What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-12-11 compared with 2024-09-12 · 179 added, 180 removed, 189 unchanged (66% of the section changed)

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Based on the current macroeconomic environment and our recent operating results, we believe the following trends may continue to impact our business and operating results:

ERP Implementation

We are in the process of a multi-year cloud-based ERP implementation.

The first phase of the implementation, including the wholesale and financial modules, went live in the second quarter of 2024.

The implementation brought operational challenges, as several key reports were delayed, resulting in a lack of visibility to the data and tools we rely on to manage our wholesale business.

As a result, net sales were unfavorably impacted during the quarter in our Brand Portfolio segment related to our wholesale business and our direct-to-consumer channels, including our e-commerce and drop-ship platforms.

While our business operations and financial results for the second quarter of 2024 were adversely impacted by the implementation, we believe we have taken the necessary steps to address the issues that temporarily impacted our visibility.

Macroeconomic Environment

Macroeconomic factors, including, among others, inflation, elevated interest rates, increased real estate costs and higher consumer debt levels continued to impact consumer discretionary spending and our financial results during the first half of 2024.

We continued to experience lighter consumer traffic in our retail stores during the second quarter, resulting in lower net sales.

We continued to experience lighter consumer traffic in our retail stores during the third quarter, resulting in lower net sales.

While we believe that the structural changes we have implemented in the last few years, as well as our diversified model and operational discipline, enable the Company to drive value in a variety of market conditions, changes in macro-level consumer spending trends may continue to adversely impact our financial results in the future.

We believe our focus on cost control and our commitment to execute our clearly defined strategic initiatives have positioned us for sustainable, long-term growth.

Our liquidity position remains strong, with $51.8 million in cash and cash equivalents and excess availability on our revolving credit agreement of $344.1 million as of August 3, 2024.

Borrowings on our revolving credit agreement totaled $146.5 million as of August 3, 2024.

During the first half of 2024, we reduced the borrowings on our revolving credit agreement by $35.5 million.

While our interest expense for the remainder of 2024 will continue to be negatively impacted by the elevated interest rates, we expect to continue to reduce the borrowings under our revolving credit agreement to mitigate the impact of the high interest rate environment.

Our liquidity position remains strong, with $33.4 million in cash and cash equivalents and excess availability on our revolving credit agreement of $252.1 million as of November 2, 2024.

During the nine months ended November 2, 2024, borrowings on our revolving credit agreement increased by $53.8 million to $238.5 million, primarily driven by $65.5 million of our common stock repurchases under our share repurchase programs.

While our interest expense during the fourth quarter of 2024 will continue to be negatively impacted by the elevated interest rates, we expect to reduce the borrowings under our revolving credit agreement to mitigate the impact of the high interest rate environment.

Financial Highlights

Highlights of our consolidated and segment results for the second quarter of 2024 and 2023 are as follows:

Highlights of our consolidated and segment results for the third quarter of 2024 and 2023 are as follows:

Thirteen Weeks Ended

($ millions, except per share amounts)

August 3, 2024

July 29, 2023

November 2, 2024

October 28, 2023

Consolidated net sales

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Thirteen Weeks Ended

Twenty-Six Weeks Ended

August 3, 2024

July 29, 2023

August 3, 2024

July 29, 2023

Thirty-Nine Weeks Ended

November 2, 2024

October 28, 2023

November 2, 2024

October 28, 2023

Cost of goods sold

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Income tax provision

Net earnings attributable to noncontrolling interests

Net (loss) earnings attributable to noncontrolling interests

Net earnings attributable to Caleres, Inc.

Net sales decreased $12.2 million, or 1.8%, to $683.3 million for the second quarter of 2024, compared to $695.5 million for the second quarter of 2023, driven by a $15.4 million, or 5.1%, decline in net sales for our Brand Portfolio segment due primarily to lower wholesale sales.

Our net sales in the second quarter of 2024 were unfavorably impacted by operational disruptions related to the launch of our new cloud-based ERP system, primarily while our e-commerce and drop-ship platforms were either offline or ramping up after the launch.

As we progressed through the quarter, the development of several key operational reports was delayed, resulting in a lack of visibility to certain data and tools we rely on to manage the wholesale business.

In addition, during the second quarter of 2024, we continued to experience weakness in sandals and dress footwear, while our fashion sneakers and casual footwear categories both experienced gains compared to the second quarter of 2023.

The decrease in the Brand Portfolio segment net sales was partially offset by an increase in net sales in the Famous Footwear segment of $6.1 million, or 1.5% during the second quarter of 2024.

Our kids business continued to perform well during the second quarter, while certain adult footwear categories underperformed.

We also experienced growth in sales from our owned e-commerce businesses, which increased approximately 4.7% on a consolidated basis compared to the second quarter of 2023.

Our direct-to-consumer sales represented approximately 75% of consolidated net sales for the second quarter of 2024, compared to 74% in the second quarter of 2023.

We remain focused on maximizing the vertical opportunity between the Famous Footwear and Brand Portfolio segments, with Dr.

Scholl’s, LifeStride, Naturalizer and Blowfish Malibu representing four of Famous Footwear’s top 20 best-selling footwear brands during the quarter.

Net sales decreased $15.8 million, or 1.2%, to $1,342.5 million for the six months ended August 3, 2024, compared to $1,358.3 million for the six months ended July 29, 2023.

Net sales for our Brand Portfolio segment decreased $23.7 million, or 3.8% during the first six months of 2024, compared to the first six months of 2023.

This decrease was partially offset by an increase in net sales for Famous Footwear of

$6.4 million, or 0.8%, in the first six months of 2024, compared to the first six months of 2023, due in part to a decline in customer traffic in our retail stores.

Comparable sales declined 2.6% in the six months ended August 3, 2024.

On a consolidated basis, our direct-to-consumer sales grew to approximately 72% of total net sales for the six months ended August 3, 2024, compared to 71% for the six months ended July 29, 2023.

Gross profit decreased $3.3 million, or 1.0%, to $310.9 million for the second quarter of 2024, compared to $314.2 million for the second quarter of 2023.

As a percentage of net sales, gross profit increased to 45.5% for the second quarter of 2024, compared to 45.2% for the second quarter of 2023, driven by improvement in the Brand Portfolio segment gross margin.

The increase primarily reflects higher merchandise margins and a higher mix of retail sales, including e-commerce sales from our owned brands and sales from our branded retail stores, both of which have higher gross margins than our wholesale sales.

These increases were partially offset by a decrease in the gross margin in the Famous Footwear segment, driven by higher levels of promotional activity.

Gross profit decreased $3.1 million, or 0.5%, to $620.0 million for the six months ended August 3, 2024, compared to $616.9 million for the six months ended July 29, 2023.

As a percentage of net sales, gross profit increased to 46.2% for the six months ended August 3, 2024, compared to 45.4% for the six months ended July 29, 2023, driven by an increase in the gross margin of our Brand Portfolio segment, partially offset by a decrease in the gross margin of our Famous Footwear segment, due to the same factors described above.

Net sales decreased $21.0 million, or 2.8%, to $740.9 million for the third quarter of 2024, compared to $761.9 million for the third quarter of 2023, driven by a $21.5 million, or 4.8%, decline in net sales for our Famous Footwear segment largely due to the retail calendar shift associated with the 53 rd week in fiscal year 2023, as well as softer seasonal demand in the boots category.

The decrease in the Famous

Footwear segment net sales was partially offset by an increase in net sales in the Brand Portfolio segment of $2.2 million, or 0.7% during the third quarter of 2024, with our brands with premium positioning generally outperforming our other brands.

We also experienced growth in sales from our owned e-commerce businesses, which increased approximately 2.1% on a consolidated basis compared to the third quarter of 2023.

Our direct-to-consumer sales represented approximately 72% of consolidated net sales for the third quarter of 2024, compared to 73% in the third quarter of 2023.

We remain focused on maximizing the vertical opportunity between the Famous Footwear and Brand Portfolio segments, with LifeStride, Dr.

Scholl’s, Naturalizer and Blowfish Malibu representing four of Famous Footwear’s top 20 best-selling footwear brands during the quarter.

Net sales decreased $36.7 million, or 1.7%, to $2,083.5 million for the nine months ended November 2, 2024, compared to $2,120.2 million for the nine months ended October 28, 2023.

Net sales for our Brand Portfolio segment decreased $21.6 million, or 2.3% during the nine months ended November 2, 2024, compared to the nine months ended October 28, 2023.

In addition, net sales for our Famous Footwear segment decreased $15.1 million, or 1.2%, in the nine months ended November 2, 2024, compared to the nine months ended October 28, 2023, due in part to a decline in customer traffic in our retail stores.

Comparable sales decreased 0.9% in the nine months ended November 2, 2024.

On a consolidated basis, our direct-to-consumer sales were approximately 72% of total net sales for both the nine months ended November 2, 2024 and the nine months ended October 28, 2023.

Gross profit decreased $13.4 million, or 3.9%, to $327.0 million for the third quarter of 2024, compared to $340.4 million for the third quarter of 2023.

As a percentage of net sales, gross profit decreased to 44.1% for the third quarter of 2024, compared to 44.7% for the third quarter of 2023, driven by a decrease in the gross margin of our Famous Footwear segment, partially offset by a slight increase in the gross margin of our Brand Portfolio segment.

The lower gross margin at Famous Footwear reflects an increase in promotional activity and higher clearance sales, partially due to aged boot inventory.

In addition, we experienced higher freight costs, due in part to the higher mix of e-commerce sales.

Gross profit decreased $10.3 million, or 1.1%, to $946.9 million for the nine months ended November 2, 2024, compared to $957.2 million for the nine months ended October 28, 2023.

As a percentage of net sales, gross profit increased to 45.5% for the nine months ended November 2, 2024, compared to 45.1% for the nine months ended October 28, 2023, driven by an increase in the gross margin of our Brand Portfolio segment, reflecting higher merchandise margins and a higher mix of retail sales, including e-commerce sales from our owned brands and sales from our branded retail stores, both of which have higher gross margins than our wholesale sales.

This increase was partially offset by a decrease in the gross margin in the Famous Footwear segment, driven by higher levels of promotional activity and clearance sales.

We classify certain warehousing, distribution, sourcing and other inventory procurement costs in selling and administrative expenses.

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Selling and Administrative Expenses

Selling and administrative expenses increased $5.6 million, or 2.1%, to $268.4 million for the second quarter of 2024, compared to $262.8 million for the second quarter of 2023.

The increase was driven by a number of factors, including higher salary and benefit expenses, higher facilities costs, reflecting an increase in depreciation expense associated with the investment in Famous Footwear store renovations and upgrades to the FLAIR (Famous Localized and Immersive Retail) store concept and higher store rent expense as leases are renewed, higher marketing expenses driven by marketing investments for our Sam Edelman and Vionic brands, and higher information technology and consulting expense associated with the implementation of our cloud-based ERP platform.

These increases were partially offset by lower expenses for our cash and share-based incentive compensation.

As a percentage of net sales, selling and administrative expenses increased to 39.3% for the second quarter of 2024, from 37.8% for the second quarter of 2023.

Selling and administrative expenses increased $18.8 million, or 3.6%, to $534.7 million for the six months ended August 3, 2024, compared to $515.9 million for the six months ended July 29, 2023.

The increase was primarily due to higher salary and benefit expenses, higher marketing expenses driven by marketing investments for our Sam Edelman and Vionic brands and higher information technology and consulting expense associated with the implementation of our cloud-based ERP platform, partially offset by lower expenses for our cash and share-based incentive compensation.

As a percentage of net sales, selling and administrative expenses increased to 39.8% for the six months ended August 3, 2024, from 38.0% for the six months ended July 29, 2023.

Selling and administrative expenses decreased $5.0 million, or 1.8%, to $268.7 million for the third quarter of 2024, compared to $273.7 million for the third quarter of 2023.

The decrease was driven by lower expenses for our cash and share-based incentive compensation.

The decrease was partially offset by higher facilities costs, reflecting higher depreciation associated with the investment in Famous Footwear store renovations and upgrades and higher store rent expense as leases are renewed, higher salary and benefit expenses, higher information technology and consulting expense associated with the implementation of our cloud-based ERP platform, and higher marketing expenses driven by marketing investments for certain brands.

As a percentage of net sales, selling and administrative expenses increased to 36.2% for the third quarter of 2024, from 35.9% for the third quarter of 2023.

Selling and administrative expenses increased $13.7 million, or 1.7%, to $803.3 million for the nine months ended November 2, 2024, compared to $789.6 million for the nine months ended October 28, 2023.

The increase was primarily due to higher salary and benefit expenses, higher marketing expenses, higher information technology and consulting expense associated with the implementation of our cloud-based ERP platform, and higher facilities costs, partially offset by lower expenses for our cash and share-based incentive compensation.

As a percentage of net sales, selling and administrative expenses increased to 38.6% for the nine months ended November 2, 2024, from 37.2% for the nine months ended October 28, 2023.

Restructuring and Other Special Charges, Net

Restructuring and other special charges of approximately $1.7 million for the three and six months ended July 29, 2023 were associated with expense reduction initiatives, primarily severance.

Restructuring and other special charges of $1.6 million for the three and nine months ended November 2, 2024 were associated with restructuring costs, primarily severance.

Restructuring and other special charges of $2.3 million and $3.9 million for the three and nine months ended October 28, 2023, respectively, were associated with expense reduction initiatives.

Refer to Note 5 to the condensed consolidated financial statements for additional information related to these charges.

There were no corresponding charges for the six months ended A ugust 3, 2024.

Operating Earnings

Operating earnings decreased $7.2 million to $42.5 million for the second quarter of 2024, compared to $49.7 million for the second quarter of 2023, reflecting the factors described above.

As a percentage of net sales, operating earnings were 6.2% for the second quarter of 2024, compared to 7.1% for the second quarter of 2023.

Operating earnings decreased $14.0 million to $85.3 million for the six months ended August 3, 2024, compared to $99.3 million for the six months ended July 29, 2023, primarily reflecting lower net sales.

As a percentage of net sales, operating earnings were 6.4% for the six months ended August 3, 2024, compared to 7.3% for the six months ended July 29, 2023.

Operating earnings decreased $7.7 million to $56.7 million for the third quarter of 2024, compared to $64.4 million for the third quarter of 2023, reflecting the factors described above.

As a percentage of net sales, operating earnings were 7.7% for the third quarter of 2024, compared to 8.5% for the third quarter of 2023.

Operating earnings decreased $21.7 million to $142.0 million for the nine months ended November 2, 2024, compared to $163.7 million for the nine months ended October 28, 2023, primarily reflecting lower net sales.

As a percentage of net sales, operating earnings were 6.8% for the nine months ended November 2, 2024, compared to 7.7% for the nine months ended October 28, 2023.

Interest Expense, Net

Interest expense, net decreased $1.8 million, or 35.0%, to $3.3 million for the second quarter of 2024, compared to $5.1 million for the second quarter of 2023.

Interest expense, net decreased $3.7 million, or 33.9%, to $7.1 million for the six months ended August 3, 2024, compared to $10.8 million for the six months ended July 29, 2023.

The decreases reflect lower average borrowings on the revolving credit facility, partially offset by higher weighted-average interest rates.

Interest expense, net decreased $1.6 million, or 35.1%, to $2.9 million for the third quarter of 2024, compared to $4.5 million for the third quarter of 2023.

Interest expense, net decreased $5.3 million, or 34.2%, to $10.0 million for the nine months ended November 2, 2024, compared to $15.3 million for the nine months ended October 28, 2023.

The decreases primarily reflect lower average borrowings on the revolving credit facility.

The interest on our revolving credit facility is based on a variable rate, which adversely impacts our interest expense in the current elevated interest rate environment.

While our interest expense for the remainder of 2024 will continue to be adversely impacted by the elevated interest rates, we expect to reduce the borrowings under our revolving credit agreement to mitigate the impact of the high interest rate environment.

Other Income, Net

Other income, net decreased $0.4 million, or 27.2%, to $1.2 million for the second quarter of 2024, compared to $1.6 million for the second quarter of 2023, and decreased $0.9 million, or 30.2%, to $2.2 million for the six months ended August 3, 2024, compared to $3.1 million for the six months ended July 29, 2023.

Other income, net decreased $1.6 million to an immaterial amount for the third quarter of 2024, compared to $1.6 million for the third quarter of 2023, and decreased $2.5 million, or 52.7%, to $2.2 million for the nine months ended November 2, 2024, compared to $4.7 million for the nine months ended October 28, 2023.

The decreases are primarily attributable to higher amortization of the actuarial loss related to our pension plans.

Refer to Note 13 of the condensed consolidated financial statements for further information.

These decreases were partially offset by non-operating income associated with logistics services, which the Company began providing in the second half of 2023.

These decreases were partially offset by non-operating income associated with logistics services provided to a third party, which the Company began providing in the second half of 2023.

Income Tax Provision

Our effective tax rate can vary considerably from period to period, depending on a number of factors.

Our consolidated effective tax rate was 25.0% for the second quarter of 2024, compared to 25.6% for the second quarter of 2023.

Our consolidated effective tax rate was 24.0% for the six months ended August 3, 2024, compared to 24.5% for the six months ended July 29, 2023.

The lower effective tax rate was driven by discrete tax benefits related to share-based compensation of approximately $1.0 million in the six months ended August 3, 2024 compared to $0.6 million in the six months ended July 29, 2023.

Our consolidated effective tax rate was 23.6% for the third quarter of 2024, compared to 23.5% for the third quarter of 2023.

Our consolidated effective tax rate was 23.8% for the nine months ended November 2, 2024, compared to 24.1% for the nine months ended October 28, 2023.

The lower effective tax rate was driven by discrete tax benefits, primarily related to share-based compensation, of approximately $1.1 million in the nine months ended November 2, 2024, compared to $0.9 million in the nine months ended October 28, 2023.

In 2021, the Organization for Economic Cooperation and Development (OECD) released Pillar Two Global Anti-Base Erosion model rules, designed to ensure large corporations are taxed at a minimum rate of 15% in all countries of operation.

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Net earnings attributable to Caleres, Inc.

were $30.0 million and $60.9 million for the second quarter and six months ended August 3, 2024, respectively, compared to $33.9 million and $68.7 million for the second quarter and six months ended July 29, 2023, respectively, as a result of the factors described above.

were $41.4 million and $102.3 million for the third quarter and nine months ended November 2, 2024, respectively, compared to $46.9 million and $115.6 million for the third quarter and nine months ended October 28, 2023, respectively, as a result of the factors described above.

FAMOUS FOOTWEAR

Thirteen Weeks Ended

Twenty-Six Weeks Ended

August 3, 2024

July 29, 2023

August 3, 2024

July 29, 2023

Thirty-Nine Weeks Ended

November 2, 2024

October 28, 2023

November 2, 2024

October 28, 2023

($ millions, except sales per square foot)

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Impact of changes in Canadian exchange rate on sales

Sales per square foot, excluding e-commerce (thirteen and twenty-six weeks ended)

Sales per square foot, excluding e-commerce (thirteen and thirty-nine weeks ended)

Sales per square foot, excluding e-commerce (trailing twelve months)

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Ending stores

Net sales of $420.3 million in the second quarter of 2024 increased $6.1 million, or 1.5%, compared to the second quarter of 2023.

Comparable sales, which reflects the calendar shift due to the 53 rd week in 2023, decreased 2.9% driven primarily by a decrease in traffic in our retail stores.

Despite the continued challenging retail environment, we experienced growth in our e-commerce sales in the second quarter of 2024, and penetration increased to approximately 12% of net sales in the second quarter of 2024 compared to 11% in the second quarter of 2023.

While our kids category, which is a key differentiator for Famous Footwear, performed well by once again exceeding last year’s volume, we experienced a decline in our adult footwear categories.

We opened three stores and closed three stores during the second quarter of 2024, resulting in 855 stores and total square footage of 5.6 million at the end of the quarter, compared to 861 stores and total square footage of 5.7 million at the end of the second quarter of 2023.

Sales to members of our customer loyalty program, Famously You Rewards ("Rewards"), continue to account for a majority of the segment’s sales, with approximately 75% of our net sales made to program members in the second quarter of 2024, compared to 77% in the second quarter of 2023.

Net sales of $769.8 million in the six months ended August 3, 2024 increased $6.4 million, or 0.8%, compared to the six months ended July 29, 2023, primarily due to the factors described above.

Comparable sales declined 2.6% in the six months ended August 3, 2024, driven by a decline in customer traffic in our retail stores.

Athletics and casual continue to be our top-selling categories.

Net sales of $428.3 million in the third quarter of 2024 decreased $21.5 million, or 4.8%, compared to the third quarter of 2023 driven by the retail calendar shift associated with the 53 rd week in fiscal year 2023.

The shift resulted in one less week of our high-volume back-to-school selling season in the third quarter of 2024 compared to the third quarter of last year.

Comparable sales, which reflects the calendar shift, increased 2.5%.

We experienced a strong start to the third quarter of 2024 with the back-to-school selling season, but sales moderated as the quarter progressed.

During the third quarter of 2024, we experienced soft demand in our boots category due in part to the unseasonably warm fall weather.

Our sales were also adversely impacted by late product receipts of certain athletic footwear during the important back-to-school selling season.

Our kids category, which is a key differentiator for Famous Footwear, continues to outperform many of our categories.

Penetration of the kids category to total Famous Footwear sales was 25% in the third quarter of 2024.

Our athletics category performed well during the quarter, driven by several of our key brands.

We also experienced growth in our e-commerce sales and higher penetration of this channel in the third quarter of 2024.

Penetration of e-commerce sales increased to approximately 15% of net sales in the third quarter of 2024, compared to 13% in the third quarter of 2023.

We opened six stores and closed 10 stores during the third quarter of 2024, resulting in 851 stores and total square footage of 5.6 million at the end of the quarter, compared to 862 stores and total square footage of 5.7 million at the end of the third quarter of 2023.

Sales to members of our customer loyalty program, Famously You Rewards, continue to account for a majority of the segment’s sales, with approximately 74% of our net sales made to program members in the third quarter of 2024, compared to 77% in the third quarter of 2023.

Net sales of $1,198.1 million in the nine months ended November 2, 2024 decreased $15.1 million, or 1.2%, compared to the nine months ended October 28, 2023, primarily due to the same factors described for the third quarter.

Comparable sales declined 0.9% in the nine months ended November 2, 2024, driven by a decline in customer traffic in our retail stores.

Athletics and casual continue to be our top-selling categories, while sales in the fashion categories, including boots, were weaker.

We remain focused on maximizing the vertical opportunity between the Famous Footwear and Brand Portfolio segments, with Dr.

Scholl’s, LifeStride, Naturalizer and Blowfish Malibu representing four of Famous Footwear’s top 20 best-selling footwear brands for the six months ended August 3, 2024.

During the first half of 2024, we opened six stores and closed 11 stores.

During the six months ended August 3, 2024, we also converted 10 stores to the new FLAIR concept, which has been successful in driving sales growth.

We expect additional FLAIR store conversions in the second half of 2024.

Gross profit decreased $2.2 million, or 1.1%, to $189.3 million for the second quarter of 2024, compared to $191.5 million for the second quarter of 2023.

As a percentage of net sales, our gross profit decreased to 45.0% for the second quarter of 2024, from 46.2% for the second quarter of 2023 as a result of higher levels of promotional activity.

Gross profit decreased $0.3 million, or 0.1%, to $350.3 million for the six months ended August 3, 2024, compared to $350.6 million for the six months ended July 29, 2023.

As a percentage of net sales, our gross profit decreased to 45.5% for the six months ended August 3, 2024, compared to 45.9% for the six months ended July 29, 2023, driven by higher levels of promotional activity, partially offset by lower freight costs.

Scholl’s, LifeStride, Naturalizer and Blowfish Malibu representing four of Famous Footwear’s top 20 best-selling footwear brands for the nine months ended November 2, 2024.

During the first nine months of 2024, we opened 12 stores and closed 21 stores.

During the nine months ended November 2, 2024, we also converted 11 stores to the new FLAIR (Famous Localized and Immersive Retail) concept, which has been successful in driving sales growth, and ended the quarter with a total of 32 FLAIR stores.

Gross profit decreased $15.0 million, or 7.5%, to $183.8 million for the third quarter of 2024, compared to $198.8 million for the third quarter of 2023.

As a percentage of net sales, our gross profit decreased to 42.9% for the third quarter of 2024, from 44.2% for the third quarter of 2023 as a result of higher levels of promotional activity.

Higher levels of clearance selling, due in part to aged boot inventory, also negatively impacted our gross profit margin during the quarter.

In addition, we experienced higher freight costs, due in part to the higher mix of e-commerce sales.

Gross profit decreased $15.2 million, or 2.8%, to $534.2 million for the nine months ended November 2, 2024, compared to $549.4 million for the nine months ended October 28, 2023, driven by lower net sales.

As a percentage of net sales, our gross profit decreased to 44.6% for the nine months ended November 2, 2024, compared to 45.3% for the nine months ended October 28, 2023, driven by higher levels of promotional activity and clearance sales.

Selling and Administrative Expenses

Selling and administrative expenses increased $4.2 million, or 2.9%, to $154.9 million for the second quarter of 2024, compared to $150.7 million for the second quarter of 2023.

The increase was primarily driven by higher salary and benefits expenses and higher facilities costs, including depreciation expense, as we continued to invest in store renovations and upgrades to the FLAIR store concept.

As a percentage of net sales, selling and administrative expenses increased to 36.8% for the second quarter of 2024, compared to 36.4% for the second quarter of 2023.

Selling and administrative expenses increased $6.4 million, or 2.2%, to $299.1 million for the six months ended August 3, 2024, compared to $292.7 million for the six months ended July 29, 2023.

The increase was driven by the same factors as above.

As a percentage of net sales, selling and administrative expenses increased to 38.8% for the six months ended August 3, 2024, compared to 38.3% for the six months ended July 29, 2023.

Selling and administrative expenses increased $3.0 million, or 2.0%, to $154.0 million for the third quarter of 2024, compared to $151.0 million for the third quarter of 2023.

The increase was primarily driven by higher facilities costs, including depreciation expense associated with the investments in the FLAIR store concept, and higher salary and benefits expenses.

As a percentage of net sales, selling and administrative expenses increased to 36.0% for the third quarter of 2024, compared to 33.6% for the third quarter of 2023.

Selling and administrative expenses increased $9.4 million, or 2.1%, to $453.2 million for the nine months ended November 2, 2024, compared to $443.8 million for the nine months ended October 28, 2023.

The increase was driven by higher facilities costs and higher salary and benefits expenses, partially offset by lower marketing expenses.

As a percentage of net sales, selling and administrative expenses increased to 37.9% for the nine months ended November 2, 2024, compared to 36.6% for the nine months ended October 28, 2023.

Restructuring and Other Special Charges, Net

Restructuring and other special charges of $0.2 million for the three and six months ended July 29, 2023 were associated with expense reduction initiatives, primarily severance.

Restructuring and other special charges of $0.2 million for the three and nine months ended November 2, 2024 were associated with restructuring costs, primarily severance.

Restructuring and other special charges of $1.2 million and $1.3 million for the three and nine months ended October 28, 2023, respectively, were associated with expense reduction initiatives.

Refer to Note 5 to the condensed consolidated financial statements for additional information related to these charges.

There were no corresponding charges for the six months ended August 3, 2024.

Operating Earnings

Operating earnings decreased $6.2 million to $34.4 million for the second quarter of 2024, compared to $40.6 million for the second quarter of 2023, primarily reflecting the factors described above.

As a percentage of net sales, operating earnings declined to 8.2% for the second quarter of 2024, compared to 9.8% for the second quarter of 2023.

Operating earnings decreased $6.5 million to $51.2 million for the six months ended August 3, 2024, compared to $57.7 million for the six months ended July 29, 2023.

As a percentage of net sales, operating earnings were 6.7% for the six months ended August 3, 2024, compared to 7.6% for the six months ended July 29, 2023.

Operating earnings decreased $17.0 million to $29.6 million for the third quarter of 2024, compared to $46.6 million for the third quarter of 2023, primarily reflecting the factors described above.

As a percentage of net sales, operating earnings declined to 6.9% for the third quarter of 2024, compared to 10.4% for the third quarter of 2023.

Operating earnings decreased $23.5 million to $80.8 million for the nine months ended November 2, 2024, compared to $104.3 million for the nine months ended October 28, 2023.

As a percentage of net sales, operating earnings were 6.7% for the nine months ended November 2, 2024, compared to 8.6% for the nine months ended October 28, 2023.

BRAND PORTFOLIO

Thirteen Weeks Ended

Twenty-Six Weeks Ended

August 3, 2024

July 29, 2023

August 3, 2024

July 29, 2023

Thirty-Nine Weeks Ended

November 2, 2024

October 28, 2023

November 2, 2024

October 28, 2023

Cost of goods sold

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(1) Direct-to-consumer includes sales of our retail stores and e-commerce sites and sales through our customers’ websites that we fulfill on a drop-ship basis.

Net sales of $285.5 million in the second quarter of 2024 decreased $15.4 million, or 5.1%, compared to the second quarter of 2023 primarily driven by lower wholesale sales in the second quarter of 2024.

Our net sales in the second quarter were unfavorably impacted by operational disruptions related to the launch of our new cloud-based ERP system, primarily while our e-commerce and drop-ship platforms were either offline or ramping up after the launch.

During the second quarter of 2024, we opened three stores and closed three stores in the United States, resulting in a total of 61 stores, consistent with the second quarter of 2023.

In addition, we continued to expand our retail store presence in East Asia by opening six new Sam Edelman stores and closing one in the second quarter of 2024, resulting in a total of 43 stores, compared to 33 stores at the end of the second quarter of 2023.

There were also 106 international branded stores owned and operated by third parties through franchise agreements at August 3, 2024, compared to 97 international branded stores at July 29, 2023.

Net sales decreased $23.7 million, or 3.8%, to $602.7 million for the six months ended August 3, 2024, compared to $626.4 million for the six months ended July 29, 2023, reflecting softer demand associated with the challenging macroeconomic environment and competitive retail landscape.

Net sales of $322.9 million in the third quarter of 2024 increased $2.1 million, or 0.7%, compared to the third quarter of 2023.

During the third quarter of 2024, we continued to see strong demand for new products, with momentum in fashion sneakers and certain casual footwear categories, including slingbacks, Mary Janes and ballet flats.

We also had sales growth in our wide-shaft and tall boot categories, while our short boot category experienced soft demand.

Our brands with premium positioning generally outperformed our other brands in the quarter.

During the third quarter of 2024, we opened one store in the United States, resulting in a total of 62 stores, consistent with the third quarter of 2023.

In addition, we continued to expand our retail store presence in East Asia in the third quarter of 2024 by opening six new Sam Edelman stores and one new Naturalizer store.

During the third quarter of 2024, we closed one Naturalizer store, resulting in a total of 49 stores at the end of the third quarter of 2024, compared to 34 stores at the end of the third quarter of 2023.

There were also 113 international branded stores owned and operated by third parties through franchise agreements at November 2, 2024, compared to 97 international branded stores at October 28, 2023.

Net sales decreased $21.6 million, or 2.3%, to $925.6 million for the nine months ended November 2, 2024, compared to $947.2 million for the nine months ended October 28, 2023.

The sales decline was driven by lower wholesale sales, partially offset by solid growth in the e-commerce business.

Our brands with a heavy sneaker concentration, such as Dr.

Scholl’s and Vionic, performed better in the first half of 2024 than brands with a higher mix of sandals and dress footwear.

Our unfilled order position for our wholesale sales increased $4.8 million, or 1.9%, to $251.6 million at August 3, 2024, compared to $246.8 million at July 29, 2023.

Gross profit decreased $2.2 million, or 1.8%, to $121.9 million for the second quarter of 2024, compared to $124.1 million for the second quarter of 2023, driven by lower net sales.

As a percentage of net sales, our gross profit increased to 42.7% for the second quarter of 2024,

compared to 41.3% for the second quarter of 2023, primarily reflecting higher merchandise margins and a higher mix of retail sales, including e-commerce sales from our owned brands and sales from our branded retail stores, both of which have higher gross margins than our wholesale sales.

Gross profit increased $1.7 million, or 0.6%, to $269.7 million for the six months ended August 3, 2024, compared to $268.0 million for the six months ended July 29, 2023.

As a percentage of net sales, our gross profit increased to 44.7% for the six months ended August 3, 2024, compared to 42.8% for the six months ended July 29, 2023 reflecting higher merchandise margins and a higher mix of retail sales, including e-commerce sales from our owned brands and sales from our branded retail stores, both of which have higher gross margins than our wholesale sales.

Our net sales were unfavorably impacted by operational disruptions related to the launch of our new cloud-based ERP system in the second quarter of 2024, primarily while our e-commerce and drop-ship platforms were either offline or ramping up after the launch.

As we progressed through the second quarter, the development of several key operational reports was delayed, resulting in a lack of visibility to certain data and tools we rely on to manage the wholesale business.

The decrease in net sales also reflects softer demand associated with the challenging macroeconomic environment and competitive retail landscape.

Our unfilled order position for our wholesale sales increased $2.7 million, or 1.1%, to $246.6 million at November 2, 2024, compared to $243.9 million at October 28, 2023.

Gross profit increased $1.4 million, or 1.0%, to $141.6 million for the third quarter of 2024, compared to $140.2 million for the third quarter of 2023, driven by higher net sales.

As a percentage of net sales, our gross profit increased slightly to 43.8% for the third quarter of 2024, compared to 43.7% for the third quarter of 2023.

Gross profit increased $3.2 million, or 0.8%, to $411.3 million for the nine months ended November 2, 2024, compared to $408.1 million for the nine months ended October 28, 2023.

As a percentage of net sales, our gross profit increased to 44.4% for the nine months ended November 2, 2024, compared to 43.1% for the nine months ended October 28, 2023 reflecting higher merchandise margins and a higher mix of retail sales, including e-commerce sales from our owned brands and sales from our branded retail stores, both of which have higher gross margins than our wholesale sales.

Selling and Administrative Expenses

Selling and administrative expenses increased $1.9 million, or 1.9%, to $98.3 million for the second quarter of 2024, compared to $96.4 million for the second quarter of 2023.

The increase was primarily due to higher marketing expenses for certain brands, including Sam Edelman and Vionic.

As a percentage of net sales, selling and administrative expenses increased to 34.4% for the second quarter of 2024, compared to 32.1% for the second quarter of 2023.

Selling and administrative expenses increased $7.1 million, or 3.6%, to $204.7 million for the six months ended August 3, 2024, compared to $197.6 million for the six months ended July 29, 2023.

The increase was primarily due to higher marketing expenses for certain brands, including Sam Edelman and Vionic, higher salary and benefits expense and higher distribution expenses.

As a percentage of net sales, selling and administrative expenses increased to 33.9% for the six months ended August 3, 2024, compared to 31.6% for the six months ended July 29, 2023, reflecting deleveraging of expenses over lower net sales.

Selling and administrative expenses increased $5.3 million, or 5.3%, to $106.4 million for the third quarter of 2024, compared to $101.1 million for the third quarter of 2023.

The increase was primarily due to higher marketing expenses, higher salary and benefits expense and higher distribution expenses.

As a percentage of net sales, selling and administrative expenses increased to 33.0% for the third quarter of 2024, compared to 31.5% for the third quarter of 2023.

Selling and administrative expenses increased $12.4 million, or 4.1%, to $311.1 million for the nine months ended November 2, 2024, compared to $298.7 million for the nine months ended October 28, 2023.

The increase was primarily due to higher salary and benefits expense, higher marketing expenses for certain brands, including Sam Edelman and Vionic, and higher distribution expenses.

As a percentage of net sales, selling and administrative expenses increased to 33.6% for the nine months ended November 2, 2024, compared to 31.5% for the nine months ended October 28, 2023, reflecting deleveraging of expenses over lower net sales.

Restructuring and Other Special Charges, Net

Restructuring and other special charges of $0.9 million for the three and six months ended July 29, 2023 were associated with expense reduction initiatives, primarily severance.

Restructuring and other special charges of $1.1 million for the three and nine months ended November 2, 2024 were associated with restructuring costs, primarily severance.

Restructuring and other special charges of $0.9 million and $1.7 million for the three and nine months ended October 28, 2023, respectively, were associated with expense reduction initiatives.

Refer to Note 5 to the condensed consolidated financial statements for additional information related to these charges.

There were no corresponding charges for the six months ended August 3, 2024.

Operating Earnings

Operating earnings decreased to $23.6 million for the second quarter of 2024, from $26.8 million for the second quarter of 2023, as a result of the factors described above.

As a percentage of net sales, operating earnings were 8.3% for the second quarter of 2024, compared to 8.9% for the second quarter of 2023.

Operating earnings decreased to $65.0 million for the six months ended August 3, 2024, compared to $69.5 million for the six months ended July 29, 2023, as a result of the factors described above.

As a percentage of net sales, operating earnings were 10.8% for the six months ended August 3, 2024, compared to 11.1% in the six months ended July 29, 2023.

Operating earnings decreased to $34.1 million for the third quarter of 2024, from $38.2 million for the third quarter of 2023, as a result of the factors described above.

As a percentage of net sales, operating earnings were 10.5% for the third quarter of 2024, compared to 11.9% for the third quarter of 2023.

Operating earnings decreased to $99.1 million for the nine months ended November 2, 2024, compared to $107.7 million for the nine months ended October 28, 2023, as a result of the factors described above.

As a percentage of net sales, operating earnings were 10.7% for the nine months ended November 2, 2024, compared to 11.4% in the nine months ended October 28, 2023.

ELIMINATIONS AND OTHER

Thirteen Weeks Ended

Twenty-Six Weeks Ended

August 3, 2024

July 29, 2023

August 3, 2024

July 29, 2023

Thirty-Nine Weeks Ended

November 2, 2024

October 28, 2023

November 2, 2024

October 28, 2023

Cost of goods sold

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The Eliminations and Other category includes the elimination of intersegment sales and profit, unallocated corporate administrative expenses, and other costs and recoveries.

The net sales elimination of $22.5 million for the second quarter of 2024 is $2.9 million, or 14.8%, higher than the second quarter of 2023, reflecting an increase in product sold from our Brand Portfolio segment to Famous Footwear.

The net sales elimination of $30.0 million for the six months ended August 3, 2024 is $1.5 million, or 4.7%, lower than the six months ended July 29, 2023, reflecting a decrease in product sold from our Brand Portfolio segment to Famous Footwear.

Selling and administrative expenses decreased $0.6 million, to $15.2 million in the second quarter of 2024, compared to $15.8 million for the second quarter of 2023.

The decrease primarily reflects lower expenses for our cash and share-based incentive compensation, partially offset by higher information technology and consulting expenses associated with the implementation of our cloud-based ERP platform compared to the second quarter of 2023.

Selling and administrative expenses increased $5.3 million, to $30.9 million for the six months ended August 3, 2024, compared to $25.6 million for the six months ended July 29, 2023.

The increase primarily reflects higher information technology and consulting expenses associated with the implementation of our cloud-based ERP platform, partially offset by lower expenses related to our cash and share-based incentive compensation.

Restructuring and other special charges of $0.6 million for the three and six months ended July 29, 2023 were associated with expense reduction initiatives at our corporate headquarters.

The net sales elimination of $10.3 million for the third quarter of 2024 is $1.7 million, or 18.7%, higher than the third quarter of 2023, reflecting an increase in product sold from our Brand Portfolio segment to Famous Footwear.

The net sales elimination of $40.3 million for the nine months ended November 2, 2024 is $0.1 million higher than the nine months ended October 28, 2023.

Selling and administrative expenses decreased $13.4 million, to $8.1 million in the third quarter of 2024, compared to $21.5 million for the third quarter of 2023.

The decrease reflects lower expenses for our cash and share-based incentive compensation, partially offset by higher information technology and consulting expenses associated with the implementation of our cloud-based ERP platform.

Selling and administrative expenses decreased $8.0 million, to $39.1 million for the nine months ended November 2, 2024, compared to $47.1 million for the nine months ended October 28, 2023.

The decrease primarily reflects the same factors described for the quarter.

Restructuring and other special charges of $0.3 million for the three and nine months ended November 2, 2024 were associated with restructuring costs, primarily severance, at our corporate headquarters.

Restructuring and other special charges of $0.3 million and $0.9 million for the three and nine months ended October 28, 2023, respectively, were associated with expense reduction initiatives at our corporate headquarters.

Refer to Note 5 to the condensed consolidated financial statements for additional information related to these charges.

There were no corresponding charges for the six months ended August 3, 2024.

LIQUIDITY AND CAPITAL RESOURCES

Total debt obligations of $146.5 million at August 3, 2024 decreased $97.5 million, from $244.0 million at July 29, 2023, and $35.5 million, from $182.0 million at February 3, 2024.

Net interest expense for the second quarter of 2024 decreased $1.8 million to $3.3 million, compared to $5.1 million for the second quarter of 2023, primarily due to lower average borrowings on our revolving credit facility.

This decrease was partially offset by higher weighted-average interest rates.

The interest on our revolving credit facility is based on a variable rate, which adversely impacts our interest expense in the current elevated interest rate environment.

While our interest expense for the remainder of 2024 may continue to be impacted by the elevated interest rates, we expect to continue to reduce the borrowings under our revolving credit agreement to mitigate the impact of the high interest rate environment.

Credit Agreement

As further discussed in Note 10 to the condensed consolidated financial statements, the Company maintains a revolving credit facility for working capital needs that matures on October 5, 2026.

1 unchanged sentence

Interest on the borrowings is at variable rates based on the SOFR, or the prime rate (as defined in the Credit Agreement), plus a spread.

At August 3, 2024, we had $146.5 million in borrowings and $9.4 million in letters of credit outstanding under the Credit Agreement.

Total borrowing availability was $344.1 million at August 3, 2024.

We were in compliance with all covenants and restrictions under the Credit Agreement as of August 3, 2024.

Total debt obligations of $238.5 million at November 2, 2024 increased $16.5 million, from $222.0 million at October 28, 2023, and $56.5 million, from $182.0 million at February 3, 2024.

During the third quarter of 2024, we used our revolving credit facility to repurchase $50.0 million of shares of our common stock under our share repurchase program.

Net interest expense for the third quarter of 2024 decreased $1.6 million to $2.9 million, compared to $4.5 million for the third quarter of 2023, reflecting lower average borrowings and a lower weighted-average interest rate on our revolving credit facility.

At November 2, 2024, we had $238.5 million in borrowings and $9.4 million in letters of credit outstanding under the Credit Agreement.

Total borrowing availability was $252.1 million at November 2, 2024.

We were in compliance with all covenants and restrictions under the Credit Agreement as of November 2, 2024.

Working Capital and Cash Flow

Twenty-Six Weeks Ended

August 3, 2024

July 29, 2023

Thirty-Nine Weeks Ended

November 2, 2024

October 28, 2023

Net cash provided by operating activities

4 unchanged sentences

Reasons for the major variances in cash provided in the table above are as follows:

Cash provided by operating activities was $9.5 million lower in the twenty-six weeks ended August 3, 2024 as compared to the twenty-six weeks ended July 29, 2023, primarily reflecting the following factors:

● A larger increase in inventory during the twenty-six weeks ended August 3, 2024, compared to the twenty-six weeks ended July 29, 2023,

● Lower net earnings in the twenty-six weeks ended August 3, 2024, compared to the twenty-six weeks ended July 29, 2023, and

● A larger increase in accounts receivable during the twenty-six weeks ended August 3, 2024, compared to the twenty-six weeks ended July 29, 2023;

Cash provided by operating activities was $81.4 million lower in the thirty-nine weeks ended November 2, 2024 as compared to the thirty-nine weeks ended October 28, 2023, primarily reflecting the following factors:

● An increase in inventory during the thirty-nine weeks ended November 2, 2024, compared to a decrease in the thirty-nine weeks ended October 28, 2023,

● A smaller increase in trade accounts payable during the thirty-nine weeks ended November 2, 2024, compared to the thirty-nine weeks ended October 28, 2023,

● Lower net earnings in the thirty-nine weeks ended November 2, 2024, compared to the thirty-nine weeks ended October 28, 2023;

partially offset by

● A larger increase in trade accounts payable during the twenty-six weeks ended August 3, 2024, compared to the twenty-six weeks ended July 29, 2023, driven in part by an unplanned shift to the third quarter of 2024 of a significant payment to one of our largest vendors, and

● A smaller decrease in accrued expenses and other liabilities during the twenty-six weeks ended August 3, 2024, compared to the twenty-six weeks ended July 29, 2023.

We are in the process of a multi-year cloud-based ERP implementation.

We funded the first phase of the implementation, which went live in the second quarter of 2024, with cash provided by operating activities.

We anticipate the second phase of the implementation for the retail modules to also be funded with cash provided by operating activities.

Cash used for investing activities was $4.9 million higher for the twenty-six weeks ended August 3, 2024 as compared to the twenty-six weeks ended July 29, 2023, reflecting higher capital expenditures, due in part to the Famous Footwear store remodels to the new FLAIR concept.

● A smaller decrease in accrued expenses and other liabilities during the thirty-nine weeks ended November 2, 2024, compared to the thirty-nine weeks ended October 28, 2023.

We are in the process of a multi-year cloud-based ERP implementation and launched the wholesale and finance modules in the second quarter of 2024.

These modules were funded with cash provided by operating activities.

Cash used for investing activities was $2.9 million higher for the thirty-nine weeks ended November 2, 2024 as compared to the thirty-nine weeks ended October 28, 2023, reflecting higher capital expenditures, due in part to the Famous Footwear store remodels to the new FLAIR concept.

We expect purchases of property and equipment and capitalized software to be between $50 million and $55 million in 2024, compared to $49.6 million in 2023.

Cash used for financing activities was $31.6 million lower for the twenty-six weeks ended August 3, 2024 as compared to the twenty-six weeks ended July 29, 2023, primarily due to net repayments on our revolving credit agreement of $35.5 million in the twenty-six weeks ended August 3, 2024, compared to net repayments of $63.5 million in the comparable period in 2023.

In addition, we repurchased $15.1 million of our common stock under our share repurchase programs during the six months ended August 3, 2024, compared to $17.4 million in repurchases during the six months ended July 29, 2023.

Cash used for financing activities was $96.3 million lower for the thirty-nine weeks ended November 2, 2024 as compared to the thirty-nine weeks ended October 28, 2023, primarily due to net borrowings on our revolving credit agreement of $56.5 million in the thirty-nine weeks ended November 2, 2024, compared to net repayments of $85.5 million in the comparable period in 2023.

In addition, we repurchased $65.0 million of our common stock under our share repurchase program during the nine months ended November 2, 2024, compared to $17.4 million in repurchases during the nine months ended October 28, 2023.

In conjunction with the share repurchases during the thirty-nine weeks ended November 2, 2024, we incurred excise taxes of $0.5 million.

The excise taxes payable are presented in other accrued expenses on the condensed consolidated balance sheet and accrued expenses and other liabilities on the consolidated statement of cash flows.

The associated share repurchases presented as acquisition of treasury stock on the condensed consolidated cash flow for the thirty-nine weeks ended November 2, 2024 excludes the excise taxes payable.

Refer to Note 4 to the condensed consolidated financial statements for further information.

A summary of key financial data and ratios at the dates indicated is as follows:

August 3, 2024

July 29, 2023

November 2, 2024

October 28, 2023

February 3, 2024

6 unchanged sentences

Total capitalization is defined as total debt and total equity .

Working capital at August 3, 2024 was $79.3 million, which was an improvement of $120.8 million from July 29, 2023 and a $33.3 million increase from February 3, 2024.

The increase in working capital from July 29, 2023 primarily reflects lower borrowings under our revolving credit agreement.

The increase in working capital from February 3, 2024 primarily reflects higher inventory and lower borrowings under our revolving credit agreement, partially offset by higher trade accounts payable.

Our current ratio was 1.09:1 as of August 3, 2024, compared to 0.96:1 at July 29, 2023 and 1.06:1 at February 3, 2024.

Our debt-to-capital ratio was 19.3% as of August 3, 2024, compared to 34.1% as of July 29, 2023 and 24.3% at February 3, 2024.

We declared and paid dividends of $0.07 per share in the second quarter of both 2024 and 2023.

Working capital at November 2, 2024 was $63.9 million, which was an improvement of $68.9 million from October 28, 2023 and a $17.9 million increase from February 3, 2024.

The increase in working capital from October 28, 2023 primarily reflects higher inventory, lower accrued expenses and higher accounts receivable, partially offset by higher borrowings under our revolving credit agreement.

The increase in working capital from February 3, 2024 primarily reflects higher inventory and higher accounts receivable, partially offset by higher borrowings under our revolving credit agreement.

Our current ratio was 1.08:1 as of November 2, 2024, compared to 0.99:1 at October 28, 2023 and 1.06:1 at February 3, 2024.

Our debt-to-capital ratio was 28.2% as of November 2, 2024, compared to 29.9% as of October 28, 2023 and 24.3% at February 3, 2024.

We declared and paid dividends of $0.07 per share in the third quarter of both 2024 and 2023.

The declaration and payment of any future dividend is at the discretion of the Board of Directors and will depend on our results of operations, financial condition, business conditions and other factors deemed relevant by our Board of Directors.

However, we presently expect that dividends will continue to be paid.

We have various contractual or other obligations, including borrowings under our revolving credit facility, operating lease commitments, one-time transition tax for the mandatory deemed repatriation of cumulative foreign earnings and obligations for our supplemental executive retirement plan and other postretirement benefits.

retirement plan and other postretirement benefits.

We also have purchase obligations to purchase inventory, assets and other goods and services.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis