What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-09-09 compared with 2025-06-10 · 197 added, 108 removed, 178 unchanged (63% of the section changed)

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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

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Macroeconomic Environment

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.

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

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

Recent tariff volatility and the lack of clarity surrounding future trade policy developments have heightened uncertainty in the global economy.

Following the executive orders on tariffs, we acted quickly to adjust our country sourcing mix and took other actions to mitigate the tariff impact, such as negotiating price concessions with our factories and selectively raising prices.

We estimate that tariffs negatively impacted our net sales in the second quarter of 2025 by approximately $10 million due to factory order cancellations and delayed receipts that will shift the timing of certain wholesale sales to the third quarter.

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.

In addition, the restructuring actions we took in the second quarter of 2025 are expected to decrease selling and administrative expenses by approximately $15 million on an annualized basis.

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 $33.1 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.

Our liquidity position remains strong, with $191.5 million in cash and cash equivalents and excess availability on our revolving credit agreement of $230.8 million as of August 2, 2025.

During the first half of 2025, borrowings on our revolving credit agreement increased by $168.0 million to $387.5 million.

Subsequent to quarter-end, on August 4, 2025, we completed the acquisition of Stuart Weitzman.

The increase in cash and cash equivalents and borrowings at August 2, 2025 reflects borrowings to fund the acquisition.

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

During the second quarter of 2025, we refinanced our revolving credit facility, increasing the aggregate amount available from $500.0 million to $700.0 million, and extending the maturity date from October 5, 2026 to June 27, 2030.

Recent Development

Acquisition of Stuart Weitzman

Subsequent to quarter-end, on August 4, 2025, we completed the previously announced acquisition of Stuart Weitzman from Tapestry, Inc.

This strategic acquisition further strengthens our position in the global footwear market and adds an iconic name in luxury footwear to our brand portfolio.

Stuart Weitzman maintains a strong presence in North America, Europe and Asia across both wholesale and direct-to-consumer channels.

The business will be included in our Brand Portfolio segment.

The purchase price, which is subject to final adjustments for net working capital, was $120.2 million, including $11.5 million in cash received at the closing.

The acquisition was funded with our revolving credit agreement.

Financial Highlights

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

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

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August 2, 2025

August 3, 2024

Consolidated net sales

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E-commerce sales for those websites that function as an extension of a retail chain are included in the comparable sales calculation.

In fiscal years with 53 weeks (e.g.

2023), the 53 rd week of comparable sales is included in the calculation.

In the following year (e.g.

2024), the prior fiscal year period is shifted by one week to compare similar calendar weeks.

In fiscal years with 53 weeks, the 53 rd week of comparable sales is included in the calculation.

In the following year, the prior fiscal year period is shifted by one week to compare similar calendar weeks.

We believe the comparable sales metric is useful to shareholders and investors in assessing our retail sales performance of existing locations with comparable prior year sales, separate from the impact of store openings or store closures.

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August 3, 2024

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August 3, 2024

Cost of goods sold

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Earnings before income taxes

Income tax provision

Net loss attributable to noncontrolling interests

Income tax benefit (provision)

Net earnings (loss) attributable to noncontrolling interests

Net earnings attributable to Caleres, Inc.

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.

Net sales decreased $24.8 million, or 3.6%, to $658.5 million for the second quarter of 2025, compared to $683.3 million for the second quarter of 2024, with declines in both our Famous Footwear and Brand Portfolio segments.

Net sales in our Famous Footwear segment decreased $20.7 million, or 4.9%, and comparable sales declined 3.4%, reflecting less traffic in our retail stores.

Net sales in the Brand Portfolio segment decreased $9.9 million, or 3.5% for the second quarter of 2025.

Our direct-to-consumer sales represented approximately 75% of consolidated net sales for the second quarter of 2025, consistent with the second 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.

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

Net sales decreased $69.8 million, or 5.2%, to $1,272.7 million for the six months ended August 2, 2025, compared to $1,342.5 million for the six months ended August 3, 2024.

Net sales for our Famous Footwear segment decreased $42.5 million, or 5.5% during the first six months of 2025, compared to the first six months of 2024 and comparable sales declined 3.9%.

Net sales for our Brand Portfolio decreased $31.7 million, or 5.3% during the first six months of 2025, compared to the first six months of 2024.

On a consolidated basis, our direct-to-consumer sales grew to approximately 73% of total net sales for the six months ended August 2, 2025, compared to 72% for the six months ended August 3, 2024.

Gross profit decreased $25.1 million, or 8.1%, to $285.8 million for the second quarter of 2025, compared to $310.9 million for the second quarter of 2024.

As a percentage of net sales, gross profit decreased to 43.4% for the second quarter of 2025, compared to 45.5% for the second quarter of 2024, driven by lower merchandise margins associated with the impact of tariffs and higher inventory markdowns.

Our Famous Footwear division was more promotional during the second quarter of 2025 compared to last year.

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

Gross profit decreased $55.5 million, or 8.9%, to $564.5 million for the six months ended August 2, 2025, compared to $620.0 million for the six months ended August 3, 2024.

As a percentage of net sales, gross profit decreased to 44.4% for the six months ended August 2, 2025, compared to 46.2% for the six months ended August 3, 2024, driven by higher inventory markdowns, lower merchandise margins and incremental costs associated with canceling and moving inventory out of China after the tariff escalation in April.

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 $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.

Selling and administrative expenses increased $1.3 million, or 0.5%, to $269.7 million for the second quarter of 2025, compared to $268.4 million for the second quarter of 2024.

The increase was driven by higher retail 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, higher marketing expenses, due in part to the launch of the Jordan brand at Famous Footwear in July, and higher information technology expenses.

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

As a percentage of net sales, selling and administrative expenses increased to 40.9% for the second quarter of 2025, from 39.3% for the second quarter of 2024, reflecting deleveraging of expenses on lower net sales.

Selling and administrative expenses increased $1.5 million, or 0.3%, to $536.2 million for the six months ended August 2, 2025, compared to $534.7 million for the six months ended August 3, 2024.

The increase was primarily due to higher facility costs, reflecting higher depreciation associated with the investment in Famous Footwear store renovations and upgrades to the FLAIR 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.

As a percentage of net sales, selling and administrative expenses increased to 42.1% for the six months ended August 2, 2025, from 39.8% for the six months ended August 3, 2024.

Restructuring and Other Special Charges, Net

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.

Restructuring and other special charges of $6.8 million for the second quarter and $7.4 million for the six months ended August 2, 2025 were for legal and other related costs associated with the acquisition of Stuart Weitzman, which closed on August 4, 2025, and severance and other related costs associated with our expense reduction initiatives.

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.

There were no restructuring and other special charges during the six months ended August 3, 2024.

Operating Earnings

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.

Operating earnings decreased $33.2 million to $9.3 million for the second quarter of 2025, compared to $42.5 million for the second quarter of 2024, reflecting the factors described above.

As a percentage of net sales, operating earnings were 1.4% for the second quarter of 2025, compared to 6.2% for the second quarter of 2024.

Operating earnings decreased $64.4 million to $20.9 million for the six months ended August 2, 2025, compared to $85.3 million for the six months ended August 3, 2024, primarily reflecting lower net sales and gross profit.

As a percentage of net sales, operating earnings were 1.7% for the six months ended August 2, 2025, compared to 6.4% for the six months ended August 3, 2024.

Interest Expense, Net

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.

Interest expense, net increased $1.2 million, or 36.3%, to $4.5 million for the second quarter of 2025, compared to $3.3 million for the second quarter of 2024, reflecting higher average borrowings on our revolving credit facility.

Interest expense, net increased $1.2 million, or 16.8%, to $8.3 million for the six months ended August 2, 2025, compared to $7.1 million for the six months ended August 3, 2024.

As discussed above, we used the revolving credit facility to fund the acquisition of Stuart Weitzman that closed on August 4, 2025.

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 $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.

Other income, net decreased $0.2 million to $1.0 million for the second quarter of 2025, compared to $1.2 million for the second quarter of 2024, and decreased $0.5 million, or 23.8%, to $1.7 million for the six months ended August 2, 2025, compared to $2.2 million for the six months ended August 3, 2024, primarily reflecting lower income generated from our pension plan assets in the second quarter and six months ended August 2, 2025.

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

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

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.

Our consolidated effective tax rate was a benefit of 22.0% for the second quarter of 2025, compared to a provision of 25.0% for the second quarter of 2024.

Our consolidated effective tax rate was 8.8% for the six months ended August 2, 2025, compared to 24.0% for the six months ended August 3, 2024.

The lower effective tax rate for the second quarter and six months ended August 2, 2025 was driven by a discrete tax benefit of $2.5 million associated with the resolution of the remaining transition tax obligation for the mandatory deemed repatriation of cumulative foreign earnings.

In the six months ended August 3, 2024, we recorded discrete tax benefits of approximately $1.0 million related to share-based compensation.

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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We are continuing to evaluate the Pillar Two rules and their potential impact on future periods, but we do not expect the rules to have a material impact on our tax provision or effective tax rate.

On July 4, 2025, the One Big Beautiful Bill Act (the “OBBB Act”) was enacted into law.

The OBBB Act includes a broad range of tax reform provisions, including allowing accelerated tax deductions for qualified property and immediate deduction of domestic research and development costs.

The OBBB Act also modifies some of the international tax rules.

We are in the process of evaluating the impact of the OBBB Act on our consolidated financial statements, but the provisions are not expected to have a material impact on the Company’s income tax provision.

Net Earnings Attributable to Caleres, Inc.

Net earnings attributable to Caleres, Inc.

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.

was $6.7 million and $13.7 million for the second quarter and six months ended August 2, 2025, respectively, compared to $30.0 million and $ 60.9 million for the second quarter and six months ended August 3, 2024, as a result of the factors described above.

FAMOUS FOOTWEAR

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Selling and administrative expenses

Restructuring and other special charges, net

Operating earnings

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Impact of changes in Canadian exchange rate on sales

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

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

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

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Ending stores

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.

Net sales of $399.6 million in the second quarter of 2025 decreased $20.7 million, or 4.9%, compared to the second quarter of 2024.

Comparable sales decreased 3.4% for the second quarter of 2025, driven by a decline in consumer traffic in our retail stores, but improved sequentially throughout the quarter.

We experienced growth in e-commerce sales and an increase in e-commerce penetration to 14% of net sales in the second quarter of 2025, from 12% in the second quarter of 2024.

In mid-July, we launched the Jordan brand, both online and in our retail stores.

Jordan quickly rose to one of Famous Footwear’s top 10 brands, which contributed to a strong start to our back-to-school selling season.

We opened two stores and closed seven stores during the second quarter of 2025, resulting in 830 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 second 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 77% of our net sales made to program members in the second quarter of 2025, compared to 75% in the second quarter of 2024.

Net sales of $727.3 million in the six months ended August 2, 2025 decreased $42.5 million, or 5.5%, compared to the six months ended August 3, 2024.

Comparable sales declined 3.9% in the six months ended August 2, 2025, driven by a decline in traffic in our retail stores.

Athletics continues to be our top-selling category.

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 2, 2025.

During the first half of 2025, we opened two stores and closed 18 stores, and converted 21 stores to the FLAIR concept.

We have experienced sales growth in stores converted to the FLAIR concept, and we will continue to evaluate stores for FLAIR conversion to drive sales growth.

Gross profit decreased $14.6 million, or 7.7%, to $174.7 million for the second quarter of 2025, compared to $189.3 million for the second quarter of 2024.

As a percentage of net sales, our gross profit decreased to 43.7% for the second quarter of 2025, from 45.0% for the second quarter of 2024, reflecting higher levels of promotional activity during the quarter and higher freight costs, due in part to the higher mix of e-commerce sales.

Gross profit decreased $27.2 million, or 7.8%, to $323.1 million for the six months ended August 2, 2025, compared to $350.3 million for the six months ended August 3, 2024.

As a percentage of net sales, our gross profit decreased to 44.4% for the six months ended August 2, 2025, compared to 45.5% for the six months ended August 3, 2024, driven by higher levels of promotional activity and higher freight costs.

Selling and Administrative Expenses

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.

Selling and administrative expenses increased $1.1 million, or 0.7%, to $156.0 million for the second quarter of 2025, compared to $154.9 million for the second quarter of 2024.

The increase was primarily driven by higher retail facilities costs, including depreciation expense associated with the investments in the FLAIR store concept and higher store rent expense as leases are renewed, and higher marketing costs due to the launch of the Jordan brand.

During the second quarter of 2025, we converted 11 stores to the new FLAIR concept, ending the quarter with a total of 55 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.

As a percentage of net sales, selling and administrative expenses increased to 39.1% for the second quarter of 2025, compared to 36.8% for the second quarter of 2024.

Selling and administrative expenses increased $0.4 million, or 0.1%, to $299.5 million for the six months ended August 2, 2025, compared to $299.1 million for the six months ended August 3, 2024.

The increase was driven by higher retail facilities costs, including depreciation expense associated with the investments in the FLAIR store concept and higher store rent expense as leases are renewed.

As a percentage of net sales, selling and administrative expenses increased to 41.2% for the six months ended August 2, 2025, compared to 38.8% for the six months ended August 3, 2024, reflecting deleveraging of expenses over lower net sales.

Restructuring and Other Special Charges, Net

Restructuring and other special charges of $0.1 million for the three and six months ended August 2, 2025 were associated with our expense reduction initiatives, primarily severance.

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 $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.

Operating earnings decreased $15.8 million to $18.6 million for the second quarter of 2025, compared to $34.4 million for the second quarter of 2024, primarily reflecting the factors described above.

As a percentage of net sales, operating earnings declined to 4.6% for the second quarter of 2025, compared to 8.2% for the second quarter of 2024.

Operating earnings decreased $27.7 million to $23.5 million for the six months ended August 2, 2025, compared to $51.2 million for the six months ended August 3, 2024.

As a percentage of net sales, operating earnings were 3.2% for the six months ended August 2, 2025, compared to 6.7% for the six months ended August 3, 2024.

BRAND PORTFOLIO

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Operating earnings

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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 $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.

Net sales of $275.6 million in the second quarter of 2025 decreased $9.9 million, or 3.5%, compared to the second quarter of 2024.

During the second quarter of 2025, we experienced soft consumer demand due to cautious buying by our wholesale customers associated with the challenging macroeconomic environment, partially offset by growth in both our retail stores and e-commerce business.

In addition, we estimate that tariffs negatively impacted our net sales in the second quarter of 2025 by approximately $10 million due to factory order cancellations and delayed receipts that will shift the timing of certain wholesale sales to the third quarter.

Our direct-to-consumer sales represented approximately 36% of net sales for the second quarter of 2025, compared to 33% in the second quarter of 2024.

During the second quarter of 2025, we opened two stores in the United States, resulting in a total of 63 stores in North America at August 2, 2025, compared to 61 stores at August 3, 2024.

We remain focused on international growth and continued to expand our international presence during the second quarter of 2025.

There were 118 stores in East Asia at August 2, 2025, compared to 104 stores at August 3, 2024.

There were also 145 international branded stores owned and operated by third parties through franchise agreements at August 2, 2025, compared to 106 international branded stores at August 3, 2024.

Net sales decreased $31.7 million, or 5.3%, to $571.0 million for the six months ended August 2, 2025, compared to $602.7 million for the six months ended August 3, 2024, reflecting softer demand associated with the challenging macroeconomic environment and competitive retail landscape.

Our unfilled order position for our wholesale sales decreased $7.4 million, or 2.9%, to $244.2 million at August 2, 2025, compared to $251.6 million at August 3, 2024.

Beginning in the third quarter of 2025, Brand Portfolio will contain the financial results of our recently acquired Stuart Weitzman brand.

The acquisition, which includes wholesale and direct-to-consumer channels, strengthens our international presence.

Gross profit decreased $10.8 million, or 8.9%, to $111.1 million for the second quarter of 2025, compared to $121.9 million for the second quarter of 2024, driven by lower net sales.

As a percentage of net sales, our gross profit decreased to 40.3% for the second quarter of 2025,

compared to 42.7% for the second quarter of 2024.

The decrease was driven by the impact of tariffs, higher inventory markdowns, and incremental costs associated with canceling factory orders and moving inventory out of China.

Gross profit decreased $29.4 million, or 10.9%, to $240.3 million for the six months ended August 2, 2025, compared to $269.7 million for the six months ended August 3, 2024.

As a percentage of net sales, our gross profit decreased to 42.1% for the six months ended August 2, 2025, compared to 44.7% for the six months ended August 3, 2024.

The decrease was driven by the same factors described above.

Selling and Administrative Expenses

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.

Selling and administrative expenses increased $4.3 million, or 4.4%, to $102.6 million for the second quarter of 2025, compared to $98.3 million for the second quarter of 2024.

The increase reflects growth in our international business, higher distribution costs and an increase in salary and benefits expense, partially offset by lower marketing expenses.

As a percentage of net sales, selling and administrative expenses increased to 37.2% for the second quarter of 2025, compared to 34.4% for the second quarter of 2024.

Selling and administrative expenses increased $9.8 million, or 4.8%, to $214.5 million for the six months ended August 2, 2025, compared to $204.7 million for the six months ended August 3, 2024.

The increase reflects 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 37.6% for the six months ended August 2, 2025, compared to 33.9% for the six months ended August 3, 2024, reflecting deleveraging of expenses over lower net sales.

Restructuring and Other Special Charges, Net

Restructuring and other special charges of $1.8 million for the three and six months ended August 2, 2025 were associated with expense reduction initiatives, primarily severance.

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 $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.

Operating earnings decreased to $6.7 million for the second quarter of 2025, from $23.6 million for the second quarter of 2024, as a result of the factors described above.

As a percentage of net sales, operating earnings were 2.4% for the second quarter of 2025, compared to 8.3% for the second quarter of 2024.

Operating earnings decreased to $24.0 million for the six months ended August 2, 2025, compared to $65.0 million for the six months ended August 3, 2024, as a result of the factors described above.

As a percentage of net sales, operating earnings were 4.3% for the six months ended August 2, 2025, compared to 10.8% in the six months ended August 3, 2024.

ELIMINATIONS AND OTHER

Thirteen Weeks Ended

Twenty-Six Weeks Ended

August 2, 2025

August 3, 2024

August 2, 2025

August 3, 2024

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 $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.

The net sales elimination of $16.7 million for the second quarter of 2025 is $5.8 million, or 25.8%, lower than the second quarter of 2024, reflecting a decrease in product sold from our Brand Portfolio segment to Famous Footwear.

The net sales elimination of $25.5 million for the six months ended August 2, 2025 is $4.5 million, or 14.9%, lower than the six months ended August 3, 2024, reflecting a decrease in product sold from our Brand Portfolio segment to Famous Footwear.

Selling and administrative expenses decreased $4.1 million, to $11.1 million in the second quarter of 2025, compared to $15.2 million for the second quarter of 2024.

Selling and administrative expenses decreased $8.7 million, to $22.2 million for the six months ended August

2, 2025, compared to $30.9 million for the six months ended August 3, 2024.

The decreases for both the quarter and six months primarily reflect lower expenses related to our cash and share-based incentive compensation.

Restructuring and other special charges of $4.8 million and $5.5 million for the three and six months ended August 2, 2025, respectively, were for our expense reduction initiatives, as well as legal and other related costs associated with the acquisition of Stuart Weitzman that closed on August 4, 2025.

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

There were no restructuring charges during the three and six months ended August 3, 2024.

LIQUIDITY AND CAPITAL RESOURCES

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.

The aggregate amount available under the revolving credit facility is up to $500.0 million, subject to borrowing base restrictions, and may be increased by up to $250.0 million.

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 June 27, 2030.

The aggregate amount available under the revolving credit facility is up to $700.0 million, subject to borrowing base restrictions, and may be further increased by up to $250.0 million.

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.

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.

Total debt obligations of $387.5 million at August 2, 2025 increased $241.0 million, from $146.5 million at August 3, 2024, and $168.0 million, from $219.5 million at February 1, 2025.

Subsequent to quarter-end, on August 4, 2025, we completed the acquisition of Stuart Weitzman.

The increase in borrowings at August 2, 2025 reflects borrowings to fund the acquisition.

Net interest expense for the second quarter of 2025 increased $1.2 million to $4.5 million, compared to $3.3 million for the second quarter of 2024, reflecting higher average borrowings on our revolving credit facility.

At August 2, 2025, we had $387.5 million in borrowings and $8.1 million in letters of credit outstanding under the Credit Agreement.

Total borrowing availability was $230.8 million at August 2, 2025.

We were in compliance with all covenants and restrictions under the Credit Agreement as of August 2, 2025.

Working Capital and Cash Flow

Thirteen Weeks Ended

Net cash (used for) provided by operating activities

Twenty-Six Weeks Ended

August 2, 2025

August 3, 2024

Net cash provided by operating activities

Net cash used for investing activities

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

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.

Cash provided by operating activities was $74.0 million lower in the twenty-six weeks ended August 2, 2025 as compared to the twenty-six weeks ended August 3, 2024, primarily reflecting the following factors:

● A smaller increase in trade accounts payable during the twenty-six weeks ended August 2, 2025, compared to the twenty-six weeks ended August 3, 2024, driven in part by an unplanned shift to the third quarter of 2024 of a significant payment to one of our largest vendors,

● Lower net earnings in the twenty-six weeks ended August 2, 2025, compared to the twenty-six weeks ended August 3, 2024,

● A larger increase in inventory during the twenty-six weeks ended August 2, 2025, compared to the twenty-six weeks ended August 3, 2024, partially offset by

● An increase in accrued expenses and other liabilities during the twenty-six weeks ended August 2, 2025, compared to a decrease in the twenty-six weeks ended August 3, 2024, and

● A decrease in accounts receivable during the twenty-six weeks ended August 2, 2025 compared to an increase in the twenty-six weeks ended August 3, 2024.

Cash used for investing activities was $12.3 million higher for the twenty-six weeks ended August 2, 2025 as compared to the twenty-six weeks ended August 3, 2024, reflecting higher capital expenditures, due in part to the Famous Footwear store remodels to the new FLAIR concept.

We had 55 FLAIR stores as of August 2, 2025 and expect to add two more FLAIR stores during the second half of 2025.

Cash provided by financing activities was $154.2 million for the twenty-six weeks ended August 2, 2025 as compared to cash used for financing activities of $63.4 million for the twenty-six weeks ended August 3, 2024, primarily due to net borrowings on our revolving credit agreement of $168.0 million in the twenty-six weeks ended August 2, 2025, compared to net repayments of $35.5 million in the comparable period in 2024.

The increase in borrowings during the twenty-six weeks ended August 2, 2025 reflects higher borrowings at quarter-end in advance of the Stuart Weitzman acquisition on August 4, 2025.

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

August 2, 2025

August 3, 2024

February 1, 2025

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Total capitalization is defined as total debt and total equity .

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.

Working capital at August 2, 2025 was $84.3 million, which was an increase of $5.0 million from August 3, 2024 and a $5.7 million increase from February 1, 2025.

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

The increase in cash and borrowings under the revolving credit agreement reflects the acquisition of Stuart Weitzman subsequent to quarter-end.

The lower trade accounts payable as of August 2, 2025 is partially due to an unplanned shift to the third quarter of 2024 of a significant payment to one of our largest vendors.

The increase 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 1.08:1 as of August 2, 2025, compared to 1.09:1 at August 3, 2024 and 1.10:1 at February 1, 2025.

Our debt-to-capital ratio was 38.4% as of August 2, 2025, compared to 19.3% as of August 3, 2024 and 26.6% at February 1, 2025.

We declared and paid dividends of $0.07 per share in the second 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 have various contractual or other obligations, including borrowings under our revolving credit facility, operating lease commitments 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.

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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