Caleres Inc. Earnings Call: Growth Amid Challenges

Caleres Inc ((CAL)) has held its Q3 earnings call. Read on for the main highlights of the call.

The recent earnings call for Caleres Inc. painted a mixed picture of the company’s performance, with a blend of optimism and challenges. The sentiment was buoyed by strong organic sales growth and robust e-commerce performance, alongside international expansion. However, the company faced significant hurdles, including gross margin pressure due to tariffs, a decline in Famous Footwear sales, and underperformance from Stuart Weitzman. Despite these challenges, Caleres expressed optimism about future improvements, particularly in mitigating tariff impacts and integrating Stuart Weitzman more effectively.

Organic Sales Growth

Caleres Inc. reported a 4.6% increase in organic sales for the quarter, which rose to 18.8% when including Stuart Weitzman. This growth exceeded the company’s internal expectations, showcasing a strong performance in their core business operations.

E-commerce Performance

Both business segments of Caleres posted double-digit growth in owned e-commerce, driven by strong customer growth. This highlights the company’s successful digital strategy and its ability to capture a growing online market.

Sam Edelman Success

The Sam Edelman brand achieved remarkable success, with double-digit sales growth both domestically and internationally. This quarter marked its best performance ever in e-commerce, with a notable increase in full-price sales.

International Business Growth

Caleres’ international business showed robust growth, particularly in premium brand categories. This expansion underscores the company’s strategic focus on global markets and premium offerings.

Famous Footwear E-commerce

Famous Footwear’s e-commerce sales continued to impress, posting double-digit growth for the second consecutive quarter. This indicates a strong online presence and effective customer engagement strategies.

Gross Margin Pressure

The company faced a decrease in consolidated gross margin by 140 basis points, largely due to tariffs and an unfavorable wholesale customer mix. This pressure on margins remains a significant challenge for Caleres.

Famous Footwear Sales Decline

Total sales for Famous Footwear were down 2.2%, with comparable sales declining by 1.2%. This decline highlights ongoing challenges in the retail segment.

Stuart Weitzman Challenges

Stuart Weitzman underperformed, being dilutive to earnings due to significant global excess inventory. The brand’s integration into Caleres’ portfolio has been challenging, yet the company remains committed to turning it around.

Tariff Impact on Brand Portfolio

The brand portfolio’s gross margin was down 150 basis points, primarily due to tariffs, which had a 175 basis point impact. This continues to be a headwind for the company’s profitability.

China Sales Volatility

The shift in ownership of Stuart Weitzman led to sales volatility in China, particularly in August. This volatility reflects the complexities of international market dynamics.

Forward-Looking Guidance

Looking ahead, Caleres provided guidance for the fourth quarter, expecting Famous Footwear sales to decline by low single digits, while brand portfolio sales are projected to be flat to up 1% organically. Stuart Weitzman is expected to contribute $55 million to $60 million in sales. The company anticipates a consolidated gross margin decline of 75 to 100 basis points year-over-year. Caleres aims to achieve breakeven for Stuart Weitzman by 2026, targeting significant synergistic savings across various functions.

In conclusion, the earnings call for Caleres Inc. highlighted a blend of strong growth areas and significant challenges. While the company faces pressures from tariffs and underperforming segments, its robust e-commerce performance and international growth provide a solid foundation for future improvements. The forward-looking guidance suggests a cautious yet optimistic outlook as Caleres navigates these challenges and opportunities.