Brand Portfolio Drives Growth at Caleres While Integration Costs Pressure Profits

Brand Portfolio Strength Offsets Weakness in Famous Footwear

Caleres reported third quarter 2025 results showing clear momentum in its Brand Portfolio, fueled by the recent Stuart Weitzman acquisition. The segment’s sales surged 18.8%, including a $45.8 million contribution from Stuart Weitzman, and Brand Portfolio organic sales grew 4.6%. This strength helped offset softness at Famous Footwear, where sales slipped 2.2% and comparable store sales dipped 1.2%.

Direct-to-consumer sales across both divisions increased at a double-digit pace, a bright spot for Caleres’ ongoing digital transition. Lead Brands—such as Sam Edelman, Allen Edmonds, and now Stuart Weitzman—delivered robust double-digit growth, further increasing the segment’s market share in women’s fashion footwear by 0.5 percentage points (excluding Stuart Weitzman).

Stuart Weitzman Integration Adds Scale but Weighs on Short-Term Earnings

In August, Caleres completed the $108.9 million purchase of Stuart Weitzman, which immediately bolstered top-line results. However, integration expenses and acquisition-related dilution are squeezing short-term profitability, as management expected. GAAP earnings per diluted share fell sharply year-over-year, from $1.19 to $0.07, while adjusted EPS (excluding Stuart Weitzman) landed at $0.67—a decline, but evidence that the core business is stabilizing.

As shown below, Stuart Weitzman’s impact on the quarter was substantial in sales, but it generated an operating loss as the business transition ramps up. Integration is progressing toward anticipated cost synergies set for 2026.

Margins Remain Pressured as Inventory and Expenses Climb

Gross margins dipped 230 basis points from last year (to 41.8%), and adjusted margins also softened due to a combination of tariff impacts and lower-margin sales at Stuart Weitzman during integration. SG&A expenses rose as a share of sales, reflecting acquisition and integration outlays—most notably $32.2 million tied to Stuart Weitzman.

Inventory finished the quarter at $678.2 million, up $92 million year-over-year, but much of this is due to $77 million in Stuart Weitzman inventory. Excluding the acquisition, inventory rose a manageable 2.6%. Liquidity stood at $312 million at quarter-end with borrowings on the revolving credit facility at $355 million.

2025 Outlook: Cost Headwinds Persist, but Synergies Expected Next Year

Looking ahead, management expects continued gross margin pressure from tariffs and ongoing earnings dilution from Stuart Weitzman, especially in Q4. For fiscal 2025, guidance is for a small GAAP loss per diluted share of $0.13 to $0.18, and adjusted earnings per diluted share in the $0.55 to $0.60 range (including a $0.60–$0.65 dilution from Stuart Weitzman). Excluding Stuart Weitzman, the underlying adjusted earnings per diluted share would have landed between $1.15 and $1.25.

With the Stuart Weitzman transition underway, Caleres expects to realize cost synergies and margin improvements in fiscal 2026. For investors and followers of retail turnarounds, Caleres offers a test case in scaling premium brands amid short-term profit pressure and longer-term potential.

Key Takeaway: Strategic Progress Amid Short-Term Profit Challenges

Caleres is leveraging its Brand Portfolio—now nearly half the business—with eCommerce acceleration and increased scale from Stuart Weitzman. While integration costs and tariffs weigh on near-term profits, management remains confident about extracting future synergies. The real story to watch is whether Caleres can deliver the promised improvements to margins and profitability in 2026, as strategic integration matures. Investors seeking value in retail might want to monitor developments closely through next year’s transition.

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