Caleres (CAL) Q2 2025 Earnings Call Transcript

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Date

Thursday, Sept. 4, 2025, at 10 a.m. ET

Call participants

• Chief Executive Officer — Jay Schmidt
• Chief Financial Officer — Jack Calandra
• Chief Administrative Officer — Liz Dunn

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Risks

• Jack Calandra stated, "Given the continued uncertainty from tariffs, we are not providing annual guidance at this time."
• Segment sales and trends were negatively affected by tariffs, with Brand Portfolio gross margin down 240 basis points, approximately 250 basis points of which were attributable to tariffs, and a $10 million negative sales impact in fiscal Q2 2025 from order cancellations and delayed receipts.
• Inventory at quarter end was $693 million, up $32 million or 4.9% from last year, with Brand Portfolio inventory increasing 8.6%.
• SG&A expense deleveraged 170 basis points and rose by $1.4 million on an adjusted basis in fiscal Q2 2025, despite a sales decline, reflecting higher expenses relative to sales.

Takeaways

• Sales-- $658.5 million, down 3.6% for fiscal Q2 2025 (adjusted), reflecting declines in both Brand Portfolio (down 3.5%) and Famous Footwear (down 4.9%).
• Adjusted EPS-- $0.35 versus $0.85 last year, including a $0.07 benefit from a discrete tax item (adjusted, fiscal Q2 2025).
• Gross margin-- 43.4%, down 210 basis points, with Brand Portfolio at 40.3% (down 240 basis points) and Famous Footwear at 43.7% (down 130 basis points) for fiscal Q2 2025 (adjusted).
• Tariff impact-- Tariffs reduced sales by $10 million (split between $5 million of outright cancellations and $5 million of delayed receipts) and pressured Brand Portfolio's gross margin by approximately 250 basis points in fiscal Q2 2025.
• Lead brands-- Combined sales grew globally by 3.6% and by approximately 1% in North America, now representing well over 50% of sales and operating earnings for the quarter.
• Famous Footwear comparable sales-- Down 3.4% for the quarter, with July comp sales down 1% and August up 1% (the largest sales month of the quarter).
• Flair format performance-- 55 locations delivered a 3-point overall sales lift and a 6-point lift for recent conversions in fiscal Q2 2025; expansion to 57 locations is targeted by year-end.
• E-commerce growth-- Famous Footwear e-commerce sales grew by double digits in fiscal Q2 2025, with particular strength in May and July.
• Inventory-- Ended fiscal Q2 2025 at $693 million, up 4.9%, with increases of 2% at Famous Footwear and 8.6% at Brand Portfolio.
• Stuart Weitzman acquisition-- Closed post-quarter, funded by $120 million in borrowings at an average rate of about 5.7%-5.8%, with roughly $90 million in inventory acquired; full financial disclosure and integration impact planned for the third quarter call.
• Cost savings initiatives-- Structural cost savings actions have been completed, expected to generate $15 million in annualized savings (about half realized this year, as of fiscal Q2 2025); further savings are targeted for 2026 and beyond through additional restructuring and integration synergy opportunities.
• Operating margin-- Consolidated margin was 2.4%, with Brand Portfolio at 3.1% and Famous Footwear at 4.7% for fiscal Q2 2025 (adjusted, non-GAAP).
• Cash and borrowings-- Cash increased to $191.5 million (up $139.7 million), while total borrowings rose to $387.5 million (up $241 million), reflecting the Stuart Weitzman acquisition and vendor payment timing.

Summary

Caleres(NYSE:CAL) reported sequential improvement in sales trends across both business segments in fiscal Q2 2025 (period ended Aug. 2, 2025), yet continued to face top-line contraction and margin headwinds, primarily due to tariff disruptions and increased promotional activity. Management emphasized immediate focus on mitigating tariff-related costs, managing inventory aligned with sales trends, and integrating the recently acquired Stuart Weitzman brand with an explicit intention to realize operational synergies and new cost savings initiatives into 2026. Caleres highlighted a positive shift in Famous Footwear comparable sales in August, notable e-commerce growth, and the increasing significance of leading brands, which now drive the majority of sales and operating earnings contribution in the quarter.

• CEO Schmidt said, "We are confident that executing our strategic plans will result in improved financial performance and drive sustained value for our shareholders."
• Brand Portfolio's direct-to-consumer and international businesses both grew during the quarter, partly offsetting wholesale softness and order cancellations tied to tariff shifts.
• Gross margin guidance indicates continued pressure in Brand Portfolio for the third quarter, with normalization expected in the fourth quarter as mitigation efforts take effect.
• Expanded licensing and product launches, including high-profile introductions such as Jordan at Famous Footwear, were accompanied by market share gains in key categories and channels.
• Management will not issue annual guidance due to ongoing tariff instability and supply chain volatility.

Industry glossary

• Flair format: Caleres's enhanced store prototype featuring elevated merchandise presentation and brands, designed to drive higher sales in Famous Footwear locations.
• Lead brands: Caleres management's designation for high-priority proprietary brands such as Sam Edelman, Allen Edmonds, Naturalizer, and Vionic that contribute disproportionately to sales and profit.
• BOGO: Promotional offer referencing "Buy One, Get One," used by Famous Footwear as a key sales driver in recent quarters.
• Surcana: Third-party retail trend analytics provider referenced for market share and category rankings in U.S. footwear.

Full Conference Call Transcript

Jay Schmidt: Thank you. Good morning, everyone. Earlier today, we reported second-quarter sales and earnings. We did experience headwinds due to market uncertainty, but we demonstrated the strength and resilience of our company this quarter. Sales trends improved sequentially in both segments of our business, and we saw market share gains in both women's fashion footwear and in shoe chains. Highlights of the second quarter include our lead brands, which in total delivered sales growth in the quarter. We experienced strength in our brand portfolio direct-to-consumer channels. International sales increased by double digits, and we saw solid improvement in July at Famous Footwear. And that improvement continued into August.

During the quarter, we worked closely with our factory partners to mitigate as much of the tariffs as possible while leaning into our supply chain agility, passing through moderate price increases. It is important to note that while tariff changes can occur quickly, our mitigation efforts require planning and implementation, which can lag the tariff impact in the short term. And given the new tariffs enacted in August, the work here is ongoing. Jack will speak to tariffs in more detail shortly. As we look to address the changes in the operating environment, we completed our previously announced structural cost savings initiatives that will deliver annualized savings of $15 million, with about half of that coming this year.

As I indicated last quarter, we engaged a consulting partner to ensure that as we integrate Stuart Weitzman, we capture all the synergistic opportunities. This partner has examined points of efficiency across our entire portfolio to ensure we are leveraging our greatest capabilities. These efforts are expected to result in additional structural cost savings in 2026 and beyond. Previously announced, we did complete the acquisition of Stuart Weitzman shortly after quarter end, adding a new lead brand to our portfolio. Stuart Weitzman is an iconic brand with unique resonance with consumers. It aligns very well with our areas of strategic focus, having premium contemporary positioning, strong direct-to-consumer penetration, and an established international footprint.

We see clear opportunities to improve operational efficiency while honoring the brand's legacy of design, fit, and quality. As we have said, our focus is on running this business profitably after a transition period. Once the business is fully integrated, we expect immediate expense savings in areas such as distribution, logistics, and media buying, with further structural actions to follow. We look forward to providing more detail when we report our third quarter. Turning now to the results for the second quarter. In total, for the second quarter, we achieved adjusted earnings per share of $0.35. Our second-quarter sales declined 3.6% year over year. Sales trends improved but were still negative in both segments of our business.

While gross margins were under continued pressure due to tariff disruption, added inventory reserves, and higher clearance promotions at Famous Footwear. Now let's review each of our business segments. Brand portfolio sales declined 3.5% in the quarter. While our lead brands outperformed in both sales and operating margin, our value-priced brands experienced ongoing pressure, which was exacerbated by cancellations related to China manufacturing. Our international and direct-to-consumer businesses were both up in the quarter, as was our retail trend from our wholesale partners. According to Surcana, our brand portfolio gained market share in women's fashion footwear during the period. Consumer demand remained solid in key categories, including flats, sandals, sneakers, and dress, all feeding the consumer's desire for newness.

Sales for our lead brands, which include Sam Edelman, Allen Edmonds, Naturalizer, and Vionic, increased in total and represented well over 50% of sales and operating earnings in the quarter. Sam Edelman delivered a very strong quarter, marked by sales growth domestically and strong double-digit growth internationally. We saw improvement in our China trend, and we saw expansion in the brand's global footprint through new marketplace partnerships and growth in The Middle East. Sam Edelman's innovative marketing broke through in the quarter with the Nantucket influencer event becoming one of the most talked-about events of the season and successfully driving new customers. From a product perspective, strappy dress, casual sandals, and sneakers were strong in the quarter.

Early fall selling is encouraging heading into fall, and we are well-positioned in tall fashion boots. At quarter end, we had 111 Sam Edelman stores, 57 owned, 54 franchised, with 107 of them internationally. Allen Edmonds also delivered a strong quarter with growth across all retail and wholesale channels. Reduced promotions led to increased gross margins, an outlier for a brand that notably has limited foreign sourcing exposure. From a product perspective, the largest growth came from sneakers, dress, and casual loafers. In the second quarter, Allen Edmonds opened another Washington studio store, bringing the total to 16. These locations continue to outperform the broader 59-store fleet by 700 basis points.

Liz Dunn: Naturalizer had a down quarter due to some sourcing shifts in their wholesale business segment.

Jay Schmidt: However, the brand's North American direct-to-consumer business posted growth, benefiting from the strength of casual sandals and newness in dress. The brand's retail sales performance for the quarter was strong, delivering double-digit growth and increasing market share ranking by one spot, as measured by Surcana. Early reads on fall are especially encouraging, particularly newness in flats, detailed dress, and tall boots. The upcoming tall boot campaign will be Naturalizer's boldest and most inclusive offering yet, with new styles across several categories and proprietary cap width options from narrow to extra wide.

Liz Dunn: In Vionic,

Jay Schmidt: sales were down modestly in the quarter, as the brand cleared through older legacy product into newer, better-performing styles. Sandal selling was strong in the quarter, with the new easy knit footbed finishing as the top sandal style in the second quarter and becoming a new icon style for the brand. The walking category was strong and saw continued growth driven by the WalkMax and the WalkStrider, our top two styles. The international business for Vionic was up double digits in the quarter. Shortly after quarter end, Vionic introduced Gabby Reiss as its newest wellness ambassador. Gabby's authentic connection to wellness reinforces Vionic's brand positioning, and we look forward to our special edition collaboration dropping in early spring 2026.

Beyond our lead brands, we see continued strength in our premium contemporary brands, Vince and Veronica Beard, which reinforces our conviction around the premium contemporary space.

Liz Dunn: If we look

Jay Schmidt: at the balance of the year for the brand portfolio, the tariff environment is clearly still uncertain. While we did selectively raise prices, the new increased Southeast Asia tariffs will require us to focus on additional mitigation efforts. We do expect our inventory position to be more aligned with our sales trend but expect gross margin pressure from tariffs to continue into the back half. Beyond that, we will continue to focus on speed, agility, controlling what we can control to drive improved financial performance.

Liz Dunn: Moving on to Famous Footwear. Total sales were down 4.9% during the second quarter, while comp sales declined 3.4%. We gained share in shoe chains and with kids during the quarter, according to Surcana. As has been a recent trend, the famous consumer responded strongly during peak shopping periods. E-commerce sales were up double digits in the quarter, particularly in May and July. Of course, the big news for back to school at Famous, the launch of Jordan, which we have exclusively in our channel this fall, across all stores and online. It quickly became a top 10 brand.

This performance reinforces Famous' ability to launch leading brands successfully and deliver powerful results, and we will continue to drive Jordan and other trending and highly demanded brands as we move forward into fall. During the quarter, men's performed best, kids was about in line with the overall trend, and women's underperformed.

Jack Calandra: By category, athletics was nearly flat on a comp basis.

Liz Dunn: And fashion declined. Jordan, Adidas, Birkenstock, New Balance, ASICS, Reebok, and Brooks were top growth brands in the quarter, while Caleres brands outperformed the Famous Footwear with flat comp sales. Within the strategically important kids category, penetration was 21% in the quarter, and Famous gained 0.6 points of kids market share in shoe chains, while total Famous gained 0.1 points.

Jay Schmidt: Famous continues to enhance

Liz Dunn: consumer experience through the Flair format. We ended the second quarter with 55 Flair locations, which generated a three-point sales lift overall and a six-point sales lift for stores converted in the last year. We plan to expand to 57 Flair locations by year-end. This success underscores Famous' ability to amplify elevated brands and products.

Jay Schmidt: In addition to Jordan,

Liz Dunn: for back to school, we added expanded or new assortments from Nike, Adidas, Birkenstock, New Balance,

Jay Schmidt: Brooks,

Liz Dunn: Timberland, and Frye. These brands and our other top national brands drove back-to-school comp sales up 1% in August, on top of a high single-digit comp in August. Famous Footwear consumer continues to shift their shopping to peak selling periods, and back to school is one of them. So we are pleased with our performance overall, as this season comes to an end. In summary, our near-term strategic focuses are ongoing tariff mitigation, expense and capital discipline, structural cost savings, and integrating Stuart Weitzman, all while continuing to fuel our lead brands and Famous Footwear.

Longer-term, our priorities are international growth and direct-to-consumer growth for the brand portfolio, and Flair stores and new powerful brand and product additions at Famous Footwear. We are confident that executing our strategic plans will result in improved financial performance and drive sustained value for our shareholders. And with that, I will now hand it over to Jack for a more detailed view of our financial performance.

Jack Calandra: Thanks, Jay, and good morning, everyone. During today's call, I will provide additional details on our second quarter results and some color on third quarter performance to date and expectations. Please note my comments will be on an adjusted basis. For the second quarter, sales were $658.5 million, down 3.6%. Sales were lower in both Brand Portfolio and Famous, but the trend improved in both segments versus 1Q. Brand Portfolio sales were down 3.5%. Lead brands grew about 1% in North America, and 3.6% on a global basis. Segment sales were weighed down by declines in our more value-oriented brands.

We estimate that tariffs negatively impacted 2Q sales by $10 million due to order cancellations and delayed receipts that pushed sales into 3Q. Famous sales were down 4.9%, with comparable sales down 3.4%. Comparable sales declined mid-single digits in May and June and improved to a 1% decline in July. As Jay noted, the improving trends continued in August, in which we delivered a positive 1% comp. Consolidated gross margin was 43.4%, down 210 basis points versus last year, and was driven by lower margins in both segments.

Brand Portfolio gross margin was 40.3%, down 240 basis points to last year, due to higher tariff-related costs and additional markdown reserves on excess spring product, somewhat offset by favorable channel mix and other variances. The gross margin impact of tariffs was about 250 basis points, while the impact of markdown reserves was about 120 basis points. Famous gross margin was 43.7%, down 130 basis points to last year, due to more days on promotion, a deeper promotional offer, and an unfavorable channel mix. For promotions, we continue to lean into our BOGO offer versus last year's buy more, save more program. We also had more BOGO clearance during the quarter as compared with last year.

In 3Q, we will anniversary the move to BOGO, and so expect less gross margin headwind from this promotional change going forward. SG&A expenses increased $1.4 million to $269.7 million. As a percentage of sales, SG&A was 41% and deleveraged 170 basis points. On a dollar basis, continued investment in our international business and higher depreciation for store and IT investments were offset by lower incentive compensation expense. Operating earnings were $16 million, and operating margin was 2.4%. Operating margin was 3.1% at Brand Portfolio, and 4.7% at Famous. Net interest expense was $4.5 million, up $1.2 million to last year due to higher average borrowings. The weighted average borrowing rate was down about 50 basis points.

Tax rate was 3.7%, and included a $2.5 million discrete tax benefit. Earnings per diluted share were $0.35, versus $0.85 last year. The aforementioned discrete tax benefit added $0.07 to EPS. Trailing twelve-month EBITDA was $162.7 million, and 6.1% of sales. Turning to the balance sheet. We ended the second quarter with $191.5 million in cash, up $139.7 million versus last year, and $387.5 million in borrowings, up $241 million last year. We borrowed $120 million just prior to quarter end to complete the Stuart Weitzman acquisition. And as a reminder, last year's end quarter borrowings were favorably impacted by a deferred $49 million vendor payment that pushed into Q3.

Inventory at quarter end was $693 million, up $32 million or 4.9% to last year. Inventory was up 2% in Famous, and up 8.6% in Brand Portfolio. Now I would like to give an update on tariffs. As I mentioned in our last earnings call, we continue to employ several strategies to mitigate the impact of tariffs on gross margin. These include the mix of sourcing countries, concessions from our factory partners, select price increases, and other strategies to reduce the dutiable value of our goods. That said, there is a lag between when the higher tariffs have taken effect and when these mitigating actions become effective.

This was the case with the first round of tariffs in the spring, and will also be with the second round of tariffs that went into effect in August. As a result, we expect continued pressure on Brand Portfolio gross margin in the second half. Given the continued uncertainty from tariffs, we are not providing annual guidance at this time. That said, we are sharing the following information about 3Q. For Famous, as mentioned earlier, comparable sales for August were a positive 1%, and August is the biggest month of the quarter. While we are pleased with our back-to-school results, we expect comparable sales in the largely non-promotional months of September and October to be down low single digits.

For Brand Portfolio, August sales, excluding Stuart Weitzman, were up low single digits versus last year. While sales in September and October are difficult to predict in this environment, we do expect continued pressure on gross margin. Specifically, we expect Brand Portfolio 3Q gross margin, excluding Stuart Weitzman, to be down a similar amount to 2Q. Improvement in the trend in 4Q as we realized more of the benefit of our mitigation strategies. For SG&A, excluding Stuart Weitzman, expect a modest increase in 3Q versus last year, with more benefit in April from the restructuring we just completed. In addition, we are actively exploring other cost savings opportunities.

And finally, we are working to finalize the purchase accounting for Stuart Weitzman. We look forward to giving more information on its impact to our 2025 financial results on our 3Q earnings call. With that, I would like to turn the call over to the operator for questions. Operator?

Operator: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question at this time, you may press star 1 from your telephone keypad. A confirmation tone will indicate your line is in the question queue. Thank you. And the first question comes from the line of Ashley Owens with KeyBanc Capital Markets. Please proceed with your question.

Ashley Owens: So just first on maybe the Famous quarter-to-date stats that you gave us with that growing in August. Any additional color on some of the dynamics at play with that? I know compares are easier in the back half of the year, but you have also shifted the assortment around a little bit, adding in some of those brands that you called out. So with back to school, was it really traffic? AUR may be better performance than Flair. Anything you could say there? And then additionally, if there has been any shift in the softness in the women's business that you mentioned. Thanks.

Jack Calandra: Yeah. Hi, Ashley. This is Jack. Thanks for your question. I will start, and I am sure Jay will fill in some additional comments. But in terms of Famous' August performance, that plus one comp, what we saw by channel is in brick and mortar, we saw improved traffic and conversion, with AURs basically flat. And then on the web part of the business, we saw there also improved traffic. AURs were also higher there. And conversion was flat.

Jay Schmidt: Yeah. I think, Ashley, we did see, you know, the good effect of our product assortment shift as you highlighted, with all the brands that we did mention having again, new or expanded assortments that really did pay off. And then, obviously, while we do not, you know, publish the results for sure, the Jordan piece continued to trend as we launched it all the way through back to school. We are very, very pleased with what we saw there. And, again, it became a top 10 brand very quickly as we launched it.

So we will continue to work on maximizing all of those brands as we move into the third quarter and beyond, as we try to really make the most out of the assortments that the consumers are demanding for.

Ashley Owens: Okay. Great. And then just a follow-up really quickly on some of the gross margin. So one for Famous, you mentioned less headwind as we annualize BOGO. Do you anticipate any other changes from 3Q to 4Q, such as deeper discounts or longer promo periods, which took place in February? What is embedded there? Then on the brand portfolio, as we think about the balance of the year, just what is going to be the biggest weight? Is it tariffs or are you anticipating a need for further markdowns or elevated markdowns in promos alongside those tariff-related costs? Just puts and takes for both of those would be helpful. Thank you.

Jack Calandra: I think at this point with Famous, we do believe we have gotten through that promotional cycle. That said, we will be, you know, as we go into Q4, we will continue to take markdowns on clearance, but we do not have any plans to change our cycle from last year. Over on the brand portfolio, I do think that if inventory becomes more aligned with sales, we are going to see a less headwind on that inventory markdown piece of the business. But as we kind of documented, again, we see more gross margin pressure earlier on and then that kind of more normalizing as we get into the fourth quarter with the results of tariff mitigation effects.

So that would be probably, I think, the best, you know, guidance we can give right now on that subject.

Jay Schmidt: I think the only thing I would add to that, Ashley, is on Famous. While certainly the promotional cadence, we will not have that headwind in the back half. And we are starting to see some price increases from our vendors in Famous. And so, obviously, we plan to pass on those price increases to hold, you know, basically, IMUs. I think the big question there is, what, if any, impact will that have on consumer demand? That would be, I think, the only difference, you know, I would also just highlight.

Ashley Owens: Okay. Got it. That is super helpful. I will pass it along. Thank you.

Jack Calandra: Thank you.

Operator: The next question is from the line of Mitch Kummetz with Seaport Research. Please proceed with your question.

Mitch Kummetz: Yes. Thanks for taking my questions. I guess, first off, just on the Stuart acquisition, is there any kind of color you can provide in terms of its impact on sales and EBIT and even on your interest expense, for the back half of the year?

Liz Dunn: Yeah, Mitch. This is Liz. We are not providing that detail at this time. There are just a number of things that are still in flux. As Jack mentioned, we are still finalizing our purchase accounting, which will have implications for how it flows through our P&L. But we will provide a breakout of Stuart through the end of the year, certainly, so that you can see from a comparability standpoint what our underlying business reflects, what the organic growth and trends are in our business. And I would also say there will be a number of things that are exceptional, and so we will be reporting both GAAP and non-GAAP view.

As I think we have discussed in the past, purchase accounting requires us to step up some of the value of the inventory. You can read in our documents that a decent amount of working capital came over, about $90 million in inventory. And so there will be, as I am sure you can imagine, some to move through some of that. So there will be a lot going on, as we move through the back half. But our goal really is to enter 2026 clean, get through the transition, and get the business onto our system. So that we can begin to really make significant improvement in their operating performance. Operating margin.

Jack Calandra: Yeah. And, Mitch, just with regard to interest expense, as I mentioned, we borrowed about $120 million to close the acquisition. I should point out that net of the cash we acquired as part of the business, the price was $108 million. But, obviously, if you think about that borrowing over the back half, let us call it probably around a 5.7%, 5.8% borrowing rate. You can do the math there to understand what that interest expense would be.

Mitch Kummetz: And then just as a follow-up on Stuart, Jay, I think in your prepared remarks, you mentioned the return to profitability after this transition integration period, which kind of sounds like might be done by the end of this year. So do you expect the acquisition to be accretive to earnings next year?

Jay Schmidt: Well, we are not, you know, getting that part through, that would be our goal. As we said, we were going through this transition period, which we expect to complete by January. And then said that those immediate expenses would come through, where exactly that will come out not ready to guide to yet, but I think that is the goal right now.

Mitch Kummetz: And then maybe just real quick on BP. It was mentioned that there were some cancellations and delayed receipts in the quarter. Can you quantify that? And those delayed receipts, is that having a benefit to the third quarter? And then also just quickly on margins for BP, I think you said that the tariff impact was 250 basis points. I know that overall, you expect gross margins to be comparable in the third quarter. But is that kind of how we should think about tariffs as well in 3Q?

Jack Calandra: Yeah, Mitch. Let me take your last question first. So what we said was there was the 250 basis point impact versus last year, and we expect the overall gross margins of the Brand Portfolio to be down similar to what they were in Q2, which was down that 240 basis points. So, I mean, obviously, within that, you know, there should be less of an issue around markdown reserves. Obviously, that we took on the spring product. But I think, as we mentioned, part of the issue with these new tariffs is, again, that lag effect between when tariffs are effective and when these mitigating actions and strategies take hold.

And so what you tend to see, saw it a little bit. The first half was a little bit more pressure in the first quarter on gross margin when those tariffs went into effect. And then some improvement in the second quarter. I would expect to see sort of the same in the third and the fourth quarter where more of that pressure in the third quarter is there. And then the fourth quarter, you see some of that trend improvement as those mitigating actions take effect. With regard to that $10 million sales impact on BP from tariffs, the split between what was canceled orders and what was delayed sales that we should recover in Q3 is about 50/50.

So about $5 million of cancellations and about $5 million in delayed receipts, which we should benefit from in Q3.

Mitch Kummetz: Great. Thanks. Good luck.

Jack Calandra: Thank you.

Operator: The next questions are from the line of Dana Telsey with Telsey Advisory Group. Please proceed with your questions.

Dana Telsey: Hi. Good morning, everyone. As you think just broadly about the consumer health of Famous Footwear customer and the BP customer, has anything changed or what are you seeing from them? And then brand performance at Famous. How did that look compared to previous quarters? And then I have a follow-up.

Jay Schmidt: So hi, Dana. First of all, I would say in Famous Footwear, when we talk about these brands that had the most growth in the quarter and then continuing in that in Q2, we are continuing to see our consumer want those highly demanded national brands that really have, you know, great meaning to them, and they are purchasing those over others. So we are continuing to see that as a trend. We are going to be watching the consumer health very closely. As we said, we had a nice back-to-school, and that was on top of a very, very successful back-to-school a year ago.

Clearly, Jordan was a big component to that, as were many of these other brands that we mentioned. So what we are really seeing is they continue to want the brands they want first, and that seems to bring the desire into them. And some of our most newest and more elevated brands and products are growing faster. Over on the brand side, we are kind of seeing a similar approach as our lead brands that are outperforming and then some of our premium brands, particularly in I would say is in this premium contemporary position, are growing quite a bit. So we are continuing to see a lot of action there.

And then also a lot of interest in fashion right now, which is really helping drive that. Including a return to dress and an early good start to boots. So again, the consumer seems to want what they want. They are very informed. They continue to vote for the products that they want. And then I think they find value as they can as they work, you know, shop across the landscape. So what I have to say on that subject.

Dana Telsey: Thank you. And then on the mitigation tactics for tariffs, where are you on those? How do you see that progressing going forward? And as you wrap to 2026, does it anniversary or how are you thinking about it? And I think you mentioned, Jack, about potentially more cost savings. Did I hear that right? Or is there other things that you are looking at? Thank you.

Jay Schmidt: Yeah. So I think that, you know, as previously we had mentioned, you know, we are selective in passing through price increases. We are continuing to negotiate with factory partners on all types of cost savings there. And then finally, when we look at it, there was also this whole piece of really looking at our whole company and coming up with structural cost savings. We look at efficiency in this back half. So we do not think we are going to get it from one place. We think it is going to be a combination of things. And then also, we are continuing to look at the mix of sourcing countries as we go forward also.

So I think those are the big ones. The other ones get highly detailed and probably just solve that piece of it.

Jack Calandra: Yeah. And, Dana, just to add to Jay's comments, on the savings, we did, I think we mentioned this, we brought a partner in to help us with the integration of Stuart Weitzman. They have validated and, in some cases, increased what are probably the expense opportunities that we can realize upon the integration. But we have also asked them to look more broadly at the company's cost structure to look for other structural opportunities and ways for us to work more efficiently. So that is work that is in progress, and we are optimistic that should generate additional savings that will likely come in 2026.

Dana Telsey: Got it. And then just wholesale order trends going forward as you look towards the holidays. How is that going on wholesale order trends? What are you seeing there?

Jay Schmidt: So, you know, as we go forward, you know, with our, I would say, half of our brand portfolio business is dynamic. As you know, between, you know, rapid reorders and speed between direct-to-consumer drop ship and direct-to-consumer, and then so it really is very much demanded. So we are measuring it in real time. What I can say is that our sell-through has been consistently better than sell-in. And so we are optimistic about that. And then in this quarter, we did outperform in direct-to-consumer channels in the brand portfolio. And in fact, B2C was up year over year. So we think that is where we are going.

But for sure, people do want to turn more quickly, and that is true of ourselves as well. So everyone is out working it and really trying to find all the opportunities right now. But I will say with a good retail trend, it gets people a little more to work with. And, obviously, there is, you know, out in the space there amongst the retail partners, there is more optimism as they look forward.

Dana Telsey: Thank you.

Operator: Thank you. At this time, we have reached the end of the question and answer session. I will hand the call over to Jay Schmidt for closing remarks.

Jay Schmidt: Thank you. Before we close, I want to acknowledge the dedication of our entire team during what has proven to be a dynamic and demanding period. Across all functions, our associates have demonstrated resilience and adaptability as we navigated operational challenges and worked to sustain momentum amid shifting market conditions and remain focused on our long-term strategy.

Operator: Thank you. This does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.

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