weitzman acquisition Eliminations and Other ($ millions) | Metric ($ millions) | Thirteen Weeks Ended May 3, 2025 | Thirteen Weeks Ended May 4, 2024 | Change ($ millions) | Change (%) | | :------------------ | :------------------------------- | :------------------------------- | :------------------ | :--------- | | Net sales | ($8.9) | ($7.6) | ($1.3) | 17.1% | | Gross profit | $1.0 | $0.3 | $0.7 | 233.3% | | Selling and administrative expenses | $11.1 | $15.8 | ($4.7) | (29.7)% | | Restructuring and other special charges, net | $0.6 | — | $0.6 | N/A | | Operating loss | ($10.7) | ($15.5) | $4.8 | (31.0)% | - The net sales elimination increased by $1.3 million, or 17.0%, reflecting higher intersegment product sales from Brand Portfolio to Famous Footwear[139] - Selling and administrative expenses decreased by $4.7 million, primarily due to lower expenses for cash and share-based incentive compensation[139] - Restructuring and other special charges of $0.6 million were incurred for legal and related costs of the Stuart Weitzman acquisition[140] LIQUIDITY AND CAPITAL RESOURCES This section analyzes the company's cash flows, debt obligations, working capital, and ability to meet future financial requirements - Total debt obligations increased by $67.5 million to $258.5 million as of May 3, 2025, from $191.0 million a year prior[142] - The company used $5.0 million from its revolving credit facility for share repurchases in Q1 2025, compared to $15.1 million in Q1 2024[142][146] - Net cash used for operating activities was $5.7 million in Q1 2025, a $41.8 million decrease from cash provided in Q1 2024, primarily due to lower net earnings, increased inventory, and decreased trade accounts payable[145][148] - Net cash provided by financing activities was $30.3 million in Q1 2025, a $46.7 million increase from cash used in Q1 2024, mainly due to higher net borrowings under the revolving credit agreement[146] Financial Ratios ($ millions) | Metric ($ millions) | May 3, 2025 | May 4, 2024 | February 1, 2025 | | :------------------ | :---------- | :---------- | :--------------- | | Working capital | $76.1 | $41.0 | $78.6 | | Current ratio | 1.10:1 | 1.05:1 | 1.10:1 | | Debt-to-capital ratio | 29.7% | 24.9% | 26.6% | - The company declared and paid dividends of $0.07 per share in Q1 2025 and Q1 2024 and expects to continue paying dividends[150] - The company believes its operating cash flows are sufficient to meet material cash requirements for at least the next 12 months[151] CRITICAL ACCOUNTING POLICIES AND ESTIMATES This section confirms no material changes to critical accounting policies and estimates since the last fiscal year - No material changes to critical accounting policies and estimates since the last fiscal year[152] RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS This section refers to Note 2 for detailed information regarding recently issued accounting pronouncements - Refer to Note 2 for details on recently issued accounting pronouncements[153] FORWARD-LOOKING STATEMENTS This section highlights risks including trade policies, consumer demand shifts, inflation, and supply chain disruptions affecting future performance - Forward-looking statements are subject to risks such as changes in trade policies (tariffs), changing consumer demands, inflationary pressures, supply chain disruptions, and intense competition[154] - The company relies heavily on third-party manufacturing in China and other countries, making it vulnerable to political and economic conditions or disruptions in inventory flow[154] ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK No material changes have occurred in the quantitative and qualitative information about market risk since the end of the most recent fiscal year - No material changes in quantitative and qualitative information about market risk since the end of the most recent fiscal year[155] ITEM 4 CONTROLS AND PROCEDURES The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of May 3, 2025. There have been no material changes to internal controls over financial reporting during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures were effective at the reasonable assurance level as of May 3, 2025[158] - No material changes in internal controls over financial reporting occurred during the quarter ended May 3, 2025[159] PART II OTHER INFORMATION This section covers other important information, including legal proceedings, risk factors, equity security sales, and disclosures ITEM 1 LEGAL PROCEEDINGS The company is involved in ordinary course legal proceedings and litigation, which management believes will not have a material adverse effect on its financial position or results of operations. Legal costs are expensed as incurred - Management believes current legal proceedings and litigation will not materially adversely affect the company's financial position or results of operations[160] - Legal costs associated with litigation are expensed as incurred[160] ITEM 1A RISK FACTORS No material changes to risk factors have occurred since the last fiscal year, except for an update on the adverse impact of changes in U.S. and international trade policies, including tariffs. The uncertainty surrounding tariffs poses significant risks to costs, margins, and supply chain management - No material changes to risk factors since the last fiscal year, except for the impact of changes in U.S. and international trade policies, including tariffs[162] - Recent U.S. tariffs on imported products and potential retaliatory tariffs pose significant risks, potentially increasing costs, reducing margins, and creating supply chain challenges[163] - Tariffs may lead to higher product pricing, potentially shifting customers to private-label or lower-cost alternatives[163] ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS The company repurchased 300,000 shares of common stock under its 2022 stock repurchase program during the first quarter of 2025 at an average price of $16.41 per share, with 3,366,055 shares remaining authorized for repurchase Stock Repurchase Program (Q1 2025) | Fiscal Period (Q1 2025) | Total Number of Shares Purchased | Average Price Paid per Share | Purchased as Part of Publicly Announced Program | Maximum Number of Shares Yet to be Purchased | | :---------------------- | :------------------------------- | :--------------------------- | :---------------------------------------------- | :------------------------------------------- | | Total | 494,535 | $16.41 | 300,000 | 3,366,055 | - The 2022 stock repurchase program authorized the repurchase of 7,000,000 shares, with 3,366,055 shares remaining authorized as of May 3, 2025[167] ITEM 3 DEFAULTS UPON SENIOR SECURITIES There were no defaults upon senior securities - No defaults upon senior securities[168] ITEM 4 MINE SAFETY DISCLOSURES Not applicable - Not applicable[169] ITEM 5 OTHER INFORMATION No director or Section 16 officer adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the thirteen weeks ended May 3, 2025 - No director or Section 16 officer adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangement in Q1 2025[170] ITEM 6 EXHIBITS This section lists the exhibits filed with the Form 10-Q, including the Sale and Purchase Agreement for Stuart Weitzman, corporate governance documents, and certifications - Key exhibits include the Sale and Purchase Agreement for Stuart Weitzman, Restated Certificate of Incorporation, Bylaws, and various certifications (CEO, CFO)[172] SIGNATURE The report was signed on June 10, 2025, by Jack P. Calandra, Senior Vice President and Chief Financial Officer of Caleres, Inc - The report was signed by Jack P. Calandra, Senior Vice President and Chief Financial Officer, on June 10, 2025[177]