Caleres, Inc.

greetings welcome to Claris Incorporated third quarter 2025 earnings call at this time all participants are in a 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 please note this conference is being recorded I will now turn the conference over to Liz Dunn SVP, Corporate Development, and Strategic Communications. Thank you, Liz. You may begin.

Thank you. Good morning and thank you for joining our third 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 that 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 operational results, we will be providing and referring to adjusted operating and earnings results, and in some cases, we will be discussing our results, excluding the impact of Stuart Weissman. Additional details on non-GAAP measures, as well as others featured in today's earnings release and presentation, are available in the reconciliation tables in our earnings release and on Calaris.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 now turn the call over to Jay. Jay?

Thank you, and good morning, everyone. Earlier today, we reported third quarter sales and earnings. We were pleased to deliver organic sales growth, led by our brand portfolio and particularly our lead brands. Sales trends also improved sequentially at Famous Footwear. Both segments of our business posted double-digit owned e-commerce performance with strong customer growth, enhanced targeting through our customer data platform, and incremental investment to fuel the momentum in trending fashion categories. As expected, tariffs continued to pressure our gross margin and earnings. However, our organic sales performance exceeded our internal expectations heading into the quarter. This is also the first quarter where our total financial results include Stuart Weitzman. It is important to remember that we are operating under a transition service agreement with Tapestry until we can fully integrate the brand into the Calaris ecosystem. I will speak in a moment about our plan to bring the brand to break even in 2026 and profitability thereafter. But we will incur temporary, elevated, and in some cases duplicative costs during this period and will not be able to unlock synergies or cost savings for the most part until we fully integrate in February next year. That said, we are pleased to be working with a highly engaged Stuart Weitzman team side by side to improve operating performance. It's also important to restate why we made this acquisition. Stuart Weitzman is an iconic brand with unique consumer resonance, aligning with our strategic focus on premium contemporary, direct-to-consumer, and international business. In addition, it represents a transformational moment for Kolaris. With this acquisition, our brand portfolio represents nearly half of our sales while continuing to generate more than half of our operating earnings. We realize that scale is important in today's operating environment and leveraging that scale through an efficient operating structure matters more than ever. For this reason, 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. To accomplish this, we have been working with an external consulting partner on integration to ensure we capture all synergistic opportunities and amplify our best capabilities. As a result of this effort, we have identified efficiencies across our company. We are establishing new centers of excellence that will support our entire Calaris portfolio. These efforts are expected to drive material structural cost savings, improve discipline and growth in 2026. We will share more about this new structure on our fourth quarter call when we provide 2026 guidance. Turning now to the results for the third quarter. Brand portfolio sales on an organic basis exceeded our expectations, increasing 4.6% in the quarter and 18.8% when factoring in Stuart Weitzman. Lead brands in total were up double digits organically, with three of the brands showing growth. The full portfolio saw growth in both wholesale and owned e-commerce on an organic basis. Premium brands showed strength, while value price brands remained under some pressure. Our international business was markedly strong in the quarter, and our direct-to-consumer channels delivered growth and momentum. According to Cercana, our brand portfolio gained significant market share in women's fashion footwear during the period. Boots were a standout category, particularly tall-shaft fashion boots. However, we also saw strength and growth in flats and loafers, solid performance in dress, and continued momentum in sneakers. Sam Edelman delivered a very strong quarter marked by double digit sales growth, both domestically and internationally. Success was broad based. Boots stood out as the fastest growing segment driven by markedly strong demand in both established and new tall boot styles. while short boots and casual flats and loafers also performed well. Sam Edelman's own e-commerce channel had its best quarter ever, achieving higher full price sales. Licensing initiatives progressed, highlighted by a successful fragrance launch that expanded retail presence for the holiday season. At quarter end, we had 114 Sam Edelman stores, 57 owned and 57 franchised, with 110 of them international. Allen Edmonds delivered a strong quarter with positive comp store sales, solid e-commerce trends, and wholesale strength. Growth was steady across categories, led by sneakers, dress and casual loafers. Boots saw improvement as the quarter progressed and are growing now in fourth quarter. The elevated reserve collection expanded into new casual and sneaker styles. And we are highly encouraged by the stronger than expected demand for these styles at premium price points, which are now in 42 stores. Lastly, our 16 Port Washington studio stores continue outperforming the broader 59 store fleet this quarter by 400 basis points. Naturalizer saw sequential revenue improvement in third quarter with e-commerce in the U.S. and Canada showing double digit growth compared to last year. Our direct-to-consumer channel saw growth across all major categories, boots, dress, casual, and sport, and delivered higher margins. Marketing efforts were highly targeted, spotlighting select product categories and silhouettes, color, and material trends through creative storytelling. The use of brand ambassadors helped attract and convert higher quality traffic. The brand had strong purchasing appeal among Gen Z, Millennials, and Gen X, reflecting a broadening generational reach. Bionic saw growth this quarter of solidly in wholesale and international markets, while e-commerce was softer. Retail sales increased in all categories, with casuals, sports styles, and slippers leading the way. International business was a bright spot, showing robust growth thanks to strong e-commerce and marketplace performance. New product launches like the Willa 2.0 and the Walk Slim Sneaker gained traction and contributed to the brand's momentum. The quarter also marked the launch of the Gabby Reeves campaign, introducing Bionic's first wellness ambassador. Campaign content outperformed traditional brand content, driving higher engagement and capturing a significant share of spend. And finally, our newest lead brand, Stuart Weitzman. As many of you know, the brand under tapestry ownership has been underperforming in recent years and as such is diluted to earnings as it came over. During our first three months of ownership, our focus has been on stabilization and transition. Here's what's working. The design changes. product quality, and price value are all resonating with the consumer on the fall line offerings. Sell-throughs on the fall product have improved year over year, especially at wholesale and U.S.-owned retail, with full price strength in dress as well as short and tall boots. Marketing featuring global ambassadors has connected with consumers of all ages. Our system integration is on track for the beginning of 2026, and reporting structures are in place for key functional areas such as finance, specialty retail, international, and sourcing. Here's what's not working, which needed some intense focus and action. The China DTC business, where the shift in ownership resulted in sales volatility, especially in August. We have added new leadership in China and in working closely with the Stuart Weissman team in New York and our Calaris International team, they have made significant progress on improving sales sequentially month by month. Global excess inventory, much of it aged and thus more difficult to clear. We've established appropriate reserves through the purchase accounting process, but it is diluted to the brand's gross margin for the back half. While costly, we feel this issue is momentary in nature. and taking action now is essential for the success of this transition. The team has made significant progress on liquidation, leading us to feel confident this issue will be largely behind us as we enter 2026. While we continue to expect the Stuart Weitzman business to be dilutive to the balance of 2025, We have a plan in place to achieve breakeven in 2026 through significant synergistic savings in distribution, logistics, specialty retail, digital and marketing operations, and office facilities, along with all other back office functions currently being covered under the TSA. And while these expense reductions will not be able to be realized until system cut over in February, I look forward to speaking much more about Stuart Weitzman, including our plans to improve sales performance on the fourth quarter call. Looking at the balance of the year for the brand portfolio, sales performance appears stable with owned e-commerce showing strong momentum Order to date direct to consumer performance remains up double digits, including during the Black Friday and Cyber Monday window. The tariff environment is stabilizing and our mitigation efforts are beginning to take hold. Our inventory position, excluding Stuart Weitzman, is now more aligned with our sales trend. And we continue to work through Stuart Weitzman's inventory to enter 2026 in a clean position. Moving on to famous footwear. In the quarter, total sales were down 2.2% and comp sales declined 1.2% in line with our expectations. Retail conversion and average unit retails increased low single digits, while traffic declined mid single digits. We continue to see the famous consumer respond strongly during peak shopping periods with positive comps in August, followed by September and October declines similar to our first half trend. Our e-commerce sales were up double digits for the second straight quarter. The launch of Jordan last quarter contributed steady momentum throughout the back-to-school season, remaining a top 10 brand and reinforcing Famous' ability to launch leading brands and deliver powerful results. Samus continues to enhance its consumer experience through the Flair format. We ended third quarter with 56 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 add one additional location by year end. as the success of our Flair concept continues to underscore Famous' ability to amplify elevated brands and products. Men's and kids performed best during the quarter while women's underperformed. By category, athletic was slightly positive on a comp basis and fashion declined. Jordan, Adidas, Birkenstock, New Balance, DC Shoes and Timberland were top growth brands. While our Calaris brands outperformed at famous footwear with sales of mid single digits. Within the strategically important kids category, penetration was 25% in the quarter. In addition to Jordan, we are seeing a trend of outperformance from premium brands at famous. which we plan to capitalize on by bringing in more of these highly demanded brands. At the same time, we see a need to edit some underperforming labels, particularly in the fashion category. This will free up open to buy to invest in demanded brands, including some of our own Calaris brands. But I want to be clear. We are following the consumer. We are growing our Calaris brands at Famous because they are performing. As we do this, it is accretive to our consolidated gross margin. Jack will cover our fourth quarter expectations in more detail, but I will note that holiday sales at Famous Footwear have been strong so far, and comp store sales are flat quarter to date. In summary, we are pleased with our sales performance in the quarter and the particular strength of our strategic growth sectors, lead brands, international, direct-to-consumer, and enhanced customer experience. Our near-term focuses are restoring gross margins, operational discipline, structural cost savings, and integrating Stuart Weissman. We are finding new, more efficient ways of working and leveraging our best capabilities. We are focused on speed, agility and controlling what we can control. We are confident that fueling both brand portfolio and famous footwear and executing our strategic plans will result in improved financial performance and drive long term value for our shareholders. And with that, I will now hand it over to Jack for a more detailed view of our financial performance.