Breaking Down Caleres, Inc. (CAL) Financial Health: Key Insights for Investors

You're looking at Caleres, Inc. (CAL) and seeing a footwear portfolio that's trying to walk a tightrope between an uncertain consumer environment and an aggressive strategic pivot. The reality is Q1 and Q2 2025 performance showed real pressure, with Q1 sales landing at $614.2 million and Q2 non-GAAP Earnings Per Share (EPS) dropping to just $0.35, missing expectations as inventory climbed to $693.3 million. Still, management is fighting back, announcing structural cost-cutting measures expected to deliver $7.5 million in SG&A savings this fiscal year, plus they've closed the $105 million acquisition of Stuart Weitzman to boost their Brand Portfolio segment. The big question is whether these moves can stabilize the business enough to hit the initial full-year EPS guidance range of $2.80 to $3.20, especially with the company's debt rising to $387.5 million to fund the acquisition. We defintely need to break down if the strategic moves outweigh the near-term operational softness.

Revenue Analysis

You need a clear picture of where Caleres, Inc. (CAL) is making its money, especially with the consumer environment being so defintely choppy. The core takeaway is that the company's total revenue is under pressure, with the Trailing Twelve Months (TTM) revenue as of November 2025 sitting at $2.65 billion, which is a -5.31% decline year-over-year. This contraction isn't a surprise given the broader retail headwinds, but it maps directly to performance in its two main segments.

Caleres, Inc. operates through two primary revenue engines: the mass-market Famous Footwear retail chain and the higher-margin Brand Portfolio of consumer-driven footwear brands like Sam Edelman, Naturalizer, and Allen Edmonds. This dual-segment structure is important because it diversifies the risk, but right now, both are slowing down. For the first quarter of fiscal year 2025 (Q1 2025), total consolidated sales were $614.2 million, a -6.8% drop from the previous year.

Segment Contribution and Near-Term Trends

The Famous Footwear segment is the volume driver, but its sales decreased 6.3% in Q1 2025 to $328 million. The Brand Portfolio, which focuses on name-brand footwear, saw a comparable decline of 6.9% in Q1 2025, reporting $295 million in sales. Here's the quick math on how the segments contributed to that Q1 total:

• Famous Footwear accounted for approximately 53.4% of Q1 2025 sales.
• Brand Portfolio accounted for approximately 48.0% of Q1 2025 sales.

What this estimate hides is the sequential improvement seen in Q2 2025, where the overall sales decline moderated to -3.6%, reaching $658.5 million. Brand Portfolio's sales decrease slowed to 3.5%, and Famous Footwear's decline was 4.9%. That's a meaningful improvement in momentum, particularly in July and August, which is a good sign for the second half of the year.

Strategic Shifts in Revenue Mix

The most significant change in the revenue mix isn't the split between the two segments, but the growing importance of the direct-to-consumer (DTC) channel. In Q2 2025, DTC sales represented approximately 75% of total net sales. This is a high-margin opportunity, especially within the Brand Portfolio, where direct channels are showing growth and partially offsetting tariff-related costs and promotions. The company is also taking clear action to protect margins by targeting $15 million in annualized structural cost savings, with $7.5 million expected to be realized in fiscal year 2025. This focus on margin and cost control is crucial when the top line is shrinking. If you want to dive deeper into who is betting on these strategic shifts, you should read Exploring Caleres, Inc. (CAL) Investor Profile: Who's Buying and Why?

Profitability Metrics

You need a clear picture of how much money Caleres, Inc. (CAL) is actually keeping from its sales, especially with the market uncertainty we've seen in 2025. The direct takeaway is this: Caleres's gross margin remains strong, but operating and net margins are under significant pressure, largely due to cost deleverage and promotional activity. This means they are efficient at sourcing and selling, but their overhead costs are too high for the current sales level.

Looking at the first half of fiscal year 2025 (H1 2025), Caleres, Inc. generated approximately $1.27 billion in net sales. Over that period, the company's profitability ratios reveal the core challenge: maintaining the bottom line while managing sales declines and rising costs. For the second quarter (Q2 2025) alone, net sales were $658.5 million, a 3.6% drop year-over-year.

Here's the quick math on the key margins for Q2 2025, which gives you the most recent view of their performance:

• Gross Profit Margin: 43.4%
• Operating Margin: 2.4% (Adjusted)
• Net Profit Margin: 1.02% (Based on $6.7 million in GAAP net earnings on $658.5 million in sales)

Profitability Trends and Industry Comparison

Caleres's gross profitability is defintely a bright spot, still outperforming the industry average. The average gross margin for the footwear retail industry is around 42%, with some estimates for Apparel Retail closer to 41.9% as of November 2025. Caleres's 43.4% gross margin in Q2 2025 shows their ability to manage product cost (Cost of Goods Sold) effectively. But, the trend is concerning. Gross margin has been declining, falling by 210 basis points (2.1 percentage points) in Q2 2025 compared to the prior year.

The real issue is operational efficiency, which is where the operating and net margins tell a different story. The average operating margin for Shoe Stores in 2024 was 2.4%, and Caleres's adjusted operating margin for Q2 2025 was exactly 2.4%, down sharply from 6.2% a year ago. This massive drop shows the pressure. The net profit margin of 1.02% is far below the footwear retail industry average of about 6.2%. This is a red flag for investors. You can dive deeper into this analysis in Breaking Down Caleres, Inc. (CAL) Financial Health: Key Insights for Investors.

Analysis of Operational Efficiency

The margin compression stems from two main areas. First, the gross margin decline is driven by tariff-related costs, higher inventory markdowns, and more selective promotions, which are necessary to move product in a softer consumer environment. Second, Selling, General, and Administrative (SG&A) expenses as a percentage of net sales rose to 41.0% in Q2 2025, up 170 basis points from the prior year. This is classic deleverage: when sales drop, fixed costs like rent and salaries eat up a larger percentage of the remaining revenue. The company is addressing this, announcing structural cost-cutting actions to generate an annualized SG&A reduction of $15 million, with $7.5 million expected in fiscal 2025. This is a clear, necessary action to re-align their cost base with the current revenue reality.

The company is working to control what they can. Still, the near-term risk is that continued weak consumer demand and promotional pressures will keep gross margin under pressure, making the cost cuts essential just to keep the operating margin flat. Investors need to watch for the impact of those $7.5 million in savings in the back half of the year. Finance: track the SG&A-to-sales ratio in Q3/Q4 2025 to confirm the cost-cutting impact.

Debt vs. Equity Structure

Caleres, Inc. (CAL) maintains a conservative capital structure, leaning heavily on short-term credit for operational flexibility rather than long-term debt, which is a key distinction in the retail sector. This approach keeps their financial leverage manageable, but the recent increase in short-term borrowings and a credit rating downgrade signal near-term pressure.

As of the second fiscal quarter ending September 2025, Caleres, Inc.'s primary debt load came from its revolving credit facility (RCF). Borrowings under this facility, which acts as the company's short-term debt, stood at $387.5 million, a significant increase from the prior year, reflecting pre-positioned cash for the planned Stuart Weitzman acquisition. Critically, the company reported having no long-term debt on its balance sheet as of the first quarter of fiscal year 2025, which is a strong sign of long-term balance sheet health.

Here's the quick math on leverage: The Debt-to-Equity (D/E) ratio for Caleres, Inc. was approximately 0.62 for the fiscal quarter ended July 31, 2025. This is defintely a low figure. To be fair, the median D/E ratio for the Shoe Stores industry in 2024 was around 1.33, so Caleres, Inc. is operating with significantly less leverage than its peers. A lower D/E ratio means the company finances more of its assets through shareholder equity than through debt, which provides a comfortable buffer against economic downturns.

The company's financing strategy is clear: use a flexible credit line to manage working capital and fund strategic moves. This was evident in June 2025, when Caleres, Inc. amended and extended its senior secured asset-based revolving credit facility to June 2030, boosting its borrowing capacity by $200 million to a total of $700 million. However, this increased reliance on debt, particularly for the Stuart Weitzman acquisition, prompted S&P Global Ratings to downgrade the company's credit rating to 'BB-' in April 2025. They project the company's adjusted leverage will rise to the mid-2x area in fiscal year 2025. That's a clear risk map.

Caleres, Inc. balances debt and equity funding by prioritizing capital allocation in this order:

• Continue paying the dividend.
• Complete the Stuart Weitzman acquisition.
• Invest in growth vectors.
• Balance debt reduction with returning capital to shareholders (like share repurchases).

Here is a snapshot of the company's debt profile based on the most recent 2025 data:

Liquidity and Solvency

You need to know if Caleres, Inc. (CAL) can cover its near-term bills, and the answer is a qualified 'yes.' The company's liquidity position is tight but manageable, which is common for a retailer with significant inventory. The key is how quickly they can move that inventory.

For the fiscal year ending February 1, 2025, Caleres's Current Ratio-which measures current assets against current liabilities-stood at about 1.08. A ratio just over 1.0 suggests they have slightly more current assets than short-term debt, which is a decent, if not stellar, baseline for short-term financial stability. By the first quarter of 2025, this edged up slightly to 1.10. That's a reasonable sign, but it's not a huge cushion. Honestly, a retailer should aim for a bit more buffer here.

The Inventory Hurdle: Quick Ratio Analysis

The real story is hidden in the Quick Ratio (or acid-test ratio), which strips out inventory-the least liquid current asset-to show a company's ability to pay liabilities with only cash and receivables. Caleres, Inc.'s Quick Ratio for the 2025 fiscal year was only 0.40. That's low. This ratio tells us that without selling any shoes, the company could only cover 40 cents of every dollar of current liabilities. This trend is defintely tied to their inventory levels.

• Current Ratio: 1.08 (FY 2025)
• Quick Ratio: 0.40 (FY 2025)
• Inventory at Q2 2025 end was $693.3 million.

The sheer size of inventory is the primary drag on the Quick Ratio. At the end of the second quarter of 2025, inventory was high at $693.3 million, up 4.9% from the prior year. This inventory is the biggest component of their current assets. What this estimate hides is the risk of markdowns: if they have to slash prices to move that stock, the actual value of that inventory-and thus the true working capital-will drop, increasing churn risk. For Q1 2025, the calculated working capital was about $76.1 million ($846.392M in current assets minus $770.256M in current liabilities), which is positive, but the negative Net Current Asset Value of $-430.87 million (TTM FY 2025) points to a structural reliance on inventory to cover short-term debt.

Cash Flow: Where the Money Moves

Looking at the cash flow statement for the 2025 fiscal year (ending February 1, 2025) gives us a clearer picture of their operating health. Here's the quick math (in millions USD):

Operating Cash Flow (OCF) was a positive $104.6 million in FY 2025, which is a strength, meaning the core business is generating cash. However, this OCF has been on a declining trend from the prior year's $200.2 million. This is the first action item: watch that OCF number closely. Investing Cash Flow was an outflow of $51.7 million, primarily for capital expenditures, which is normal for maintaining and growing a retail footprint. Financing Cash Flow was an outflow of $44.5 million, driven by dividend payments and stock repurchases, which returns capital to shareholders but reduces the cash on hand. They also increased borrowings to $258.5 million in Q1 2025, which, combined with the recent Stuart Weitzman acquisition, will increase leverage. The company is focused on structural expense cuts to generate annualized savings of $15 million, which will help OCF.

The overall takeaway is that Caleres, Inc. is not facing an immediate liquidity crisis, but their reliance on selling down a large inventory to meet short-term obligations is a clear near-term risk. You can read more about the company's performance in this full post: Breaking Down Caleres, Inc. (CAL) Financial Health: Key Insights for Investors.

Valuation Analysis

You're looking at Caleres, Inc. (CAL) and trying to figure out if the recent stock price volatility has created a buying opportunity or if the market is correctly pricing a deteriorating outlook. The direct takeaway is that Caleres, Inc. appears undervalued based on traditional metrics like Price-to-Earnings (P/E) and Price-to-Book (P/B) when compared to historical averages, but this low valuation is a clear signal of the near-term risk and market skepticism following a massive price drop.

The stock has been on a rollercoaster, dropping precipitously from a 52-week high of around $33.24 to a low of approximately $9.78 in November 2025. This represents a total return decline of over -62.45% in the last 12 months, which is a defintely painful correction. Here's the quick math on why the stock looks cheap, but still carries a 'Reduce' consensus from some analysts.

Key Valuation Multiples (FY 2025)

Caleres, Inc.'s valuation multiples for the fiscal year 2025 (ending February) suggest a deeply discounted stock. These ratios tell us the market is pricing in significant risk or expecting a sharp decline in future earnings. A low multiple can mean 'cheap' or 'trouble,' and right now, it's a bit of both.

• Price-to-Earnings (P/E) Ratio: The P/E for FY 2025 was 5.96. To be fair, a forward P/E of around 5x is incredibly low for any retailer, signaling deep skepticism about the sustainability of those earnings.
• Price-to-Book (P/B) Ratio: The P/B was 1.02 for FY 2025. This is close to book value, meaning the market is valuing the company's equity barely above its net asset value, essentially treating the stock as a distressed asset.
• Enterprise Value-to-EBITDA (EV/EBITDA): The FY 2025 EV/EBITDA was 6.81. This is also low, though a more current Trailing Twelve Months (TTM) EV/EBITDA as of November 2025 is even lower at 3.29, reflecting the recent stock and Enterprise Value decline.

What this estimate hides is the market's concern over declining sales and poor free cash flow margins, which is why the stock is trading at such a low multiple despite the seemingly attractive numbers.

Dividend and Analyst Consensus

The dividend profile is stable but not a growth story. Caleres, Inc. maintains an annual dividend of $0.28 per share, translating to a dividend yield of approximately 2.72%. The payout ratio is quite safe, ranging between 13.15% and 15.89% of earnings, meaning the company uses a small portion of its profit to fund the dividend.

Analyst sentiment is mixed, leaning cautious. The consensus rating from a group of analysts is 'Reduce,' with 2 Hold ratings and 1 Sell rating. However, the average price target is significantly higher than the current price, sitting between $14.00 and $19.00, suggesting a potential upside of over 40% to 90% from the current price. This gap between the cautious rating and the high price target shows the uncertainty: the stock is cheap, but the path to realizing that value is murky.

Here is a summary of the key valuation data:

If you want to dig deeper into who is currently buying and selling, you should be Exploring Caleres, Inc. (CAL) Investor Profile: Who's Buying and Why?

The clear action for you is to treat Caleres, Inc. as a deep value play, not a growth stock. The low multiples suggest the market has already punished it severely, but you need to see a clear path for the company to stabilize sales and improve cash flow before a true re-rating can happen.

Risk Factors

You're looking at Caleres, Inc. (CAL) and seeing a low price-to-earnings (P/E) ratio-around 4.21 in Q1 2025-which can look like a bargain. But as a seasoned financial analyst, I see a clear map of near-term risks that are collapsing margins and forcing the company to suspend its full-year guidance. The core issue is that external market pressures are hitting their operational and financial stability hard, so you need to understand where the pressure points are.

The biggest external headwind is the unpredictable regulatory environment, specifically around tariffs. Management has called the tariff situation 'fluid' and unpredictable, which directly impacts their cost of goods sold. This issue, combined with a general decline in consumer spending, is creating a challenging market for their key segments. For example, in Q2 2025, consolidated sales dropped 3.6% year-over-year to $658.5 million, with Famous Footwear sales falling 4.9%. Honestly, a shrinking top line makes everything else harder.

• Tariff Volatility: Threatens to compress margins further, with potential increases as high as 220% on certain imports.
• Consumer Headwinds: Decline in spending patterns impacting sales, especially in the footwear sector.
• Wholesale Deterioration: Worsening outlook with customer cancellations and increased bad debt expense, which hit profit by nearly $3.1 million in Q1 2025.

Operational and Financial Pressure Points

The external risks translate directly into internal financial stress. The most immediate risk is the continuous gross margin compression. In Q2 2025, the consolidated gross margin was 43.4%, a drop of 210 basis points year-over-year. This was driven by tariff-related costs, selective promotions to move product, and higher provision for inventory markdowns. Inventory is another key risk; it was up 8.1% year-over-year in Q1 2025, totaling $573.6 million, which signals a potential future need for deeper markdowns.

Plus, the company is taking on more debt to fund strategic moves, like the Stuart Weitzman acquisition, which may limit financial flexibility. The debt-to-EBITDA ratio was 1.4 times at the end of Q1 2025, with borrowings at $258.5 million. Here's the quick math on the margin squeeze:

What this estimate hides is the potential for Q3 Brand Portfolio gross margin to be down similar to Q2, with relief only anticipated in the fourth quarter.

Clear Actions and Mitigation Strategies

Caleres, Inc. is defintely not standing still; they are executing clear mitigation strategies. The most critical action is accelerating sourcing migration away from China, with a target to reduce China sourcing dollars to 10% or less in the second half of 2025. This is a direct response to the tariff risk. Also, they are focused on structural cost control, targeting $15 million in annualized SG&A (Selling, General, and Administrative) expense reductions, with $7.5 million expected to be realized in the back half of 2025.

Other strategies include leveraging the growth in their higher-margin direct-to-consumer (DTC) channels, which represented about 75% of total net sales in Q2 2025, and implementing factory concessions and selective price increases to offset costs. The focus on integrating Stuart Weitzman for profitability by early 2026 is another long-term strategic move. For a deeper dive into who is betting on these brands, you should read Exploring Caleres, Inc. (CAL) Investor Profile: Who's Buying and Why?

Growth Opportunities

You're looking at Caleres, Inc. (CAL) and wondering where the real growth levers are, especially with the mixed results we've seen in 2025. The core takeaway is this: while the overall market is soft, Caleres is making calculated, structural moves-specifically in brand elevation and supply chain reinvention-that should pay off in 2026 and beyond. They are defintely playing the long game.

The company's official guidance for the full fiscal year 2025 is conservative, projecting consolidated net sales to be flat, ranging from down 1% to up 1% compared to fiscal 2024. This caution is warranted given the macroeconomic headwinds. However, the earnings per diluted share (EPS) forecast, excluding the recent acquisition, is still solid at a range of $2.80 to $3.20. This indicates a focus on margin protection even with tepid top-line growth.

Key Growth Drivers and Strategic Shifts

Caleres is not waiting for the market to fix itself; they are actively repositioning the business around three major initiatives. These are the engine for future revenue and margin expansion, moving beyond the current consumer slowdown. The biggest move is the planned acquisition of luxury brand Stuart Weitzman for $105 million, expected to close in the summer of 2025, which immediately strengthens their premium, high-margin Brand Portfolio segment.

Here's the quick math on their structural actions:

• Cost Discipline: Implementing structural actions to reduce selling, general, and administrative (SG&A) expenses by $15 million annually, with $7.5 million of that savings expected to be realized in fiscal 2025.
• Supply Chain Agility: Diversifying sourcing away from China to mitigate tariff risks and enhance stability. The goal is to reduce China-sourced materials to 10% or less of the Brand Portfolio's total sourcing by the second half of 2025.
• International Expansion: Aggressive expansion of their Lead Brands, particularly in China. Plans include opening 45 new Sam Edelman stores and a digital relaunch and 10 new stores for the Naturalizer brand.

Competitive Advantages

The company's most enduring competitive advantage is its dual-segment structure, which allows it to capture market share across different price points and consumer demographics. The Brand Portfolio, encompassing Sam Edelman, Naturalizer, and Allen Edmonds, is gaining market share in women's fashion footwear, which is a high-margin segment.

Plus, the Famous Footwear segment maintains a leadership position with the millennial family, especially in the resilient kids' footwear category. This broad appeal, combined with a significant Direct-to-Consumer (DTC) channel that represented about 73% of total net sales in Q4 2024, creates a defensible position in a fragmented market.

For a deeper dive into who is betting on this strategy, you should read Exploring Caleres, Inc. (CAL) Investor Profile: Who's Buying and Why?

What this estimate hides is the potential for margin expansion from the structural changes. If they hit the $7.5 million in SG&A savings and successfully shift sourcing to lower-cost/lower-tariff regions, the bottom line could see a significant boost, even if revenue growth stays flat. This is a story of operational excellence driving shareholder value, not just a simple sales story.