Caleres, Inc. Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Overall, first quarter results fell short of expectations due to weak February sales, lower gross margins, increased reserves, and inventory issues. However, retail momentum improved and international business grew.
• Immediate focus: Controlling costs, optimizing sourcing strategy, aiming to decrease SG&A by $15 million annually through structural expense cuts.
• Segment details: Brand Portfolio faced challenges like lower margins and inventory issues but lead brands performed better; Famous Footwear saw sales decline but improving trends, e-commerce growth, FLAIR stores expansion, and Jordan launch.

Segment Performance

• Brand Portfolio: Sales declined 6.9% in the quarter. Gross margin dropped 280 basis points due to lower initial margins, costs from canceling/moving production, and higher inventory markdown reserves. Lead brands (Sam Edelman, Allen Edmonds, Naturalizer, Vionic) accounted for ~60% of sales and 80% of operating earnings. Sam Edelman had domestic sales growth and double-digit international growth; Allen Edmonds faced softer demand but new store openings; Naturalizer had a down quarter but maintained market share; Vionic had timing issues but growth in walk-in and sandals.
• Famous Footwear: Total sales down 6.3%, comp sales down 4.6%. E-commerce sales up 2.5%. Men's, kids, and accessories outperformed. Gained 0.5 points of market share in kids category. FLAIR stores plan to reach 53 by back-to-school. Launched Jordan in 147 stores with encouraging early trends.

Guidance

• Suspended guidance due to volatile operating environment.
• Announced $15 million annualized SG&A savings, with $7.5 million expected in the back half of 2025.
• Tariff situation is fluid, with no significant adjustments made yet as the environment remains uncertain.

Risks

• Volatile operating environment, including ongoing tariff uncertainties.
• Sourcing disruption impacting margins.
• Inventory markdowns and worsening customer credit issues putting pressure on profitability.

Question and Answer

Q: About price differentiation, brand portfolio restructuring, Famous Back to School, Flare stores A: Jay Schmidt stated brand portfolio is making selective price increases, no immediate plans to restructure brands, Famous is well-positioned for back-to-school with good inventory, and Flare stores will reach 53 by back-to-school.

Q: On Jordan launch trends, tariff impact, wholesale fluidity A: Jay Schmidt mentioned early Jordan trends are encouraging, tariff situation is fluid with no immediate adjustments, and wholesale at brand portfolio is fluid but retail trends are improving.

Q: On tariff cost impacts, persistence of headwinds A: Jack Calandra discussed tariff impacts being limited, inventory reserves expected to stabilize, customer credit issues dependent on macro environment, and SG&A in brand portfolio related to international investments.