What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-12-11 compared with 2025-09-09 · 171 added, 182 removed, 193 unchanged (65% of the section changed)

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Macroeconomic Environment

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.

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

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

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

We source a majority of our products internationally.

Following the executive orders on tariffs in early 2025, 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.

Despite these actions, we have been subject to tariffs ranging from 19% to 50% and price increases from our vendors.

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, 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.

In addition, the expense reduction initiatives that began 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 $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.

Our liquidity position remains strong, with $34.0 million in cash and cash equivalents and excess availability on our revolving credit agreement of $278.1 million as of November 1, 2025.

During the third quarter of 2025, borrowings on our revolving credit agreement increased to $355.0 million, primarily driven by borrowings to fund the acquisition of Stuart Weitzman.

Refer to Note 3 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 second quarter of 2025 and 2024 are as follows:

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

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August 2, 2025

August 3, 2024

November 1, 2025

November 2, 2024

Consolidated net sales

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Thirteen Weeks Ended

Twenty-Six Weeks Ended

August 2, 2025

August 3, 2024

August 2, 2025

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Cost of goods sold

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Interest expense, net

Other income, net

Other (expense) income, net

Earnings before income taxes

Income tax benefit (provision)

Net earnings (loss) attributable to noncontrolling interests

Income tax provision

Net loss attributable to noncontrolling interests

Net earnings attributable to Caleres, Inc.

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.

Net sales increased $49.2 million, or 6.6%, to $790.1 million for the third quarter of 2025, compared to $740.9 million for the third quarter of 2024.

Net sales of our Brand Portfolio segment increased $60.8 million, or 18.8%, reflecting the impact of our Stuart Weitzman acquisition on August 4, 2025, which contributed net sales of $45.8 million, and organic growth in our owned e-commerce and wholesale businesses.

We saw strength in premium brands and declines in our more value-oriented brands.

Net sales in our Famous Footwear segment decreased $9.5 million, or 2.2%, and comparable sales declined 1.2%, reflecting less traffic.

Our direct-to-consumer sales represented approximately 71% of consolidated net sales for the third quarter of 2025, compared to 72% for the third 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, 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.

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

Net sales decreased $20.7 million, or 1.0%, to $2,062.8 million for the nine months ended November 1, 2025, compared to $2,083.5 million for the nine months ended November 2, 2024.

Net sales for our Famous Footwear segment decreased $52.1 million, or 4.3% during the first nine months of 2025, compared to the first nine months of 2024 and comparable sales declined 3.0%.

Net sales for our Brand Portfolio segment increased $29.1 million, primarily reflecting the impact of our Stuart Weitzman acquisition, which contributed net sales of $45.8 million.

On a consolidated basis, our direct-to-consumer sales were 72% of total net sales for the nine months ended November 1, 2025, consistent with the nine months ended November 2, 2024.

Gross profit increased $2.9 million, or 0.9%, to $329.9 million for the third quarter of 2025, compared to $327.0 million for the third quarter of 2024.

As a percentage of net sales, gross profit decreased to 41.8% for the third quarter of 2025, compared to 44.1% for the third quarter of 2024, driven by lower merchandise margins associated with the impact of tariffs, higher inventory markdowns and higher sales of lower margin product.

In addition, the Brand Portfolio segment recognized $7.7 million in incremental cost of goods sold related to the fair value step-up adjustment on the acquired Stuart Weitzman inventory in the third quarter of 2025.

Gross profit decreased $52.5 million, or 5.5%, to $894.4 million for the nine months ended November 1, 2025, compared to $946.9 million for the nine months ended November 2, 2024.

As a percentage of net sales, gross profit decreased to 43.4% for the nine months ended November 1, 2025, compared to 45.5% for the nine months ended November 2, 2024, driven by lower merchandise margins associated with the impact of tariffs, higher inventory markdowns, incremental cost of goods sold of $7.7 million for the Stuart Weitzman fair value inventory step-up adjustment required for purchase accounting 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 $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.

Selling and administrative expenses increased $42.5 million, or 15.9%, to $311.2 million for the third quarter of 2025, compared to $268.7 million for the third quarter of 2024.

The increase was driven by expenses associated with the Stuart Weitzman brand acquired in the third quarter of 2025, as well as higher expenses associated with our cash and share-based incentive compensation programs.

As a percentage of net sales, selling and administrative expenses increased to 39.4% for the third quarter of 2025, from 36.2% for the third quarter of 2024.

Selling and administrative expenses increased $44.2 million, or 5.5%, to $847.5 million for the nine months ended November 1, 2025, compared to $803.3 million for the nine months ended November 2, 2024.

The increase was primarily due to expenses associated with our acquired Stuart Weitzman brand.

We also experienced higher expenses associated with growth in our international business, 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 a higher provision for expected credit losses.

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 42.1% for the six months ended August 2, 2025, from 39.8% for the six months ended August 3, 2024.

As a percentage of net sales, selling and administrative expenses increased to 41.1% for the nine months ended November 1, 2025, from 38.6% for the nine months ended November 2, 2024.

Restructuring and Other Special Charges, Net

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.

Restructuring and other special charges of $6.7 million and $14.1 million for the third quarter and nine months ended November 1, 2025, respectively, were for legal, information technology and other related costs associated with the acquisition and integration of Stuart Weitzman, which closed on August 4, 2025, and severance and other related costs associated with our expense reduction initiatives.

Refer to Note 6 to the condensed consolidated financial statements for additional information related to these charges.

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

We incurred restructuring costs of $1.6 million for the third quarter and nine months ended November 2, 2024, primarily for severance.

Operating Earnings

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.

Operating earnings decreased $44.7 million to $12.0 million for the third quarter of 2025, compared to $56.7 million for the third quarter of 2024, reflecting the factors described above.

As a percentage of net sales, operating earnings were 1.5% for the third quarter of 2025, compared to 7.7% for the third quarter of 2024.

Operating earnings decreased $109.2 million to $32.8 million for the nine months ended November 1, 2025, compared to $142.0 million for the nine months ended November 2, 2024, primarily reflecting lower net sales and gross profit.

As a percentage of net sales, operating earnings were 1.6% for the nine months ended November 1, 2025, compared to 6.8% for the nine months ended November 2, 2024.

Interest Expense, Net

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.

Interest expense, net increased $2.6 million, or 88.5%, to $5.5 million for the third quarter of 2025, compared to $2.9 million for the third quarter of 2024, reflecting higher average borrowings on our revolving credit facility.

Interest expense, net increased $3.8 million, or 37.5%, to $13.8 million for the nine months ended November 1, 2025, compared to $10.0 million for the nine months ended November 2, 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 $0.2 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.

We anticipate that the higher borrowings will result in higher interest expense for the remainder of 2025 and into fiscal 2026.

Other (Expense) Income, Net

Other expense, net was $0.3 million for the third quarter of 2025, compared to an immaterial amount for the third quarter of 2024.

Other income decreased $0.8 million to $1.4 million for the nine months ended November 1, 2025, compared to $2.2 million for the nine months ended November 2, 2024, primarily reflecting lower income generated from our pension plan assets in the third quarter and nine months ended November 1, 2025.

Refer to Note 14 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 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.

Our consolidated effective tax rates were 76.7% and 23.6% for the thirteen weeks ended November 1, 2025 and November 2, 2024, respectively.

For the thirty-nine weeks ended November 1, 2025 and November 2, 2024, our consolidated effective tax rates were 29.3% and 23.8%, respectively.

The higher effective tax rates for the thirteen and thirty-nine weeks ended November 1, 2025 were primarily driven by the year-to-date pre-tax book income mix, including the financial results of Stuart Weitzman following the acquisition on August 4, 2025.

The effective tax rate for the thirty-nine weeks ended November 1, 2025 was also impacted by discrete tax benefits of $2.5 million associated with the resolution of the remaining transition tax for the mandatory deemed repatriation of cumulative foreign earnings.

For the thirty-nine weeks ended November 2, 2024, we recorded discrete tax benefits of approximately $1.1 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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Net earnings attributable to Caleres, Inc.

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.

was $2.4 million and $16.0 million for the third quarter and nine months ended November 1, 2025, respectively, compared to $41.4 million and $102.3 million for the third quarter and nine months ended November 2, 2024, as a result of the factors described above.

FAMOUS FOOTWEAR

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($ millions, except sales per square foot)

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Impact of changes in Canadian exchange rate on sales

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

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

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

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Ending stores

Net sales of $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.

Net sales of $418.8 million in the third quarter of 2025 decreased $9.5 million, or 2.2%, compared to the third quarter of 2024.

While comparable sales decreased 1.2% for the third quarter of 2025 driven by a decline in consumer traffic, Famous Footwear has experienced sequential sales improvement throughout the year.

We experienced strong growth in e-commerce sales and an increase in e-commerce penetration to 16% of net sales in the third quarter of 2025, from 14% in the third quarter of 2024.

We closed seven stores during the third quarter of 2025, resulting in 823 stores and total square footage of 5.4 million at the end of the quarter, compared to 851 stores and total square footage of 5.6 million at the end of the third 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 75% of our net sales made to program members in the third quarter of 2025, compared to 74% in the third quarter of 2024.

Net sales of $1,146.0 million in the nine months ended November 1, 2025 decreased $52.1 million, or 4.3%, compared to the nine months ended November 2, 2024.

Comparable sales declined 3.0% in the nine months ended November 1, 2025, driven by a decline in traffic.

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.

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 1, 2025.

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 brands.

During the first nine months of 2025, we opened two stores and closed 25 stores, and operated 56 FLAIR stores as of November 1, 2025.

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.

Gross profit decreased $9.5 million, or 5.2%, to $174.3 million for the third quarter of 2025, compared to $183.8 million for the third quarter of 2024.

As a percentage of net sales, our gross profit decreased to 41.6% for the third quarter of 2025, from 42.9% for the third quarter of 2024, reflecting higher sales volume of lower margin product, higher levels of promotional activity during the quarter and additional LIFO and other reserves.

Gross profit decreased $36.8 million, or 6.9%, to $497.5 million for the nine months ended November 1, 2025, compared to $534.2 million for the nine months ended November 2, 2024.

As a percentage of net sales, our gross profit decreased to 43.4% for the nine months ended November 1, 2025, compared to 44.6% for the nine months ended November 2, 2024, driven by higher levels of promotional activity and higher freight costs.

Selling and Administrative Expenses

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.

Selling and administrative expenses decreased $0.6 million, or 0.4%, to $153.4 million for the third quarter of 2025, compared to $154.0 million for the third quarter of 2024.

The decrease was primarily driven by lower warehouse and distribution costs due to lower volume as well as lower salaries expense, partially offset by higher retail facilities costs, including depreciation expense associated with the investments in the FLAIR store concept.

During the third quarter of 2025, we converted one store to the new FLAIR concept, ending the quarter with a total of 56 FLAIR stores.

These stores continue to outperform our traditionally designed retail stores.

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.

As a percentage of net sales, selling and administrative expenses increased to 36.6% for the third quarter of 2025, compared to 36.0% for the third quarter of 2024.

Selling and administrative expenses decreased $0.2 million, or 0.1%, to $453.0 million for the nine months ended November 1, 2025, compared to $453.2 million for the nine months ended November 2, 2024.

As a percentage of net sales, selling and administrative expenses increased to 39.5% for the nine months ended November 1, 2025, compared to 37.9% for the nine months ended November 2, 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.

Restructuring and other special charges of $0.2 million and $0.3 million for the three and nine months ended November 1, 2025, respectively, were associated with our expense reduction initiatives, primarily severance.

Restructuring costs of $0.2 million were incurred, primarily for severance, during the three and nine months ended November 2, 2024.

Refer to Note 6 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 $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.

Operating earnings decreased $8.8 million to $20.7 million for the third quarter of 2025, compared to $29.6 million for the third quarter of 2024, primarily reflecting the factors described above.

As a percentage of net sales, operating earnings declined to 5.0% for the third quarter of 2025, compared to 6.9% for the third quarter of 2024.

Operating earnings decreased $36.6 million to $44.2 million for the nine months ended November 1, 2025, compared to $80.8 million for the nine months ended November 2, 2024.

As a percentage of net sales, operating earnings were 3.9% for the nine months ended November 1, 2025, compared to 6.7% for the nine months ended November 2, 2024.

BRAND PORTFOLIO

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Cost of goods sold

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Change in retail net sales ($)

Sales change from acquired Stuart Weitzman business

Unfilled order position at end of period

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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 $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.

(2) Includes the 25 North America and 53 East Asia retail stores acquired from Stuart Weitzman.

Net sales of $393.7 million in the third quarter of 2025 increased $60.8 million, or 18.8%, compared to the third quarter of 2024.

The increase primarily reflects the acquisition of Stuart Weitzman on August 4, 2025, which contributed net sales of $45.8 million in the third quarter of 2025.

We experienced strong growth in our company-owned e-commerce business, which increased approximately 14% during the third quarter of 2025, and organic growth in our wholesale business.

We saw strength in premium brands and declines in our more value-oriented brands.

Our direct-to-consumer sales represented approximately 37% of net sales for the third quarter of 2025, compared to 34% for the third quarter of 2024.

During the third quarter of 2025, we did not open or close any stores in North America.

We acquired 25 retail stores located in North America from Stuart Weitzman, resulting in a total of 88 stores at November 1, 2025, compared to 62 stores at November 2, 2024.

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

There were 109 stores in East Asia at November 1, 2025, including 53 acquired from Stuart Weitzman, compared to 49 stores at November 2, 2024.

There were also 150 international branded stores owned and operated by third parties through franchise agreements at November 1, 2025, compared to 113 international branded stores at August 3, 2024.

Net sales increased $29.1 million, or 3.1%, to $954.7 million for the nine months ended November 1, 2025, compared to $925.6 million for the nine months ended November 2, 2024, reflecting softer demand associated with the challenging macroeconomic environment and competitive retail landscape, partially offset by the $45.8 million net sales contribution from our recently acquired Stuart Weitzman brand.

Our unfilled order position for our wholesale sales increased $53.8 million, or 21.8%, to $300.4 million at November 1, 2025, compared to $246.6 million at November 2, 2024, primarily reflecting the unfilled order position for the Stuart Weitzman brand.

Gross profit increased $13.1 million, or 9.3%, to $154.7 million for the third quarter of 2025, compared to $141.6 million for the third quarter of 2024, driven by net sales growth, partially offset by the incremental cost of goods sold related to the fair value step-up adjustment on the

acquired Stuart Weitzman inventory.

As a percentage of net sales, our gross profit decreased to 40.3% for the third quarter of 2025, compared to 43.8% for the third quarter of 2024.

The decrease was driven by the incremental cost of goods sold related to purchase accounting inventory adjustments, continued impact of tariffs and higher inventory markdowns, due in part to the addition of the Stuart Weitzman brand.

Gross profit decreased $16.2 million, or 3.9%, to $395.1 million for the nine months ended November 1, 2025, compared to $411.3 million for the nine months ended November 2, 2024.

As a percentage of net sales, our gross profit decreased to 41.4% for the nine months ended November 1, 2025, compared to 44.4% for the nine months ended November 2, 2024.

The decrease was driven by the same factors described above, as well as incremental costs associated with canceling factory orders and moving inventory out of China.

Selling and Administrative Expenses

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.

Selling and administrative expenses increased $36.0 million, or 33.8%, to $142.4 million for the third quarter of 2025, compared to $106.4 million for the third quarter of 2024 driven by expenses related to our acquired Stuart Weitzman brand and growth in our international business.

As a percentage of net sales, selling and administrative expenses increased to 37.1% for the third quarter of 2025, compared to 33.0% for the third quarter of 2024.

Selling and administrative expenses increased $45.8 million, or 14.7%, to $356.0 million for the nine months ended November 1, 2025, compared to $311.1 million for the nine months ended November 2, 2024.

The increase primarily reflects our acquired Stuart Weitzman brand in the third quarter of 2025, growth in our international business, a higher provision for expected credit losses and higher salary and benefits expense.

As a percentage of net sales, selling and administrative expenses increased to 37.4% for the nine months ended November 1, 2025, compared to 33.6% for the nine months ended November 2, 2024.

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.

Restructuring and other special charges of $1.2 million and $3.0 million for the three and nine months ended November 1, 2025 were primarily associated severance for our expense reduction initiatives.

Refer to Note 6 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.

Restructuring costs of $1.1 million were incurred primarily for severance during the three and nine months ended November 2, 2024.

Operating Earnings

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.

Operating earnings decreased to $11.1 million for the third quarter of 2025, from $34.1 million for the third quarter of 2024, as a result of the factors described above.

As a percentage of net sales, operating earnings were 2.9% for the third quarter of 2025, compared to 10.5% for the third quarter of 2024.

Operating earnings decreased to $35.2 million for the nine months ended November 1, 2025, compared to $99.1 million for the nine months ended November 2, 2024, as a result of the factors described above.

As a percentage of net sales, operating earnings were 3.7% for the nine months ended November 1, 2025, compared to 10.7% in the nine months ended November 2, 2024.

ELIMINATIONS AND OTHER

Thirteen Weeks Ended

Twenty-Six Weeks Ended

August 2, 2025

August 3, 2024

August 2, 2025

August 3, 2024

Thirty-Nine Weeks Ended

November 1, 2025

November 2, 2024

November 1, 2025

November 2, 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 $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.

The net sales elimination of $12.4 million for the third quarter of 2025 is $2.1 million, or 25.8%, higher than the third quarter of 2024, reflecting an increase in product sold from our Brand Portfolio segment to Famous Footwear.

The net sales elimination of $38.0 million for the nine months ended November 1, 2025 is $2.3 million, or 5.8%, lower than the nine months ended November 2, 2024, reflecting a decrease in product sold from our Brand Portfolio segment to Famous Footwear.

Selling and administrative expenses increased $7.3 million, to $15.4 million in the third quarter of 2025, compared to $8.1 million for the third quarter of 2024, primarily reflecting higher expenses related to our cash-based incentive compensation and higher medical costs, partially offset by lower share-based incentive compensation expenses.

Selling and administrative expenses decreased $1.4 million, to $37.7 million for the nine months ended November 1, 2025, compared to $39.1 million for the nine months ended November 2, 2024 reflecting lower expenses for cash and share-based incentive compensation.

Restructuring and other special charges of $5.4 million and $10.8 million for the three and nine months ended November 1, 2025, respectively, were for legal, information technology and other related costs associated with the acquisition of Stuart Weitzman that closed on August 4, 2025 as well as severance and other costs associated with our expense reduction initiatives.

Refer to Note 6 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.

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

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 June 27, 2030.

As further discussed in Note 11 to the condensed consolidated financial statements, the Company maintains a revolving credit facility for working capital needs and strategic initiatives 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.

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.

Total debt obligations of $355.0 million at November 1, 2025 increased $116.5 million, from $238.5 million at November 2, 2024, and $135.5 million, from $219.5 million at February 1, 2025.

On August 4, 2025, we completed the acquisition of Stuart Weitzman, as further discussed in Note 3 to the condensed consolidated financial statements.

The increase in borrowings at November 1, 2025 reflects borrowings to fund the acquisition.

Net interest expense for the third quarter of 2025 increased $2.6 million to $5.5 million, compared to $2.9 million for the third quarter of 2024, reflecting higher average borrowings on our revolving credit facility.

At November 1, 2025, we had $355.0 million in borrowings and $8.5 million in letters of credit outstanding under the Credit Agreement.

Total borrowing availability was $278.1 million at November 1, 2025.

We were in compliance with all covenants and restrictions under the Credit Agreement as of November 1, 2025.

Working Capital and Cash Flow

Twenty-Six Weeks Ended

August 2, 2025

August 3, 2024

Thirty-Nine Weeks Ended

November 1, 2025

November 2, 2024

Net cash provided by operating 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 $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.

Cash provided by operating activities was $35.3 million lower in the thirty-nine weeks ended November 1, 2025 as compared to the thirty-nine weeks ended November 2, 2024, primarily reflecting the following factors:

● Lower net earnings in the thirty-nine weeks ended November 1, 2025, compared to the thirty-nine weeks ended November 2, 2024,

● A decrease in trade accounts payable during the thirty-nine weeks ended November 1, 2025, compared to an increase in the thirty-nine weeks ended November 2, 2024, partially offset by

● An increase in accrued expenses and other liabilities during the thirty-nine weeks ended November 1, 2025, compared to a decrease in the thirty-nine weeks ended November 2, 2024, and

● A smaller increase in receivables during the thirty-nine weeks ended November 1, 2025, compared to the thirty-nine weeks ended November 2, 2024.

Cash used for investing activities was $115.4 million higher for the thirty-nine weeks ended November 1, 2025 as compared to the thirty-nine weeks ended November 2, 2024, reflecting the acquisition of Stuart Weitzman at the beginning of the third quarter of 2025 and higher capital expenditures, due in part to the Famous Footwear store remodels to the new FLAIR concept.

We had 56 FLAIR stores as of November 1, 2025 and expect to add one more FLAIR store in 2025.

Cash provided by financing activities was $119.5 million for the thirty-nine weeks ended November 1, 2025 as compared to cash used for financing activities of $23.2 million for the thirty-nine weeks ended November 2, 2024, primarily due to net borrowings on our revolving credit agreement of $135.5 million in the thirty-nine weeks ended November 1, 2025, compared to net repayments of $56.5 million in the comparable period in 2024.

The increase in borrowings during the thirty-nine weeks ended November 1, 2025 reflects the use of the revolving credit agreement to fund 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

November 1, 2025

November 2, 2024

February 1, 2025

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Total capitalization is defined as total debt and total equity .

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.

Working capital at November 1, 2025 was $56.7 million, which was a decrease of $7.2 million from November 2, 2024 and a $21.9 million decrease from February 1, 2025.

The decrease in working capital from November 2, 2024 primarily reflects higher borrowings under our revolving credit agreement, partially offset by higher inventory, higher receivables and lower trade accounts payable.

The revolver was used to fund the acquisition of Stuart Weitzman, as further described in Note 3 to the condensed consolidated financial statements.

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

Our current ratio was 1.06:1 as of November 1, 2025, compared to 1.08:1 at November 2, 2024 and 1.10:1 at February 1, 2025.

Our debt-to-capital ratio was 36.2% as of November 1, 2025, compared to 28.2% as of November 2, 2024 and 26.6% at February 1, 2025.

The higher debt-to-capital ratio as of November 1, 2025 reflects the increase in borrowings under our revolving credit agreement as a result of the Stuart Weitzman acquisition.

We declared and paid dividends of $0.07 per share in the third 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.

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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