Caleres, Inc. Q2 FY2025 earnings call

• Sales trends improved sequentially in both business segments with market share gains. - Lead brands delivered sales growth, strength in direct-to-consumer channels, and international sales growth. - Worked with factory partners to mitigate tariffs, passed through moderate price increases. - Completed $15M annualized structural cost savings, with half coming this year; engaged consulting partner for Stuart Weitzman integration. - Completed acquisition of Stuart Weitzman, an iconic brand with strategic fit. - Famous Footwear saw strong performance in August, with improved traffic and conversion in brick and mortar and higher traffic and AURs online. - Flair format expanded with sales lifts.

Brand Portfolio: Sales declined 3.5% in the quarter. Lead brands grew about 1% in North America and 3.6% globally. Value-priced brands faced pressure. Lead brands like Sam Edelman had domestic sales growth and double-digit international growth, Allen Edmonds saw growth across channels, Naturalizer had North American direct-to-consumer growth but a down quarter due to sourcing shifts, Vionic had modest sales decline with strong sandal and walking category sales. International sales for Vionic were up double digits. Famous Footwear: Total sales down 4.9%, comp sales down 3.4%. Gained share in shoe chains and kids. E-commerce up double digits. Jordan launch was successful, Flair format had 55 locations with sales lift, plan to expand to 57 by year-end. Back-to-school assortments drove comp sales up.

• For Famous, comparable sales expected down low single digits in non-promotional September and October. - Brand Portfolio gross margin expected to face pressure but mitigate in 4Q as mitigation strategies take effect. - Borrowed $120M for Stuart Weitzman acquisition, interest expense to be considered. - Goal to have Stuart Weitzman return to profitability after transition period, aiming for accretive earnings in 2026. - Brand Portfolio had $10M sales impact from tariffs, with ~50/50 split of cancellations and delayed receipts, half expected to benefit 3Q.

• Tariffs: Uncertainty, lag in mitigation effects leading to continued gross margin pressure. - Inventory: Impact on gross margin from markdowns on excess product. - Consumer Demand: Impact of price increases on Famous Footwear consumers' purchasing behavior.

Q: On Famous quarter-to-date stats, any color on dynamics like traffic, AUR; shift in women's softness?

A: Jack Calandra said Famous' August plus one comp had improved brick and mortar traffic/conversion with flat AURs, web had improved traffic and higher AURs. Jay Schmidt mentioned product assortment shift helped.

Q: On Famous gross margin, anticipation of changes; Brand Portfolio biggest weight?

A: Jack Calandra said Famous likely through promotional cycle, Brand Portfolio expects less inventory markdown headwind but continued tariff pressure early with improvement in 4Q.

Q: On Stuart acquisition impact, color on sales, EBIT, interest expense?

A: Liz Dunn said purchase accounting still in flux, Jack Calandra mentioned borrowed ~$120M for acquisition with ~5.7%-5.8% borrowing rate.

Q: On Stuart, expectation of accretive earnings next year?

A: Jay Schmidt said goal to have transition period complete by January, then immediate expenses to come through but not ready to guide yet.

Q: On BP cancellations, delayed receipts quantification; 3Q impact; BP margins?

A: Jack Calandra said $10M sales impact split 50/50 between cancellations and delayed receipts, half to benefit 3Q. Brand Portfolio gross margin expected to be down similar to Q2, with less markdown reserve issue but continued tariff pressure.

Q: On consumer health of Famous and BP customers, brand performance at Famous?

A: Jay Schmidt said Famous consumer wants highly demanded national brands, Brand Portfolio lead and premium brands performing well.

Q: On tariff mitigation tactics progress, cost savings for 2026?

A: Jay Schmidt said selective price increases, negotiating with factory partners, Jack Calandra said consulting partner looking for broader cost savings for 2026.

Q: On wholesale order trends for holidays?

A: Jay Schmidt said sell-through better than sell-in, B2C up year over year, optimistic about holidays with good retail trend.