Item 2. Management’s Discussion and Analysis
ITEM 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Business Overview
We are a global footwear company that operates retail stores and e-commerce websites, and designs, develops, sources, manufactures and distributes footwear for people of all ages. Our mission is to inspire people to feel great...feet first. We offer retailers and consumers a diversified portfolio of leading footwear brands. Outfitted in our brands, customers can step confidently into every aspect of their lives. As both a retailer and a wholesaler, we have a perspective on the marketplace that enables us to serve consumers from different vantage points. We believe our diversified business model provides us with synergies by spanning consumer segments, categories and distribution channels. A combination of thoughtful planning and rigorous execution is key to our success in optimizing our business and portfolio of brands.
Known Trends Impacting Our Business
Based on the current macroeconomic environment and our recent operating results, we believe the following trends may continue to impact our business and operating results:
Macroeconomic Environment
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 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.
Liquidity
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 $355.0 million, primarily driven by borrowings to fund the acquisition of Stuart Weitzman. Refer to Note 3 to the condensed consolidated financial statements for further discussion of the acquisition.
Financial Highlights
Highlights of our consolidated and segment results for the third quarter of 2025 and 2024 are as follows:
Thirteen Weeks Ended
($ millions, except per share amounts)
November 1, 2025
November 2, 2024
Change (1)
Consolidated net sales
$790.1
$740.9
$49.2
6.6
%
Famous Footwear segment net sales
$418.8
$428.3
($9.5)
(2.2)
%
Famous Footwear comparable sales % change
(1.2)
%
2.5
%
n/m
n/m
Brand Portfolio segment net sales
$383.7
$322.9
$60.8
18.8
%
Gross profit
$329.9
$327.0
$2.9
0.9
%
Gross margin
41.8
%
44.1
%
n/m
n/m
Operating earnings
$12.0
$56.7
($44.7)
(78.9)
%
Diluted earnings per share
$0.07
$1.19
($1.12)
(94.1)
%
(1) n/m – not meaningful
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Metrics Used in the Evaluation of Our Business
The following are a few key metrics by which we evaluate our business, identify trends and make strategic decisions:
Comparable sales
The comparable sales metric is a metric commonly used in the retail industry to evaluate the revenue generated for stores that have been open for more than a year, though other retailers may calculate the metric differently. Management uses the comparable sales metric as a measure of an individual store’s success to determine whether it is performing in line with expectations. Our comparable sales metric is a daily-weighted calculation for the period, which includes sales for stores that have been open for at least 13 months. In addition, in order to be included in the comparable sales metric, a store must be open in the current period as well as the corresponding day(s) of the comparable retail calendar in the prior year. Accordingly, closed stores are excluded from the comparable sales metric for each day of the closure. Relocated stores are treated as new stores and therefore excluded from the calculation. 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, 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.
Sales per square foot
The sales per square foot metric is commonly used in the retail industry to calculate the efficiency of sales based upon the square footage in a store. Management uses the sales per square foot metric as a measure of an individual store’s success to determine whether it is performing in line with expectations. The sales per square foot metric is calculated by dividing total retail store sales, excluding e-commerce sales and the retail operations of our joint venture in China, by the total square footage of the retail store base in North America at the end of each month of the respective period.
Dire ct-to-consumer sales
Direct-to-consumer sales includes sales from our retail stores, our company-owned websites and sales through our customers’ websites that we fulfill on a drop-ship basis. While we take an omni-channel approach to reach consumers, we believe that our direct-to-consumer channels reinforce the image of our brands and strengthens our connection with the end consumer. In addition, direct-to-consumer sales generally result in a higher gross margin for the Company as compared to wholesale sales. As a result, management monitors trends in direct-to-consumer sales as a percentage of our Brand Portfolio segment and total consolidated net sales.
RESULTS OF OPERATIONS
Following are the consolidated results and the results by segment:
CONSOLIDATED RESULTS
Thirteen Weeks Ended
Thirty-Nine Weeks Ended
November 1, 2025
November 2, 2024
November 1, 2025
November 2, 2024
% of
% of
% of
% of
($ millions)
Net Sales
Net Sales
Net Sales
Net Sales
Net sales
$
790.1
100.0
%
$
740.9
100.0
%
$
2,062.8
100.0
%
$
2,083.5
100.0
%
Cost of goods sold
460.1
58.2
%
413.9
55.9
%
1,168.4
56.6
%
1,136.6
54.5
%
Gross profit
329.9
41.8
%
327.0
44.1
%
894.4
43.4
%
946.9
45.5
%
Selling and administrative expenses
311.2
39.4
%
268.7
36.2
%
847.5
41.1
%
803.3
38.6
%
Restructuring and other special charges, net
6.7
0.9
%
1.6
0.2
%
14.1
0.7
%
1.6
0.1
%
Operating earnings
12.0
1.5
%
56.7
7.7
%
32.8
1.6
%
142.0
6.8
%
Interest expense, net
(5.5)
(0.7)
%
(2.9)
(0.4)
%
(13.8)
(0.7)
%
(10.0)
(0.5)
%
Other (expense) income, net
(0.3)
(0.0)
%
0.0
0.0
%
1.4
0.1
%
2.2
0.1
%
Earnings before income taxes
6.2
0.8
%
53.8
7.3
%
20.4
1.0
%
134.2
6.4
%
Income tax provision
(4.7)
0.6
%
(12.7)
(1.7)
%
(6.0)
0.3
%
(32.0)
(1.5)
%
Net earnings
1.4
0.2
%
41.1
5.6
%
14.4
0.7
%
102.2
4.9
%
Net loss attributable to noncontrolling interests
(1.0)
(0.1)
%
(0.3)
0.0
%
(1.6)
(0.1)
%
(0.1)
(0.0)
%
Net earnings attributable to Caleres, Inc.
$
2.4
0.3
%
$
41.4
5.6
%
$
16.0
0.8
%
$
102.3
4.9
%
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Net Sales
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, 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
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. Accordingly, our gross profit and selling and administrative expense rates, as a percentage of net sales, may not be comparable to other companies.
Selling and Administrative 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 41.1% for the nine months ended November 1, 2025, from 38.6% for the nine months ended November 2, 2024.
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Table of Contents
Restructuring and Other Special Charges, Net
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. 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 $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 $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 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.
Income Tax Provision
Our effective tax rate can vary considerably from period to period, depending on a number of factors. 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. The OECD continues to release guidance and countries are implementing legislation to adopt the rules, which became effective on January 1, 2024. The United States has not yet enacted legislation implementing Pillar Two. 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 $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 $102.3 million for the third quarter and nine months ended November 2, 2024, as a result of the factors described above.
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FAMOUS FOOTWEAR
Thirteen Weeks Ended
Thirty-Nine Weeks Ended
November 1, 2025
November 2, 2024
November 1, 2025
November 2, 2024
% of
% of
% of
% of
($ millions, except sales per square foot)
Net Sales
Net Sales
Net Sales
Net Sales
Net sales
$
418.8
100.0
%
$
428.3
100.0
%
$
1,146.0
100.0
%
$
1,198.1
100.0
%
Cost of goods sold
244.4
58.4
%
244.5
57.1
%
648.6
56.6
%
663.9
55.4
%
Gross profit
174.3
41.6
%
$
183.8
42.9
%
497.4
43.4
%
$
534.2
44.6
%
Selling and administrative expenses
153.4
36.6
%
154.0
36.0
%
453.0
39.5
%
453.2
37.9
%
Restructuring and other special charges, net
0.2
0.0
%
0.2
—
%
0.3
0.0
%
0.2
—
%
Operating earnings
$
20.7
5.0
%
$
29.6
6.9
%
$
44.1
3.9
%
$
80.8
6.7
%
Key Metrics
Comparable sales % change
(1.2)
%
2.5
%
(3.0)
%
(0.9)
%
Comparable sales $ change
$
(5.0)
$
10.3
$
(34.4)
$
(10.2)
Sales change from new and closed stores, net
$
(4.5)
$
(31.7)
$
(17.3)
$
(4.5)
Impact of changes in Canadian exchange rate on sales
$
—
$
(0.1)
$
(0.3)
$
(0.4)
Sales per square foot, excluding e-commerce (thirteen and thirty-nine weeks ended)
$
64
$
65
$
178
$
185
Sales per square foot, excluding e-commerce (trailing twelve months)
$
231
$
244
$
231
$
244
Square footage (thousand sq. ft.)
5,417
5,592
5,417
5,592
Stores opened
—
6
2
12
Stores closed
7
10
25
21
Ending stores
823
851
823
851
Net Sales
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 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
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.
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Table of Contents
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 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 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 $0.2 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.
Operating Earnings
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 $80.8 million for the nine months ended November 2, 2024. As a percentage of net sales, operating earnings were 3.9% for the nine months ended November 1, 2025, compared to 6.7% for the nine months ended November 2, 2024.
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BRAND PORTFOLIO
Thirteen Weeks Ended
Thirty-Nine Weeks Ended
November 1, 2025
November 2, 2024
November 1, 2025
November 2, 2024
% of
% of
% of
% of
($ millions)
Net Sales
Net Sales
Net Sales
Net Sales
Net sales
$
383.7
100.0
%
$
322.9
100.0
%
$
954.7
100.0
%
$
925.6
100.0
%
Cost of goods sold
229.0
59.7
%
181.3
56.2
%
559.6
58.6
%
514.3
55.6
%
Gross profit
154.7
40.3
%
141.6
43.8
%
395.1
41.4
%
411.3
44.4
%
Selling and administrative expenses
142.4
37.1
%
106.4
33.0
%
356.9
37.4
%
311.1
33.6
%
Restructuring and other special charges, net
1.2
0.3
%
1.1
0.3
%
3.0
0.3
%
1.1
0.1
%
Operating earnings
$
11.1
2.9
%
$
34.1
10.5
%
$
35.2
3.7
%
$
99.1
10.7
%
Key Metrics
Direct-to-consumer (% of net sales) (1)
37
%
34
%
36
%
33
%
Change in wholesale net sales ($)
$
5.8
$
1.1
$
(23.4)
$
(26.1)
Change in retail net sales ($)
$
9.2
$
1.0
$
6.7
$
4.5
Sales change from acquired Stuart Weitzman business
$
45.8
$
—
$
45.8
$
—
Unfilled order position at end of period
$
300.4
$
246.6
Company-Operated Stores:
North America
Stores opened (2)
25
1
30
4
Stores closed
—
—
2
4
Ending stores - North America
88
62
88
62
East Asia
Ending stores - East Asia (2)
109
49
109
49
Total Company-Operated Stores
197
111
197
111
International franchise locations
150
113
150
113
Total
347
224
347
224
(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.
(2) Includes the 25 North America and 53 East Asia retail stores acquired from Stuart Weitzman.
Net Sales
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
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
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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 $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 $1.2 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. 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 $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 $99.1 million for the nine months ended November 2, 2024, as a result of the factors described above. As a percentage of net sales, operating earnings were 3.7% for the nine months ended November 1, 2025, compared to 10.7% in the nine months ended November 2, 2024.
ELIMINATIONS AND OTHER
Thirteen Weeks Ended
Thirty-Nine Weeks Ended
November 1, 2025
November 2, 2024
November 1, 2025
November 2, 2024
% of
% of
% of
% of
($ millions)
Net Sales
Net Sales
Net Sales
Net Sales
Net sales
$
(12.4)
100.0
%
$
(10.3)
100.0
%
$
(38.0)
100.0
%
$
(40.3)
100.0
%
Cost of goods sold
(13.3)
107.4
%
(11.8)
115.4
%
(39.9)
105.0
%
(41.8)
103.8
%
Gross profit
0.9
(7.4)
%
1.5
(15.4)
%
1.9
(5.0)
%
1.5
(3.8)
%
Selling and administrative expenses
15.4
(124.2)
%
8.1
(79.6)
%
37.7
(99.1)
%
39.1
(97.1)
%
Restructuring and other special charges, net
5.4
(43.3)
%
0.3
(3.0)
%
10.8
(28.6)
%
0.3
(0.8)
%
Operating loss
$
(19.9)
160.1
%
$
(6.9)
67.2
%
$
(46.6)
122.7
%
$
(37.9)
94.1
%
The Eliminations and Other category includes the elimination of intersegment sales and profit, unallocated corporate administrative expenses, and other costs and recoveries.
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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. 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
Borrowings
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 $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 $278.1 million at November 1, 2025. We were in compliance with all covenants and restrictions under the Credit Agreement as of November 1, 2025.
Working Capital and Cash Flow
Thirty-Nine Weeks Ended
($ millions)
November 1, 2025
November 2, 2024
Change
Net cash provided by operating activities
$
40.5
$
75.8
$
(35.3)
Net cash used for investing activities
(155.7)
(40.3)
(115.4)
Net cash provided by (used for) financing activities
119.5
(23.2)
142.7
Effect of exchange rate changes on cash and cash equivalents
0.0
0.0
0.0
Increase in cash and cash equivalents
$
4.3
$
12.3
$
(8.0)
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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 $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 $56.5 million in the comparable period in 2024. The increase in borrowings during the thirty-nine weeks ended November 1, 2025 reflects the use of the revolving credit agreement to fund the Stuart Weitzman acquisition on August 4, 2025.
A summary of key financial data and ratios at the dates indicated is as follows:
November 1, 2025
November 2, 2024
February 1, 2025
Working capital ($ millions) (1)
$
56.7
$
63.9
$
78.6
Current ratio (2)
1.06:1
1.08:1
1.10:1
Debt-to-capital ratio (3)
36.2
%
28.2
%
26.6
%
(1) Working capital has been computed as total current assets less total current liabilities.
(2) The current ratio has been computed by dividing total current assets by total current liabilities.
(3) The debt-to-capital ratio has been computed by dividing the borrowings under our revolving credit agreement by total capitalization. Total capitalization is defined as total debt and total equity .
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. 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 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. We believe our operating cash flows are sufficient to meet our material cash requirements for at least the next 12 months.
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CRITICAL ACCOUNTING POLICIES AND ESTIMATES
No material changes have occurred related to critical accounting policies and estimates since the end of the most recent fiscal year. For further information on the Company’s critical accounting policies and estimates, see Part II, Item 7 of our Annual Report on Form 10-K for the year ended February 1, 2025.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Recently issued accounting pronouncements, if any, and their impact on the Company are described in Note 2 to the condensed consolidated financial statements.
FORWARD-LOOKING STATEMENTS
This Form 10-Q contains certain forward-looking statements and expectations regarding the Company’s future performance and the performance of its brands. Such statements are subject to various risks and uncertainties that could cause actual results to differ materially. These risks include (i) changes in United States and international trade policies, including tariffs and trade restrictions; (ii) changing consumer demands, which may be influenced by general economic conditions and other factors; (iii) inflationary pressures and supply chain disruptions; (iv) rapidly changing consumer preferences and purchasing patterns and fashion trends; (v) supplier concentration, customer concentration and increased consolidation in the retail industry; (vi) intense competition within the footwear industry; (vii) foreign currency fluctuations; (viii) political and economic conditions or other threats to the continued and uninterrupted flow of inventory from China and other countries, where the company relies heavily on third-party manufacturing facilities for a significant amount of its inventory; (ix) cybersecurity threats or other major disruption to the company’s information technology systems including those related to our ERP upgrade; (x) transitional challenges with acquisitions and divestitures; (xi) the ability to accurately forecast sales and manage inventory levels; (xii) a disruption in the company’s distribution centers; (xiii) the ability to recruit and retain senior management and other key associates; (xiv) the ability to secure/exit leases on favorable terms; (xv) the ability to maintain relationships with current suppliers; (xvi) changes to tax laws, policies and treaties; (xvii) our commitments and shareholder expectations related to responsible business initiatives; (xviii) compliance with applicable laws and standards with respect to labor, trade and product safety issues; and (xix) the ability to attract, retain, and maintain good relationships with licensors and protect our intellectual property rights. The Company’s reports to the Securities and Exchange Commission contain detailed information relating to such factors, including, without limitation, the information under the caption “Risk Factors” in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended February 1, 2025, which information is incorporated by reference herein and updated by the Company’s Quarterly Reports on Form 10-Q. The Company does not undertake any obligation or plan to update these forward-looking statements, even though its situation may change.
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
No material changes have taken place in the quantitative and qualitative information about market risk since the end of the most recent fiscal year. For further information, see Part II, Item 7A of the Company’s Annual Report on Form 10-K for the year ended February 1, 2025.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.