Caleres(CAL) - 2026 Q2 - Quarterly Results

Executive Summary Caleres achieved Q2 2025 sales improvements and market share gains, completed cost savings, and acquired Stuart Weitzman, enhancing its premium and direct-to-consumer focus Q2 2025 Performance Highlights Caleres experienced sequential sales improvements in both business segments during Q2 2025, achieving market share gains in women's fashion footwear and shoe chains, and noting strength in Lead Brands and direct-to-consumer channels, despite overall market uncertainty - Sales trends improved sequentially in both segments of the business[2] - Achieved market share gains in women's fashion footwear and in shoe chains[2] - Experienced strength in Lead Brands, Brand Portfolio direct-to-consumer channels, and international[2] - Saw significant improvement in sales trends at Famous Footwear in July and continuing through August[2] Strategic Developments The company successfully completed structural cost savings initiatives, projected to yield $15 million in annualized savings, and strategically acquired Stuart Weitzman post-quarter end, aligning with its focus on premium, direct-to-consumer, and international business expansion - Completed previously announced structural cost savings initiatives, expected to deliver annualized savings of $15 million[3][4] - Completed the acquisition of Stuart Weitzman shortly after quarter-end, adding a new Lead Brand that aligns with the strategic focus on premium, direct-to-consumer, and international business[3][4] Second Quarter 2025 Financial Performance Caleres experienced a consolidated sales decline and reduced gross margins in Q2 2025, with both segments facing challenges, while strategically increasing borrowings for the Stuart Weitzman acquisition and enhancing credit flexibility Consolidated Financial Overview Caleres reported a 3.6% decline in consolidated sales to $658.5 million for Q2 2025, with gross margin decreasing by 210 basis points to 43.4%. Net earnings attributable to Caleres, Inc. significantly dropped to $6.7 million, or $0.20 per diluted share, compared to $29.96 million, or $0.85 per diluted share, in the prior year, though adjusted EPS was $0.35 Consolidated Sales and Profitability (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change (YoY) | | :----------------------- | :---------- | :---------- | :----------- | | Reported Consolidated Sales (in millions) | $658.5 | $683.3 | -3.6% | | Gross Profit (in millions) | $285.8 | $310.9 | -8.1% | | Gross Margin (%) | 43.4% | 45.5% | -210 bps | | SG&A (in millions) | $269.7 | $268.3 | +0.5% | | SG&A as % of Net Sales (%) | 41.0% | 39.3% | +170 bps | | Net Earnings (in millions) | $6.7 | $30.0 | -77.7% | | Earnings Per Diluted Share ($) | $0.20 | $0.85 | -76.5% | | Adjusted Net Earnings (in millions) | $11.7 | $30.0 | -61.0% | | Adjusted Earnings Per Diluted Share ($) | $0.35 | $0.85 | -58.8% | - Gross margin decline was attributed to tariff-related costs, selective promotions, and higher provision for inventory markdowns, partially offset by growth in higher-margin direct-to-consumer channels within Brand Portfolio[4][5] - SG&A as a percentage of net sales increased by 170 basis points, reflecting deleverage on lower sales[5] Segment Performance Both Famous Footwear and Brand Portfolio segments experienced sales declines and reduced gross margins in Q2 2025 compared to the prior year, with Brand Portfolio also facing tariff impacts Famous Footwear Segment Famous Footwear segment saw $399.6 million net sales, a 4.9% decline, and a 130 bps gross margin drop, with July sales trends improving Famous Footwear Segment Performance (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change (YoY) | | :----------------------- | :---------- | :---------- | :----------- | | Net Sales (in millions) | $399.6 | $420.3 | -4.9% | | Comparable Sales (%) | -3.4% | -2.9% | -0.5 ppt | | Gross Margin (%) | 43.7% | 45.0% | -130 bps | | Operating Earnings (in millions) | $18.6 | $34.4 | -46.0% | - Experienced meaningful improvement in sales trends in July[4] Brand Portfolio Segment Brand Portfolio segment reported $275.6 million net sales, a 3.5% decline, and a 240 bps gross margin drop, impacted by tariffs, but gained women's fashion footwear market share Brand Portfolio Segment Performance (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change (YoY) | | :----------------------- | :---------- | :---------- | :----------- | | Net Sales (in millions) | $275.6 | $285.5 | -3.5% | | Gross Margin (%) | 40.3% | 42.7% | -240 bps | | Operating Earnings (in millions) | $6.6 | $23.6 | -71.9% | - Sales decline included approximately $10 million in tariff impact[4] - Achieved gains in women's fashion footwear market share and strong performance from Lead Brands[4] - Direct-to-consumer sales represented approximately 75% of total net sales for the consolidated business[5] Key Financial Position and Liquidity Indicators Caleres ended Q2 2025 with increased inventory levels and significantly higher borrowings under its revolving credit facility, primarily to pre-position cash for the Stuart Weitzman acquisition, while also enhancing financial flexibility through an amended credit agreement Key Financial Position (Q2 2025 vs Q2 2024) | Metric | August 2, 2025 | August 3, 2024 | Change (YoY) | | :---------------------------------- | :------------- | :------------- | :----------- | | Inventory, net (in millions) | $693.3 | $661.1 | +4.9% | | Borrowings under revolving credit agreement (in millions) | $387.5 | $146.5 | +164.5% | | Cash and cash equivalents (in millions) | $191.5 | $51.8 | +270.0% | | Total Assets (in millions) | $2,152.2 | $2,020.0 | +6.5% | | Total Liabilities (in millions) | $1,530.3 | $1,406.5 | +8.8% | - Increased borrowings reflect pre-positioned cash for the Stuart Weitzman acquisition[11] Capital Allocation and Fiscal Outlook Caleres focuses on growth and shareholder returns, enhanced credit flexibility, and suspended fiscal 2025 guidance due to market uncertainty, despite positive August sales trends Capital Allocation Strategy Caleres is focused on investing in value-driving growth opportunities and returning cash to shareholders through dividends. The company enhanced its financial flexibility by amending its credit agreement, extending its maturity to June 2030, and increasing its borrowing capacity to $700 million, with an accordion feature up to $950 million - Capital allocation priorities are to continue to fund its dividend and to invest in value-enhancing growth vectors[6] - Entered into an amendment of its credit agreement, extending the senior secured asset-based revolving credit facility to June 2030[6] - Increased borrowing capacity under the agreement by $200 million to $700 million, with an accordion feature allowing an increase to $950 million[6] Fiscal 2025 Outlook Due to environmental uncertainty, Caleres has suspended its annual guidance for Fiscal 2025. However, August trends showed positive comparable sales for Famous Footwear and low-single-digit growth for Brand Portfolio (excluding Stuart Weitzman), with ongoing gross margin pressure from tariffs expected for Brand Portfolio through Q3, improving in Q4 - Annual guidance is suspended due to uncertainty in the environment[7] August 2025 Sales Trends | Segment | Performance | | :-------------------- | :------------------------------------------------ | | Famous Footwear | Same-store comparable sales up 1% | | Brand Portfolio (ex-Stuart Weitzman) | Sales up low-single digits | - Expect ongoing gross margin pressure in Brand Portfolio from tariffs for the balance of the year, with third-quarter Brand Portfolio gross margin expected to be down similar to the second quarter, with improvement in the fourth quarter[7] Additional Information This section clarifies GAAP and non-GAAP financial measures for business insights and presents a Safe Harbor Statement on forward-looking statements and risks Definitions and Non-GAAP Financial Measures This section clarifies the company's use of both GAAP and non-GAAP financial measures, such as EBITDA and adjusted earnings, explaining that non-GAAP metrics are provided to offer additional insights into underlying business trends by excluding certain items not indicative of core operating results - The company's financial results are provided both in accordance with generally accepted accounting principles (GAAP) and using certain non-GAAP financial measures and metrics[10] - Non-GAAP measures include earnings before interest, taxes, depreciation and amortization (EBITDA), and estimated/future operating earnings, net earnings, and earnings per diluted share, adjusted to exclude certain gains, charges, and recoveries[10] - Management believes these non-GAAP measures help identify underlying trends and provide useful information by excluding items that may not be indicative of core operating results[10] Safe Harbor Statement The Safe Harbor Statement advises that the press release contains forward-looking statements subject to various risks and uncertainties, including changes in trade policies, consumer demands, inflation, supply chain disruptions, and intense competition, which could cause actual results to differ materially from expectations - This press release contains certain forward-looking statements and expectations regarding the company's future performance and the performance of its brands[12] - Such statements are subject to various risks and uncertainties that could cause actual results to differ materially[12] - Key risks include changes in United States and international trade policies (including tariffs), changing consumer demands, inflationary pressures, supply chain disruptions, rapidly changing consumer preferences, intense competition, and cybersecurity threats[12] - Detailed information relating to such factors is available under the caption Risk Factors in Item 1A of the company's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q[13] Condensed Consolidated Financial Statements The condensed consolidated financial statements present Caleres' Q2 2025 performance, detailing earnings declines, increased inventory and borrowings, and shifts in cash flow activities Statements of Earnings The condensed consolidated statements of earnings detail Caleres' financial performance for the thirteen and twenty-six weeks ended August 2, 2025, and August 3, 2024, showing declines in net sales, gross profit, operating earnings, and net earnings year-over-year Consolidated Statements of Earnings (Thirteen Weeks Ended) | Metric | August 2, 2025 | August 3, 2024 | | :-------------------------- | :------------- | :------------- | | Net sales (in thousands) | $658,519 | $683,317 | | Cost of goods sold (in thousands) | $372,724 | $372,439 | | Gross profit (in thousands) | $285,795 | $310,878 | | Operating earnings (in thousands) | $9,292 | $42,529 | | Net earnings attributable to Caleres, Inc. (in thousands) | $6,713 | $29,958 | | Diluted earnings per common share ($) | $0.20 | $0.85 | Consolidated Statements of Earnings (Twenty-Six Weeks Ended) | Metric | August 2, 2025 | August 3, 2024 | | :-------------------------- | :------------- | :------------- | | Net sales (in thousands) | $1,272,740 | $1,342,515 | | Cost of goods sold (in thousands) | $708,251 | $722,542 | | Gross profit (in thousands) | $564,489 | $619,973 | | Operating earnings (in thousands) | $20,876 | $85,288 | | Net earnings attributable to Caleres, Inc. (in thousands) | $13,656 | $60,898 | | Diluted earnings per common share ($) | $0.40 | $1.73 | Balance Sheets The condensed consolidated balance sheets provide a snapshot of Caleres' financial position as of August 2, 2025, and August 3, 2024, indicating an increase in total assets and liabilities, notably a significant rise in borrowings under the revolving credit agreement Consolidated Balance Sheet (As of) | Metric | August 2, 2025 | August 3, 2024 | | :---------------------------------- | :------------- | :------------- | | Cash and cash equivalents (in thousands) | $191,494 | $51,753 | | Inventories, net (in thousands) | $693,282 | $661,146 | | Total current assets (in thousands) | $1,099,418 | $939,700 | | Total assets (in thousands) | $2,152,228 | $2,019,985 | | Borrowings under revolving credit agreement (in thousands) | $387,500 | $146,500 | | Total current liabilities (in thousands) | $1,015,087 | $860,423 | | Total liabilities and equity (in thousands) | $2,152,228 | $2,019,985 | | Total equity (in thousands) | $621,944 | $613,484 | Statements of Cash Flows The condensed consolidated statements of cash flows for the twenty-six weeks ended August 2, 2025, show a significant increase in cash provided by financing activities, primarily due to higher borrowings, while cash provided by operating activities decreased compared to the prior year Consolidated Statements of Cash Flows (Twenty-Six Weeks Ended) | Metric | August 2, 2025 | August 3, 2024 | | :---------------------------------- | :------------- | :------------- | | Net cash provided by operating activities (in thousands) | $41,646 | $115,696 | | Net cash used for investing activities (in thousands) | $(34,072) | $(21,808) | | Net cash provided by (used for) financing activities (in thousands) | $154,221 | $(63,426) | | Increase in cash and cash equivalents (in thousands) | $161,858 | $30,395 | | Cash and cash equivalents at end of period (in thousands) | $191,494 | $51,753 | Non-GAAP Reconciliations and Metrics This section provides reconciliations of GAAP to adjusted financial measures and calculations of EBITDA and leverage ratios, offering a clearer view of core operational performance and financial health GAAP to Adjusted Net Earnings and EPS This section reconciles GAAP net earnings and diluted EPS to adjusted figures for the thirteen and twenty-six weeks, and trailing twelve months, by excluding specific charges such as Stuart Weitzman acquisition costs and expense reduction initiatives, providing a clearer view of core operational performance GAAP to Adjusted Net Earnings and EPS (Thirteen Weeks Ended) | Metric | GAAP (Aug 2, 2025) | Adjusted (Aug 2, 2025) | GAAP (Aug 3, 2024) | Adjusted (Aug 3, 2024) | | :---------------------------------- | :------------------- | :--------------------- | :------------------- | :--------------------- | | Net earnings attributable to Caleres, Inc. (in thousands) | $6,713 | $11,730 | $29,958 | $29,958 | | Diluted earnings per common share ($) | $0.20 | $0.35 | $0.85 | $0.85 | - Adjustments for the thirteen weeks ended August 2, 2025, include Stuart Weitzman acquisition and integration costs ($1,678 thousand after tax) and expense reduction initiatives ($3,339 thousand after tax)[18] GAAP to Adjusted Net Earnings and EPS (Twenty-Six Weeks Ended) | Metric | GAAP (Aug 2, 2025) | Adjusted (Aug 2, 2025) | GAAP (Aug 3, 2024) | Adjusted (Aug 3, 2024) | | :---------------------------------- | :------------------- | :--------------------- | :------------------- | :--------------------- | | Net earnings attributable to Caleres, Inc. (in thousands) | $13,656 | $19,138 | $60,898 | $60,898 | | Diluted earnings per common share ($) | $0.40 | $0.56 | $1.73 | $1.73 | Segment Adjusted Operating Earnings This section reconciles GAAP operating earnings to adjusted operating earnings for the Famous Footwear and Brand Portfolio segments for both the thirteen and twenty-six weeks, isolating the impact of specific charges like acquisition and expense reduction initiatives to show segment-level adjusted performance Segment Adjusted Operating Earnings (Thirteen Weeks Ended Aug 2, 2025) | Segment | GAAP Operating Earnings (in thousands) | Charges/Other Items (in thousands) | Adjusted Operating Earnings (in thousands) | | :---------------- | :---------------------- | :-------------------- | :-------------------------- | | Famous Footwear | $18,551 | $123 | $18,674 | | Brand Portfolio | $6,649 | $1,792 | $8,441 | | Consolidated | $9,292 | $6,756 | $16,048 | Segment Adjusted Operating Earnings (Twenty-Six Weeks Ended Aug 2, 2025) | Segment | GAAP Operating Earnings (in thousands) | Charges/Other Items (in thousands) | Adjusted Operating Earnings (in thousands) | | :---------------- | :---------------------- | :-------------------- | :-------------------------- | | Famous Footwear | $23,525 | $123 | $23,648 | | Brand Portfolio | $24,064 | $1,792 | $25,856 | | Consolidated | $20,876 | $7,383 | $28,259 | EBITDA and Debt/EBITDA Leverage Ratio Calculation This section provides the calculation of EBITDA and Adjusted EBITDA for the thirteen weeks and trailing twelve months, along with the Debt/EBITDA leverage ratio, highlighting a significant increase in the leverage ratio from 0.6 to 2.7 year-over-year EBITDA and Adjusted EBITDA (Thirteen Weeks Ended) | Metric | August 2, 2025 | August 3, 2024 | | :-------------------- | :------------- | :------------- | | EBITDA (in thousands) | $25,302 | $57,209 | | EBITDA margin (%) | 3.8% | 8.4% | | Adjusted EBITDA (in thousands) | $32,058 | $57,209 | | Adjusted EBITDA margin (%) | 4.9% | 8.4% | EBITDA and Adjusted EBITDA (Trailing Twelve Months Ended) | Metric | August 2, 2025 | August 3, 2024 | | :-------------------- | :------------- | :------------- | | EBITDA (in thousands) | $145,461 | $240,737 | | EBITDA margin (%) | 5.5% | 8.6% | | Adjusted EBITDA (in thousands) | $162,727 | $245,193 | | Adjusted EBITDA margin (%) | 6.1% | 8.8% | Debt/EBITDA Leverage Ratio | Metric | August 2, 2025 | August 3, 2024 | | :-------------------- | :------------- | :------------- | | Borrowings under revolving credit agreement (in thousands) | $387,500 | $146,500 | | EBITDA (trailing twelve months, in thousands) | $145,461 | $240,737 | | Debt/EBITDA (x) | 2.7 | 0.6 |