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. 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. Our business strategy is focused on accelerating growth in our Brand Portfolio segment, gaining market share and deepening connections with the millennial family in our Famous Footwear segment, leveraging our “One Caleres” capabilities to increase profitability, and delivering value for our shareholders.
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 conditions continued to weigh on consumer discretionary spending and our financial results during the second quarter of 2026. Consumers remain impacted by elevated interest rates, persistent inflation, and expectations of future price increases, which have increased pressure on discretionary spending. In addition, heightened geopolitical volatility has adversely affected the global economy. More recently, conflict throughout the Middle East, particularly the war in Iran, has increased oil prices, resulting in higher product and transportation costs. As a result, we continued to experience lower consumer traffic in our Famous Footwear retail stores during the quarter.
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. We continue to monitor changes in policy impacting global trade, including tariffs, which have been volatile and subject to ongoing modification. In February 2026, the U.S. Supreme Court invalidated certain tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”) and in March 2026, the U.S. Court of International Trade ordered the U.S. Customs and Border Protection Agency (“CBP”) to suspend collection of the invalidated tariffs and to establish a process to refund IEEPA tariffs previously collected. During the thirteen and twenty-six weeks ended August 1, 2026, we collected $57.4 million of tariff refunds and related interest. The Company has received substantially all of the tariff refunds.
Additionally, following the Supreme Court’s ruling invalidating the IEEPA tariffs, the U.S. imposed a temporary 10% general tariff under Section 122 of the Trade Act of 1974 and initiated additional trade actions, including the imposition of tariffs under Sections 301of the Trade Act of 1974, as well as other statutory authorities that may be used to impose tariffs or other import restrictions. On July 24, 2026, new tariff rates were imposed under Section 301 of the Trade Act of 1974. In addition, the U.S. Trade Representative has indicated that additional Section 301 tariffs may be implemented in the coming months following investigations covering a broad range of countries, including major sourcing markets. There remains substantial uncertainty regarding the potential changes or pauses to existing and newly announced tariffs, tariff levels, and whether additional tariffs or other reciprocal actions may be imposed, modified, or suspended. We have continued to implement various mitigation strategies including adjusting the countries from which we source our products and negotiating price concessions with our factories and selectively raising prices. Proposed or enacted tariffs and changes to U.S. trade policies may be reinstituted, paused, removed, or changed at any time, and to the extent we are unable to successfully mitigate any negative resulting impacts, it could adversely affect our business, financial condition, and results of operation.
Liquidity
Our liquidity position remains strong, with $50.9 million in cash and cash equivalents and excess availability on our revolving credit agreement of $357.3 million as of August 1, 2026. During the second quarter of 2026, borrowings on our revolving credit agreement decreased to $288.0 million, primarily driven by repayments under our revolving credit agreement resulting from cash receipts from tariff refunds.
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Financial Highlights
Highlights of our consolidated and segment results for the second quarter of 2026 and 2025 are as follows:
Thirteen Weeks Ended
($ millions, except per share amounts)
August 1, 2026
August 2, 2025
Change (1)
Consolidated net sales
$695.5
$658.5
$37.0
5.6
%
Famous Footwear segment net sales
$374.4
$399.6
($25.2)
(6.3)
%
Famous Footwear comparable sales % change
(5.9)
%
(3.4)
%
n/m
n/m
Brand Portfolio segment net sales
$340.6
$275.6
$65.0
23.6
%
Gross profit
$381.0
$285.8
$95.2
33.3
%
Gross margin
54.8
%
43.4
%
n/m
1,140
bps
Operating earnings
$77.6
$9.3
$68.3
734.6
%
Diluted earnings per share
$1.71
$0.20
$1.51
755.0
%
(1) n/m – not meaningful
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.
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RESULTS OF OPERATIONS
Following are the consolidated results and the results by segment:
CONSOLIDATED RESULTS
Thirteen Weeks Ended
Twenty-Six Weeks Ended
August 1, 2026
August 2, 2025
August 1, 2026
August 2, 2025
% of
% of
% of
% of
($ millions)
Net Sales
Net Sales
Net Sales
Net Sales
Net sales
$
695.5
100.0
%
$
658.5
100.0
%
$
1,362.1
100.0
%
$
1,272.7
100.0
%
Cost of goods sold
314.5
45.2
%
372.7
56.6
%
665.6
48.9
%
708.3
55.6
%
Gross profit
381.0
54.8
%
285.8
43.4
%
696.4
51.1
%
564.5
44.4
%
Selling and administrative expenses
303.4
43.6
%
269.7
40.9
%
597.1
43.8
%
536.2
42.1
%
Restructuring and other special charges, net
—
—
%
6.8
1.1
%
(2.1)
(0.2)
%
7.4
0.6
%
Operating earnings
77.6
11.2
%
9.3
1.4
%
101.5
7.5
%
20.9
1.7
%
Interest expense, net
(4.4)
(0.6)
%
(4.5)
(0.7)
%
(9.1)
(0.7)
%
(8.3)
(0.7)
%
Other income, net
4.5
0.6
%
1.0
0.2
%
5.7
0.4
%
1.7
0.1
%
Earnings before income taxes
77.7
11.2
%
5.8
0.9
%
98.1
7.2
%
14.3
1.1
%
Income tax (provision) benefit
(18.3)
(2.6)
%
1.3
0.2
%
(24.9)
(1.8)
%
(1.3)
(0.1)
%
Net earnings
59.4
8.6
%
7.1
1.1
%
73.2
5.4
%
13.0
1.0
%
Net earnings (loss) attributable to noncontrolling interests
0.8
0.1
%
0.4
0.1
%
0.3
0.0
%
(0.7)
(0.1)
%
Net earnings attributable to Caleres, Inc.
$
58.6
8.5
%
$
6.7
1.0
%
$
72.9
5.4
%
$
13.7
1.1
%
Net Sales
Net sales increased $37.0 million, or 5.6%, to $695.5 million for the second quarter of 2026, compared to $658.5 million for the second quarter of 2025. Net sales of our Brand Portfolio segment increased $65.0 million, or 23.6%. Stuart Weitzman, acquired on August 4, 2025, contributed net sales of $42.5 million. Brand Portfolio net sales were up 8.2% on an organic growth basis, reflecting increases in our wholesale and international businesses. We saw broad strength in our fashion footwear brands and growth in most of our more value-oriented brands. Net sales in our Famous Footwear segment decreased $25.2 million, or 6.3%, and comparable sales declined 5.9%, reflecting less traffic in our retail stores. Our direct-to-consumer sales represented approximately 71% of consolidated net sales for the second quarter of 2026, compared to 75% for the second quarter of 2025. 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 increased $89.4 million, or 7.0%, to $1,362.1 million for the six months ended August 1, 2026, compared to $1,272.7 million for the six months ended August 2, 2025. Net sales of our Brand Portfolio segment increased $125.9 million, or 22.0%. Stuart Weitzman contributed net sales of $86.4 million. Brand Portfolio net sales were up 6.9% on an organic growth basis. Net sales in our Famous Footwear segment decreased $33.6 million, or 4.6%, and comparable sales declined 4.3%, reflecting less traffic in our retail stores. Our direct-to-consumer sales represented approximately 69% of consolidated net sales for the six months ended August 1, 2026, compared to 73% for the six months ended August 2, 2025.
Gross Profit
Gross profit increased $95.2 million, or 33.3%, to $381.0 million for the second quarter of 2026, compared to $285.8 million for the second quarter of 2025. As a percentage of net sales, gross profit increased to 54.8% for the second quarter of 2026, compared to 43.4% for the second quarter of 2025. The increase primarily reflects $55.6 million of tariff refunds received in the second quarter of 2026. The remaining increase is driven by lower ongoing tariffs and the continuation of our tariff mitigation efforts as well as favorable channel mix with more retail sales, which have a higher margin than wholesale, as a result of the Stuart Weitzman acquisition. This was offset by clearance-related activity.
Gross profit increased $131.9 million, or 23.4%, to $696.4 million for the six months ended August 1, 2026, compared to $564.5 million for the six months ended August 2, 2025. As a percentage of net sales, gross profit increased to 51.1% for the six months ended August 1, 2026, compared to 44.4% for the six months ended August 2, 2025. The increase primarily reflects $55.6 million of tariff refunds received in the second quarter of 2026. The remaining increase is driven by the same factors described above.
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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 $33.7 million, or 12.5%, to $303.4 million for the second quarter of 2026, compared to $269.7 million for the second quarter of 2025. The increase was driven by expenses associated with our acquired Stuart Weitzman brand, as well as higher expenses associated with our incentive compensation programs. As a percentage of net sales, selling and administrative expenses increased to 43.6% for the second quarter of 2026, from 40.9% for the second quarter of 2025.
Selling and administrative expenses increased $60.9 million, or 11.4%, to $597.1 million for the six months ended August 1, 2026, compared to $536.2 million for the six months ended August 2, 2025. The increase was driven by the same factors described above. As a percentage of net sales, selling and administrative expenses increased to 43.8% for the six months ended August 1, 2026, from 42.1% for the six months ended August 2, 2025.
Restructuring and Other Special Charges, Net
Restructuring and other special charges, net resulted in income of $2.1 million for the six months ended August 1, 2026, driven by a gain on the sale of one of the remaining parcels comprising the corporate headquarters and offset by Stuart Weitzman acquisition and integration costs. Refer to Note 6 to the condensed consolidated financial statements for additional information related to these charges. We incurred restructuring costs of $7.4 million for the six months ended August 2, 2025, primarily for legal and other related costs associated with the acquisition of Stuart Weitzman and other related costs associated with our expense reduction initiatives.
Operating Earnings
Operating earnings increased $68.3 million to $77.6 million for the second quarter of 2026, compared to $9.3 million for the second quarter of 2025, reflecting the factors described above. As a percentage of net sales, operating earnings were 11.2% for the second quarter of 2026, compared to 1.4% for the second quarter of 2025.
Operating earnings increased $80.6 million to $101.5 million for the six months ended August 1, 2026, compared to $20.9 million for the six months ended August 2, 2025, reflecting the factors described above. As a percentage of net sales, operating earnings were 7.5% for the six months ended August 1, 2026, compared to 1.7% for the six months ended August 2, 2025.
Interest Expense, Net
Interest expense, net decreased $0.1 million, or 2.5%, to $4.4 million for the second quarter of 2026, compared to $4.5 million for the second quarter of 2025, reflecting lower average borrowings on our revolving credit facility.
Interest expense, net increased $0.8 million, or 9.3%, to $9.1 million for the six months ended August 1, 2026, compared to $8.3 million for the six months ended August 2, 2025, reflecting higher average borrowings on our revolving credit facility.
Other Income, Net
Other income, net increased $3.5 million to $4.5 million for the second quarter of 2026, compared to $1.0 million for the second quarter of 2025, and increased $4.0 million, to $5.7 million for the six months ended August 1, 2026, compared to $1.7 million for the six months ended August 2, 2025, primarily reflecting $1.8 million of interest received from tariff refunds, as well as higher income generated from our pension plan assets in the second quarter and six months ended August 1, 2026. 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 a provision of 23.6% and a benefit of 22.0% for the second quarter of 2026 and 2025, respectively. Our consolidated effective tax rates were provisions of 25.4% and 8.8% for the six months ended August 1, 2026 and August 2, 2025, respectively. The higher effective tax rate for the quarter was driven by the pre-tax income and tax provision associated with tariff refunds received during the second quarter of 2026 contrasted with a discrete tax benefit of $2.5 million associated with foreign earnings transition tax resolution during the second quarter of 2025. Discrete tax provisions related to share-based compensation of $1.5 million and $0.4 million were also recorded for the six months ended August 1, 2026 and August 2, 2025, respectively.
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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. In January 2026, the OECD announced that the U.S. multinational regime would be considered a side-by-side regime that should prevent U.S. companies from double taxation, although the arrangement is still being reviewed and adopted by other countries who have enacted Pillar Two legislation. 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.
Net Earnings Attributable to Caleres, Inc.
Net earnings attributable to Caleres, Inc. was $58.6 million and $72.9 million for the second quarter and six months ended August 1, 2026, respectively, compared to $6.7 million and $13.7 million for the second quarter and six months ended August 2, 2025, respectively, as a result of the factors described above.
FAMOUS FOOTWEAR
Thirteen Weeks Ended
Twenty-Six Weeks Ended
August 1, 2026
August 2, 2025
August 1, 2026
August 2, 2025
% of
% of
% of
% of
($ millions, except sales per square foot)
Net Sales
Net Sales
Net Sales
Net Sales
Net sales
$
374.4
100.0
%
$
399.6
100.0
%
$
693.7
100.0
%
$
727.3
100.0
%
Cost of goods sold
214.6
57.3
%
224.9
56.3
%
393.9
56.8
%
404.2
55.6
%
Gross profit
159.8
42.7
%
$
174.7
43.7
%
299.8
43.2
%
$
323.1
44.4
%
Selling and administrative expenses
154.6
41.3
%
156.0
39.1
%
295.1
42.5
%
299.5
41.2
%
Restructuring and other special charges, net
—
—
%
0.1
0.0
%
—
—
%
0.1
0.0
%
Operating earnings
$
5.2
1.4
%
$
18.6
4.6
%
$
4.7
0.7
%
$
23.5
3.2
%
Key Metrics
Comparable sales % change
(5.9)
%
(3.4)
%
(4.3)
%
(3.9)
%
Comparable sales $ change
$
(23.1)
$
(13.8)
$
(30.3)
$
(29.4)
Sales change from new and closed stores, net
$
(1.9)
$
(6.9)
$
(3.3)
$
(12.8)
Impact of changes in Canadian exchange rate on sales
$
(0.2)
$
0.0
$
0.0
$
(0.3)
Sales per square foot, excluding e-commerce (thirteen and twenty-six weeks ended)
$
60
$
63
$
110
$
114
Sales per square foot, excluding e-commerce (trailing twelve months)
$
225
$
232
$
225
$
232
Square footage (thousand sq. ft.)
5,366
5,463
5,366
5,463
Stores opened
6
2
7
2
Stores closed
4
7
14
18
Ending stores
814
830
814
830
Net Sales
Net sales of $374.4 million in the second quarter of 2026 decreased $25.2 million, or 6.3%, compared to the second quarter of 2025. Comparable sales decreased 5.9% for the second quarter of 2026 driven by a decline in consumer traffic in our retail stores. E-commerce sales were 14% of net sales in both the second quarter of 2026 and 2025. Our kids category, which is a key differentiator for Famous Footwear, continued to outperform the total chain.
We opened six stores and closed four stores during the second quarter of 2026, resulting in 814 stores and total square footage of 5.4 million at the end of the quarter, compared to 830 stores and total square footage of 5.5 million at the end of the second quarter of 2025. 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 2026, consistent with the second quarter of 2025.
Net sales of $693.7 million in the six months ended August 1, 2026 decreased $33.6 million, or 4.6%, compared to the six months ended August 2, 2025. Comparable sales decreased 4.3% for the six months ended August 1, 2026 driven by a decline in consumer traffic in our retail stores. During the first half of 2026, we opened seven stores and closed 14 stores.
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Table of Contents
Gross Profit
Gross profit decreased $14.9 million, or 8.5%, to $159.8 million for the second quarter of 2026, compared to $174.7 million for the second quarter of 2025. As a percentage of net sales, our gross profit decreased to 42.7% for the second quarter of 2026, from 43.7% for the second quarter of 2025, reflecting higher levels of clearance-related activity.
Gross profit decreased $23.3 million, or 7.2%, to $299.8 million for the six months ended August 1, 2026, compared to $323.1 million for the six months ended August 2, 2025. As a percentage of net sales, our gross profit decreased to 43.2% for the six months ended August 1, 2026, from 44.4% for the six months ended August 2, 2025, reflecting higher levels of clearance-related activity.
Selling and Administrative Expenses
Selling and administrative expenses decreased $1.4 million, or 0.9%, to $154.6 million for the second quarter of 2026, compared to $156.0 million for the second quarter of 2025. The decrease was primarily driven by lower information technology costs and lower warehouse and distribution costs. During the second quarter of 2026, we converted two stores to the FLAIR concept, ending the quarter with a total of 61 FLAIR stores. As a percentage of net sales, selling and administrative expenses increased to 41.3% for the second quarter of 2026, compared to 39.1% for the second quarter of 2025.
Selling and administrative expenses decreased $4.4 million, or 1.5%, to $295.1 million for the six months ended August 1, 2026, compared to $299.5 million for the six months ended August 2, 2025. The decrease was primarily driven by lower information technology spend and lower warehouse and distribution costs. As a percentage of net sales, selling and administrative expenses increased to 42.5% for the six months ended August 1, 2026, compared to 41.2% for the six months ended August 2, 2025.
Operating Earnings
Operating earnings decreased $13.4 million to $5.2 million for the second quarter of 2026, compared to $18.6 million for the second quarter of 2025, primarily reflecting the factors described above. As a percentage of net sales, operating earnings declined to 1.4% for the second quarter of 2026, compared to 4.6% for the second quarter of 2025.
Operating earnings decreased $18.8 million to $4.7 million for the six months ended August 1, 2026, compared to $23.5 million for the six months ended August 2, 2025, primarily reflecting the factors described above. As a percentage of net sales, operating earnings declined to 0.7% for the six months ended August 1, 2026, compared to 3.2% for the six months ended August 2, 2025.
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Table of Contents
BRAND PORTFOLIO
Thirteen Weeks Ended
Twenty-Six Weeks Ended
August 1, 2026
August 2, 2025
August 1, 2026
August 2, 2025
% of
% of
% of
% of
($ millions)
Net Sales
Net Sales
Net Sales
Net Sales
Net sales
$
340.6
100.0
%
$
275.6
100.0
%
$
696.9
100.0
%
$
571.0
100.0
%
Cost of goods sold
117.8
34.6
%
164.5
59.7
%
299.6
43.0
%
330.7
57.9
%
Gross profit
222.8
65.4
%
111.1
40.3
%
397.3
57.0
%
240.3
42.1
%
Selling and administrative expenses
131.5
38.6
%
102.6
37.2
%
266.6
38.3
%
214.5
37.6
%
Restructuring and other special charges, net
—
—
%
1.8
0.7
%
0.4
0.00
%
1.8
0.2
%
Operating earnings
$
91.2
26.8
%
$
6.7
2.4
%
$
130.3
18.7
%
$
24.0
4.3
%
Key Metrics
Direct-to-consumer (% of net sales) (1)
37
%
36
%
36
%
35
%
Change in wholesale net sales, excluding Stuart Weitzman ($)
$
20.9
$
(11.6)
$
31.8
$
(29.2)
Change in retail net sales, excluding Stuart Weitzman ($)
$
1.6
$
1.7
$
7.7
$
(2.5)
Sales change from acquired Stuart Weitzman business
$
42.5
$
—
$
86.4
$
—
Unfilled order position at end of period
$
340.7
$
244.2
Company-Operated Stores:
North America
Stores opened
2
2
2
5
Stores closed
4
—
4
2
Ending stores - North America (2)
83
63
83
63
East and Southeast Asia
Ending stores - East Asia (2)
91
55
91
55
Total Company-Operated Stores
174
118
174
118
International franchise locations
151
145
151
145
Total
325
263
325
263
(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) Ending stores for the period ended August 1, 2026, include 21 North America and 41 East Asia Stuart Weitzman retail stores.
Net Sales
Net sales of $340.6 million in the second quarter of 2026 increased $65.0 million, or 23.6%, compared to the second quarter of 2025. The increase primarily reflects the acquisition of Stuart Weitzman on August 4, 2025. Stuart Weitzman contributed net sales of $42.5 million in the second quarter of 2026. The remaining 8.2% increase in net sales was driven by strong organic growth in our wholesale and international businesses. We saw broad strength in our fashion footwear brands and growth in our more value-oriented brands. Our direct-to-consumer sales represented approximately 37% of net sales for the second quarter of 2026, compared to 36% for the second quarter of 2025. During the second quarter of 2026, opened two stores and closed four stores in North America, resulting in a total of 83 stores, compared to 63 stores in the second quarter of 2025. We remain focused on international growth and continue to evaluate expansion of our international presence during the second quarter of 2026. There were 91 stores in East Asia at August 1, 2026, compared to 55 stores at August 2, 2025. There were also 151 international branded stores owned and operated by third parties through franchise agreements at August 1, 2026, compared to 145 international branded stores at August 2, 2025.
Net sales increased $125.9 million, or 22.0%, to $696.9 million for the six months ended August 1, 2026, compared to $571.0 for the six months ended August 2, 2025. The increase primarily reflects the acquisition of Stuart Weitzman on August 4, 2025, which contributed net sales of $86.4 million in the six months ended August 1, 2026. The remaining 6.9% increase in net sales was driven by organic growth.
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Our unfilled order position for our wholesale sales increased $96.5 million, or 39.5%, to $340.7 million at August 1, 2026, compared to $244.2 million at August 2, 2025.
Gross Profit
Gross profit increased $111.7 million, or 101%, to $222.8 million for the second quarter of 2026, compared to $111.1 million for the second quarter of 2025. As a percentage of net sales, our gross profit increased to 65.4% for the second quarter of 2026, compared to 40.3% for the second quarter of 2025. The increase was driven primarily by $55.6 million of tariff recoveries received in the current period. The remaining increase is driven by lower ongoing tariffs and the continuation of our tariff mitigation efforts, as well as favorable channel mix with more retail sales, which have a higher margin than wholesale, as a result of the Stuart Weitzman acquisition.
Gross profit increased $157.0 million, or 65.3%, to $397.3 million for the six months ended August 1, 2026, compared to $240.3 million for the six months ended August 2, 2025. As a percentage of net sales, our gross profit increased to 57.0% for the six months ended August 1, 2026, compared to 42.1% for the six months ended August 2, 2025. The increase was driven by the same factors described above.
Selling and Administrative Expenses
Selling and administrative expenses increased $28.9 million, or 28.2%, to $131.5 million for the second quarter of 2026, compared to $102.6 million for the second quarter of 2025 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 38.6% for the second quarter of 2026, compared to 37.2% for the second quarter of 2025.
Selling and administrative expenses increased $52.1 million, or 24.2%, to $266.6 million for the six months ended August 1, 2026, compared to $214.5 million for the six months ended August 2, 2025 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 38.3% for the six months ended August 1, 2026, compared to 37.6% for the six months ended August 2, 2025.
Restructuring and Other Special Charges, Net
There were no restructuring and other special charges during the second quarter of 2026. Restructuring and other special charges of $0.4 million for the six months ended August 1, 2026 were primarily associated Stuart Weitzman acquisition and integration costs. Refer to Note 6 to the condensed consolidated financial statements for additional information related to these charges. 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.
Operating Earnings
Operating earnings increased to $91.2 million for the second quarter of 2026, from $6.7 million for the second quarter of 2025, as a result of the factors described above. As a percentage of net sales, operating earnings were 26.8% for the second quarter of 2026, compared to 2.4% for the second quarter of 2025.
Operating earnings increased to $130.3 million for the six months ended August 1, 2026, compared to $24.0 million for the six months ended August 2, 2025, as a result of the factors described above. As a percentage of net sales, operating earnings were 18.7% for the six months ended August 1, 2026, compared to 4.3% in the six months ended August 2, 2025.
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ELIMINATIONS AND OTHER
Thirteen Weeks Ended
Twenty-Six Weeks Ended
August 1, 2026
August 2, 2025
August 1, 2026
August 2, 2025
% of
% of
% of
% of
($ millions)
Net Sales
Net Sales
Net Sales
Net Sales
Net sales
$
(19.5)
100.0
%
$
(16.7)
100.0
%
$
(28.5)
100.0
%
$
(25.5)
100.0
%
Cost of goods sold
(17.9)
91.9
%
(16.7)
100.0
%
(27.9)
97.8
%
(26.5)
103.9
%
Gross profit
(1.6)
8.1
%
0.0
0.0
%
(0.6)
2.2
%
1.0
(3.9)
%
Selling and administrative expenses
17.2
(88.2)
%
11.1
(66.5)
%
38.1
(133.7)
%
22.2
(87.1)
%
Restructuring and other special charges, net
—
—
%
4.8
(28.7)
%
(2.6)
9.1
%
5.5
(21.6)
%
Operating loss
$
(18.8)
96.3
%
$
(15.9)
95.2
%
$
(36.1)
126.8
%
$
(26.7)
104.8
%
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 $19.5 million for the second quarter of 2026 is $2.8 million, or 16.8%, higher than the second quarter of 2025, reflecting an increase in product sold from our Brand Portfolio segment to Famous Footwear compared to the prior comparable period. The net sales elimination of $28.5 million for the six months ended August 1, 2026 is $3.0 million, or 11.8%, higher than the six months ended August 2, 2025, reflecting an increase in product sold from our Brand Portfolio segment to Famous Footwear compared to the prior comparable period.
Selling and administrative expenses increased $6.1 million, to $17.2 million in the second quarter of 2026, compared to $11.1 million for the second quarter of 2025. Selling and administrative expenses increased $15.9 million, to $38.1 million in the six months ended August 1, 2026, compared to $22.2 million in the six months ended August 2, 2025. The increase for both the quarter and six months primarily reflect higher expenses related to our incentive compensation programs.
Restructuring and other special charges, net consisted of $2.6 million of income for the six months ended August 1, 2026, driven by a gain of $3.9 million for the sale of one of the remaining parcels comprising our corporate headquarters in Clayton, Missouri, partially offset by $1.3 million of technology, office relocation and other related costs associated with the acquisition of Stuart Weitzman. Restructuring and other special charges of $5.5 million for the six months ended August 2, 2025 were for legal and other related costs associated with the acquisition of Stuart Weitzman. Refer to Note 6 to the condensed consolidated financial statements for additional information.
LIQUIDITY AND CAPITAL RESOURCES
Borrowings
As further discussed in Note 11 to the condensed consolidated financial statements, we maintain 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 $288.0 million at August 1, 2026 decreased $99.5 million, from $387.5 million at August 2, 2025, and $8.5 million, from $296.5 million at January 31, 2026. On August 4, 2025, we completed the acquisition of Stuart Weitzman, as further discussed in Note 3 to the condensed consolidated financial statements. The decrease in borrowings at August 1, 2026 primarily reflects repayments of borrowings at the end of the second quarter of 2025 to fund the acquisition. Net interest expense for the second quarter of 2026 decreased $0.1 million to $4.4 million, compared to $4.5 million for the second quarter of 2025, reflecting lower average borrowings on our revolving credit facility.
At August 1, 2026, we had $288.0 million in borrowings and $7.6 million in letters of credit outstanding under the Credit Agreement. Total borrowing availability was $357.3 million at August 1, 2026. We were in compliance with all covenants and restrictions under the Credit Agreement as of August 1, 2026.
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Working Capital and Cash Flow
Twenty-Six Weeks Ended
($ millions)
August 1, 2026
August 2, 2025
Change
Net cash provided by operating activities
$
55.8
$
41.7
$
14.1
Net cash used for investing activities
(16.9)
(34.1)
17.2
Net cash (used for) provided by financing activities
(17.6)
154.2
(171.8)
Effect of exchange rate changes on cash and cash equivalents
(0.1)
0.1
0.0
Increase in cash and cash equivalents
$
21.2
$
161.9
$
(140.7)
Reasons for the major variances in cash provided in the table above are as follows:
Cash provided by operating activities was $14.1 million higher in the twenty-six weeks ended August 1, 2026 as compared to the twenty-six weeks ended August 2, 2025, primarily reflecting the following factors, including cash used for Stuart Weitzman operating activities:
● Net earnings of $73.2 million for the twenty-six weeks ended August 1, 2026, compared to $13.0 million for the twenty-six weeks ended August 2, 2025,
● A larger increase in trade accounts payable during the twenty-six weeks ended August 1, 2026, compared to the twenty-six weeks ended August 2, 2025, partially offset by,
● An increase in accounts receivable of $13.5 million during the twenty-six weeks ended August 1, 2026, compared to a decrease of $18.4 million during twenty-six weeks ended August 2, 2025,
● A decrease in accrued expenses and other liabilities during the twenty-six weeks ended August 1, 2026, compared to an increase during the twenty-six weeks ended August 2, 2025, and
● A larger increase in inventory during the twenty-six weeks ended August 1, 2026, compared to the twenty-six weeks ended August 2, 2025.
Cash used for investing activities was $17.2 million lower for the twenty-six weeks ended August 1, 2026 as compared to the twenty-six weeks ended August 2, 2025, reflecting lower capital expenditures, due in part to less Famous Footwear remodel spending. We had 61 FLAIR stores as of August 1, 2026 and expect to add three to five more FLAIR stores during the second half of 2026. The lower capital expenditures are offset by $4.0 million of cash received for the sale of one of the remaining parcels comprising the Company’s corporate headquarters.
Cash used for financing activities was $17.6 million for the twenty-six weeks ended August 1, 2026, as compared to cash provided by financing activities of $154.2 million for the twenty-six weeks ended August 2, 2025. The primary driver of the change is due to net repayments on our revolving credit agreement of $8.5 million for the twenty-six weeks ended August 1, 2026, compared to net borrowings on our revolving credit agreement of $168.0 million for the twenty-six weeks ended August 2, 2025. The decrease in borrowings at August 1, 2026 primarily reflects repayments of borrowings at the end of the second quarter of 2025.
A summary of key financial data and ratios at the dates indicated is as follows:
August 1, 2026
August 2, 2025
January 31, 2026
Working capital ($ millions) (1)
$
105.6
$
84.3
$
17.2
Current ratio (2)
1.11:1
1.08:1
1.02:1
Debt-to-capital ratio (3)
29.7
%
38.4
%
32.7
%
(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 August 1, 2026 was $105.6 million, which was an increase of $21.3 million from August 2, 2025 and an increase of $88.1 million from January 31, 2026. The increase in working capital from August 2, 2025 to August 1, 2026 primarily reflects a decrease in
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borrowings under our revolving credit agreement. The revolver was used to fund the acquisition of Stuart Weitzman, as further described in Note 3 to the condensed consolidated financial statements. The increase was further driven by increases in net receivables and net inventories. The increase in working capital from January 31, 2026 primarily reflects higher net inventories.
Our current ratio was 1.11:1 at August 1, 2026, compared to 1.08:1 at August 2, 2025 and 1.02:1 at January 31, 2026. Our debt-to-capital ratio was 29.7% as of August 1, 2026, compared to 38.4% as of August 2, 2025 and 32.7% at January 31, 2026. The lower debt-to-capital ratio as of August 1, 2026 reflects the decrease in borrowings under our revolving credit agreement from the previous year, which was higher as a result of the Stuart Weitzman acquisition.
We declared and paid dividends of $0.07 per share in the second quarter of both 2026 and 2025. 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.
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 January 31, 2026.
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) transitional challenges with acquisitions and divestitures; (x) cybersecurity threats or other major disruption to the company’s information technology; (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) changes to tax laws, policies and treaties; (xvi) our commitments and shareholder expectations related to responsible business initiatives; (xvii) compliance with applicable laws and standards with respect to labor, trade and product safety issues; and (xviii) the ability to attract, retain, and maintain good relationships with licensors and protect our intellectual property rights. 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 January 31, 2026, 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.
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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 January 31, 2026.