Caleres(CAL) - 2026 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION This section presents the Company's unaudited financial statements and management's discussion and analysis ITEM 1 Financial Statements (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 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] - 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] - Borrowings under the revolving credit agreement increased to $387.5 million as of August 2, 2025, from $146.5 million on August 3, 2024, reflecting funding for the Stuart Weitzman acquisition[4] Condensed Consolidated Statements of Earnings This section presents the Company's financial performance over specific periods, detailing net sales, gross profit, operating earnings, and earnings per share Condensed Consolidated Statements of Earnings | ($ 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] - 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] - Diluted EPS decreased from $0.85 to $0.20 for the thirteen weeks and from $1.73 to $0.40 for the twenty-six weeks ended August 2, 2025, reflecting the overall decline in profitability[5] Condensed Consolidated Statements of Comprehensive Income This section outlines comprehensive income, including net earnings and other comprehensive earnings from non-owner sources Condensed Consolidated Statements of Comprehensive Income | ($ 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] - 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 $6,915k), primarily driven by foreign currency translation adjustments and pension/postretirement benefit adjustments[7] Condensed Consolidated Statements of Cash Flows This section details cash flows from operating, investing, and financing activities over specific periods Condensed Consolidated Statements of Cash Flows | ($ 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][162] - 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][164] - Cash and cash equivalents at the end of the period increased substantially to $191.5 million, up from $51.8 million in the prior year, reflecting the increased financing activities[9] Condensed Consolidated Statements of Shareholders' Equity This section presents changes in shareholders' equity, including retained earnings and other comprehensive loss Condensed Consolidated Statements of Shareholders' Equity | ($ 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] - 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] - Accumulated other comprehensive loss improved slightly to $(27.2) million as of August 2, 2025, from $(29.5) million on August 3, 2024, and $(34.0) million on February 1, 2025[10] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and additional information supporting the financial statements Note 1 Basis of Presentation and General This note describes financial statement presentation, accounting policies, and business context, including acquisitions - The Company's business is seasonal, with historically higher earnings in the third fiscal quarter, though recent years show a more equal distribution[13] - The Company consolidates CLT Brand Solutions, a 50/50 joint venture with Brand Investment Holding Limited for selling footwear in China, on a one-month lag[16] CLT Brand Solutions Net Sales and Operating Earnings (Loss) | ($ 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 $108.7 million), which will be included in the Brand Portfolio segment starting Q3 2025[21] Note 2 Impact of New Accounting Pronouncements This note discusses the potential impact of recently issued accounting standards on financial statements - ASU 2023-09 (Income Taxes) is effective for the Company in fiscal year 2025 and is not expected to have a material impact on financial statement disclosures[22] - ASU 2024-03 (Disaggregation of Income Statement Expenses) is effective for annual disclosures in fiscal year 2027 and interim periods beginning Q1 2028; the Company is currently evaluating its impact[23] Note 3 Revenues This note disaggregates net sales by channel and segment, with information on loyalty programs and credit losses Disaggregation of Revenues (Thirteen Weeks Ended) | ($ 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 $8.9 million due to expirations and redemptions during the twenty-six weeks ended August 2, 2025[35] Allowance for Expected Credit Losses Activity (Twenty-Six Weeks Ended) | ($ 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 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] - 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] Note 5 Restructuring and Other Special Charges 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] - 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 $0.06 per diluted share) for the twenty-six weeks ended August 2, 2025[41] Note 6 Business Segment Information This note presents financial information by operating segments, detailing net sales and operating earnings Segment Net Sales and Operating Earnings (Thirteen Weeks Ended) | ($ 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][44] - Brand Portfolio's operating earnings decreased by $16.9 million (71%) for the thirteen weeks and $41.0 million (63%) for the twenty-six weeks ended August 2, 2025, compared to the prior year[43][44] Note 7 Inventories This note provides a breakdown of inventory composition, including raw materials, work-in-process, and finished goods Inventory Composition ($ 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 $565.2 million on February 1, 2025, primarily driven by an increase in finished goods[47] Note 8 Goodwill and Intangible Assets This note details goodwill and intangible assets, including amortization expense and impairment assessments Goodwill and Intangible Assets, Net ($ 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] - 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] - 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][52] Note 9 Leases 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] - New or amended leases resulted in the recognition of $58.6 million in right-of-use assets and lease obligations during the twenty-six weeks ended August 2, 2025[57] Lease Expense ($ 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 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] - As of August 2, 2025, the Company had $387.5 million in borrowings outstanding and $230.8 million in additional borrowing availability under the credit agreement[65] - Borrowings under the revolving credit agreement were used to fund the Stuart Weitzman acquisition, which closed on August 4, 2025[65] - The Company was in compliance with all covenants and restrictions under the Credit Agreement as of August 2, 2025[64] Note 11 Shareholders' Equity This note details changes in shareholders' equity components, particularly accumulated other comprehensive loss Changes in Accumulated Other Comprehensive Loss (OCL) ($ 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] Note 12 Share-Based Compensation 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] - 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] - 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][72] - 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 $13.18[75] Note 13 Retirement and Other Benefit Plans This note provides details on pension and other postretirement benefit plans, including net periodic benefit expense Net Periodic Benefit Expense (Income) ($ 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] - Other postretirement benefits showed a net income of $(8)k for the thirteen weeks and $(15)k for the twenty-six weeks ended August 2, 2025[76] Note 14 Fair Value Measurements This note explains the fair value measurement hierarchy and details assets and liabilities measured at fair value - The Company uses a fair value hierarchy (Level 1, 2, 3) to categorize valuation techniques based on input observability[78][83] - Non-qualified deferred compensation plan assets and liabilities, non-qualified restoration plan assets and liabilities, and deferred compensation plan liabilities for non-employee directors are measured at fair value using Level 1 inputs (quoted market prices)[80][81][85][86] Fair Value Measurements (August 2, 2025) | ($ 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 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] - 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] - No deferred taxes have been provided on accumulated unremitted earnings of foreign subsidiaries considered indefinitely reinvested[94] Note 16 Commitments and Contingencies 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][98] - 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] - 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] - 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] 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 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 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] - 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] - Restructuring actions in Q2 2025 are expected to decrease selling and administrative expenses by approximately $15 million on an annualized basis[104] - 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] - The acquisition of Stuart Weitzman was completed on August 4, 2025, for $120.2 million, funded by the revolving credit agreement, strengthening the Company's position in luxury footwear[106] Financial Highlights This section presents a concise summary of the Company's key consolidated financial performance metrics Consolidated Financial Highlights (Thirteen Weeks Ended) | Metric | August 2, 2025 | August 3, 2024 | Change ($) | 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 $9.3 million for the second quarter of 2025[107] - Gross margin declined by 210 basis points to 43.4% in Q2 2025, primarily due to lower merchandise margins from tariffs and higher inventory markdowns[107] Metrics Used in the Evaluation of Our Business This section defines key operational and financial metrics used by management to assess business performance - Comparable sales measure revenue for stores open over a year, including e-commerce sales that extend a retail chain, and are used to assess existing store performance[108] - Sales per square foot evaluate sales efficiency based on retail store square footage in North America, excluding e-commerce and the China joint venture[109] - Direct-to-consumer sales, including retail stores, company websites, and drop-ship sales, are monitored for their higher gross margin and ability to reinforce brand image and consumer connection[110] CONSOLIDATED RESULTS This section analyzes overall financial performance, including net sales, gross profit, operating earnings, and net earnings Consolidated Results Summary ($ 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][114] - 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][116] - 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][119] - 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][122] - 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] - The effective tax rate was a benefit of 22.0% for Q2 2025 and 8.8% for the first six months, driven by a $2.5 million discrete tax benefit related to foreign earnings repatriation[125] FAMOUS FOOTWEAR This section analyzes Famous Footwear segment performance, detailing net sales, operating earnings, and comparable sales Famous Footwear Segment Performance ($ 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][132] - 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] - 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][134] - Operating earnings decreased by $15.8 million (46%) for Q2 2025 and $27.7 million (54%) for the first six months, reflecting lower sales, reduced gross profit, and increased selling and administrative expenses[138][139] - The segment ended Q2 2025 with 830 stores, having opened 2 and closed 7 during the quarter, and converted 21 stores to the FLAIR concept during the first half of 2025, which continue to outperform traditional stores[131][132][135] BRAND PORTFOLIO This section analyzes Brand Portfolio segment performance, detailing net sales, operating earnings, and direct-to-consumer sales Brand Portfolio Segment Performance ($ 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][142] - Direct-to-consumer sales increased to 36% of net sales in Q2 2025, up from 33% in the prior year[141] - 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][145][146] - Operating earnings decreased to $6.7 million for Q2 2025 (from $23.6 million) and $24.0 million for the first six months (from $65.0 million), reflecting lower sales, reduced gross profit, and increased selling and administrative expenses[150][151] - The segment expanded its international presence, with 118 stores in East Asia and 145 international franchise locations as of August 2, 2025[141] ELIMINATIONS AND OTHER This section explains the financial impact of intersegment eliminations and unallocated corporate expenses Eliminations and Other Operating Loss ($ 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] - 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][155] - 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] LIQUIDITY AND CAPITAL RESOURCES 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] - The Company had $230.8 million in additional borrowing availability under its $700.0 million revolving credit facility as of August 2, 2025, and was in compliance with all covenants[157][159] Cash Flow Summary ($ 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] - The debt-to-capital ratio increased to 38.4% as of August 2, 2025, from 19.3% at August 3, 2024[167] - The Company declared and paid dividends of $0.07 per share in Q2 2025 and expects to continue dividend payments[168] 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 have occurred related to critical accounting policies and estimates since the end of the most recent fiscal year (February 1, 2025)[170] RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS 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] FORWARD-LOOKING STATEMENTS 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] - The Company does not undertake any obligation to update these forward-looking statements[172] ITEM 3 Quantitative and Qualitative Disclosures About Market Risk 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] ITEM 4 Controls and Procedures 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] - 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] PART II OTHER INFORMATION This section provides additional information not in financial statements, covering legal, risks, equity, and exhibits ITEM 1 Legal Proceedings 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] ITEM 1A Risk Factors 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] - 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] - 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] ITEM 2 Unregistered Sales of Equity Securities and Use of Proceeds 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] - As of August 2, 2025, 3,366,055 shares remained authorized for repurchase under the 2022 Program[184] ITEM 3 Defaults Upon Senior Securities This section indicates that there were no defaults upon senior securities - There were no defaults upon senior securities[185] ITEM 4 Mine Safety Disclosures This section states that mine safety disclosures are not applicable to the Company - Mine safety disclosures are not applicable to the Company[186] ITEM 5 Other Information 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] - 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] ITEM 6 Exhibits 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] 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]