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Company News

Manufacturing

Caleres Inc.

09/09/2025 | Press release | Distributed by Public on 09/09/2025 12:28

Quarterly Report for Quarter Ending August 2, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

Business Overview

We are a global footwear company that operates retail stores and e-commerce websites, and designs, develops, sources, manufactures and distributes footwear for people of all ages. Our mission is to inspire people to feel great...feet first. We offer retailers and consumers a diversified portfolio of leading footwear brands. Outfitted in our brands, customers can step confidently into every aspect of their lives. As both a retailer and a wholesaler, we have a perspective on the marketplace that enables us to serve consumers from different vantage points. We believe our diversified business model provides us with synergies by spanning consumer segments, categories and distribution channels. A combination of thoughtful planning and rigorous execution is key to our success in optimizing our business and portfolio of brands.

Known Trends Impacting Our Business

Based on the current macroeconomic environment and our recent operating results, we believe the following trends may continue to impact our business and operating results:

Macroeconomic Environment

Macroeconomic factors continued to impact consumer discretionary spending and our financial results during the second quarter of 2025. We continued to experience lighter consumer traffic in our Famous Footwear retail stores during the second quarter, resulting in lower net sales. Recent tariff volatility and the lack of clarity surrounding future trade policy developments have heightened uncertainty in the global economy. Following the executive orders on tariffs, we acted quickly to adjust our country sourcing mix and took other actions to mitigate the tariff impact, such as negotiating price concessions with our factories and selectively raising prices. We estimate that tariffs negatively impacted our net sales in the second quarter of 2025 by approximately $10 million due to factory order cancellations and delayed receipts that will shift the timing of certain wholesale sales to the third quarter. While we believe that the structural changes we have implemented in the last few years, as well as our diversified model and operational discipline, enable the Company to drive value in a variety of market conditions, changes in macro-level consumer spending trends and the impact of trade policy decisions may continue to adversely impact our financial results in the future. In the near-term, we are focused on the areas within our control, including optimizing our sourcing strategy. In addition, the restructuring actions we took in the second quarter of 2025 are expected to decrease selling and administrative expenses by approximately $15 million on an annualized basis. We believe our focus on cost control and our commitment to execute our clearly defined strategic initiatives have positioned us for sustainable, long-term growth.

Liquidity

Our liquidity position remains strong, with $191.5 million in cash and cash equivalents and excess availability on our revolving credit agreement of $230.8 million as of August 2, 2025. During the first half of 2025, borrowings on our revolving credit agreement increased by $168.0 million to $387.5 million. Subsequent to quarter-end, on August 4, 2025, we completed the acquisition of Stuart Weitzman. The increase in cash and cash equivalents and borrowings at August 2, 2025 reflects borrowings to fund the acquisition. Refer to Note 5 to the condensed consolidated financial statements for further discussion of the acquisition. During the second quarter of 2025, we refinanced our revolving credit facility, increasing the aggregate amount available from $500.0 million to $700.0 million, and extending the maturity date from October 5, 2026 to June 27, 2030.

Recent Development

Acquisition of Stuart Weitzman

Subsequent to quarter-end, on August 4, 2025, we completed the previously announced acquisition of Stuart Weitzman from Tapestry, Inc. This strategic acquisition further strengthens our position in the global footwear market and adds an iconic name in luxury footwear to our brand portfolio. Stuart Weitzman maintains a strong presence in North America, Europe and Asia across both wholesale and direct-to-consumer channels. The business will be included in our Brand Portfolio segment. The purchase price, which is subject to final adjustments for net working capital, was $120.2 million, including $11.5 million in cash received at the closing. The acquisition was funded with our revolving credit agreement.

Financial Highlights

Highlights of our consolidated and segment results for the second quarter of 2025 and 2024 are as follows:


	Thirteen Weeks Ended
($ millions, except per share amounts)	August 2, 2025		August 3, 2024		Change ⁽¹⁾
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)	%

(1)

n/m - not meaningful

Metrics Used in the Evaluation of Our Business

The following are a few key metrics by which we evaluate our business, identify trends and make strategic decisions:

Comparable sales

The comparable sales metric is a metric commonly used in the retail industry to evaluate the revenue generated for stores that have been open for more than a year, though other retailers may calculate the metric differently. Management uses the comparable sales metric as a measure of an individual store's success to determine whether it is performing in line with expectations. Our comparable sales metric is a daily-weighted calculation for the period, which includes sales for stores that have been open for at least 13 months. In addition, in order to be included in the comparable sales metric, a store must be open in the current period as well as the corresponding day(s) of the comparable retail calendar in the prior year. Accordingly, closed stores are excluded from the comparable sales metric for each day of the closure. Relocated stores are treated as new stores and therefore excluded from the calculation. E-commerce sales for those websites that function as an extension of a retail chain are included in the comparable sales calculation. In fiscal years with 53 weeks, the 53^rd week of comparable sales is included in the calculation. In the following year, the prior fiscal year period is shifted by one week to compare similar calendar weeks. We believe the comparable sales metric is useful to shareholders and investors in assessing our retail sales performance of existing locations with comparable prior year sales, separate from the impact of store openings or store closures.

Sales per square foot

The sales per square foot metric is commonly used in the retail industry to calculate the efficiency of sales based upon the square footage in a store. Management uses the sales per square foot metric as a measure of an individual store's success to determine whether it is performing in line with expectations. The sales per square foot metric is calculated by dividing total retail store sales, excluding e-commerce sales and the retail operations of our joint venture in China, by the total square footage of the retail store base in North America at the end of each month of the respective period.

Direct-to-consumer sales

Direct-to-consumer sales includes sales from our retail stores, our company-owned websites and sales through our customers' websites that we fulfill on a drop-ship basis. While we take an omni-channel approach to reach consumers, we believe that our direct-to-consumer channels reinforce the image of our brands and strengthens our connection with the end consumer. In addition, direct-to-consumer sales generally result in a higher gross margin for the Company as compared to wholesale sales. As a result, management monitors trends in direct-to-consumer sales as a percentage of our Brand Portfolio segment and total consolidated net sales.

RESULTS OF OPERATIONS

Following are the consolidated results and the results by segment:

CONSOLIDATED RESULTS


	Thirteen Weeks Ended								Twenty-Six Weeks Ended
	August 2, 2025				August 3, 2024				August 2, 2025				August 3, 2024
			% of				% of				% of				% of
($ millions)			Net Sales				Net Sales				Net Sales				Net Sales
Net sales	$	658.5	100.0	%	$	683.3	100.0	%	$	1,272.7	100.0	%	$	1,342.5	100.0	%
Cost of goods sold		372.7	56.6	%		372.4	54.5	%		708.3	55.6	%		722.5	53.8	%
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	%
Interest expense, net		(4.5)	(0.7)	%		(3.3)	(0.5)	%		(8.3)	(0.7)	%		(7.1)	(0.5)	%
Other income, net		1.0	0.2	%		1.2	0.2	%		1.7	0.1	%		2.2	0.1	%
Earnings before income taxes		5.8	0.9	%		40.4	5.9	%		14.3	1.1	%		80.4	6.0	%
Income tax benefit (provision)		1.3	0.2	%		(10.1)	(1.5)	%		(1.3)	(0.1)	%		(19.3)	(1.5)	%
Net earnings		7.1	1.1	%		30.3	4.4	%		13.0	1.0	%		61.1	4.5	%
Net earnings (loss) attributable to noncontrolling interests		0.4	0.1	%		0.3	0.0	%		(0.7)	(0.1)	%		0.2	0.0	%
Net earnings attributable to Caleres, Inc.	$	6.7	1.0	%	$	30.0	4.4	%	$	13.7	1.1	%	$	60.9	4.5	%

Net Sales

Net sales decreased $24.8 million, or 3.6%, to $658.5 million for the second quarter of 2025, compared to $683.3 million for the second quarter of 2024, with declines in both our Famous Footwear and Brand Portfolio segments. Net sales in our Famous Footwear segment decreased $20.7 million, or 4.9%, and comparable sales declined 3.4%, reflecting less traffic in our retail stores. Net sales in the Brand Portfolio segment decreased $9.9 million, or 3.5% for the second quarter of 2025. Our direct-to-consumer sales represented approximately 75% of consolidated net sales for the second quarter of 2025, consistent with the second quarter of 2024. We remain focused on international growth, direct-to-consumer penetration, elevating the consumer experience at Famous Footwear and maximizing the vertical opportunity between the Famous Footwear and Brand Portfolio segments, with Dr. Scholl's, Naturalizer, LifeStride and Blowfish Malibu representing four of Famous Footwear's top 20 best-selling footwear brands during the quarter.

Net sales decreased $69.8 million, or 5.2%, to $1,272.7 million for the six months ended August 2, 2025, compared to $1,342.5 million for the six months ended August 3, 2024. Net sales for our Famous Footwear segment decreased $42.5 million, or 5.5% during the first six months of 2025, compared to the first six months of 2024 and comparable sales declined 3.9%. Net sales for our Brand Portfolio decreased $31.7 million, or 5.3% during the first six months of 2025, compared to the first six months of 2024. On a consolidated basis, our direct-to-consumer sales grew to approximately 73% of total net sales for the six months ended August 2, 2025, compared to 72% for the six months ended August 3, 2024.

Gross Profit

Gross profit decreased $25.1 million, or 8.1%, to $285.8 million for the second quarter of 2025, compared to $310.9 million for the second quarter of 2024. As a percentage of net sales, gross profit decreased to 43.4% for the second quarter of 2025, compared to 45.5% for the second quarter of 2024, driven by lower merchandise margins associated with the impact of tariffs and higher inventory markdowns. Our Famous Footwear division was more promotional during the second quarter of 2025 compared to last year. In addition, we experienced higher freight costs, due in part to the higher mix of e-commerce sales.

Gross profit decreased $55.5 million, or 8.9%, to $564.5 million for the six months ended August 2, 2025, compared to $620.0 million for the six months ended August 3, 2024. As a percentage of net sales, gross profit decreased to 44.4% for the six months ended August 2, 2025, compared to 46.2% for the six months ended August 3, 2024, driven by higher inventory markdowns, lower merchandise margins and incremental costs associated with canceling and moving inventory out of China after the tariff escalation in April.

We classify certain warehousing, distribution, sourcing and other inventory procurement costs in selling and administrative expenses. Accordingly, our gross profit and selling and administrative expense rates, as a percentage of net sales, may not be comparable to other companies.

Selling and Administrative Expenses

Selling and administrative expenses increased $1.3 million, or 0.5%, to $269.7 million for the second quarter of 2025, compared to $268.4 million for the second quarter of 2024. The increase was driven by higher retail facilities costs, reflecting higher depreciation associated with the investment in Famous Footwear store renovations and upgrades to the FLAIR (Famous Localized and Immersive Retail) concept and higher store rent expense as leases are renewed, higher marketing expenses, due in part to the launch of the Jordan brand at Famous Footwear in July, and higher information technology expenses. These increases were partially offset by lower expenses associated with our cash and share-based incentive compensation programs. As a percentage of net sales, selling and administrative expenses increased to 40.9% for the second quarter of 2025, from 39.3% for the second quarter of 2024, reflecting deleveraging of expenses on lower net sales.

Selling and administrative expenses increased $1.5 million, or 0.3%, to $536.2 million for the six months ended August 2, 2025, compared to $534.7 million for the six months ended August 3, 2024. The increase was primarily due to higher facility costs, reflecting higher depreciation associated with the investment in Famous Footwear store renovations and upgrades to the FLAIR concept and higher store rent expense as leases are renewed, and higher information technology expenses. These increases were partially offset by lower advertising and marketing expenses and lower expenses for our cash and share-based incentive compensation plans. As a percentage of net sales, selling and administrative expenses increased to 42.1% for the six months ended August 2, 2025, from 39.8% for the six months ended August 3, 2024.

Restructuring and Other Special Charges, Net

Restructuring and other special charges of $6.8 million for the second quarter and $7.4 million for the six months ended August 2, 2025 were for legal and other related costs associated with the acquisition of Stuart Weitzman, which closed on August 4, 2025, and severance and other related costs associated with our expense reduction initiatives. Refer to Note 5 to the condensed consolidated financial statements for additional information related to these charges. There were no restructuring and other special charges during the six months ended August 3, 2024.

Operating Earnings

Operating earnings decreased $33.2 million to $9.3 million for the second quarter of 2025, compared to $42.5 million for the second quarter of 2024, reflecting the factors described above. As a percentage of net sales, operating earnings were 1.4% for the second quarter of 2025, compared to 6.2% for the second quarter of 2024.

Operating earnings decreased $64.4 million to $20.9 million for the six months ended August 2, 2025, compared to $85.3 million for the six months ended August 3, 2024, primarily reflecting lower net sales and gross profit. As a percentage of net sales, operating earnings were 1.7% for the six months ended August 2, 2025, compared to 6.4% for the six months ended August 3, 2024.

Interest Expense, Net

Interest expense, net increased $1.2 million, or 36.3%, to $4.5 million for the second quarter of 2025, compared to $3.3 million for the second quarter of 2024, reflecting higher average borrowings on our revolving credit facility. Interest expense, net increased $1.2 million, or 16.8%, to $8.3 million for the six months ended August 2, 2025, compared to $7.1 million for the six months ended August 3, 2024. As discussed above, we used the revolving credit facility to fund the acquisition of Stuart Weitzman that closed on August 4, 2025. We anticipate that the higher borrowings will result in higher interest expense for the second half of 2025.

Other Income, Net

Other income, net decreased $0.2 million to $1.0 million for the second quarter of 2025, compared to $1.2 million for the second quarter of 2024, and decreased $0.5 million, or 23.8%, to $1.7 million for the six months ended August 2, 2025, compared to $2.2 million for the six months ended August 3, 2024, primarily reflecting lower income generated from our pension plan assets in the second quarter and six months ended August 2, 2025. Refer to Note 13 of the condensed consolidated financial statements for further information.

Income Tax Provision

Our effective tax rate can vary considerably from period to period, depending on a number of factors. Our consolidated effective tax rate was a benefit of 22.0% for the second quarter of 2025, compared to a provision of 25.0% for the second quarter of 2024. Our consolidated effective tax rate was 8.8% for the six months ended August 2, 2025, compared to 24.0% for the six months ended August 3, 2024. The lower effective tax rate for the second quarter and six months ended August 2, 2025 was driven by a discrete tax benefit of $2.5 million associated with the resolution of the remaining transition tax obligation for the mandatory deemed repatriation of cumulative foreign earnings. In the six months ended August 3, 2024, we recorded discrete tax benefits of approximately $1.0 million related to share-based compensation.

In 2021, the Organization for Economic Cooperation and Development (OECD) released Pillar Two Global Anti-Base Erosion model rules, designed to ensure large corporations are taxed at a minimum rate of 15% in all countries of operation. The OECD continues to release guidance and countries are implementing legislation to adopt the rules, which became effective on January 1, 2024. The United States has not yet enacted legislation implementing Pillar Two. We are continuing to evaluate the Pillar Two rules and their potential impact on future periods, but we do not expect the rules to have a material impact on our tax provision or effective tax rate.

On July 4, 2025, the One Big Beautiful Bill Act (the "OBBB Act") was enacted into law. The OBBB Act includes a broad range of tax reform provisions, including allowing accelerated tax deductions for qualified property and immediate deduction of domestic research and development costs. The OBBB Act also modifies some of the international tax rules. We are in the process of evaluating the impact of the OBBB Act on our consolidated financial statements, but the provisions are not expected to have a material impact on the Company's income tax provision.

Net Earnings Attributable to Caleres, Inc.

Net earnings attributable to Caleres, Inc. was $6.7 million and $13.7 million for the second quarter and six months ended August 2, 2025, respectively, compared to $30.0 million and $ 60.9 million for the second quarter and six months ended August 3, 2024, as a result of the factors described above.

FAMOUS FOOTWEAR


	Thirteen Weeks Ended										Twenty-Six Weeks Ended
	August 2, 2025					August 3, 2024					August 2, 2025					August 3, 2024
				% of					% of					% of					% of
($ millions, except sales per square foot)				Net Sales					Net Sales					Net Sales					Net Sales
Net sales	$	399.6		100.0	%	$	420.3		100.0	%	$	727.3		100.0	%	$	769.8		100.0	%
Cost of goods sold		224.9		56.3	%		231.0		55.0	%		404.2		55.6	%		419.5		54.5	%
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	%
Restructuring and other special charges, net		0.1		0.0	%		-		-	%		0.1		0.0	%		-		-	%
Operating earnings	$	18.6		4.6	%	$	34.4		8.2	%	$	23.5		3.2	%	$	51.2		6.7	%

Key Metrics
Comparable sales % change		(3.4)	%				(2.9)	%				(3.9)	%				(2.6)	%
Comparable sales $ change	$	(13.8)				$	(12.6)				$	(29.4)				$	(20.5)
Sales change from new and closed stores, net	$	(6.9)				$	18.9				$	(12.8)				$	27.2
Impact of changes in Canadian exchange rate on sales	$	(0.0)				$	(0.2)				$	(0.3)				$	(0.3)

Sales per square foot, excluding e-commerce (thirteen and twenty-six weeks ended)	$	63				$	66				$	114				$	120
Sales per square foot, excluding e-commerce (trailing twelve months)	$	232				$	247				$	232				$	247
Square footage (thousand sq. ft.)		5,463					5,616					5,463					5,616

Stores opened		2					3					2					6
Stores closed		7					3					18					11
Ending stores		830					855					830					855

Net Sales

Net sales of $399.6 million in the second quarter of 2025 decreased $20.7 million, or 4.9%, compared to the second quarter of 2024. Comparable sales decreased 3.4% for the second quarter of 2025, driven by a decline in consumer traffic in our retail stores, but improved sequentially throughout the quarter. We experienced growth in e-commerce sales and an increase in e-commerce penetration to 14% of net sales in the second quarter of 2025, from 12% in the second quarter of 2024. In mid-July, we launched the Jordan brand, both online and in our retail stores. Jordan quickly rose to one of Famous Footwear's top 10 brands, which contributed to a strong start to our back-to-school selling season.

We opened two stores and closed seven stores during the second quarter of 2025, resulting in 830 stores and total square footage of 5.5 million at the end of the quarter, compared to 855 stores and total square footage of 5.6 million at the end of the second quarter of 2024. Sales to members of our customer loyalty program, Famously You Rewards, continue to account for a majority of the segment's sales, with approximately 77% of our net sales made to program members in the second quarter of 2025, compared to 75% in the second quarter of 2024.

Net sales of $727.3 million in the six months ended August 2, 2025 decreased $42.5 million, or 5.5%, compared to the six months ended August 3, 2024. Comparable sales declined 3.9% in the six months ended August 2, 2025, driven by a decline in traffic in our retail stores. Athletics continues to be our top-selling category. We remain focused on maximizing the vertical opportunity between the Famous Footwear and Brand Portfolio segments, with Dr. Scholl's, LifeStride, Naturalizer and Blowfish Malibu representing four of Famous Footwear's top 20 best-selling footwear brands for the six months ended August 2, 2025. During the first half of 2025, we opened two stores and closed 18 stores, and converted 21 stores to the FLAIR concept. We have experienced sales growth in stores converted to the FLAIR concept, and we will continue to evaluate stores for FLAIR conversion to drive sales growth.

Gross Profit

Gross profit decreased $14.6 million, or 7.7%, to $174.7 million for the second quarter of 2025, compared to $189.3 million for the second quarter of 2024. As a percentage of net sales, our gross profit decreased to 43.7% for the second quarter of 2025, from 45.0% for the second quarter of 2024, reflecting higher levels of promotional activity during the quarter and higher freight costs, due in part to the higher mix of e-commerce sales.

Gross profit decreased $27.2 million, or 7.8%, to $323.1 million for the six months ended August 2, 2025, compared to $350.3 million for the six months ended August 3, 2024. As a percentage of net sales, our gross profit decreased to 44.4% for the six months ended August 2, 2025, compared to 45.5% for the six months ended August 3, 2024, driven by higher levels of promotional activity and higher freight costs.

Selling and Administrative Expenses

Selling and administrative expenses increased $1.1 million, or 0.7%, to $156.0 million for the second quarter of 2025, compared to $154.9 million for the second quarter of 2024. The increase was primarily driven by higher retail facilities costs, including depreciation expense associated with the investments in the FLAIR store concept and higher store rent expense as leases are renewed, and higher marketing costs due to the launch of the Jordan brand. During the second quarter of 2025, we converted 11 stores to the new FLAIR concept,ending the quarter with a total of 55 FLAIR stores. These stores continue to outperform our traditionally designed retail stores. As a percentage of net sales, selling and administrative expenses increased to 39.1% for the second quarter of 2025, compared to 36.8% for the second quarter of 2024.

Selling and administrative expenses increased $0.4 million, or 0.1%, to $299.5 million for the six months ended August 2, 2025, compared to $299.1 million for the six months ended August 3, 2024. The increase was driven by higher retail facilities costs, including depreciation expense associated with the investments in the FLAIR store concept and higher store rent expense as leases are renewed. As a percentage of net sales, selling and administrative expenses increased to 41.2% for the six months ended August 2, 2025, compared to 38.8% for the six months ended August 3, 2024, reflecting deleveraging of expenses over lower net sales.

Restructuring and Other Special Charges, Net

Restructuring and other special charges of $0.1 million for the three and six months ended August 2, 2025 were associated with our expense reduction initiatives, primarily severance. Refer to Note 5 to the condensed consolidated financial statements for additional information related to these charges. There were no corresponding charges for the six months ended August 3, 2024.

Operating Earnings

Operating earnings decreased $15.8 million to $18.6 million for the second quarter of 2025, compared to $34.4 million for the second quarter of 2024, primarily reflecting the factors described above. As a percentage of net sales, operating earnings declined to 4.6% for the second quarter of 2025, compared to 8.2% for the second quarter of 2024.

Operating earnings decreased $27.7 million to $23.5 million for the six months ended August 2, 2025, compared to $51.2 million for the six months ended August 3, 2024. As a percentage of net sales, operating earnings were 3.2% for the six months ended August 2, 2025, compared to 6.7% for the six months ended August 3, 2024.

BRAND PORTFOLIO


	Thirteen Weeks Ended										Twenty-Six Weeks Ended
	August 2, 2025					August 3, 2024					August 2, 2025					August 3, 2024
				% of					% of					% of					% of
($ millions)				Net Sales					Net Sales					Net Sales					Net Sales
Net sales	$	275.6		100.0	%	$	285.5		100.0	%	$	571.0		100.0	%	$	602.7		100.0	%
Cost of goods sold		164.5		59.7	%		163.6		57.3	%		330.7		57.9	%		333.0		55.3	%
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	%
Restructuring and other special charges, net		1.8		0.7	%		-		-	%		1.8		0.2	%		-		-	%
Operating earnings	$	6.7		2.4	%	$	23.6		8.3	%	$	24.0		4.3	%	$	65.0		10.8	%

Key Metrics
Direct-to-consumer (% of net sales) ⁽¹⁾		36	%				33	%				35	%				33	%
Change in wholesale net sales ($)	$	(11.6)				$	(14.5)				$	(29.2)				$	(27.2)
Change in retail net sales ($)	$	1.7				$	(0.9)				$	(2.5)				$	3.5
Unfilled order position at end of period	$	244.2				$	251.6

Company-Operated Stores:
North America
Stores opened		2					3					5					3
Stores closed		-					3					2					4
Ending stores - North America		63					61					63					61
East Asia
Ending stores - East Asia		55					43					55					43
Total Company-Operated Stores		118					104					118					104

International franchise locations		145					106					145					106
Total		263					210					263					210

(1)	Direct-to-consumer includes sales of our retail stores and e-commerce sites and sales through our customers' websites that we fulfill on a drop-ship basis.

Net Sales

Net sales of $275.6 million in the second quarter of 2025 decreased $9.9 million, or 3.5%, compared to the second quarter of 2024. During the second quarter of 2025, we experienced soft consumer demand due to cautious buying by our wholesale customers associated with the challenging macroeconomic environment, partially offset by growth in both our retail stores and e-commerce business. In addition, we estimate that tariffs negatively impacted our net sales in the second quarter of 2025 by approximately $10 million due to factory order cancellations and delayed receipts that will shift the timing of certain wholesale sales to the third quarter. Our direct-to-consumer sales represented approximately 36% of net sales for the second quarter of 2025, compared to 33% in the second quarter of 2024. During the second quarter of 2025, we opened two stores in the United States, resulting in a total of 63 stores in North America at August 2, 2025, compared to 61 stores at August 3, 2024. We remain focused on international growth and continued to expand our international presence during the second quarter of 2025. There were 118 stores in East Asia at August 2, 2025, compared to 104 stores at August 3, 2024. There were also 145 international branded stores owned and operated by third parties through franchise agreements at August 2, 2025, compared to 106 international branded stores at August 3, 2024.

Net sales decreased $31.7 million, or 5.3%, to $571.0 million for the six months ended August 2, 2025, compared to $602.7 million for the six months ended August 3, 2024, reflecting softer demand associated with the challenging macroeconomic environment and competitive retail landscape.

Our unfilled order position for our wholesale sales decreased $7.4 million, or 2.9%, to $244.2 million at August 2, 2025, compared to $251.6 million at August 3, 2024.

Beginning in the third quarter of 2025, Brand Portfolio will contain the financial results of our recently acquired Stuart Weitzman brand. The acquisition, which includes wholesale and direct-to-consumer channels, strengthens our international presence.

Gross Profit

Gross profit decreased $10.8 million, or 8.9%, to $111.1 million for the second quarter of 2025, compared to $121.9 million for the second quarter of 2024, driven by lower net sales. As a percentage of net sales, our gross profit decreased to 40.3% for the second quarter of 2025,

compared to 42.7% for the second quarter of 2024. The decrease was driven by the impact of tariffs, higher inventory markdowns, and incremental costs associated with canceling factory orders and moving inventory out of China.

Gross profit decreased $29.4 million, or 10.9%, to $240.3 million for the six months ended August 2, 2025, compared to $269.7 million for the six months ended August 3, 2024. As a percentage of net sales, our gross profit decreased to 42.1% for the six months ended August 2, 2025, compared to 44.7% for the six months ended August 3, 2024. The decrease was driven by the same factors described above.

Selling and Administrative Expenses

Selling and administrative expenses increased $4.3 million, or 4.4%, to $102.6 million for the second quarter of 2025, compared to $98.3 million for the second quarter of 2024. The increase reflects growth in our international business, higher distribution costs and an increase in salary and benefits expense, partially offset by lower marketing expenses. As a percentage of net sales, selling and administrative expenses increased to 37.2% for the second quarter of 2025, compared to 34.4% for the second quarter of 2024.

Selling and administrative expenses increased $9.8 million, or 4.8%, to $214.5 million for the six months ended August 2, 2025, compared to $204.7 million for the six months ended August 3, 2024. The increase reflects growth in our international business, a higher provision for expected credit losses and higher salary and benefits expense, partially offset by lower marketing expenses. As a percentage of net sales, selling and administrative expenses increased to 37.6% for the six months ended August 2, 2025, compared to 33.9% for the six months ended August 3, 2024, reflecting deleveraging of expenses over lower net sales.

Restructuring and Other Special Charges, Net

Restructuring and other special charges of $1.8 million for the three and six months ended August 2, 2025 were associated with expense reduction initiatives, primarily severance. Refer to Note 5 to the condensed consolidated financial statements for additional information related to these charges. There were no corresponding charges for the six months ended August 3, 2024.

Operating Earnings

Operating earnings decreased to $6.7 million for the second quarter of 2025, from $23.6 million for the second quarter of 2024, as a result of the factors described above. As a percentage of net sales, operating earnings were 2.4% for the second quarter of 2025, compared to 8.3% for the second quarter of 2024.

Operating earnings decreased to $24.0 million for the six months ended August 2, 2025, compared to $65.0 million for the six months ended August 3, 2024, as a result of the factors described above. As a percentage of net sales, operating earnings were 4.3% for the six months ended August 2, 2025, compared to 10.8% in the six months ended August 3, 2024.

ELIMINATIONS AND OTHER


	Thirteen Weeks Ended								Twenty-Six Weeks Ended
	August 2, 2025				August 3, 2024				August 2, 2025				August 3, 2024
			% of				% of				% of				% of
($ millions)			Net Sales				Net Sales				Net Sales				Net Sales
Net sales	$	(16.7)	100.0	%	$	(22.5)	100.0	%	$	(25.5)	100.0	%	$	(30.0)	100.0	%
Cost of goods sold		(16.7)	100.0	%		(22.2)	98.5	%		(26.5)	103.9	%		(29.9)	99.8	%
Gross profit		0.0	0.0	%		(0.3)	1.5	%		1.0	(3.9)	%		(0.1)	0.2	%
Selling and administrative expenses		11.1	(66.5)	%		15.2	(67.4)	%		22.2	(87.1)	%		30.9	(103.0)	%
Restructuring and other special charges, net		4.8	(28.7)	%		-	-	%		5.5	(21.6)	%		-	-	%
Operating loss	$	(15.9)	95.2	%	$	(15.5)	68.9	%	$	(26.7)	104.8	%	$	(31.0)	103.2	%

The Eliminations and Other category includes the elimination of intersegment sales and profit, unallocated corporate administrative expenses, and other costs and recoveries.

The net sales elimination of $16.7 million for the second quarter of 2025 is $5.8 million, or 25.8%, lower than the second quarter of 2024, reflecting a decrease in product sold from our Brand Portfolio segment to Famous Footwear. The net sales elimination of $25.5 million for the six months ended August 2, 2025 is $4.5 million, or 14.9%, lower than the six months ended August 3, 2024, reflecting a decrease in product sold from our Brand Portfolio segment to Famous Footwear.

Selling and administrative expenses decreased $4.1 million, to $11.1 million in the second quarter of 2025, compared to $15.2 million for the second quarter of 2024. Selling and administrative expenses decreased $8.7 million, to $22.2 million for the six months ended August

2, 2025, compared to $30.9 million for the six months ended August 3, 2024. The decreases for both the quarter and six months primarily reflect lower expenses related to our cash and share-based incentive compensation.

Restructuring and other special charges of $4.8 million and $5.5 million for the three and six months ended August 2, 2025, respectively, were for our expense reduction initiatives, as well as legal and other related costs associated with the acquisition of Stuart Weitzman that closed on August 4, 2025. Refer to Note 5 to the condensed consolidated financial statements for additional information related to these charges. There were no restructuring charges during the three and six months ended August 3, 2024.

LIQUIDITY AND CAPITAL RESOURCES

Borrowings

As further discussed in Note 10 to the condensed consolidated financial statements, the Company maintains a revolving credit facility for working capital needs that matures on June 27, 2030. The aggregate amount available under the revolving credit facility is up to $700.0 million, subject to borrowing base restrictions, and may be further increased by up to $250.0 million. Interest on the borrowings is at variable rates based on the SOFR, or the prime rate (as defined in the Credit Agreement), plus a spread.

Total debt obligations of $387.5 million at August 2, 2025 increased $241.0 million, from $146.5 million at August 3, 2024, and $168.0 million, from $219.5 million at February 1, 2025. Subsequent to quarter-end, on August 4, 2025, we completed the acquisition of Stuart Weitzman. The increase in borrowings at August 2, 2025 reflects borrowings to fund the acquisition. Net interest expense for the second quarter of 2025 increased $1.2 million to $4.5 million, compared to $3.3 million for the second quarter of 2024, reflecting higher average borrowings on our revolving credit facility.

At August 2, 2025, we had $387.5 million in borrowings and $8.1 million in letters of credit outstanding under the Credit Agreement. Total borrowing availability was $230.8 million at August 2, 2025. We were in compliance with all covenants and restrictions under the Credit Agreement as of August 2, 2025.

Working Capital and Cash Flow


	Twenty-Six Weeks Ended

($ 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
Effect of exchange rate changes on cash and cash equivalents		0.1		(0.1)		0.2
Increase in cash and cash equivalents	$	161.9	$	30.4	$	131.5

Reasons for the major variances in cash provided in the table above are as follows:

Cash provided by operating activities was $74.0 million lower in the twenty-six weeks ended August 2, 2025 as compared to the twenty-six weeks ended August 3, 2024, primarily reflecting the following factors:

●

A smaller increase in trade accounts payable during the twenty-six weeks ended August 2, 2025, compared to the twenty-six weeks ended August 3, 2024, driven in part by an unplanned shift to the third quarter of 2024 of a significant payment to one of our largest vendors,

●

Lower net earnings in the twenty-six weeks ended August 2, 2025, compared to the twenty-six weeks ended August 3, 2024,

●

A larger increase in inventory during the twenty-six weeks ended August 2, 2025, compared to the twenty-six weeks ended August 3, 2024, partially offset by

●

An increase in accrued expenses and other liabilities during the twenty-six weeks ended August 2, 2025, compared to a decrease in the twenty-six weeks ended August 3, 2024, and

●

A decrease in accounts receivable during the twenty-six weeks ended August 2, 2025 compared to an increase in the twenty-six weeks ended August 3, 2024.

Cash used for investing activities was $12.3 million higher for the twenty-six weeks ended August 2, 2025 as compared to the twenty-six weeks ended August 3, 2024, reflecting higher capital expenditures, due in part to the Famous Footwear store remodels to the new FLAIR concept. We had 55 FLAIR stores as of August 2, 2025 and expect to add two more FLAIR stores during the second half of 2025.

Cash provided by financing activities was $154.2 million for the twenty-six weeks ended August 2, 2025 as compared to cash used for financing activities of $63.4 million for the twenty-six weeks ended August 3, 2024, primarily due to net borrowings on our revolving credit agreement of $168.0 million in the twenty-six weeks ended August 2, 2025, compared to net repayments of $35.5 million in the comparable period in 2024. The increase in borrowings during the twenty-six weeks ended August 2, 2025 reflects higher borrowings at quarter-end in advance of the Stuart Weitzman acquisition on August 4, 2025.

A summary of key financial data and ratios at the dates indicated is as follows:


	August 2, 2025			August 3, 2024			February 1, 2025
Working capital ($ millions) ⁽¹⁾	$	84.3		$	79.3		$	78.6
Current ratio ⁽²⁾		1.08:1			1.09:1			1.10:1
Debt-to-capital ratio ⁽³⁾		38.4	%		19.3	%		26.6	%

(1)	Working capital has been computed as total current assets less total current liabilities.

(2)	The current ratio has been computed by dividing total current assets by total current liabilities.

(3)	The debt-to-capital ratio has been computed by dividing the borrowings under our revolving credit agreement by total capitalization. Total capitalization is defined as total debt and total equity.

Working capital at August 2, 2025 was $84.3 million, which was an increase of $5.0 million from August 3, 2024 and a $5.7 million increase from February 1, 2025. The increase in working capital from August 3, 2024 primarily reflects higher cash and cash equivalents, lower trade accounts payable and higher inventory, partially offset by higher borrowings under our revolving credit agreement. The increase in cash and borrowings under the revolving credit agreement reflects the acquisition of Stuart Weitzman subsequent to quarter-end. The lower trade accounts payable as of August 2, 2025 is partially due to an unplanned shift to the third quarter of 2024 of a significant payment to one of our largest vendors. The increase in working capital from February 1, 2025 primarily reflects higher borrowings under our revolving credit agreement and accrued expenses, partially offset by lower trade accounts payable. Our current ratio was 1.08:1 as of August 2, 2025, compared to 1.09:1 at August 3, 2024 and 1.10:1 at February 1, 2025. Our debt-to-capital ratio was 38.4% as of August 2, 2025, compared to 19.3% as of August 3, 2024 and 26.6% at February 1, 2025.

We declared and paid dividends of $0.07 per share in the second quarter of both 2025 and 2024. The declaration and payment of any future dividend is at the discretion of the Board of Directors and will depend on our results of operations, financial condition, business conditions and other factors deemed relevant by our Board of Directors. However, we presently expect that dividends will continue to be paid.

We have various contractual or other obligations, including borrowings under our revolving credit facility, operating lease commitments and obligations for our supplemental executive retirement plan and other postretirement benefits. We also have purchase obligations to purchase inventory, assets and other goods and services. We believe our operating cash flows are sufficient to meet our material cash requirements for at least the next 12 months.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

No material changes have occurred related to critical accounting policies and estimates since the end of the most recent fiscal year. For further information on the Company's critical accounting policies and estimates, see Part II, Item 7 of our Annual Report on Form 10-K for the year ended February 1, 2025.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Recently issued accounting pronouncements, if any, and their impact on the Company are described in Note 2 to the condensed consolidated financial statements.

FORWARD-LOOKING STATEMENTS

This Form 10-Q contains certain forward-looking statements and expectations regarding the Company's future performance and the performance of its brands. Such statements are subject to various risks and uncertainties that could cause actual results to differ materially. These risks include (i) changes in United States and international trade policies, including tariffs and trade restrictions; (ii) changing consumer demands, which may be influenced by general economic conditions and other factors; (iii) inflationary pressures and supply chain disruptions; (iv) rapidly changing consumer preferences and purchasing patterns and fashion trends; (v) supplier concentration, customer concentration and increased consolidation in the retail industry; (vi) intense competition within the footwear industry; (vii) foreign currency fluctuations; (viii) political and economic conditions or other threats to the continued and uninterrupted flow of inventory from China and other countries, where the company relies heavily on third-party manufacturing facilities for a significant amount of its inventory; (ix) cybersecurity threats or other major disruption to the company's information technology systems including those related to our ERP upgrade; (x) transitional challenges with acquisitions and divestitures; (xi) the ability to accurately forecast sales and manage inventory levels; (xii) a disruption in the company's distribution centers; (xiii) the ability to recruit and retain senior management and other key associates; (xiv) the ability to secure/exit leases on favorable terms; (xv) the ability to maintain relationships with current suppliers; (xvi) changes to tax laws, policies and treaties; (xvii) our commitments and shareholder expectations related to responsible business initiatives; (xviii) compliance with applicable laws and standards with respect to labor, trade and product safety issues; and (xix) the ability to attract, retain, and maintain good relationships with licensors and protect our intellectual property rights. The Company's reports to the Securities and Exchange Commission contain detailed information relating to such factors, including, without limitation, the information under the caption "Risk Factors" in Part I, Item 1A of the Company's Annual Report on Form 10-K for the year ended February 1, 2025, which information is incorporated by reference herein and updated by the Company's Quarterly Reports on Form 10-Q. The Company does not undertake any obligation or plan to update these forward-looking statements, even though its situation may change.

Caleres Inc. published this content on September 09, 2025, and is solely responsible for the information contained herein. Distributed via SEC EDGAR on September 09, 2025 at 18:28 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]