Core Insights - Moretus Research provides high-quality equity research focused on U.S. public markets, aiming to deliver clarity, conviction, and alpha for serious investors [1] - The research methodology emphasizes a structured, repeatable framework to identify companies with durable business models and mispriced cash flow potential [1] - Valuation practices are based on sector-relevant multiples tailored to each company's business model, emphasizing comparability and simplicity [1] Research Focus - Moretus Research targets underappreciated companies that are undergoing structural changes or temporary dislocations, where disciplined analysis can yield asymmetric returns [1] - The research combines rigorous fundamental analysis with a judgment-driven process, avoiding noise and overly complex forecasting [1] - The firm aims to elevate the standard for independent investment research by providing actionable insights and a strong filter for relevant information in equity analysis [1]

Core Viewpoint - Pomerantz LLP is investigating potential securities fraud and unlawful business practices involving Caleres, Inc. and its officers or directors, following disappointing financial results and a significant stock price drop [1][3]. Financial Performance - Caleres reported first-quarter 2025 sales of $614.2 million, marking a 6.8% decline year-over-year, which was acknowledged by the CFO as below expectations [3]. - The company suspended its guidance for 2025 due to uncertainty in the market environment [3]. - Following the financial report, Caleres's stock price decreased by $3.00 per share, or 18.32%, closing at $13.38 per share on May 29, 2025 [3]. Legal Investigation - Pomerantz LLP is actively investigating claims on behalf of investors regarding potential securities fraud by Caleres [1]. - The firm has a long history in corporate and securities class litigation, having recovered significant damages for victims of securities fraud and corporate misconduct [4].

Financial Data and Key Metrics Changes - The company reported total revenue of $474 million for the first quarter, an increase of approximately 4% year-over-year, driven by a 5% growth in comparable sales, marking the third consecutive quarter of positive comps [34][35] - Adjusted gross margin for the quarter was 46.7%, a decline of 90 basis points compared to the previous year, primarily due to a shift towards higher price point but lower margin products [35] - Adjusted earnings per share loss improved by $0.05 year-over-year, with an adjusted diluted loss per share of $2.05 for the quarter compared to a loss of $2.10 last year [38][42] Business Line Data and Key Metrics Changes - Journeys led the business with comparable sales up 8%, while Schuh saw a 1% increase, and Johnston and Murphy experienced a 2% decline in comps [34][35] - The company noted that all channels posted positive growth, with store comps improving by 5% and direct comps increasing by 7% [34][36] - Schuh's digital capabilities and e-commerce business remained a key channel, with digital sales growth outpacing store sales in Q1 [19] Market Data and Key Metrics Changes - The consumer environment was described as choppy, with consumers showing a willingness to shop during specific events like Valentine's Day and Easter, but retreating during quieter periods [5][6] - The UK consumer remains selective, impacting the footwear category and overall purchases [19] Company Strategy and Development Direction - The company is focused on diversifying its product offerings and strengthening its leadership in premium athletic footwear, with a significant increase in athletic sales contributing to overall growth [25][26] - The strategic growth plan for Journeys includes enhancing product assortments, improving customer experience through store remodels, and leveraging brand partnerships [24][29] - The company is actively mitigating tariff impacts by diversifying suppliers and sourcing from countries with lower tariffs, aiming to reduce dependence on China [12][13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the current trade environment and emphasized the importance of compelling footwear and freshness to motivate consumer purchases [8][9] - The company reaffirmed its full-year EPS guidance range of $1.30 to $1.70, despite acknowledging increased uncertainty in the external consumer environment [42][43] - Management highlighted the importance of the back-to-school and holiday shopping periods for driving sales and expressed optimism about the second half of the fiscal year [30][42] Other Important Information - The company ended the quarter with 1,256 total stores, having closed 26 stores and opened 4, resulting in a net reduction of 65 stores year-over-year [40] - Free cash flow for the quarter was negative $120 million, impacted by higher capital spending and inventory growth to meet consumer demand [39][40] Q&A Session Summary Question: Can you talk about the impacts of new athletic brand relationships on Q1 comps? - Management noted that existing brands drove the comp, but new brands like HOKA and Saucony had a positive impact, validating Journeys' position in lifestyle running [50][51] Question: How did the vulcanized product category perform? - Management acknowledged pressure on vulcanized products but stated that strength in other brands offset this pressure [53][54] Question: What are the expectations for Journeys in the back half of the year? - Management indicated that while they are lapping more difficult comparisons, they are optimistic about serving a broader market and continuing to strengthen product leadership [67][70] Question: How does the company view recent M&A activity in the footwear landscape? - Management expressed confidence in their positioning, focusing on lifestyle-driven offerings for the teen market, which differs from the performance-focused M&A activity [78][79] Question: What are the expectations regarding gross margins and price increases? - Management discussed the shift towards athletic products impacting margins but emphasized that they do not expect to absorb gross margin reductions due to tariffs [80][81]

Financial Data and Key Metrics Changes - The company reported total revenue of $474 million for Q1 2026, an increase of approximately 4% year-over-year, driven by a 5% growth in comparable sales, marking the third consecutive quarter of positive comps [30][31] - Adjusted gross margin for the quarter was 46.7%, a decline of 90 basis points compared to the previous year, primarily due to a shift towards higher price point but lower margin products [32] - SG&A expenses were 52.5% of sales, improving by 170 basis points year-over-year, driven by reduced occupancy and bonus expenses along with cost-saving initiatives [33] Business Line Data and Key Metrics Changes - Journeys led the business with comparable sales up 8%, while Schuh saw a 1% increase, and Johnston and Murphy experienced a 2% decline in comps [30][31] - Journeys' strong performance was attributed to a strategic focus on product assortment and brand partnerships, resulting in double-digit gains across several brands [14][23] - Schuh's comps increased due to improved brand access and digital capabilities, with over 40% of sales coming from e-commerce [18] Market Data and Key Metrics Changes - The consumer environment remains choppy, with consumers showing willingness to shop during key events but retreating during quieter periods [5][28] - The UK consumer market is under pressure, impacting Schuh's performance, while Johnston and Murphy faced challenges in factory store traffic [19][28] Company Strategy and Development Direction - The company is focused on diversifying its product offerings and strengthening its brand partnerships, particularly in the athletic category, to capture a broader teen market [22][23] - The strategic growth plan for Journeys includes enhancing product assortment, elevating customer experience through new store designs, and increasing brand awareness through marketing initiatives [26][68] - The company is actively mitigating tariff impacts by diversifying suppliers and adjusting inventory strategies [12][11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the current trade environment and emphasized the importance of compelling footwear and freshness to drive consumer purchases [7][10] - The company reiterated its full-year EPS guidance of $1.3 to $1.7, acknowledging ongoing macroeconomic uncertainties and the impact of tariffs [38][39] - Management expects positive comps for Journeys in Q2, despite challenges in other business segments [56][58] Other Important Information - The company ended the quarter with a negative free cash flow of $120 million, attributed to higher capital spending and inventory growth to meet consumer demand [36][37] - The company repurchased approximately 605,000 shares during the quarter, representing about 5% of its outstanding shares [37] Q&A Session Summary Question: Can you talk about the impacts of new athletic brand relationships on Q1 comp? - Management noted that existing brands drove the comp, but new brands like HOKA and Saucony had a positive impact, validating Journeys' position in lifestyle running [46][48] Question: How did vulcanized product trends compare to expectations? - Management acknowledged pressure on vulcanized products but stated that strength in other brands offset this pressure [50][51] Question: What is the guidance for Journeys in Q2? - Management indicated that Journeys is tracking similarly to Q1, with expectations for a positive comp, despite challenges in other segments [56][58] Question: What are the drivers for Journeys in the back half of the year? - Management highlighted the focus on product assortment, store remodels, and marketing initiatives as key drivers for growth [60][68] Question: How does the company view recent M&A activity in the footwear landscape? - Management stated that the company is positioned differently from competitors focused on performance athletic, emphasizing lifestyle and style-driven strategies [77][78] Question: What are the impacts on gross margin and balancing price increases? - Management explained that the shift to athletic products has affected margins, but they are working with brand partners to manage costs and maintain profitability [79][80]

Financial Performance - Sales reached $474 million, a 4% increase compared to Q1 FY2025, with e-commerce accounting for 23% of retail sales[8] - GAAP EPS improved by $0.20 compared to Q1 FY2025, while Non-GAAP EPS improved by $0.05[8] - Gross margin decreased by 60 basis points compared to Q1 FY2025, with Non-GAAP gross margin down by 90 basis points[8] - SG&A expenses were $249 million, representing 52.5% of sales, a leverage of 170 basis points compared to Q1 FY2025[8] - Comparable sales increased by 5%, with stores up mid-single digits and e-commerce up high single digits[9] Segment Performance - Journeys' comparable sales increased by 8%[9] - Wholesale channel experienced a growth of 5%[9] - Journeys accounted for 58% of Q1 FY26 net sales[54] - Schuh accounted for 20% of Q1 FY26 net sales[54] - Johnston & Murphy Group accounted for 16% of Q1 FY26 net sales[54] - Genesco Brands Group accounted for 6% of Q1 FY26 net sales[54] Outlook - The company reiterates its full-year EPS outlook of $1.30 to $1.70, inclusive of current tariffs[9, 59]

Group 1 - Shoe Carnival has faced significant challenges over the past several months, indicating a decline in performance [1] - The company was previously reaffirmed as a 'buy' candidate in July of the previous year, suggesting a potential for recovery [1] Group 2 - Crude Value Insights focuses on cash flow and companies in the oil and natural gas sector, highlighting the importance of financial health for investment decisions [2] - Subscribers to the service benefit from a comprehensive stock model account and in-depth cash flow analyses of exploration and production firms [2]

Financial Data and Key Metrics Changes - The company's first quarter profits outperformed expectations by approximately 10% despite a year-over-year decrease in net income to $9.3 million or $0.34 per diluted share, down from $17.3 million or $0.63 per diluted share in Q1 of fiscal 2024 [29][30][35] - Net sales totaled $277.7 million, a decline of 7.5% compared to $300.4 million last year, with comparable store sales down 8.1% [35][36] - The company ended the quarter with $93 million in cash, up over 30% compared to the end of Q1 last year, maintaining a debt-free position [33][35] Business Line Data and Key Metrics Changes - Shoe Station achieved sales growth of 4.9% and was comp positive in the quarter, contrasting with Shoe Carnival's total sales decline of 10% [30][36] - Rogan's net sales remained consistent at over $19 million for both this year and last year, aligning with synergy and integration plans [36] - The rebanner initiative is expected to result in a $0.65 drag on EPS this year, with future benefits anticipated as the performance of rebannered stores improves [43][72] Market Data and Key Metrics Changes - The family footwear industry experienced a decline, with Shoe Carnival's performance reflecting broader industry challenges, particularly among lower-income consumers [9][36] - Shoe Station's performance in various markets, including rural and diverse demographics, indicates a strong growth opportunity, with sales growth exceeding 20% in some locations [14][17][19] Company Strategy and Development Direction - The company is focused on expanding Shoe Station to represent over 80% of its store fleet by March 2027, up from a previous target of 51% [18][50] - The rebanner initiative is seen as the best use of capital, with a two to three year payback period expected [31][44] - The company plans to maintain elevated inventory levels to navigate marketplace uncertainties and ensure product availability [21][34] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the back-to-school season, citing a compelling assortment and stable product costs [4][9] - The company does not anticipate a return to profitable sales growth in the near term but expects a moderating sales decline trend in the latter half of the year [9][45] - Management emphasized the importance of consumer sentiment as a key factor influencing future performance [84] Other Important Information - The company is committed to pursuing mergers and acquisitions to achieve its long-term vision of being the leading footwear retailer for families [25][26] - The corporate headquarters has been designated in Fort Mill, South Carolina, to enhance collaboration with vendor partners and improve operational efficiencies [27][28] Q&A Session Summary Question: What is driving the decision to expand Shoe Station stores more quickly? - Management noted that there is significant white space nationally for Shoe Station, where the competitive set is not fully meeting the needs of higher-end customers [58][60] Question: How is the performance of dress shoes in Shoe Station? - Management confirmed that the dress assortment offered is a competitive advantage, with strong performance in both men's and women's categories [61][62] Question: What is the expected impact of rebannerings on next year's earnings? - Management indicated that while there will be a drag on EPS due to accelerated costs, the performance of rebannered stores is expected to improve, potentially offsetting some of the negative impact [72][73] Question: How are trends in March and April compared to February? - Management stated that February was challenging, but March and April showed improvement, particularly for Shoe Station, although overall consumer sentiment remains a concern [88][89]

Group 1 - Sales declined across both Brand Portfolio and Famous Footwear, indicating a potential downturn in consumer demand [1] - Inventories increased significantly, particularly within the brand segment, which may suggest overstocking or reduced sales velocity [1] - Bad debt expenses and customer-related issues were highlighted, indicating potential challenges in credit management and customer payment behaviors [1]

Core Viewpoint - Dick's Sporting Goods will acquire Foot Locker for $2.4 billion, significantly increasing its store count and enhancing its position in the sporting goods market [1][2]. Financial Overview - Dick's will pay $24 per share for Foot Locker, representing a 90% premium over its pre-announcement share price [2]. - In 2024, Dick's reported revenues of $13 billion, a 3.5% year-over-year increase, while Foot Locker's revenue was $8 billion, reflecting a 1.9% decline at constant currency rates [3]. Market Position and Strategy - Dick's operates 856 stores in the U.S. market, targeting a $140 billion addressable market, while Foot Locker has a global footprint of 2,400 stores and targets a $300 billion market, with 30% of its revenues coming from international sales [4]. - The acquisition is expected to yield $100 million to $125 million in cost synergies and is set to close in the second half of 2025, pending regulatory approvals [5]. Background and Rationale - Dick's has been considering the acquisition for some time, aiming to leverage its strong track record in sporting goods and performance athletics [6]. - Foot Locker has faced challenges, particularly after Nike shifted its distribution model away from wholesale partnerships, impacting Foot Locker's sales [6]. Market Share Impact - The acquisition will increase Dick's market share by 4.3 percentage points, building on its existing 11.1% share [7]. - Combined, Nike could represent 30% to 35% of the sales for both Dick's and Foot Locker, reinforcing the strategic importance of this acquisition for Nike [6][9]. Analyst Perspectives - Analysts express mixed views on the acquisition, with some highlighting the potential for value creation while others caution against the historical challenges of retail mergers [10].

Core Viewpoint - Dick's Sporting Goods is nearing a deal to acquire Foot Locker for approximately $2.3 billion, representing a significant premium over Foot Locker's recent stock price [1][3]. Group 1: Deal Details - The proposed acquisition price for Foot Locker is $24 per share, which indicates an 86.5% premium compared to the stock's last closing price [1]. - The deal could potentially be finalized as soon as Thursday [3][6]. Group 2: Market Reaction - Following the news of the acquisition, shares of Foot Locker experienced a surge of 62% in extended trading [3][4]. - In contrast, shares of Dick's Sporting Goods saw a decline of approximately 5% [3][4]. Group 3: Company Responses - Neither Dick's Sporting Goods nor Foot Locker provided immediate comments regarding the acquisition discussions [5].