Caleres (CAL) Q2 Earnings call transcript Sep 12, 2025

In the latest earnings call, Caleres, the footwear company behind brands such as Sam Edelman, Allen Edmonds, Naturalizer, and Vionic, revealed a challenging second quarter with sales and earnings below expectations. Despite the setbacks, management remains confident in the company's long-term vision, highlighting growth opportunities and strategic initiatives aimed at bolstering Caleres' position in the footwear market.

ERP Upgrade Challenges and Response

One of the primary factors impacting Caleres' performance was the implementation of a new enterprise resource planning (ERP) system. The upgrade resulted in operational disruptions, including delayed operational reports and difficulties in servicing drop ship and replenishment orders. To address these issues, Caleres took immediate action, replacing one of its integration partners and enlisting experienced order management professionals to help ship out orders. The company also developed workarounds and shored up reporting to restore operational efficiency. While the ERP issues contributed to missed sales, particularly in direct-to-consumer and replenishment channels, Caleres is now operational in all areas impacted by the disruption.

Financial Performance and Outlook

Caleres reported earnings per share of $0.85 for the second quarter, with sales declining 1.8% year-over-year. The company's gross margin rates improved by 30 basis points, driven by its brand portfolio, which saw a 5.1% sales decline. The Brand Portfolio's return on sales was down to 8.3% from the previous year due to deleveraging of expenses. However, Caleres continues to see strong growth in demand for new products, especially in the sneakers and sport categories, which accounted for 28% of retail selling in the quarter. The company's Famous Footwear segment also reported total sales up 1.5%, although comparable sales declined 2.9%.

Looking ahead, Caleres has updated its full-year guidance, expecting sales to be down a low-single-digit percent versus last year. The company plans to close an additional 10 stores this year and expects to end the year with 850 stores, down from 860 last year. Caleres also announced a restructuring that will save approximately $7.5 million on an annualized basis and $2 million in this fiscal year. These actions aim to make the company's teams more efficient and effective.

Growth Opportunities and Strategic Initiatives

Despite the challenges faced in the second quarter, Caleres remains optimistic about its future prospects. The company is seeing strong growth in demand for new products, particularly in the sneakers and sport categories. Caleres is also making strategic moves in distribution channels, with Allen Edmonds' wholesale door count up 30% year-over-year and strong response at key accounts like Nordstrom. The company is also expanding its reach to new consumers through initiatives like inclusivity ambassadors for Naturalizer and Vionic. Additionally, Caleres is focusing on enhancing the consumer experience at Famous Footwear through initiatives like the Flair stores, which have seen a 5-point sales lift in fall 2023 and spring 2024.

Conclusion

Caleres' second quarter performance was marked by challenges, particularly due to the ERP upgrade and sales misses. However, the company remains focused on its long-term vision and growth opportunities, leveraging strategic initiatives to bolster its position in the footwear market. Caleres' confidence in its ability to get back on track and deliver earnings in line with its revised guidance is a testament to its resilience and strategic foresight. As the company navigates the remaining quarters of the year, investors will be closely watching its progress in implementing its strategic plans and recovering from the setbacks of the second quarter.