Footwear company Caleres (NYSE: CAL) missed Wall Street’s revenue expectations in Q1 CY2025, with sales falling 6.8% year on year to $614.2 million. Its non-GAAP EPS of $0.22 per share was 39.7% below analysts’ consensus estimates.

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StockStory’s Take

Caleres’ first quarter results were shaped by softer consumer demand and operational pressures across both its Brand Portfolio and Famous Footwear segments. CEO Jay Schmidt pointed to particularly weak February sales, with some improvement in March and April, though overall performance remained below plan. Management attributed the underperformance to lower gross margins, higher inventory reserves, and increased costs tied to sourcing disruptions and tariffs. Schmidt acknowledged, “Our first quarter results fell short of expectations,” highlighting the company’s exposure to both macroeconomic volatility and specific industry challenges. Additional factors included higher-than-anticipated bad debt write-downs, as customer credit conditions worsened compared to last year.

Looking ahead, Caleres is suspending formal guidance due to ongoing volatility in tariffs and global sourcing. Management emphasized a focus on cost controls and structural expense reductions, with CFO Jack Calandra detailing a $15 million annualized SG&A reduction initiative. The company is also navigating uncertainty around tariff timelines and potential sourcing disruptions, which could impact both gross margins and inventory. Schmidt noted, “We must redouble our efforts to drive growth and profitability,” while also pointing to upcoming product launches and store format changes, such as the broader rollout of the Jordan brand and continued expansion of FLAIR locations, as key initiatives to support future performance. The planned integration of Stuart Weitzman is expected to further diversify the portfolio.

Key Insights from Management’s Remarks

Management cited tariff escalation, sourcing disruption, and inventory management as the primary drivers behind the quarter’s margin and earnings pressure, while highlighting selective strength in international and direct-to-consumer channels.

• Tariff and sourcing disruption: The company experienced increased costs and operational complexity from shifting production out of China following new U.S. tariffs. This led to order cancellations, higher costs to relocate manufacturing, and additional inventory write-downs, which collectively pressured gross margins.

• Inventory management challenges: Caleres was unable to adjust its inventory flow quickly enough as demand softened, resulting in elevated inventory levels and a need for higher markdown reserves, especially in its Brand Portfolio segment.

• International segment growth: Despite overall declines, international sales—particularly from the Sam Edelman brand—showed double-digit growth, supported by expansion in China, the Middle East, and new marketplace partnerships. Management views these international gains as a strategic counterbalance to domestic softness.

• Brand Portfolio performance: Lead brands such as Sam Edelman outperformed others, with new product assortments like sneakers and sandals resonating well in key markets. However, Allen Edmonds and Naturalizer faced distinct category challenges, and Vionic’s decline was attributed to a timing shift in catalog drops.

• Famous Footwear and product initiatives: The Famous Footwear segment experienced sequential sales improvement during the quarter, aided by growth in e-commerce and the launch of new brands and store formats. The introduction of the Jordan brand and continued rollout of FLAIR stores are anticipated to boost performance in upcoming periods.

Drivers of Future Performance

Caleres’ outlook is shaped by volatile tariff policies, cost-saving initiatives, and evolving consumer demand across its core segments.

• Tariff environment remains fluid: Management has suspended forward guidance due to ongoing uncertainty around U.S. tariffs on Chinese and global imports. Sourcing disruption and possible further escalation or reversal of tariffs could materially affect gross margins and inventory costs in the next several quarters.

• Expense reduction and operational efficiency: The company is implementing a $15 million annualized SG&A reduction, with savings expected to materialize in the second half of the year. This initiative is designed to offset profit pressure from lower sales and higher sourcing costs, though management noted that further opportunities for efficiency may emerge as integration partners assess the business.

• Product and format innovation: Upcoming launches, such as the full-door rollout of the Jordan brand at Famous Footwear and expanded FLAIR store locations, are expected to drive renewed customer engagement. Management also cited ongoing investment in international markets and the integration of Stuart Weitzman as potential growth levers, even as domestic wholesale order books remain “fluid.”

Catalysts in Upcoming Quarters

Over the coming quarters, the StockStory team will track (1) the company’s ability to reduce inventory and capture anticipated SG&A savings, (2) the impact of new product launches—particularly the Jordan brand rollout and FLAIR store conversions—on segment sales, and (3) progress on the integration and performance of Stuart Weitzman. The evolution of global tariff policy and sourcing costs will also be critical to monitor.

Caleres currently trades at a forward P/E ratio of 4.4×. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free).

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