What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-06-10 compared with 2024-12-11 · 124 added, 206 removed, 162 unchanged (67% of the section changed)

8 unchanged sentences

A combination of thoughtful planning and rigorous execution is key to our success in optimizing our business and portfolio of brands.

Acquisition of Stuart Weitzman

In February 2025, we signed a definitive agreement to acquire Stuart Weitzman from Tapestry, Inc.

for $105 million, subject to customary adjustments.

Stuart Weitzman has been an iconic global luxury women’s footwear brand for over 35 years.

The acquisition of Stuart Weitzman advances our strategic agenda to grow our Brand Portfolio segment with more global and direct-to-consumer reach.

The acquisition is expected to close in the summer of 2025.

We expect to fund the acquisition with our revolving credit facility.

Known Trends Impacting Our Business

1 unchanged sentence

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 nine months of 2024.

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.

Macroeconomic factors continued to impact consumer discretionary spending and our financial results during the first quarter of 2025.

Recent tariff announcements by the United States presidential administration and the lack of clarity surrounding future trade policy developments have heightened uncertainty in the global economy.

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

Following the executive order on tariffs, we acted quickly to pause production in China and made other sourcing changes, such as negotiating price concessions with our factories, to mitigate the impact of the tariffs.

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 and the impact of trade policy decisions may continue to adversely impact our financial results in the future.

In the near-term, we are focused on the areas within our control, including optimizing our sourcing strategy.

In addition, we expect to decrease selling and administrative expenses by approximately $15 million on an annualized basis through structural expense reductions.

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 $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.

Our liquidity position remains strong, with $33.1 million in cash and cash equivalents and excess availability on our revolving credit agreement of $233.4 million as of May 3, 2025.

During the first quarter of 2025, borrowings on our revolving credit agreement increased by $39.0 million to $258.5 million.

During 2025, we expect to refinance our revolving credit facility in advance of its maturity in October 2026.

Refer to Note 5 to the condensed consolidated financial statements for further discussion of the acquisition.

Financial Highlights

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

Highlights of our consolidated and segment results for the first quarter of 2025 and 2024 are as follows:

Thirteen Weeks Ended

($ millions, except per share amounts)

November 2, 2024

October 28, 2023

Consolidated net sales

33 unchanged sentences

Thirteen Weeks Ended

Thirty-Nine Weeks Ended

November 2, 2024

October 28, 2023

November 2, 2024

October 28, 2023

Cost of goods sold

6 unchanged sentences

Income tax provision

Net (loss) earnings attributable to noncontrolling interests

Net loss attributable to noncontrolling interests

Net earnings attributable to Caleres, Inc.

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.

Net sales decreased $45.0 million, or 6.8%, to $614.2 million for the first quarter of 2025, compared to $659.2 million for the first quarter of 2024, with declines in both our Famous Footwear and Brand Portfolio segments.

Net sales in our Famous Footwear segment decreased $21.9 million, or 6.3%, and comparable sales declined 4.6%, reflecting slower traffic in both our retail stores and e-commerce business.

Net sales in the Brand Portfolio segment decreased $21.8 million, or 6.9% during the first quarter of 2025.

Our direct-to-consumer sales represented approximately 70% of consolidated net sales for the first quarter of 2025, compared to 69% in the first quarter of 2024.

We remain focused on international growth, direct-to-consumer penetration, elevating the consumer experience at Famous Footwear and 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.

Gross profit decreased $30.4 million, or 9.8%, to $278.7 million for the first quarter of 2025, compared to $309.1 million for the first quarter of 2024.

As a percentage of net sales, gross profit decreased to 45.4% for the first quarter of 2025, compared to 46.9% for the first quarter of 2024, reflecting lower merchandise margins, incremental costs associated with canceling and moving inventory out of China after the tariff escalation in April and higher inventory markdowns.

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.

1 unchanged sentence

Selling and Administrative Expenses

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.

Selling and administrative expenses increased $0.2 million, or 0.1%, to $266.5 million for the first quarter of 2025, compared to $266.3 million for the first quarter of 2024.

The increase was driven by higher costs associated with growth in our international business, higher facilities costs, reflecting higher depreciation associated with the investment in Famous Footwear store renovations and upgrades to the FLAIR (Famous Localized and Immersive Retail) concept and higher store rent expense as leases are renewed, and higher information technology expenses.

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

As a percentage of net sales, selling and administrative expenses increased to 43.4% for the first quarter of 2025, from 40.4% for the first quarter of 2024, reflecting deleveraging of expenses on lower net sales.

Restructuring and Other Special Charges, Net

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.

Restructuring and other special charges of $0.6 million for the first quarter of 2025 were for legal and other related costs associated with the pending acquisition of Stuart Weitzman, which is expected to close in the summer of 2025.

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

There were no restructuring and other special charges during the first quarter of 2024.

Operating Earnings

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.

Operating earnings decreased $31.2 million to $11.6 million for the first quarter of 2025, compared to $42.8 million for the first quarter of 2024, reflecting the factors described above.

As a percentage of net sales, operating earnings were 1.9% for the first quarter of 2025, compared to 6.5% for the first quarter of 2024.

Interest Expense, Net

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.

Interest expense, net was $3.8 million for the first quarter of 2025, consistent with the first quarter of 2024, reflecting higher average borrowings on our revolving credit facility, offset by a lower weighted-average interest rate.

As discussed above, we expect to fund the acquisition of Stuart Weitzman with our revolving credit facility.

We anticipate that the higher borrowings will result in higher interest expense for the second half of 2025.

Other Income, Net

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.

Other income, net decreased $0.3 million to $0.7 million for the first quarter of 2025, compared to $1.0 million for the first quarter of 2024, primarily reflecting lower income generated from our pension plan assets in the first quarter of 2025.

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 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 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.

Our consolidated effective tax rate was 29.8% for the first quarter of 2025, compared to 23.0% for the first quarter of 2024.

The higher effective tax rate was driven in part by a discrete tax provision, related to share-based compensation, of approximately $0.3 million in the first quarter of 2025, compared to discrete tax benefits of approximately $0.8 million in the first quarter of 2024.

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.

4 unchanged sentences

Net earnings attributable to Caleres, Inc.

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.

was $6.9 million for the first quarter of 2025 and $30.9 million for the first quarter of 2024, as a result of the factors described above.

FAMOUS FOOTWEAR

Thirteen Weeks Ended

Thirty-Nine Weeks Ended

November 2, 2024

October 28, 2023

November 2, 2024

October 28, 2023

($ millions, except sales per square foot)

1 unchanged sentence

Selling and administrative expenses

Restructuring and other special charges, net

Operating earnings

3 unchanged sentences

Impact of changes in Canadian exchange rate on sales

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

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

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

3 unchanged sentences

Ending stores

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 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.

Net sales of $327.7 million in the first quarter of 2025 decreased $21.9 million, or 6.3%, compared to the first quarter of 2024.

We experienced a slow start to the first quarter of 2025, but sales improved in March and April.

Comparable sales decreased 4.6% driven by a decline in consumer traffic in both our retail stores and e-commerce business.

Despite the decline in traffic, we experienced growth in e-commerce sales and higher penetration of this channel.

Penetration of e-commerce sales increased to 14% of net sales in the first quarter of 2025, compared to 13% in the first quarter of 2024.

Our kids category, which is a key differentiator for Famous Footwear, continued to outperform the total chain.

We closed 11 stores during the first quarter of 2025, resulting in 835 stores and total square footage of 5.5 million at the end of the quarter, compared to 855 stores and total square footage of 5.6 million at the end of the first quarter of 2024.

Sales to members of our customer loyalty program, Famously You Rewards, continue to account for a majority of the segment’s sales, with approximately 79% of our net sales made to program members in the first quarter of 2025, compared to 78% in the first quarter of 2024.

Gross profit decreased $12.6 million, or 7.8%, to $148.4 million for the first quarter of 2025, compared to $161.0 million for the first quarter of 2024.

As a percentage of net sales, our gross profit decreased to 45.3% for the first quarter of 2025, from 46.1% for the first quarter of 2024, reflecting higher freight costs, due in part to the higher mix of e-commerce sales, and higher levels of promotional activity during the quarter.

Selling and Administrative Expenses

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 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.

Selling and administrative expenses decreased $0.6 million, or 0.4%, to $143.5 million for the first quarter of 2025, compared to $144.1 million for the first quarter of 2024.

The decrease was primarily driven by lower marketing costs, partially offset by higher facilities costs, including depreciation expense associated with the investments in the FLAIR store concept.

During the first quarter of 2025, we converted 10 stores to the new FLAIR concept, ending the quarter with a total of 44 FLAIR stores.

These stores continue to outperform our traditionally designed retail stores.

As a percentage of net sales, selling and administrative expenses increased to 43.8% for the first quarter of 2025, compared to 41.3% for the first quarter of 2024, reflecting the deleveraging of expenses on lower net sales.

Operating Earnings

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.

Operating earnings decreased $11.9 million to $5.0 million for the first quarter of 2025, compared to $16.9 million for the first quarter of 2024, primarily reflecting the factors described above.

As a percentage of net sales, operating earnings declined to 1.5% for the first quarter of 2025, compared to 4.8% for the first quarter of 2024.

BRAND PORTFOLIO

Thirteen Weeks Ended

Thirty-Nine Weeks Ended

November 2, 2024

October 28, 2023

November 2, 2024

October 28, 2023

Cost of goods sold

Selling and administrative expenses

Restructuring and other special charges, net

Operating earnings

12 unchanged sentences

(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 $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 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.

Net sales of $295.4 million in the first quarter of 2025 decreased $21.8 million, or 6.9%, compared to the first quarter of 2024.

During the first quarter of 2025, we experienced solid consumer demand in key categories, including fashion, flats, sandals and sneakers, while dress styles were more challenged.

Our direct-to-consumer sales represented approximately 35% of net sales for the first quarter of 2025, compared to 33% in the first quarter of 2024.

During the first quarter of 2025, we opened three stores and closed two stores in the United States, resulting in a total of 61 stores, consistent with the first quarter of 2024.

We have expanded our international presence.

There were 54 stores in East Asia at May 3, 2025, compared to 38 stores at May 4, 2024.

There were also 116 international branded stores owned and operated by third parties through franchise agreements at May 3, 2025, compared to 103 international branded stores at May 4, 2024.

Our unfilled order position for our wholesale sales increased $6.6 million, or 2.6%, to $263.6 million at May 3, 2025, compared to $257.0 million at May 4, 2024.

Gross profit decreased $18.5 million, or 12.5%, to $129.3 million for the first quarter of 2025, compared to $147.8 million for the first quarter of 2024, driven by lower net sales.

As a percentage of net sales, our gross profit decreased to 43.8% for the first quarter of 2025, compared to 46.6% for the first quarter of 2024.

The decrease was driven by lower merchandise margins, incremental costs associated with canceling and moving inventory out of China after the tariff escalation in April and higher inventory markdowns.

Selling and Administrative Expenses

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 $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.

Selling and administrative expenses increased $5.5 million, or 5.2%, to $111.9 million for the first quarter of 2025, compared to $106.4 million for the first quarter of 2024.

The increase reflects higher costs associated with growth in our international business, a higher provision for expected credit losses and higher salary and benefits expense, partially offset by lower marketing expenses.

As a percentage of net sales, selling and administrative expenses increased to 37.9% for the first quarter of 2025, compared to 33.5% for the first quarter of 2024.

Operating Earnings

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.

Operating earnings decreased to $17.4 million for the first quarter of 2025, from $41.4 million for the first quarter of 2024, as a result of the factors described above.

As a percentage of net sales, operating earnings were 5.9% for the first quarter of 2025, compared to 13.1% for the first quarter of 2024.

ELIMINATIONS AND OTHER

Thirteen Weeks Ended

Thirty-Nine Weeks Ended

November 2, 2024

October 28, 2023

November 2, 2024

October 28, 2023

Cost of goods sold

3 unchanged sentences

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 $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.

The net sales elimination of $8.9 million for the first quarter of 2025 is $1.3 million, or 17.0%, higher than the first quarter of 2024, reflecting an increase in product sold from our Brand Portfolio segment to Famous Footwear.

Selling and administrative expenses decreased $4.7 million, to $11.1 million in the first quarter of 2025, compared to $15.8 million for the first quarter of 2024.

The decrease primarily reflects lower expenses for our cash and share-based incentive compensation.

There were no restructuring and other special charges during the first quarter of 2024.

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

3 unchanged sentences

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.

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.

During 2025, we expect to refinance our revolving credit facility in advance of its maturity in October 2026.

Total debt obligations of $258.5 million at May 3, 2025 increased $67.5 million, from $191.0 million at May 4, 2024, and $39.0 million, from $219.5 million at February 1, 2025.

During the first quarter of 2025, we used our revolving credit facility to repurchase $5.0 million of shares of our common stock under our share repurchase program.

Net interest expense for the first quarter of 2025 was $3.8 million, consistent with the first quarter of 2024, reflecting higher average borrowings on our revolving credit facility, offset by a lower weighted-average interest rate.

At May 3, 2025, we had $258.5 million in borrowings and $8.1 million in letters of credit outstanding under the Credit Agreement.

Total borrowing availability was $233.4 million at May 3, 2025.

We were in compliance with all covenants and restrictions under the Credit Agreement as of May 3, 2025.

Working Capital and Cash Flow

Thirty-Nine Weeks Ended

November 2, 2024

October 28, 2023

Net cash provided by operating activities

Thirteen Weeks Ended

Net cash (used for) provided by operating activities

Net cash used for investing activities

Net cash used for financing activities

Net cash provided by (used for) financing activities

Effect of exchange rate changes on cash and cash equivalents

1 unchanged sentence

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

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 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 $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.

Cash provided by operating activities was $41.8 million lower in the thirteen weeks ended May 3, 2025 as compared to the thirteen weeks ended May 4, 2024, primarily reflecting the following factors:

● A decrease in trade accounts payable during the thirteen weeks ended May 3, 2025, compared to the thirteen weeks ended May 4, 2024,

● Lower net earnings in the thirteen weeks ended May 3, 2025, compared to the thirteen weeks ended May 4, 2024,

● An increase in inventory during the thirteen weeks ended May 3, 2025, compared to a decrease in the thirteen weeks ended May 4, 2024, partially offset by

● A smaller increase in accounts receivable during the thirteen weeks ended May 3, 2025 compared to the thirteen weeks ended May 4, 2024, and

● A smaller decrease in accrued expenses and other liabilities during the thirteen weeks ended May 3, 2025, compared to the thirteen weeks ended May 4, 2024.

Cash used for investing activities was $10.8 million higher for the thirteen weeks ended May 3, 2025 as compared to the thirteen weeks ended May 4, 2024, reflecting higher capital expenditures, due in part to the Famous Footwear store remodels to the new FLAIR concept.

We had 44 FLAIR stores as of May 3, 2025 and expect to add nine more FLAIR stores during the second quarter of 2025.

Cash provided by financing activities was $30.3 million for the thirteen weeks ended May 3, 2025 as compared to cash used for financing activities of $16.4 million for the thirteen weeks ended May 4, 2024, primarily due to net borrowings on our revolving credit agreement of $39.0 million in the thirteen weeks ended May 3, 2025, compared to net borrowings of $9.0 million in the comparable period in 2024.

These increases were partially offset by $5.0 million of repurchases of our common stock during the thirteen weeks ended May 3, 2025, compared to $15.1 million in repurchases during the thirteen weeks ended May 4, 2024.

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

November 2, 2024

October 28, 2023

February 1, 2025

6 unchanged sentences

Total capitalization is defined as total debt and total equity .

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.

Working capital at May 3, 2025 was $76.1 million, which was an increase of $35.1 million from May 4, 2024 and a $2.5 million decrease from February 1, 2025.

The increase in working capital from May 4, 2024 primarily reflects lower trade accounts payable and higher inventory, partially offset by higher borrowings under our revolving credit agreement.

The decrease in working capital from February 1, 2025 primarily reflects higher borrowings under our revolving credit agreement and accrued expenses, partially offset by lower trade accounts payable.

Our current ratio was 1.10:1 as of May 3, 2025, compared to 1.05:1 at May 4, 2024 and 1.10:1 at February 1, 2025.

Our debt-to-capital ratio was 29.7% as of May 3, 2025, compared to 24.9% as of May 4, 2024 and 26.6% at February 1, 2025.

We declared and paid dividends of $0.07 per share in the first quarter of both 2025 and 2024.

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.

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

8 unchanged sentences

Such statements are subject to various risks and uncertainties that could cause actual results to differ materially.

These risks include (i) changing consumer demands, which may be influenced by general economic conditions and other factors;

(ii) inflationary pressures and supply chain disruptions;

(iii) rapidly changing consumer preferences and purchasing patterns and fashion trends;

(iv) the ability to maintain relationships with current suppliers;

(v) customer concentration and increased consolidation in the retail industry;

These risks include (i) changes in United States and international trade policies, including tariffs and trade restrictions;

(ii) changing consumer demands, which may be influenced by general economic conditions and other factors;

(iii) inflationary pressures and supply chain disruptions;

(iv) rapidly changing consumer preferences and purchasing patterns and fashion trends;

(v) supplier concentration, customer concentration and increased consolidation in the retail industry;

(vi) intense competition within the footwear industry;

2 unchanged sentences

(ix) cybersecurity threats or other major disruption to the company’s information technology systems including those related to our ERP upgrade;

(x) the ability to accurately forecast sales and manage inventory levels;

(xi) a disruption in the Company’s distribution centers;

(xii) the ability to recruit and retain senior management and other key associates;

(xiii) the ability to secure/exit leases on favorable terms;

(xiv) transitional challenges with acquisitions and divestitures;

(xv) changes to tax laws, policies and treaties;

(xvi) commitments and shareholder expectations relating to environmental, social and governance ("ESG") considerations (xvii) compliance with applicable laws and standards with respect to labor, trade and product safety issues;

and (xviii) the ability to attract, retain, and maintain good relationships with licensors and protect our intellectual property rights.

(x) transitional challenges with acquisitions and divestitures;

(xi) the ability to accurately forecast sales and manage inventory levels;

(xii) a disruption in the company’s distribution centers;

(xiii) the ability to recruit and retain senior management and other key associates;

(xiv) the ability to secure/exit leases on favorable terms;

(xv) the ability to maintain relationships with current suppliers;

(xvi) changes to tax laws, policies and treaties;

(xvii) our commitments and shareholder expectations related to responsible business initiatives;

(xviii) compliance with applicable laws and standards with respect to labor, trade and product safety issues;

and (xix) the ability to attract, retain, and maintain good relationships with licensors and protect our intellectual property rights.

The Company’s reports to the Securities and Exchange Commission contain detailed information relating to such factors, including, without limitation, the information under the caption “Risk Factors” in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended February 1, 2025, which information is incorporated by reference herein and updated by the Company’s Quarterly Reports on Form 10-Q.

4 unchanged sentences

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