Caleres: A Dividend Anchor in a Volatile Retail Landscape

Caleres Inc. (NYSE: CAL) has long been a paradox in the retail sector: a footwear giant that combines a rock-solid dividend policy with the agility to navigate turbulent markets. For long-term investors seeking stability amid economic uncertainty, CAL’s consistent payout and resilient financial framework make it a compelling play. Let’s dissect why this dividend stalwart remains a buy despite near-term headwinds.

A Dividend That Weathered the Storm
Caleres’ dividend history since 2020 has been a study in discipline. The company has maintained a $0.07 quarterly dividend since at least 2023, totaling $0.28 annually, even as sales dipped and earnings fluctuated. This consistency is underscored by a payout ratio averaging just 8-10% in recent years—far below the 41% sector average. As of 2024, with earnings per share (EPS) of $3.09, the dividend consumed a mere 8.5% of profits, leaving ample room for reinvestment or future increases.

This low payout ratio isn’t a fluke. Even under 2025’s conservative guidance—projecting EPS of $2.80–3.20—the dividend would account for just 8.75%–10% of earnings. Such financial prudence suggests the dividend is bulletproof, a rare trait in an industry where retailers often slash payouts during downturns.

Resilience in a Slump
While Caleres’ top-line performance has stumbled—2024 sales fell 3.4% to $2.72 billion—the company’s balance sheet remains intact. Key metrics:
- Debt/EBITDA: 1.1x (manageable, even after the Stuart Weitzman acquisition).
- Free cash flow: $52.88 million in 2024, down from $200 million in 2023 but still positive.
- Net cash: $29.6 million, up $8.3 million year-over-year.

The acquisition of Stuart Weitzman, while funded via debt, is a strategic move to diversify into higher-margin luxury brands—a hedge against the discount-driven Famous Footwear segment. While near-term leverage may rise, Caleres’ track record of maintaining dividends during weaker cycles suggests shareholder returns remain a priority.

Why Now Is the Time to Buy
Caleres’ stock trades at a 52-week low, reflecting investor anxiety over retail sector woes. But this creates an entry point for those willing to look beyond short-term noise:
1. Undervalued: At ~$20/share, CAL trades at 7x projected 2025 EPS, a discount to its 10-year average of 12x.
2. Dividend Yield: 1.7%, higher than peers like Wolverine World Wide (WWW) at 1.4% and Steven Madden (SHOO) at 0.8%.
3. Catalyst on the Horizon: The Stuart Weitzman acquisition could boost margins, while Famous Footwear’s omnichannel strategy positions it to rebound as consumer confidence stabilizes.

Risks to Consider
No investment is risk-free. Caleres faces headwinds like:
- Inventory bloat: A 4.5% year-over-year rise in stockpiles could pressure margins.
- Debt load: Rising leverage post-acquisition may limit flexibility.
- Retail competition: Rival discounters and e-commerce giants remain a threat.

Yet these risks are priced into the stock. For income-focused investors, the dividend’s safety and CAL’s valuation offer a compelling risk-reward trade.

Final Verdict: A Dividend Fortress for the Long Haul
Caleres isn’t a high-growth story—it’s a defensive play. With a dividend that’s grown through recessions, inflation, and supply chain chaos, CAL offers stability in an unstable sector. At current prices, the stock offers both value and income, making it a top pick for portfolios seeking ballast.

For investors willing to look past quarterly noise, Caleres is more than a dividend stock—it’s a recession-resistant anchor in a volatile retail sea. Act now before the market catches on.