Caleres, Inc.

Greetings. Welcome to the Kolaris Incorporated's second quarter 2025 earnings call. At this time, all participants will be in listen-only mode. A question-and-answer session will follow the forum presentation. If anyone should require operator assistance during today's conference, please press star zero from your telephone keypad. Please note that the conference is being recorded. At this time, I'll turn the conference over to Liz Dunn, Senior Vice President, Corporate Development and Strategic Communications. You may begin, Liz.

Thanks, Rob. Good morning, and thank you for joining our second quarter 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, which 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 operating results, we will 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 second quarter sales and earnings. While we did experience headwinds due to market uncertainty, we demonstrated the strength and the 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 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 and 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 initiative 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. As 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 seek clear opportunities to improve its 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 35 cents. 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 price 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 Cercana, our brand portfolio gained market share in women's fashion footwear during the period. Consumer demand rate 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 boot 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 and 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 second quarter, Allen Edmonds opened another Port Washington studio store, bringing the total to 16. These locations continue to outperform the broader 59-store fleet by 700 basis points. Naturalizer had a down quarter due to some sourcing shifts in their wholesale business segment. 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 CERCANA. 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 calf-width options from narrow to extra wide. In bionic, 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 second quarter and becoming a new icon style for the brand. The walking category was strong and saw continued growth driven by the walk max and the walk strider, our top two styles. The international business for Bionic was up double digits in the quarter. Shortly after quarter end, Bionic introduced Gabby Reese as its newest wellness ambassador. Gabby's authentic connection to wellness reinforces Bionic'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. As we look 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, and controlling what we can control to drive improved financial performance. 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 Cercana. As has been our recent trend, the Famous consumer responded strongly during peak shopping periods. These e-commerce sales were up double digits in the quarter, particularly in May and July. Of course, the big news for Back to School and Famous was 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. By category, athletics was nearly flat on a comp basis and fashion declined. Jordan, Adidas, Birkenstock, New Balance, Asics, Reece, and Brooks were top growth brands in the quarter, while Calaris brands outperformed a 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. Famous continues to enhance its consumer experience through the Flair format. We ended 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 flare locations by year end. This success underscores Famo.us' ability to amplify elevated brands and products. In addition to Jordan for back to school, we added expanded or new assortments from Nike, Adidas, Birkenstock, New Balance, Brooks, 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 of last year. 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 the 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 flare 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?