It could have been a far better first quarter at Caleres Inc., but there’s also much to be upbeat about looking ahead to the rest of the year.
Both sales and profits were down for the three months ended May 3. While sales were weak in February, volatility increased in April after President Donald Trump announced reciprocal tariffs on April 2.
Caleres also faced additional costs associated with moving goods and canceled orders related to tariffs — and it had higher than planned inventory levels at up 8.1 percent versus year-ago levels. The company also noticed customer credit issues and/or bad debt at some wholesale accounts, such as the Canadian Hudson’s Bay retail chain, which will close all it stores on Sunday.
“While our brands continue to resonate with consumers and both segments of our business gained market share in the period, our first-quarter results fell short of expectations,” said Caleres president and CEO Jay Schmidt.
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He noted that sales trends improved in March and April following the weakness in February, although overall performance was below plan. In addition, “operating earnings were pressured by lower gross margins, increased reserves, and costs to cancel and move inventory,” he said. One bright spot in the quarter was growth in the company’s international business.
“The operating environment has become more challenging, and we must redouble our efforts to drive growth and profitability. In the near term, we are focused on controlling what we can control, including optimizing our sourcing strategy,” the CEO said. “Additionally, we expect to decrease SG&A (selling, general and administrative costs) by $15 million on an annualized basis through structural expense cuts. We are viewing this as an opportunity to strengthen Caleres and position our company for the future.”
The company expects to have 10 percent or less sourced from China in the back half of 2025. The company’s prior guidance was 25 percent or less. And like others in the shoe industry, the company is also selectively raising prices.
Looking ahead, a company spokeswoman said Famous Footwear added the Jordan brand in 147 stores. For back-to-school, it will be an all-door exclusive for the shoe chain channel for back-to-school across men’s, women’s, kids and accessories. She also said that the fashion lines — Sam Edelman, and Vince and Veronica Beard under license — are resonating with consumers. In addition the Favorite Daughter collaboration with Dr. Scholls “sold out,” representing a positive for Caleres when Favorite Daughter launches its first shoe collection this fall under license.
Net income dropped to $6.9 million, or 21 cents a diluted share, from net income of $30.9 million, or 88 cents, in the same year-ago period. On an adjusted basis, earnings per diluted share was 22 cents. Net sales fell 6.8 percent to $614.2 million from $6.6 million. By segment, Famous Footwear sales were down 6.3 percent, with comparable sales decreasing 4.6 percent. The Brand Portfolio saw sales decline 6.9 percent. The company said direct-to-consumer sales represented 70 percent of total net sales.
The company in February inked a deal with Tapestry Inc. to acquire the Stuart Weitzman brand for $105 million. The deal is expected to close in late summer.
Caleres is among the 80 companies that signed the FDRA letter in April to Trump urging an exemption for shoes from tariffs.
