Caleres(CAL) - 2026 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For the third quarter, sales were $790.1 million, up 6.6%, with organic sales increasing 0.4% excluding Stuart Weitzman [20] - Consolidated gross margin was 42.7%, down 140 basis points year-over-year, driven by lower margins in both segments [21] - Operating earnings were $26.3 million, with an operating margin of 3.3% [22] Business Line Data and Key Metrics Changes - Brand portfolio sales increased 4.6% on an organic basis and 18.8% including Stuart Weitzman [20] - Famous Footwear sales were down 2.2%, with comparable sales declining 1.2% [21] - Sam Edelman and Allen Edmonds delivered strong quarters with double-digit sales growth [9][10] Market Data and Key Metrics Changes - The international business showed robust growth, particularly in e-commerce and marketplace performance [11] - The brand portfolio gained significant market share in women's fashion footwear during the period [8] - Premium brands showed strength, while value-priced brands remained under pressure [21] Company Strategy and Development Direction - The acquisition of Stuart Weitzman is seen as transformational, with plans to achieve break-even in 2026 and profitability thereafter [5][6] - The company is focusing on integrating Stuart Weitzman into its ecosystem and capturing synergies [7] - There is a strategic emphasis on premium contemporary, direct-to-consumer, and international business [6] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving better results in 2026, driven by gross margin improvements and SG&A reductions [29][46] - The tariff environment is stabilizing, and mitigation efforts are beginning to take hold [15] - Management is optimistic about the performance of lead brands and the potential for organic growth [56] Other Important Information - Inventory at quarter end was $678 million, up $92 million year-over-year, with a portion attributed to Stuart Weitzman [23] - The company is working on reducing aged inventory and expects to clear most of it by the end of the year [44] - The company plans to enhance its consumer experience through the Flair format, which has shown positive results [16] Q&A Session Summary Question: What is the opportunity for Stuart Weitzman going forward? - Management plans to achieve better results in 2026 through gross margin improvement and SG&A reductions, with a focus on wholesale and direct-to-consumer opportunities [29][31] Question: What is happening with the Famous Footwear business? - Management noted success with premium brands and plans to build on this strength, while also addressing underperformance in women's fashion [32][34] Question: What are the expectations for gross margins and SG&A going forward? - Management expects improvement in gross margins in Q4 and anticipates a more favorable channel mix to enhance profitability [37][38] Question: How much inventory needs to be worked through for Stuart Weitzman? - Approximately a quarter to a third of the inventory is considered aged, and management is taking steps to clear it without damaging the brand [41][44] Question: What is the long-term earnings power of the company post-transition? - Management is focused on brand portfolio growth, particularly lead brands, and expects to see organic growth in 2026 [46][56]