Caleres, Inc. shares were down nearly 10 percent in pre-market trading on Thursday, September 4, as the parent company of Famous Footwear and the Naturalizer, Vionic, Allen Edmonds, Blowfish Malibu, and Sam Edelman brands reported net sales for the fiscal second quarter ended August 3 amounted to $658.5 million, down 3.6 percent from the prior-year Q2 period ended August 3, 2024.

  • Famous Footwear segment net sales decreased 4.9 percent to $399.6 million in Q2, with comparable sales down 3.4 percent year-over-year (y/y).
  • Brand Portfolio segment net sales declined 3.5 percent y/y to $275.6 million.
  • Direct-to-consumer sales represented approximately 75 percent of total net sales in the second quarter.

“While we did experience headwinds due to market uncertainty, we demonstrated the strength and resilience of our company this quarter,” said Jay Schmidt, president and CEO, Caleres Inc. “Sales trends improved sequentially in both segments of our business, and we saw market share gains in women’s fashion footwear and in shoe chains. We experienced strength in our lead brands, brand portfolio, direct-to-consumer channels, and international. We also saw significant improvement in sales trends at Famous Footwear in July and continuing through August.”

Summary Financial Results by Segment

Profitability and Expenses Summary
Gross profit was $285.8 million in the second quarter, with a gross margin of 43.4 percent, down 210 basis points y/y.

  • Famous Footwear segment gross margin was 43.7 percent, down 130 basis points y/y.
  • Brand Portfolio segment gross margin of 40.3 percent, down 240 basis points y/y.

SG&A expenses were $269.7 million, or 41.0 percent of net sales, for the most recent quarter, up 170 basis points y/y, reportedly reflecting a deleverage due to lower sales.

Net earnings reached $6.7 million, or 20 cents per diluted share, in the second quarter, and Adjusted net earnings were tallied at $11.7 million, or Adjusted diluted EPS of 35 cents per share. This compares to net earnings of $30.0 million, 85 cents per diluted share, in the second quarter of 2024.

“As we look to address the changes in the operating environment, we completed our previously announced structural cost savings initiatives that will deliver annualized savings of $15 million and support a more efficient operating structure,” Schmidt added. “Just after quarter-end, we completed the acquisition of Stuart Weitzman, adding a new Lead Brand to our portfolio that aligns with our strategic focus on premium, direct-to-consumer, and international business. Longer term, we will continue looking for ways to leverage our greatest capabilities across our portfolio, and we are confident in our ability to execute our strategic plan, invest to fuel our growth initiatives, and drive sustained value for our shareholders.”

Balance Sheet Summary
Inventory amounted to $693.3 million at quarter-end, up 4.9 percent compared to the end of the Q2 2024 period.

Borrowings under the asset-based revolving credit facility totaled $387.5 million at quarter-end, representing a $241 million increase from the second quarter of 2024, reflecting pre-positioned cash for the Stuart Weitzman acquisition.

Capital Allocation Update
During the quarter, Caleres stated that it continued to invest in value-driving growth opportunities while also returning cash to shareholders through its dividend. In June, Caleres entered into an amendment of its credit agreement, which extended the senior secured asset-based revolving credit facility to June 2030. The company’s borrowing capacity under the agreement increased by $200 million to $700 million, and the agreement includes an accordion feature that allows the company to request an increase in the size of the facility to $950 million in aggregate.

The expanded facility provides Caleres with enhanced liquidity and flexibility, further strengthening the balance sheet. Given the volatile and challenging environment, Caleres’ capital allocation priorities are to continue funding its dividend and to invest in value-enhancing growth vectors. In the longer term, the company reported it will balance investment priorities with debt reduction and returning capital to shareholders.

Fiscal 2025 Outlook
Caleres stated that, given the uncertainty in the environment, the company will continue to suspend its annual guidance.

For the month of August, Famous Footwear’s same-store comparable sales were up 1 percent, and Brand Portfolio sales, excluding Stuart Weitzman, were up in the low single-digits.

“We expect ongoing gross margin pressure in Brand Portfolio from tariffs for the balance of the year,” the company noted in its earnings release. “We anticipate third quarter Brand Portfolio gross margin, excluding Stuart Weitzman, to be down similar to the second quarter, with improvement in the fourth quarter as we realize more of the benefit from our mitigation strategies.”

Image courtesy Caleres, Inc.