Release Date: May 29, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Caleres Inc (CAL, Financial) reported growth in its strategically important international business, particularly with the Sam Edelman brand experiencing double-digit growth internationally.
- The company plans to decrease SG&A expenses by $15 million on an annualized basis through structural expense cuts, which are expected to strengthen the company.
- Caleres Inc (CAL) gained market share in women's fashion footwear during the period, according to Zirkana.
- The Sam Edelman brand delivered a solid quarter with sales growth domestically and internationally, driven by strong response to sneaker assortments and expansion in the Middle East.
- Famous Footwear's e-commerce sales were up 2.5% in the quarter, and the company saw strength in the athletic category and kids' segment, gaining market share in shoe chains.
Negative Points
- Caleres Inc (CAL) reported a 6.8% decline in first-quarter sales year over year, falling short of expectations.
- Operating earnings were pressured by lower gross margins, increased reserves, and costs to cancel and move inventory.
- The company faced challenges due to tariff escalation and sourcing disruption, which reduced gross margin profit by nearly $1.9 million during the quarter.
- Higher than planned inventories and worsening customer credit issues impacted profitability, with bad debt write-downs hitting profit by almost $3.1 million compared to last year.
- Famous Footwear's total sales were down 6.3% during the first quarter, with comparable sales declining 4.6%.
Q & A Highlights
Q: How are you managing the tariff headwinds and inventory issues, and what are your plans for pricing and gross margins moving forward?
A: Jay Schmidt, President and CEO, explained that Caleres is implementing selective price increases for its brand portfolio, starting with fall receipts. The company is working closely with factory partners to manage costs and is taking a thoughtful approach to pricing. Regarding the brand portfolio, there are no immediate plans to restructure or exit weaker brands, but the company continues to evaluate its portfolio. For Famous Footwear, they are well-positioned for back-to-school with no major cancellations and are expanding their FLAIR stores to 53 by July.
Q: Can you provide more details on the $15 million annualized SG&A savings and how it will impact the financials?
A: Jack Calandra, CFO, stated that the $15 million SG&A savings are permanent and structural, expected to begin in the third quarter and spread evenly between the third and fourth quarters, amounting to $7.5 million in savings for the back half of 2025. The company is also engaging a partner to identify further efficiencies.
Q: What is the impact of the Jordan brand launch at Famous Footwear, and how does it affect back-to-school expectations?
A: Jack Calandra noted that the Jordan brand launch on May 17 is still in its early stages, with limited marketing. The brand will be rolled out to all stores for back-to-school, and the company is excited about its potential, especially given its exclusivity in the family channel for the year.
Q: How are you handling the fluid situation with tariffs, and what is the impact on your sourcing strategy?
A: Jay Schmidt mentioned that the company is maintaining its current sourcing strategy despite the fluid tariff situation. They have moved production out of China and are working with factory partners globally. The company is prepared to adapt as the situation evolves but is currently not making significant changes.
Q: Can you elaborate on the pressures on operating earnings and how they might persist in future quarters?
A: Jack Calandra explained that the 280 basis point decline in brand portfolio gross margin was primarily due to higher inventory markdown reserves, tariff-related cancellations, and lower initial margins. The company believes it is well-reserved for spring 2025 inventory markdowns and expects these pressures to lessen moving forward.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
