Caleres' Q3 2026: Contradictions Emerge on Stuart Weitzman Inventory, Tariff Impacts, and Strategic Focus

Date of Call: December 9, 2025

Financials Results

• Revenue: $790.1M, up 6.6% YOY
• EPS: $0.38 per diluted share (Q3), $0.67 excluding Stuart Weitzman
• Gross Margin: Consolidated 42.7%, down 140 bps YOY; Brand Portfolio 42.3% (down 150 bps; excluding Stuart Weitzman down 200 bps; tariff impact ~175 bps); Famous 41.6% (down 130 bps)
• Operating Margin: Consolidated 3.3% (operating earnings $26.3M); excluding Stuart Weitzman 5.0% (operating earnings $37.4M); Brand Portfolio 5.2% (9.2% excluding Stuart Weitzman); Famous 5.0%

Guidance:

• Famous Q4: comp store sales about flat; total sales down low single digits.
• Brand Portfolio Q4: organic sales flat to +1%; Stuart Weitzman expected to add $55M–$60M.
• Consolidated gross margin expected down 75–100 bps YoY in Q4, with more pressure in Brand Portfolio but improvement vs Q3.
• SG&A: modest increase excluding Stuart; Stuart SG&A expected slightly higher than $32M in Q3.
• Q4 EPS expected loss of $0.35 to $0.40, including $0.30–$0.35 dilution from Stuart Weitzman.
• Full-year EPS $0.55–$0.60; full-year EPS excluding Stuart Weitzman $1.15–$1.25; tax rate 27%–28%.

Business Commentary:

* Brand Portfolio Performance: - Caleres' Brand Portfolio sales exceeded expectations, up 4.6% organically in Q3, and 18.8% including Stuart Weitzman. - The growth was driven by strong organic sales led by Lead Brands, particularly Sam Edelman and Allen Edmonds, and a marked international business performance.

• Famous Footwear Sales Trends:
• Total sales at Famous Footwear were down 2.2%, with a comp sales decline of 1.2%.

• The decline was due to mid-single-digit traffic decreases, although eCommerce sales rose double digits and premium brands like Jordan showed strong momentum.

• Stuart Weitzman Transition Challenges:

• Stuart Weitzman underperformed, resulting in dilution to earnings, but the fall product line showed improved sell-throughs.

• The transition has been challenging due to excess inventory and volatility in the China D2C business, but efforts are underway to stabilize and improve sales.

• Tariff Impact and Mitigation:

• Tariffs had a 175 basis point impact on Brand Portfolio's gross margin, but mitigation efforts are expected to improve this in 2026.
• The company aims to neutralize tariff impacts through factory negotiations, price increases, and other cost reductions.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management repeatedly stated they were "pleased with our sales performance" and that "organic sales performance exceeded our internal expectations." They announced a plan to "bring Stuart Weitzman to breakeven in 2026," cited market-share gains and Lead Brand momentum, and closed saying they "look forward to a more profitable 2026."

Q&A:

• Question from Dana Telsey (Telsey Advisory Group LLC): As you think about Stuart Weitzman and what you're finding under the hood and what the opportunity is going forward into 2026 and beyond... Is there more opportunity on margin, on top line? How are you thinking about it? And then on the Famous Footwear side of the business... what's happening on the fashion side of business given the other categories out there?
  Response: Plan to reach breakeven in 2026 via inventory cleanup, gross-margin recovery and SG&A reductions; product and marketing are resonating and there are incremental wholesale, DTC and international growth opportunities.

• Question from Dana Telsey (Telsey Advisory Group LLC): I think you had mentioned in the prepared remarks something about women's underperforming and athletic slightly positive. What are you seeing in women's?
  Response: Q3 strength was driven by athletic (e.g., Jordan/back-to-school); management expects to rebuild women's fashion in Q3/Q4 with marketing support and notes holiday trends have stabilized comps.

• Question from Dana Telsey (Telsey Advisory Group LLC): On the margins. When you think about gross margin for Famous and Brand Portfolio and the SG&A, any markers that would be different going forward than what happened in this third quarter? And what does it mean for the balance sheet?
  Response: Expect Q4 gross-margin improvement: Famous aided by reduced shrink and lower LIFO reserve; Brand Portfolio will face similar tariff pressure (~175 bps) but benefit from improved channel/customer mix versus Q3.

• Question from Ashley Owens (KeyBanc Capital Markets Inc., Research Division): On the Stuart Weitzman inventory... Can you dissect how much needs to be worked through over the next 5 months and what the promotional or discounting strategy will be to move through product while protecting the brand?
  Response: About 25%–33% of the acquired inventory is aged/excess (valuation roughly $85M–$90M incl. step-up); management expects >2/3 of the cleanup sold/processed by year-end via market-specific liquidation actions, with most shipments completing in Q4.

• Question from Ashley Owens (KeyBanc Capital Markets Inc., Research Division): How should we think about the company's normalized earnings power once you're through this transition period with Stuart? Which factors contribute most to rebuilding that?
  Response: Normalized earnings should improve from higher Brand Portfolio profitability (Lead Brands, DTC, international), tariff mitigation, and structural SG&A savings from new centers of excellence; Famous will focus on improving profitability over growth.

• Question from Mitchel Kummetz (Seaport Research Partners): You talked about taking actions to go into next year as clean as possible and then you would expect to drive growth next year. Could you elaborate—are you mainly referring to gross-margin growth? Are tariffs a net positive next year? Is there margin opportunity from being less promotional?
  Response: Expect 2026 gross-margin improvement from tariff mitigation and inventory cleanup, but remaining tariff increments won't be fully offset by margin actions alone—additional SG&A savings are planned to neutralize operating-margin impact.

• Question from Mitchel Kummetz (Seaport Research Partners): When you say drive growth in '26, do you mean on an organic basis?
  Response: Yes—management is targeting organic growth in 2026, driven by Lead Brands, though they provided no formal 2026 guidance today.

• Question from Mitchel Kummetz (Seaport Research Partners): On Stuart's longer-term margin profile, do you expect it to be in line with Brand Portfolio margins and is the biggest opportunity on SG&A?
  Response: They expect Stuart Weitzman to reach roughly the Brand Portfolio average margin over time, with material opportunity from SG&A efficiencies and leveraging Caleres' operating capabilities.

Contradiction Point 1

Stuart Weitzman's Inventory and Transition Strategy

It involves the approach to addressing Stuart Weitzman's inventory issues and the expected timeline for achieving profitability and growth, which are crucial for understanding the company's financial outlook and its integration strategy.

What is the strategy for addressing Stuart Weitzman's inventory issues and promotional strategy? What is Caleres' normalized earnings potential post-transition? - Ashley Owens (KeyBanc Capital Markets Inc., Research Division)

2026Q3: We're working now through that aged inventory, and we would expect to work through a significant portion of that in the Q4. And we're focused now on the wholesale market, direct-to-consumer and really throughout our markets, including Europe and China. - John Schmidt(CEO)

Is the Stuart Weitzman acquisition expected to be accretive to earnings next year? - Mitchel Kummetz (Seaport Research Partners)

2025Q2: We're not providing detailed impact yet. We're finalizing purchase accounting. Stuart will have exceptional impacts, and we plan to report its contribution separately. Around $108 million was the acquisition price, with borrowing at interest rate around 5.7%. - Liz Dunn(CFO)

Contradiction Point 2

Tariff Impact on Sales and Margins

It pertains to the financial impact of tariffs on sales and gross margins, which are critical factors in assessing the company's financial health and operational strategies.

What is the growth outlook for 2026 and how will the Stuart Weitzman transition impact overall growth? What are the long-term margin expectations for Stuart Weitzman? - Mitchel Kummetz (Seaport Research Partners)

2026Q3: Tariffs have a neutral impact on operating margins. Our strategy is to, obviously, continue to work on offsetting those costs as we can. - John Schmidt(CEO)

How is tariff mitigation progressing, and are there plans for additional cost savings? - Dana Telsey (Telsey Advisory Group LLC)

2025Q2: Tariffs impacted 2Q sales by $10 million due to cancellations and delayed receipts. We expect continued pressure on Brand Portfolio gross margin, with a $250 basis point tariff impact in Q2. - Jack Calandra(CFO)

Contradiction Point 3

Inventory Management and Stuart Weitzman's Strategic Focus

It highlights differing strategies and approaches to managing Stuart Weitzman's inventory and market focus, which are critical for the company's financial performance and brand positioning.

Can you outline the strategy for addressing Stuart Weitzman's inventory challenges and promotional efforts? How should we assess Caleres' normalized earnings power after the transition? - Ashley Owens (KeyBanc Capital Markets Inc., Research Division)

2026Q3: We expect to continue working through excess inventory at Stuart Weitzman in the fourth quarter, with a strategic focus now on driving gross margin expansion through increased sales and marketing efforts on key styles, and SG&A reduction, which are already underway. - John Schmidt(CEO)

How are you adjusting portfolio brand pricing for summer/fall, what price differentiation strategies are in place, and how does this impact gross margins? Is inventory prepared for the Back to School season? - Dana Telsey (Telsey Advisory Group LLC)

2025Q1: For Stuart Weitzman, we have seen particular strength in sandals and our wholesale channel. Approximately 20% of our Stuart Weitzman wholesale business is represented by sandals this season. So, it's a good start to the year, and we feel good about the health of that part of the business. We're really happy with the performance of this brand, and we're optimistic as we look forward to the remainder of the year. We're off to a good start, and we're excited about the opportunities ahead. - Jay Schmidt(CEO)

Contradiction Point 4

Tariff Impact on Operating Margins

It involves the company's stance on the impact of tariffs on operating margins, which can significantly affect financial performance and strategic planning.

What will drive growth in 2026 and how will Stuart Weitzman's transition impact overall growth? What are the long-term margin expectations for Stuart Weitzman? - Mitchel Kummetz (Seaport Research Partners)

2026Q3: We're also working on ways to offset some of the cost increases we've seen this year, and that will continue as we look forward through 2026. We feel good about this because the gross margin guidance we gave for Q4 and 2026 is fully sequential and is taking into consideration any duty increases that might occur as we move forward. - Jack Calandra(CFO)

Does the tariff news affect your plans? If new tariffs this year are removed, will the percentage in China increase again? - Laura Champine (Loop Capital Markets)

2025Q1: As you know, we have been seeing an impact from recent tariffs and our company's exposure is significant. We are seeing higher costs across various aspects of our business, and we will continue to work with our suppliers and our customers to address this as we move forward. - Jack Calandra(CFO)

Contradiction Point 5

Stuart Weitzman's Inventory and Transition Strategy

It involves the approach to managing Stuart Weitzman's aged inventory and the expected timeline for the brand's transition to improve profitability.

How are you addressing Stuart Weitzman's inventory challenges and promotional strategy? How do you assess Caleres' normalized earnings power post-transition? - Ashley Owens (KeyBanc Capital Markets Inc., Research Division)

2026Q3: Stuart Weitzman's aged inventory, approximately 1/4 to 1/3 of total, is being addressed. We're working through it, especially in Q4. The transition aims to improve profitability and growth through efficient integration. - Liz Dunn(SVP of Corporate Development & Strategic Communications)

How do you expect markdowns to progress through the year given the tough Q1 base? - Laura Champine (Loop Capital Markets)

2025Q4: We expect to return to full-term growth patterns with a new taste level and return to profitability, as we anniversary the sales increase from the luxury handbag program and address elevated markdowns. - Jay Schmidt(President and CEO)