Caleres Faces Margin Challenges Amid Tariff Pressures
Caleres Inc. Reports Decline in Revenue Amid Tariff Pressures
Caleres Inc. (NYSE: CAL) has experienced a significant decrease in share value following the company's recent financial report, showcasing a revenue of $658.5 million for the second quarter of 2025. This marks a 3.6% decline compared to the same period last year, although it exceeded expectations of $656.5 million.
Financial Performance Overview
Adjusted earnings per share landed at 35 cents, falling short of the projected 56-cent estimate. Net income dropped to $6.7 million (20 cents per share), a stark contrast to $30 million (85 cents per share) recorded a year prior. Both results included a tax benefit of 7 cents.
Gross Margin and Operating Expenses
Gross profit reached $285.8 million; however, the gross margin decreased by 210 basis points to 43.4%. The selling, general, and administrative expenses accounted for 41% of sales, climbing from 39.3% last year.
Famous Footwear Segment Performance
Famous Footwear, a key segment for Caleres, reported a revenue drop of 4.9%, totaling $399.6 million, with comparable sales down 3.4%. The segment's gross margin faced a setback, decreasing by 130 basis points to 43.7%. Revenue from the Brand Portfolio fell by 3.5% to $275.6 million, primarily impacted by a $10 million tariff burden, causing a margin decline of 240 basis points to 40.3%. Notably, direct-to-consumer sales represented 75% of their revenue.
Inventory and Cash Flow Insights
At the end of the quarter, inventory stood at $693.3 million, reflecting a 4.9% increase year-over-year. Borrowings under the credit facility grew to $387.5 million, surging by $241 million, primarily to finance the acquisition of Stuart Weitzman that concluded post-quarter.
Cash Management and Financial Strategies
The company reported a cash balance of $191.5 million, a significant rise from $51.8 million in the previous year. Operating cash flow for the first half totaled $41.6 million, a decline from $115.7 million noted in the prior year.
Credit Facility Amendment and Cost Savings
Recently, Caleres modified its revolving credit facility, extending the maturity to 2030 while increasing its capacity by $200 million, now totaling $700 million, with an option for up to $950 million. Furthermore, the firm has implemented cost-saving initiatives expected to yield $15 million in annual savings.
Management's Perspective on Current Trends
Caleres President and CEO Jay Schmidt commented, "Despite the challenges posed by market uncertainty, we have shown resilience as a company this quarter. Improvements in sales trends were observed across both segments of our business, with market share gains particularly noted in women's fashion footwear and retail shoe chains."
Future Outlook and Expectations
The company has paused its annual guidance, anticipating continued margin pressures from tariffs within the Brand Portfolio segment. Third-quarter gross margins are projected to align with the second quarter, with hopeful signs of improvement expected in the fourth quarter as mitigation strategies are rolled out.
Recent Sales Performance
In August, Famous Footwear saw a slight rise in comparable sales of 1%, while the Brand Portfolio, excluding Stuart Weitzman, reported modest growth in the low single digits.
Market Reaction and Stock Performance
In the market, CAL shares noticed a decline of 16.39%, falling to $12.50 in premarket trading, signaling concerns from investors about the company's financial health and future projections.
Frequently Asked Questions
What financial results did Caleres report for the second quarter?
Caleres reported a revenue of $658.5 million, down 3.6% from the previous year, with adjusted earnings of 35 cents per share.
How did the tariff impacts affect Caleres?
The tariffs contributed approximately $10 million in losses to the Brand Portfolio, leading to a decline in gross margin.
What measures is Caleres taking to address financial challenges?
Caleres amended its credit facility to enhance liquidity and implemented cost-saving initiatives aimed at improving overall profitability.
What is the outlook for Caleres in the coming quarters?
The company has paused annual guidance but expects third-quarter margins to be similar to the second quarter with improvements anticipated later in the year.
How has the market reacted to Caleres' recent performance?
Following the announcement of financial results, CAL shares fell significantly, reflecting market concerns regarding the company's future performance.
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