Caleres, Inc.

Greetings and welcome to CLARA's first quarter 2025 earnings conference call. At this time, all participants are on the listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Liz Dunn. Senior Vice President, Corporate Development, and Strategic Communication. Thank you. You may begin.

Thanks, Rob. Good morning, and thank you for joining our first quarter 2025 earnings call and webcast. A press release with detailed financial tables, as well as our quarterly slide presentation, are available at calaris.com. Please be aware today's discussion contains forward-looking statements that are subject to several risks and uncertainties. Actual results may differ materially due to various risk factors, including those disclosed in the company's Form 10-K and other filings with the U.S. Securities and Exchange Commission. Please refer to today's press release and our SEC filings for more information on risk factors and other factors which could impact forward-looking statements. Copies of these reports are available online. In discussing our operational results, we'll be providing and referring to certain non-GAAP financial measures, Additional details on these measures, as well as others featured in today's earnings release and presentation, are available at CLARIS.com. The company undertakes no obligation to update any information discussed in this call at any time. Joining me today are Jay Schmidt, President and CEO, and Jack Calandra, Senior Vice President and CFO. Our call will begin with prepared remarks, followed by a Q&A session to address any questions you have. With that, I will turn the call over to Jay. Jay?

Thank you, and good morning, everyone. Earlier today, we reported first quarter sales and earnings. While our brands continue to resonate with consumers and both segments of our business gain market share in the period, our first quarter results fell short of expectations. February sales were particularly weak, and although trends improved in March and in April, overall performance was below plan. Furthermore, operating earnings were pressured by lower gross margins, increased reserves, and costs to cancel and move inventory. Despite the weak quarter, we did experience improving momentum at retail and growth in our strategically important international business. The operating environment has become more challenging, and we must redouble our efforts to drive growth and profitability. In the near term, we are focused on controlling what we can control, including optimizing our sourcing strategy. Additionally, we expect to decrease SG&A by 15 million on an annualized basis through structural expense cuts. We are viewing this as an opportunity to strengthen Calaris and position our company for the future. Turning now to the results. In total for the first quarter, we achieved adjusted earnings per share of 22 cents. Our first quarter sales declined 6.8% year over year. Sales were below plan, but lower gross margin drove most of the bottom line miss. Our Q1 results include several larger than planned impacts related to tariff escalation and sourcing disruption, higher than planned inventories, and worsening customer credit issues. I want to take a moment to detail some of the items affecting profitability in the quarter. First, on sourcing. Following the executive order on tariffs in early April, we acted quickly to pause our production in China. Depending on where items were in the production cycle, we either canceled, paused, or relocated manufacturing. As you can imagine, Each of these decisions had associated costs that impacted the quarter. Jack will talk more about our mitigation strategies, but in total, we believe sourcing disruption had a minimal impact on sales, but reduced gross margin profit by nearly $1.9 million during the quarter. Turning to our inventory positions. As sales trends softened late last year and into the first quarter, our outlook shifted and we could not adjust our inventory flow quickly enough to match the lower demand coming from some parts of the brand portfolio. While the excess inventory is largely current and came in before April, thus avoiding the latest tariffs, these higher inventory levels required additional markdown reserves. Markdown reserves impacted the quarter by about $2.3 million as compared with last year. And finally, we saw expanding customer credit concerns this quarter and added bad debt write-downs, which hit profit by almost $3.1 million as compared with last year. We are taking multiple actions to offset additional sourcing costs and improve our financial performance, including sourcing migration, price increases, and expense reduction. Now let's review each of the business segments. Brand portfolio sales declined 6.9% in the quarter, with similar softness seen across all channels. However, According to Zircona, our brand portfolio gained market share in women's fashion footwear during the period. Consumer demand remained solid in key categories, including fashion, flats, sandals, and sneakers, while dress styles were more challenged. Lower product margins, costs relating to canceling or moving goods, and higher inventory reserves pressured the brand portfolio gross margin and resulted in a 280 basis point decline versus last year. Our four lead brands, which include Sam Edelman, Allen Edmonds, Naturalizer, and Phionic, represented about 60% of sales and 80% of operating earnings in the quarter. While sales were down for lead brands in total, they outperformed the other brands in the portfolio. Our Sam Edelman brand delivered a solid quarter, marked by sales growth domestically and double-digit growth internationally. We saw improvement in our business in China, driven by strong response to our sneaker assortment, and expansion in the brand's global footprint through new marketplace partnerships and growth in the Middle East. Sam Edelman was well positioned with key trends this season, including raffia, jellies, footbed sandals, and slides, all while continuing to grow its sneaker business. Both wholesale and direct-to-consumer channels posted growth in the quarter. At quarter end, we had 106 stores, 56 owned and 56 franchised, with 102 of them located internationally. Allen Edmonds experienced a softer quarter from a demand standpoint. The consumer here continues to respond to newness across all channels, and newness in our own retail stores outperformed total store performance by 10 points. growth in rubber-soled verse casuals and sneakers was offset by softness in leather-soled dress shoes. Retail trends, however, were meaningfully impacted in April by financial market volatility, but we've seen some rebound as markets stabilized. In first quarter, Allen Edmonds opened three additional Port Washington studio stores, bringing the total to 15. These stores continue to outperform the fleet by 300 to 400 basis points. We also opened a new outlet store in Charlotte, North Carolina. We plan to open a small number of Allen Edmonds outlets in the future to more effectively clear end of season goods. At the end of the quarter, we had a total of 57 stores. Our Naturalizer brand had a down quarter, but maintained its market share. Sneakers and casuals grew in penetration to the total, and sandal styles were up, led by strong performance from new footbed styles. While Naturalizer.com saw lower sales in the quarter, conversion was up double digits. We are also seeing growth with our largest wholesale partners. As a reminder, Naturalizer invested in its first shop and shop at Macy's Herald Square last October. This elevated modern shopping experience drove over a 50% sales increase in the first quarter and is on track to be the number one Naturalizer location globally. Our Bionic brand declined year over year due mostly to timing issues, but was slightly better than our expectations. The brand shifted some deliveries in the fourth quarter to fuel an event at Nordstrom and shifted a catalog drop from Q1 to Q2. Our walking category sales grew over 100% to last year, driven by a walking campaign in February and the launch of three new walking styles. We also saw encouraging early results in sandals, supported by new styling and enhanced footbed technology. In March, Bionic announced Gabby Reese as the brand's first wellness ambassador. Her consumer-facing campaign will begin this fall with a special edition collaboration dropping in early spring 2026. Finally, I do want to touch on our planned acquisition of Stuart Weitzman. As I said when we announced the transaction, this brand is a strategic fit for Kolaris for several reasons. We love its premium positioning, and we have proven an ability to operate profitably in the accessible luxury lane with our Veronica Beard and Vince licensed businesses. We see the higher-end consumer as more resilient long-term, and we view Steward's strong direct-to-consumer presence and international footprint as important strategic advantages. We continue to believe we are the right owners for this asset, and we are excited about its future at Kolaris. We are also engaging an external firm to ensure we integrate the business well and capture all the synergies. This work will also include ways that Kolaris can work more efficiently as a portfolio company. We look forward to giving you an update after we close the transaction, which is expected later this summer. Moving on to famous footwear. Total sales were down 6.3% during the first quarter, while comp sales declined 4.6%. As previously noted, February was significantly down. However, we saw sequential improvement in March and in April. E-commerce sales were up 2.5% in the quarter, and gross margins declined 80 basis points. with more promotional days, mostly concentrated in February, and higher freight costs. Men's, kids', and accessories outperformed the total, while women's underperformed. By category, we saw relative strength in athletics. Within the strategically important kids' category, Famous gained 0.5 points of market share in shoe chains, while Total Famous gained 0.2 points. Kids Penetration was 21% in the quarter, with sales exceeding the total chain for 16 of the last 17 quarters. And finally, Calaris Owned Brands outperformed at Famous in the quarter, with notable increases from both our Blowfish and our Ryka brand. We continue to enhance the consumer experience at Famous. At the end of first quarter, we had 44 Flair locations in total. We saw an eight-point sales lift versus the rest of the chain for stores converted in the last year and a three-point lift for all Flair stores. Flair is helping to attract more elevated products and brands, and our famous consumer is responding. We've already added two Flair stores this quarter and expect to add seven more by July, bringing our total to 53 stores heading into back to school. And speaking of elevated brands and products, many of you have already noticed that we launched Jordan in 147 stores in mid-May. We supported the launch with bold exterior signage, branded fixtures, full family displays that are flare locations, and geo-targeted messaging. We look forward to rolling the brand out to all stores for back to school across men's, women's, kids', and accessories. The brand is currently exclusive to Famous in the shoe chain channel. Early selling is very encouraging, and we look forward to even stronger results with our national marketing campaign during back to school. In addition to Jordan, we are well positioned for back to school with expanded or new assortments from Nike, Adidas, Birkenstock, New Balance, Brooks, Timberland, and Sorel, as well as Frye, which arrives later in fall. In summary, the strength of Athletic, kids, our flair results, and the brand and product lineup make us feel cautiously optimistic. We believe Famous' inherent competitive advantages, namely its leadership position with the millennial family, especially kids, coupled with its clear avenues for growth and support from the Calera structure, position the business to gain additional market share in shoe chains, generate robust levels of cash, and increase profitability over the long term. As we look ahead, we are confident in our ability to get back on track, execute our strategic plan, invest to fuel our growth initiatives, 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?