Footwear company Caleres (NYSE:CAL) announced better-than-expected revenue in Q3 CY2025, with sales up 6.6% year on year to $790.1 million. Its non-GAAP profit of $0.38 per share was 55.5% below analysts’ consensus estimates.
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Caleres (CAL) Q3 CY2025 Highlights:
- Revenue: $790.1 million vs analyst estimates of $768.6 million (6.6% year-on-year growth, 2.8% beat)
- Adjusted EPS: $0.38 vs analyst expectations of $0.85 (55.5% miss)
- Adjusted EBITDA: $30.04 million vs analyst estimates of $61.2 million (3.8% margin, 50.9% miss)
- Adjusted EPS guidance for the full year is $0.58 at the midpoint, missing analyst estimates by 66.7%
- Operating Margin: 2.4%, down from 8% in the same quarter last year
- Market Capitalization: $431.2 million
StockStory’s Take
Caleres’ third quarter results were met with a negative reaction from the market, largely due to a significant shortfall in non-GAAP earnings per share despite stronger-than-expected revenue. Management identified ongoing margin pressures stemming from elevated tariffs and additional costs linked to the integration of Stuart Weitzman, which diluted profitability. CEO Jay Schmidt acknowledged these issues, noting, “We are taking decisive action in the back half of 2025 to bring Stuart Weitzman along with the rest of our portfolio into 2026 as clean, productive, and efficient as possible.”
Looking forward, Caleres’ guidance reflects the continued burden of integration expenses and a cautious approach to cost savings as the company absorbs Stuart Weitzman. Management expects to drive future improvement through structural cost reductions and restoring gross margins, but near-term visibility remains limited. CFO Jack Calandra noted that while tariff mitigation efforts are progressing, the company has “not offset all of that through the actions we’re taking on gross margin alone,” emphasizing the need for further SG&A (selling, general, and administrative expense) discipline. The company aims for breakeven performance at Stuart Weitzman in 2026, with further profitability improvements tied to realizing planned synergies.
Key Insights from Management’s Remarks
Management attributed the quarter’s underperformance primarily to higher-than-anticipated integration and inventory costs, continued tariff impacts, and uneven performance between premium and value-oriented brands.
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Stuart Weitzman integration challenges: Early integration of Stuart Weitzman introduced duplicative costs and inventory overhang, which management stated were temporarily dilutive to earnings. CEO Jay Schmidt emphasized that most synergies and cost savings will not be realized until 2026, once system integration completes and duplicative functions are eliminated.
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Tariff headwinds persist: Elevated U.S. tariffs on imported footwear continued to impact margins. Management estimated a 175 basis point drag on brand portfolio gross margin, partially offset by price increases and supplier negotiations. These impacts are expected to lessen in 2026 as mitigation efforts progress.
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Premium brands and DTC momentum: Organic growth was concentrated in Caleres’ premium brands and direct-to-consumer (DTC) channels, with Sam Edelman delivering double-digit growth and record e-commerce sales. In contrast, value-priced brands lagged, and the Famous Footwear segment saw softer traffic, offset by increased average retail prices.
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International and wholesale strength: International sales outperformed, notably in women’s fashion segments and through expansion in key markets. Wholesale demand for boots and premium offerings bolstered portfolio performance.
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Inventory cleanup underway: Excess inventory, especially at Stuart Weitzman, required aggressive liquidation measures. Management indicated that the majority of this inventory should be worked through by early 2026, with anticipated improvement in gross margins as aged stock is cleared.
Drivers of Future Performance
Management’s outlook for the next year centers on restoring profitability by reducing integration costs, stabilizing tariffs, and refocusing on growth in premium brands and international markets.
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Stuart Weitzman cost synergies: Management sees the largest future earnings lever in achieving cost savings through consolidating back-office functions, logistics, and marketing as Stuart Weitzman is fully integrated. CEO Jay Schmidt said the company plans to reach breakeven for the brand in 2026, with further margin improvements tied to these synergies.
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Tariff mitigation and SG&A control: While tariff-related pressures are expected to persist in the near term, management is pursuing additional factory negotiations and operational efficiencies to blunt their impact. CFO Jack Calandra stated that SG&A reductions across the portfolio are needed to fully neutralize tariff effects on operating margins.
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Premium and international growth focus: Caleres aims to drive organic growth by investing in its strongest brands and expanding internationally, particularly through direct-to-consumer channels and targeted marketing. Management believes these areas offer the greatest potential for sustainable revenue and margin improvement.
Catalysts in Upcoming Quarters
In the quarters ahead, our analysts will closely monitor (1) progress on Stuart Weitzman’s inventory liquidation and the pace of cost synergies, (2) stabilization of gross margins as tariff mitigation and SG&A reductions take effect, and (3) continued strength in premium brands and international markets. Execution on these priorities will determine Caleres’ ability to restore profitability and achieve its integration goals.
Caleres currently trades at $12.80, down from $13.52 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free for active Edge members).
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