CALERES INC 10-Q

ITEM 1 FINANCIAL STATEMENTS CALERES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Unaudited) ​ ​ ​ ($ thousands) October 29, 2022 October 30, 2021 January 29, 2022 Assets ​ ​ ​ Current assets: ​ ​ ​ ​ Cash and cash equivalents ​ $ 32,773 ​ $ 74,772 ​ $ 30,115 Receivables, net ​ 161,367 ​ 161,892 ​ 122,236 Inventories, net ​ 649,257 ​ 543,218 ​ 596,807 Income taxes ​ 12,046 ​ 35,026 ​ 33,073 Property and equipment, held for sale ​ ​ 16,777 ​ ​ — ​ ​ 5,455 Prepaid expenses and other current assets ​ 48,864 ​ 47,790 ​ 48,790 Total current assets ​ 921,084 ​ 862,698 ​ 836,476 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Prepaid pension costs ​ 106,781 ​ 96,705 ​ 99,139 Lease right-of-use assets ​ 523,011 ​ 500,308 ​ 503,430 Property and equipment, net ​ 151,798 ​ 155,516 ​ 150,238 Goodwill and intangible assets, net ​ 218,420 ​ 230,625 ​ 227,503 Other assets ​ 27,219 ​ 28,706 ​ 27,140 Total assets ​ $ 1,948,313 ​ $ 1,874,558 ​ $ 1,843,926 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Liabilities and Equity ​ ​ ​ Current liabilities: ​ ​ ​ Borrowings under revolving credit agreement ​ $ 364,500 ​ $ 175,000 ​ $ 290,000 Current portion of long-term debt ​ ​ — ​ ​ 99,598 ​ ​ — Mandatory purchase obligation - Blowfish Malibu ​ ​ — ​ ​ 54,558 ​ ​ — Trade accounts payable ​ 279,704 ​ 352,084 ​ 331,470 Income taxes ​ 31,106 ​ 22,371 ​ 22,622 Lease obligations ​ 133,227 ​ 128,151 ​ 128,495 Other accrued expenses ​ 230,377 ​ 238,298 ​ 253,026 Total current liabilities ​ 1,038,914 ​ 1,070,060 ​ 1,025,613 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other liabilities: ​ ​ ​ Noncurrent lease obligations ​ 453,718 ​ 452,786 ​ 452,909 Income taxes ​ 7,786 ​ 2,464 ​ 2,464 Deferred income taxes ​ 15,044 ​ 13,603 ​ 14,731 Other liabilities ​ 27,440 ​ 29,900 ​ 24,822 Total other liabilities ​ 503,988 ​ 498,753 ​ 494,926 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Equity: ​ ​ ​ Common stock ​ 356 ​ 383 ​ 376 Additional paid-in capital ​ 177,269 ​ 165,475 ​ 168,830 Accumulated other comprehensive loss ​ ( 7,187 ) ​ ( 8,471 ) ​ ( 8,606 ) Retained earnings ​ 228,006 ​ 143,711 ​ 157,970 Total Caleres, Inc. shareholders’ equity ​ 398,444 ​ 301,098 ​ 318,570 Noncontrolling interests ​ 6,967 ​ 4,647 ​ 4,817 Total equity ​ 405,411 ​ 305,745 ​ 323,387 Total liabilities and equity ​ $ 1,948,313 ​ $ 1,874,558 ​ $ 1,843,926 ​ See notes to condensed consolidated financial statements. ​ ​ 3 Table of Contents CALERES, INC. CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Unaudited) ​ ​ Thirteen Weeks Ended Thirty-Nine Weeks Ended ($ thousands, except per share amounts) October 29, 2022 ​ October 30, 2021 ​ October 29, 2022 October 30, 2021 Net sales ​ $ 798,258 ​ $ 784,156 ​ $ 2,271,704 ​ $ 2,098,323 Cost of goods sold ​ 458,382 ​ 448,805 ​ 1,268,019 ​ 1,165,792 Gross profit ​ 339,876 ​ 335,351 ​ 1,003,685 ​ 932,531 Selling and administrative expenses ​ 283,119 ​ 254,033 ​ 812,313 ​ 757,070 Restructuring and other special charges, net ​ 2,910 ​ — ​ 2,910 ​ 13,482 Operating earnings ​ 53,847 ​ 81,318 ​ 188,462 ​ 161,979 Interest expense, net ​ ( 4,003 ) ​ ( 5,069 ) ​ ( 8,886 ) ​ ( 28,803 ) Loss on early extinguishment of debt ​ — ​ ( 649 ) ​ — ​ ( 649 ) Other income, net ​ 2,997 ​ 3,844 ​ 9,636 ​ 11,533 Earnings before income taxes ​ 52,841 ​ 79,444 ​ 189,212 ​ 144,060 Income tax provision ​ ( 13,849 ) ​ ( 19,759 ) ​ ( 48,683 ) ​ ( 39,838 ) Net earnings ​ 38,992 ​ 59,685 ​ 140,529 ​ 104,222 Net (loss) earnings attributable to noncontrolling interests ​ ( 254 ) ​ 63 ​ ( 404 ) ​ 1,057 Net earnings attributable to Caleres, Inc. ​ $ 39,246 ​ $ 59,622 ​ $ 140,933 ​ $ 103,165 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic earnings per common share attributable to Caleres, Inc. shareholders ​ $ 1.09 ​ $ 1.56 ​ $ 3.83 ​ $ 2.70 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Diluted earnings per common share attributable to Caleres, Inc. shareholders ​ $ 1.08 ​ $ 1.54 ​ $ 3.79 ​ $ 2.68 ​ See notes to condensed consolidated financial statements. ​ ​ 4 Table of Contents CALERES, INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Unaudited) ​ Thirteen Weeks Ended Thirty-Nine Weeks Ended ($ thousands) October 29, 2022 October 30, 2021 ​ October 29, 2022 October 30, 2021 Net earnings $ 38,992 ​ $ 59,685 ​ $ 140,529 ​ $ 104,222 Other comprehensive income (loss) ("OCI"), net of tax: ​ ​ ​ ​ Foreign currency translation adjustment ( 980 ) ​ ( 267 ) ​ ( 1,100 ) ​ ( 423 ) Pension and other postretirement benefits adjustments 908 ​ 358 ​ 1,931 ​ 1,071 Other comprehensive (loss) income, net of tax ( 72 ) ​ 91 ​ 831 ​ 648 Comprehensive income 38,920 ​ 59,776 ​ 141,360 ​ 104,870 Comprehensive (loss) income attributable to noncontrolling interests ( 419 ) ​ 53 ​ ( 992 ) ​ 1,040 Comprehensive income attributable to Caleres, Inc. $ 39,339 ​ $ 59,723 ​ $ 142,352 ​ $ 103,830 ​ See notes to condensed consolidated financial statements. ​ ​ 5 Table of Contents CALERES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ​ ​ ​ ​ ​ ​ ​ ​ (Unaudited) ​ ​ Thirty-Nine Weeks Ended ($ thousands) October 29, 2022 October 30, 2021 Operating Activities ​ ​ Net earnings ​ $ 140,529 ​ $ 104,222 Adjustments to reconcile net earnings to net cash provided by operating activities: ​ ​ ​ Depreciation ​ 23,945 ​ 25,617 Amortization of capitalized software ​ 3,669 ​ 4,417 Amortization of intangible assets ​ 9,080 ​ 9,446 Amortization of debt issuance costs and debt discount ​ 305 ​ 732 Fair value adjustments to Blowfish mandatory purchase obligation ​ ​ — ​ ​ 15,424 Loss on early extinguishment of debt ​ — ​ 649 Share-based compensation expense ​ 13,249 ​ 8,811 Loss on disposal of property and equipment ​ 1,167 ​ 640 Impairment charges for property, equipment, and lease right-of-use assets ​ 1,979 ​ 3,399 Adjustment to expected credit losses ​ ​ ( 303 ) ​ ​ ( 2,711 ) Deferred income taxes ​ 313 ​ 5,359 Changes in operating assets and liabilities: ​ ​ ​ ​ Receivables ​ ( 38,826 ) ​ ( 32,188 ) Inventories ​ ( 53,025 ) ​ ( 54,917 ) Prepaid expenses and other current and noncurrent assets ​ ( 4,496 ) ​ ( 9,056 ) Trade accounts payable ​ ( 51,547 ) ​ 71,468 Accrued expenses and other liabilities ​ ( 33,667 ) ​ 25,972 Income taxes, net ​ 34,833 ​ 13,627 Other, net ​ ( 939 ) ​ ( 1,183 ) Net cash provided by operating activities ​ 46,266 ​ 189,728 ​ ​ ​ ​ ​ ​ ​ Investing Activities ​ ​ Purchases of property and equipment ​ ( 40,056 ) ​ ( 10,437 ) Capitalized software ​ ( 5,350 ) ​ ( 4,122 ) Net cash used for investing activities ​ ( 45,406 ) ​ ( 14,559 ) ​ ​ ​ ​ ​ ​ ​ Financing Activities ​ ​ Borrowings under revolving credit agreement ​ 708,500 ​ 363,000 Repayments under revolving credit agreement ​ ( 634,000 ) ​ ( 438,000 ) Redemption of senior notes ​ ​ — ​ ​ ( 100,000 ) Dividends paid ​ ( 7,698 ) ​ ( 8,011 ) Debt issuance costs ​ — ​ ( 1,190 ) Acquisition of treasury stock ​ ( 63,225 ) ​ — Issuance of common stock under share-based plans, net ​ ( 4,804 ) ​ ( 3,779 ) Contributions by noncontrolling interests ​ 3,142 ​ — Other ​ — ​ ( 676 ) Net cash provided by (used for) financing activities ​ 1,915 ​ ( 188,656 ) Effect of exchange rate changes on cash and cash equivalents ​ ( 117 ) ​ ( 36 ) Increase (decrease) in cash and cash equivalents ​ 2,658 ​ ( 13,523 ) Cash and cash equivalents at beginning of period ​ 30,115 ​ 88,295 Cash and cash equivalents at end of period ​ $ 32,773 ​ $ 74,772 ​ See notes to condensed consolidated financial statements. ​ ​ 6 Table of Contents CALERES, INC. CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ Total ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other ​ ​ ​ ​ Caleres, Inc. ​ Non- ​ ​ ​ (Unaudited) ​ Common Stock ​ Additional ​ Comprehensive ​ Retained ​ Shareholders’ ​ controlling ​ ​ ​ ($ thousands, except number of shares and per share amounts) Shares Dollars Paid-In Capital Loss Earnings Equity Interests Total Equity BALANCE JULY 30, 2022 36,450,780 ​ $ 364 ​ $ 173,246 ​ $ ( 7,280 ) ​ $ 212,803 ​ $ 379,133 ​ $ 5,744 ​ $ 384,877 Net earnings ​ ​ ​ ​ ​ ​ ​ ​ 39,246 ​ 39,246 ​ ( 254 ) ​ 38,992 Foreign currency translation adjustment ​ ​ ​ ​ ​ ​ ( 815 ) ​ ​ ( 815 ) ​ ( 165 ) ​ ( 980 ) Pension and other postretirement benefits adjustments, net of tax of $ 86 ​ ​ ​ ​ ​ ​ 908 ​ ​ 908 ​ ​ 908 Comprehensive income (loss) ​ ​ ​ ​ ​ ​ 93 ​ 39,246 ​ 39,339 ​ ( 419 ) ​ 38,920 Contributions by noncontrolling interests ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ — ​ ​ 1,642 ​ ​ 1,642 Dividends ($ 0.07 per share) ​ ​ ​ ​ ​ ​ ​ ( 2,498 ) ​ ( 2,498 ) ​ ​ ( 2,498 ) Acquisition of treasury stock ( 838,025 ) ​ ( 8 ) ​ ​ ​ ​ ​ ( 21,545 ) ​ ( 21,553 ) ​ ​ ( 21,553 ) Issuance of common stock under share-based plans, net 20,699 ​ 0 ​ ( 990 ) ​ ​ ​ ​ ​ ( 990 ) ​ ​ ( 990 ) Share-based compensation expense ​ ​ ​ ​ 5,013 ​ ​ ​ 5,013 ​ ​ 5,013 BALANCE OCTOBER 29, 2022 35,633,454 ​ $ 356 ​ $ 177,269 ​ $ ( 7,187 ) ​ $ 228,006 ​ $ 398,444 ​ $ 6,967 ​ $ 405,411 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ BALANCE JULY 31, 2021 38,268,064 ​ $ 383 ​ $ 162,122 ​ $ ( 8,572 ) ​ $ 86,764 ​ $ 240,697 ​ $ 4,594 ​ $ 245,291 Net earnings ​ ​ ​ ​ ​ ​ ​ ​ 59,622 ​ 59,622 ​ 63 ​ 59,685 Foreign currency translation adjustment ​ ​ ​ ​ ​ ​ ( 257 ) ​ ​ ( 257 ) ​ ( 10 ) ​ ( 267 ) Pension and other postretirement benefits adjustments, net of tax of $ 87 ​ ​ ​ ​ ​ ​ 358 ​ ​ 358 ​ ​ ​ 358 Comprehensive income ​ ​ ​ ​ ​ ​ ​ ​ ​ 101 ​ 59,622 ​ 59,723 ​ 53 ​ 59,776 Dividends ($ 0.07 per share) ​ ​ ​ ​ ​ ​ ​ ( 2,675 ) ​ ( 2,675 ) ​ ​ ​ ( 2,675 ) Issuance of common stock under share-based plans, net ( 10,554 ) ​ ( 0 ) ​ ( 27 ) ​ ​ ​ ​ ( 27 ) ​ ​ ( 27 ) Share-based compensation expense ​ ​ ​ ​ 3,380 ​ ​ ​ 3,380 ​ ​ 3,380 BALANCE OCTOBER 30, 2021 38,257,510 ​ $ 383 ​ $ 165,475 ​ $ ( 8,471 ) ​ $ 143,711 ​ $ 301,098 ​ $ 4,647 ​ $ 305,745 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other ​ ​ ​ ​ Total Caleres, Inc. ​ Non- ​ ​ ​ (Unaudited) ​ Common Stock ​ Additional ​ Comprehensive ​ Retained ​ Shareholders’ ​ controlling ​ ​ ​ ($ thousands, except number of shares and per share amounts) Shares Dollars Paid-In Capital Loss Earnings Equity Interests Total Equity BALANCE JANUARY 29, 2022 37,635,145 ​ $ 376 ​ $ 168,830 ​ $ ( 8,606 ) ​ $ 157,970 ​ $ 318,570 ​ $ 4,817 ​ $ 323,387 Net earnings (loss) ​ ​ ​ ​ ​ 140,933 ​ 140,933 ​ ( 404 ) ​ 140,529 Foreign currency translation adjustment ​ ​ ​ ( 512 ) ​ ​ ( 512 ) ​ ( 588 ) ​ ( 1,100 ) Pension and other postretirement benefits adjustments, net of tax of $ 417 ​ ​ ​ 1,931 ​ ​ 1,931 ​ — ​ 1,931 Comprehensive income (loss) ​ ​ ​ 1,419 ​ 140,933 ​ 142,352 ​ ( 992 ) ​ 141,360 Contributions by noncontrolling interests ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ — ​ ​ 3,142 ​ ​ 3,142 Dividends ($ 0.21 per share) ​ ​ ​ ​ ( 7,698 ) ​ ( 7,698 ) ​ ​ ( 7,698 ) Acquisition of treasury stock ( 2,622,845 ) ​ ( 26 ) ​ ​ ​ ( 63,199 ) ​ ( 63,225 ) ​ ​ ( 63,225 ) Issuance of common stock under share-based plans, net 621,154 ​ 6 ​ ( 4,810 ) ​ ​ ​ ( 4,804 ) ​ ​ ( 4,804 ) Share-based compensation expense ​ ​ 13,249 ​ ​ ​ 13,249 ​ ​ 13,249 BALANCE OCTOBER 29, 2022 35,633,454 ​ $ 356 ​ $ 177,269 ​ $ ( 7,187 ) ​ $ 228,006 ​ $ 398,444 ​ $ 6,967 ​ $ 405,411 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ BALANCE JANUARY 30, 2021 37,966,204 ​ $ 380 ​ $ 160,446 ​ $ ( 9,136 ) ​ $ 48,557 ​ $ 200,247 ​ $ 3,607 ​ $ 203,854 Net earnings ​ ​ ​ ​ 103,165 ​ 103,165 ​ 1,057 ​ 104,222 Foreign currency translation adjustment ​ ​ ​ ( 406 ) ​ ​ ( 406 ) ​ ( 17 ) ​ ( 423 ) Pension and other postretirement benefits adjustments, net of tax of $ 269 ​ ​ ​ 1,071 ​ ​ 1,071 ​ ​ 1,071 Comprehensive income ​ ​ ​ 665 ​ 103,165 ​ 103,830 ​ 1,040 ​ 104,870 Dividends ($ 0.21 per share) ​ ​ ​ ​ ( 8,011 ) ​ ( 8,011 ) ​ ​ ( 8,011 ) Issuance of common stock under share-based plans, net 291,306 ​ 3 ​ ( 3,782 ) ​ ​ ​ ( 3,779 ) ​ ​ ( 3,779 ) Share-based compensation expense ​ ​ 8,811 ​ ​ ​ 8,811 ​ ​ 8,811 BALANCE OCTOBER 30, 2021 38,257,510 ​ $ 383 ​ $ 165,475 ​ $ ( 8,471 ) ​ $ 143,711 ​ $ 301,098 ​ $ 4,647 ​ $ 305,745 ​ ​ ​ ​ ​ ​ ​ See notes to condensed consolidated financial statements. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 7 Table of Contents CALERES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 1 Basis of Presentation and General Basis of Presentation The accompanying condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q of the United States Securities and Exchange Commission (“SEC”) and reflect all adjustments and accruals of a normal recurring nature, which management believes are necessary to present fairly the financial position, results of operations, comprehensive income and cash flows of Caleres, Inc. ("the Company"). These statements, however, do not include all information and footnotes necessary for a complete presentation of the Company’s consolidated financial position, results of operations, comprehensive income and cash flows in conformity with accounting principles generally accepted in the United States. The condensed consolidated financial statements include the accounts of the Company and its wholly-owned and majority-owned subsidiaries, after the elimination of intercompany accounts and transactions. ​ The Company’s business is seasonal in nature due to consumer spending patterns, with higher back-to-school and holiday season sales. Although the third fiscal quarter has historically accounted for a substantial portion of the Company’s earnings for the year, the Company is beginning to experience more equal distribution among the quarters. Interim results may not necessarily be indicative of results which may be expected for any other interim period or for the year as a whole. Certain prior period amounts in the notes to the condensed consolidated financial statements have been reclassified to conform to the current period presentation. These reclassifications did not affect net earnings attributable to Caleres, Inc. ​ The accompanying condensed consolidated financial statements and footnotes should be read in conjunction with the consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the year ended January 29, 2022. Noncontrolling Interests During 2019, the Company entered into a joint venture with Brand Investment Holding Limited (“Brand Investment Holding”), a member of the Gemkell Group, to sell Sam Edelman, Naturalizer and other branded footwear in China. The Company and Brand Investment Holding are each 50 % owners of the joint venture, which is named CLT Brand Solutions (“CLT”). During the thirty-nine weeks ended October 29, 2022, capital contributions of $ 6.3 million were made to CLT, including $ 3.1 million received from Brand Investment Holding. Net sales were $ 5.4 million and $ 13.2 million for the thirteen and thirty-nine weeks ended October 29, 2022, respectively. Operating losses were $ 0.3 million and $ 0.6 million for the thirteen and thirty-nine weeks ended October 29, 2022, respectively. Net sales and operating earnings were $ 4.7 million and $ 0.2 million, respectively, for the thirteen weeks and $ 14.5 million and $ 2.4 million, respectively, for the thirty-nine weeks ended October 30, 2021. The Company had a joint venture agreement with a subsidiary of C. banner International Holdings Limited (“CBI”) to market Naturalizer footwear in China. The Company was a 51 % owner of the joint venture (“B&H Footwear”), with CBI owning the other 49 %. The license enabling the joint venture to market the footwear expired in August 2017 and the parties are in the process of dissolving their joint venture agreements. The Company consolidates CLT and B&H Footwear into its condensed consolidated financial statements. Net earnings (loss) attributable to noncontrolling interests represents the share of net earnings or losses that is attributable to Brand Investment Holding and CBI. Transactions between the Company and the joint ventures have been eliminated in the condensed consolidated financial statements. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates. ​ CARES Act On March 27, 2020, the Coronavirus Aid, Relief and Economic Security ("CARES") Act was enacted. The CARES Act includes a provision that allowed the Company to defer the employer portion of social security payroll tax payments that would have been paid between the enactment date and December 31, 2020, with 50% payable by December 31, 2021 and 50% payable by December 31, 2022. During 2020, the Company deferred approximately $ 9.4 million of employer social security payroll taxes. As of October 29, 2022, employer social security payroll taxes totaling $ 5.0 million, which are payable by December 31, 2022, are presented in other accrued expenses on the ​ 8 Table of Contents condensed consolidated balance sheet. As of October 30, 2021, approximately $ 4.7 million of deferred employer social security payroll taxes are recorded in other accrued expenses and $ 4.7 million was recorded in other liabilities on the condensed consolidated balance sheet. P roperty and Equipment, Held for Sale The Company is actively marketing to sell its nine -acre corporate headquarters campus (the “Campus”) located in Clayton, Missouri. The Company expects the Campus to qualify as a completed sale within the next year. Accordingly, the Campus has been classified as property and equipment, held for sale on the condensed consolidated balance sheet as of October 29, 2022 and is reflected within the Eliminations and Other category. The Company evaluated the Campus asset group for impairment indicators and determined that no indicators were present as of October 29, 2022. Note 2 Impact of New Accounting Pronouncements Impact of Prospective Accounting Pronouncements In September 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-04, Liabilities – Supplier Finance Programs (Topic 405-50): Disclosure of Supplier Finance Program Obligations . The guidance requires qualitative and quantitative disclosures about supplier finance programs in annual financial statements, including key terms of the programs, amounts outstanding, balance sheet presentation and a rollforward of amounts outstanding during the year. For interim periods, the ASU requires disclosure of total obligations outstanding that have been confirmed as valid. The ASU is effective for years beginning after December 15, 2022, except for the rollforward requirement, which is effective in fiscal year 2024. Early adoption is permitted. The amendments in the ASU will be applied retrospectively, except for the annual rollforward requirement, which will be applied prospectively. The adoption of the ASU is not expected to have a material impact on the Company’s financial statement disclosures. ​ ​ ​ ​ 9 Table of Contents Note 3 Revenues Disaggregation of Revenues The following table disaggregates revenue by segment and major source for the periods ended October 29, 2022 and October 30, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended October 29, 2022 ​ ​ ​ ​ ​ ​ ​ ​ Eliminations and ​ ​ ​ ($ thousands) Famous Footwear Brand Portfolio Other Total ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Retail stores ​ $ 415,678 ​ $ 14,810 ​ $ — ​ $ 430,488 E-commerce - Company websites (1) ​ 65,549 ​ 53,673 ​ — ​ 119,222 E-commerce - wholesale drop-ship (1) ​ — ​ 40,672 ​ ( 1,854 ) ​ 38,818 Total direct-to-consumer sales ​ ​ 481,227 ​ ​ 109,155 ​ ​ ( 1,854 ) ​ ​ 588,528 Wholesale - e-commerce (1) ​ — ​ 59,035 ​ — ​ 59,035 Wholesale - landed ​ — ​ 135,161 ​ ( 5,081 ) ​ 130,080 Wholesale - first cost ​ — ​ 16,424 ​ — ​ 16,424 Licensing and royalty ​ 601 ​ 3,454 ​ — ​ 4,055 Other (2) ​ 123 ​ 13 ​ — ​ 136 Net sales ​ $ 481,951 ​ $ 323,242 ​ $ ( 6,935 ) ​ $ 798,258 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended October 30, 2021 ​ ​ ​ ​ ​ ​ ​ ​ Eliminations and ​ ​ ​ ($ thousands) Famous Footwear Brand Portfolio Other Total ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Retail stores ​ $ 429,914 ​ $ 17,230 ​ $ — ​ $ 447,144 E-commerce -Company websites (1) ​ 63,964 ​ 44,101 ​ — ​ 108,065 E-commerce - wholesale drop-ship (1) ​ ​ — ​ ​ 22,054 ​ ​ ( 644 ) ​ ​ 21,410 Total direct-to-consumer sales ​ ​ 493,878 ​ ​ 83,385 ​ ​ ( 644 ) ​ ​ 576,619 Wholesale - e-commerce (1) ​ — ​ 47,409 ​ — ​ 47,409 Wholesale - landed ​ — ​ 138,813 ​ ( 10,373 ) ​ 128,440 Wholesale - first cost ​ — ​ 27,315 ​ — ​ 27,315 Licensing and royalty ​ 602 ​ 3,536 ​ — ​ 4,138 Other (2) ​ 180 ​ 55 ​ — ​ 235 Net sales ​ $ 494,660 ​ $ 300,513 ​ $ ( 11,017 ) ​ $ 784,156 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirty-Nine Weeks Ended October 29, 2022 ​ ​ ​ ​ ​ ​ ​ ​ Eliminations and ​ ​ ​ ($ thousands) Famous Footwear Brand Portfolio Other Total ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Retail stores ​ $ 1,133,276 ​ $ 43,371 ​ $ — ​ $ 1,176,647 E-commerce - Company websites (1) ​ 167,604 ​ 155,698 ​ — ​ 323,302 E-commerce - wholesale drop-ship (1) ​ — ​ 106,348 ​ ( 3,759 ) ​ 102,589 Total direct-to-consumer sales ​ $ 1,300,880 ​ $ 305,417 ​ $ ( 3,759 ) ​ $ 1,602,538 Wholesale - e-commerce (1) ​ — ​ 167,494 ​ — ​ 167,494 Wholesale - landed ​ — ​ 441,544 ​ ( 40,408 ) ​ 401,136 Wholesale - first cost ​ — ​ 88,205 ​ — ​ 88,205 Licensing and royalty ​ 1,538 ​ 10,329 ​ — ​ 11,867 Other (2) ​ 410 ​ 54 ​ — ​ 464 Net sales ​ $ 1,302,828 ​ $ 1,013,043 ​ $ ( 44,167 ) ​ $ 2,271,704 ​ ​ 10 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirty-Nine Weeks Ended October 30, 2021 ​ ​ ​ ​ ​ ​ ​ ​ Eliminations and ​ ​ ​ ($ thousands) Famous Footwear Brand Portfolio Other Total ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Retail stores ​ $ 1,166,837 ​ $ 44,241 ​ $ — ​ $ 1,211,078 E-commerce - Company websites (1) ​ 178,367 ​ 136,458 ​ — ​ 314,825 E-commerce - wholesale drop-ship (1) ​ — ​ 62,529 ​ ( 1,477 ) ​ 61,052 Total direct-to-consumer sales ​ $ 1,345,204 ​ $ 243,228 ​ $ ( 1,477 ) ​ $ 1,586,955 Wholesale - e-commerce (1) ​ — ​ 116,948 ​ — ​ 116,948 Wholesale - landed ​ — ​ 353,597 ​ ( 36,445 ) ​ 317,152 Wholesale - first cost ​ — ​ 67,651 ​ — ​ 67,651 Licensing and royalty ​ 602 ​ 8,302 ​ — ​ 8,904 Other (2) ​ 607 ​ 106 ​ — ​ 713 Net sales ​ $ 1,346,413 ​ $ 789,832 ​ $ ( 37,922 ) ​ $ 2,098,323 (1) Collectively referred to as "e-commerce" in the narrative below (2) Includes breakage revenue from unredeemed gift cards Retail stores Traditionally, the majority of the Company’s revenue is generated from retail sales where control is transferred and revenue is recognized at the point of sale. Retail sales are recorded net of estimated returns and exclude sales tax. The Company records a returns reserve and a corresponding return asset for expected returns of merchandise. Retail sales to members of the Company’s loyalty programs, including the Famously You Rewards program, include two performance obligations: the sale of merchandise and the delivery of points that may be redeemed for future purchases. The transaction price is allocated to the separate performance obligations based on the relative stand-alone selling price. The stand-alone selling price for the points is estimated using the retail value of the merchandise earned, adjusted for estimated breakage based upon historical redemption patterns. The revenue associated with the initial merchandise purchased is recognized immediately and the value assigned to the points is deferred until the points are redeemed, forfeited or expired. E-commerce The Company generates revenue from sales on websites maintained by the Company that are shipped from the Company’s distribution centers or retail stores directly to the consumer, or picked up directly by the consumer from the Company’s stores (“e-commerce – Company websites”); sales from the Company’s wholesale customers’ websites that are fulfilled on a drop-ship basis (“e-commerce – wholesale drop ship”); and other e-commerce sales (“wholesale – e-commerce”), collectively referred to as "e-commerce". The Company transfers control and recognizes revenue for merchandise sold that is shipped directly to an individual consumer upon delivery to the consumer. Landed wholesale Landed sales are wholesale sales in which the merchandise is shipped directly to the customer from the Company’s warehouses. Many customers purchasing footwear on a landed basis arrange their own transportation of merchandise and, with limited exceptions, control is transferred at the time of shipment. First-cost wholesale First-cost sales are wholesale sales in which the Company purchases merchandise from an international factory that manufactures the product and subsequently sells to a customer at an overseas port. Revenue is recognized at the time the merchandise is delivered to the customer’s designated freight forwarder and control is transferred to the customer. Licensing and royalty The Company has license agreements with third parties allowing them to sell the Company’s branded product, or other merchandise that uses the Company’s owned or licensed brand names. These license agreements provide the licensee access to the Company’s symbolic intellectual property, and revenue is therefore recognized over the license term. For royalty contracts that do not have guaranteed minimums, the Company recognizes revenue as the licensee’s sales occur. For royalty contracts that have guaranteed minimums, revenue for the guaranteed minimum is recognized on a straight-line basis during the term, until such time that the cumulative royalties exceed the total minimum guarantee. Up-front payments are recognized over the contractual term to which the guaranteed minimum relates. ​ 11 Table of Contents The Company also licenses its Famous Footwear trade name and logo to a third-party financial institution to offer Famous Footwear-branded credit cards to its consumers. The Company receives royalties based upon cardholder spending, which is recognized as licensing revenue at the time when the credit card is used. Contract Balances Revenue is recorded at the transaction price, net of estimates for variable consideration for which reserves are established, including returns, allowances and discounts. Variable consideration is estimated using the expected value method and given the large number of contracts with similar characteristics, the portfolio approach is applied to determine the variable consideration for each revenue stream. Reserves for projected returns are based on historical patterns and current expectations. Information about significant contract balances from contracts with customers is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ($ thousands) October 29, 2022 October 30, 2021 January 29, 2022 Customer allowances and discounts ​ $ 23,164 ​ $ 20,277 ​ $ 20,328 Loyalty programs liability ​ 17,690 ​ 18,354 ​ 18,814 Returns reserve ​ 16,619 ​ 15,704 ​ 12,468 Gift card liability ​ 5,718 ​ 5,034 ​ 6,804 ​ Changes in contract balances with customers generally reflect differences in relative sales volume for the periods presented. In addition, during the thirty-nine weeks ended October 29, 2022, the loyalty programs liability increased $ 32.5 million due to points and material rights earned on purchases and decreased $ 33.6 million due to expirations and redemptions. During the thirty-nine weeks ended October 30, 2021, the loyalty programs liability increased $ 27.4 million due to points and material rights earned on purchases and decreased $ 23.0 million due to expirations and redemptions. The liability for loyalty programs is presented within other accrued expenses when earned and is generally expected to be recognized as revenue within one year. The gift card liability is established upon the sale of a gift card and revenue is recognized either upon redemption of the gift card by the consumer or based upon the gift card breakage rate, which is generally within the 24-month period following the sale of the gift card. ​ The following table summarizes the activity in the Company’s allowance for expected credit losses during the thirty-nine weeks ended October 29, 2022 and October 30, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirty-Nine Weeks Ended ($ thousands) October 29, 2022 ​ October 30, 2021 Balance, beginning of period ​ $ 9,601 ​ $ 14,928 Adjustment to expected credit losses ​ ​ ( 303 ) ​ ​ ( 2,711 ) Uncollectible accounts written off, net of recoveries ​ ​ ( 300 ) ​ ​ ( 2,724 ) Balance, end of period ​ $ 8,998 ​ $ 9,493 ​ ​ ​ ​ ​ Note 4 Earnings Per Share The Company uses the two-class method to compute basic and diluted earnings per common share attributable to Caleres, Inc. shareholders. In periods of net loss, no effect is given to the Company’s participating securities since they do not contractually participate in the losses of ​ 12 Table of Contents the Company. The following table sets forth the computation of basic and diluted earnings per common share attributable to Caleres, Inc. shareholders for the periods ended October 29, 2022 and October 30, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended ​ Thirty-Nine Weeks Ended ($ thousands, except per share amounts) October 29, 2022 October 30, 2021 October 29, 2022 October 30, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ NUMERATOR ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net earnings $ 38,992 ​ $ 59,685 ​ $ 140,529 ​ $ 104,222 Net loss (earnings) attributable to noncontrolling interests 254 ​ ( 63 ) ​ 404 ​ ( 1,057 ) Net earnings attributable to Caleres, Inc. $ 39,246 ​ $ 59,622 ​ $ 140,933 ​ $ 103,165 Net earnings allocated to participating securities ( 1,723 ) ​ ( 2,140 ) ​ ( 5,951 ) ​ ( 3,737 ) Net earnings attributable to Caleres, Inc. after allocation of earnings to participating securities $ 37,523 ​ $ 57,482 ​ $ 134,982 ​ $ 99,428 ​ ​ ​ ​ DENOMINATOR ​ ​ ​ Denominator for basic earnings per common share attributable to Caleres, Inc. shareholders 34,379 ​ 36,889 ​ 35,207 ​ 36,825 Dilutive effect of share-based awards 507 ​ 457 ​ 450 ​ 294 Denominator for diluted earnings per common share attributable to Caleres, Inc. shareholders 34,886 ​ 37,346 ​ 35,657 ​ 37,119 ​ ​ ​ ​ Basic earnings per common share attributable to Caleres, Inc. shareholders $ 1.09 ​ $ 1.56 ​ $ 3.83 ​ $ 2.70 ​ ​ ​ ​ Diluted earnings per common share attributable to Caleres, Inc. shareholders $ 1.08 ​ $ 1.54 ​ $ 3.79 ​ $ 2.68 ​ Options to purchase 16,667 shares of common stock for both the thirteen and thirty-nine weeks ended October 29, 2022 and October 30, 2021 were not included in the denominator for diluted earnings per common share attributable to Caleres, Inc. shareholders because the effect would be anti-dilutive. During the thirteen and thirty-nine weeks ended October 29, 2022, the Company repurchased 838,025 and 2,622,845 shares, respectively, under the 2019 and 2022 publicly announced share repurchase programs, which permit repurchases of up to 5.0 million and 7.0 million shares, respectively. The Company did no t repurchase any shares under the share repurchase programs during the thirty-nine weeks ended October 30, 2021. Refer to further discussion in Item 2, Unregistered Sales of Equity Securities and Use of Proceeds . ​ Note 5 Restructuring and Other Special Charges Organizational Change During the thirteen and thirty-nine weeks ended October 29, 2022, the Company incurred costs of $ 2.9 million ($ 2.7 million on an after-tax basis, or $ 0.07 per diluted share) related to a CFO transition at the corporate headquarters, with no corresponding charges for the thirty-nine weeks ended October 30, 2021. These costs were recognized as restructuring and other special charges in the condensed consolidated statement of earnings within the Eliminations and Other category. ​ 13 Table of Contents Blowfish Mandatory Purchase Obligation In 2018, the Company acquired a controlling interest in Blowfish Malibu. The remaining interest was subject to a mandatory purchase obligation after a three-year period, which ended on July 31, 2021, based upon an earnings multiple formula as specified in the purchase agreement. Approximately $ 9.0 million was initially assigned to the mandatory purchase obligation and fair value adjustments were recorded as interest expense. The fair value adjustments on the mandatory purchase obligation totaled $ 1.9 million ( $ 1.4 million on an after-tax basis, or $ 0.04 per diluted share) and $ 15.4 million ( $ 11.5 million on an after-tax basis, or $ 0.30 per diluted share) for the thirteen and thirty-nine weeks ended October 30, 2021, respectively. There were no corresponding charges during the thirty-nine weeks ended October 29, 2022. The mandatory purchase obligation was settled for $ 54.6 million on November 4, 2021. Refer to further discussion regarding the mandatory purchase obligation in Note 14 to the condensed consolidated financial statements . Brand Portfolio – Business Exits During the thirty-nine weeks ended October 30, 2021, the Company incurred costs of $ 13.5 million ($ 11.9 million on an after-tax basis, or $ 0.31 per diluted share) related to the strategic realignment of the Naturalizer retail store operations. These costs primarily represented lease termination and other store closure costs, including employee severance, for the 73 stores that were closed during the first quarter of 2021. These charges are presented in restructuring and special charges on the condensed consolidated statement of earnings within the Brand Portfolio segment for the thirty-nine weeks ended October 30, 2021. There were no corresponding charges during the thirty-nine weeks ended October 29, 2022. As of October 29, 2022 and October 30, 2021, reserves of $ 0.0 million and $ 2.5 million, respectively, were included on the condensed consolidated balance sheets. Note 6 Business Segment Information Following is a summary of certain key financial measures for the Company’s business segments for the periods ended October 29, 2022 and October 30, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Famous ​ Brand ​ Eliminations ​ ​ ​ ($ thousands) Footwear Portfolio and Other Total Thirteen Weeks Ended October 29, 2022 ​ ​ ​ ​ ​ ​ ​ ​ Net sales ​ $ 481,951 ​ $ 323,242 ​ $ ( 6,935 ) ​ $ 798,258 Intersegment sales (1) ​ — ​ ​ 6,935 ​ ​ — ​ 6,935 Operating earnings (loss) ​ 59,267 ​ 22,304 ​ ( 27,724 ) ​ 53,847 Segment assets ​ 833,268 ​ 955,712 ​ 159,333 ​ 1,948,313 ​ ​ ​ ​ ​ Thirteen Weeks Ended October 30, 2021 ​ ​ ​ ​ Net sales ​ $ 494,660 ​ $ 300,513 ​ $ ( 11,017 ) ​ $ 784,156 Intersegment sales (1) ​ — ​ 11,017 ​ — ​ 11,017 Operating earnings (loss) ​ 87,375 ​ 11,383 ​ ( 17,440 ) ​ 81,318 Segment assets ​ 736,858 ​ 909,175 ​ 228,525 ​ 1,874,558 ​ ​ ​ ​ ​ Thirty-Nine Weeks Ended October 29, 2022 ​ ​ ​ ​ ​ ​ ​ ​ Net sales ​ $ 1,302,828 ​ $ 1,013,043 ​ $ ( 44,167 ) ​ $ 2,271,704 Intersegment sales (1) ​ — ​ 44,167 ​ — ​ 44,167 Operating earnings (loss) ​ 171,451 ​ 93,063 ​ ( 76,052 ) ​ 188,462 ​ ​ ​ ​ ​ Thirty-Nine Weeks Ended October 30, 2021 ​ ​ ​ ​ Net sales ​ $ 1,346,413 ​ $ 789,832 ​ $ ( 37,922 ) ​ $ 2,098,323 Intersegment sales (1) ​ — ​ 37,922 ​ — ​ 37,922 Operating earnings (loss) ​ 220,746 ​ 25,116 ​ ( 83,883 ) ​ 161,979 (1) Included in net sales in the Brand Portfolio segment and eliminated in the Eliminations and Other category. The Eliminations and Other category includes corporate assets, administrative expenses and other costs and recoveries, which are not allocated to the operating segments, as well as the elimination of intersegment sales and profit. ​ 14 Table of Contents Following is a reconciliation of operating earnings to earnings before income taxes: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended ​ Thirty-Nine Weeks Ended ($ thousands) October 29, 2022 October 30, 2021 October 29, 2022 October 30, 2021 Operating earnings ​ $ 53,847 ​ $ 81,318 ​ $ 188,462 ​ $ 161,979 Interest expense, net ​ ( 4,003 ) ​ ( 5,069 ) ​ ( 8,886 ) ​ ( 28,803 ) Loss on early extinguishment of debt ​ — ​ ( 649 ) ​ — ​ ( 649 ) Other income, net ​ 2,997 ​ 3,844 ​ 9,636 ​ 11,533 Earnings before income taxes ​ $ 52,841 ​ $ 79,444 ​ $ 189,212 ​ $ 144,060 ​ ​ Note 7 Inventories The Company’s net inventory balance was comprised of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ($ thousands) October 29, 2022 October 30, 2021 January 29, 2022 Raw materials ​ $ 21,044 ​ $ 14,951 ​ $ 16,764 Work-in-process ​ 629 ​ 581 ​ 614 Finished goods ​ 627,584 ​ 527,686 ​ 579,429 Inventories, net ​ $ 649,257 ​ $ 543,218 ​ $ 596,807 ​ ​ Note 8 Goodwill and Intangible Assets Goodwill and intangible assets were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ($ thousands) October 29, 2022 October 30, 2021 January 29, 2022 Intangible Assets ​ ​ ​ Famous Footwear ​ $ 2,800 ​ $ 2,800 ​ $ 2,800 Brand Portfolio ​ 342,083 ​ 342,083 ​ 342,083 Total intangible assets ​ 344,883 ​ 344,883 ​ 344,883 Accumulated amortization ​ ( 131,419 ) ​ ( 119,214 ) ​ ( 122,336 ) Total intangible assets, net ​ 213,464 ​ 225,669 ​ 222,547 Goodwill ​ ​ ​ Brand Portfolio (1) ​ 4,956 ​ 4,956 ​ 4,956 Total goodwill ​ 4,956 ​ 4,956 ​ 4,956 Goodwill and intangible assets, net ​ $ 218,420 ​ $ 230,625 ​ $ 227,503 (1) The carrying amount of goodwill as of October 29, 2022, October 30, 2021 and January 29, 2022 is presented net of accumulated impairment charges of $ 415.7 million. ​ 15 Table of Contents The Company’s intangible assets as of October 29, 2022, October 30, 2021 and January 29, 2022 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ($ thousands) October 29, 2022 ​ Estimated Useful Lives ​ ​ Accumulated Accumulated ​ ​ ​ ​ (In Years) ​ Cost Basis ​ Amortization ​ Impairment ​ Net Carrying Value Trade names 2 - 40 ​ $ 299,488 ​ $ 119,461 ​ $ 10,200 ​ $ 169,827 Trade names Indefinite ​ 107,400 ​ — ​ 92,000 ​ 15,400 Customer relationships 15 - 16 44,200 11,958 4,005 28,237 ​ ​ ​ ​ $ 451,088 ​ $ 131,419 ​ $ 106,205 ​ $ 213,464 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ October 30, 2021 ​ Estimated Useful Lives ​ ​ Accumulated Accumulated ​ ​ ​ ​ (In Years) ​ Cost Basis ​ Amortization ​ Impairment ​ Net Carrying Value Trade names 2 - 40 ​ $ 299,488 ​ $ 109,545 ​ $ 10,200 ​ $ 179,743 Trade names Indefinite ​ 107,400 ​ — ​ 92,000 ​ 15,400 Customer relationships 15 - 16 44,200 9,669 4,005 30,526 ​ ​ ​ ​ $ 451,088 ​ $ 119,214 ​ $ 106,205 ​ $ 225,669 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ January 29, 2022 ​ Estimated Useful Lives ​ ​ Accumulated Accumulated ​ ​ ​ ​ (In Years) ​ Cost Basis ​ Amortization ​ Impairment ​ Net Carrying Value Trade names 2 - 40 ​ $ 299,488 ​ $ 112,061 ​ $ 10,200 ​ $ 177,227 Trade names Indefinite ​ 107,400 ​ — ​ 92,000 ​ 15,400 Customer relationships 15 - 16 44,200 10,275 4,005 29,920 ​ ​ ​ ​ $ 451,088 ​ $ 122,336 ​ $ 106,205 ​ $ 222,547 ​ Amortization expense related to intangible assets was $ 3.0 million and $ 3.1 million for the thirteen weeks ended October 29, 2022 and October 30, 2021, respectively, and $ 9.1 million and $ 9.4 million for the thirty-nine weeks ended October 29, 2022 and October 30, 2021, respectively. The Company estimates that amortization expense related to intangible assets will be approximately $ 12.1 million in 2022, $ 11.9 million in 2023 and $ 11.0 million in each of the fiscal years 2024, 2025 and 2026 . Goodwill is tested for impairment at least annually, or more frequently if events or circumstances indicate it might be impaired, using either the qualitative assessment or a quantitative fair value-based test. The Company recorded no goodwill impairment charges during the thirty-nine weeks ended October 29, 2022 or October 30, 2021. Indefinite-lived intangible assets are tested for impairment as of the first day of the fourth quarter of each fiscal year unless events or circumstances indicate an interim test is required. The Company recorded no impairment charges for indefinite-lived intangible assets during the thirty-nine weeks ended October 29, 2022 or October 30, 2021. Note 9 Leases The Company leases all of its retail locations, a manufacturing facility, and certain office locations, distribution centers and equipment. At contract inception, leases are evaluated and classified as either operating or finance leases. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Lease right-of-use assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term. The majority of the Company’s leases do not provide an implicit rate and therefore, the Company uses an incremental borrowing rate based on information available at the commencement date to determine the present value of future payments. For operating leases, lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Variable lease payments are expensed as incurred. The Company regularly analyzes the results of all of its stores and assesses the viability of underperforming stores to determine whether events or circumstances exist that indicate the stores should be closed or whether the carrying amount of their long-lived assets may not be recoverable. After allowing for an appropriate start-up period and consideration of any unusual nonrecurring events, property and equipment ​ 16 Table of Contents at stores and the lease right-of-use assets indicated as impaired are written down to fair value as calculated using a discounted cash flow method. The fair value of the lease right-of-use assets is determined utilizing projected cash flows for each store location, discounted using a risk-adjusted discount rate, subject to a market floor based on current market lease rates. The Company recorded no asset impairment charges in the thirteen weeks and asset impairment charges of $ 2.0 million for the thirty-nine weeks ended October 29, 2022. For the thirteen and thirty-nine weeks ended October 30, 2021, the Company recorded asset impairment charges of $ 1.1 million and $ 3.4 million, respectively. The impairment charges are primarily related to capitalized software and underperforming retail stores. Refer to Note 14 to the condensed consolidated financial statements for further discussion on these impairment charges. As a result of the temporary store closures during the first half of 2020 associated with the pandemic, certain leases were amended to provide rent abatements and/or deferral of lease payments. Deferred payments continue to be reflected in lease obligations on the condensed consolidated balance sheets. Under relief provided by the FASB, entities could make a policy election to account for COVID-19-related lease concessions as if the enforceable rights existed under the original contract, accounting for them as variable rent rather than lease modifications. The Company made a policy election to account for rent abatements as variable rent. Accordingly, during the thirteen and thirty-nine weeks ended October 29, 2022, the Company recorded $ 0.4 million and $ 1.1 million, respectively, in lease concessions as a reduction of rent expense within selling and administrative expenses in the condensed consolidated statements of earnings. During the thirteen and thirty-nine-weeks October 30, 2021, the Company recorded $ 0.1 million and $ 1.7 million, respectively, in lease concessions. Rent concessions for leases that were extended were recognized as a lease modification. During the thirty-nine weeks ended October 29, 2022, the Company entered into new or amended leases that resulted in the recognition of right-of-use assets and lease obligations of $ 130.7 million on the condensed consolidated balance sheets. As of October 29, 2022, the Company has entered into lease commitments for five retail locations for which the leases have not yet commenced. The Company anticipates that one lease will begin in the current fiscal year and four leases will begin in the next fiscal year. Upon commencement, right-of-use assets and lease liabilities of approximately $ 0.9 million will be recorded in the current fiscal year and $ 3.4 million will be recorded in the next fiscal year on the condensed consolidated balance sheets. The components of lease expense for the thirteen and thirty-nine weeks ended October 29, 2022 and October 30, 2021 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended ($ thousands) ​ October 29, 2022 October 30, 2021 Operating lease expense $ 38,116 $ 35,140 Variable lease expense ​ 10,679 ​ 10,982 Short-term lease expense ​ 970 ​ 737 Sublease income ​ — ​ ( 419 ) Total lease expense ​ $ 49,765 ​ $ 46,440 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirty-Nine Weeks Ended ($ thousands) ​ October 29, 2022 October 30, 2021 Operating lease expense $ 109,810 $ 112,838 Variable lease expense ​ 29,567 ​ 30,985 Short-term lease expense ​ 3,340 ​ 2,011 Sublease income ​ ( 59 ) ​ ( 477 ) Total lease expense ​ $ 142,658 ​ $ 145,357 ​ Supplemental cash flow information related to leases is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirty-Nine Weeks Ended ($ thousands) October 29, 2022 October 30, 2021 Cash paid for lease liabilities (1) ​ $ 125,967 ​ $ 140,930 Cash received from sublease income ​ 59 ​ 477 (1) Cash paid for lease liabilities for the thirty-nine weeks ended October 29, 2022 includes payment of certain lease payments deferred in 2020, as described above, as well as lease termination costs associated with the Naturalizer retail store closings, as further discussed in Note 5 to the condensed consolidated financial statement s. ​ ​ ​ ​ 17 Table of Contents Note 10 Financing Arrangements Credit Agreement The Company maintains a revolving credit facility for working capital needs. The Company is the lead borrower, and Sidney Rich Associates, Inc., BG Retail, LLC, Allen Edmonds LLC, Vionic Group LLC and Vionic International LLC are each co-borrowers and guarantors. On April 8, 2022, Blowfish, LLC was joined to the Credit Agreement as a co-borrower and guarantor. On October 5, 2021, the Company entered into a Fifth Amendment to Fourth Amended and Restated Credit Agreement (as so amended, the "Credit Agreement") which, among other modifications, decreased the amount available under the revolving credit facility by $ 100.0 million to an aggregate amount of up to $ 500.0 million, subject to borrowing base restrictions, and may be increased by up to $ 250.0 million. The Credit Agreement also decreased the spread applied to the London Interbank Offered Rate (“LIBOR”) or prime rate by a total of 75 basis points. Borrowing availability under the Credit Agreement is limited to the lesser of the total commitments and the borrowing base ("Loan Cap"), which is based on stated percentages of the sum of eligible accounts receivable, eligible inventory and eligible credit card receivables, as defined, less applicable reserves. Under the Credit Agreement, the Loan Parties’ obligations are secured by a first-priority security interest in all accounts receivable, inventory and certain other collateral. Interest on borrowings is at variable rates based on LIBOR (with a floor of 0.0 %), or the prime rate (as defined in the Credit Agreement), plus a spread. The interest rate and fees for letters of credit vary based upon the level of excess availability under the Credit Agreement. There is an unused line fee payable on the unused portion under the facility and a letter of credit fee payable on the outstanding face amount under letters of credit. The Credit Agreement limits the Company’s ability to create, incur, assume or permit to exist additional indebtedness and liens, make investments or specified payments, give guarantees, pay dividends, make capital expenditures and merge or acquire or sell assets. In addition, if excess availability falls below the greater of 10.0 % of the Loan Cap and $ 40.0 million for three consecutive business days, and the fixed charge coverage ratio is less than 1.25 to 1.0, the Company would be in default under the Credit Agreement and certain additional covenants would be triggered. The Credit Agreement contains customary events of default, including, without limitation, payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to similar obligations, certain events of bankruptcy and insolvency, judgment defaults and the failure of any guaranty or security document supporting the agreement to be in full force and effect. If an event of default occurs, the collateral agent may assume dominion and control over the Company’s cash (a “cash dominion event”) until such event of default is cured or waived or the excess availability exceeds such amount for 30 consecutive days, provided that a cash dominion event shall be deemed continuing (even if an event of default is no longer continuing and/or excess availability exceeds the required amount for 30 consecutive business days) after a cash dominion event has occurred and been discontinued on two occasions in any 12-month period. The Credit Agreement also contains certain other covenants and restrictions. The Company was in compliance with all covenants and restrictions under the Credit Agreement as of October 29, 2022. At October 29, 2022, the Company had $ 364.5 million of borrowings outstanding and $ 10.1 million in letters of credit outstanding under the Credit Agreement. Total additional borrowing availability was $ 125.4 million at October 29, 2022. Senior Notes On July 27, 2015, the Company issued $ 200.0 million aggregate principal amount of senior notes due on August 15, 2023 (the "Senior Notes"). The Senior Notes bore interest at 6.25 %, which was payable on February 15 and August 15 of each year. The Senior Notes were guaranteed on a senior unsecured basis by each of the Company’s subsidiaries that is a borrower or guarantor under the Credit Agreement. On August 16, 2021, the Company redeemed $ 100.0 million of Senior Notes at 100.0 %. In addition, on January 3, 2022, the remaining $ 100.0 million of Senior Notes were redeemed at 100.0 %, extinguishing the Company’s long-term debt. ​ Loss on Early Extinguishment of Debt In conjunction with the early redemption of the Senior Notes in August 2021 and the amendment of the revolving credit facility in October 2021, the Company incurred losses totaling $ 0.6 million. ​ ​ 18 Table of Contents Note 11 Shareholders’ Equity Accumulated Other Comprehensive Loss The following table sets forth the changes in accumulated other comprehensive loss (OCL) by component for the periods ended October 29, 2022 and October 30, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pension and ​ Accumulated ​ ​ Foreign ​ Other ​ Other ​ ​ Currency ​ Postretirement ​ Comprehensive ($ thousands) ​ Translation ​ Transactions (1) ​ (Loss) Income Balance at July 30, 2022 ​ $ ( 485 ) ​ $ ( 6,795 ) ​ $ ( 7,280 ) Other comprehensive loss before reclassifications ​ ​ ( 815 ) ​ ​ — ​ ​ ( 815 ) Reclassifications: ​ ​ ​ ​ ​ ​ Amounts reclassified from accumulated other comprehensive loss ​ ​ — ​ ​ 994 ​ ​ 994 Tax benefit ​ — ​ ( 86 ) ​ ( 86 ) Net reclassifications ​ — ​ 908 ​ 908 Other comprehensive (loss) income ​ ( 815 ) ​ 908 ​ 93 Balance at October 29, 2022 ​ $ ( 1,300 ) ​ $ ( 5,887 ) ​ $ ( 7,187 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at July 31, 2021 ​ $ ( 260 ) ​ $ ( 8,312 ) ​ $ ( 8,572 ) Other comprehensive loss before reclassifications ​ ( 257 ) ​ — ​ ( 257 ) Reclassifications: ​ ​ ​ Amounts reclassified from accumulated other comprehensive loss ​ — ​ 445 ​ 445 Tax benefit ​ — ​ ( 87 ) ​ ( 87 ) Net reclassifications ​ — ​ 358 ​ 358 Other comprehensive (loss) income ​ ( 257 ) ​ 358 ​ 101 Balance at October 30, 2021 ​ $ ( 517 ) ​ $ ( 7,954 ) ​ $ ( 8,471 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at January 29, 2022 ​ $ ( 788 ) ​ $ ( 7,818 ) ​ $ ( 8,606 ) Other comprehensive loss before reclassifications ​ ( 512 ) ​ — ​ ( 512 ) Reclassifications: ​ ​ ​ ​ Amounts reclassified from accumulated other comprehensive loss ​ — ​ 2,348 ​ 2,348 Tax benefit ​ — ​ ( 417 ) ​ ( 417 ) Net reclassifications ​ — ​ 1,931 ​ 1,931 Other comprehensive (loss) income ​ ( 512 ) ​ 1,931 ​ 1,419 Balance at October 29, 2022 ​ $ ( 1,300 ) ​ $ ( 5,887 ) ​ $ ( 7,187 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at January 30, 2021 ​ $ ( 111 ) ​ $ ( 9,025 ) ​ $ ( 9,136 ) Other comprehensive loss before reclassifications ​ ( 406 ) ​ — ​ ( 406 ) Reclassifications: ​ ​ ​ ​ Amounts reclassified from accumulated other comprehensive loss ​ — ​ 1,340 ​ 1,340 Tax benefit ​ — ​ ( 269 ) ​ ( 269 ) Net reclassifications ​ — ​ 1,071 ​ 1,071 Other comprehensive (loss) income ​ ( 406 ) ​ 1,071 ​ 665 Balance at October 30, 2021 ​ $ ( 517 ) ​ $ ( 7,954 ) ​ $ ( 8,471 ) (1) Amounts reclassified are included in other income, net. Refer to Note 13 to the condensed consolidated financial statements for additional information related to pension and other postretirement benefits. ​ Note 12 Share-Based Compensation The Company recognized share-based compensation expense of $ 5.0 million and $ 3.4 million during the thirteen weeks and $ 13.2 million and $ 8.8 million during the thirty-nine weeks ended October 29, 2022 and October 30, 2021, respectively. ​ 19 Table of Contents The Company had net issuances (repurchases) of 20,699 and ( 10,554 ) shares of common stock during the thirteen weeks ended October 29, 2022 and October 30, 2021, respectively, for restricted stock grants, stock performance awards issued to employees and common and restricted stock grants issued to non-employee directors, net of forfeitures and shares withheld to satisfy the tax withholding requirement. During the thirty-nine weeks ended October 29, 2022 and October 30, 2021, the Company had net issuances of 621,154 and 291,306 shares of common stock, respectively, related to share-based plans. Restricted Stock The following table summarizes restricted stock activity for the periods ended October 29, 2022 and October 30, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended ​ ​ ​ Thirteen Weeks Ended ​ ​ October 29, 2022 ​ ​ ​ October 30, 2021 ​ ​ ​ ​ ​ Weighted- ​ ​ ​ ​ ​ ​ Weighted- ​ ​ Total Number ​ ​ Average ​ ​ ​ Total Number ​ ​ Average ​ ​ of Restricted ​ ​ Grant Date ​ ​ ​ of Restricted ​ ​ Grant Date ​ Shares ​ Fair Value ​ Shares ​ Fair Value July 30, 2022 ​ 1,579,202 ​ $ 17.53 ​ July 31, 2021 ​ 1,380,246 ​ $ 14.05 Granted ​ 45,050 ​ ​ 26.65 ​ Granted ​ — ​ ​ — Forfeited ​ ( 15,500 ) ​ ​ 21.00 ​ Forfeited ​ ( 9,500 ) ​ ​ 15.72 Vested ( 58,000 ) ​ 13.16 Vested ( 3,500 ) ​ 26.42 October 29, 2022 1,550,752 ​ $ 17.92 ​ October 30, 2021 1,367,246 ​ $ 14.01 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirty-Nine Weeks Ended ​ ​ ​ Thirty-Nine Weeks Ended ​ October 29, 2022 ​ October 30, 2021 ​ ​ ​ ​ Weighted- ​ ​ ​ ​ ​ Weighted- ​ ​ Total Number ​ Average ​ ​ ​ Total Number ​ Average ​ ​ of Restricted ​ Grant Date ​ ​ ​ of Restricted ​ Grant Date ​ ​ Shares ​ Fair Value ​ ​ ​ Shares ​ Fair Value January 29, 2022 1,390,397 ​ $ 14.24 ​ January 30, 2021 1,397,227 ​ $ 16.74 Granted 726,720 ​ 21.45 ​ Granted 568,916 ​ 18.73 Forfeited ( 95,716 ) ​ 15.35 ​ Forfeited ( 78,375 ) ​ 15.48 Vested ( 470,649 ) ​ 13.02 ​ Vested ( 520,522 ) ​ 26.26 October 29, 2022 1,550,752 ​ $ 17.92 ​ October 30, 2021 1,367,246 ​ $ 14.01 ​ The Company granted 45,050 restricted shares during the thirteen weeks ended October 29, 2022, which have a graded-vesting term of three years , with 50 % vesting after two years and 50 % after three years . Of the 726,720 restricted shares granted during the thirty-nine weeks ended October 29, 2022, 716,250 restricted shares have a graded-vesting term of three years , with 50 % vesting after two years and 50 % after three years , and 10,470 shares have a cliff-vesting term of one year . There were no restricted shares granted during the thirteen weeks ended October 30, 2021. Of the 568,916 restricted shares granted during the thirty-nine weeks October 30 2021, 544,006 shares have a graded-vesting term of three years , with 50 % vesting after two years and 50 % after three years , 20,000 shares have a cliff-vesting term of two years and 4,910 shares have a cliff-vesting term of one year . Performance Awards During the thirty-nine weeks ended October 29, 2022, the Company granted performance share awards for a targeted 87,750 shares, with a weighted-average grant date fair value of $ 20.99 in connection with the 2020 performance award. During the thirty-nine weeks ended October 30, 2021, the Company granted performance share awards for a targeted 175,500 shares, with a weighted-average grant date fair value of $ 18.63 . There were no performance-based share awards granted by the Company during the thirteen weeks ended October 29, 2022 or October 30, 2021. Vesting of performance-based awards is generally dependent upon the financial performance of the Company and the attainment of certain financial goals during the three-year period following the grant. At the end of the vesting period, the employee will have earned an amount of shares or units between 0 % and 200 % of the targeted award, depending on the achievement of the specified financial goals for the service period. Compensation expense is recognized based on the fair value of the award and the anticipated number of shares or units to be awarded for each tranche in accordance with the vesting schedule of the units over the three-year service period. In connection with the Company’s CFO transition during the thirteen weeks ended October 29, 2022, the Company approved the accelerated vesting of 30,000 performance-based share awards, representing two of the four award tranches from the 2020 performance award. The ​ 20 Table of Contents performance conditions had been satisfied for the two award tranches based on the achievement of financial goals for the 2020 and 2021 fiscal periods. The modification to accelerate vesting eliminated the remaining service requirement. These awards had a weighted-average grant date fair value of $ 13.05 per share, but were revalued using a fair value on the date of modification of $ 24.31 per share. The modification of these awards resulted in incremental compensation expense of $ 0.4 million, which is presented in restructuring and other special charges on the condensed consolidated statements of earnings for the thirteen and thirty-nine weeks ended October 29, 2022. ​ During the thirty-nine weeks ended October 29, 2022, the Company granted long-term incentive awards payable in cash for the 2022-2024 performance period, with a target value of $ 8.3 million and a maximum value of $ 16.6 million. During the thirty-nine weeks ended October 30, 2021, the Company granted long-term incentive awards payable in cash for the 2021-2023 performance period, with a target value of $ 6.5 million and a maximum value of $ 13.0 million. These awards, which vest after a three-year period, are dependent upon the attainment of certain financial goals of the Company for each of the three years and individual achievement of strategic initiatives over the cumulative period of the award. The estimated values of the awards, which are reflected within other liabilities on the condensed consolidated balance sheets, are being expensed ratably over the three-year performance period. There were no performance-based awards payable in cash granted by the Company during the thirteen weeks ended October 29, 2022 or October 30, 2021. ​ Restricted Stock Units for Non-Employee Directors Equity-based grants may be made to non-employee directors in the form of restricted stock units ("RSUs") payable in cash or common stock at no cost to the non-employee director. The RSUs are subject to a vesting requirement (usually one year) and earn dividend equivalents at the same rate as dividends on the Company’s common stock. The dividend equivalents, which vest immediately, are automatically re-invested in additional RSUs. Expense related to the initial grant of RSUs is recognized ratably over the vesting period based upon the fair value of the RSUs. The RSUs payable in cash are remeasured at the end of each period. Expense for the dividend equivalents is recognized at fair value when the dividend equivalents are granted. Gains and losses resulting from changes in the fair value of the RSUs payable in cash subsequent to the vesting period and through the settlement date are recognized in the Company’s condensed consolidated statements of earnings. The Company granted 1,314 and 1,739 RSUs to non-employee directors for dividend equivalents, during the thirteen weeks ended October 29, 2022 and October 30, 2021, respectively, with weighted-average grant date fair values of $ 24.30 and $ 22.49 , respectively. The Company granted 41,325 and 44,180 RSUs to non-employee directors, including 4,680 and 4,900 for dividend equivalents, during the thirty-nine weeks ended October 29, 2022 and October 30, 2021, respectively, with weighted-average grant date fair values of $ 27.23 and $ 27.03 , respectively. ​ ​ 21 Table of Contents Note 13 Retirement and Other Benefit Plans The following table sets forth the components of net periodic benefit income for the Company, including the domestic and Canadian plans: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pension Benefits Other Postretirement Benefits ​ Thirteen Weeks Ended ​ Thirteen Weeks Ended ($ thousands) ​ October 29, 2022 October 30, 2021 October 29, 2022 October 30, 2021 Service cost ​ $ 1,786 ​ $ 1,872 ​ $ — ​ $ — Interest cost ​ 2,997 ​ 2,811 ​ 9 ​ 8 Expected return on assets ​ ( 6,997 ) ​ ( 7,108 ) ​ — ​ — Amortization of: ​ ​ ​ ​ ​ ​ Actuarial loss (gain) ​ 779 ​ 601 ​ ( 26 ) ​ ( 27 ) Prior service income ​ ( 79 ) ​ ( 129 ) ​ — ​ — Settlement cost ​ 320 ​ — ​ — ​ — Total net periodic benefit income ​ $ ( 1,194 ) ​ $ ( 1,953 ) ​ $ ( 17 ) ​ $ ( 19 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pension Benefits Other Postretirement Benefits ​ Thirty-Nine Weeks Ended ​ Thirty-Nine Weeks Ended ($ thousands) October 29, 2022 October 30, 2021 October 29, 2022 October 30, 2021 Service cost ​ $ 5,358 ​ $ 5,615 ​ $ — ​ $ — Interest cost ​ 8,994 ​ 8,430 ​ 27 ​ 28 Expected return on assets ​ ( 21,005 ) ​ ( 21,331 ) ​ — ​ — Amortization of: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Actuarial loss (gain) ​ 2,343 ​ 1,808 ​ ( 78 ) ​ ( 82 ) Prior service income ​ ( 237 ) ​ ( 386 ) ​ — ​ — Settlement cost ​ 320 ​ — ​ — ​ — Total net periodic benefit income ​ $ ( 4,227 ) ​ $ ( 5,864 ) ​ $ ( 51 ) ​ $ ( 54 ) ​ The non-service cost components of net periodic benefit income are included in other income, net in the condensed consolidated statements of earnings. Service cost is included in selling and administrative expenses. ​ Note 14 Fair Value Measurements Fair Value Hierarchy Fair value measurement disclosure requirements specify a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptions other market participants would use based upon market data obtained from independent sources (“observable inputs”) or reflect the Company’s own assumptions of market participant valuation (“unobservable inputs”). In accordance with the fair value guidance, the inputs to valuation techniques used to measure fair value are categorized into three levels based on the reliability of the inputs as follows: ● Level 1 – Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities; ● Level 2 – Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly; and ● Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. ​ In determining fair value, the Company uses valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company also considers counterparty credit risk in its assessment of fair value. Classification of the financial or non-financial asset or liability within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. ​ 22 Table of Contents Measurement of Fair Value The Company measures fair value as an exit price, the price to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date, using the procedures described below for all financial and non-financial assets and liabilities measured at fair value. Money Market Funds The Company periodically invests in cash equivalents consisting of short-term money market funds backed by U.S. Treasury securities to preserve the Company’s capital for the purpose of funding operations. It does not enter into money market funds for trading or speculative purposes. The fair value is based on unadjusted quoted market prices for the funds in active markets with sufficient volume and frequency (Level 1). Non-Qualified Deferred Compensation Plan Assets and Liabilities The Company maintains a non-qualified deferred compensation plan (the “Deferred Compensation Plan”) for the benefit of certain management employees. The investment funds offered to the participants generally correspond to the funds offered in the Company’s 401(k) plan, and the account balance fluctuates with the investment returns on those funds. The Deferred Compensation Plan permits the deferral of up to 50 % of base salary and 100 % of compensation received under the Company’s annual incentive plan. The deferrals are held in a separate trust, which has been established by the Company to administer the Deferred Compensation Plan. The assets of the trust are subject to the claims of the Company’s creditors in the event that the Company becomes insolvent. Consequently, the trust qualifies as a grantor trust for income tax purposes (i.e., a “Rabbi Trust”). The liabilities of the Deferred Compensation Plan are presented in other accrued expenses and the assets held by the trust are classified within prepaid expenses and other current assets in the condensed consolidated balance sheets. Changes in deferred compensation plan assets and liabilities are charged to selling and administrative expenses. The fair value is based on unadjusted quoted market prices for the funds in active markets with sufficient volume and frequency (Level 1). Deferred Compensation Plan for Non-Employee Directors Non-employee directors are eligible to participate in a deferred compensation plan with deferred amounts valued as if invested in the Company’s common stock through the use of phantom stock units (“PSUs”). Under the plan, each participating director’s account is credited with the number of PSUs equal to the number of shares of the Company’s common stock that the participant could purchase or receive with the amount of the deferred compensation, based upon the average of the high and low prices of the Company’s common stock on the last trading day of the fiscal quarter when the cash compensation was earned. Dividend equivalents are paid on PSUs at the same rate as dividends on the Company’s common stock and are re-invested in additional PSUs at the next fiscal quarter-end. The liabilities of the plan are based on the fair value of the outstanding PSUs and are presented in other accrued expenses (current portion) or other liabilities in the condensed consolidated balance sheets. Gains and losses resulting from changes in the fair value of the PSUs are presented in selling and administrative expenses in the Company’s condensed consolidated statements of earnings. The fair value of each PSU is based on an unadjusted quoted market price for the Company’s common stock in an active market with sufficient volume and frequency on each measurement date (Level 1). Restricted Stock Units for Non-Employee Directors Under the Company’s incentive compensation plans, cash-equivalent restricted stock units (“RSUs”) of the Company were previously granted at no cost to non-employee directors. These cash-equivalent RSUs are subject to a vesting requirement (usually one year ), earn dividend-equivalent units, and are settled in cash on the date the director terminates service or such earlier date as a director may elect, subject to restrictions, based on the then current fair value of the Company’s common stock. The fair value of each cash-equivalent RSU is based on an unadjusted quoted market price for the Company’s common stock in an active market with sufficient volume and frequency on each measurement date (Level 1). Additional information related to RSUs for non-employee directors is disclosed in Note 12 to the condensed consolidated financial statements. Mandatory Purchase Obligation The Company recorded a mandatory purchase obligation of the remaining interest in conjunction with the acquisition of Blowfish Malibu in July 2018. The fair value of the mandatory purchase obligation was based on the earnings formula specified in the purchase agreement (Level 3). Fair value adjustments on the mandatory purchase obligation were recorded as interest expense. There were no fair value adjustments for the thirteen and thirty-nine weeks ended October 29, 2022. The Company recorded fair value adjustments of $ 1.9 million and $ 15.4 million for the thirteen and thirty-nine weeks ended October 30, 2021, respectively. The mandatory purchase obligation of $ 54.6 million was paid on November 4, 2021. Refer to further discussion of the mandatory purchase obligation in Note 5 to the condensed consolidated financial statements. ​ 23 Table of Contents The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis at October 29, 2022, October 30, 2021 and January 29, 2022. During the thirty-nine weeks ended October 29, 2022 and October 30, 2021, there were no transfers into or out of Level 3. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements ($ thousands) Total Level 1 Level 2 Level 3 Asset (Liability) ​ ​ ​ ​ ​ ​ ​ ​ October 29, 2022: ​ ​ ​ ​ ​ ​ ​ ​ Non-qualified deferred compensation plan assets ​ $ 7,769 ​ $ 7,769 ​ $ — ​ $ — Non-qualified deferred compensation plan liabilities ​ ( 7,769 ) ​ ( 7,769 ) ​ — ​ ​ — Deferred compensation plan liabilities for non-employee directors ​ ( 1,805 ) ​ ( 1,805 ) ​ — ​ ​ — Restricted stock units for non-employee directors ​ ( 2,220 ) ​ ( 2,220 ) ​ — ​ ​ — October 30, 2021: ​ ​ ​ ​ ​ ​ ​ ​ Cash equivalents – money market funds ​ $ 35,000 ​ $ 35,000 ​ $ — ​ $ — Non-qualified deferred compensation plan assets ​ ​ 7,789 ​ ​ 7,789 ​ ​ — ​ ​ — Non-qualified deferred compensation plan liabilities ​ ( 7,789 ) ​ ( 7,789 ) ​ — ​ ​ — Deferred compensation plan liabilities for non-employee directors ​ ( 1,764 ) ​ ( 1,764 ) ​ — ​ ​ — Restricted stock units for non-employee directors ​ ( 2,558 ) ​ ( 2,558 ) ​ — ​ ​ — Mandatory purchase obligation - Blowfish Malibu ​ ( 54,558 ) ​ — ​ — ​ ​ ( 54,558 ) January 29, 2022: ​ ​ ​ ​ ​ ​ ​ ​ Non-qualified deferred compensation plan assets ​ 7,463 ​ 7,463 ​ — ​ ​ — Non-qualified deferred compensation plan liabilities ​ ( 7,463 ) ​ ( 7,463 ) ​ — ​ ​ — Deferred compensation plan liabilities for non-employee directors ​ ( 1,770 ) ​ ( 1,770 ) ​ — ​ ​ — Restricted stock units for non-employee directors ​ ( 2,568 ) ​ ( 2,568 ) ​ — ​ ​ — ​ Impairment Charges The Company assesses the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors the Company considers important that could trigger an impairment review include underperformance relative to historical or projected future operating results, a significant change in the manner of the use of the asset, or a negative industry or economic trend. When the Company determines that the carrying value of long-lived assets may not be recoverable based upon the existence of one or more of the aforementioned factors, impairment is measured based on a projected discounted cash flow method. Certain factors, such as estimated store sales and expenses, used for this nonrecurring fair value measurement are considered Level 3 inputs as defined by FASB ASC Topic 820, Fair Value Measurement . Long-lived assets held and used with a carrying amount of $ 564.6 million and $ 542.3 million at October 29, 2022 and October 30, 2021, respectively, were assessed for indicators of impairment. This assessment resulted in the following impairment charges, primarily for capitalized software and operating lease right-of-use assets, leasehold improvements and furniture and fixtures in the Company’s retail stores. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended ​ Thirty-Nine Weeks Ended ($ thousands) October 29, 2022 October 30, 2021 October 29, 2022 October 30, 2021 Long-Lived Asset Impairment Charges ​ ​ ​ ​ Famous Footwear ​ $ — ​ $ 400 ​ $ 419 ​ $ 1,200 Brand Portfolio ​ — ​ 711 ​ 1,560 ​ 2,199 Total long-lived asset impairment charges ​ $ — ​ $ 1,111 ​ $ 1,979 ​ $ 3,399 ​ Fair Value of the Company’s Other Financial Instruments The fair values of cash and cash equivalents (excluding money market funds discussed above), receivables and trade accounts payable approximate their carrying values due to the short-term nature of these instruments. ​ 24 Table of Contents The carrying amounts and fair values of the Company’s other financial instruments subject to fair value disclosures are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ October 29, 2022 October 30, 2021 January 29, 2022 ($ thousands) Carrying Value (1) Fair Value Carrying Value (1) Fair Value Carrying Value (1) Fair Value Borrowings under revolving credit agreement ​ $ 364,500 ​ $ 364,500 ​ $ 175,000 ​ $ 175,000 ​ $ 290,000 ​ $ 290,000 Current portion of long-term debt ​ ​ — ​ ​ — ​ ​ 100,000 ​ ​ 100,000 ​ ​ — ​ ​ — Total debt ​ $ 364,500 ​ $ 364,500 ​ $ 275,000 ​ $ 275,000 ​ $ 290,000 ​ $ 290,000 (1) Excludes unamortized debt issuance costs and debt discount The fair values of borrowings under revolving credit agreement and current portion of long-term debt approximate their carrying values due to the short-term nature of these borrowings (Level 1). ​ Note 15 Income Taxes The Company’s consolidated effective tax rate can vary considerably from period to period, depending on a number of factors. The Company’s consolidated effective tax rates were 26.2 % and 24.9 % for the thirteen weeks ended October 29, 2022 and October 30, 2021, respectively. The higher effective tax rate for the thirteen weeks ended October 29, 2022 was driven by an increase in permanent adjustments, primarily due to the non-deductible portion of executive compensation. The Company’s consolidated effective tax rate was 25.7 % for the thirty-nine weeks ended October 29, 2022, compared to 27.7 % for the nine months ended October 30, 2021. The higher effective tax rate for the thirty-nine weeks ended October 30, 2021 primarily reflects the incremental valuation allowances for the Company’s deferred tax assets for certain jurisdictions recorded in the thirty-nine weeks ended October 30, 2021, as well as the non-deductibility of losses at the Company’s Canadian division, which were driven by exit-related costs associated with Naturalizer retail stores in the first quarter of 2021. As of October 29, 2022, no deferred taxes have been provided on the accumulated unremitted earnings of the Company’s foreign subsidiaries that are not subject to United States income tax, beyond the amounts recorded for the one-time transition tax for the mandatory deemed repatriation of cumulative foreign earnings, as required by the Tax Cuts and Jobs Act. The Company periodically evaluates its international investment opportunities and plans, as well as its international working capital needs, to determine the level of investment required and, accordingly, determines the level of international earnings that is considered indefinitely reinvested. Based upon that evaluation, earnings of the Company’s international subsidiaries that are not otherwise subject to United States taxation are considered to be indefinitely reinvested, and accordingly, deferred taxes have not been provided. If changes occur in future investment opportunities and plans, those changes will be reflected when known and may result in providing residual United States deferred taxes on unremitted international earnings. ​ Note 16 Commitments and Contingencies Environmental Remediation Prior operations included numerous manufacturing and other facilities for which the Company may have responsibility under various environmental laws for the remediation of conditions that may be identified in the future. The Company is involved in environmental remediation and ongoing compliance activities at several sites and has been notified that it is or may be a potentially responsible party at several other sites. Redfield The Company is remediating, under the oversight of Colorado authorities, the groundwater and indoor air at its owned facility in Colorado (the “Redfield site” or, when referring to remediation activities at or under the facility, the “on-site remediation”) and residential neighborhoods adjacent to and near the property (the “off-site remediation”) that have been affected by solvents previously used at the facility. The on-site remediation calls for the operation of a pump and treat system (which prevents migration of contaminated groundwater off the property) as the final remedy for the site, subject to monitoring and periodic review of the on-site conditions and other remedial technologies that may be developed in the future. In 2016, the Company submitted a revised plan to address on-site conditions, including direct treatment of source areas, and received approval from the oversight authorities to begin implementing the revised plan. ​ 25 Table of Contents As the treatment of the on-site source areas progresses, the Company expects to convert the pump and treat system to a passive treatment barrier system. Off-site groundwater concentrations have been reducing over time since installation of the pump and treat system in 2000 and injection of clean water beginning in 2003. However, localized areas of contaminated bedrock just beyond the property line continue to impact off-site groundwater. The modified work plan for addressing this condition includes converting the off-site bioremediation system into a monitoring well network and employing different remediation methods in these recalcitrant areas. In accordance with the work plan, a pilot test was conducted of certain groundwater remediation methods and the results of that test were used to develop more detailed plans for remedial activities in the off-site areas, which were approved by the authorities and are being implemented in a phased manner. The results of groundwater monitoring are being used to evaluate the effectiveness of these activities. The Company continues to implement the expanded remedy work plan that was approved by the oversight authorities in 2015. Based on the progress of the direct remedial action of on-site conditions, the Company submitted a request to the oversight authorities for permission to convert the perimeter pump and treat active remediation system to a passive one. In 2019, a final response was received from the oversight authorities, which is allowing the Company to proceed with implementation of the revised plan on a portion of the treatment system. The Company continues to pursue approval from the oversight authorities for the full conversion of the perimeter pump and treat active remediation system to a passive one. The Company also continues to work with the oversight authorities on the off-site work plan. The cumulative expenditures for both on-site and off-site remediation through October 29, 2022 were $ 33.0 million. The Company has recovered a portion of these expenditures from insurers and other third parties. The reserve for the anticipated future remediation activities at October 29, 2022 is $ 9.7 million, of which $ 8.7 million is recorded within other liabilities and $ 1.0 million is recorded within other accrued expenses. Of the total $ 9.7 million reserve, $ 5.0 million is for off-site remediation and $ 4.7 million is for on-site remediation. The liability for the on-site remediation was discounted at 4.8 %. On an undiscounted basis, the on-site remediation liability would be $ 13.4 million as of October 29, 2022. The Company expects to spend approximately $ 0.6 million in 2022, $ 0.1 million in each of the following four years and $ 12.4 million in the aggregate thereafter related to the on-site remediation. Other Various federal and state authorities have identified the Company as a potentially responsible party for remediation at certain other sites. However, the Company does not currently believe that its liability for such sites, if any, would be material. The Company continues to evaluate its remediation plans in conjunction with its environmental consultants and records its best estimate of remediation liabilities. However, future actions and the associated costs are subject to oversight and approval of various governmental authorities. Accordingly, the ultimate costs may vary, and it is possible costs may exceed the recorded amounts. Litigation The Company is involved in legal proceedings and litigation arising in the ordinary course of business. In the opinion of management, the outcome of such ordinary course of business proceedings and litigation currently pending is not expected to have a material adverse effect on the Company’s results of operations or financial position. Legal costs associated with litigation are expensed as incurred. ​ ​ 26 Table of Contents