EDGAR 10-K Filing

Company CIK: 14707
Filing Year: 2025
Filename: 14707_10-K_2025_0000014707-25-000017.json

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ITEM 1. BUSINESS
Item 1
Business

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ITEM 1A. RISK FACTORS
Item 1A
Risk Factors

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B
Unresolved Staff Comments

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ITEM 2. PROPERTIES
ITEM 2 PROPERTIES
We own our principal executive, sales and administrative offices located in Clayton (“St. Louis”), Missouri.
Our retail operations, included in both our Famous Footwear and Brand Portfolio segments, are conducted throughout the United States, Canada, China and Guam and involve the operation of 960 retail stores. All store locations, excluding our Perth, Ontario outlet center, are leased, with approximately 32% of them having renewal options. The footwear sold through our domestic wholesale business is primarily processed through our leased distribution centers in Chino, California and Lebanon, Tennessee.
The following table summarizes the location and general use of the Company’s primary properties:
Location
Owned/Leased
Segment
Use
Clayton, Missouri
Owned
Famous Footwear and Brand Portfolio
Principal corporate, executive, sales and administrative offices
St. Louis, Missouri
Leased
Famous Footwear and Brand Portfolio
Office space
United States, Canada, East Asia and Guam
Leased
Famous Footwear and Brand Portfolio
Retail operations
Chino, California (1)
Leased
Brand Portfolio
Distribution centers
Lebanon, Tennessee (2)
Leased
Famous Footwear and Brand Portfolio
Distribution center
Lebec, California (3)
Leased
Famous Footwear
Distribution center
New York, New York
Leased
Brand Portfolio
Office space and showrooms
Perth, Ontario (4)
Owned
Famous Footwear and Brand Portfolio
Distribution center and outlet center
Novato, California
Leased
Brand Portfolio
Office space
Dongguan, China
Leased
Brand Portfolio
Office space and sample-making facility
Santiago, Dominican Republic
Leased
Brand Portfolio
Manufacturing facility
Port Washington, Wisconsin
Leased
Brand Portfolio
Land
Port Washington, Wisconsin
Owned
Brand Portfolio
Manufacturing and recrafting facility, office space and warehouse
(1) This campus includes two company-operated distribution centers with approximately 725,000 and 606,000 square feet at each respective location.
(2) This distribution center is approximately 540,000 square feet.
(3) This distribution center is approximately 350,000 square feet.
(4) This distribution center is approximately 150,000 square feet.
We also own a building in Denver, Colorado, which is leased to a third party, and undeveloped land in Colorado and New York. See Item 3, Legal Proceedings, for further discussion of certain of these properties.

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ITEM 3. LEGAL PROCEEDINGS
ITEM 3 LEGAL PROCEEDINGS
We are involved in legal proceedings and litigation arising in the ordinary course of business. In the opinion of management, the outcome of such ordinary course business proceedings and litigation currently pending will not have a material adverse effect on our results of operations or financial position.
Our prior operations included numerous manufacturing and other facilities for which we may have responsibility under various environmental laws to address conditions that may be identified in the future. We are involved in environmental remediation and ongoing compliance activities at several sites and have been notified that we are or may be a potentially responsible party at several other sites. We are remediating, under the oversight of Colorado authorities, contamination at and beneath our owned facility in Colorado (also known as the “Redfield” site) and groundwater and indoor air in residential neighborhoods adjacent to and near the property, which have been affected by solvents previously used at the site and surrounding facilities.
Refer to Note 16 to the consolidated financial statements for additional information related to the Redfield matter and other legal proceedings.

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ITEM 4. MINE SAFETY DISCLOSURE
ITEM 4 MINE SAFETY DISCLOSURES
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
ITEM 5 MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock is listed on the New York Stock Exchange (“NYSE”) under the trading symbol “CAL.” As of February 1, 2025, we had 3,681 shareholders of record.
Issuer Purchases of Equity Securities
The following table provides information relating to our repurchases of common stock during the fourth quarter of 2024:
Total Number of
Maximum Number
Shares Purchased
of Shares that May
Total Number
Average Price
as Part of
Yet Be
Fiscal
of Shares
Paid per
Publicly Announced
Purchased Under
Period
Purchased (1)
Share (1)
Program (2)
the Program (2)
November 3, 2024 - November 30, 2024
5,187
$
31.38
-
3,666,055
December 1, 2024 - January 4, 2025
-
-
-
3,666,055
January 5, 2025 - February 1, 2025
14,350
20.37
-
3,666,055
Total
19,537
$
23.29
-
3,666,055
(1) Includes shares that are tendered by employees related to certain share-based awards to satisfy tax withholding amounts for restricted stock and stock performance awards.
(2) On September 2, 2019, the Board of Directors approved a stock repurchase program ("2019 Program") authorizing the purchase of up to 5,000,000 shares of our outstanding common stock. In addition, on March 10, 2022, the Board of Directors approved a stock repurchase program ("2022 Program") authorizing the repurchase of an additional 7,000,000 shares of our outstanding common stock. We can use the repurchase programs to repurchase shares on the open market or in private transactions. Under these programs, the Company repurchased 1,938,324 shares during 2024 and 763,000 shares during 2023. As of February 1, 2025, there were 3,666,055 shares authorized to be repurchased under the 2022 Program. Our repurchases of common stock are limited under our debt agreements. Subsequent to our 2024 year-end, the Company has repurchased 150,000 shares at an aggregate price of $2.6 million.
Stock Performance Graph
The following performance graph compares the cumulative total return on our common stock with the cumulative total return of the following indices: (i) the S&P© SmallCap 600 Stock Index and (ii) a peer group of companies believed to be engaged in similar businesses. Our peer group consists of Designer Brands, Inc., Genesco, Inc., Shoe Carnival, Inc., Skechers U.S.A., Inc., Steven Madden, Ltd. and Wolverine World Wide, Inc.
Our fiscal year ends on the Saturday nearest to each January 31. Accordingly, share prices are as of the last business day in each fiscal year. The graph assumes that the value of the investment in our common stock and each index was $100 at February 1, 2020. The graph also assumes that all dividends were reinvested and that investments were held through February 1, 2025. These indices are included for comparative purposes only and do not necessarily reflect management’s opinion that such indices are an appropriate measure of the relative performance of the stock involved and are not intended to forecast or be indicative of possible future performance of the common stock.
*$100 invested on February 1, 2020 in stock or index, including reinvestment of dividends. Index calculated on daily basis.
2/1/2020
1/30/2021
1/29/2022
1/28/2023
2/3/2024
2/1/2025
Caleres, Inc.
$
100.00
$
89.92
$
139.11
$
153.21
$
196.95
$
114.03
Peer Group
100.00
92.59
108.80
102.94
112.71
143.46
S&P© SmallCap 600 Stock Index
100.00
123.18
133.42
133.11
138.39
160.08

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ITEM 6. SELECTED FINANCIAL DATA
ITEM 6 RESERVED

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 7 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Business Overview
We are a global footwear company that operates retail shoe stores and e-commerce websites, and designs, develops, sources, manufactures and distributes footwear for people of all ages. Our mission is to inspire people to feel great...feet
first. We offer retailers and consumers a diversified portfolio of leading footwear brands. Outfitted in our brands, customers can step confidently into every aspect of their lives. As both a retailer and a wholesaler, we have a perspective on the marketplace that enables us to serve consumers from different vantage points. We believe our diversified business model provides us with synergies by spanning consumer segments, categories and distribution channels. A combination of thoughtful planning and rigorous execution is key to our success in optimizing our business and portfolio of brands. Our business strategy is focused on accelerating growth in our Brand Portfolio segment, gaining market share and deepening connections with the millennial family in our Famous Footwear segment, leveraging our “One Caleres” capabilities to increase profitability, and delivering value for our shareholders.
Famous Footwear
Famous Footwear, which is one of America’s leading family-branded footwear retailers, was founded on a simple idea: that everyone deserves to feel the joy that comes from a new pair of shoes. Our Famous Footwear segment includes 846 Famous Footwear stores, famousfootwear.com and famousfootwear.ca in Canada. This national footprint of mostly off-mall store locations is convenient for Famous Footwear’s target consumer, the millennial family. We seek to meet the needs of that millennial family and others by providing an assortment of trend-right, brand-name fashion, casual and athletic footwear at a great price.
During 2024, we continued to execute on our three-pronged strategy, which concentrates on merchandising, marketing and consumer experience. We remained focused on increasing the opportunity between Famous Footwear and the brands within our Brand Portfolio segment, such as Dr. Scholl’s Shoes, LifeStride, Naturalizer and Blowfish Malibu, among others. Vertical integration provides Famous Footwear with greater access to fashion products from brands that resonate with its consumer, as well as greater ability to be flexible with trends and offer better profit potential. We also have focused on offering the consumer a balanced assortment of fashion and athletic styles from well-known brands. We continued to tightly manage our inventory levels in 2024, reducing SKU counts and amplifying key product trends and items to drive sales volume. As we work to evolve our product offerings, we are testing and adding new and emerging brands across various categories to meet the shifting preferences and behaviors of the consumer, which we believe may attract new Famous Footwear consumers while providing the current consumer with additional options. We believe our kids category, which continues to grow, is a key competitive differentiator. With the millennial mom as our target consumer, we believe her primary purchase motivation is her kids and will prioritize these purchases, even with macroeconomic pressures. As a result, we are making the kids business a critical component of how our associates connect with our consumers, including ensuring every child finds the perfect fit. Our investments in new and remodeled stores over the last few years have prioritized an elevated experience within our kids department.
We are leaning into our best brands from an inventory, marketing and store presence perspective. In addition, we continue to invest in enhancing our in-store shopping experience to deliver a more engaging and inspiring experience across the omnichannel. Our new FLAIR (Famous Localized and Immersive Retail) store concept has been successful at driving sales growth and we plan to continue to transform stores to this enhanced consumer shopping experience in 2025. The FLAIR store concept highlights our leading assortment of trending brands and elevates those brands in an energetic and exciting manner.
Brand Portfolio
Our Brand Portfolio segment is consumer-focused and we believe our success is dependent upon our ability to strengthen consumers’ preference for our brands by offering compelling style, quality, differentiated brand promises and innovative marketing campaigns. The segment is comprised of the Sam Edelman, Vionic, Naturalizer, Allen Edmonds, Dr. Scholl’s Shoes, LifeStride, Franco Sarto, Blowfish Malibu, Rykä, Vince and Veronica Beard. Through these brands, we offer our customers a diversified selection of footwear, each designed and targeted to a specific consumer segment within the marketplace. We are able to showcase many of our brands in our retail stores and online, leveraging our wholesale and retail platforms, sharing consumer insights across our businesses and testing new and innovative products. Our Brand Portfolio segment operates 60 retail stores in the United States for our Allen Edmonds and Sam Edelman brands. This segment also includes our e-commerce businesses that sell our branded footwear. We also operate a joint venture, which expands our international presence by distributing our Sam Edelman and Naturalizer brands through e-commerce sites, 54 retail stores in East Asia and 120 branded stores owned and operated by third parties through franchise agreements.
Known Trends Impacting Our Business
Macroeconomic Environment
Macroeconomic factors, including, among others, inflation, elevated interest rates, increased real estate costs, higher consumer debt levels and continuing fears of a recession, continued to impact consumer discretionary spending and our financial results during 2024. In addition, the geopolitical landscape remains uncertain, with potential changes to international trade relations, tariffs and import regulations. We continued to experience lighter consumer traffic in our retail stores during 2024, resulting in lower net sales. While we believe that the structural changes we’ve implemented in the last few years, as well as our diversified model and operational discipline, enable the Company to drive value in a variety of market conditions, changes in macro-level consumer spending trends may continue to adversely impact our financial results in the future. We believe our focus on cost control and our commitment to execute our clearly defined strategic initiatives have positioned us for sustainable, long-term growth.
Liquidity
Our liquidity position remains strong, with $29.6 million in cash and cash equivalents and excess availability on our revolving credit agreement of $272.3 million as of February 1, 2025. During 2024, borrowings on our revolving credit agreement increased by $37.5 million to $219.5 million, primarily driven by $65.0 million of common stock repurchases under our share repurchase programs. During 2025, we will continue to evaluate our capital allocation priorities in light of business performance and market conditions.
Recent Development
In February 2025, we signed a definitive agreement to acquire Stuart Weitzman from Tapestry, Inc. for $105 million, subject to customary adjustments. Stuart Weitzman has been an iconic global luxury women’s footwear brand for over 35 years. The acquisition of Stuart Weitzman advances our strategic agenda to grow our Brand Portfolio segment with more global and direct-to-consumer reach. The acquisition, which is expected to close in the summer of 2025, will be funded through our revolving credit agreement.
Financial Highlights
The following is a summary of the financial highlights for 2024 and 2023:
($ millions, except per share amounts)
Change (1)
Consolidated net sales
$2,722.7
$2,817.3
($94.6)
(3.4)
%
Famous Footwear segment net sales
$1,556.5
$1,609.4
($52.9)
(3.3)
%
Famous Footwear comparable sales % change
(1.3)
%
(6.3)
%
n/m
n/m
Brand Portfolio segment net sales
$1,226.0
$1,270.9
($44.9)
(3.5)
%
Gross profit
$1,222.0
$1,263.0
($41.0)
(3.2)
%
Gross margin
44.9
%
44.8
%
n/m
6 bps
Operating earnings
$149.9
$194.5
($44.6)
(22.9)
%
Diluted earnings per share
$3.09
$4.80
($1.71)
(35.6)
%
(1) n/m - not meaningful
The following items should be considered in evaluating the comparability of our 2024 and 2023 results:
● Restructuring costs - During 2024, we incurred costs of $9.9 million ($7.3 million on an after-tax basis, or $0.21 per diluted share) for restructuring. The costs were primarily for the exit of our Naturalizer domestic retail store operations, severance and pension settlement costs associated with the acceptance of a lump sum buyout offer for the domestic pension plan. Of the $7.2 million in charges presented in restructuring and other special charges on the consolidated statements of earnings in 2024, $6.4 million is reflected in the Brand Portfolio segment, $0.6 million is reflected in the Famous Footwear segment and $0.2 million is reflected within the Eliminations and Other category. The remaining $2.7 million of restructuring costs related to the pension settlement are presented in other (expense) income, net, and reflected in the Eliminations and Other category. Refer to Note 4 to the consolidated financial statements for further discussion of these costs.
● Impact of the 53rd week - Our accounting period is based upon a traditional retail calendar, which ends on the Saturday nearest January 31. Periodically, this results in a fiscal year that includes 53 weeks. Our 2023 fiscal year included 53 weeks, while both our 2024 and 2022 fiscal years had only 52 weeks. The difference in the number of weeks included in our fiscal years can affect annual comparisons. The inclusion of the 53rd week in 2023 resulted in an increase to our consolidated net sales of approximately $25 million and had an immaterial impact on net earnings.
● Deferred tax valuation allowances - As a result of the significant loss before income taxes in 2020 driven by the impairment of goodwill and intangible assets during the pandemic, we entered into a three-year cumulative loss position for federal, state and certain international jurisdictions. At that time, we increased our valuation allowances on deferred tax assets to $50.0 million, reflecting the uncertainty regarding the utilization of our deferred tax assets in those jurisdictions. Due to stronger earnings in 2022 and 2023, the Company is no longer in a cumulative three-year loss position. Accordingly, the Company released valuation allowances on certain deferred tax assets totaling $26.7 million ($0.75 per diluted share) in 2023.
● Expense reduction initiatives -During 2023, we incurred costs of approximately $6.1 million ($4.5 million on an after-tax basis, or $0.13 per diluted share) associated with expense reduction initiatives. Refer to Note 4 to the consolidated financial statements for further discussion of these initiatives.
Financial Outlook
While 2024 was a disappointing year relative to our initial expectations, we made meaningful progress in advancing our strategic priorities and positioning our brands for sustainable growth. During 2025, we will focus on improving sales trends and delivering on our financial targets. We will continue our strategic investment spending while staying disciplined on overall expense levels, and we will remain nimble with product strategies and sourcing to maximize our wins and minimize the impact of tariffs. We believe we are well-positioned to manage additional tariffs through a combination of factory negotiations, selective price increases and modest gross margin pressure. Our acquisition of Stuart Weitzman is expected to close in the summer of 2025 and will be a pivotal milestone for us as we have expanded our exposure in contemporary footwear and premium price points.
Metrics Used in the Evaluation of Our Business
The following are a couple of key metrics by which we evaluate our business and make strategic decisions:
Comparable sales
The comparable sales metric is a metric commonly used in the retail industry to evaluate the revenue generated for stores that have been open for more than a year, though many retailers may calculate the metric differently. Management uses the comparable sales metric as a measure of an individual store’s success to determine whether its sales performance is consistent with expectations. Our comparable sales metric is a daily-weighted calculation for the period, which includes sales for stores that have been open at least 13 months. In addition, in order to be included in the comparable sales metric, a store must be open in the current period as well as the corresponding day(s) of the comparable retail calendar in the prior year. Accordingly, closed stores (including temporary store closures) are excluded from the comparable sales metric for each day of the closure. Relocated stores are treated as new stores and therefore excluded from the calculation. E-commerce sales for those websites that function as an extension of a retail chain are included in the comparable sales calculation. We believe the comparable sales metric is useful to shareholders and investors in assessing the performance of our existing retail store locations with comparable prior year sales, separate from the impact of store openings or closures.
Sales per square foot
The sales per square foot metric is commonly used in the retail industry to measure the efficiency of a store’s sales based upon the square footage in a store. Management uses the sales per square foot metric in our Famous Footwear segment as a measure of an individual store’s success to determine whether it is performing consistent with expectations. The sales per square foot metric is calculated by dividing total retail store sales, excluding e-commerce sales, by the total square footage of the retail store base at the end of each month of the respective period.
Comparison of Financial Results
The following sections discuss the consolidated and segment results of our operations for the year ended February 1, 2025 compared to the year ended February 3, 2024. For a discussion of the results for the year ended February 3, 2024 compared to the year ended January 28, 2023, refer to Part II, Item 7 "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended February 3, 2024.
CONSOLIDATED RESULTS
% of
% of
% of
($ millions)
Net Sales
Net Sales
Net Sales
Net sales
$
2,722.7
100.0
%
$
2,817.3
100.0
%
$
2,968.1
100.0
%
Cost of goods sold
1,500.7
55.1
%
1,554.3
55.2
%
1,683.2
56.7
%
Gross profit
1,222.0
44.9
%
1,263.0
44.8
%
1,284.9
43.3
%
Selling and administrative expenses
1,065.0
39.1
%
1,062.4
37.7
%
1,067.7
36.0
%
Restructuring and other special charges, net
7.1
0.3
%
6.1
0.2
%
2.9
0.1
%
Operating earnings
149.9
5.5
%
194.5
6.9
%
214.3
7.2
%
Interest expense, net
(14.0)
(0.5)
%
(19.4)
(0.7)
%
(14.3)
(0.5)
%
Other (expense) income, net
(0.7)
0.0
%
6.2
0.2
%
13.0
0.5
%
Earnings before income taxes
135.2
5.0
%
181.3
6.4
%
213.0
7.2
%
Income tax provision
(29.1)
(1.1)
%
(9.5)
(0.3)
%
(33.3)
(1.1)
%
Net earnings
106.1
3.9
%
171.8
6.1
%
179.7
6.1
%
Net (loss) earnings attributable to noncontrolling interests
(1.2)
0.0
%
0.4
0.0
%
(2.0)
(0.0)
%
Net earnings attributable to Caleres, Inc.
$
107.3
3.9
%
$
171.4
6.1
%
$
181.7
6.1
%
Net Sales
Net sales decreased $94.6 million, or 3.4%, to $2,722.7 million in 2024, compared to $2,817.3 million last year, reflecting soft consumer demand and the impact of the 53rd week in 2023. Net sales for our Famous Footwear segment decreased $52.9 million, or 3.3%, compared to 2023 net sales. Net sales for our Brand Portfolio segment decreased $44.9 million, or 3.5%, compared to 2023. The 53rd week in 2023 contributed approximately $25 million to our 2023 consolidated net sales, including $18.2 million in our Famous Footwear segment and $6.8 million in our Brand Portfolio segment. On a consolidated basis, our direct-to-consumer sales represented approximately 72% of total net sales for both 2024 and 2023.
Gross Profit
Gross profit decreased $41.0 million, or 3.2%, to $1,222.0 million in 2024, compared to $1,263.0 million in 2023, primarily driven by lower net sales. As a percentage of net sales, our gross profit rate increased slightly to 44.9% in 2024, compared to 44.8% in 2023, primarily due to a higher gross margin rate at our Brand Portfolio segment. The gross margin at Brand Portfolio benefitted from higher merchandise margins and a higher mix of retail sales, including e-commerce sales from our owned brands and sales from our branded retail stores, both of which have higher gross margins than our wholesale sales. These increases were partially offset by a decrease in the gross margin rate at our Famous Footwear segment driven by higher levels of promotional activity and clearance sales.
We classify warehousing, distribution, sourcing and other inventory procurement costs in selling and administrative expenses. Accordingly, our gross profit and selling and administrative expenses, as a percentage of net sales, may not be comparable to other companies.
Selling and Administrative Expenses
Selling and administrative expenses increased $2.6 million, or 0.2%, to $1,065.0 million in 2024, compared to $1,062.4 million last year. The increase is primarily due to higher salary and benefit expenses, marketing expenses, information technology and consulting expense associated with the implementation of our cloud-based ERP platform, and facilities costs, partially offset by lower expenses for our cash and share-based incentive compensation and incremental expenses associated with the 53rd week in 2023. As a percentage of net sales, selling and administrative expenses increased to 39.1% in 2024, from 37.7% last year, reflecting deleveraging of expenses on lower net sales.
Restructuring and Other Special Charges, Net
During 2024, we incurred restructuring costs of $7.1 million ($5.3 million on an after-tax basis, or $0.15 per diluted share). The costs were primarily for the exit of the Naturalizer retail store operations and other restructuring costs, mainly severance. During 2023, we incurred restructuring and other special charges of $6.1 million ($4.5 million on an after-tax basis, or $0.13 per diluted share) associated with our expense reduction initiatives. Refer to further discussion of these charges in the Financial Highlights section above and Note 4 to the consolidated financial statements.
Operating Earnings
Operating earnings decreased $44.6 million to $149.9 million in 2024, compared to $194.5 million last year, reflecting the factors described above. As a percentage of net sales, operating earnings were 5.5% in 2024, compared 6.9% in 2023.
Interest Expense, Net
Interest expense, net decreased $5.4 million, or 27.8%, to $14.0 million in 2024, compared to $19.4 million last year, reflecting lower average borrowings and a lower weighted-average interest rate on our revolving credit facility. Refer to Note 11 to the consolidated financial statements for additional information related to our borrowings.
Other (Expense) Income, Net
Other expense was $0.7 million in 2024, compared to other income of $6.2 million in 2023. During the fourth quarter of 2024, we incurred a pension settlement charge of $2.7 million associated with a lump sum buyout for certain participants in the domestic pension plan. In addition, we incurred higher amortization of the actuarial loss related to our pension plans in 2024. Refer to Note 5 to the consolidated financial statements for additional information related to our retirement plans. The net pension income in 2024 was offset by non-operating expenses associated with logistics services provided to a third party, which the Company began providing in the second half of 2023.
Income Tax Provision
Our consolidated effective tax rate was 21.5% in 2024, compared to 5.2% in 2023. Our lower tax rate for 2023 primarily reflected the release of $26.7 million of valuation allowances recorded for certain deferred tax assets. As a result of the significant loss before income taxes in 2020 driven by the impairment of goodwill and intangible assets during the pandemic, we entered into a three-year cumulative loss position for federal, state and certain international jurisdictions. At that time, we increased our valuation allowances on deferred tax assets to $50.0 million, reflecting the uncertainty regarding the utilization of our deferred tax assets in those jurisdictions. Due to stronger earnings in 2022 and 2023, the Company was no longer in a cumulative three-year loss position. Accordingly, the Company released valuation allowances on certain deferred tax assets totaling $26.7 million ($0.75 per diluted share) in 2023.
In 2021, the OECD released Pillar Two Global Anti-Base Erosion model rules, designed to ensure large corporations are taxed at a minimum rate of 15% in all countries of operation. The OECD continues to release guidance and countries are implementing legislation to adopt the rules, which became effective on January 1, 2024. The United States has not yet enacted legislation implementing Pillar Two. We are continuing to evaluate the Pillar Two rules and their potential impact on future periods, but we do not expect the rules to have a material impact on our tax provision or effective tax rate.
Refer to Note 6 to the consolidated financial statements for additional information regarding income taxes.
Net Earnings Attributable to Caleres, Inc.
Consolidated net earnings attributable to Caleres, Inc. were $107.3 million in 2024, compared to $171.4 million last year, reflecting the factors described above.
Geographic Results
We have both domestic and international operations. Domestic operations include the nationwide operation of our Famous Footwear and other branded retail footwear stores, the wholesale distribution of footwear to numerous retail consumers and the operation of our domestic e-commerce websites. International operations primarily consist of wholesale operations in East Asia, Canada and Europe, retail operations in Canada and East Asia and the operation of our international e-commerce websites. In addition, we license certain of our trade names to third parties who distribute and/or operate retail locations internationally. The operations in East Asia include first-cost transactions, where footwear is sold at international
ports to customers who then import the footwear into the United States and other countries. The breakdown of domestic and international net sales and earnings before income taxes is as follows:
Earnings Before
Earnings Before
Earnings Before
($ millions)
Net Sales
Income Taxes
Net Sales
Income Taxes
Net Sales
Income Taxes
Domestic
$
2,532.7
$
84.8
$
2,624.5
$
132.5
$
2,763.9
$
168.0
International
190.0
50.4
192.8
48.8
204.2
45.0
$
2,722.7
$
135.2
$
2,817.3
$
181.3
$
2,968.1
$
213.0
As a percentage of sales, the pre-tax profitability on international sales is higher than on domestic sales because of a lower cost structure and the inclusion of the unallocated corporate administrative and other costs within domestic earnings.
FAMOUS FOOTWEAR
% of
% of
% of
($ millions, except sales per square foot)
Net Sales
Net Sales
Net Sales
Net sales
$
1,556.5
100.0
%
$
1,609.4
100.0
%
$
1,705.1
100.0
%
Cost of goods sold
869.9
55.9
%
889.9
55.3
%
916.1
53.7
%
Gross profit
686.6
44.1
%
719.5
44.7
%
789.0
46.3
%
Selling and administrative expenses
598.9
38.5
%
594.3
36.9
%
593.2
34.8
%
Restructuring and other special charges, net
0.6
0.0
%
1.4
0.1
%
-
-
%
Operating earnings
$
87.1
5.6
%
$
123.8
7.7
%
$
195.8
11.5
%
Key Metrics
Comparable sales % change
(1.3)
%
(6.3)
%
(1.8)
%
Comparable sales $ change
$
(20.5)
$
(106.4)
$
(30.1)
Sales change from 53rd week
$
(18.2)
$
18.2
$
-
Sales change from new and closed stores, net
$
(13.5)
$
(6.3)
$
(11.7)
Impact of changes in Canadian exchange rate on sales
$
(0.7)
$
(1.2)
$
(1.4)
Sales per square foot, excluding e-commerce (trailing twelve months)
$
$
$
Square footage (thousand sq. ft.)
5,566
5,661
5,749
Stores opened
Stores closed
Ending stores
Net Sales
Net sales decreased $52.9 million, or 3.3%, to $1,556.5 million in 2024, compared to $1,609.4 million last year, reflecting soft consumer demand and the impact of the 53rd week in 2023, which contributed $18.2 million to our 2023 net sales. Comparable sales decreased 1.3% in 2024 driven by a decline in consumer traffic in our retail stores. Despite the challenging retail environment, we experienced growth in our e-commerce business and higher penetration of this channel in 2024. Our e-commerce penetration in 2024 grew to 14% of net sales, from 13% last year. Our kids category, which is a key differentiator for Famous Footwear, continued to outperform our other categories, while our boots category was weaker. We remain focused on maximizing the vertical integration opportunity between the Brand Portfolio and Famous Footwear segments, with Dr. Scholl’s Shoes, LifeStride, Naturalizer and Blowfish Malibu representing four of Famous Footwear’s top 20 best-selling footwear brands in 2024. During 2024, we closed 14 stores on a net basis as we continued to focus on optimizing our store base. During 2024, we converted 12 stores to the new FLAIR (Famous Localized and Immersive Retail) concept, and these stores continue to outperform our traditionally designed retail stores. In addition, we opened our first new store with the FLAIR concept in the fourth quarter of 2024. We ended the year with a total of 34 FLAIR stores and anticipate investing in more store conversions in 2025.
Sales to members of our customer loyalty program, Famously You Rewards ("Rewards"), continue to account for a majority of the segment’s sales, with approximately 75% of net sales to loyalty program members in 2024, compared to 77% in 2023.
Gross Profit
Gross profit decreased $32.9 million, or 4.6%, to $686.6 million in 2024, compared to $719.5 million last year, primarily driven by lower net sales. As a percentage of net sales, our gross profit rate decreased to 44.1% in 2024, compared to 44.7% in 2023 as a result of higher levels of promotional activity and clearance sales.
Selling and Administrative Expenses
Selling and administrative expenses increased $4.6 million, or 0.8%, to $598.9 million during 2024, compared to $594.3 million last year. The increase primarily reflects higher facilities costs, including depreciation expense associated with the investments in the FLAIR store concept, and higher salary and benefits expenses, partially offset by lower marketing expenses. As a percentage of net sales, selling and administrative expenses increased to 38.5% in 2024 from 36.9% last year, reflecting the deleveraging of expenses on lower net sales.
Restructuring and Other Special Charges, Net
Restructuring and other special charges of $0.6 million were incurred for severance costs during 2024. Restructuring and other special charges of $1.4 million were recorded during 2023 for expenses associated with expense reduction initiatives, primarily severance. Refer to Note 4 to the consolidated financial statements for additional information related to these charges.
Operating Earnings
Operating earnings decreased $36.7 million to $87.1 million for 2024, compared to $123.8 million last year, primarily reflecting lower net sales and gross profit, as described above. As a percentage of net sales, operating earnings were 5.6% for 2024, compared to 7.7% last year.
BRAND PORTFOLIO
% of
% of
% of
($ millions)
Net Sales
Net Sales
Net Sales
Net sales
$
1,226.0
100.0
%
$
1,270.9
100.0
%
$
1,322.8
100.0
%
Cost of goods sold
689.7
56.3
%
724.9
57.0
%
825.5
62.4
%
Gross profit
$
536.3
43.7
%
$
546.0
43.0
%
$
497.3
37.6
%
Selling and administrative expenses
407.9
33.2
%
397.9
31.4
%
385.0
29.1
%
Restructuring and other special charges, net
6.3
0.5
%
2.6
0.2
%
-
-
%
Operating earnings
$
122.1
10.0
%
$
145.5
11.4
%
$
112.3
8.5
%
Key Metrics
Direct-to-consumer (% of net sales) (1)
%
%
%
Change in wholesale net sales ($)
$
(43.8)
$
(67.6)
$
206.6
Change in retail net sales ($)
$
5.7
$
8.9
$
35.2
Sales change from 53rd week
$
(6.8)
$
6.8
$
-
Unfilled order position at end of period
$
260.2
$
234.5
$
284.6
Company-Operated Stores:
North America
Stores opened
Stores closed
Ending stores - North America
East Asia
Ending stores - East Asia
Total Company-Operated Stores
International franchise locations
Total
(1) Direct-to-consumer includes sales of our retail stores and e-commerce sites, and sales through our customers’ websites that we fulfill on a drop-ship basis.
Net Sales
Net sales decreased $44.9 million, or 3.5%, to $1,226.0 million in 2024, compared to $1,270.9 million last year, driven by lower wholesale sales. The decrease in sales reflects softer demand associated with the challenging macroeconomic environment, as well as the impact of operational disruptions in the second quarter of 2024 related to the launch of our new cloud-based ERP system, primarily while our e-commerce and drop-ship platforms were either offline or ramping up after the launch. In addition, the 53rd week in 2023 contributed $6.8 million to net sales last year.
We closed six stores and opened four stores in the United States and expanded our retail store presence in East Asia by opening 20 stores and closing two stores, resulting in a total of 60 stores in the United States and 54 stores in East Asia at the end of 2024. There were also 120 international branded stores owned and operated by third parties through franchise agreements at the end of 2024, compared to 107 international branded stores at the end of 2023.
The unfilled order position for our wholesale business increased $25.7 million to $260.2 million at the end of 2024, compared to $234.5 million at the end of last year.
Gross Profit
Gross profit decreased $9.7 million, or 1.8%, to $536.3 million in 2024, compared to $546.0 million last year. As a percentage of sales, our gross profit rate increased to 43.7% in 2024, compared to 43.0% last year, reflecting higher merchandise margins and a higher mix of retail sales, including e-commerce sales from our owned brands and sales from our branded retail stores, both of which have higher gross margins than our wholesale sales.
Selling and Administrative Expenses
Selling and administrative expenses increased $10.0 million, or 2.5%, to $407.9 during 2024, compared to $397.9 million last year. The increase was driven by higher salary and benefits, higher marketing expenses and higher distribution expenses. As a percentage of net sales, selling and administrative expenses increased to 33.2% in 2024 from 31.4% last year, reflecting deleveraging of expenses over a lower net sales base.
Restructuring and Other Special Charges, Net
Restructuring and other special charges of $6.3 million were incurred during 2024. The costs were primarily associated with the exit of our Naturalizer retail store operations and severance. Restructuring and other special charges of $2.6 million were recorded during 2023 for expenses associated with our expense reduction initiatives, primarily severance and other costs to integrate the Blowfish Malibu office, showroom and information systems into the St. Louis infrastructure. Refer to Note 4 to the consolidated financial statements for additional information related to these charges.
Operating Earnings
Operating earnings decreased $23.4 million to $122.1 million in 2024, compared to $145.5 million last year, as a result of the factors described above. As a percentage of net sales, operating earnings were 10.0% in 2024, compared to 11.4% last year.
ELIMINATIONS AND OTHER
% of
% of
% of
($ millions)
Net Sales
Net Sales
Net Sales
Net sales
$
(59.7)
100.0
%
$
(63.0)
100.0
%
$
(59.7)
100.0
%
Cost of goods sold
(58.8)
98.5
%
(60.4)
95.9
%
(58.3)
97.7
%
Gross profit
$
(0.9)
1.5
%
$
(2.6)
4.1
%
$
(1.4)
2.3
%
Selling and administrative expenses
58.2
(97.7)
%
70.1
(111.4)
%
89.6
(149.9)
%
Restructuring and other special charges, net
0.2
(0.1)
%
2.1
(3.4)
%
2.9
(4.9)
%
Operating loss
$
(59.3)
99.3
%
$
(74.8)
118.9
%
$
(93.9)
157.1
%
The Eliminations and Other category includes the elimination of intersegment sales and profit, unallocated corporate administrative expenses, and other costs and recoveries.
The net sales elimination of $59.7 million for 2024 is $3.3 million, or 5.1%, lower than in 2023, reflecting a decrease in product sold from our Brand Portfolio segment to Famous Footwear.
Selling and administrative expenses decreased $11.9 million, or 16.9%, to $58.2 million in 2024, compared to $70.1 million last year. The decrease primarily reflects lower anticipated payments under our cash and share-based incentive compensation plans and other employee benefits.
Restructuring and other special charges of $0.2 million in 2024 were associated with severance. Restructuring and other special charges of $2.1 million in 2023 were associated with expense reduction initiatives, primarily severance, at our corporate headquarters. Refer to Note 4 to the consolidated financial statements for additional information related to these charges.
RESTRUCTURING AND OTHER INITIATIVES
Refer to the Financial Highlights section above and Note 4 to the consolidated financial statements for additional information related to these charges.
LIQUIDITY AND CAPITAL RESOURCES
Our borrowings under the revolving credit agreement increased $37.5 million to $219.5 million at the end of 2024, compared to $182.0 million at the end of last year. We used our revolving credit facility to repurchase $65.5 million of shares of our common stock under our share repurchase program. This increase was partially offset by cash generated from our operations in 2024. Net interest expense in 2024 was $14.0 million, compared to $19.4 million in 2023. The decrease in net interest expense in 2024 reflects lower average borrowings and a lower weighted-average interest rate on our revolving credit facility.
Credit Agreement
As further discussed in Note 11 to the consolidated financial statements, the Company maintains a revolving credit facility (the “Credit Agreement”) for working capital needs. The Credit Agreement, which provides borrowing availability of up to $500.0 million, subject to borrowing base restrictions, that may be further increased by up to $250.0 million, matures on October 5, 2026. Interest on the borrowings was previously calculated using variable rates based on the London Interbank Offered Rate ("LIBOR") (with a floor of 0.0%), or the prime rate (as defined in the Fifth Amendment), plus a spread. On April 27, 2023, the Company entered into a Sixth Amendment to Fourth Amended and Restated Credit agreement (as so amended, the “Credit Agreement”) to transition the borrowings on the revolving credit facility from bearing interest based on LIBOR to a term secured overnight financing rate (“SOFR”).
At February 1, 2025, we had $219.5 million of borrowings and $8.2 million in letters of credit outstanding under the Credit Agreement. Total borrowing availability was $272.3 million at February 1, 2025. We were in compliance with all covenants and restrictions under the Credit Agreement as of February 1, 2025.
Working Capital and Cash Flow
February 1, 2025
February 3, 2024
Working capital ($ millions) (1)
$
78.6
$
46.0
Current ratio (2)
1.10:1
1.06:1
Debt-to-capital ratio (3)
26.6
%
24.3
%
(1) Working capital has been computed as total current assets less total current liabilities.
(2) The current ratio has been computed by dividing total current assets by total current liabilities.
(3) Debt-to-capital has been computed by dividing the borrowings under our revolving credit agreement by total capitalization. Total capitalization is defined as total debt and total equity.
Working capital at February 1, 2025 was $78.6 million, which was $32.6 million higher than at February 3, 2024. The increase in working capital from 2023 primarily reflects higher inventory and trade accounts receivable and lower trade accounts payable, partially offset by higher borrowings under our revolving credit agreement and higher lease obligations. Our current ratio was 1.10 to 1 at February 1, 2025, compared to 1.06 to 1 at February 3, 2024. Our debt-to-capital ratio was 26.6% as of February 1, 2025, compared to 24.3% at February 3, 2024, primarily reflecting higher borrowings under our revolving credit agreement in 2024.
(Decrease) Increase
($ millions)
in Cash Equivalents
Net cash provided by operating activities
$
104.6
$
200.2
$
(95.6)
Net cash used for investing activities
(51.7)
(49.6)
(2.1)
Net cash used for financing activities
(44.5)
(163.0)
118.5
Effect of exchange rate changes on cash and cash equivalents
(0.1)
0.1
(0.2)
Increase (decrease) in cash and cash equivalents
$
8.3
$
(12.3)
$
20.6
Cash provided by operating activities was $95.6 million lower in 2024 than last year, reflecting the following factors:
● Lower earnings in 2024 compared to last year, primarily driven by lower consumer demand;
● An increase in inventory in 2024 compared to a decrease in 2023;
● A decrease in trade accounts payable in 2024 compared to an increase last year; partially offset by
● A smaller decrease in accrued expenses and other liabilities in 2024 compared to 2023; and
● An increase in deferred income taxes in 2024, compared to a decrease last year.
Cash used for investing activities was $2.1 million higher in 2024 than last year, reflecting higher capital expenditures. In 2025, we expect our purchases of property and equipment and capitalized software to be between $50 million and $55 million.
Cash used for financing activities was $118.5 million higher in 2024 than last year, primarily due to net borrowings on our revolving credit agreement of $37.5 million in 2024, compared to net repayments on our revolving credit agreement of $125.5 million in 2023. This increase was partially offset by a $48.1 million increase in repurchases of common stock under our share repurchase programs during 2024.
We paid dividends of $0.28 per share in each of 2024, 2023 and 2022. The 2024 dividends marked the 102nd year of consecutive quarterly dividends. On March 14, 2025, the Board of Directors declared a quarterly dividend of $0.07 per share, payable on April 11, 2025, to shareholders of record on March 27, 2025. The declaration and payment of any future dividend is at the discretion of the Board of Directors and will depend on our results of operations, financial condition, business conditions and other factors deemed relevant by our Board of Directors.
As of February 1, 2025, we had various contractual or other obligations, including the following:
Payments Due by Period
Less Than
1-3
3-5
More Than
($ millions)
Total
1 Year
Years
Years
5 Years
Borrowings under Credit Agreement (1)
$
219.5
$
219.5
$
-
$
-
$
-
Operating lease commitments, including imputed interest (2)
700.6
188.4
251.6
129.7
130.9
Purchase obligations (3)
606.6
580.0
20.4
2.7
3.5
Transition tax (4)
2.5
-
2.5
-
-
Other (5)
16.8
9.5
1.6
1.6
4.1
Total
$
1,546.0
$
997.4
$
276.1
$
134.0
$
138.5
(1) Refer to further discussion in Note 11 to the consolidated financial statements.
(2) The majority of our retail operating leases contain provisions that allow us to modify amounts payable under the lease or terminate the lease in certain circumstances, such as experiencing actual sales volume below a defined threshold and/or co-tenancy provisions associated with the facility. The contractual obligations presented in the table above reflect the minimum rent obligations, irrespective of our ability to reduce or terminate rental payments in the future. Refer to Note 12 to the consolidated financial statements.
(3) Purchase obligations include agreements to purchase assets, goods or services that specify all significant terms, including quantity and price provision.
(4) One-time transition tax for the mandatory deemed repatriation of cumulative international earnings related to income tax reform.
(5) Includes obligations of our supplemental executive retirement plan and other postretirement benefits, as discussed in Note 5 to the consolidated financial statements.
We believe our operating cash flows are sufficient to meet our material cash requirements for at least the next 12 months.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Certain accounting issues require management estimates and judgments for the preparation of financial statements. Our most significant policies requiring the use of estimates and judgments are described below.
Inventories
Inventories are one of our most significant assets, representing approximately 30% of total assets at the end of 2024. We value our inventories at the lower of cost or market for approximately 86% of our consolidated inventories, which represents the divisions using the LIFO cost method. For the remaining portion, our inventories are valued at the lower of cost or net realizable value. For inventory valued at LIFO, we regularly review the inventory for excess, obsolete or impaired inventory and write it down to the lower of cost or market. We apply judgment in determining the market value of inventory, which requires an estimate of net realizable value, including current and expected selling prices, costs to sell and normal gross profit rates. The method used to determine market value varies by business division, based on the unique operating models. At our Famous Footwear segment and certain operations within our Brand Portfolio segment, market value is determined based on net realizable value less an estimate of expected costs to be incurred to sell the product. Accordingly, we record markdowns when it becomes evident that inventory items will be sold at prices below cost. As a result, gross profit rates at our Famous Footwear segment and, to a lesser extent, our Brand Portfolio segment are lower than the initial markup during periods when permanent price reductions are taken to clear product. For the majority of our Brand Portfolio segment, we determine market value based upon the net realizable value of inventory less a normal gross profit rate. We believe these policies reflect the difference in operating models between our Famous Footwear segment and our Brand Portfolio segment. Famous Footwear periodically runs promotional events to drive sales to clear seasonal inventories. The Brand Portfolio segment generally relies on permanent price reductions to clear slower-moving inventory.
The determination of markdown reserves for the Brand Portfolio segment requires significant assumptions, estimates and
judgments by management, and is subject to inherent uncertainties and subjectivity. In determining markdown reserves,
management considers recent and forecasted sales prices, historical gross profit rates, the length of time the product is held in inventory and quantities of various product styles contained in inventory, as well as demand, among other factors. The ultimate amount realized from the sale of certain products could differ from management estimates.
We perform physical inventory counts or cycle counts on merchandise inventory on hand throughout the year and adjust the recorded balance to reflect the results. We record estimated shrinkage between physical inventory counts based on historical results. Inventory shrinkage is included as a component of cost of goods sold.
Store Impairment Charges
We regularly analyze the results of all stores and assess the viability of underperforming stores to determine whether events or circumstances exist that indicate the stores should be closed or whether the carrying amount of their long-lived assets may not be recoverable. After allowing for an appropriate start-up period, and consideration of any unusual nonrecurring events, property and equipment at stores and the lease right-of-use assets indicated as impaired are written down to fair value as calculated using a discounted cash flow method. The fair value of the lease right-of-use assets and property and equipment is determined utilizing projected cash flows for each store location, discounted using a risk-adjusted discount rate, subject to a market floor based on current market lease rates. The projected cash flows of the stores (including net sales projections), discount rates and current market lease rates for the remaining lease term of the related stores used to determine fair value require significant management judgment and are the assumptions to which the fair value calculations are most sensitive.
Income Tax Valuation Allowances
We recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the consolidated financial statement carrying amounts and the tax bases of assets and liabilities. Valuation allowances are established if we believe that it is more-likely-than-not that some or all of our deferred tax assets will not be realized. The evaluation of the realizability of deferred tax assets requires significant assumptions, estimates and judgment by management, including estimates of future taxable income by jurisdiction. Such estimates are subject to inherent uncertainties and subjectivity.
During 2020, we entered into a three-year cumulative loss position driven by the significant loss before income taxes. At that time, we increased our valuation allowances on deferred tax assets to $50.0 million, reflecting the uncertainty regarding the utilization of our deferred tax assets in those jurisdictions. Due to stronger earnings in 2022 and 2023, the Company was no longer in a cumulative three-year loss position as of February 3, 2024. Accordingly, we released valuation allowances on certain deferred tax assets totaling $17.4 million in 2022 and $26.7 million in 2023. During 2024, we released valuation allowances totaling $3.7 million. As of February 1, 2025, we have valuation allowances totaling $3.4 million, reflecting the uncertainty regarding the utilization of net operating loss carryforwards.
Impact of Prospective Accounting Pronouncements
Recent accounting pronouncements and their impact on the Company are described in Note 1 to the consolidated financial statements.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND FORWARD-LOOKING STATEMENTS
This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those projected as they are subject to various risks and uncertainties. These risks and uncertainties include, without limitation, the risks detailed in Item 1A, Risk Factors, and those described in other documents and reports filed from time to time with the SEC, press releases and other communications. We do not undertake any obligation or plan to update these forward-looking statements, even though our situation may change.
ITEM 7AQUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
FOREIGN CURRENCY EXCHANGE RATES
The market risk inherent in our financial instruments and positions represents the potential loss arising from adverse changes in foreign currency exchange rates and interest rates. To address these risks, we may enter into various hedging transactions. All decisions on hedging transactions are authorized and executed pursuant to our policies and procedures, which do not allow the use of financial instruments for trading purposes. We also are exposed to credit-related losses in the event of nonperformance by counterparties to these financial instruments. Counterparties to these agreements, however, are major international financial institutions, and we believe the risk of loss due to nonperformance is minimal.
In addition, we are exposed to translation risk because certain of our international operations use the local currency as their functional currency and those financial results must be translated into United States dollars. As currency exchange rates
fluctuate, translation of our financial statements of international businesses into United States dollars affects the comparability of financial results between years.
INTEREST RATES
Our financing arrangements as of February 1, 2025 include outstanding variable-rate debt under the Credit Agreement. Changes in interest rates impact fixed and variable rate debt differently. For fixed-rate debt, a change in interest rates will only impact the fair value of the debt, whereas a change in the interest rates on variable-rate debt will impact interest expense and cash flows. Refer to Note 11 to the consolidated financial statements for further discussion of our Credit Agreement.
Information appearing under the caption Fair Value Measurements in Note 13 to the consolidated financial statements is incorporated herein by reference.
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework). Based on our evaluation, our principal executive officer and principal financial officer have concluded that the Company’s internal control over financial reporting was effective as of February 1, 2025. The effectiveness of our internal control over financial reporting as of February 1, 2025 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in its report, which is included herein.
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Caleres, Inc.
Opinion on Internal Control Over Financial Reporting
We have audited Caleres, Inc.’s internal control over financial reporting as of February 1, 2025, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Caleres, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of February 1, 2025, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of February 1, 2025 and February 3, 2024, the related consolidated statements of earnings, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended February 1, 2025, and the related notes and financial statement schedule listed in the Index at Item 15(a), and our report dated April 1, 2025 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
St. Louis, Missouri
April 1, 2025
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Caleres, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Caleres, Inc. (the Company) as of February 1, 2025 and February 3, 2024, the related consolidated statements of earnings, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended February 1, 2025, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at February 1, 2025 and February 3, 2024, and the results of its operations and its cash flows for each of the three years in the period ended February 1, 2025, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of February 1, 2025, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated April 1, 2025 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.
Inventory Markdown Reserves
Description of the Matter
As described in Note 1 and Note 8, the Company had inventories of $565.2 million as of February 1, 2025 which included finished goods of $550.2 million, net of related markdown reserves of $17.7 million. The Company provides markdown reserves to reduce the carrying values of inventories. In determining markdown reserves, the Company considers recent and forecasted sales prices, the length of time the product is held in inventory, quantities of various product styles contained in inventory as well as demand, among other factors.
Auditing the Company’s Brand Portfolio markdown reserves was complex and involved a high degree of subjectivity, as it included assessing the significant assumptions, including forecasted sales prices and demand, considering the length of time the product is held in inventory and quantities of various product styles contained in inventory.
How We Addressed the Matter in Our Audit
We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company's markdown reserves determination process. This included controls over the Company’s review of the significant assumptions underlying the markdown reserves estimate, as outlined above.
We performed audit procedures which included, among other procedures, testing the accuracy and completeness of the underlying data used in the estimation calculations and evaluating significant assumptions, including forecasted sales prices, and demand, considering the length of time the product is held in inventory and quantities of various product styles contained in inventory. For example, we compared recent sales of inventory items on-hand at year-end, performed a retrospective review analysis comparing sales activity in the current year to the inventory markdown reserves estimated by the Company in the prior year to evaluate management’s ability to accurately estimate the markdown reserves, and developed an independent expectation of the markdown reserves using historical activity and compared our independent expectation to the markdown reserves recorded. In addition, we performed inquiries of the Company’s management to evaluate the Company’s estimate of the markdown reserves.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 1917.
St. Louis, Missouri
April 1, 2025
Consolidated Balance Sheets
($ thousands)
February 1, 2025
February 3, 2024
Assets
Current assets:
Cash and cash equivalents
$
29,636
$
21,358
Receivables, net of allowances of $25,990 in 2024 and $30,317 in 2023
155,905
140,400
Inventories, net of adjustment to last-in, first-out cost of $10,878 in 2024 and $10,254 in 2023
565,241
540,674
Income taxes
13,668
14,215
Property and equipment, held for sale
16,777
16,777
Prepaid expenses and other current assets
55,282
55,485
Total current assets
836,509
788,909
Prepaid pension costs
78,463
74,951
Lease right-of-use assets
564,330
528,029
Property and equipment, net
175,213
167,583
Deferred income taxes
4,826
4,401
Goodwill and intangible assets, net
192,274
203,310
Other assets
43,139
37,563
Total assets
$
1,894,754
$
1,804,746
Liabilities and Equity
Current liabilities:
Borrowings under revolving credit agreement
$
219,500
$
182,000
Trade accounts payable
237,038
251,912
Employee compensation and benefits
56,284
70,316
Income taxes
6,425
11,222
Lease obligations
127,522
112,764
Other accrued expenses
111,164
114,742
Total current liabilities
757,933
742,956
Other liabilities:
Noncurrent lease obligations
479,524
453,097
Income taxes
2,464
2,464
Deferred income taxes
31,772
11,536
Other liabilities
17,112
27,123
Total other liabilities
530,872
494,220
Equity:
Common stock, $0.01 par value, 33,631,764 and 35,490,019 shares outstanding in 2024 and 2023, respectively
Additional paid-in capital
190,320
184,451
Accumulated other comprehensive loss
(34,022)
(34,504)
Retained earnings
442,390
410,329
Total Caleres, Inc. shareholders’ equity
599,024
560,631
Noncontrolling interests
6,925
6,939
Total equity
605,949
567,570
Total liabilities and equity
$
1,894,754
$
1,804,746
See notes to consolidated financial statements.
Consolidated Statements of Earnings
($ thousands, except per share amounts)
Net sales
$
2,722,683
$
2,817,294
$
2,968,138
Cost of goods sold
1,500,641
1,554,337
1,683,265
Gross profit
1,222,042
1,262,957
1,284,873
Selling and administrative expenses
1,065,019
1,062,399
1,067,636
Restructuring and other special charges, net
7,167
6,103
2,910
Operating earnings
149,856
194,455
214,327
Interest expense, net
(13,957)
(19,343)
(14,264)
Other (expense) income, net
(741)
6,210
12,971
Earnings before income taxes
135,158
181,322
213,034
Income tax provision
(29,061)
(9,490)
(33,339)
Net earnings
106,097
171,832
179,695
Net (loss) earnings attributable to noncontrolling interests
(1,158)
(2,047)
Net earnings attributable to Caleres, Inc.
107,255
171,391
181,742
Basic earnings per common share attributable to Caleres, Inc. shareholders
$
3.10
$
4.80
$
4.98
Diluted earnings per common share attributable to Caleres, Inc. shareholders
$
3.09
$
4.80
$
4.92
See notes to consolidated financial statements.
Consolidated Statements of Comprehensive Income
($ thousands)
Net earnings
$
106,097
$
171,832
$
179,695
Other comprehensive (loss) income ("OCI"), net of tax:
Foreign currency translation adjustment
(5,547)
(907)
Pension and other postretirement benefits adjustments
5,173
(7,869)
(17,719)
Other comprehensive loss, net of tax
(374)
(7,686)
(18,626)
Comprehensive income
105,723
164,146
161,069
Comprehensive (loss) income attributable to noncontrolling interests
(2,014)
(2,529)
Comprehensive income attributable to Caleres, Inc.
$
107,737
$
163,637
$
163,598
See notes to consolidated financial statements.
Consolidated Statements of Cash Flows
($ thousands)
Operating Activities
Net earnings
$
106,097
$
171,832
$
179,695
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation
40,245
36,172
32,449
Amortization of capitalized software
5,147
5,026
4,451
Amortization of intangible assets
11,036
12,082
12,111
Amortization of debt issuance costs and debt discount
Share-based compensation expense
15,145
14,804
17,311
Loss on disposal of property and equipment
1,353
1,369
Impairment charges for property, equipment, and lease right-of-use assets
1,864
1,803
Adjustment to expected credit losses
(815)
1,018
(262)
Deferred income taxes
19,811
(11,866)
4,270
Changes in operating assets and liabilities:
Receivables
(15,614)
(8,494)
(10,302)
Inventories
(23,289)
39,495
16,242
Prepaid expenses and other current and noncurrent assets
(6,744)
(15,285)
(1,971)
Trade accounts payable
(14,356)
22,038
(101,450)
Accrued expenses and other liabilities
(28,889)
(70,974)
(34,590)
Income taxes, net
(4,250)
1,562
5,896
Other, net
(1,654)
(1,550)
Net cash provided by operating activities
104,562
200,151
125,879
Investing Activities
Purchases of property and equipment
(49,147)
(44,584)
(55,913)
Capitalized software
(2,539)
(5,034)
(8,124)
Net cash used for investing activities
(51,686)
(49,618)
(64,037)
Financing Activities
Borrowings under revolving credit agreement
639,868
532,500
859,500
Repayments under revolving credit agreement
(602,368)
(658,000)
(842,000)
Dividends paid
(9,694)
(9,954)
(10,184)
Acquisition of treasury stock
(65,039)
(17,445)
(63,225)
Issuance of common stock under share-based plans, net
(9,276)
(11,094)
(5,387)
Contributions by noncontrolling interests
2,000
1,000
3,142
Net cash used for financing activities
(44,509)
(162,993)
(58,154)
Effect of exchange rate changes on cash and cash equivalents
(89)
(103)
Increase (decrease) in cash and cash equivalents
8,278
(12,342)
3,585
Cash and cash equivalents at beginning of period
21,358
33,700
30,115
Cash and cash equivalents at end of period
$
29,636
$
21,358
$
33,700
See notes to consolidated financial statements, including the supplemental disclosures on cash flows in Note 1.
Consolidated Statements of Shareholders’ Equity
Accumulated
Other
Total
Comprehensive
Caleres, Inc.
Non-
($ thousands, except number of shares
Common Stock
Additional
(Loss)
Retained
Shareholders’
controlling
and per share amounts)
Shares
Dollars
Paid-In Capital
Income
Earnings
Equity
Interests
Total Equity
BALANCE JANUARY 29, 2022
37,635,145
$
$
168,830
$
(8,606)
$
157,970
$
318,570
$
4,817
$
323,387
Net earnings (loss)
181,742
181,742
(2,047)
179,695
Foreign currency translation adjustment
(425)
(425)
(482)
(907)
Pension and other postretirement benefits adjustments, net of tax of $6,145
(17,719)
(17,719)
(17,719)
Comprehensive (loss) income
(18,144)
181,742
163,598
(2,529)
161,069
Contributions by noncontrolling interests, net
-
3,142
3,142
Dividends ($0.28 per share)
(10,184)
(10,184)
(10,184)
Acquisition of treasury stock
(2,622,845)
(26)
(63,199)
(63,225)
(63,225)
Issuance of common stock under share-based plans, net
703,452
(5,394)
(5,387)
(5,387)
Share-based compensation expense
17,311
17,311
17,311
BALANCE JANUARY 28, 2023
35,715,752
$
$
180,747
$
(26,750)
$
266,329
$
420,683
$
5,430
$
426,113
Net earnings
171,391
171,391
171,832
Foreign currency translation adjustment
Pension and other postretirement benefits adjustments, net of tax of $2,724
(7,869)
(7,869)
(7,869)
Comprehensive (loss) income
(7,754)
171,391
163,637
164,146
Contributions by noncontrolling interests, net
-
1,000
1,000
Dividends ($0.28 per share)
(9,954)
(9,954)
(9,954)
Acquisition of treasury stock
(763,000)
(8)
(17,437)
(17,445)
(17,445)
Issuance of common stock under share-based plans, net
537,267
(11,100)
(11,094)
(11,094)
Share-based compensation expense
14,804
14,804
14,804
BALANCE FEBRUARY 3, 2024
35,490,019
$
$
184,451
$
(34,504)
$
410,329
$
560,631
$
6,939
$
567,570
Net earnings (loss)
107,255
107,255
(1,158)
106,097
Foreign currency translation adjustment
(4,691)
(4,691)
(856)
(5,547)
Pension and other postretirement benefits adjustments, net of tax of $1,796
5,173
5,173
5,173
Comprehensive income (loss)
107,255
107,737
(2,014)
105,723
Contributions by noncontrolling interests, net
-
2,000
2,000
Dividends ($0.28 per share)
(9,694)
(9,694)
(9,694)
Acquisition of treasury stock
(1,938,324)
(19)
(65,500)
(65,519)
(65,519)
Issuance of common stock under share-based plans, net
80,069
-
(9,276)
(9,276)
(9,276)
Share-based compensation expense
15,145
15,145
15,145
BALANCE FEBRUARY 1, 2025
33,631,764
$
$
190,320
$
(34,022)
$
442,390
$
599,024
$
6,925
$
605,949
See notes to consolidated financial statements.
Notes to Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Caleres, Inc., originally founded as Brown Shoe Company in 1878 and incorporated in 1913, is a global footwear company. The Company’s shares are traded under the “CAL” symbol on the New York Stock Exchange.
The Company provides a broad offering of branded, licensed and private-label athletic, casual and dress footwear products to women, men and children. The footwear is sold at a variety of price points through multiple distribution channels both domestically and internationally. As of February 1, 2025, the Company operated 960 retail shoe stores in the United States, Canada, East Asia and Guam under the Famous Footwear, Sam Edelman, Naturalizer and Allen Edmonds names. In addition, through its Brand Portfolio segment, the Company designs, sources, manufactures and markets footwear to retail stores domestically and internationally, including online retailers, national chains, department stores, independent retailers and mass merchandisers. Refer to Note 2 to the consolidated financial statements for additional information regarding the Company’s revenue by category and Note 7 for discussion of the Company’s business segments.
The Company’s business is seasonal in nature due to consumer spending patterns with higher back-to-school and holiday season sales. Although the third fiscal quarter has historically accounted for a substantial portion of the Company’s earnings for the year, the Company has experienced more equal distribution among the quarters in recent years.
Consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned and majority-owned subsidiaries, after the elimination of intercompany accounts and transactions.
Noncontrolling Interests
Noncontrolling interests in the Company’s consolidated financial statements result from the accounting for noncontrolling interests in partially-owned consolidated subsidiaries or affiliates. In 2019, the Company entered into a joint venture with Brand Investment Holding Limited ("Brand Investment Holding"), a member of the Gemkell Group, to sell branded footwear in China, including Sam Edelman, Naturalizer and other brands. The Company and Brand Investment Holding are each 50% owners of the joint venture, which is named CLT Brand Solutions ("CLT"). In 2024, capital contributions of $4.0 million were made to CLT, including $2.0 million received from Brand Investment Holding. In 2023, capital contributions of $2.0 million were made to CLT, including $1.0 million received from Brand Investment Holding. As of February 1, 2025 and February 3, 2024, assets of CLT were $27.1 million and $23.2 million, respectively, and liabilities were $13.2 million and $9.3 million, respectively. Net sales of CLT were $29.8 million, $26.8 million and $16.9 million in 2024, 2023 and 2022, respectively. Operating earnings of CLT were $0.5 million for 2023 and operating losses were $2.6 million and $2.7 million in 2024 and 2022, respectively.
The Company consolidates CLT into its consolidated financial statements on a one-month lag. Net (loss) earnings attributable to noncontrolling interests represents the share of net earnings or losses that are attributable to Brand Investment Holding. Transactions between the Company and the joint venture have been eliminated in the consolidated financial statements.
Accounting Period
The Company’s fiscal year is the 52- or 53-week period ending the Saturday nearest to January 31. Fiscal years 2024 and 2022, both of which included 52 weeks, ended on February 1, 2025 and January 28, 2023, respectively. Fiscal year 2023 included a 53-week period ending February 3, 2024.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of three months or less when purchased to be cash equivalents. Cash equivalents also include amounts due from third-party financial institutions for credit and debit card transactions. These receivables typically settle in five days or less. Amounts due from the financial institutions for these transactions totaled $8.4 million and $9.3 million as of February 1, 2025 and February 3, 2024, respectively. The Company had an immaterial amount of restricted cash as of February 1, 2025 and February 3, 2024.
Receivables
In accordance with Accounting Standards Codification (“ASC”) Topic 326, Financial Instruments - Credit Losses, the Company estimates and records an expected lifetime credit loss on accounts receivable by utilizing credit ratings and other customer-related information, as well as historical loss experience. The allowance for expected credit losses is adjusted for current conditions and reasonable and supportable forecasts. The Company recorded adjustments to the provision for expected credit losses of $0.8 million and $0.3 million in 2024 in 2022, respectively, and recorded a provision for expected credit losses of $1.0 million in 2023.
Customer allowances represent reserves against the Company’s wholesale customers’ accounts receivable for margin assistance, product returns, customer deductions and co-op advertising allowances. The Company estimates the reserves needed for margin assistance by reviewing inventory levels on the retail floors, sell-through rates, historical dilution, current gross margin levels and other performance indicators of the Company’s major retail customers. Product returns and customer deductions are estimated using historical experience and anticipated future trends. Co-op advertising allowances are estimated based on customer agreements. The Company recognized provisions for customer allowances of $25.0 million, $28.5 million and $27.6 million in 2024, 2023 and 2022, respectively.
Customer discounts represent reserves against the Company’s accounts receivable for discounts that wholesale customers may take based on meeting certain order, payment or return guidelines. The Company estimates the reserves needed for customer discounts based upon customer net sales and terms of the respective agreements. The Company recognized provisions for customer discounts of $11.5 million, $9.9 million and $11.4 million in 2024, 2023 and 2022, respectively.
Inventories
The Company values inventories at the lower of cost or market for approximately 84% of consolidated inventories, which represents divisions using the last-in, first-out (“LIFO”) method. For the remaining portion, the Company’s inventories are valued at the lower of cost or net realizable value. For inventory valued at LIFO, the Company regularly reviews the inventory for excess, obsolete or impaired inventory, and writes it down to the lower of cost or market. An actual valuation of inventory under the LIFO method can be made only at the end of each year based on the inventory levels and costs at that time. If the first-in, first-out (“FIFO”) method had been used, consolidated inventories would have been $10.9 million and $10.3 million higher at February 1, 2025 and February 3, 2024, respectively. In 2024 and 2023, the Company recorded LIFO provisions of $0.6 million and $4.0 million, respectively, on certain inventories as a result of product cost inflation. Refer to Note 8 to the consolidated financial statements for additional information related to inventories.
The Company applies judgment in determining the market value of inventory, which requires an estimate of net realizable value, including current and expected selling prices, costs to sell and normal gross profit rates. The method used to determine market value varies by business division, based on the unique operating models. At the Famous Footwear segment and certain operations within the Brand Portfolio segment, market value is determined based on net realizable value less an estimate of expected costs to be incurred to sell the product. Accordingly, the Company records markdowns when it becomes evident that inventory items will be sold at prices below cost. As a result, gross profit rates at the Famous Footwear segment and, to a lesser extent, the Brand Portfolio segment are lower than the initial markup during periods when permanent price reductions are taken to clear product. For the majority of the Brand Portfolio segment, the Company determines market value based upon the net realizable value of inventory less a normal gross profit rate. The Company believes these policies reflect the difference in operating models between the Famous Footwear and Brand Portfolio segments. Famous Footwear periodically runs promotional events to drive sales to clear seasonal inventories. The Brand Portfolio segment generally relies on permanent price reductions to clear slower-moving inventory.
The determination of markdown reserves for the Brand Portfolio segment requires significant assumptions, estimates and judgments by management, and is subject to inherent uncertainties and subjectivity. In determining markdown reserves, management considers recent and forecasted sales prices, historical gross profit rates, the length of time the product is held in inventory and quantities of various product styles contained in inventory, as well as demand, among other factors. The ultimate amount realized from the sale of certain products could differ from management estimates. Markdown reserves were $17.7 million and $20.9 million as of February 1, 2025 and February 3, 2024, respectively.
The costs of inventory, inbound freight and duties, markdowns, shrinkage and royalty expense are classified in cost of goods sold. Costs of warehousing and distribution are classified in selling and administrative expenses and are expensed as incurred. Such warehousing and distribution costs totaled $114.3 million, $117.0 million and $121.0 million in 2024, 2023 and 2022, respectively. Costs of overseas sourcing offices and other inventory procurement costs are reflected in selling and administrative expenses and are expensed as incurred. Such sourcing and procurement costs totaled $21.5 million, $22.0 million and $21.4 million in 2024, 2023 and 2022, respectively.
The Company performs physical inventory counts or cycle counts on all merchandise inventory on hand throughout the year and adjusts the recorded balance to reflect the results. The Company records estimated shrinkage between physical inventory counts based on historical results.
Computer Software Costs
The Company capitalizes certain costs in other assets, including internal payroll costs incurred in connection with the development or acquisition of software for internal use. Other assets on the consolidated balance sheets include $13.6 million and $16.3 million of computer software costs as of February 1, 2025 and February 3, 2024, respectively, which are net of accumulated amortization of $76.8 million and $88.1 million as of the end of the respective periods. In addition, other assets on the consolidated balance sheets include $24.8 million and $16.4 million for cloud computing arrangements (software-as-a-service contracts) and related implementation costs as of February 1, 2025 and February 3, 2024, respectively, which are net of accumulated amortization of $9.4 million and $6.7 million as of the end of the respective periods. These balances include capitalized costs associated with the Company’s implementation of its cloud-based ERP in 2024.
Property and Equipment
Property and equipment are stated at cost. Depreciation of property and equipment is provided over the estimated useful lives of the assets or the remaining lease terms, where applicable, using the straight-line method.
Interest Expense
Interest Expense
Interest expense generally includes interest for borrowings under the Company’s revolving credit agreement, fees paid for the unused portion of the line of credit, and amortization of the deferred debt issuance costs.
Capitalized Interest
Interest costs for major asset additions are capitalized during the construction or development period and amortized over the lives of the related assets. The Company capitalized interest of $0.4 and $0.3 million in 2024 and 2023, respectively, related to the implementation of its cloud-based ERP.
Goodwill and Intangible Assets
Goodwill and intangible assets deemed to have indefinite lives are not amortized but are subject to annual impairment tests. In accordance with ASC 350, Intangibles-Goodwill and Other, the Company is permitted, but not required, to qualitatively assess indicators of a reporting unit’s fair value when it is unlikely that a reporting unit is impaired. If a quantitative test is deemed necessary, a discounted cash flow analysis is prepared to estimate fair value. A fair value-based test is applied at the reporting unit level, which is generally at or one level below the operating segment level. The test compares the fair value of the Company’s reporting units to the carrying value of those reporting units. This test requires significant assumptions, estimates and judgments by management, and is subject to inherent uncertainties and subjectivity.
The Company performs its goodwill impairment assessment and impairment tests on its indefinite-lived intangible assets as of the first day of the fourth quarter of each fiscal year unless events indicate an interim test is required. Definite-lived intangible assets are amortized over their useful lives and are reviewed for impairment if and when impairment indicators are present. Refer to Note 10 to the consolidated financial statements for further discussion of goodwill and intangible assets.
Self-Insurance Reserves
The Company is self-insured and/or retains high deductibles for a significant portion of its workers’ compensation, health, disability, cyber risk, general liability, automobile and property programs, among others. Liabilities associated with the risks that are retained by the Company are estimated by considering historical claims experience, trends of the Company and the industry and other actuarial assumptions. The estimated accruals for these liabilities could be affected if development of costs on claims differ from these assumptions and historical trends. Based on available information as of February 1, 2025, the Company believes it has provided adequate reserves for its self-insurance exposure. As of February 1, 2025 and February 3, 2024, self-insurance reserves were $9.4 million and $10.4 million, respectively.
Supplier Finance Program
The Company facilitates a voluntary supplier finance program (“the Program”) that provides certain of the Company’s suppliers the opportunity to sell receivables related to products that the Company has purchased to participating financial institutions at a rate that leverages the Company’s credit rating, which may be more beneficial to the suppliers than the rate they can obtain based upon their own credit rating. The Company negotiates payment and other terms directly with the suppliers, regardless of whether the supplier participates in the Program, and the Company’s responsibility is limited to making payment based on the terms originally negotiated with the supplier. The suppliers that participate in the Program have discretion to determine which invoices, if any, are sold to the participating financing institutions. The liabilities for the suppliers that participate in the Program are presented within accounts payable in the Company’s consolidated balance sheets, with changes reflected within cash flows from operating activities when settled. As of February 1, 2025 and February 3, 2024, the Company had $22.0 million and $13.0 million, respectively, of accounts payable subject to the Program arrangements.
The following table is a rollforward of the obligations confirmed under the Program for 2024 and 2023:
($ thousands)
February 1, 2025
February 3, 2024
Confirmed obligations outstanding at the beginning of the year
$
12,955
$
26,030
Invoices confirmed during the year
119,160
132,265
Confirmed invoices paid during the year
110,145
145,340
Confirmed obligations outstanding at the end of the year
$
21,970
$
12,955
Revenue Recognition
Retail sales, recognized at the point of sale, are recorded net of returns and exclude sales tax. Wholesale sales are recorded, net of returns, allowances and discounts, when obligations under the terms of a contract with the consumer are satisfied. This generally occurs at the time of transfer of control of merchandise. The Company considers several control indicators in its assessment of the timing of the transfer of control, including significant risks and rewards of ownership, physical possession and the Company’s right to receive payment. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring merchandise. Reserves for projected merchandise returns, discounts and allowances are determined based on historical experience and current expectations. Revenue is recognized on license fees related to Company-owned brand names, where the Company is the licensor, when the related sales of the licensee are made. The Company applies the guidance using the portfolio approach in ASC 606, Revenue from Contracts with Customers, because this methodology would not differ materially from applying the guidance to the individual contracts within the portfolio. The Company excludes sales and similar taxes collected from customers from the measurement of the transaction price for its retail sales. Refer to Note 2 for further discussion of revenue.
Gift Cards
The Company sells gift cards to its customers in its retail stores, through its e-commerce sites and at other retailers. The Company’s gift cards do not have expiration dates or inactivity fees. The Company recognizes revenue from gift cards
when (i) the gift card is redeemed by the consumer or (ii) the likelihood of the gift card being redeemed by the consumer is remote (“gift card breakage”) and the Company determines that it does not have a legal obligation to remit the value of unredeemed gift cards to the relevant jurisdictions. The gift card breakage rate is determined based upon historical redemption patterns. Gift card breakage is recognized during the 24-month period following the sale of the gift card, according to the Company’s historical redemption pattern. Gift card breakage income is included in net sales in the consolidated statements of earnings and the liability established upon the sale of a gift card is included in other accrued expenses within the consolidated balance sheets. The Company recognized gift card breakage of $0.8 million in both 2024 and 2023, and $1.1 million in 2022.
Loyalty Program
The Company maintains a loyalty program at Famous Footwear, through which consumers earn points toward savings certificates for qualifying purchases. Upon reaching specified point values, consumers are issued a savings certificate that may be redeemed for purchases at Famous Footwear. Savings certificates earned must be redeemed within stated expiration dates. In addition to the savings certificates, the Company also offers exclusive member discounts. The value of points and rewards earned by Famous Footwear’s loyalty program members are recorded as a reduction of net sales and a liability is established within other accrued expenses at the time the points are earned based on historical conversion and redemption rates. Approximately 75% and 77% of net sales in the Famous Footwear segment were made to its loyalty program members in 2024 and 2023, respectively. In addition, loyalty programs have recently been launched for the Allen Edmonds and Naturalizer brands. As of February 1, 2025 and February 3, 2024, the Company had loyalty program liabilities totaling $7.8 million and $11.5 million, respectively, which are included in other accrued expenses on the consolidated balance sheets. Of the $7.8 million loyalty program liability as of February 1, 2025, $6.6 million is reflected in the Famous Footwear segment and $1.2 million is reflected in the Brand Portfolio segment. Of the $11.5 million loyalty program liability as of February 3, 2024, $10.0 million is reflected in the Famous Footwear segment and $1.5 million is reflected in the Brand Portfolio segment.
Store Impairment Charges
The Company regularly analyzes the results of all of its stores and assesses the viability of underperforming stores to determine whether events or circumstances exist that indicate the stores should be closed or whether the carrying amount of their long-lived assets may not be recoverable. After allowing for an appropriate start-up period and consideration of any unusual nonrecurring events, property and equipment at stores and the lease right-of-use asset, indicated as impaired are written down to fair value as calculated using a discounted cash flow method. The Company recorded asset impairment charges, primarily for operating lease right-of-use assets, leasehold improvements, and furniture and fixtures in the Company’s retail stores, of $1.9 million, $0.7 million and $1.8 million in 2024, 2023 and 2022, respectively.
Advertising and Marketing Expense
Advertising and marketing costs are expensed as incurred, except for the costs of direct response advertising that relate primarily to the production and distribution of the Company’s catalogs and coupon mailers. Direct response advertising costs are capitalized and amortized over the expected future revenue stream, which is generally one to three months from the date the materials are mailed. External production costs of advertising are expensed when the advertising first appears in the media or in the store.
In addition, the Company participates in co-op advertising programs with certain of its wholesale customers. For those co-op advertising programs where the Company has validated the fair value of the advertising received, co-op advertising costs are reflected as advertising expense within selling and administrative expenses. Otherwise, co-op advertising costs are reflected as a reduction of net sales.
Total advertising and marketing expense was $149.7 million, $145.7 million and $138.0 million in 2024, 2023 and 2022, respectively. These costs were offset by co-op advertising allowances recovered by the Company’s retail business of $5.8 million, $6.2 million and $6.0 million in 2024, 2023 and 2022, respectively. Total costs of co-op advertising provided to wholesale customers that are reflected as a reduction of net sales were $19.4 million in 2024, $17.0 million in 2023 and $18.5 million in 2022. Total advertising costs attributable to future periods that are deferred and recognized as a component of prepaid expenses and other current assets were $3.1 million and $7.0 million at February 1, 2025 and February 3, 2024, respectively.
Income Taxes
The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the consolidated financial statement carrying amounts and the tax bases of its assets and liabilities. The Company establishes valuation allowances if it believes that it is more-likely-than-not that some or all of its deferred tax assets will not be realized. The Company does not recognize a tax benefit unless it concludes that it is more-likely-than-not that the benefit will be sustained on audit by the taxing authority based solely on the technical merits of the associated tax position. If the recognition threshold is met, the Company recognizes a tax benefit measured at the largest amount of the tax benefit that, in its judgment, is greater than 50% likely to be realized. The Company records interest and penalties related to unrecognized tax positions within the income tax provision benefit on the consolidated statements of earnings.
Operating Leases
The Company leases all of its retail locations, a manufacturing facility and certain office locations, distribution centers and equipment under operating leases. Approximately 32% of the leases entered into by the Company include options that allow the Company to extend the lease term beyond the initial commitment period, subject to terms agreed to at lease inception. Some leases also include early termination options that can be exercised under specific conditions. In accordance with ASC Topic 842, Leases (“ASC 842”), lease right-of-use assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term. The majority of the Company’s leases do not provide an implicit rate and therefore, the Company uses an incremental borrowing rate based on the information available at the commencement date, including implied traded debt yield and seniority adjustments, to determine the present value of future payments. Lease expense for the minimum lease payments is recognized on a straight-line basis over the lease term. Variable lease payments are expensed as incurred.
Contingent Rentals
Many of the leases covering retail stores require contingent rental payments in addition to the minimum monthly rental charge based on retail sales volume. The Company excludes from lease payments any variable payments that are not based on an index or market. If payment for a lease is fully contingent on sales, such as a percentage of sales gross rent lease, none of the lease payments are included in the lease right-of-use asset or the lease liability.
Construction Allowances Received From Landlords
At the time its retail facilities are initially leased, the Company often receives consideration from landlords to be applied against the cost of leasehold improvements necessary to open the store. The Company treats these construction allowances as a lease incentive. In accordance with ASC 842, the allowances are recorded within the lease right-of-use asset and amortized to income over the lease term as a reduction of rent expense.
Straight-Line Rents and Rent Holidays
The Company records rent expense on a straight-line basis over the lease term for all of its leased facilities. For leases that have predetermined fixed escalations of the minimum rentals, the Company recognizes the related rental expense on a straight-line basis and records the difference between the recognized rental expense and amounts payable under the lease as the lease right-of-use asset. At the time its retail facilities are leased, the Company is frequently not charged rent for a specified period of time, typically 30 to 60 days, while the store is being prepared for opening. This rent-free period is referred to as a rent holiday. The Company recognizes rent expense over the lease term, including any rent holiday, within selling and administrative expenses on the consolidated statements of earnings.
Pre-opening Costs
Pre-opening costs associated with opening retail stores, including payroll, supplies and facility costs, are expensed as incurred.
Earnings Per Common Share Attributable to Caleres, Inc. Shareholders
The Company uses the two-class method to calculate basic and diluted earnings per common share attributable to Caleres, Inc. shareholders. Unvested restricted stock awards are considered participating units because they entitle holders to non-forfeitable rights to dividends or dividend equivalents during the vesting term. Under the two-class method, basic earnings per common share attributable to Caleres, Inc. shareholders is computed by dividing the net earnings attributable to Caleres, Inc. after allocation of earnings to participating securities by the weighted-average number of common shares
outstanding during the year. Diluted earnings per common share attributable to Caleres, Inc. shareholders is computed by dividing the net earnings attributable to Caleres, Inc. after allocation of earnings to participating securities by the weighted-average number of common shares and potential dilutive securities outstanding during the year. Potential dilutive securities consist of outstanding stock options and contingently issuable shares for the Company’s performance share awards. Refer to Note 3 to the consolidated financial statements for additional information related to the calculation of earnings per common share attributable to Caleres, Inc. shareholders.
Comprehensive Income
Comprehensive income primarily includes the effect of foreign currency translation adjustments and pension and other postretirement benefits adjustments.
Foreign Currency Translation Adjustment
For certain of the Company’s international subsidiaries, the local currency is the functional currency. Assets and liabilities of these subsidiaries are translated into United States dollars at the period-end exchange rate or historical rates as appropriate. Consolidated statements of earnings amounts are translated at average exchange rates for the period. The cumulative translation adjustments resulting from changes in exchange rates are included in the consolidated balance sheets as a component of accumulated other comprehensive loss in total Caleres, Inc. shareholders’ equity. Transaction gains and losses are included in the consolidated statements of earnings.
Pension and Other Postretirement Benefits Adjustments
The Company determines the expense and obligations for retirement and other benefit plans using assumptions related to discount rates, expected long-term rates of return on invested plan assets, expected salary increases and certain employee-related factors. The Company determines the fair value of plan assets and benefit obligations as of the January 31 measurement date. The unrecognized portion of the gain or loss on plan assets is included in the consolidated balance sheets as a component of accumulated other comprehensive loss in total Caleres, Inc. shareholders’ equity and is recognized into expense over time. Refer to additional information related to pension and other postretirement benefits in Note 5 and Note 14 to the consolidated financial statements.
Litigation Contingencies
The Company is the defendant in several claims and lawsuits arising in the ordinary course of business. The Company believes the outcome of such proceedings and litigation currently pending will not have a material adverse effect on the consolidated financial position or results of operations. The Company accrues its best estimate of the cost of resolution of these claims. Legal defense costs of such claims are recognized in the period in which the costs are incurred. Refer to Note 16 to the consolidated financial statements for further discussion of commitments and contingencies.
Environmental Matters
The Company is involved in environmental remediation and ongoing compliance activities at several sites. The Company is remediating, under the oversight of Colorado authorities, the groundwater and indoor air at its owned facility and residential neighborhoods adjacent to and near the property, which have been affected by solvents previously used at the facility. In addition, various federal and state authorities have identified the Company as a potentially responsible party for remediation at certain other sites. The Company’s prior operations included numerous manufacturing and other facilities for which the Company may have responsibility under various environmental laws to address conditions that may be identified in the future. Refer to Note 16 to the consolidated financial statements for additional information.
Environmental expenditures relating to an existing condition caused by past operations and that do not contribute to current or future revenue generation are expensed. Based upon independent environmental assessments, liabilities are recorded when remedial action is considered probable and the costs can be reasonably estimated and are evaluated independently of any future claims recovery. Generally, the timing of these accruals coincides with completion of a feasibility study or the Company’s commitment to a formal plan of action, and the cost estimates are subject to change as new information becomes available. Costs of future expenditures for environmental remediation obligations are discounted to their present value in those situations requiring only continuing maintenance and monitoring based upon a schedule of fixed payments.
Share-Based Compensation
The Company has share-based incentive compensation plans under which certain officers, employees and members of the Board of Directors are participants and may be granted restricted stock, stock performance awards and stock options. Additionally, share-based grants may be made to non-employee members of the Board of Directors in the form of restricted stock units (“RSUs”) payable in cash or the Company’s common stock. The Company accounts for share-based compensation in accordance with the fair value recognition provisions of ASC 718, Compensation - Stock Compensation, and ASC 505, Equity, which require all share-based payments to employees and members of the Board of Directors, to be recognized as expense in the consolidated financial statements based on their fair values. Expense for restricted stock is based on the fair value of the restricted stock on the date of grant. Expense for graded-vesting grants is recognized ratably over the respective vesting periods, which is generally 50% over two years and 50% over three years, and expense for cliff-vesting grants is recognized on a straight-line basis over the vesting period, which is generally one year. Expense for stock performance awards is recognized based upon the fair value of the awards on the date of grant and the anticipated number of shares or units to be awarded on a straight-line basis over the respective term of the award, or individual vesting portion of an award. Expense for the initial grant of RSUs is recognized ratably over the one-year vesting period based upon the fair value of the RSUs, and for cash-equivalent RSUs, is remeasured at the end of each period. The Company accounts for forfeitures of share-based grants as they occur. If the anticipated number of shares to be awarded or the share value of the Company’s common stock changes significantly, share-based compensation expense may differ materially in the future from that recorded in the current period. Refer to additional information related to share-based compensation in Note 15 to the consolidated financial statements.
Consolidated Statements of Cash Flows Supplemental Disclosures
The Company made payments for federal, state and international taxes, net of refunds, of $15.8 million, including $7.0 million for federal taxes, $6.5 million for international taxes and $2.3 million for state taxes in 2024. The Company made payments for federal, state and international taxes, net of refunds, of $19.8 million, including $9.2 million for international taxes and $5.3 million each for federal and state taxes in 2023. During 2022, the Company made payments for federal, state and international taxes, net of refunds, of $17.4 million, including $8.4 million for state taxes, $4.7 million for federal taxes and $4.3 million for international taxes. Refer to Note 6 to the consolidated financial statements for further information regarding income taxes.
Cash payments of interest for the Company’s borrowings under the revolving credit agreement and long-term debt during 2024, 2023 and 2022 were $13.0 million, $19.7 million and $12.5 million, respectively. Refer to Note 11 to the consolidated financial statements for further discussion regarding the Company’s financing arrangements.
Impact of Recently Adopted Accounting Pronouncements
In September 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-04, Liabilities - Supplier Finance Programs (Topic 405-50): Disclosure of Supplier Finance Program Obligations. The guidance requires qualitative and quantitative disclosures about supplier finance programs in annual financial statements, including key terms of the programs, amounts outstanding, balance sheet presentation and a rollforward of amounts outstanding during the year. For interim periods, the ASU requires disclosure of total obligations outstanding that have been confirmed as valid. The Company adopted the amendments on a retrospective basis during the first quarter of 2023, with the exception of the annual rollforward requirement, which was adopted during the fourth quarter of 2024. Refer to the Supply Chain Financing section earlier in this footnote for additional information regarding the Company’s supplier finance program.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which is intended to improve reportable segment disclosures by disclosing significant segment expenses that are regularly provided to the chief operating decision maker. The Company adopted the ASU on a retrospective basis during the fourth quarter of 2024. Refer to Note 7 to the consolidated financial statements for additional information related to segment expenses.
Impact of Prospective Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The ASU expands the income tax disclosure requirements, principally related to the rate reconciliation table and income taxes paid by jurisdiction. ASU 2023-09 is effective for the Company on a prospective basis in fiscal 2025, with the option
to apply the standard retrospectively. The adoption of the ASU is not expected to have a material impact on the Company’s financial statement disclosures.
2. REVENUES
Disaggregation of Revenues
The following table disaggregates revenue by segment and major source for 2024, 2023 and 2022:
Eliminations and
($ thousands)
Famous Footwear
Brand Portfolio
Other
Total
Retail stores
$
1,333,827
$
71,704
$
-
$
1,405,531
E-commerce - Company websites (1)
220,135
230,869
-
451,004
E-commerce - wholesale drop-ship (1)
-
117,128
(5,761)
111,367
Total direct-to-consumer sales
1,553,962
419,701
(5,761)
1,967,902
Wholesale - e-commerce (1)
-
240,338
-
240,338
Wholesale - landed
-
484,797
(53,975)
430,822
Wholesale - first cost
-
71,832
-
71,832
Licensing and royalty
1,810
9,210
-
11,020
Other (2)
-
Net sales
$
1,556,456
$
1,225,963
$
(59,736)
$
2,722,683
Eliminations and
($ thousands)
Famous Footwear
Brand Portfolio
Other
Total
Retail stores
$
1,395,689
$
69,820
$
-
$
1,465,509
E-commerce - Company websites (1)
210,622
229,495
-
440,117
E-commerce - wholesale drop-ship (1)
-
133,097
(5,786)
127,311
Total direct-to-consumer sales
1,606,311
432,412
(5,786)
2,032,937
Wholesale - e-commerce (1)
-
233,183
-
233,183
Wholesale - landed
-
491,132
(57,169)
433,963
Wholesale - first cost
-
101,472
-
101,472
Licensing and royalty
2,330
12,576
-
14,906
Other (2)
-
Net sales
$
1,609,396
$
1,270,853
$
(62,955)
$
2,817,294
Eliminations and
($ thousands)
Famous Footwear
Brand Portfolio
Other
Total
Retail stores
$
1,467,968
$
60,113
$
-
$
1,528,081
E-commerce - Company websites (1)
233,977
218,434
-
452,411
E-commerce - wholesale drop-ship (1)
-
148,825
(5,649)
143,176
Total direct-to-consumer sales
1,701,945
427,372
(5,649)
2,123,668
Wholesale - e-commerce (1)
-
207,779
-
207,779
Wholesale - landed
-
548,838
(54,078)
494,760
Wholesale - first cost
-
125,091
-
125,091
Licensing and royalty
2,105
13,604
-
15,709
Other (2)
1,043
-
1,131
Net sales
$
1,705,093
$
1,322,772
$
(59,727)
$
2,968,138
(1) Collectively referred to as "e-commerce" below
(2) Includes breakage revenue from unredeemed gift cards
Retail stores
The Company generates revenue from retail sales where control is transferred and revenue is recognized at the point of sale. Retail sales are recorded net of estimated returns and exclude sales tax. The Company records a returns reserve and a corresponding return asset for expected returns of merchandise.
Retail sales to members of the Company’s loyalty programs, including the Famously You Rewards program, include two performance obligations: the sale of merchandise and the delivery of points that may be converted to savings certificates and redeemed for future purchases. The transaction price is allocated to the separate performance obligations based on the relative stand-alone selling price. The stand-alone selling price for the points is estimated using the retail value of the merchandise earned, adjusted for estimated breakage based upon historical redemption patterns. The revenue associated with the initial merchandise purchased is recognized immediately and the value assigned to the points is deferred until the points are redeemed, forfeited or expired.
E-commerce
The Company generates revenue from sales on websites maintained by the Company that are shipped from the Company’s distribution centers or retail stores directly to the consumer, or picked up directly by the consumer from the Company’s stores (“e-commerce - Company websites”); sales from the Company’s wholesale customers’ websites that are fulfilled on a drop-ship basis (“e-commerce - wholesale drop-ship”); and other e-commerce sales (wholesale - e-commerce”), collectively referred to as “e-commerce”. The Company transfers control and recognizes revenue for merchandise sold that is shipped directly to an individual consumer upon delivery to the consumer.
Landed wholesale
Landed sales are wholesale sales in which the Company obtains title to the footwear from the overseas suppliers and maintains title until the merchandise clears United States customs. The merchandise is shipped directly to the customer from the Company’s warehouses. Many customers that purchase footwear on a landed basis arrange their own transportation of merchandise and, with limited exceptions, control is transferred at the time of shipment. Landed sales generally carry a higher profit rate than first-cost wholesale sales as a result of the brand equity associated with the product along with the additional customs, warehousing and logistics services provided to customers and the risks associated with inventory ownership.
First-cost wholesale
First-cost sales are wholesale sales in which the Company purchases merchandise from an international factory that manufactures the product and subsequently sells to a customer at an overseas port. Many of the customers then import this product into the United States. Revenue is recognized at the time the merchandise is delivered to the customer’s designated freight forwarder and control is transferred to the customer.
Licensing and royalty
The Company has license agreements with third parties allowing them to sell the Company’s branded product, or other merchandise that uses the Company’s owned or licensed brand names. These license agreements provide the licensee access to the Company’s symbolic intellectual property, and revenue is therefore recognized over the license term. For royalty contracts that do not have guaranteed minimums, the Company recognizes revenue as the licensee’s sales occur. For royalty contracts that have guaranteed minimums, revenue for the guaranteed minimum is recognized on a straight-line basis during the term, until such time that the cumulative royalties exceed the total minimum guarantee. Up-front payments are recognized over the contractual term to which the guaranteed minimum relates.
The Company also licenses its Famous Footwear trade name and logo to a third-party financial institution to offer Famous Footwear-branded credit cards to its consumers. The Company receives royalties based upon cardholder spending, which is recognized as licensing revenue at the time when the credit card is used.
Contract Balances
Revenue is recorded at the transaction price, net of estimates for variable consideration for which reserves are established, including returns, allowances and discounts. Variable consideration is estimated using the expected value method and given the large number of contracts with similar characteristics, the portfolio approach is applied to determine the variable consideration for each revenue stream. Reserves for projected returns are based on historical patterns and current expectations.
Information about significant contract balances from contracts with customers is as follows:
($ thousands)
February 1, 2025
February 3, 2024
Customer allowances and discounts
$
16,147
$
21,497
Loyalty programs liability
7,776
11,457
Returns reserve
9,584
10,586
Gift card liability
6,338
6,385
Changes in contract balances with customers generally reflect differences in relative sales volume for the period presented. In addition, during 2024, the loyalty programs liability increased $26.3 million due to points and material rights earned on purchases and decreased $30.0 million due to expirations and redemptions. During 2023, the loyalty programs liability increased $44.1 million due to points and material rights earned on purchases and decreased $50.4 million due to expirations and redemptions.
Allowance for Expected Credit Losses
The following table summarizes the activity in the Company’s allowance for expected credit losses for 2024 and 2023:
($ thousands)
Balance, beginning of period
$
8,820
$
8,903
Adjustment for expected credit losses
(815)
1,018
Uncollectible account recoveries (write-offs), net
(1,101)
Balance, end of period
$
8,323
$
8,820
3. EARNINGS PER SHARE
The Company uses the two-class method to compute basic and diluted earnings per common share attributable to Caleres, Inc. shareholders. In periods of net loss, no effect is given to the Company’s participating securities since they do not contractually participate in the losses of the Company. The following table sets forth the computation of basic and diluted earnings per common share attributable to Caleres, Inc. shareholders:
($ thousands, except per share amounts)
NUMERATOR
Net earnings
$
106,097
$
171,832
$
179,695
Net loss (earnings) attributable to noncontrolling interests
1,158
(441)
2,047
Net earnings attributable to Caleres, Inc.
$
107,255
$
171,391
$
181,742
Net earnings allocated to participating securities
(3,839)
(7,517)
(7,716)
Net earnings attributable to Caleres, Inc. after allocation of earnings to participating securities
$
103,416
$
163,874
$
174,026
DENOMINATOR
Denominator for basic earnings per common share attributable to Caleres, Inc. shareholders
33,397
34,142
34,930
Dilutive effect of share-based awards
Denominator for diluted earnings per common share attributable to Caleres, Inc. shareholders
33,513
34,152
35,405
Basic earnings per common share attributable to Caleres, Inc. shareholders
$
3.10
$
4.80
$
4.98
Diluted earnings per common share attributable to Caleres, Inc. shareholders
$
3.09
$
4.80
$
4.92
As further discussed in Item 5, Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities, the Company has two publicly announced share repurchase programs. The Company repurchased 1,938,324, 763,000 and 2,622,845 shares at a cost of $65.0 million, $17.4 million and $63.2 million during the years ended February 1, 2025, February 3, 2024 and January 28, 2023, respectively, under these programs.
Under the provisions of the Inflation Reduction Act of 2022 (“Inflation Reduction Act”), a 1% excise tax is imposed on repurchases of common stock beginning on January 1, 2023. Excise taxes incurred on share repurchases are incremental costs to purchase the stock, and accordingly, are included in the total cost basis of the common stock acquired and reflected as a reduction of shareholders’ equity within retained earnings in the consolidated statements of shareholders’ equity. Excise taxes of $0.5 million are due on the Company’s share repurchases during 2024. An immaterial amount of excise taxes were due on share repurchases during 2023.
4. RESTRUCTURING AND OTHER INITIATIVES
Restructuring Costs
During 2024, the Company incurred restructuring costs of $9.9 million ($7.3 million on an after-tax basis, or $0.21 per diluted share). The costs were primarily for the exit of the Company’s domestic retail store operations for the Naturalizer brand, severance and pension settlement costs associated with the acceptance of a lump sum buyout offer by certain pension plan participants. Of the $7.2 million in charges presented in restructuring and other special charges on the consolidated statements of earnings in 2024, $6.4 million is reflected in the Brand Portfolio segment, $0.6 million is reflected in the Famous Footwear segment and $0.2 million is reflected within the Eliminations and Other category. The remaining $2.7 million of restructuring costs related to the pension settlement are presented in other (expense) income, net, and reflected in the Eliminations and Other category. As of February 1, 2025, restructuring reserves of $5.5 million
were included in current liabilities on the consolidated balance sheet, with $4.0 million included in accounts payable, $1.3 million included in employee compensation and benefits and $0.2 million in other accrued expenses.
Expense Reduction Initiatives
During 2023, the Company incurred costs of $6.1 million ($4.5 million on an after-tax basis, or $0.13 per diluted share) associated with its expense reduction initiatives. The costs were primarily for severance and other costs to integrate the Blowfish Malibu office, showroom and information systems into the St. Louis infrastructure. Of the $6.1 million in charges presented in restructuring and other special charges on the consolidated statements of earnings for 2023, $2.6 million is reflected in the Brand Portfolio segment, $2.1 million is reflected in the Eliminations and Other category and $1.4 million is reflected in the Famous Footwear segment. As of February 3, 2024, restructuring reserves of $3.2 million were included in other accrued expenses on the consolidated balance sheet.
Organizational Change
During 2022, the Company incurred costs of $2.9 million ($2.7 million on an after-tax basis, or $0.07 per diluted share) related to organizational changes at the corporate headquarters. These costs were recognized as restructuring and other special charges in the consolidated statement of earnings within the Eliminations and Other category.
5. RETIREMENT AND OTHER BENEFIT PLANS
The Company sponsors pension plans in both the United States and Canada. Under the domestic plans, salaried, management and certain hourly employees’ pension benefits are based on a two-rate formula applied to each year of service. Participants receive the larger of the accrued benefit as of December 31, 2015 (based on service commencing at the date of hire and a 35-year service cap and an average annual salary for the five highest consecutive years during the last 10-year period) and the benefit calculated under the current plan provisions from the date of hire. Generally, under the current plan provisions, a participant receives credit for one year of service for each 365 days of employment as an eligible employee with the Company commencing after the employee’s date of participation in the plan, up to 30 years. Except for grandfathered employees and certain hourly associates in the Company’s retail divisions, final average compensation, taxable covered compensation and credited service for purposes of determining accrued pension benefits were frozen as of December 31, 2018.
The Company’s Canadian pension plans cover certain employees based on plan specifications. Under the Canadian plans, employees’ pension benefits are based on the employee’s highest consecutive five years of compensation during the 10 years before retirement. The Company’s funding policy for all plans is to make the minimum annual contributions required by applicable regulations. The Company also maintains an unfunded Supplemental Executive Retirement Plan (“SERP”). In addition to providing pension benefits, the Company sponsors unfunded postretirement life insurance plans that cover both salaried and hourly employees who became eligible for benefits by January 1, 1995. The life insurance plans provide coverage of up to $20,000 for qualifying retired employees.
Benefit Obligations
The following table sets forth changes in benefit obligations, including all domestic and Canadian plans:
Pension Benefits
Other Postretirement Benefits
($ thousands)
Benefit obligation at beginning of year
$
282,175
$
285,572
$
$
1,018
Service cost
4,931
5,020
-
-
Interest cost
15,025
14,543
Plan participants’ contribution
Actuarial (gain) loss
(10,062)
(6,773)
(61)
Benefits paid
(16,561)
(16,149)
(68)
(75)
Settlements
(17,985)
-
-
-
Foreign exchange rate changes
(307)
(49)
-
-
Benefit obligation at end of year
$
257,225
$
282,175
$
$
The accumulated benefit obligation for the United States pension plans was $252.1 million and $277.1 million as of February 1, 2025 and February 3, 2024, respectively. The accumulated benefit obligation for the Canadian pension plans was $2.9 million and $3.2 million as of February 1, 2025 and February 3, 2024, respectively.
Pension Benefits
Other Postretirement Benefits
Weighted-average assumptions used to determine benefit obligations, end of year
Discount rate
5.80
%
5.40
%
5.80
%
5.40
%
Rate of compensation increase
1.70
%
1.70
%
N/A
N/A
As of February 1, 2025 and February 3, 2024, the Company used the PRI-2012 Bottom Quartile mortality table, projected using generational scale MP-2021, a base mortality table issued by the Society of Actuaries in 2021, to estimate the plan liabilities.
Plan Assets
Pension assets are managed in accordance with the prudent investor standards of the Employee Retirement Income Security Act (“ERISA”). The plan’s investment objective is to earn a competitive total return on assets, while also ensuring plan assets are adequately managed to provide for future pension obligations. This results in the protection of plan surplus and is accomplished by matching the duration of the projected benefit obligation using leveraged fixed income instruments and, while maintaining an equity commitment, managing an equity overlay strategy. The overlay strategy is intended to protect the managed equity portfolios against adverse stock market environments. The Company delegates investment management of the plan assets to specialists in each asset class and regularly monitors manager performance and compliance with investment guidelines. The Company’s overall investment strategy is to achieve a mix of approximately 97% of investments for long-term growth and 3% for near-term benefit payments with a wide diversification of asset types, fund strategies and fund managers. The target allocations for plan assets for 2024 were equities of between 65% and 75% and debt securities of between 25% and 35%. Allocations may change periodically based upon changing market conditions. Corporate stocks - common, as listed in the table below, did not include any Company stock at February 1, 2025 or February 3, 2024.
Assets of the Canadian pension plans, which totaled approximately $4.0 million on February 1, 2025, were invested 55% in equity funds, 42% in bond funds and 3% in money market funds. The Canadian pension plans did not include any Company stock as of February 1, 2025 or February 3, 2024.
A financial instrument’s level within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Refer to further discussion on the fair value hierarchy in Note 13 to the consolidated financial
statements. Following is a description of the pension plan investments measured at fair value, including the general classification of such investments pursuant to the valuation hierarchy.
● Cash and cash equivalents include cash collateral and margin as well as money market funds. The fair values are based on unadjusted quoted market prices in active markets with sufficient volume and frequency and therefore are classified within Level 1 of the fair value hierarchy.
● Investments in U.S. government securities, the mutual fund, exchange-traded funds, corporate stocks - common, the warrant, real estate investment trusts and S&P 500 Index put and call options (traded on security exchanges) are classified within Level 1 of the fair value hierarchy because the fair values are based on unadjusted quoted market prices in active markets with sufficient volume and frequency. Interest rate swap agreements and certain U.S. government securities are not traded on an exchange but are based on observable inputs that can be corroborated. Therefore, these investments are classified within Level 2 of the fair value hierarchy. The preferred securities and certain corporate stocks - common were offered in a private placement. The fair values of these investments are based on unobservable prices and therefore, they are classified within Level 3 of the fair value hierarchy.
● The alternative investment fund is an investment in a pool of long-duration domestic investment grade assets. This investment is measured using net asset value per share, and therefore, is not classified within the fair value hierarchy.
● The unallocated insurance contract is measured at net asset value per share, and therefore, is not classified within the fair value hierarchy.
The fair values of the Company’s pension plan assets at February 1, 2025 by asset category were as follows:
Fair Value Measurements at February 1, 2025
($ thousands)
Total
Level 1
Level 2
Level 3
Asset
Cash and cash equivalents
$
15,233
$
15,233
$
-
$
-
U.S. government securities
70,577
63,423
7,154
-
Interest rate swap agreements
(4,188)
-
(4,188)
-
Mutual fund
27,661
27,661
-
-
Exchange-traded funds
119,650
119,650
-
-
Corporate stocks - common
80,489
80,446
-
Warrant
-
-
Real estate investment trust
1,118
1,118
-
-
Preferred securities
-
-
S&P 500 Index options
(3,738)
(3,738)
-
-
Total investments in the fair value hierarchy
$
307,126
$
303,946
$
2,966
$
Investments measured at net asset value:
Alternative investment fund
14,579
-
-
-
Unallocated insurance contract
-
-
-
Total investments measured at net asset value
14,603
-
-
-
Total investments at fair value
$
321,729
$
303,946
$
2,966
$
The fair values of the Company’s pension plan assets at February 3, 2024 by asset category were as follows:
Fair Value Measurements at February 3, 2024
($ thousands)
Total
Level 1
Level 2
Level 3
Asset
Cash and cash equivalents
$
11,138
$
11,138
$
-
$
-
U.S. government securities
74,777
65,345
9,432
-
Interest rate swap agreements
3,647
-
3,647
Mutual fund
28,114
28,114
-
-
Exchange-traded funds
128,263
128,263
-
-
Corporate stocks - common
84,652
84,528
-
Warrant
-
-
Real estate investment trust
-
-
Preferred securities
-
-
S&P 500 Index options
(1,788)
(1,788)
-
-
Total investments in the fair value hierarchy
$
329,365
$
315,925
$
13,079
$
Investments measured at net asset value:
Alternative investment fund
14,654
-
-
-
Unallocated insurance contract
-
-
-
Total investments measured at net asset value
14,686
-
-
-
Total investments at fair value
$
344,051
$
315,925
$
13,079
$
The following table sets forth changes in the fair value of plan assets, including all domestic and Canadian plans:
Pension Benefits
Other Postretirement Benefits
($ thousands)
Fair value of plan assets at beginning of year
$
344,051
$
356,745
$
-
$
-
Actual return on plan assets
12,432
3,375
-
-
Employer contributions
Plan participants’ contributions
Benefits paid
(16,561)
(16,149)
(68)
(75)
Settlements
(17,985)
-
-
-
Foreign exchange rate changes
(307)
(49)
-
-
Fair value of plan assets at end of year
$
321,729
$
344,051
$
-
$
-
Funded Status
The over-funded status as of February 1, 2025 and February 3, 2024 for pension benefits was $64.5 million and $61.9 million, respectively. The under-funded status for other postretirement benefits was $0.9 million as of February 1, 2025 and February 3, 2024.
Amounts recognized in the consolidated balance sheets consist of:
Pension Benefits
Other Postretirement Benefits
($ thousands)
Prepaid pension costs (noncurrent assets)
$
78,463
$
74,951
$
-
$
-
Accrued benefit liabilities (current liability)
(9,023)
(5,327)
(176)
Accrued benefit liabilities (noncurrent liability)
(4,936)
(7,748)
(755)
Net amount recognized at end of year
$
64,504
$
61,876
$
$
(931)
The projected benefit obligation, the accumulated benefit obligation and the fair value of plan assets for pension plans with a projected benefit obligation in excess of plan assets and for pension plans with an accumulated benefit obligation in excess of plan assets, which includes only the Company’s SERP, were as follows:
Projected Benefit Obligation Exceeds the
Accumulated Benefit Obligation
Fair Value of Plan Assets
Exceeds the Fair Value of Plan Assets
($ thousands)
End of Year
Projected benefit obligation
$
13,958
$
13,075
$
13,958
$
13,075
Accumulated benefit obligation
12,568
12,144
12,568
12,144
Fair value of plan assets
-
-
-
-
The accumulated postretirement benefit obligation exceeds assets for all of the Company’s other postretirement benefit plans.
The amounts in accumulated other comprehensive loss that have not yet been recognized as components of net periodic benefit income at February 1, 2025 and February 3, 2024 are as follows:
Pension Benefits
Other Postretirement Benefits
($ thousands)
Components of accumulated other comprehensive loss, net of tax:
Net actuarial loss (gain)
$
28,455
$
33,709
$
(256)
$
(374)
Net prior service credit
-
-
Accumulated other comprehensive loss, net of tax
$
28,489
$
33,780
$
(256)
$
(374)
Net Periodic Benefit Expense (Income)
Net periodic benefit expense (income) for 2024, 2023 and 2022 for all domestic and Canadian plans included the following components:
Pension Benefits
Other Postretirement Benefits
($ thousands)
Service cost
$
4,931
$
5,020
$
7,143
$
-
$
-
$
-
Interest cost
15,025
14,543
11,977
Expected return on assets
(24,279)
(24,353)
(27,987)
-
-
-
Amortization of:
Actuarial loss (gain)
6,038
3,785
3,088
(108)
(110)
(103)
Prior service credit
(123)
(314)
-
-
-
Settlement cost
2,716
Curtailments
-
-
-
-
-
Total net periodic benefit expense (income)
$
4,480
$
(1,128)
$
(5,760)
$
(63)
$
(62)
$
(68)
The non-service cost components of net periodic benefit expense (income) are included in other income, net in the consolidated statements of earnings. Service cost is included in selling and administrative expenses.
Pension Benefits
Other Postretirement Benefits
Weighted-average assumptions used to determine net periodic benefit income
Discount rate
5.40
%
5.20
%
3.40
%
5.40
%
5.20
%
3.40
%
Rate of compensation increase
1.70
%
3.00
%
3.00
%
N/A
N/A
N/A
Expected return on plan assets
7.70
%
7.50
%
7.20
%
N/A
N/A
N/A
The net actuarial loss (gain) subject to amortization is amortized on a straight-line basis over the average future service of active plan participants as of the measurement date. The prior service credit is amortized on a straight-line basis over the average future service of active plan participants benefiting under the plan at the time of each plan amendment.
The expected long-term rate of return on plan assets is based on historical and projected rates of return for current and planned asset classes in the plan’s investment portfolio. Assumed projected rates of return for each asset class were selected after analyzing experience and future expectations of the returns. The overall expected rate of return for the portfolio was developed based on the target allocation for each asset class.
Expected Cash Flows
Information about expected cash flows for all pension and postretirement benefit plans follows:
Pension Benefits
Other
Postretirement
($ thousands)
Funded Plan
SERP
Total
Benefits
Employer Contributions
2025 expected contributions to plan trusts
$
$
-
$
$
-
2025 expected contributions to plan participants
-
9,281
9,281
2025 refund of assets (e.g. surplus) to employer
-
-
Expected Benefit Payments
$
15,855
$
9,281
$
25,136
$
16,355
16,856
16,773
17,598
17,272
18,057
17,687
18,406
2030-2034
90,466
3,941
94,407
Defined Contribution Plans
The Company’s domestic defined contribution 401(k) plan covers certain salaried employees. For eligible salaried employees, the Company makes a core contribution of 1.5% and a matching contribution of up to 50% of the first 6% of the employees’ contributions. The Company’s expense for this plan was $4.7 million in 2024, $5.0 million in 2023, and $4.6 million in 2022. In addition to the core and matching contributions, the Company has the discretion to contribute up to an additional 2% profit-sharing benefit based on the Company’s performance. The Company’s expense for the profit-sharing contribution was zero for both 2024 and 2023 and $2.6 million for 2022. Beginning in January 2024, the Company also offers a 401(k) plan to certain hourly employees, providing the option to contribute from 2% to 30% of pre-tax wages to the 401(k) plan. The hourly 401(k) plan does not offer matching contributions and therefore, the Company incurred no expense during 2024.
Non-Qualified Deferred Compensation Plan
The Company has a non-qualified deferred compensation plan (the “Deferred Compensation Plan”) for the benefit of certain management employees. The investment funds offered to the participants generally correspond to the funds offered in the Company’s 401(k) plan and the account balance fluctuates with the investment returns on those funds. The Deferred Compensation Plan permits the deferral of up to 50% of base salary and 100% of compensation received under the Company’s annual incentive plan. The deferrals are held in a separate trust, which has been established by the Company to administer the Deferred Compensation Plan. The assets of the trust are subject to the claims of the Company’s creditors in the event that the Company becomes insolvent. Consequently, the trust qualifies as a grantor trust for income tax purposes (i.e., a “Rabbi Trust”). The liabilities of the Deferred Compensation Plan of $10.9 million and $9.5 million as of February 1, 2025 and February 3, 2024, respectively, are presented in employee compensation and benefits in the accompanying consolidated balance sheets. The assets held by the trust of $10.9 million and $9.5 million as of February 1, 2025 and February 3, 2024, respectively, are presented within prepaid expenses and other current assets in the accompanying consolidated balance sheets, with changes in the deferred compensation charged to selling and administrative expenses in the accompanying consolidated statements of earnings.
Non-Qualified Restoration Deferred Compensation Plan
In 2023, the Company adopted a non-qualified restoration deferred compensation plan (the “Restoration Plan”) for the benefit of certain members of executive management. The Restoration Plan provides an incremental retirement benefit to key executives whose contributions to qualified retirement plans are limited by Internal Revenue Service annual compensation maximums. The investment funds offered to the participants generally correspond to the funds offered in the Company’s 401(k) plan. The initial contribution to the Restoration Plan was funded in January 2024 and will occur annually thereafter. The plan assets and liabilities will fluctuate with the returns on the investment funds. The deferrals are held in a separate trust, which has been established by the Company to administer the Restoration Plan. The assets of the trust are subject to the claims of the Company’s creditors in the event that the Company becomes insolvent. Consequently, the trust qualifies as a grantor trust for income tax purposes (i.e., a “Rabbi Trust”). The liabilities of the Restoration Plan of $0.4 million and $0.3 million as of February 1, 2025 and February 3, 2024, respectively, are presented in employee compensation and benefits in the accompanying consolidated balance sheets. The assets held by the trust of $0.4 million and $0.3 million as of February 1, 2025 and February 3, 2024, respectively, are classified within prepaid and other current assets in the accompanying consolidated balance sheets. Changes in deferred compensation plan assets and liabilities are charged to selling and administrative expense in the accompanying consolidated statement of earnings.
Deferred Compensation Plan for Non-Employee Directors
Non-employee directors are eligible to participate in a deferred compensation plan, whereby deferred compensation amounts are valued as if invested in the Company’s common stock through the use of phantom stock units (“PSUs”). Under the plan, each participating director’s account is credited with the number of PSUs equal to the number of shares of the Company’s common stock that the participant could purchase or receive with the amount of the deferred compensation, based upon the fair value (as determined based on the average of the high and low prices) of the Company’s common stock on the last trading day of the fiscal quarter when the cash compensation was earned. Dividend equivalents are paid on PSUs at the same rate as dividends on the Company’s common stock and are re-invested in additional PSUs at the next fiscal quarter-end. The PSUs are payable in cash based on the number of PSUs credited to the participating director’s account, valued on the basis of the fair value at fiscal quarter-end on or following termination of the director’s service. The liabilities of the plan of $1.2 million and $2.0 million as of February 1, 2025 and February 3, 2024, respectively, are based on 50,820 and 55,516 outstanding PSUs, respectively, and are presented in other liabilities in the accompanying consolidated balance sheets. Gains and losses resulting from changes in the fair value of the PSUs are charged to selling and administrative expenses in the accompanying consolidated statements of earnings.
6. INCOME TAXES
The components of earnings before income taxes consisted of domestic earnings before income taxes of $84.8 million, $132.5 million and $168.0 million in 2024, 2023 and 2022, respectively. The Company’s international earnings before income taxes were $50.4 million, $48.8 million and $45.0 million in 2024, 2023 and 2022, respectively.
The components of income tax provision on earnings were as follows:
($ thousands)
Federal
Current
$
3,818
$
10,849
$
11,506
Deferred
13,710
5,138
6,975
Total federal income tax provision
17,528
15,987
18,481
State
Current
1,876
2,423
6,660
Deferred
4,775
(9,819)
3,421
Total state income tax provision (benefit)
6,651
(7,396)
10,081
International
Current
5,289
4,879
4,759
Deferred
(407)
(3,980)
Total international income tax provision
4,882
4,777
Total income tax provision
$
29,061
$
9,490
$
33,339
The differences between the income tax provision reflected in the consolidated financial statements and the amounts calculated at the federal statutory income tax rate were as follows:
($ thousands)
Income taxes at statutory rate
$
28,383
$
38,078
$
44,737
State income taxes, net of federal tax benefit
4,514
5,710
8,981
International earnings taxed at differing rates from U.S. statutory
(3,584)
(5,367)
(1,974)
Share-based compensation
(2,647)
(3,106)
(602)
Valuation allowances, net
(2,204)
(30,054)
(20,743)
Non-deductibility of 162(m) limitations
3,401
4,373
3,363
GILTI, BEAT and FDII provisions
1,307
Other (1)
(109)
(571)
(845)
Total income tax provision
$
29,061
$
9,490
$
33,339
(1) The other category of income tax provision principally represents the impact of expenses that are not deductible or partially deductible for federal income tax purposes and the impact of any return-to-provision adjustments.
Significant components of the Company’s deferred income tax assets and liabilities were as follows:
($ thousands)
February 1, 2025
February 3, 2024
Deferred Tax Assets
Lease obligations
$
158,310
$
148,242
Goodwill
30,308
34,386
Net operating loss carryforward/carryback
6,551
10,107
Accrued expenses
14,053
17,870
Employee benefits, compensation and insurance
10,954
15,689
Accounts receivable
4,043
6,094
Inventory capitalization and inventory reserves
6,532
6,623
Impairment of investment in nonconsolidated affiliate
1,418
1,470
Postretirement and postemployment benefit plans
Other
3,444
1,605
Total deferred tax assets, before valuation allowance
235,814
242,293
Valuation allowance
(3,406)
(7,153)
Total deferred tax assets, net of valuation allowance
$
232,408
$
235,140
Deferred Tax Liabilities
Lease right-of-use assets
$
(149,414)
$
(138,315)
Intangible assets
(15,472)
(13,659)
LIFO inventory valuation
(54,808)
(51,021)
Retirement plans
(18,184)
(17,239)
Capitalized software
(1,797)
(1,800)
Depreciation
(17,100)
(16,822)
Other
(2,579)
(3,419)
Total deferred tax liabilities
(259,354)
(242,275)
Net deferred tax liability
$
(26,946)
$
(7,135)
As of February 1, 2025, the Company had various federal, state and international net operating loss (“NOL”) carryforwards with tax values totaling $6.6 million. The state NOLs totaling $2.9 million have carryforward periods ranging from one to 20 years. The Company has NOLs in Canada, the United Kingdom and China of $1.8 million and $1.3 million and $0.6 million, respectively. The Canada and China NOLs have a carryforward period of 17 years and 5 years, respectively, while the United Kingdom NOLs have no expiration.
As of February 1, 2025, no deferred taxes have been provided on the accumulated unremitted earnings of the Company’s international subsidiaries that are not subject to United States income tax, beyond the amounts recorded for the one-time transition tax for the mandatory deemed repatriation of cumulative international earnings, as required by the Tax Cuts and Jobs Act. The Company periodically evaluates its international investment opportunities and plans, as well as its international working capital needs, to determine the level of investment required and, accordingly, determines the level of international earnings that is considered indefinitely reinvested. Based upon that evaluation, earnings of the Company’s international subsidiaries that are not otherwise subject to United States taxation are considered to be indefinitely reinvested, and accordingly, deferred taxes have not been provided. If changes occur in future investment opportunities and plans, those changes will be reflected when known and may result in providing residual United States deferred taxes on unremitted international earnings. If the Company’s unremitted international earnings were not considered indefinitely reinvested as of February 1, 2025, an immaterial amount of additional deferred taxes would have been provided.
Uncertain Tax Positions
ASC 740, Income Taxes, establishes a single model to address accounting for uncertain tax positions. The standard clarifies the accounting for income taxes by prescribing a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. The standard also provides guidance on derecognition, measurement
classification, interest and penalties, accounting in interim periods, disclosure and transition. As of February 1, 2025 and February 3, 2024, the Company had no unrecognized tax benefits.
For federal purposes, the Company’s tax filings for fiscal years 2019 to 2023 remain open to examination but are not currently being examined. The Company also files tax returns in various international jurisdictions and numerous states for which various tax years are subject to examination and currently involved in audits. While the Company is involved in examinations in certain jurisdictions, it does not expect any significant changes in its liability for uncertain tax positions during the next 12 months.
7. BUSINESS SEGMENT INFORMATION
The Company’s reportable segments are Famous Footwear and Brand Portfolio. The Famous Footwear segment is comprised of Famous Footwear, famousfootwear.com and famousfootwear.ca. Famous Footwear operated 846 stores at the end of 2024, selling primarily branded footwear for the entire family.
The Brand Portfolio segment is comprised of wholesale operations selling the Company’s branded footwear, and the retail stores and e-commerce sites associated with those brands. This segment sources, manufactures and markets branded, licensed and private-label footwear primarily to online retailers, national chains, department stores, independent retailers and mass merchandisers as well as Company-owned Famous Footwear, Sam Edelman, Naturalizer and Allen Edmonds stores and e-commerce businesses. The Brand Portfolio segment included 60 branded retail stores in the United States and 54 branded retail stores in East Asia at the end of 2024.
The accounting policies of the reportable segments are the same as those described in Note 1 to the consolidated financial statements. The Company’s Famous Footwear and Brand Portfolio reportable segments are operating units that are managed separately. These reportable segments reflect the level at which the chief operating decision maker (CODM), the Company’s President and Chief Executive Officer, evaluates financial performance and allocates resources. The CODM uses segment operating earnings (loss), which represents gross profit, less selling and administrative expenses and restructuring and other special charges, net, to allocate resources. Intersegment sales are generally recorded at a profit, and intersegment earnings related to inventory on hand at the purchasing segment are eliminated against the earnings.
Corporate assets, administrative expenses and other costs and recoveries that are not allocated to the operating units, as well as the elimination of intersegment sales and profit, are reported in the Eliminations and Other category.
Following is a summary of certain key financial measures for the respective periods:
Famous
Brand
Eliminations
($ thousands)
Footwear
Portfolio
and Other
Total
Net sales (1)
$
1,556,456
$
1,225,963
$
(59,736)
$
2,722,683
Cost of goods sold
869,829
689,668
(58,856)
1,500,641
Gross profit
686,627
536,295
(880)
1,222,042
Less expenses:
Retail stores (2)
366,144
31,108
-
397,252
Information technology
30,843
27,631
7,881
66,355
Warehousing and distribution
50,905
70,368
3,580
124,853
Advertising and marketing
50,370
78,275
3,459
132,104
Restructuring and other special charges, net
6,343
7,167
Other expenses (3)
100,650
200,448
43,357
344,455
Operating earnings (loss)
$
87,076
$
122,122
$
(59,342)
$
149,856
Segment assets
$
817,469
$
893,460
$
183,825
$
1,894,754
Purchases of property and equipment
$
36,694
$
10,335
$
2,118
$
49,147
Capitalized software
$
$
$
1,877
$
2,539
Famous
Brand
Eliminations
($ thousands)
Footwear
Portfolio
and Other
Total
Net sales (1)
$
1,609,396
$
1,270,853
$
(62,955)
$
2,817,294
Cost of goods sold
889,847
724,848
(60,358)
1,554,337
Gross profit
719,549
546,005
(2,597)
1,262,957
Less expenses:
Retail stores (2)
360,102
28,793
-
388,895
Information technology
31,286
28,180
1,459
60,925
Warehousing and distribution
52,874
59,045
4,439
116,358
Advertising and marketing
52,771
70,761
3,102
126,634
Restructuring and other special charges, net
1,366
2,608
2,129
6,103
Other expenses (3)
97,312
211,159
61,116
369,587
Operating earnings (loss)
$
123,838
$
145,459
$
(74,842)
$
194,455
Segment assets
$
770,848
$
862,404
$
171,494
$
1,804,746
Purchases of property and equipment
$
31,743
$
10,515
$
2,326
$
44,584
Capitalized software
$
$
-
$
4,291
$
5,034
Famous
Brand
Eliminations
($ thousands)
Footwear
Portfolio
and Other
Total
Net sales (1)
$
1,705,093
$
1,322,772
$
(59,727)
$
2,968,138
Cost of goods sold
916,089
825,507
(58,331)
1,683,265
Gross Profit
789,004
497,265
(1,396)
1,284,873
Less expenses:
Retail stores (2)
352,088
27,699
-
379,787
Information technology
28,100
26,331
1,781
56,212
Warehousing and distribution
54,056
57,337
5,192
116,585
Advertising and marketing
56,762
65,339
3,463
125,564
Restructuring and other special charges, net
-
-
2,910
2,910
Other expenses (3)
102,161
208,214
79,113
389,488
Operating earnings (loss)
$
195,837
$
112,345
$
(93,855)
$
214,327
Segment assets
$
767,575
$
921,110
$
147,787
$
1,836,472
Purchases of property and equipment
$
41,755
$
4,170
$
9,988
$
55,913
Capitalized software
$
-
$
$
8,082
$
8,124
(1) Net sales includes intersegment sales from Brand Portfolio to Famous Footwear of $59.7 million, $63.0 million and $59.7 million in 2024, 2023 and 2022, respectively.
(2) Includes compensation and facilities costs associated with the Company’s North America retail stores.
(3) Primarily includes compensation costs associated with non-retail store operations, depreciation and amortization, and other overhead expenses.
Products purchased for the Famous Footwear segment from three key third-party suppliers (Nike, Skechers and adidas) represented approximately 24% of consolidated net sales for 2024, 2023, and 2022.
Following is a reconciliation of operating earnings to earnings before income taxes:
($ thousands)
Operating earnings
$
149,856
$
194,455
$
214,327
Interest expense, net
(13,957)
(19,343)
(14,264)
Other income, net
(741)
6,210
12,971
Earnings before income taxes
$
135,158
$
181,322
$
213,034
For geographic purposes, the domestic operations include the Company’s domestic retail operations, the wholesale distribution of licensed, branded and private-label footwear to a variety of retail customers, including the Famous Footwear and Brand Portfolio stores, as well as the Company’s e-commerce businesses.
The Company’s international operations consist of wholesale and retail operations primarily in East Asia, Canada and Europe. The East Asia operations primarily include first-cost transactions, where footwear is sold at international ports to customers who then import the footwear into the United States and other countries.
A summary of the Company’s net sales and long-lived assets, including lease right-of-use assets and property and equipment, by geographic area were as follows:
($ thousands)
Net Sales
United States
$
2,532,717
$
2,624,474
$
2,763,896
East Asia
111,670
130,423
146,700
Canada
58,140
48,220
44,484
Other
20,156
14,177
13,058
Total net sales
$
2,722,683
$
2,817,294
$
2,968,138
Long-Lived Assets
United States
$
8,855,001
$
676,937
$
656,840
East Asia
140,929
11,805
11,614
Canada
113,060
6,601
10,441
Other
2,401
Total long-lived assets
$
9,111,391
$
695,612
$
679,079
8. INVENTORIES
The Company’s net inventory balance was comprised of the following:
($ thousands)
February 1, 2025
February 3, 2024
Raw materials
$
14,352
$
14,198
Work-in-process
Finished goods
550,245
525,811
Inventories, net (1)
$
565,241
$
540,674
(1) Net of adjustment to last-in, first-out cost of $10.9 million and $10.3 million as of February 1, 2025 and February 3, 2024, respectively.
As of February 1, 2025 and February 3, 2024, the Company’s inventory balance included $0.2 million and $0.4 million, respectively, of finished goods product subject to consignment arrangements with wholesale customers.
9. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
($thousands)
February 1, 2025
February 3, 2024
Land and buildings
$
37,494
$
38,795
Leasehold improvements
229,227
216,531
Technology equipment
56,900
51,690
Machinery and equipment
116,404
114,245
Furniture and fixtures
146,730
140,456
Construction in progress
16,518
14,204
Property and equipment
603,273
575,921
Allowances for depreciation
(428,060)
(408,338)
Property and equipment, net
$
175,213
$
167,583
Useful lives of property and equipment are as follows:
Years
Buildings
5 - 30
Leasehold improvements
5 - 20
Technology equipment
2 - 7
Machinery and equipment
4 - 20
Furniture and fixtures
3 - 10
After allowing for an appropriate start-up period, property and equipment at stores and any lease right-of-use assets indicated as impaired are written down to fair value as calculated using a discounted cash flow method. The Company recorded charges for impairment of $1.9 million, $0.7 million and $1.8 million in 2024, 2023 and 2022, respectively, primarily for operating lease right-of-use assets, leasehold improvements and furniture and fixtures in the Company’s retail stores and capitalized software, which are presented in selling and administrative expenses. Fair value was based on estimated future cash flows to be generated by retail stores, discounted at a market rate of interest. Refer to Note 12 and Note 13 to the consolidated financial statements for further discussion of these impairment charges.
Property and Equipment, Held for Sale
During 2024, the Company continued to actively market for sale its nine-acre corporate headquarters campus (the “Campus”) located in Clayton, Missouri. In January 2025, the Company entered into an agreement to sell the main portion of the Campus, subject to certain closing conditions. In February 2025, the Company entered into two letters of intent to sell the remaining portions of the Campus. The Company expects each of the components of the Campus to qualify as a completed sale within the next year. Accordingly, the Campus, primarily consisting of land and buildings, has been classified as property and equipment, held for sale category on the consolidated balance sheet as of February 1, 2025 within the Eliminations and Other category. The Company evaluated the Campus asset group for impairment and determined that no indicators were present as of February 1, 2025.
10. GOODWILL AND INTANGIBLE ASSETS
Goodwill and intangible assets were as follows:
($ thousands)
February 1, 2025
February 3, 2024
Intangible Assets
Famous Footwear
$
2,800
$
2,800
Brand Portfolio (1)
342,083
342,083
Total intangible assets
344,883
344,883
Accumulated amortization
(157,565)
(146,529)
Total intangible assets, net
187,318
198,354
Goodwill
Brand Portfolio (2)
4,956
4,956
Total goodwill
4,956
4,956
Goodwill and intangible assets, net
$
192,274
$
203,310
(1) The carrying amount of intangible assets as of February 1, 2025 and February 3, 2024 is presented net of accumulated impairment charges of $106.2 million.
(2) The carrying amount of goodwill as of February 1, 2025 and February 3, 2024 is presented net of accumulated impairment charges of $415.7 million.
The Company’s intangible assets as of February 1, 2025 and February 3, 2024 were as follows:
($ thousands)
February 1, 2025
Estimated Useful Lives
Accumulated
Accumulated
(In Years)
Cost Basis
Amortization
Impairment
Net Carrying Value
Trade names
2 - 40
$
299,488
$
140,424
$
10,200
$
148,864
Trade names
Indefinite
107,400
-
92,000
15,400
Customer relationships
15 - 16
44,200
17,141
4,005
23,054
$
451,088
$
157,565
$
106,205
$
187,318
February 3, 2024
Estimated Useful Lives
Accumulated
Accumulated
(In Years)
Cost Basis
Amortization
Impairment
Net Carrying Value
Trade names
2 - 40
$
299,488
$
131,677
$
10,200
$
157,611
Trade names
Indefinite
107,400
-
92,000
15,400
Customer relationships
15 - 16
44,200
14,852
4,005
25,343
$
451,088
$
146,529
$
106,205
$
198,354
Amortization expense related to intangible assets was $11.0 million in 2024 and $12.1 million in both 2023 and 2022. The Company estimates $11.0 million of amortization expense related to intangible assets in 2025 and 2026, $10.9 million in 2027 and $10.7 million in 2028.
Goodwill is tested for impairment at least annually, or more frequently if events or circumstances indicate it might be impaired, using either the qualitative assessment or a quantitative fair value-based test. During 2024 and 2023, the goodwill impairment testing was performed as of the first day of the fourth fiscal quarter, which resulted in no impairment charges.
Indefinite-lived intangible assets are tested for impairment as of the first day of the fourth quarter of each fiscal year unless events or circumstances indicate an interim test is required. The Company did not record any impairment charges for intangible assets during 2024 or 2023.
11. FINANCING ARRANGEMENTS
Credit Agreement
The Company maintains a revolving credit facility for working capital needs. The Company is the lead borrower, and certain wholly-owned subsidiaries, including Sidney Rich Associates, Inc., BG Retail, LLC, Allen Edmonds LLC, Vionic Group LLC, Vionic International LLC and Blowfish, LLC are each co-borrowers and guarantors.
On October 5, 2021, the Company entered into a Fifth Amendment to Fourth Amended and Restated Credit Agreement (as so amended, the "Credit Agreement") which, among other modifications, decreased the amount available under the revolving credit facility by $100.0 million to an aggregate amount of up to $500.0 million, subject to borrowing base restrictions, and may be increased by up to $250.0 million. The Credit Agreement also decreased the spread applied to the London Interbank Offered Rate (“LIBOR”) or prime rate by a total of 75 basis points. On April 27, 2023, the Company entered into a Sixth Amendment to Fourth Amended and Restated Credit agreement to transition the borrowings on the revolving credit facility from bearing interest based on LIBOR to a team secured overnight financing rate (“SOFR”).
Borrowing availability under the Credit Agreement is limited to the lesser of the total commitments and the borrowing base ("Loan Cap"), which is based on stated percentages of the sum of eligible accounts receivable, eligible inventory and eligible credit card receivables, as defined, less applicable reserves. Under the Credit Agreement, the Loan Parties’ obligations are secured by a first-priority security interest in all accounts receivable, inventory and certain other collateral.
Interest on borrowings is at variable rates based on SOFR or the prime rate (as defined in the Credit Agreement), plus a spread. The interest rate and fees for letters of credit vary based upon the level of excess availability under the Credit Agreement. There is a fee payable on the unused portion under the facility and a letter of credit fee payable on the outstanding face amount under letters of credit.
The Credit Agreement limits the Company’s ability to create, incur, assume or permit to exist additional indebtedness and liens, make investments or specified payments, give guarantees, pay dividends, make capital expenditures and merge or acquire or sell assets. In addition, if excess availability falls below the greater of 10.0% of the Loan Cap and $40.0 million for three consecutive business days, and the fixed charge coverage ratio is less than 1.25 to 1.0, the Company would be in default under the Credit Agreement and certain additional covenants would be triggered.
The Credit Agreement contains customary events of default, including, without limitation, payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to similar obligations, certain events of bankruptcy and insolvency, judgment defaults and the failure of any guaranty or security document supporting the agreement to be in full force and effect. If an event of default occurs, the collateral agent may assume dominion and control over the Company’s cash (a “cash dominion event”) until such event of default is cured or waived or the excess availability exceeds an amount as defined in the Credit Agreement for 30 consecutive days, provided that a cash dominion event shall be deemed continuing (even if an event of default is no longer continuing and/or excess availability exceeds the required amount for 30 consecutive business days) after a cash dominion event has occurred and been discontinued on two occasions in any 12-month period. The Credit Agreement also contains certain other covenants and restrictions. The Company was in compliance with all covenants and restrictions under the Credit Agreement as of February 1, 2025.
The maximum amount of borrowings under the Credit Agreement at the end of any month was $261.5 million and $366.5 million in 2024 and 2023, respectively. As of February 1, 2025, the Company had $219.5 million of borrowings outstanding and $8.2 million in letters of credit outstanding under the Credit Agreement, with total additional borrowing availability of $272.3 million. Average daily borrowings were $201.5 million and $267.9 million in 2024 and 2023, respectively, and the weighted-average interest rates approximated 6.2% and 6.7% for the respective periods.
12. LEASES
The Company leases all of its retail locations, a manufacturing facility, and certain office locations, distribution centers and equipment. At contract inception, leases are evaluated and classified as either operating or finance leases. Leases with an initial term of 12 months or less are not recorded on the balance sheet.
Lease right-of-use assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term. The majority of the Company’s leases do not provide an implicit rate and therefore, the Company uses an incremental borrowing rate based on the information available at the commencement date to determine the present value of future payments. For operating leases, lease expense for the minimum lease payments is recognized on a straight-line basis over the lease term. Variable lease payments are expensed as incurred.
The Company regularly analyzes the results of all of its stores and assesses the viability of underperforming stores to determine whether events or circumstances exist that indicate the stores should be closed or whether the carrying amount of their long-lived assets may not be recoverable. After allowing for an appropriate start-up period and consideration of any unusual nonrecurring events, property and equipment at stores and the lease right-of-use assets indicated as impaired are written down to fair value as calculated using a discounted cash flow method. The fair value of the lease right-of-use assets and property and equipment is determined utilizing projected cash flows for each store location, discounted using a risk-adjusted discount rate, subject to a market floor based on current market lease rates. Refer to Note 13 to the consolidated financial statements for further discussion of impairment charges on the Company’s operating lease right-of-use assets and property and equipment in its retail stores.
The weighted-average lease term and discount rate as of February 1, 2025 and February 3, 2024 were as follows:
February 1, 2025
February 3, 2024
Weighted-average remaining lease term (in years)
6.1
5.7
Weighted-average discount rate
5.2
%
4.9
%
During 2024, the Company entered into new or amended leases that resulted in the recognition of right-of-use assets and lease obligations of $182.1 million on the consolidated balance sheets. As of February 1, 2025, the Company has entered into lease commitments for six retail locations for which the leases have not yet commenced. The Company anticipates that the leases for four of the new retail locations will begin in the next fiscal year and two will begin in fiscal year 2026. Upon commencement, right-of-use assets and lease liabilities of approximately $4.1 million and $3.2 million will be recorded on the consolidated balance sheets in 2025 and 2026, respectively.
The components of lease expense for 2024, 2023 and 2022 were as follows:
($ thousands)
Operating lease expense
$
160,832
$
156,849
$
148,299
Variable lease expense
46,672
42,983
40,233
Short-term lease expense
1,149
2,757
4,059
Sublease income
-
-
(59)
Total lease expense
$
208,653
$
202,589
$
192,532
The aggregate future annual lease payments at February 1, 2025 were as follows:
($ thousands)
$
188,415
141,915
109,694
76,703
52,979
Thereafter
130,861
Total minimum operating lease payments
$
700,567
Less imputed interest
(93,522)
Present value of lease obligations
$
607,045
Supplemental cash flow information related to leases is as follows:
($ thousands)
Cash paid for lease obligations
$
158,156
$
181,420
$
167,163
Cash received from sublease income
-
-
13. FAIR VALUE MEASUREMENTS
Fair Value Hierarchy
Fair value measurement disclosure requirements specify a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptions other market participants would use based upon market data obtained from independent sources (“observable inputs”) or reflect the Company’s own assumptions of market participant valuation
(“unobservable inputs”). In accordance with the fair value guidance, the inputs to valuation techniques used to measure fair value are categorized into three levels based on the reliability of the inputs as follows:
● Level 1 - Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities;
● Level 2 - Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly; and
● Level 3 - Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.
In determining fair value, the Company uses valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company also considers counterparty credit risk in its assessment of fair value. Classification of the financial or non-financial asset or liability within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.
Measurement of Fair Value
The Company measures fair value as an exit price, the price to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date, using the procedures described below for all financial and non-financial assets and liabilities measured at fair value.
Non-Qualified Deferred Compensation Plan Assets and Liabilities
As discussed in Note 5 to the consolidated financial statements, the Company maintains the Deferred Compensation Plan for the benefit of certain management employees. The investment funds offered to the participants generally correspond to the funds offered in the Company’s 401(k) plan, and the account balance fluctuates with the investment returns on those funds. The fair value is based on unadjusted quoted market prices for the funds in active markets with sufficient volume and frequency (Level 1).
Non-Qualified Restoration Plan Assets and Liabilities
As discussed in Note 5 to the consolidated financial statements, in 2023, the Company adopted the Restoration Plan for the benefit of certain members of executive management. The Restoration Plan provides an incremental retirement benefit to key executives whose contributions to qualified retirement plans are limited by Internal Revenue Service annual compensation maximums. The investment funds offered to the participants generally correspond to the funds offered in the Company’s 401(k) plan. The fair value is based on unadjusted quote market prices for the funds in active markets with sufficient volume and frequency (Level 1).
Deferred Compensation Plan for Non-Employee Directors
As discussed in Note 5 to the consolidated financial statements, non-employee directors are eligible to participate in a deferred compensation plan with deferred amounts valued as if invested in the Company’s common stock through the use of PSUs. Under the plan, each participating director’s account is credited with the number of PSUs equal to the number of shares of the Company’s common stock that the participant could purchase or receive with the amount of the deferred compensation, based upon the average of the high and low prices of the Company’s common stock on the last trading day of the fiscal quarter when the cash compensation was earned. Dividend equivalents are paid on PSUs at the same rate as dividends on the Company’s common stock and are re-invested in additional PSUs at the next fiscal quarter-end. The liabilities of the plan are based on the fair value of the outstanding PSUs and are presented in other accrued expenses (current portion) or other liabilities in the accompanying consolidated balance sheets. Gains and losses resulting from changes in the fair value of the PSUs are presented in selling and administrative expenses in the Company’s consolidated statements of earnings. The fair value of each PSU is based on an unadjusted quoted market price for the Company’s common stock in an active market with sufficient volume and frequency on each measurement date (Level 1).
Restricted Stock Units for Non-Employee Directors
Under the Company’s incentive compensation plans, cash-equivalent restricted stock units (“RSUs”) of the Company were previously granted at no cost to non-employee directors. These cash-equivalent RSUs are subject to a vesting requirement (usually one year), earn dividend-equivalent units and are settled in cash on the date the director terminates service or such earlier date as a director may elect, subject to restrictions, based on the then current fair value of the Company’s common stock. The fair value of each cash-equivalent RSU payable is based on an unadjusted quoted market price for the Company’s common stock in an active market with sufficient volume and frequency on each measurement date (Level 1). Additional information related to RSUs for non-employee directors is disclosed in Note 15 to the consolidated financial statements.
The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis at February 1, 2025 and February 3, 2024. During 2024, 2023 or 2022, the Company did not have any transfers between into or out of Level 3.
Fair Value Measurements
($ thousands)
Total
Level 1
Level 2
Level 3
Asset (Liability)
February 1, 2025:
Non-qualified deferred compensation plan assets
$
10,939
10,939
$
-
$
-
Non-qualified deferred compensation plan liabilities
(10,939)
(10,939)
-
-
Non-qualified restoration plan assets
-
-
Non-qualified restoration plan liabilities
(444)
(444)
-
-
Deferred compensation plan liabilities for non-employee directors
(1,039)
(1,039)
-
-
Restricted stock units for non-employee directors
(1,130)
(1,130)
-
-
February 3, 2024:
Non-qualified deferred compensation plan assets
9,494
9,494
-
-
Non-qualified deferred compensation plan liabilities
(9,494)
(9,494)
-
-
Non-qualified restoration plan assets
Non-qualified restoration plan liabilities
(271)
(271)
Deferred compensation plan liabilities for non-employee directors
(1,921)
(1,921)
-
-
Restricted stock units for non-employee directors
(2,606)
(2,606)
-
-
Impairment Charges
The Company assesses the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors the Company considers important that could trigger an impairment review include underperformance relative to expected historical or projected future operating results, a significant change in the manner of the use of the asset or a negative industry or economic trend. When the Company determines that the carrying value of long-lived assets may not be recoverable based upon the existence of one or more of the aforementioned factors, impairment is measured based on a projected discounted cash flow method. Certain factors, such as estimated store sales and expenses, used for this nonrecurring fair value measurement are considered Level 3 inputs as defined by FASB ASC 820, Fair Value Measurement. Long-lived assets held and used with a carrying amount of $626.2 million, $579.1 million and $562.2 million in 2024, 2023 and 2022, respectively, were assessed for indicators of impairment. This assessment resulted in the impairment charges presented in the table below, primarily for operating lease right-of-use assets, leasehold improvements, and furniture and fixtures in the Company’s retail stores, as well as capitalized software.
($ thousands)
Long-Lived Asset Impairment Charges:
Famous Footwear
$
1,448
$
$
Brand Portfolio
-
1,603
Total long-lived asset impairment charges
$
1,864
$
$
1,803
The Company performed its annual impairment review of intangible assets, which involves estimating the fair value using significant unobservable inputs (Level 3). The intangible asset impairment reviews performed in 2024, 2023 and 2022 resulted in no impairment charges.
During 2024 and 2022, the Company performed qualitative assessments of goodwill as of the first day of the fourth fiscal quarter and during 2023 Company performed a quantitative assessment of goodwill. The reviews indicated no impairment. Refer to Note 1 and Note 10 to the consolidated financial statements for additional information related to the goodwill impairment tests.
Fair Value of the Company’s Other Financial Instruments
The fair values of cash and cash equivalents, receivables and trade accounts payable approximate their carrying values due to the short-term nature of these instruments.
The fair values of the borrowings under revolving credit agreement of $219.5 million and $182.0 million as of February 1, 2025 and February 3, 2024, respectively, approximate the carrying values due to the short-term nature of the borrowings. (Level 1).
14. SHAREHOLDERS’ EQUITY
Company Stock
The Company’s common stock, which has a $0.01 par value per share, is listed for trading under the ticker symbol “CAL” on the New York Stock Exchange. Holders of the common shares are entitled to one vote per share. The Company is also authorized to issue preferred shares with a $1.00 par value per share.
The following table provides additional information regarding the Company’s common and preferred stock:
(in thousands)
February 1, 2025
February 3, 2024
Common
Preferred
Common
Preferred
Authorized shares
100,000
1,000
100,000
1,000
Outstanding shares
33,632
-
35,490
-
Stock Repurchase Programs
On September 2, 2019 and March 10, 2022, the Board of Directors approved stock repurchase programs (“2019 Program" and "2022 Program", respectively) authorizing the repurchase of the Company’s outstanding common stock of up to 5.0 million shares in the 2019 Program and 7.0 million shares in the 2022 Program. The Company can use the repurchase programs to repurchase shares on the open market or in private transactions from time to time, depending on market conditions. The repurchase programs do not have an expiration date. Repurchases of common stock are limited under the Company’s debt agreements. During 2024, 2023 and 2022, the Company repurchased 1,938,324 shares, 763,000 shares and 2,622,845 shares, respectively, under the share repurchase programs. In total, 5.0 million shares have been repurchased under the 2019 Program and there are no additional shares authorized to be repurchased. There are 3,666,055 additional shares authorized to be repurchased under the 2022 Program as of February 1, 2025.
Repurchases Related to Employee Share-based Awards
During 2024, 2023 and 2022, employees tendered 249,678, 449,285 and 246,688 shares, respectively, related to certain share-based awards. These shares were tendered to satisfy tax withholding amounts for restricted stock, stock performance awards and non-qualified stock options. Accordingly, these share repurchases are not considered a part of the Company’s publicly announced stock repurchase programs.
Accumulated Other Comprehensive Loss
The following table sets forth the changes in accumulated other comprehensive loss, net of tax, by component for 2024, 2023 and 2022:
Pension and
Accumulated
Foreign
Other
Other
Currency
Postretirement
Comprehensive
($ thousands)
Translation
Transactions (1)
(Loss) Income
Balance January 29, 2022
$
(788)
$
(7,818)
$
(8,606)
Other comprehensive loss before reclassifications
(425)
(19,776)
(20,201)
Reclassifications:
Amounts reclassified from accumulated other comprehensive loss
-
2,991
2,991
Tax benefit
-
(934)
(934)
Net reclassifications
-
2,057
2,057
Other comprehensive loss
(425)
(17,719)
(18,144)
Balance January 28, 2023
$
(1,213)
$
(25,537)
$
(26,750)
Other comprehensive income (loss) before reclassifications
(10,506)
(10,391)
Reclassifications:
Amounts reclassified from accumulated other comprehensive loss
-
3,552
3,552
Tax benefit
-
(915)
(915)
Net reclassifications
-
2,637
2,637
Other comprehensive income (loss)
(7,869)
(7,754)
Balance February 3, 2024
$
(1,098)
$
(33,406)
$
(34,504)
Other comprehensive loss before reclassifications
(4,691)
(1,284)
(5,975)
Reclassifications:
Amounts reclassified from accumulated other comprehensive loss
-
8,695
8,695
Tax benefit
-
(2,238)
(2,238)
Net reclassifications
-
6,457
6,457
Other comprehensive (loss) income
(4,691)
5,173
Balance February 1, 2025
$
(5,789)
$
(28,233)
$
(34,022)
(1) Amounts reclassified are included in other (expense) income, net. Refer to Note 5 to the consolidated financial statements for additional information related to pension and other postretirement benefits.
15. SHARE-BASED COMPENSATION
The Company has share-based incentive compensation plans under which certain officers, employees and members of the Board of Directors are participants and may be granted restricted stock, stock performance awards, restricted stock units and stock options.
ASC 718, Compensation - Stock Compensation, and ASC 505, Equity, require companies to recognize compensation expense in an amount equal to the fair value of all share-based payments granted to employees over the requisite service period for each award. In certain limited circumstances, the Company’s incentive compensation plan provides for accelerated vesting of the awards, such as in the event of a change in control, qualified retirement, death or disability. The Company has a policy of issuing treasury shares in satisfaction of share-based awards.
Share-based compensation expense of $15.1 million, $14.8 million and $17.3 million was recognized in 2024, 2023 and 2022, respectively, as a component of selling and administrative expenses. The following table details the share-based compensation expense by plan for 2024, 2023 and 2022:
($ thousands)
Expense for share-based compensation plans, net of forfeitures:
Restricted stock
$
12,746
$
12,579
$
10,974
Stock performance awards
1,410
1,183
5,190
Restricted stock units
1,042
1,147
Total share-based compensation expense
$
15,145
$
14,804
$
17,311
The Company issued 80,069, 537,267 and 703,452 shares of common stock in 2024, 2023 and 2022, respectively, for restricted stock grants, stock performance awards issued to employees and common and restricted stock issued to non-employee directors, net of forfeitures and shares withheld to satisfy the tax withholding requirement.
The Company recognized excess tax benefits of $2.6 million, $3.1 million and $0.6 million in 2024, 2023, and 2022, respectively, related to restricted stock vestings and dividends and performance share award vestings. The excess tax benefit or provision for the respective periods were recorded in income tax provision on the Company’s consolidated statements of earnings.
Restricted Stock
Under the Company’s incentive compensation plans, restricted stock of the Company may be granted at no cost to certain officers, key employees and directors. Plan participants are entitled to cash dividends and voting rights for their respective shares. The restricted stock awards limit the sale or transfer of these shares during the requisite service period. Expense for restricted stock grants is recognized on a straight-line basis separately for each vesting portion of the stock award based upon the fair value of the award on the date of grant. The fair value of the restricted stock grants is the quoted market price for the Company’s common stock on the date of grant.
The following table summarizes restricted stock activity for 2024, 2023 and 2022:
Number of
Nonvested
Weighted-
Restricted
Average Grant
Shares
Date Fair Value
Nonvested at January 29, 2022
1,390,397
14.24
Granted
848,678
21.76
Vested
(525,399)
12.87
Forfeited
(109,716)
15.67
Nonvested at January 28, 2023
1,603,960
18.57
Granted
603,121
23.13
Vested
(513,238)
13.73
Forfeited
(181,422)
19.15
Nonvested at February 3, 2024
1,512,421
21.96
Granted
346,686
39.77
Vested
(620,800)
21.08
Forfeited
(96,988)
26.08
Nonvested at February 1, 2025
1,141,319
$
27.60
Of the 346,686 restricted shares granted during 2024, 13,692 shares have a cliff-vesting term of one year and 332,994 shares have a graded-vesting term of three years, with 50% vesting after two years and 50% after three years. Of the 603,121 restricted shares granted during 2023, 23,268 shares have a cliff-vesting term of one year, 7,000 shares have a graded vesting term of three years, with 50% vesting after eighteen months and 50% after three years, 5,800 shares have a graded-vesting term of two years and 567,053 shares have a graded-vesting term of three years, with 50% vesting after two years and 50% after three years. Of the 848,678 restricted shares granted during 2022, 10,470 shares have a cliff-
vesting term of one year, 63,614 shares have a cliff-vesting term of two years and 774,594 shares have a graded-vesting term of three years, with 50% vesting after two years and 50% after three years.
The total grant date fair value of restricted stock awards vested during the years ended February 1, 2025, February 3, 2024 and January 28, 2023 was $13.0 million, $7.0 million and $6.8 million, respectively. The total fair value of restricted stock awards that vested during the years ended February 1, 2025, February 3, 2024 and January 28, 2023 was $23.1 million, $12.2 million and $11.5 million, respectively. As of February 1, 2025, the total remaining unrecognized compensation cost related to nonvested restricted stock grants was $11.5 million, which will be amortized over the weighted-average remaining requisite service period of approximately 1.5 years.
Performance Share Awards
Under the Company’s incentive compensation plans, common stock or cash may be awarded at the end of the performance period at no cost to certain officers and key employees if certain financial goals are met. Under the plan, employees are granted performance share awards at a target number of shares or units, which generally vest over a three-year service period. At the end of the vesting period, the employee will have earned an amount of shares between 0% and 200% of the targeted award, depending on the attainment of certain financial goals for the service period and individual achievement of strategic initiatives over the cumulative period of the award. If the awards are granted in units, the employee will be given an amount of cash ranging from 0% to 200% of the equivalent market value of the targeted award. Expense for performance share awards is recognized based upon the fair value of the awards on the date of grant and the number of shares or cash that are probable to be awarded on a straight-line basis for each performance period of the share award.
During 2024, the Company granted performance share awards for a targeted 165,854 shares, with a weighted-average grant date fair value of $41.05 in connection with the 2024 performance award (2024 - 2026 performance period). During 2023, the Company granted performance share awards for a targeted 276,434 shares, with a weighted-average grant date fair value of $23.12 in connection with the 2023 performance award (2023 - 2025 performance period). The 2024 and 2023 performance awards are payable in common stock for up to 100% of the targeted award and the remainder in cash if any portion exceeds the targeted award. Compensation expense is recognized based on the fair value of the award and the number of shares or units that are probable to be awarded for each tranche in accordance with the vesting schedule of the units over the three-year service period.
In connection with a senior management transition during 2022, the Company approved the accelerated vesting of 30,000 performance-based share awards, representing the maximum payout of two of the four award tranches from the 2020 performance award. The performance conditions had been satisfied for the two award tranches based on the achievement of financial goals for the 2020 and 2021 fiscal periods. The modification to accelerate vesting eliminated the remaining service requirement. These awards had a weighted-average grant date fair value of $13.05 per share, but were revalued using a fair value on the date of modification of $24.31 per share. The modification of these awards resulted in incremental compensation expense of $0.4 million, which is presented in restructuring and other special charges on the consolidated statements of earnings for 2022.
The following table summarizes performance share award activity for 2024, 2023 and 2022:
Number of Nonvested
Number of Nonvested
Performance Share
Performance Share
Awards at Target
Awards at Maximum
Weighted-Average
Level
Level
Grant Date Fair Value
Nonvested at January 29, 2022
390,750
781,500
16.12
Granted
77,750
155,500
21.00
Vested
(172,500)
(345,000)
23.50
Forfeited
(15,000)
(30,000)
14.24
Nonvested at January 28, 2023
281,000
562,000
13.64
Granted
276,434
276,434
23.12
Vested
(273,918)
(547,836)
13.64
Forfeited
(14,868)
(21,950)
18.65
Nonvested at February 3, 2024
268,648
268,648
23.12
Granted
165,854
165,854
41.05
Vested
-
-
-
Forfeited
(21,886)
(21,886)
23.12
Nonvested at February 1, 2025
412,616
412,616
$
30.33
The total fair value of performance share awards that vested during the years ended February 1, 2025, February 3, 2024 and January 28, 2023 was zero, $13.8 million and $2.1 million, respectively. As of February 1, 2025, the remaining unrecognized compensation cost related to nonvested performance share awards for the 2024 performance award was $2.1 million, which will be recognized over the remaining service period of 1.6 years.
During 2022, the Company granted long-term incentive awards payable in cash for the 2022-2024 performance period, with a target value of $8.3 million and a maximum value of $16.6 million. During 2021, the Company granted long-term incentive awards payable in cash for the 2021-2023 performance period, with a target value of $7.3 million and a maximum value of $14.6 million. These awards, which vested after a three-year period, were dependent upon the attainment of certain financial goals of the Company for each of the three years and individual achievement of strategic initiatives over the cumulative period of the award. The estimated value of these awards, which is reflected within other accrued expenses on the consolidated balance sheets, was being accrued over the three-year performance period.
Restricted Stock Units for Non-Employee Directors
Equity-based grants may be made to non-employee directors in the form of restricted stock units (“RSUs”) payable in cash or common stock at no cost to the non-employee director. The RSUs are subject to a vesting requirement (usually one year), earn dividend equivalent units and are payable in cash or common stock on the date the director terminates service or such earlier date as a director may elect, subject to restrictions, based on the then current fair value of the Company’s common stock. Dividend equivalents are paid on outstanding RSUs at the same rate as dividends on the Company’s common stock, are automatically re-invested in additional RSUs and vest immediately as of the payment date for the dividend. Expense related to the initial grant of RSUs is recognized ratably over the vesting period based upon the fair value of the RSUs. The RSUs payable in cash are remeasured at the end of each period. Expense for the dividend equivalents is recognized at fair value immediately. Gains and losses resulting from changes in the fair value of the RSUs payable in cash subsequent to the vesting period and through the settlement date are recognized in the Company’s consolidated statements of earnings. Refer to Note 5 and Note 13 to the consolidated financial statements for information regarding the deferred compensation plan for non-employee directors.
The following table summarizes restricted stock unit activity for the year ended February 1, 2025:
Nonvested
Outstanding
Accrued (3)
RSUs
Weighted-
Number of
Number of
Total
Total
Average
Vested
Nonvested
Number of
Number of
Grant Date
RSUs
RSUs
RSUs (2)
RSUs
Fair Value
February 3, 2024
480,270
52,335
532,605
515,159
$
16.85
Granted (1)
3,972
27,690
31,662
22,534
35.01
Vested
46,842
(46,842)
-
15,512
19.41
Settled
(78,791)
-
(78,791)
(78,791)
41.27
February 1, 2025
452,293
33,183
485,476
474,414
$
28.38
(1) Granted RSUs include 4,278 RSUs resulting from dividend equivalents paid on outstanding RSUs, of which 3,972 related to outstanding vested RSUs and 306 to outstanding nonvested RSUs.
(2) Total number of RSUs as of February 1, 2025 includes 348,761 RSUs payable in shares and 136,715 RSUs payable in cash.
(3) Accrued RSUs include all fully vested awards and a pro-rata portion of nonvested awards based on the elapsed portion of the vesting period.
The following table summarizes RSUs granted, vested and settled during 2024, 2023 and 2022:
($ thousands, except per unit amounts)
Weighted-average grant date fair value of RSUs granted (1)
$
34.40
$
19.92
$
27.09
Fair value of RSUs vested
$
$
1,186
$
RSUs settled
78,791
17,017
114,242
(1) Includes dividend equivalents granted on outstanding RSUs, which vest immediately.
The following table details the RSU compensation (income) expense and the related income tax provision (benefit) for 2024, 2023 and 2022:
($ thousands)
Compensation (income) expense
$
(609)
$
$
Income tax provision (benefit)
(149)
(86)
Compensation (income) expense, net of tax
$
(452)
$
$
The aggregate fair value of RSUs outstanding and currently vested at February 1, 2025 is $8.9 million and $8.3 million, respectively. The liabilities associated with the accrued RSUs totaled $1.1 million and $2.6 million as of February 1, 2025 and February 3, 2024, respectively.
16. COMMITMENTS AND CONTINGENCIES
Environmental Remediation
Prior operations included numerous manufacturing and other facilities for which the Company may have responsibility under various environmental laws for the remediation of conditions that may be identified in the future. The Company is involved in environmental remediation and ongoing compliance activities at several sites and has been notified that it is or may be a potentially responsible party at several other sites.
Redfield
The Company is remediating, under the oversight of Colorado authorities, the groundwater and indoor air at its owned facility in Colorado (the “Redfield site” or, when referring to remediation activities at or under the facility, the “on-site
remediation”) and residential neighborhoods adjacent to and near the property (the “off-site remediation”) that have been affected by solvents previously used at the facility. The on-site remediation calls for the operation of a pump and treat system (which prevents migration of contaminated groundwater off the property) as the final remedy for the site, subject to monitoring and periodic review of the on-site conditions and other remedial technologies that may be developed in the future. In 2016, the Company submitted a revised plan to address on-site conditions, including direct treatment of source areas, and received approval from the oversight authorities to begin implementing the revised plan. The Company received permission from the oversight authorities to convert the pump and treat system to a passive treatment barrier system and completed the conversion during 2023.
Off-site groundwater concentrations have been reducing over time since installation of the pump and treat system in 2000 and injection of clean water beginning in 2003. However, localized areas of contaminated bedrock just beyond the property line continue to impact off-site groundwater. The modified workplan for addressing this condition includes converting the off-site bioremediation system into a monitoring well network and employing different remediation methods in these recalcitrant areas. In accordance with the workplan, a pilot test was conducted of certain groundwater remediation methods and the results of that test were used to develop more detailed plans for remedial activities in the off-site areas, which were approved by the authorities and are being implemented in a phased manner. The results of groundwater monitoring are being used to evaluate the effectiveness of these activities. The Company continues to implement the expanded remedy workplan that was approved by the oversight authorities in 2015 and to work with the oversight authorities on the off-site work plan.
The cumulative expenditures for both on-site and off-site remediation through February 1, 2025 were $34.7 million. The Company has recovered a portion of these expenditures from insurers and other third parties. The reserve for the anticipated future remediation activities at February 1, 2025 is $9.3 million, of which $8.4 million is recorded within other liabilities and $0.9 million is recorded within other accrued expenses. Of the total $9.3 million reserve, $4.9 million is for off-site remediation and $4.4 million is for on-site remediation. The liability for the on-site remediation was discounted at 4.8%. On an undiscounted basis, the on-site remediation liability would be $12.2 million as of February 1, 2025. The Company expects to spend approximately $0.2 million in the next year, $0.1 million in each of the following four years and $11.6 million in the aggregate thereafter related to the on-site remediation.
Other
Various federal and state authorities have identified the Company as a potentially responsible party for remediation at certain other sites. However, the Company does not currently believe that its liability for such sites, if any, would be material.
The Company continues to evaluate its estimated costs in conjunction with its environmental consultants and records its best estimate of such liabilities. However, future actions and the associated costs are subject to oversight and approval of various governmental authorities. Accordingly, the ultimate costs may vary, and it is possible costs may exceed the recorded amounts.
Litigation
The Company is involved in legal proceedings and litigation arising in the ordinary course of business. In the opinion of management, the outcome of such ordinary course of business proceedings and litigation currently pending is not expected to have a material adverse effect on the Company’s results of operations or financial position. Legal costs associated with litigation are generally expensed as incurred.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Col. A
Col. B
Col. C
Col. D
Col. E
Additions
Balance at
Charged to
Charged to Other
Balance at
Beginning
Costs and
Accounts -
Deductions -
End of
Description
of Period
Expenses
Describe
Describe
Period
($ thousands)
YEAR ENDED FEBRUARY 1, 2025
Deducted from assets or accounts:
Allowance for expected credit losses
$
8,820
$
(815)
$
-
$
(318)
(A)
$
8,323
Customer allowances
17,372
24,967
-
26,505
(B)
15,834
Customer discounts
4,125
11,461
-
13,753
(B)
1,833
Inventory markdowns and other
20,935
36,791
-
40,032
(C)
17,694
Deferred tax asset valuation allowance
7,153
(3,747)
-
-
3,406
YEAR ENDED FEBRUARY 3, 2024
Deducted from assets or accounts:
Allowance for expected credit losses
$
8,903
$
1,018
$
-
$
1,101
(A)
$
8,820
Customer allowances
18,624
28,535
-
29,787
(B)
17,372
Customer discounts
3,293
9,904
-
9,072
(B)
4,125
Inventory markdowns and other
43,911
36,485
-
59,461
(C)
20,935
Deferred tax asset valuation allowance
39,540
(32,387)
-
-
7,153
YEAR ENDED JANUARY 29, 2023
Deducted from assets or accounts:
Allowance for expected credit losses
$
9,601
$
(262)
$
-
$
(A)
$
8,903
Customer allowances
17,857
27,559
-
26,792
(B)
18,624
Customer discounts
2,472
11,357
-
10,536
(B)
3,293
Inventory markdowns and other
30,455
53,787
-
40,331
(C)
43,911
Deferred tax asset valuation allowance
58,959
(19,419)
-
-
39,540
(A) Accounts written off, net of recoveries.
(B) Discounts and allowances granted to wholesale customers of the Brand Portfolio segment.
(C) Adjustment upon sale of related inventories.
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9ACONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
It is the Chief Executive Officer’s and Chief Financial Officer’s ultimate responsibility to ensure we maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms and is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our disclosure controls and procedures include mandatory communication of material events; automated accounting processing and reporting; management review of monthly, quarterly and annual results; an established system of internal controls; and internal control reviews by our internal auditors.
A control system, no matter how well-conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Furthermore, the design of a control system must reflect the fact there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in
all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to errors or fraud may occur and not be detected. Our disclosure controls and procedures are designed to provide a reasonable level of assurance that their objectives are achieved. As of February 1, 2025, management of the Company, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based upon and as of the date of that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded our disclosure controls and procedures were effective at the reasonable assurance level.
Internal Control Over Financial Reporting
Based on the evaluation of internal control over financial reporting, the Chief Executive Officer and Chief Financial Officer have concluded that there have been no changes in the Company’s internal controls over financial reporting or in other factors during the quarter ended February 1, 2025, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
ITEM 9BOTHER INFORMATION
During the thirteen weeks ended February 1, 2025, no director or Section 16 officer adopted or terminated any “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement”, as each term is defined in Item 408(a) of Regulation S-K.
ITEM 9CDISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
PART III
ITEM 10DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information regarding Directors of the Company is set forth under the caption Proposal 1 - Election of Directors in the Proxy Statement for the Annual Meeting of Shareholders to be held May 22, 2025, which information is incorporated herein by reference.
Information regarding Executive Officers of the Registrant is set forth under the caption Information about our Executive Officers that can be found in Item 1 of this report, which information is incorporated herein by reference.
Information regarding Section 16, Beneficial Ownership Reporting Compliance, is set forth under the caption Delinquent Section 16(a) Reports in the Proxy Statement for the Annual Meeting of Shareholders to be held May 22, 2025, which information is incorporated herein by reference.
Information regarding the Audit Committee and the Audit Committee financial expert is set forth under the caption Board Meetings and Committees in the Proxy Statement for the Annual Meeting of Shareholders to be held May 22, 2025, which information is incorporated herein by reference.
Information regarding the Corporate Governance Guidelines, Code of Business Conduct, and Code of Ethics is set forth under the caption Corporate Governance in the Proxy Statement for the Annual Meeting of Shareholders to be held May 22, 2025, which information is incorporated herein by reference.
ITEM 11EXECUTIVE COMPENSATION
Information regarding Executive Compensation is set forth under the captions Compensation Discussion and Analysis, Executive Compensation, and Compensation of Non-Employee Directors in the Proxy Statement for the Annual Meeting of Shareholders to be held May 22, 2025, which information (other than the information set forth under “Pay Versus Performance”) is incorporated herein by reference.
Information regarding the Culture, Compensation and People Committee Report is set forth under the caption Culture, Compensation and People Committee Report in the Proxy Statement for the Annual Meeting of Shareholders to be held May 22, 2025, which information is incorporated herein by reference.
Information regarding Compensation Committee Interlocks and Insider Participation is set forth under the caption Culture, Compensation and People Committee Interlocks and Insider Participation in the Proxy Statement for the Annual Meeting of Shareholders to be held May 22, 2025, which information is incorporated herein by reference.
ITEM 12SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Information regarding Company Stock Ownership by Directors, Officers and Principal Holders of Our Stock is set forth under the caption Stock Ownership by Directors, Executive Officers and 5% Shareholders in the Proxy Statement for the Annual Meeting of Shareholders to be held May 22, 2025, which information is incorporated herein by reference.
Equity Compensation Plan Information
The following table sets forth aggregate information regarding the Company’s equity compensation plans as of February 1, 2025:
Number of
securities
remaining
available for
future
Number of
issuance
securities to be
Weighted-
under equity
issued upon
average
compensation
exercise of
exercise price
plans
outstanding
of outstanding
(excluding
options,
options,
securities
warrants and
warrants and
reflected in
rights
rights
column (a))
Plan Category
(a)
(b)
(c)
Equity compensation plans approved by security holders
412,616
(1)
$
-
(1)
1,533,281
(2)
Equity compensation plans not approved by security holders
-
-
-
Total
412,616
$
-
1,533,281
(1) Column (a) includes 412,616 performance share units payable in stock, which reflects the maximum number of shares to be issued under the performance share plans. The target number of shares to be issued under the plans is 412,616. Performance share awards were disregarded for purposes of computing the weighted-average exercise price in column
(b). There were no outstanding (vested and nonvested) stock options as of February 1, 2025. This table excludes independent directors’ deferred compensation units and restricted stock units payable in cash.
(2) Represents our remaining shares available for award grants based upon the provisions of the plans, which reflect our practice to reserve shares for outstanding awards. The number of securities available for grant has been reduced for performance share awards payable in stock. Performance share awards are reserved based on the maximum payout level.
Information regarding share-based plans is set forth in Note 15 to the consolidated financial statements and is hereby incorporated by reference.
ITEM 13CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information regarding Certain Relationships and Related Transactions is set forth under the caption Related Party Transactions in the Proxy Statement for the Annual Meeting of Shareholders to be held May 22, 2025, which information is incorporated herein by reference.
Information regarding Director Independence is set forth under the caption Director Independence in the Proxy Statement for the Annual Meeting of Shareholders to be held May 22, 2025, which information is incorporated herein by reference.
ITEM 14PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information regarding our Principal Accountant Fees and Services is set forth under the caption Fees Paid to Independent Registered Public Accountants in the Proxy Statement for the Annual Meeting of Shareholders to be held May 22, 2025, which information is incorporated herein by reference.
PART IV
ITEM 15EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)
(1) and (2) The list of financial statements and Financial Statement Schedules required by this item is included in the Index under Financial Statements and Supplementary Data. All other schedules specified under Regulation S-X have been omitted because they are not applicable, because they are not required or because the information required is included in the financial statements or notes thereto.
(3) Exhibits
Exhibit No.
Description
2.1
Sale and Purchase Agreement, dated February 16, 2025, by and between Caleres, Inc. (the “Company”) and Tapestry, Inc. incorporated herein by reference to Exhibit 2.1 to the Company's Form 8-K filed February 19, 2025.
3.1
Restated Certificate of Incorporation of Caleres, Inc. incorporated herein by reference to Exhibit 3.1 to the Company's Form 8-K filed June 1, 2020.
3.2
Bylaws of the Company as amended through November 5, 2024, incorporated herein by reference to Exhibit 3.1 to the Company’s Form 8-K filed November 7, 2024.
4.1
Description of the Registrant's Securities Registered Pursuant to Section 12 of The Securities Exchange Act of 1934, incorporated herein by reference to Exhibit 4.1 to the Company’s Form 10-K for the year ended February 1, 2020, and filed March 31, 2020.
10.1
First Amendment to Fourth Amended and Restated Credit Agreement, dated as of July 20, 2015 (the “Credit Agreement”), among the Company, as lead borrower for itself and on behalf of certain of its subsidiaries, and Bank of America, N.A., as lead issuing bank, administrative agent and collateral agent, Wells Fargo Bank, National Association, as an issuing bank, Wells Fargo Bank, National Association, as syndication agent, JPMorgan Chase Bank, N.A. and SunTrust Bank, as co-documentation agents, and the other financial
institutions party thereto, as lenders, incorporated herein by reference to Exhibit 10.1 to the Company’s Form 8-K dated and filed July 20, 2015.
10.1a
Second Amendment to Fourth Amended and Restated Credit Agreement, dated August 17, 2016, among the Company, as lead borrower for itself and on behalf of certain of its subsidiaries, and the financial institutions party thereto, incorporated herein by reference to Exhibit 10.1 to the Company’s Form 10-Q for the quarterly period ended July 30, 2016.
10.1b
Third Amendment to Fourth Amended and Restated Credit Agreement, dated January 18, 2019, among the Company, as lead borrower for itself and on behalf of certain of its subsidiaries, and the financial institutions party thereto, incorporated herein by reference to Exhibit 10.1 to the Company’s Form 8-K dated and filed January 23, 2019.
10.1c
Fourth Amendment to Fourth Amended and Restated Credit Agreement, dated April 14, 2020, among the Company, as lead borrower for itself and on behalf of certain of its subsidiaries, and the financial institutions party thereto, incorporated herein by reference to Exhibit 10.1 to the Company’s 8-K dated and filed April 20, 2020.
10.1d
Fifth Amendment to Fourth Amended and Restated Credit Agreement, dated October 5, 2021, among the Company, as lead borrower for itself and on behalf of certain of its subsidiaries, and the financial institutions party thereto, incorporated herein by reference to Exhibit 10.1 to the Company’s 8-K dated and filed October 7, 2021.
10.1e
Sixth Amendment to Fourth Amended and Restated Credit Agreement, dated April 27, 2023, among the Company, as lead borrower for itself and on behalf of certain of its subsidiaries, and the financial institutions party thereto, incorporated herein by reference to Exhibit 10.1 to the Company’s Form 10-Q for the quarterly period ended April 29, 2023, and filed June 6, 2023.
10.2a*
Caleres, Inc. Incentive and Stock Compensation Plan of 2017, incorporated herein by reference to Exhibit A to the Company’s definitive proxy statement dated and filed April 14, 2017.
10.2b*
Form of Performance Award Agreement (for 2021-2023 performance period) under the Company’s Incentive and Stock Compensation Plan of 2017, incorporated herein by reference to Exhibit 10.4e to the Company’s Form 10-K for the year ended January 30, 2021, and filed March 30, 2021.
10.2c*
Form of Performance Award Agreement (for 2022-2024 performance period) under the Company’s Incentive and Stock Compensation Plan of 2017, incorporated herein by reference to Exhibit 10.4e to the Company’s Form 10-K for the year ended January 29, 2022, and filed March 28, 2022.
10.2d*
Form of Restricted Stock Award Agreement (for employee grants commencing March 2019) under the Company’s Incentive and Stock Compensation Plan of 2017, incorporated herein by reference to Exhibit 10.4f to the Company’s Form 10-K for the year ended February 2, 2019, and filed April 2, 2019.
10.2e*
Form of Restricted Stock Award Agreement (for employee grants commencing March 2020) under the Company’s Incentive and Stock Compensation Plan of 2017, incorporated herein by reference to Exhibit 10.4h to the Company’s 10-K for the year ended February 1, 2020, and filed March 31, 2020.
10.2f*
Form of Restricted Stock Award Agreement (for employee grants commencing March 2021) under the Company’s Incentive and Stock Compensation Plan of 2017, incorporated herein by reference to Exhibit 10.4j to the Company’s 10-K for the year ended January 31, 2021, and filed March 30, 2021.
10.2g*
Form of Restricted Stock Award Agreement (for employee grants commencing March 2022) under the Company’s Incentive and Stock Compensation Plan of 2017, incorporated herein by reference to Exhibit 10.4j to the Company’s Form 10-K for the year ended January 29, 2022, and filed March 28, 2022.
10.3a*
Caleres, Inc. Incentive and Stock Compensation Plan of 2022, incorporated herein by reference to Exhibit A to the Company’s definitive proxy statement dated and filed April 14, 2022.
10.3b*
Form of Performance Award Agreement under the Company’s Incentive and Stock Compensation Plan of 2022 (for grants commencing in May 2022), incorporated herein by reference to Exhibit 10.4a to the Company’s Form 10-Q for the quarter ended April 30, 2022, and filed June 7, 2022.
10.3c*
Form of Restricted Stock Award Agreement under the Company’s Incentive and Stock Compensation Plan of 2022 (for grants commencing in May 2022), incorporated herein by reference to Exhibit 10.4b to the Company’s Form 10-Q for the quarter ended April 30, 2022, and filed June 7, 2022.
10.3d*
Form of Performance Award Agreement (for 2023 - 2025 performance period) under the Company’s Incentive and Stock Compensation Plan of 2022, incorporated herein by reference to Exhibit 10.3d to the Company’s Form 10-K for the year ended January 28, 2023, and filed March 28, 2023.
10.3e*
Form of Restricted Award Agreement (for employee grants commencing March 2023) under the Company’s Incentive and Stock Compensation Plan of 2022, incorporated herein by reference to Exhibit 10.3e to the Company’s Form 10-K for the year ended January 28, 2023, and filed March 28, 2023.
10.3f*
Form of Performance Award Agreement (for 2024 - 2026 performance period) under the Company’s Incentive and Stock Compensation Plan of 2022, incorporated herein by reference to Exhibit 10.3f to the Company’s Form 10-K for the year ended February 3, 2024, and filed April 2, 2024.
10.3g*
Form of Restricted Award Agreement (for employee grants commencing March 2024) under the Company’s Incentive and Stock Compensation Plan of 2022, incorporated herein by reference to Exhibit 10.3g to the Company’s Form 10-K for the year ended February 3, 2024, and filed April 2, 2024.
†10.3h*
Form of Performance Award Agreement (for 2025 - 2027 performance period) under the Company’s Incentive and Stock Compensation Plan of 2022, filed herewith.
†10.3i*
Form of Restricted Award Agreement (for employee grants commencing March 2025) under the Company’s Incentive and Stock Compensation Plan of 2022, filed herewith.
10.4a*
Form of Non-Employee Director Restricted Stock Unit Agreement between the Company and its Non-Employee Directors (for grants commencing in 2022), incorporated herein by reference to Exhibit 10.5a to the Company’s Form 10-Q for the quarter ended April 30, 2022, and filed June 7, 2022.
10.4b*
Form of Non-Employee Director Restricted Stock Award Agreement between the Company and its Non-Employee Directors (for grants commencing in 2022), incorporated herein by reference to Exhibit 10.5b to the Company’s Form 10-Q for the quarter ended April 30, 2022, and filed June 7, 2022.
10.5*
Caleres, Inc. Deferred Compensation Plan for Non-Employee Directors, as amended and restated as of May 28, 2015, incorporated herein by reference to Exhibit 10.2 to the Company’s Form 10-Q for the quarter ended May 2, 2015, and filed June 10, 2015.
10.6*
Amendment to the Caleres, Inc. Supplemental Executive Retirement Plan, incorporated herein by reference to Exhibit 10.1 to the Company’s Form 8-K dated December 22, 2022, and filed December 28, 2022.
10.7*
Caleres, Inc. Supplemental Executive Retirement Plan (SERP), as amended and restated as of May 28, 2015, incorporated herein by reference to Exhibit 10.3 to the Company’s Form 10-Q for the quarter ended May 2, 2015, and filed June 10, 2015.
10.8*
Caleres, Inc. Deferred Compensation Plan, as amended and restated as of May 28, 2015, incorporated herein by reference to Exhibit 10.4 to the Company’s Form 10-Q for the quarter ended May 2, 2015, and filed June 10, 2015.
10.9*
Caleres, Inc. Non-Employee Director Share Plan (2009), incorporated herein by reference to Exhibit 10.5 to the Company’s Form 10-Q for the quarter ended May 2, 2015, and filed June 10, 2015.
10.10*
Severance Agreement, dated March 24, 2009 and effective as of April 1, 2009, between the Company and Daniel R. Friedman, incorporated herein by reference to Exhibit 10.16 to the Company’s Form 10-K for the year ended January 31, 2015, and filed March 31, 2015.
10.11*
Form of Amendment letter dated December 18, 2009, to the Severance Agreements between the Company and Daniel R. Friedman, as incorporated herein by reference to Exhibit 10.6 to the Company’s Form 10-Q for the quarter ended July 31, 2010, and filed September 7, 2010.
10.12*
Severance Agreement, effective June 14, 2018, between the Company and John W. Schmidt, incorporated herein by reference to Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended August 4, 2018, and filed September 12, 2018.
10.13*
Severance Agreement, effective January 31, 2022, between the Company and Michael R. Edwards, incorporated herein by reference to Exhibit 10.15 to the Company’s Form 10-K for the year ended January 28, 2023, and filed March 28, 2022.
10.14*
Severance Agreement, effective September 12, 2022, between the Company and Jack P. Calandra, incorporated herein by reference to Exhibit 10.10 to the Company’s Form 10-Q for the quarter ended October 29, 2022, and filed December 6, 2022.
10.15*
Employment Agreement, effective as of January 12, 2023, between the Company and Diane M. Sullivan, incorporated herein by reference to Exhibit 10.15 to the Company’s Form 10-K for the year ended January 28, 2023, and filed March 28, 2023.
10.16*
Caleres, Inc. Nonqualified Restoration Plan, incorporated herein by reference to Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended October 28, 2023, and filed December 5, 2023.
†21
Subsidiaries of the registrant.
†23
Consent of Independent Registered Public Accounting Firm.
†24
Power of attorney (contained on signature page).
†31.1
Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
†31.2
Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
†32.1
Certification of the Chief Executive and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
97.1
Caleres, Inc. Incentive Compensation Recovery Policy, incorporated herein by reference to Exhibit 97.1 to the Company’s Form 10-K for the year ended February 3, 2024, and filed April 2, 2024.
†101.INS
Inline XBRL Instance Document
†101.SCH
Inline XBRL Taxonomy Extension Schema Document
†101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
†101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
†101.PRE
Inline XBRL Taxonomy Presentation Linkbase Document
†101.DEF
Inline XBRL Taxonomy Definition Linkbase Document
†104
Cover Page Interactive Data File, formatted in iXBRL and contained in Exhibit 101.
(b)Exhibits:
See Item 15(a)(3) above. On request, copies of any exhibit will be furnished to shareholders upon payment of the Company’s reasonable expenses incurred in furnishing such exhibits.
(c)Financial Statement Schedules:
See Item 8 above.
*
Denotes management contract or compensatory plan arrangements.
†
Denotes exhibit is filed with this Form 10-K.
ITEM 16FORM 10-K SUMMARY
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CALERES, INC.
By:
/s/ Jack P. Calandra
Jack P. Calandra
Senior Vice President and Chief Financial Officer
Date: April 1, 2025
Know all men by these presents, that each person whose signature appears below constitutes and appoints John W. Schmidt and Jack P. Calandra his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant, on the dates and in the capacities indicated.
Signatures
Date
Title
/s/ John W. Schmidt
President, Chief Executive Officer and Director
John W. Schmidt
April 1, 2025
(Principal Executive Officer)
/s/ Jack P. Calandra
Senior Vice President and Chief Financial Officer
Jack P. Calandra
April 1, 2025
(Principal Financial Officer)
/s/ Todd E. Hasty
Senior Vice President and Chief Accounting Officer
Todd E. Hasty
April 1, 2025
(Principal Accounting Officer)
/s/ Diane M. Sullivan
Diane M. Sullivan
April 1, 2025
Executive Chair
/s/ Lisa A. Flavin
Lisa A. Flavin
April 1, 2025
Director
/s/ Brenda C. Freeman
Brenda C. Freeman
April 1, 2025
Director
/s/ Kyle F. Gendreau
Kyle F. Gendreau
April 1, 2025
Director
/s/ Lori H. Greeley
Lori H. Greeley
April 1, 2025
Director
/s/ Mahendra R. Gupta
Mahendra R. Gupta
April 1, 2025
Director
/s/ Ward M. Klein
Ward M. Klein
April 1, 2025
Director
/s/ Steven W. Korn
Steven W. Korn
April 1, 2025
Director
/s/ Molly Langenstein
Molly Langenstein
April 1, 2025
Director
/s/ Wenda Harris Millard
Wenda Harris Millard
April 1, 2025
Director
/s/ Bruce K. Thorn
Bruce K. Thorn
April 1, 2025
Director

---

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

---

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework). Based on our evaluation, our principal executive officer and principal financial officer have concluded that the Company’s internal control over financial reporting was effective as of February 1, 2025. The effectiveness of our internal control over financial reporting as of February 1, 2025 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in its report, which is included herein.
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Caleres, Inc.
Opinion on Internal Control Over Financial Reporting
We have audited Caleres, Inc.’s internal control over financial reporting as of February 1, 2025, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Caleres, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of February 1, 2025, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of February 1, 2025 and February 3, 2024, the related consolidated statements of earnings, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended February 1, 2025, and the related notes and financial statement schedule listed in the Index at Item 15(a), and our report dated April 1, 2025 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
St. Louis, Missouri
April 1, 2025
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Caleres, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Caleres, Inc. (the Company) as of February 1, 2025 and February 3, 2024, the related consolidated statements of earnings, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended February 1, 2025, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at February 1, 2025 and February 3, 2024, and the results of its operations and its cash flows for each of the three years in the period ended February 1, 2025, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of February 1, 2025, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated April 1, 2025 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.
Inventory Markdown Reserves
Description of the Matter
As described in Note 1 and Note 8, the Company had inventories of $565.2 million as of February 1, 2025 which included finished goods of $550.2 million, net of related markdown reserves of $17.7 million. The Company provides markdown reserves to reduce the carrying values of inventories. In determining markdown reserves, the Company considers recent and forecasted sales prices, the length of time the product is held in inventory, quantities of various product styles contained in inventory as well as demand, among other factors.
Auditing the Company’s Brand Portfolio markdown reserves was complex and involved a high degree of subjectivity, as it included assessing the significant assumptions, including forecasted sales prices and demand, considering the length of time the product is held in inventory and quantities of various product styles contained in inventory.
How We Addressed the Matter in Our Audit
We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company's markdown reserves determination process. This included controls over the Company’s review of the significant assumptions underlying the markdown reserves estimate, as outlined above.
We performed audit procedures which included, among other procedures, testing the accuracy and completeness of the underlying data used in the estimation calculations and evaluating significant assumptions, including forecasted sales prices, and demand, considering the length of time the product is held in inventory and quantities of various product styles contained in inventory. For example, we compared recent sales of inventory items on-hand at year-end, performed a retrospective review analysis comparing sales activity in the current year to the inventory markdown reserves estimated by the Company in the prior year to evaluate management’s ability to accurately estimate the markdown reserves, and developed an independent expectation of the markdown reserves using historical activity and compared our independent expectation to the markdown reserves recorded. In addition, we performed inquiries of the Company’s management to evaluate the Company’s estimate of the markdown reserves.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 1917.
St. Louis, Missouri
April 1, 2025
Consolidated Balance Sheets
($ thousands)
February 1, 2025
February 3, 2024
Assets
Current assets:
Cash and cash equivalents
$
29,636
$
21,358
Receivables, net of allowances of $25,990 in 2024 and $30,317 in 2023
155,905
140,400
Inventories, net of adjustment to last-in, first-out cost of $10,878 in 2024 and $10,254 in 2023
565,241
540,674
Income taxes
13,668
14,215
Property and equipment, held for sale
16,777
16,777
Prepaid expenses and other current assets
55,282
55,485
Total current assets
836,509
788,909
Prepaid pension costs
78,463
74,951
Lease right-of-use assets
564,330
528,029
Property and equipment, net
175,213
167,583
Deferred income taxes
4,826
4,401
Goodwill and intangible assets, net
192,274
203,310
Other assets
43,139
37,563
Total assets
$
1,894,754
$
1,804,746
Liabilities and Equity
Current liabilities:
Borrowings under revolving credit agreement
$
219,500
$
182,000
Trade accounts payable
237,038
251,912
Employee compensation and benefits
56,284
70,316
Income taxes
6,425
11,222
Lease obligations
127,522
112,764
Other accrued expenses
111,164
114,742
Total current liabilities
757,933
742,956
Other liabilities:
Noncurrent lease obligations
479,524
453,097
Income taxes
2,464
2,464
Deferred income taxes
31,772
11,536
Other liabilities
17,112
27,123
Total other liabilities
530,872
494,220
Equity:
Common stock, $0.01 par value, 33,631,764 and 35,490,019 shares outstanding in 2024 and 2023, respectively
Additional paid-in capital
190,320
184,451
Accumulated other comprehensive loss
(34,022)
(34,504)
Retained earnings
442,390
410,329
Total Caleres, Inc. shareholders’ equity
599,024
560,631
Noncontrolling interests
6,925
6,939
Total equity
605,949
567,570
Total liabilities and equity
$
1,894,754
$
1,804,746
See notes to consolidated financial statements.
Consolidated Statements of Earnings
($ thousands, except per share amounts)
Net sales
$
2,722,683
$
2,817,294
$
2,968,138
Cost of goods sold
1,500,641
1,554,337
1,683,265
Gross profit
1,222,042
1,262,957
1,284,873
Selling and administrative expenses
1,065,019
1,062,399
1,067,636
Restructuring and other special charges, net
7,167
6,103
2,910
Operating earnings
149,856
194,455
214,327
Interest expense, net
(13,957)
(19,343)
(14,264)
Other (expense) income, net
(741)
6,210
12,971
Earnings before income taxes
135,158
181,322
213,034
Income tax provision
(29,061)
(9,490)
(33,339)
Net earnings
106,097
171,832
179,695
Net (loss) earnings attributable to noncontrolling interests
(1,158)
(2,047)
Net earnings attributable to Caleres, Inc.
107,255
171,391
181,742
Basic earnings per common share attributable to Caleres, Inc. shareholders
$
3.10
$
4.80
$
4.98
Diluted earnings per common share attributable to Caleres, Inc. shareholders
$
3.09
$
4.80
$
4.92
See notes to consolidated financial statements.
Consolidated Statements of Comprehensive Income
($ thousands)
Net earnings
$
106,097
$
171,832
$
179,695
Other comprehensive (loss) income ("OCI"), net of tax:
Foreign currency translation adjustment
(5,547)
(907)
Pension and other postretirement benefits adjustments
5,173
(7,869)
(17,719)
Other comprehensive loss, net of tax
(374)
(7,686)
(18,626)
Comprehensive income
105,723
164,146
161,069
Comprehensive (loss) income attributable to noncontrolling interests
(2,014)
(2,529)
Comprehensive income attributable to Caleres, Inc.
$
107,737
$
163,637
$
163,598
See notes to consolidated financial statements.
Consolidated Statements of Cash Flows
($ thousands)
Operating Activities
Net earnings
$
106,097
$
171,832
$
179,695
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation
40,245
36,172
32,449
Amortization of capitalized software
5,147
5,026
4,451
Amortization of intangible assets
11,036
12,082
12,111
Amortization of debt issuance costs and debt discount
Share-based compensation expense
15,145
14,804
17,311
Loss on disposal of property and equipment
1,353
1,369
Impairment charges for property, equipment, and lease right-of-use assets
1,864
1,803
Adjustment to expected credit losses
(815)
1,018
(262)
Deferred income taxes
19,811
(11,866)
4,270
Changes in operating assets and liabilities:
Receivables
(15,614)
(8,494)
(10,302)
Inventories
(23,289)
39,495
16,242
Prepaid expenses and other current and noncurrent assets
(6,744)
(15,285)
(1,971)
Trade accounts payable
(14,356)
22,038
(101,450)
Accrued expenses and other liabilities
(28,889)
(70,974)
(34,590)
Income taxes, net
(4,250)
1,562
5,896
Other, net
(1,654)
(1,550)
Net cash provided by operating activities
104,562
200,151
125,879
Investing Activities
Purchases of property and equipment
(49,147)
(44,584)
(55,913)
Capitalized software
(2,539)
(5,034)
(8,124)
Net cash used for investing activities
(51,686)
(49,618)
(64,037)
Financing Activities
Borrowings under revolving credit agreement
639,868
532,500
859,500
Repayments under revolving credit agreement
(602,368)
(658,000)
(842,000)
Dividends paid
(9,694)
(9,954)
(10,184)
Acquisition of treasury stock
(65,039)
(17,445)
(63,225)
Issuance of common stock under share-based plans, net
(9,276)
(11,094)
(5,387)
Contributions by noncontrolling interests
2,000
1,000
3,142
Net cash used for financing activities
(44,509)
(162,993)
(58,154)
Effect of exchange rate changes on cash and cash equivalents
(89)
(103)
Increase (decrease) in cash and cash equivalents
8,278
(12,342)
3,585
Cash and cash equivalents at beginning of period
21,358
33,700
30,115
Cash and cash equivalents at end of period
$
29,636
$
21,358
$
33,700
See notes to consolidated financial statements, including the supplemental disclosures on cash flows in Note 1.
Consolidated Statements of Shareholders’ Equity
Accumulated
Other
Total
Comprehensive
Caleres, Inc.
Non-
($ thousands, except number of shares
Common Stock
Additional
(Loss)
Retained
Shareholders’
controlling
and per share amounts)
Shares
Dollars
Paid-In Capital
Income
Earnings
Equity
Interests
Total Equity
BALANCE JANUARY 29, 2022
37,635,145
$
$
168,830
$
(8,606)
$
157,970
$
318,570
$
4,817
$
323,387
Net earnings (loss)
181,742
181,742
(2,047)
179,695
Foreign currency translation adjustment
(425)
(425)
(482)
(907)
Pension and other postretirement benefits adjustments, net of tax of $6,145
(17,719)
(17,719)
(17,719)
Comprehensive (loss) income
(18,144)
181,742
163,598
(2,529)
161,069
Contributions by noncontrolling interests, net
-
3,142
3,142
Dividends ($0.28 per share)
(10,184)
(10,184)
(10,184)
Acquisition of treasury stock
(2,622,845)
(26)
(63,199)
(63,225)
(63,225)
Issuance of common stock under share-based plans, net
703,452
(5,394)
(5,387)
(5,387)
Share-based compensation expense
17,311
17,311
17,311
BALANCE JANUARY 28, 2023
35,715,752
$
$
180,747
$
(26,750)
$
266,329
$
420,683
$
5,430
$
426,113
Net earnings
171,391
171,391
171,832
Foreign currency translation adjustment
Pension and other postretirement benefits adjustments, net of tax of $2,724
(7,869)
(7,869)
(7,869)
Comprehensive (loss) income
(7,754)
171,391
163,637
164,146
Contributions by noncontrolling interests, net
-
1,000
1,000
Dividends ($0.28 per share)
(9,954)
(9,954)
(9,954)
Acquisition of treasury stock
(763,000)
(8)
(17,437)
(17,445)
(17,445)
Issuance of common stock under share-based plans, net
537,267
(11,100)
(11,094)
(11,094)
Share-based compensation expense
14,804
14,804
14,804
BALANCE FEBRUARY 3, 2024
35,490,019
$
$
184,451
$
(34,504)
$
410,329
$
560,631
$
6,939
$
567,570
Net earnings (loss)
107,255
107,255
(1,158)
106,097
Foreign currency translation adjustment
(4,691)
(4,691)
(856)
(5,547)
Pension and other postretirement benefits adjustments, net of tax of $1,796
5,173
5,173
5,173
Comprehensive income (loss)
107,255
107,737
(2,014)
105,723
Contributions by noncontrolling interests, net
-
2,000
2,000
Dividends ($0.28 per share)
(9,694)
(9,694)
(9,694)
Acquisition of treasury stock
(1,938,324)
(19)
(65,500)
(65,519)
(65,519)
Issuance of common stock under share-based plans, net
80,069
-
(9,276)
(9,276)
(9,276)
Share-based compensation expense
15,145
15,145
15,145
BALANCE FEBRUARY 1, 2025
33,631,764
$
$
190,320
$
(34,022)
$
442,390
$
599,024
$
6,925
$
605,949
See notes to consolidated financial statements.
Notes to Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Caleres, Inc., originally founded as Brown Shoe Company in 1878 and incorporated in 1913, is a global footwear company. The Company’s shares are traded under the “CAL” symbol on the New York Stock Exchange.
The Company provides a broad offering of branded, licensed and private-label athletic, casual and dress footwear products to women, men and children. The footwear is sold at a variety of price points through multiple distribution channels both domestically and internationally. As of February 1, 2025, the Company operated 960 retail shoe stores in the United States, Canada, East Asia and Guam under the Famous Footwear, Sam Edelman, Naturalizer and Allen Edmonds names. In addition, through its Brand Portfolio segment, the Company designs, sources, manufactures and markets footwear to retail stores domestically and internationally, including online retailers, national chains, department stores, independent retailers and mass merchandisers. Refer to Note 2 to the consolidated financial statements for additional information regarding the Company’s revenue by category and Note 7 for discussion of the Company’s business segments.
The Company’s business is seasonal in nature due to consumer spending patterns with higher back-to-school and holiday season sales. Although the third fiscal quarter has historically accounted for a substantial portion of the Company’s earnings for the year, the Company has experienced more equal distribution among the quarters in recent years.
Consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned and majority-owned subsidiaries, after the elimination of intercompany accounts and transactions.
Noncontrolling Interests
Noncontrolling interests in the Company’s consolidated financial statements result from the accounting for noncontrolling interests in partially-owned consolidated subsidiaries or affiliates. In 2019, the Company entered into a joint venture with Brand Investment Holding Limited ("Brand Investment Holding"), a member of the Gemkell Group, to sell branded footwear in China, including Sam Edelman, Naturalizer and other brands. The Company and Brand Investment Holding are each 50% owners of the joint venture, which is named CLT Brand Solutions ("CLT"). In 2024, capital contributions of $4.0 million were made to CLT, including $2.0 million received from Brand Investment Holding. In 2023, capital contributions of $2.0 million were made to CLT, including $1.0 million received from Brand Investment Holding. As of February 1, 2025 and February 3, 2024, assets of CLT were $27.1 million and $23.2 million, respectively, and liabilities were $13.2 million and $9.3 million, respectively. Net sales of CLT were $29.8 million, $26.8 million and $16.9 million in 2024, 2023 and 2022, respectively. Operating earnings of CLT were $0.5 million for 2023 and operating losses were $2.6 million and $2.7 million in 2024 and 2022, respectively.
The Company consolidates CLT into its consolidated financial statements on a one-month lag. Net (loss) earnings attributable to noncontrolling interests represents the share of net earnings or losses that are attributable to Brand Investment Holding. Transactions between the Company and the joint venture have been eliminated in the consolidated financial statements.
Accounting Period
The Company’s fiscal year is the 52- or 53-week period ending the Saturday nearest to January 31. Fiscal years 2024 and 2022, both of which included 52 weeks, ended on February 1, 2025 and January 28, 2023, respectively. Fiscal year 2023 included a 53-week period ending February 3, 2024.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of three months or less when purchased to be cash equivalents. Cash equivalents also include amounts due from third-party financial institutions for credit and debit card transactions. These receivables typically settle in five days or less. Amounts due from the financial institutions for these transactions totaled $8.4 million and $9.3 million as of February 1, 2025 and February 3, 2024, respectively. The Company had an immaterial amount of restricted cash as of February 1, 2025 and February 3, 2024.
Receivables
In accordance with Accounting Standards Codification (“ASC”) Topic 326, Financial Instruments - Credit Losses, the Company estimates and records an expected lifetime credit loss on accounts receivable by utilizing credit ratings and other customer-related information, as well as historical loss experience. The allowance for expected credit losses is adjusted for current conditions and reasonable and supportable forecasts. The Company recorded adjustments to the provision for expected credit losses of $0.8 million and $0.3 million in 2024 in 2022, respectively, and recorded a provision for expected credit losses of $1.0 million in 2023.
Customer allowances represent reserves against the Company’s wholesale customers’ accounts receivable for margin assistance, product returns, customer deductions and co-op advertising allowances. The Company estimates the reserves needed for margin assistance by reviewing inventory levels on the retail floors, sell-through rates, historical dilution, current gross margin levels and other performance indicators of the Company’s major retail customers. Product returns and customer deductions are estimated using historical experience and anticipated future trends. Co-op advertising allowances are estimated based on customer agreements. The Company recognized provisions for customer allowances of $25.0 million, $28.5 million and $27.6 million in 2024, 2023 and 2022, respectively.
Customer discounts represent reserves against the Company’s accounts receivable for discounts that wholesale customers may take based on meeting certain order, payment or return guidelines. The Company estimates the reserves needed for customer discounts based upon customer net sales and terms of the respective agreements. The Company recognized provisions for customer discounts of $11.5 million, $9.9 million and $11.4 million in 2024, 2023 and 2022, respectively.
Inventories
The Company values inventories at the lower of cost or market for approximately 84% of consolidated inventories, which represents divisions using the last-in, first-out (“LIFO”) method. For the remaining portion, the Company’s inventories are valued at the lower of cost or net realizable value. For inventory valued at LIFO, the Company regularly reviews the inventory for excess, obsolete or impaired inventory, and writes it down to the lower of cost or market. An actual valuation of inventory under the LIFO method can be made only at the end of each year based on the inventory levels and costs at that time. If the first-in, first-out (“FIFO”) method had been used, consolidated inventories would have been $10.9 million and $10.3 million higher at February 1, 2025 and February 3, 2024, respectively. In 2024 and 2023, the Company recorded LIFO provisions of $0.6 million and $4.0 million, respectively, on certain inventories as a result of product cost inflation. Refer to Note 8 to the consolidated financial statements for additional information related to inventories.
The Company applies judgment in determining the market value of inventory, which requires an estimate of net realizable value, including current and expected selling prices, costs to sell and normal gross profit rates. The method used to determine market value varies by business division, based on the unique operating models. At the Famous Footwear segment and certain operations within the Brand Portfolio segment, market value is determined based on net realizable value less an estimate of expected costs to be incurred to sell the product. Accordingly, the Company records markdowns when it becomes evident that inventory items will be sold at prices below cost. As a result, gross profit rates at the Famous Footwear segment and, to a lesser extent, the Brand Portfolio segment are lower than the initial markup during periods when permanent price reductions are taken to clear product. For the majority of the Brand Portfolio segment, the Company determines market value based upon the net realizable value of inventory less a normal gross profit rate. The Company believes these policies reflect the difference in operating models between the Famous Footwear and Brand Portfolio segments. Famous Footwear periodically runs promotional events to drive sales to clear seasonal inventories. The Brand Portfolio segment generally relies on permanent price reductions to clear slower-moving inventory.
The determination of markdown reserves for the Brand Portfolio segment requires significant assumptions, estimates and judgments by management, and is subject to inherent uncertainties and subjectivity. In determining markdown reserves, management considers recent and forecasted sales prices, historical gross profit rates, the length of time the product is held in inventory and quantities of various product styles contained in inventory, as well as demand, among other factors. The ultimate amount realized from the sale of certain products could differ from management estimates. Markdown reserves were $17.7 million and $20.9 million as of February 1, 2025 and February 3, 2024, respectively.
The costs of inventory, inbound freight and duties, markdowns, shrinkage and royalty expense are classified in cost of goods sold. Costs of warehousing and distribution are classified in selling and administrative expenses and are expensed as incurred. Such warehousing and distribution costs totaled $114.3 million, $117.0 million and $121.0 million in 2024, 2023 and 2022, respectively. Costs of overseas sourcing offices and other inventory procurement costs are reflected in selling and administrative expenses and are expensed as incurred. Such sourcing and procurement costs totaled $21.5 million, $22.0 million and $21.4 million in 2024, 2023 and 2022, respectively.
The Company performs physical inventory counts or cycle counts on all merchandise inventory on hand throughout the year and adjusts the recorded balance to reflect the results. The Company records estimated shrinkage between physical inventory counts based on historical results.
Computer Software Costs
The Company capitalizes certain costs in other assets, including internal payroll costs incurred in connection with the development or acquisition of software for internal use. Other assets on the consolidated balance sheets include $13.6 million and $16.3 million of computer software costs as of February 1, 2025 and February 3, 2024, respectively, which are net of accumulated amortization of $76.8 million and $88.1 million as of the end of the respective periods. In addition, other assets on the consolidated balance sheets include $24.8 million and $16.4 million for cloud computing arrangements (software-as-a-service contracts) and related implementation costs as of February 1, 2025 and February 3, 2024, respectively, which are net of accumulated amortization of $9.4 million and $6.7 million as of the end of the respective periods. These balances include capitalized costs associated with the Company’s implementation of its cloud-based ERP in 2024.
Property and Equipment
Property and equipment are stated at cost. Depreciation of property and equipment is provided over the estimated useful lives of the assets or the remaining lease terms, where applicable, using the straight-line method.
Interest Expense
Interest Expense
Interest expense generally includes interest for borrowings under the Company’s revolving credit agreement, fees paid for the unused portion of the line of credit, and amortization of the deferred debt issuance costs.
Capitalized Interest
Interest costs for major asset additions are capitalized during the construction or development period and amortized over the lives of the related assets. The Company capitalized interest of $0.4 and $0.3 million in 2024 and 2023, respectively, related to the implementation of its cloud-based ERP.
Goodwill and Intangible Assets
Goodwill and intangible assets deemed to have indefinite lives are not amortized but are subject to annual impairment tests. In accordance with ASC 350, Intangibles-Goodwill and Other, the Company is permitted, but not required, to qualitatively assess indicators of a reporting unit’s fair value when it is unlikely that a reporting unit is impaired. If a quantitative test is deemed necessary, a discounted cash flow analysis is prepared to estimate fair value. A fair value-based test is applied at the reporting unit level, which is generally at or one level below the operating segment level. The test compares the fair value of the Company’s reporting units to the carrying value of those reporting units. This test requires significant assumptions, estimates and judgments by management, and is subject to inherent uncertainties and subjectivity.
The Company performs its goodwill impairment assessment and impairment tests on its indefinite-lived intangible assets as of the first day of the fourth quarter of each fiscal year unless events indicate an interim test is required. Definite-lived intangible assets are amortized over their useful lives and are reviewed for impairment if and when impairment indicators are present. Refer to Note 10 to the consolidated financial statements for further discussion of goodwill and intangible assets.
Self-Insurance Reserves
The Company is self-insured and/or retains high deductibles for a significant portion of its workers’ compensation, health, disability, cyber risk, general liability, automobile and property programs, among others. Liabilities associated with the risks that are retained by the Company are estimated by considering historical claims experience, trends of the Company and the industry and other actuarial assumptions. The estimated accruals for these liabilities could be affected if development of costs on claims differ from these assumptions and historical trends. Based on available information as of February 1, 2025, the Company believes it has provided adequate reserves for its self-insurance exposure. As of February 1, 2025 and February 3, 2024, self-insurance reserves were $9.4 million and $10.4 million, respectively.
Supplier Finance Program
The Company facilitates a voluntary supplier finance program (“the Program”) that provides certain of the Company’s suppliers the opportunity to sell receivables related to products that the Company has purchased to participating financial institutions at a rate that leverages the Company’s credit rating, which may be more beneficial to the suppliers than the rate they can obtain based upon their own credit rating. The Company negotiates payment and other terms directly with the suppliers, regardless of whether the supplier participates in the Program, and the Company’s responsibility is limited to making payment based on the terms originally negotiated with the supplier. The suppliers that participate in the Program have discretion to determine which invoices, if any, are sold to the participating financing institutions. The liabilities for the suppliers that participate in the Program are presented within accounts payable in the Company’s consolidated balance sheets, with changes reflected within cash flows from operating activities when settled. As of February 1, 2025 and February 3, 2024, the Company had $22.0 million and $13.0 million, respectively, of accounts payable subject to the Program arrangements.
The following table is a rollforward of the obligations confirmed under the Program for 2024 and 2023:
($ thousands)
February 1, 2025
February 3, 2024
Confirmed obligations outstanding at the beginning of the year
$
12,955
$
26,030
Invoices confirmed during the year
119,160
132,265
Confirmed invoices paid during the year
110,145
145,340
Confirmed obligations outstanding at the end of the year
$
21,970
$
12,955
Revenue Recognition
Retail sales, recognized at the point of sale, are recorded net of returns and exclude sales tax. Wholesale sales are recorded, net of returns, allowances and discounts, when obligations under the terms of a contract with the consumer are satisfied. This generally occurs at the time of transfer of control of merchandise. The Company considers several control indicators in its assessment of the timing of the transfer of control, including significant risks and rewards of ownership, physical possession and the Company’s right to receive payment. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring merchandise. Reserves for projected merchandise returns, discounts and allowances are determined based on historical experience and current expectations. Revenue is recognized on license fees related to Company-owned brand names, where the Company is the licensor, when the related sales of the licensee are made. The Company applies the guidance using the portfolio approach in ASC 606, Revenue from Contracts with Customers, because this methodology would not differ materially from applying the guidance to the individual contracts within the portfolio. The Company excludes sales and similar taxes collected from customers from the measurement of the transaction price for its retail sales. Refer to Note 2 for further discussion of revenue.
Gift Cards
The Company sells gift cards to its customers in its retail stores, through its e-commerce sites and at other retailers. The Company’s gift cards do not have expiration dates or inactivity fees. The Company recognizes revenue from gift cards
when (i) the gift card is redeemed by the consumer or (ii) the likelihood of the gift card being redeemed by the consumer is remote (“gift card breakage”) and the Company determines that it does not have a legal obligation to remit the value of unredeemed gift cards to the relevant jurisdictions. The gift card breakage rate is determined based upon historical redemption patterns. Gift card breakage is recognized during the 24-month period following the sale of the gift card, according to the Company’s historical redemption pattern. Gift card breakage income is included in net sales in the consolidated statements of earnings and the liability established upon the sale of a gift card is included in other accrued expenses within the consolidated balance sheets. The Company recognized gift card breakage of $0.8 million in both 2024 and 2023, and $1.1 million in 2022.
Loyalty Program
The Company maintains a loyalty program at Famous Footwear, through which consumers earn points toward savings certificates for qualifying purchases. Upon reaching specified point values, consumers are issued a savings certificate that may be redeemed for purchases at Famous Footwear. Savings certificates earned must be redeemed within stated expiration dates. In addition to the savings certificates, the Company also offers exclusive member discounts. The value of points and rewards earned by Famous Footwear’s loyalty program members are recorded as a reduction of net sales and a liability is established within other accrued expenses at the time the points are earned based on historical conversion and redemption rates. Approximately 75% and 77% of net sales in the Famous Footwear segment were made to its loyalty program members in 2024 and 2023, respectively. In addition, loyalty programs have recently been launched for the Allen Edmonds and Naturalizer brands. As of February 1, 2025 and February 3, 2024, the Company had loyalty program liabilities totaling $7.8 million and $11.5 million, respectively, which are included in other accrued expenses on the consolidated balance sheets. Of the $7.8 million loyalty program liability as of February 1, 2025, $6.6 million is reflected in the Famous Footwear segment and $1.2 million is reflected in the Brand Portfolio segment. Of the $11.5 million loyalty program liability as of February 3, 2024, $10.0 million is reflected in the Famous Footwear segment and $1.5 million is reflected in the Brand Portfolio segment.
Store Impairment Charges
The Company regularly analyzes the results of all of its stores and assesses the viability of underperforming stores to determine whether events or circumstances exist that indicate the stores should be closed or whether the carrying amount of their long-lived assets may not be recoverable. After allowing for an appropriate start-up period and consideration of any unusual nonrecurring events, property and equipment at stores and the lease right-of-use asset, indicated as impaired are written down to fair value as calculated using a discounted cash flow method. The Company recorded asset impairment charges, primarily for operating lease right-of-use assets, leasehold improvements, and furniture and fixtures in the Company’s retail stores, of $1.9 million, $0.7 million and $1.8 million in 2024, 2023 and 2022, respectively.
Advertising and Marketing Expense
Advertising and marketing costs are expensed as incurred, except for the costs of direct response advertising that relate primarily to the production and distribution of the Company’s catalogs and coupon mailers. Direct response advertising costs are capitalized and amortized over the expected future revenue stream, which is generally one to three months from the date the materials are mailed. External production costs of advertising are expensed when the advertising first appears in the media or in the store.
In addition, the Company participates in co-op advertising programs with certain of its wholesale customers. For those co-op advertising programs where the Company has validated the fair value of the advertising received, co-op advertising costs are reflected as advertising expense within selling and administrative expenses. Otherwise, co-op advertising costs are reflected as a reduction of net sales.
Total advertising and marketing expense was $149.7 million, $145.7 million and $138.0 million in 2024, 2023 and 2022, respectively. These costs were offset by co-op advertising allowances recovered by the Company’s retail business of $5.8 million, $6.2 million and $6.0 million in 2024, 2023 and 2022, respectively. Total costs of co-op advertising provided to wholesale customers that are reflected as a reduction of net sales were $19.4 million in 2024, $17.0 million in 2023 and $18.5 million in 2022. Total advertising costs attributable to future periods that are deferred and recognized as a component of prepaid expenses and other current assets were $3.1 million and $7.0 million at February 1, 2025 and February 3, 2024, respectively.
Income Taxes
The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the consolidated financial statement carrying amounts and the tax bases of its assets and liabilities. The Company establishes valuation allowances if it believes that it is more-likely-than-not that some or all of its deferred tax assets will not be realized. The Company does not recognize a tax benefit unless it concludes that it is more-likely-than-not that the benefit will be sustained on audit by the taxing authority based solely on the technical merits of the associated tax position. If the recognition threshold is met, the Company recognizes a tax benefit measured at the largest amount of the tax benefit that, in its judgment, is greater than 50% likely to be realized. The Company records interest and penalties related to unrecognized tax positions within the income tax provision benefit on the consolidated statements of earnings.
Operating Leases
The Company leases all of its retail locations, a manufacturing facility and certain office locations, distribution centers and equipment under operating leases. Approximately 32% of the leases entered into by the Company include options that allow the Company to extend the lease term beyond the initial commitment period, subject to terms agreed to at lease inception. Some leases also include early termination options that can be exercised under specific conditions. In accordance with ASC Topic 842, Leases (“ASC 842”), lease right-of-use assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term. The majority of the Company’s leases do not provide an implicit rate and therefore, the Company uses an incremental borrowing rate based on the information available at the commencement date, including implied traded debt yield and seniority adjustments, to determine the present value of future payments. Lease expense for the minimum lease payments is recognized on a straight-line basis over the lease term. Variable lease payments are expensed as incurred.
Contingent Rentals
Many of the leases covering retail stores require contingent rental payments in addition to the minimum monthly rental charge based on retail sales volume. The Company excludes from lease payments any variable payments that are not based on an index or market. If payment for a lease is fully contingent on sales, such as a percentage of sales gross rent lease, none of the lease payments are included in the lease right-of-use asset or the lease liability.
Construction Allowances Received From Landlords
At the time its retail facilities are initially leased, the Company often receives consideration from landlords to be applied against the cost of leasehold improvements necessary to open the store. The Company treats these construction allowances as a lease incentive. In accordance with ASC 842, the allowances are recorded within the lease right-of-use asset and amortized to income over the lease term as a reduction of rent expense.
Straight-Line Rents and Rent Holidays
The Company records rent expense on a straight-line basis over the lease term for all of its leased facilities. For leases that have predetermined fixed escalations of the minimum rentals, the Company recognizes the related rental expense on a straight-line basis and records the difference between the recognized rental expense and amounts payable under the lease as the lease right-of-use asset. At the time its retail facilities are leased, the Company is frequently not charged rent for a specified period of time, typically 30 to 60 days, while the store is being prepared for opening. This rent-free period is referred to as a rent holiday. The Company recognizes rent expense over the lease term, including any rent holiday, within selling and administrative expenses on the consolidated statements of earnings.
Pre-opening Costs
Pre-opening costs associated with opening retail stores, including payroll, supplies and facility costs, are expensed as incurred.
Earnings Per Common Share Attributable to Caleres, Inc. Shareholders
The Company uses the two-class method to calculate basic and diluted earnings per common share attributable to Caleres, Inc. shareholders. Unvested restricted stock awards are considered participating units because they entitle holders to non-forfeitable rights to dividends or dividend equivalents during the vesting term. Under the two-class method, basic earnings per common share attributable to Caleres, Inc. shareholders is computed by dividing the net earnings attributable to Caleres, Inc. after allocation of earnings to participating securities by the weighted-average number of common shares
outstanding during the year. Diluted earnings per common share attributable to Caleres, Inc. shareholders is computed by dividing the net earnings attributable to Caleres, Inc. after allocation of earnings to participating securities by the weighted-average number of common shares and potential dilutive securities outstanding during the year. Potential dilutive securities consist of outstanding stock options and contingently issuable shares for the Company’s performance share awards. Refer to Note 3 to the consolidated financial statements for additional information related to the calculation of earnings per common share attributable to Caleres, Inc. shareholders.
Comprehensive Income
Comprehensive income primarily includes the effect of foreign currency translation adjustments and pension and other postretirement benefits adjustments.
Foreign Currency Translation Adjustment
For certain of the Company’s international subsidiaries, the local currency is the functional currency. Assets and liabilities of these subsidiaries are translated into United States dollars at the period-end exchange rate or historical rates as appropriate. Consolidated statements of earnings amounts are translated at average exchange rates for the period. The cumulative translation adjustments resulting from changes in exchange rates are included in the consolidated balance sheets as a component of accumulated other comprehensive loss in total Caleres, Inc. shareholders’ equity. Transaction gains and losses are included in the consolidated statements of earnings.
Pension and Other Postretirement Benefits Adjustments
The Company determines the expense and obligations for retirement and other benefit plans using assumptions related to discount rates, expected long-term rates of return on invested plan assets, expected salary increases and certain employee-related factors. The Company determines the fair value of plan assets and benefit obligations as of the January 31 measurement date. The unrecognized portion of the gain or loss on plan assets is included in the consolidated balance sheets as a component of accumulated other comprehensive loss in total Caleres, Inc. shareholders’ equity and is recognized into expense over time. Refer to additional information related to pension and other postretirement benefits in Note 5 and Note 14 to the consolidated financial statements.
Litigation Contingencies
The Company is the defendant in several claims and lawsuits arising in the ordinary course of business. The Company believes the outcome of such proceedings and litigation currently pending will not have a material adverse effect on the consolidated financial position or results of operations. The Company accrues its best estimate of the cost of resolution of these claims. Legal defense costs of such claims are recognized in the period in which the costs are incurred. Refer to Note 16 to the consolidated financial statements for further discussion of commitments and contingencies.
Environmental Matters
The Company is involved in environmental remediation and ongoing compliance activities at several sites. The Company is remediating, under the oversight of Colorado authorities, the groundwater and indoor air at its owned facility and residential neighborhoods adjacent to and near the property, which have been affected by solvents previously used at the facility. In addition, various federal and state authorities have identified the Company as a potentially responsible party for remediation at certain other sites. The Company’s prior operations included numerous manufacturing and other facilities for which the Company may have responsibility under various environmental laws to address conditions that may be identified in the future. Refer to Note 16 to the consolidated financial statements for additional information.
Environmental expenditures relating to an existing condition caused by past operations and that do not contribute to current or future revenue generation are expensed. Based upon independent environmental assessments, liabilities are recorded when remedial action is considered probable and the costs can be reasonably estimated and are evaluated independently of any future claims recovery. Generally, the timing of these accruals coincides with completion of a feasibility study or the Company’s commitment to a formal plan of action, and the cost estimates are subject to change as new information becomes available. Costs of future expenditures for environmental remediation obligations are discounted to their present value in those situations requiring only continuing maintenance and monitoring based upon a schedule of fixed payments.
Share-Based Compensation
The Company has share-based incentive compensation plans under which certain officers, employees and members of the Board of Directors are participants and may be granted restricted stock, stock performance awards and stock options. Additionally, share-based grants may be made to non-employee members of the Board of Directors in the form of restricted stock units (“RSUs”) payable in cash or the Company’s common stock. The Company accounts for share-based compensation in accordance with the fair value recognition provisions of ASC 718, Compensation - Stock Compensation, and ASC 505, Equity, which require all share-based payments to employees and members of the Board of Directors, to be recognized as expense in the consolidated financial statements based on their fair values. Expense for restricted stock is based on the fair value of the restricted stock on the date of grant. Expense for graded-vesting grants is recognized ratably over the respective vesting periods, which is generally 50% over two years and 50% over three years, and expense for cliff-vesting grants is recognized on a straight-line basis over the vesting period, which is generally one year. Expense for stock performance awards is recognized based upon the fair value of the awards on the date of grant and the anticipated number of shares or units to be awarded on a straight-line basis over the respective term of the award, or individual vesting portion of an award. Expense for the initial grant of RSUs is recognized ratably over the one-year vesting period based upon the fair value of the RSUs, and for cash-equivalent RSUs, is remeasured at the end of each period. The Company accounts for forfeitures of share-based grants as they occur. If the anticipated number of shares to be awarded or the share value of the Company’s common stock changes significantly, share-based compensation expense may differ materially in the future from that recorded in the current period. Refer to additional information related to share-based compensation in Note 15 to the consolidated financial statements.
Consolidated Statements of Cash Flows Supplemental Disclosures
The Company made payments for federal, state and international taxes, net of refunds, of $15.8 million, including $7.0 million for federal taxes, $6.5 million for international taxes and $2.3 million for state taxes in 2024. The Company made payments for federal, state and international taxes, net of refunds, of $19.8 million, including $9.2 million for international taxes and $5.3 million each for federal and state taxes in 2023. During 2022, the Company made payments for federal, state and international taxes, net of refunds, of $17.4 million, including $8.4 million for state taxes, $4.7 million for federal taxes and $4.3 million for international taxes. Refer to Note 6 to the consolidated financial statements for further information regarding income taxes.
Cash payments of interest for the Company’s borrowings under the revolving credit agreement and long-term debt during 2024, 2023 and 2022 were $13.0 million, $19.7 million and $12.5 million, respectively. Refer to Note 11 to the consolidated financial statements for further discussion regarding the Company’s financing arrangements.
Impact of Recently Adopted Accounting Pronouncements
In September 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-04, Liabilities - Supplier Finance Programs (Topic 405-50): Disclosure of Supplier Finance Program Obligations. The guidance requires qualitative and quantitative disclosures about supplier finance programs in annual financial statements, including key terms of the programs, amounts outstanding, balance sheet presentation and a rollforward of amounts outstanding during the year. For interim periods, the ASU requires disclosure of total obligations outstanding that have been confirmed as valid. The Company adopted the amendments on a retrospective basis during the first quarter of 2023, with the exception of the annual rollforward requirement, which was adopted during the fourth quarter of 2024. Refer to the Supply Chain Financing section earlier in this footnote for additional information regarding the Company’s supplier finance program.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which is intended to improve reportable segment disclosures by disclosing significant segment expenses that are regularly provided to the chief operating decision maker. The Company adopted the ASU on a retrospective basis during the fourth quarter of 2024. Refer to Note 7 to the consolidated financial statements for additional information related to segment expenses.
Impact of Prospective Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The ASU expands the income tax disclosure requirements, principally related to the rate reconciliation table and income taxes paid by jurisdiction. ASU 2023-09 is effective for the Company on a prospective basis in fiscal 2025, with the option
to apply the standard retrospectively. The adoption of the ASU is not expected to have a material impact on the Company’s financial statement disclosures.
2. REVENUES
Disaggregation of Revenues
The following table disaggregates revenue by segment and major source for 2024, 2023 and 2022:
Eliminations and
($ thousands)
Famous Footwear
Brand Portfolio
Other
Total
Retail stores
$
1,333,827
$
71,704
$
-
$
1,405,531
E-commerce - Company websites (1)
220,135
230,869
-
451,004
E-commerce - wholesale drop-ship (1)
-
117,128
(5,761)
111,367
Total direct-to-consumer sales
1,553,962
419,701
(5,761)
1,967,902
Wholesale - e-commerce (1)
-
240,338
-
240,338
Wholesale - landed
-
484,797
(53,975)
430,822
Wholesale - first cost
-
71,832
-
71,832
Licensing and royalty
1,810
9,210
-
11,020
Other (2)
-
Net sales
$
1,556,456
$
1,225,963
$
(59,736)
$
2,722,683
Eliminations and
($ thousands)
Famous Footwear
Brand Portfolio
Other
Total
Retail stores
$
1,395,689
$
69,820
$
-
$
1,465,509
E-commerce - Company websites (1)
210,622
229,495
-
440,117
E-commerce - wholesale drop-ship (1)
-
133,097
(5,786)
127,311
Total direct-to-consumer sales
1,606,311
432,412
(5,786)
2,032,937
Wholesale - e-commerce (1)
-
233,183
-
233,183
Wholesale - landed
-
491,132
(57,169)
433,963
Wholesale - first cost
-
101,472
-
101,472
Licensing and royalty
2,330
12,576
-
14,906
Other (2)
-
Net sales
$
1,609,396
$
1,270,853
$
(62,955)
$
2,817,294
Eliminations and
($ thousands)
Famous Footwear
Brand Portfolio
Other
Total
Retail stores
$
1,467,968
$
60,113
$
-
$
1,528,081
E-commerce - Company websites (1)
233,977
218,434
-
452,411
E-commerce - wholesale drop-ship (1)
-
148,825
(5,649)
143,176
Total direct-to-consumer sales
1,701,945
427,372
(5,649)
2,123,668
Wholesale - e-commerce (1)
-
207,779
-
207,779
Wholesale - landed
-
548,838
(54,078)
494,760
Wholesale - first cost
-
125,091
-
125,091
Licensing and royalty
2,105
13,604
-
15,709
Other (2)
1,043
-
1,131
Net sales
$
1,705,093
$
1,322,772
$
(59,727)
$
2,968,138
(1) Collectively referred to as "e-commerce" below
(2) Includes breakage revenue from unredeemed gift cards
Retail stores
The Company generates revenue from retail sales where control is transferred and revenue is recognized at the point of sale. Retail sales are recorded net of estimated returns and exclude sales tax. The Company records a returns reserve and a corresponding return asset for expected returns of merchandise.
Retail sales to members of the Company’s loyalty programs, including the Famously You Rewards program, include two performance obligations: the sale of merchandise and the delivery of points that may be converted to savings certificates and redeemed for future purchases. The transaction price is allocated to the separate performance obligations based on the relative stand-alone selling price. The stand-alone selling price for the points is estimated using the retail value of the merchandise earned, adjusted for estimated breakage based upon historical redemption patterns. The revenue associated with the initial merchandise purchased is recognized immediately and the value assigned to the points is deferred until the points are redeemed, forfeited or expired.
E-commerce
The Company generates revenue from sales on websites maintained by the Company that are shipped from the Company’s distribution centers or retail stores directly to the consumer, or picked up directly by the consumer from the Company’s stores (“e-commerce - Company websites”); sales from the Company’s wholesale customers’ websites that are fulfilled on a drop-ship basis (“e-commerce - wholesale drop-ship”); and other e-commerce sales (wholesale - e-commerce”), collectively referred to as “e-commerce”. The Company transfers control and recognizes revenue for merchandise sold that is shipped directly to an individual consumer upon delivery to the consumer.
Landed wholesale
Landed sales are wholesale sales in which the Company obtains title to the footwear from the overseas suppliers and maintains title until the merchandise clears United States customs. The merchandise is shipped directly to the customer from the Company’s warehouses. Many customers that purchase footwear on a landed basis arrange their own transportation of merchandise and, with limited exceptions, control is transferred at the time of shipment. Landed sales generally carry a higher profit rate than first-cost wholesale sales as a result of the brand equity associated with the product along with the additional customs, warehousing and logistics services provided to customers and the risks associated with inventory ownership.
First-cost wholesale
First-cost sales are wholesale sales in which the Company purchases merchandise from an international factory that manufactures the product and subsequently sells to a customer at an overseas port. Many of the customers then import this product into the United States. Revenue is recognized at the time the merchandise is delivered to the customer’s designated freight forwarder and control is transferred to the customer.
Licensing and royalty
The Company has license agreements with third parties allowing them to sell the Company’s branded product, or other merchandise that uses the Company’s owned or licensed brand names. These license agreements provide the licensee access to the Company’s symbolic intellectual property, and revenue is therefore recognized over the license term. For royalty contracts that do not have guaranteed minimums, the Company recognizes revenue as the licensee’s sales occur. For royalty contracts that have guaranteed minimums, revenue for the guaranteed minimum is recognized on a straight-line basis during the term, until such time that the cumulative royalties exceed the total minimum guarantee. Up-front payments are recognized over the contractual term to which the guaranteed minimum relates.
The Company also licenses its Famous Footwear trade name and logo to a third-party financial institution to offer Famous Footwear-branded credit cards to its consumers. The Company receives royalties based upon cardholder spending, which is recognized as licensing revenue at the time when the credit card is used.
Contract Balances
Revenue is recorded at the transaction price, net of estimates for variable consideration for which reserves are established, including returns, allowances and discounts. Variable consideration is estimated using the expected value method and given the large number of contracts with similar characteristics, the portfolio approach is applied to determine the variable consideration for each revenue stream. Reserves for projected returns are based on historical patterns and current expectations.
Information about significant contract balances from contracts with customers is as follows:
($ thousands)
February 1, 2025
February 3, 2024
Customer allowances and discounts
$
16,147
$
21,497
Loyalty programs liability
7,776
11,457
Returns reserve
9,584
10,586
Gift card liability
6,338
6,385
Changes in contract balances with customers generally reflect differences in relative sales volume for the period presented. In addition, during 2024, the loyalty programs liability increased $26.3 million due to points and material rights earned on purchases and decreased $30.0 million due to expirations and redemptions. During 2023, the loyalty programs liability increased $44.1 million due to points and material rights earned on purchases and decreased $50.4 million due to expirations and redemptions.
Allowance for Expected Credit Losses
The following table summarizes the activity in the Company’s allowance for expected credit losses for 2024 and 2023:
($ thousands)
Balance, beginning of period
$
8,820
$
8,903
Adjustment for expected credit losses
(815)
1,018
Uncollectible account recoveries (write-offs), net
(1,101)
Balance, end of period
$
8,323
$
8,820
3. EARNINGS PER SHARE
The Company uses the two-class method to compute basic and diluted earnings per common share attributable to Caleres, Inc. shareholders. In periods of net loss, no effect is given to the Company’s participating securities since they do not contractually participate in the losses of the Company. The following table sets forth the computation of basic and diluted earnings per common share attributable to Caleres, Inc. shareholders:
($ thousands, except per share amounts)
NUMERATOR
Net earnings
$
106,097
$
171,832
$
179,695
Net loss (earnings) attributable to noncontrolling interests
1,158
(441)
2,047
Net earnings attributable to Caleres, Inc.
$
107,255
$
171,391
$
181,742
Net earnings allocated to participating securities
(3,839)
(7,517)
(7,716)
Net earnings attributable to Caleres, Inc. after allocation of earnings to participating securities
$
103,416
$
163,874
$
174,026
DENOMINATOR
Denominator for basic earnings per common share attributable to Caleres, Inc. shareholders
33,397
34,142
34,930
Dilutive effect of share-based awards
Denominator for diluted earnings per common share attributable to Caleres, Inc. shareholders
33,513
34,152
35,405
Basic earnings per common share attributable to Caleres, Inc. shareholders
$
3.10
$
4.80
$
4.98
Diluted earnings per common share attributable to Caleres, Inc. shareholders
$
3.09
$
4.80
$
4.92
As further discussed in Item 5, Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities, the Company has two publicly announced share repurchase programs. The Company repurchased 1,938,324, 763,000 and 2,622,845 shares at a cost of $65.0 million, $17.4 million and $63.2 million during the years ended February 1, 2025, February 3, 2024 and January 28, 2023, respectively, under these programs.
Under the provisions of the Inflation Reduction Act of 2022 (“Inflation Reduction Act”), a 1% excise tax is imposed on repurchases of common stock beginning on January 1, 2023. Excise taxes incurred on share repurchases are incremental costs to purchase the stock, and accordingly, are included in the total cost basis of the common stock acquired and reflected as a reduction of shareholders’ equity within retained earnings in the consolidated statements of shareholders’ equity. Excise taxes of $0.5 million are due on the Company’s share repurchases during 2024. An immaterial amount of excise taxes were due on share repurchases during 2023.
4. RESTRUCTURING AND OTHER INITIATIVES
Restructuring Costs
During 2024, the Company incurred restructuring costs of $9.9 million ($7.3 million on an after-tax basis, or $0.21 per diluted share). The costs were primarily for the exit of the Company’s domestic retail store operations for the Naturalizer brand, severance and pension settlement costs associated with the acceptance of a lump sum buyout offer by certain pension plan participants. Of the $7.2 million in charges presented in restructuring and other special charges on the consolidated statements of earnings in 2024, $6.4 million is reflected in the Brand Portfolio segment, $0.6 million is reflected in the Famous Footwear segment and $0.2 million is reflected within the Eliminations and Other category. The remaining $2.7 million of restructuring costs related to the pension settlement are presented in other (expense) income, net, and reflected in the Eliminations and Other category. As of February 1, 2025, restructuring reserves of $5.5 million
were included in current liabilities on the consolidated balance sheet, with $4.0 million included in accounts payable, $1.3 million included in employee compensation and benefits and $0.2 million in other accrued expenses.
Expense Reduction Initiatives
During 2023, the Company incurred costs of $6.1 million ($4.5 million on an after-tax basis, or $0.13 per diluted share) associated with its expense reduction initiatives. The costs were primarily for severance and other costs to integrate the Blowfish Malibu office, showroom and information systems into the St. Louis infrastructure. Of the $6.1 million in charges presented in restructuring and other special charges on the consolidated statements of earnings for 2023, $2.6 million is reflected in the Brand Portfolio segment, $2.1 million is reflected in the Eliminations and Other category and $1.4 million is reflected in the Famous Footwear segment. As of February 3, 2024, restructuring reserves of $3.2 million were included in other accrued expenses on the consolidated balance sheet.
Organizational Change
During 2022, the Company incurred costs of $2.9 million ($2.7 million on an after-tax basis, or $0.07 per diluted share) related to organizational changes at the corporate headquarters. These costs were recognized as restructuring and other special charges in the consolidated statement of earnings within the Eliminations and Other category.
5. RETIREMENT AND OTHER BENEFIT PLANS
The Company sponsors pension plans in both the United States and Canada. Under the domestic plans, salaried, management and certain hourly employees’ pension benefits are based on a two-rate formula applied to each year of service. Participants receive the larger of the accrued benefit as of December 31, 2015 (based on service commencing at the date of hire and a 35-year service cap and an average annual salary for the five highest consecutive years during the last 10-year period) and the benefit calculated under the current plan provisions from the date of hire. Generally, under the current plan provisions, a participant receives credit for one year of service for each 365 days of employment as an eligible employee with the Company commencing after the employee’s date of participation in the plan, up to 30 years. Except for grandfathered employees and certain hourly associates in the Company’s retail divisions, final average compensation, taxable covered compensation and credited service for purposes of determining accrued pension benefits were frozen as of December 31, 2018.
The Company’s Canadian pension plans cover certain employees based on plan specifications. Under the Canadian plans, employees’ pension benefits are based on the employee’s highest consecutive five years of compensation during the 10 years before retirement. The Company’s funding policy for all plans is to make the minimum annual contributions required by applicable regulations. The Company also maintains an unfunded Supplemental Executive Retirement Plan (“SERP”). In addition to providing pension benefits, the Company sponsors unfunded postretirement life insurance plans that cover both salaried and hourly employees who became eligible for benefits by January 1, 1995. The life insurance plans provide coverage of up to $20,000 for qualifying retired employees.
Benefit Obligations
The following table sets forth changes in benefit obligations, including all domestic and Canadian plans:
Pension Benefits
Other Postretirement Benefits
($ thousands)
Benefit obligation at beginning of year
$
282,175
$
285,572
$
$
1,018
Service cost
4,931
5,020
-
-
Interest cost
15,025
14,543
Plan participants’ contribution
Actuarial (gain) loss
(10,062)
(6,773)
(61)
Benefits paid
(16,561)
(16,149)
(68)
(75)
Settlements
(17,985)
-
-
-
Foreign exchange rate changes
(307)
(49)
-
-
Benefit obligation at end of year
$
257,225
$
282,175
$
$
The accumulated benefit obligation for the United States pension plans was $252.1 million and $277.1 million as of February 1, 2025 and February 3, 2024, respectively. The accumulated benefit obligation for the Canadian pension plans was $2.9 million and $3.2 million as of February 1, 2025 and February 3, 2024, respectively.
Pension Benefits
Other Postretirement Benefits
Weighted-average assumptions used to determine benefit obligations, end of year
Discount rate
5.80
%
5.40
%
5.80
%
5.40
%
Rate of compensation increase
1.70
%
1.70
%
N/A
N/A
As of February 1, 2025 and February 3, 2024, the Company used the PRI-2012 Bottom Quartile mortality table, projected using generational scale MP-2021, a base mortality table issued by the Society of Actuaries in 2021, to estimate the plan liabilities.
Plan Assets
Pension assets are managed in accordance with the prudent investor standards of the Employee Retirement Income Security Act (“ERISA”). The plan’s investment objective is to earn a competitive total return on assets, while also ensuring plan assets are adequately managed to provide for future pension obligations. This results in the protection of plan surplus and is accomplished by matching the duration of the projected benefit obligation using leveraged fixed income instruments and, while maintaining an equity commitment, managing an equity overlay strategy. The overlay strategy is intended to protect the managed equity portfolios against adverse stock market environments. The Company delegates investment management of the plan assets to specialists in each asset class and regularly monitors manager performance and compliance with investment guidelines. The Company’s overall investment strategy is to achieve a mix of approximately 97% of investments for long-term growth and 3% for near-term benefit payments with a wide diversification of asset types, fund strategies and fund managers. The target allocations for plan assets for 2024 were equities of between 65% and 75% and debt securities of between 25% and 35%. Allocations may change periodically based upon changing market conditions. Corporate stocks - common, as listed in the table below, did not include any Company stock at February 1, 2025 or February 3, 2024.
Assets of the Canadian pension plans, which totaled approximately $4.0 million on February 1, 2025, were invested 55% in equity funds, 42% in bond funds and 3% in money market funds. The Canadian pension plans did not include any Company stock as of February 1, 2025 or February 3, 2024.
A financial instrument’s level within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Refer to further discussion on the fair value hierarchy in Note 13 to the consolidated financial
statements. Following is a description of the pension plan investments measured at fair value, including the general classification of such investments pursuant to the valuation hierarchy.
● Cash and cash equivalents include cash collateral and margin as well as money market funds. The fair values are based on unadjusted quoted market prices in active markets with sufficient volume and frequency and therefore are classified within Level 1 of the fair value hierarchy.
● Investments in U.S. government securities, the mutual fund, exchange-traded funds, corporate stocks - common, the warrant, real estate investment trusts and S&P 500 Index put and call options (traded on security exchanges) are classified within Level 1 of the fair value hierarchy because the fair values are based on unadjusted quoted market prices in active markets with sufficient volume and frequency. Interest rate swap agreements and certain U.S. government securities are not traded on an exchange but are based on observable inputs that can be corroborated. Therefore, these investments are classified within Level 2 of the fair value hierarchy. The preferred securities and certain corporate stocks - common were offered in a private placement. The fair values of these investments are based on unobservable prices and therefore, they are classified within Level 3 of the fair value hierarchy.
● The alternative investment fund is an investment in a pool of long-duration domestic investment grade assets. This investment is measured using net asset value per share, and therefore, is not classified within the fair value hierarchy.
● The unallocated insurance contract is measured at net asset value per share, and therefore, is not classified within the fair value hierarchy.
The fair values of the Company’s pension plan assets at February 1, 2025 by asset category were as follows:
Fair Value Measurements at February 1, 2025
($ thousands)
Total
Level 1
Level 2
Level 3
Asset
Cash and cash equivalents
$
15,233
$
15,233
$
-
$
-
U.S. government securities
70,577
63,423
7,154
-
Interest rate swap agreements
(4,188)
-
(4,188)
-
Mutual fund
27,661
27,661
-
-
Exchange-traded funds
119,650
119,650
-
-
Corporate stocks - common
80,489
80,446
-
Warrant
-
-
Real estate investment trust
1,118
1,118
-
-
Preferred securities
-
-
S&P 500 Index options
(3,738)
(3,738)
-
-
Total investments in the fair value hierarchy
$
307,126
$
303,946
$
2,966
$
Investments measured at net asset value:
Alternative investment fund
14,579
-
-
-
Unallocated insurance contract
-
-
-
Total investments measured at net asset value
14,603
-
-
-
Total investments at fair value
$
321,729
$
303,946
$
2,966
$
The fair values of the Company’s pension plan assets at February 3, 2024 by asset category were as follows:
Fair Value Measurements at February 3, 2024
($ thousands)
Total
Level 1
Level 2
Level 3
Asset
Cash and cash equivalents
$
11,138
$
11,138
$
-
$
-
U.S. government securities
74,777
65,345
9,432
-
Interest rate swap agreements
3,647
-
3,647
Mutual fund
28,114
28,114
-
-
Exchange-traded funds
128,263
128,263
-
-
Corporate stocks - common
84,652
84,528
-
Warrant
-
-
Real estate investment trust
-
-
Preferred securities
-
-
S&P 500 Index options
(1,788)
(1,788)
-
-
Total investments in the fair value hierarchy
$
329,365
$
315,925
$
13,079
$
Investments measured at net asset value:
Alternative investment fund
14,654
-
-
-
Unallocated insurance contract
-
-
-
Total investments measured at net asset value
14,686
-
-
-
Total investments at fair value
$
344,051
$
315,925
$
13,079
$
The following table sets forth changes in the fair value of plan assets, including all domestic and Canadian plans:
Pension Benefits
Other Postretirement Benefits
($ thousands)
Fair value of plan assets at beginning of year
$
344,051
$
356,745
$
-
$
-
Actual return on plan assets
12,432
3,375
-
-
Employer contributions
Plan participants’ contributions
Benefits paid
(16,561)
(16,149)
(68)
(75)
Settlements
(17,985)
-
-
-
Foreign exchange rate changes
(307)
(49)
-
-
Fair value of plan assets at end of year
$
321,729
$
344,051
$
-
$
-
Funded Status
The over-funded status as of February 1, 2025 and February 3, 2024 for pension benefits was $64.5 million and $61.9 million, respectively. The under-funded status for other postretirement benefits was $0.9 million as of February 1, 2025 and February 3, 2024.
Amounts recognized in the consolidated balance sheets consist of:
Pension Benefits
Other Postretirement Benefits
($ thousands)
Prepaid pension costs (noncurrent assets)
$
78,463
$
74,951
$
-
$
-
Accrued benefit liabilities (current liability)
(9,023)
(5,327)
(176)
Accrued benefit liabilities (noncurrent liability)
(4,936)
(7,748)
(755)
Net amount recognized at end of year
$
64,504
$
61,876
$
$
(931)
The projected benefit obligation, the accumulated benefit obligation and the fair value of plan assets for pension plans with a projected benefit obligation in excess of plan assets and for pension plans with an accumulated benefit obligation in excess of plan assets, which includes only the Company’s SERP, were as follows:
Projected Benefit Obligation Exceeds the
Accumulated Benefit Obligation
Fair Value of Plan Assets
Exceeds the Fair Value of Plan Assets
($ thousands)
End of Year
Projected benefit obligation
$
13,958
$
13,075
$
13,958
$
13,075
Accumulated benefit obligation
12,568
12,144
12,568
12,144
Fair value of plan assets
-
-
-
-
The accumulated postretirement benefit obligation exceeds assets for all of the Company’s other postretirement benefit plans.
The amounts in accumulated other comprehensive loss that have not yet been recognized as components of net periodic benefit income at February 1, 2025 and February 3, 2024 are as follows:
Pension Benefits
Other Postretirement Benefits
($ thousands)
Components of accumulated other comprehensive loss, net of tax:
Net actuarial loss (gain)
$
28,455
$
33,709
$
(256)
$
(374)
Net prior service credit
-
-
Accumulated other comprehensive loss, net of tax
$
28,489
$
33,780
$
(256)
$
(374)
Net Periodic Benefit Expense (Income)
Net periodic benefit expense (income) for 2024, 2023 and 2022 for all domestic and Canadian plans included the following components:
Pension Benefits
Other Postretirement Benefits
($ thousands)
Service cost
$
4,931
$
5,020
$
7,143
$
-
$
-
$
-
Interest cost
15,025
14,543
11,977
Expected return on assets
(24,279)
(24,353)
(27,987)
-
-
-
Amortization of:
Actuarial loss (gain)
6,038
3,785
3,088
(108)
(110)
(103)
Prior service credit
(123)
(314)
-
-
-
Settlement cost
2,716
Curtailments
-
-
-
-
-
Total net periodic benefit expense (income)
$
4,480
$
(1,128)
$
(5,760)
$
(63)
$
(62)
$
(68)
The non-service cost components of net periodic benefit expense (income) are included in other income, net in the consolidated statements of earnings. Service cost is included in selling and administrative expenses.
Pension Benefits
Other Postretirement Benefits
Weighted-average assumptions used to determine net periodic benefit income
Discount rate
5.40
%
5.20
%
3.40
%
5.40
%
5.20
%
3.40
%
Rate of compensation increase
1.70
%
3.00
%
3.00
%
N/A
N/A
N/A
Expected return on plan assets
7.70
%
7.50
%
7.20
%
N/A
N/A
N/A
The net actuarial loss (gain) subject to amortization is amortized on a straight-line basis over the average future service of active plan participants as of the measurement date. The prior service credit is amortized on a straight-line basis over the average future service of active plan participants benefiting under the plan at the time of each plan amendment.
The expected long-term rate of return on plan assets is based on historical and projected rates of return for current and planned asset classes in the plan’s investment portfolio. Assumed projected rates of return for each asset class were selected after analyzing experience and future expectations of the returns. The overall expected rate of return for the portfolio was developed based on the target allocation for each asset class.
Expected Cash Flows
Information about expected cash flows for all pension and postretirement benefit plans follows:
Pension Benefits
Other
Postretirement
($ thousands)
Funded Plan
SERP
Total
Benefits
Employer Contributions
2025 expected contributions to plan trusts
$
$
-
$
$
-
2025 expected contributions to plan participants
-
9,281
9,281
2025 refund of assets (e.g. surplus) to employer
-
-
Expected Benefit Payments
$
15,855
$
9,281
$
25,136
$
16,355
16,856
16,773
17,598
17,272
18,057
17,687
18,406
2030-2034
90,466
3,941
94,407
Defined Contribution Plans
The Company’s domestic defined contribution 401(k) plan covers certain salaried employees. For eligible salaried employees, the Company makes a core contribution of 1.5% and a matching contribution of up to 50% of the first 6% of the employees’ contributions. The Company’s expense for this plan was $4.7 million in 2024, $5.0 million in 2023, and $4.6 million in 2022. In addition to the core and matching contributions, the Company has the discretion to contribute up to an additional 2% profit-sharing benefit based on the Company’s performance. The Company’s expense for the profit-sharing contribution was zero for both 2024 and 2023 and $2.6 million for 2022. Beginning in January 2024, the Company also offers a 401(k) plan to certain hourly employees, providing the option to contribute from 2% to 30% of pre-tax wages to the 401(k) plan. The hourly 401(k) plan does not offer matching contributions and therefore, the Company incurred no expense during 2024.
Non-Qualified Deferred Compensation Plan
The Company has a non-qualified deferred compensation plan (the “Deferred Compensation Plan”) for the benefit of certain management employees. The investment funds offered to the participants generally correspond to the funds offered in the Company’s 401(k) plan and the account balance fluctuates with the investment returns on those funds. The Deferred Compensation Plan permits the deferral of up to 50% of base salary and 100% of compensation received under the Company’s annual incentive plan. The deferrals are held in a separate trust, which has been established by the Company to administer the Deferred Compensation Plan. The assets of the trust are subject to the claims of the Company’s creditors in the event that the Company becomes insolvent. Consequently, the trust qualifies as a grantor trust for income tax purposes (i.e., a “Rabbi Trust”). The liabilities of the Deferred Compensation Plan of $10.9 million and $9.5 million as of February 1, 2025 and February 3, 2024, respectively, are presented in employee compensation and benefits in the accompanying consolidated balance sheets. The assets held by the trust of $10.9 million and $9.5 million as of February 1, 2025 and February 3, 2024, respectively, are presented within prepaid expenses and other current assets in the accompanying consolidated balance sheets, with changes in the deferred compensation charged to selling and administrative expenses in the accompanying consolidated statements of earnings.
Non-Qualified Restoration Deferred Compensation Plan
In 2023, the Company adopted a non-qualified restoration deferred compensation plan (the “Restoration Plan”) for the benefit of certain members of executive management. The Restoration Plan provides an incremental retirement benefit to key executives whose contributions to qualified retirement plans are limited by Internal Revenue Service annual compensation maximums. The investment funds offered to the participants generally correspond to the funds offered in the Company’s 401(k) plan. The initial contribution to the Restoration Plan was funded in January 2024 and will occur annually thereafter. The plan assets and liabilities will fluctuate with the returns on the investment funds. The deferrals are held in a separate trust, which has been established by the Company to administer the Restoration Plan. The assets of the trust are subject to the claims of the Company’s creditors in the event that the Company becomes insolvent. Consequently, the trust qualifies as a grantor trust for income tax purposes (i.e., a “Rabbi Trust”). The liabilities of the Restoration Plan of $0.4 million and $0.3 million as of February 1, 2025 and February 3, 2024, respectively, are presented in employee compensation and benefits in the accompanying consolidated balance sheets. The assets held by the trust of $0.4 million and $0.3 million as of February 1, 2025 and February 3, 2024, respectively, are classified within prepaid and other current assets in the accompanying consolidated balance sheets. Changes in deferred compensation plan assets and liabilities are charged to selling and administrative expense in the accompanying consolidated statement of earnings.
Deferred Compensation Plan for Non-Employee Directors
Non-employee directors are eligible to participate in a deferred compensation plan, whereby deferred compensation amounts are valued as if invested in the Company’s common stock through the use of phantom stock units (“PSUs”). Under the plan, each participating director’s account is credited with the number of PSUs equal to the number of shares of the Company’s common stock that the participant could purchase or receive with the amount of the deferred compensation, based upon the fair value (as determined based on the average of the high and low prices) of the Company’s common stock on the last trading day of the fiscal quarter when the cash compensation was earned. Dividend equivalents are paid on PSUs at the same rate as dividends on the Company’s common stock and are re-invested in additional PSUs at the next fiscal quarter-end. The PSUs are payable in cash based on the number of PSUs credited to the participating director’s account, valued on the basis of the fair value at fiscal quarter-end on or following termination of the director’s service. The liabilities of the plan of $1.2 million and $2.0 million as of February 1, 2025 and February 3, 2024, respectively, are based on 50,820 and 55,516 outstanding PSUs, respectively, and are presented in other liabilities in the accompanying consolidated balance sheets. Gains and losses resulting from changes in the fair value of the PSUs are charged to selling and administrative expenses in the accompanying consolidated statements of earnings.
6. INCOME TAXES
The components of earnings before income taxes consisted of domestic earnings before income taxes of $84.8 million, $132.5 million and $168.0 million in 2024, 2023 and 2022, respectively. The Company’s international earnings before income taxes were $50.4 million, $48.8 million and $45.0 million in 2024, 2023 and 2022, respectively.
The components of income tax provision on earnings were as follows:
($ thousands)
Federal
Current
$
3,818
$
10,849
$
11,506
Deferred
13,710
5,138
6,975
Total federal income tax provision
17,528
15,987
18,481
State
Current
1,876
2,423
6,660
Deferred
4,775
(9,819)
3,421
Total state income tax provision (benefit)
6,651
(7,396)
10,081
International
Current
5,289
4,879
4,759
Deferred
(407)
(3,980)
Total international income tax provision
4,882
4,777
Total income tax provision
$
29,061
$
9,490
$
33,339
The differences between the income tax provision reflected in the consolidated financial statements and the amounts calculated at the federal statutory income tax rate were as follows:
($ thousands)
Income taxes at statutory rate
$
28,383
$
38,078
$
44,737
State income taxes, net of federal tax benefit
4,514
5,710
8,981
International earnings taxed at differing rates from U.S. statutory
(3,584)
(5,367)
(1,974)
Share-based compensation
(2,647)
(3,106)
(602)
Valuation allowances, net
(2,204)
(30,054)
(20,743)
Non-deductibility of 162(m) limitations
3,401
4,373
3,363
GILTI, BEAT and FDII provisions
1,307
Other (1)
(109)
(571)
(845)
Total income tax provision
$
29,061
$
9,490
$
33,339
(1) The other category of income tax provision principally represents the impact of expenses that are not deductible or partially deductible for federal income tax purposes and the impact of any return-to-provision adjustments.
Significant components of the Company’s deferred income tax assets and liabilities were as follows:
($ thousands)
February 1, 2025
February 3, 2024
Deferred Tax Assets
Lease obligations
$
158,310
$
148,242
Goodwill
30,308
34,386
Net operating loss carryforward/carryback
6,551
10,107
Accrued expenses
14,053
17,870
Employee benefits, compensation and insurance
10,954
15,689
Accounts receivable
4,043
6,094
Inventory capitalization and inventory reserves
6,532
6,623
Impairment of investment in nonconsolidated affiliate
1,418
1,470
Postretirement and postemployment benefit plans
Other
3,444
1,605
Total deferred tax assets, before valuation allowance
235,814
242,293
Valuation allowance
(3,406)
(7,153)
Total deferred tax assets, net of valuation allowance
$
232,408
$
235,140
Deferred Tax Liabilities
Lease right-of-use assets
$
(149,414)
$
(138,315)
Intangible assets
(15,472)
(13,659)
LIFO inventory valuation
(54,808)
(51,021)
Retirement plans
(18,184)
(17,239)
Capitalized software
(1,797)
(1,800)
Depreciation
(17,100)
(16,822)
Other
(2,579)
(3,419)
Total deferred tax liabilities
(259,354)
(242,275)
Net deferred tax liability
$
(26,946)
$
(7,135)
As of February 1, 2025, the Company had various federal, state and international net operating loss (“NOL”) carryforwards with tax values totaling $6.6 million. The state NOLs totaling $2.9 million have carryforward periods ranging from one to 20 years. The Company has NOLs in Canada, the United Kingdom and China of $1.8 million and $1.3 million and $0.6 million, respectively. The Canada and China NOLs have a carryforward period of 17 years and 5 years, respectively, while the United Kingdom NOLs have no expiration.
As of February 1, 2025, no deferred taxes have been provided on the accumulated unremitted earnings of the Company’s international subsidiaries that are not subject to United States income tax, beyond the amounts recorded for the one-time transition tax for the mandatory deemed repatriation of cumulative international earnings, as required by the Tax Cuts and Jobs Act. The Company periodically evaluates its international investment opportunities and plans, as well as its international working capital needs, to determine the level of investment required and, accordingly, determines the level of international earnings that is considered indefinitely reinvested. Based upon that evaluation, earnings of the Company’s international subsidiaries that are not otherwise subject to United States taxation are considered to be indefinitely reinvested, and accordingly, deferred taxes have not been provided. If changes occur in future investment opportunities and plans, those changes will be reflected when known and may result in providing residual United States deferred taxes on unremitted international earnings. If the Company’s unremitted international earnings were not considered indefinitely reinvested as of February 1, 2025, an immaterial amount of additional deferred taxes would have been provided.
Uncertain Tax Positions
ASC 740, Income Taxes, establishes a single model to address accounting for uncertain tax positions. The standard clarifies the accounting for income taxes by prescribing a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. The standard also provides guidance on derecognition, measurement
classification, interest and penalties, accounting in interim periods, disclosure and transition. As of February 1, 2025 and February 3, 2024, the Company had no unrecognized tax benefits.
For federal purposes, the Company’s tax filings for fiscal years 2019 to 2023 remain open to examination but are not currently being examined. The Company also files tax returns in various international jurisdictions and numerous states for which various tax years are subject to examination and currently involved in audits. While the Company is involved in examinations in certain jurisdictions, it does not expect any significant changes in its liability for uncertain tax positions during the next 12 months.
7. BUSINESS SEGMENT INFORMATION
The Company’s reportable segments are Famous Footwear and Brand Portfolio. The Famous Footwear segment is comprised of Famous Footwear, famousfootwear.com and famousfootwear.ca. Famous Footwear operated 846 stores at the end of 2024, selling primarily branded footwear for the entire family.
The Brand Portfolio segment is comprised of wholesale operations selling the Company’s branded footwear, and the retail stores and e-commerce sites associated with those brands. This segment sources, manufactures and markets branded, licensed and private-label footwear primarily to online retailers, national chains, department stores, independent retailers and mass merchandisers as well as Company-owned Famous Footwear, Sam Edelman, Naturalizer and Allen Edmonds stores and e-commerce businesses. The Brand Portfolio segment included 60 branded retail stores in the United States and 54 branded retail stores in East Asia at the end of 2024.
The accounting policies of the reportable segments are the same as those described in Note 1 to the consolidated financial statements. The Company’s Famous Footwear and Brand Portfolio reportable segments are operating units that are managed separately. These reportable segments reflect the level at which the chief operating decision maker (CODM), the Company’s President and Chief Executive Officer, evaluates financial performance and allocates resources. The CODM uses segment operating earnings (loss), which represents gross profit, less selling and administrative expenses and restructuring and other special charges, net, to allocate resources. Intersegment sales are generally recorded at a profit, and intersegment earnings related to inventory on hand at the purchasing segment are eliminated against the earnings.
Corporate assets, administrative expenses and other costs and recoveries that are not allocated to the operating units, as well as the elimination of intersegment sales and profit, are reported in the Eliminations and Other category.
Following is a summary of certain key financial measures for the respective periods:
Famous
Brand
Eliminations
($ thousands)
Footwear
Portfolio
and Other
Total
Net sales (1)
$
1,556,456
$
1,225,963
$
(59,736)
$
2,722,683
Cost of goods sold
869,829
689,668
(58,856)
1,500,641
Gross profit
686,627
536,295
(880)
1,222,042
Less expenses:
Retail stores (2)
366,144
31,108
-
397,252
Information technology
30,843
27,631
7,881
66,355
Warehousing and distribution
50,905
70,368
3,580
124,853
Advertising and marketing
50,370
78,275
3,459
132,104
Restructuring and other special charges, net
6,343
7,167
Other expenses (3)
100,650
200,448
43,357
344,455
Operating earnings (loss)
$
87,076
$
122,122
$
(59,342)
$
149,856
Segment assets
$
817,469
$
893,460
$
183,825
$
1,894,754
Purchases of property and equipment
$
36,694
$
10,335
$
2,118
$
49,147
Capitalized software
$
$
$
1,877
$
2,539
Famous
Brand
Eliminations
($ thousands)
Footwear
Portfolio
and Other
Total
Net sales (1)
$
1,609,396
$
1,270,853
$
(62,955)
$
2,817,294
Cost of goods sold
889,847
724,848
(60,358)
1,554,337
Gross profit
719,549
546,005
(2,597)
1,262,957
Less expenses:
Retail stores (2)
360,102
28,793
-
388,895
Information technology
31,286
28,180
1,459
60,925
Warehousing and distribution
52,874
59,045
4,439
116,358
Advertising and marketing
52,771
70,761
3,102
126,634
Restructuring and other special charges, net
1,366
2,608
2,129
6,103
Other expenses (3)
97,312
211,159
61,116
369,587
Operating earnings (loss)
$
123,838
$
145,459
$
(74,842)
$
194,455
Segment assets
$
770,848
$
862,404
$
171,494
$
1,804,746
Purchases of property and equipment
$
31,743
$
10,515
$
2,326
$
44,584
Capitalized software
$
$
-
$
4,291
$
5,034
Famous
Brand
Eliminations
($ thousands)
Footwear
Portfolio
and Other
Total
Net sales (1)
$
1,705,093
$
1,322,772
$
(59,727)
$
2,968,138
Cost of goods sold
916,089
825,507
(58,331)
1,683,265
Gross Profit
789,004
497,265
(1,396)
1,284,873
Less expenses:
Retail stores (2)
352,088
27,699
-
379,787
Information technology
28,100
26,331
1,781
56,212
Warehousing and distribution
54,056
57,337
5,192
116,585
Advertising and marketing
56,762
65,339
3,463
125,564
Restructuring and other special charges, net
-
-
2,910
2,910
Other expenses (3)
102,161
208,214
79,113
389,488
Operating earnings (loss)
$
195,837
$
112,345
$
(93,855)
$
214,327
Segment assets
$
767,575
$
921,110
$
147,787
$
1,836,472
Purchases of property and equipment
$
41,755
$
4,170
$
9,988
$
55,913
Capitalized software
$
-
$
$
8,082
$
8,124
(1) Net sales includes intersegment sales from Brand Portfolio to Famous Footwear of $59.7 million, $63.0 million and $59.7 million in 2024, 2023 and 2022, respectively.
(2) Includes compensation and facilities costs associated with the Company’s North America retail stores.
(3) Primarily includes compensation costs associated with non-retail store operations, depreciation and amortization, and other overhead expenses.
Products purchased for the Famous Footwear segment from three key third-party suppliers (Nike, Skechers and adidas) represented approximately 24% of consolidated net sales for 2024, 2023, and 2022.
Following is a reconciliation of operating earnings to earnings before income taxes:
($ thousands)
Operating earnings
$
149,856
$
194,455
$
214,327
Interest expense, net
(13,957)
(19,343)
(14,264)
Other income, net
(741)
6,210
12,971
Earnings before income taxes
$
135,158
$
181,322
$
213,034
For geographic purposes, the domestic operations include the Company’s domestic retail operations, the wholesale distribution of licensed, branded and private-label footwear to a variety of retail customers, including the Famous Footwear and Brand Portfolio stores, as well as the Company’s e-commerce businesses.
The Company’s international operations consist of wholesale and retail operations primarily in East Asia, Canada and Europe. The East Asia operations primarily include first-cost transactions, where footwear is sold at international ports to customers who then import the footwear into the United States and other countries.
A summary of the Company’s net sales and long-lived assets, including lease right-of-use assets and property and equipment, by geographic area were as follows:
($ thousands)
Net Sales
United States
$
2,532,717
$
2,624,474
$
2,763,896
East Asia
111,670
130,423
146,700
Canada
58,140
48,220
44,484
Other
20,156
14,177
13,058
Total net sales
$
2,722,683
$
2,817,294
$
2,968,138
Long-Lived Assets
United States
$
8,855,001
$
676,937
$
656,840
East Asia
140,929
11,805
11,614
Canada
113,060
6,601
10,441
Other
2,401
Total long-lived assets
$
9,111,391
$
695,612
$
679,079
8. INVENTORIES
The Company’s net inventory balance was comprised of the following:
($ thousands)
February 1, 2025
February 3, 2024
Raw materials
$
14,352
$
14,198
Work-in-process
Finished goods
550,245
525,811
Inventories, net (1)
$
565,241
$
540,674
(1) Net of adjustment to last-in, first-out cost of $10.9 million and $10.3 million as of February 1, 2025 and February 3, 2024, respectively.
As of February 1, 2025 and February 3, 2024, the Company’s inventory balance included $0.2 million and $0.4 million, respectively, of finished goods product subject to consignment arrangements with wholesale customers.
9. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
($thousands)
February 1, 2025
February 3, 2024
Land and buildings
$
37,494
$
38,795
Leasehold improvements
229,227
216,531
Technology equipment
56,900
51,690
Machinery and equipment
116,404
114,245
Furniture and fixtures
146,730
140,456
Construction in progress
16,518
14,204
Property and equipment
603,273
575,921
Allowances for depreciation
(428,060)
(408,338)
Property and equipment, net
$
175,213
$
167,583
Useful lives of property and equipment are as follows:
Years
Buildings
5 - 30
Leasehold improvements
5 - 20
Technology equipment
2 - 7
Machinery and equipment
4 - 20
Furniture and fixtures
3 - 10
After allowing for an appropriate start-up period, property and equipment at stores and any lease right-of-use assets indicated as impaired are written down to fair value as calculated using a discounted cash flow method. The Company recorded charges for impairment of $1.9 million, $0.7 million and $1.8 million in 2024, 2023 and 2022, respectively, primarily for operating lease right-of-use assets, leasehold improvements and furniture and fixtures in the Company’s retail stores and capitalized software, which are presented in selling and administrative expenses. Fair value was based on estimated future cash flows to be generated by retail stores, discounted at a market rate of interest. Refer to Note 12 and Note 13 to the consolidated financial statements for further discussion of these impairment charges.
Property and Equipment, Held for Sale
During 2024, the Company continued to actively market for sale its nine-acre corporate headquarters campus (the “Campus”) located in Clayton, Missouri. In January 2025, the Company entered into an agreement to sell the main portion of the Campus, subject to certain closing conditions. In February 2025, the Company entered into two letters of intent to sell the remaining portions of the Campus. The Company expects each of the components of the Campus to qualify as a completed sale within the next year. Accordingly, the Campus, primarily consisting of land and buildings, has been classified as property and equipment, held for sale category on the consolidated balance sheet as of February 1, 2025 within the Eliminations and Other category. The Company evaluated the Campus asset group for impairment and determined that no indicators were present as of February 1, 2025.
10. GOODWILL AND INTANGIBLE ASSETS
Goodwill and intangible assets were as follows:
($ thousands)
February 1, 2025
February 3, 2024
Intangible Assets
Famous Footwear
$
2,800
$
2,800
Brand Portfolio (1)
342,083
342,083
Total intangible assets
344,883
344,883
Accumulated amortization
(157,565)
(146,529)
Total intangible assets, net
187,318
198,354
Goodwill
Brand Portfolio (2)
4,956
4,956
Total goodwill
4,956
4,956
Goodwill and intangible assets, net
$
192,274
$
203,310
(1) The carrying amount of intangible assets as of February 1, 2025 and February 3, 2024 is presented net of accumulated impairment charges of $106.2 million.
(2) The carrying amount of goodwill as of February 1, 2025 and February 3, 2024 is presented net of accumulated impairment charges of $415.7 million.
The Company’s intangible assets as of February 1, 2025 and February 3, 2024 were as follows:
($ thousands)
February 1, 2025
Estimated Useful Lives
Accumulated
Accumulated
(In Years)
Cost Basis
Amortization
Impairment
Net Carrying Value
Trade names
2 - 40
$
299,488
$
140,424
$
10,200
$
148,864
Trade names
Indefinite
107,400
-
92,000
15,400
Customer relationships
15 - 16
44,200
17,141
4,005
23,054
$
451,088
$
157,565
$
106,205
$
187,318
February 3, 2024
Estimated Useful Lives
Accumulated
Accumulated
(In Years)
Cost Basis
Amortization
Impairment
Net Carrying Value
Trade names
2 - 40
$
299,488
$
131,677
$
10,200
$
157,611
Trade names
Indefinite
107,400
-
92,000
15,400
Customer relationships
15 - 16
44,200
14,852
4,005
25,343
$
451,088
$
146,529
$
106,205
$
198,354
Amortization expense related to intangible assets was $11.0 million in 2024 and $12.1 million in both 2023 and 2022. The Company estimates $11.0 million of amortization expense related to intangible assets in 2025 and 2026, $10.9 million in 2027 and $10.7 million in 2028.
Goodwill is tested for impairment at least annually, or more frequently if events or circumstances indicate it might be impaired, using either the qualitative assessment or a quantitative fair value-based test. During 2024 and 2023, the goodwill impairment testing was performed as of the first day of the fourth fiscal quarter, which resulted in no impairment charges.
Indefinite-lived intangible assets are tested for impairment as of the first day of the fourth quarter of each fiscal year unless events or circumstances indicate an interim test is required. The Company did not record any impairment charges for intangible assets during 2024 or 2023.
11. FINANCING ARRANGEMENTS
Credit Agreement
The Company maintains a revolving credit facility for working capital needs. The Company is the lead borrower, and certain wholly-owned subsidiaries, including Sidney Rich Associates, Inc., BG Retail, LLC, Allen Edmonds LLC, Vionic Group LLC, Vionic International LLC and Blowfish, LLC are each co-borrowers and guarantors.
On October 5, 2021, the Company entered into a Fifth Amendment to Fourth Amended and Restated Credit Agreement (as so amended, the "Credit Agreement") which, among other modifications, decreased the amount available under the revolving credit facility by $100.0 million to an aggregate amount of up to $500.0 million, subject to borrowing base restrictions, and may be increased by up to $250.0 million. The Credit Agreement also decreased the spread applied to the London Interbank Offered Rate (“LIBOR”) or prime rate by a total of 75 basis points. On April 27, 2023, the Company entered into a Sixth Amendment to Fourth Amended and Restated Credit agreement to transition the borrowings on the revolving credit facility from bearing interest based on LIBOR to a team secured overnight financing rate (“SOFR”).
Borrowing availability under the Credit Agreement is limited to the lesser of the total commitments and the borrowing base ("Loan Cap"), which is based on stated percentages of the sum of eligible accounts receivable, eligible inventory and eligible credit card receivables, as defined, less applicable reserves. Under the Credit Agreement, the Loan Parties’ obligations are secured by a first-priority security interest in all accounts receivable, inventory and certain other collateral.
Interest on borrowings is at variable rates based on SOFR or the prime rate (as defined in the Credit Agreement), plus a spread. The interest rate and fees for letters of credit vary based upon the level of excess availability under the Credit Agreement. There is a fee payable on the unused portion under the facility and a letter of credit fee payable on the outstanding face amount under letters of credit.
The Credit Agreement limits the Company’s ability to create, incur, assume or permit to exist additional indebtedness and liens, make investments or specified payments, give guarantees, pay dividends, make capital expenditures and merge or acquire or sell assets. In addition, if excess availability falls below the greater of 10.0% of the Loan Cap and $40.0 million for three consecutive business days, and the fixed charge coverage ratio is less than 1.25 to 1.0, the Company would be in default under the Credit Agreement and certain additional covenants would be triggered.
The Credit Agreement contains customary events of default, including, without limitation, payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to similar obligations, certain events of bankruptcy and insolvency, judgment defaults and the failure of any guaranty or security document supporting the agreement to be in full force and effect. If an event of default occurs, the collateral agent may assume dominion and control over the Company’s cash (a “cash dominion event”) until such event of default is cured or waived or the excess availability exceeds an amount as defined in the Credit Agreement for 30 consecutive days, provided that a cash dominion event shall be deemed continuing (even if an event of default is no longer continuing and/or excess availability exceeds the required amount for 30 consecutive business days) after a cash dominion event has occurred and been discontinued on two occasions in any 12-month period. The Credit Agreement also contains certain other covenants and restrictions. The Company was in compliance with all covenants and restrictions under the Credit Agreement as of February 1, 2025.
The maximum amount of borrowings under the Credit Agreement at the end of any month was $261.5 million and $366.5 million in 2024 and 2023, respectively. As of February 1, 2025, the Company had $219.5 million of borrowings outstanding and $8.2 million in letters of credit outstanding under the Credit Agreement, with total additional borrowing availability of $272.3 million. Average daily borrowings were $201.5 million and $267.9 million in 2024 and 2023, respectively, and the weighted-average interest rates approximated 6.2% and 6.7% for the respective periods.
12. LEASES
The Company leases all of its retail locations, a manufacturing facility, and certain office locations, distribution centers and equipment. At contract inception, leases are evaluated and classified as either operating or finance leases. Leases with an initial term of 12 months or less are not recorded on the balance sheet.
Lease right-of-use assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term. The majority of the Company’s leases do not provide an implicit rate and therefore, the Company uses an incremental borrowing rate based on the information available at the commencement date to determine the present value of future payments. For operating leases, lease expense for the minimum lease payments is recognized on a straight-line basis over the lease term. Variable lease payments are expensed as incurred.
The Company regularly analyzes the results of all of its stores and assesses the viability of underperforming stores to determine whether events or circumstances exist that indicate the stores should be closed or whether the carrying amount of their long-lived assets may not be recoverable. After allowing for an appropriate start-up period and consideration of any unusual nonrecurring events, property and equipment at stores and the lease right-of-use assets indicated as impaired are written down to fair value as calculated using a discounted cash flow method. The fair value of the lease right-of-use assets and property and equipment is determined utilizing projected cash flows for each store location, discounted using a risk-adjusted discount rate, subject to a market floor based on current market lease rates. Refer to Note 13 to the consolidated financial statements for further discussion of impairment charges on the Company’s operating lease right-of-use assets and property and equipment in its retail stores.
The weighted-average lease term and discount rate as of February 1, 2025 and February 3, 2024 were as follows:
February 1, 2025
February 3, 2024
Weighted-average remaining lease term (in years)
6.1
5.7
Weighted-average discount rate
5.2
%
4.9
%
During 2024, the Company entered into new or amended leases that resulted in the recognition of right-of-use assets and lease obligations of $182.1 million on the consolidated balance sheets. As of February 1, 2025, the Company has entered into lease commitments for six retail locations for which the leases have not yet commenced. The Company anticipates that the leases for four of the new retail locations will begin in the next fiscal year and two will begin in fiscal year 2026. Upon commencement, right-of-use assets and lease liabilities of approximately $4.1 million and $3.2 million will be recorded on the consolidated balance sheets in 2025 and 2026, respectively.
The components of lease expense for 2024, 2023 and 2022 were as follows:
($ thousands)
Operating lease expense
$
160,832
$
156,849
$
148,299
Variable lease expense
46,672
42,983
40,233
Short-term lease expense
1,149
2,757
4,059
Sublease income
-
-
(59)
Total lease expense
$
208,653
$
202,589
$
192,532
The aggregate future annual lease payments at February 1, 2025 were as follows:
($ thousands)
$
188,415
141,915
109,694
76,703
52,979
Thereafter
130,861
Total minimum operating lease payments
$
700,567
Less imputed interest
(93,522)
Present value of lease obligations
$
607,045
Supplemental cash flow information related to leases is as follows:
($ thousands)
Cash paid for lease obligations
$
158,156
$
181,420
$
167,163
Cash received from sublease income
-
-
13. FAIR VALUE MEASUREMENTS
Fair Value Hierarchy
Fair value measurement disclosure requirements specify a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptions other market participants would use based upon market data obtained from independent sources (“observable inputs”) or reflect the Company’s own assumptions of market participant valuation
(“unobservable inputs”). In accordance with the fair value guidance, the inputs to valuation techniques used to measure fair value are categorized into three levels based on the reliability of the inputs as follows:
● Level 1 - Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities;
● Level 2 - Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly; and
● Level 3 - Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.
In determining fair value, the Company uses valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company also considers counterparty credit risk in its assessment of fair value. Classification of the financial or non-financial asset or liability within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.
Measurement of Fair Value
The Company measures fair value as an exit price, the price to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date, using the procedures described below for all financial and non-financial assets and liabilities measured at fair value.
Non-Qualified Deferred Compensation Plan Assets and Liabilities
As discussed in Note 5 to the consolidated financial statements, the Company maintains the Deferred Compensation Plan for the benefit of certain management employees. The investment funds offered to the participants generally correspond to the funds offered in the Company’s 401(k) plan, and the account balance fluctuates with the investment returns on those funds. The fair value is based on unadjusted quoted market prices for the funds in active markets with sufficient volume and frequency (Level 1).
Non-Qualified Restoration Plan Assets and Liabilities
As discussed in Note 5 to the consolidated financial statements, in 2023, the Company adopted the Restoration Plan for the benefit of certain members of executive management. The Restoration Plan provides an incremental retirement benefit to key executives whose contributions to qualified retirement plans are limited by Internal Revenue Service annual compensation maximums. The investment funds offered to the participants generally correspond to the funds offered in the Company’s 401(k) plan. The fair value is based on unadjusted quote market prices for the funds in active markets with sufficient volume and frequency (Level 1).
Deferred Compensation Plan for Non-Employee Directors
As discussed in Note 5 to the consolidated financial statements, non-employee directors are eligible to participate in a deferred compensation plan with deferred amounts valued as if invested in the Company’s common stock through the use of PSUs. Under the plan, each participating director’s account is credited with the number of PSUs equal to the number of shares of the Company’s common stock that the participant could purchase or receive with the amount of the deferred compensation, based upon the average of the high and low prices of the Company’s common stock on the last trading day of the fiscal quarter when the cash compensation was earned. Dividend equivalents are paid on PSUs at the same rate as dividends on the Company’s common stock and are re-invested in additional PSUs at the next fiscal quarter-end. The liabilities of the plan are based on the fair value of the outstanding PSUs and are presented in other accrued expenses (current portion) or other liabilities in the accompanying consolidated balance sheets. Gains and losses resulting from changes in the fair value of the PSUs are presented in selling and administrative expenses in the Company’s consolidated statements of earnings. The fair value of each PSU is based on an unadjusted quoted market price for the Company’s common stock in an active market with sufficient volume and frequency on each measurement date (Level 1).
Restricted Stock Units for Non-Employee Directors
Under the Company’s incentive compensation plans, cash-equivalent restricted stock units (“RSUs”) of the Company were previously granted at no cost to non-employee directors. These cash-equivalent RSUs are subject to a vesting requirement (usually one year), earn dividend-equivalent units and are settled in cash on the date the director terminates service or such earlier date as a director may elect, subject to restrictions, based on the then current fair value of the Company’s common stock. The fair value of each cash-equivalent RSU payable is based on an unadjusted quoted market price for the Company’s common stock in an active market with sufficient volume and frequency on each measurement date (Level 1). Additional information related to RSUs for non-employee directors is disclosed in Note 15 to the consolidated financial statements.
The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis at February 1, 2025 and February 3, 2024. During 2024, 2023 or 2022, the Company did not have any transfers between into or out of Level 3.
Fair Value Measurements
($ thousands)
Total
Level 1
Level 2
Level 3
Asset (Liability)
February 1, 2025:
Non-qualified deferred compensation plan assets
$
10,939
10,939
$
-
$
-
Non-qualified deferred compensation plan liabilities
(10,939)
(10,939)
-
-
Non-qualified restoration plan assets
-
-
Non-qualified restoration plan liabilities
(444)
(444)
-
-
Deferred compensation plan liabilities for non-employee directors
(1,039)
(1,039)
-
-
Restricted stock units for non-employee directors
(1,130)
(1,130)
-
-
February 3, 2024:
Non-qualified deferred compensation plan assets
9,494
9,494
-
-
Non-qualified deferred compensation plan liabilities
(9,494)
(9,494)
-
-
Non-qualified restoration plan assets
Non-qualified restoration plan liabilities
(271)
(271)
Deferred compensation plan liabilities for non-employee directors
(1,921)
(1,921)
-
-
Restricted stock units for non-employee directors
(2,606)
(2,606)
-
-
Impairment Charges
The Company assesses the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors the Company considers important that could trigger an impairment review include underperformance relative to expected historical or projected future operating results, a significant change in the manner of the use of the asset or a negative industry or economic trend. When the Company determines that the carrying value of long-lived assets may not be recoverable based upon the existence of one or more of the aforementioned factors, impairment is measured based on a projected discounted cash flow method. Certain factors, such as estimated store sales and expenses, used for this nonrecurring fair value measurement are considered Level 3 inputs as defined by FASB ASC 820, Fair Value Measurement. Long-lived assets held and used with a carrying amount of $626.2 million, $579.1 million and $562.2 million in 2024, 2023 and 2022, respectively, were assessed for indicators of impairment. This assessment resulted in the impairment charges presented in the table below, primarily for operating lease right-of-use assets, leasehold improvements, and furniture and fixtures in the Company’s retail stores, as well as capitalized software.
($ thousands)
Long-Lived Asset Impairment Charges:
Famous Footwear
$
1,448
$
$
Brand Portfolio
-
1,603
Total long-lived asset impairment charges
$
1,864
$
$
1,803
The Company performed its annual impairment review of intangible assets, which involves estimating the fair value using significant unobservable inputs (Level 3). The intangible asset impairment reviews performed in 2024, 2023 and 2022 resulted in no impairment charges.
During 2024 and 2022, the Company performed qualitative assessments of goodwill as of the first day of the fourth fiscal quarter and during 2023 Company performed a quantitative assessment of goodwill. The reviews indicated no impairment. Refer to Note 1 and Note 10 to the consolidated financial statements for additional information related to the goodwill impairment tests.
Fair Value of the Company’s Other Financial Instruments
The fair values of cash and cash equivalents, receivables and trade accounts payable approximate their carrying values due to the short-term nature of these instruments.
The fair values of the borrowings under revolving credit agreement of $219.5 million and $182.0 million as of February 1, 2025 and February 3, 2024, respectively, approximate the carrying values due to the short-term nature of the borrowings. (Level 1).
14. SHAREHOLDERS’ EQUITY
Company Stock
The Company’s common stock, which has a $0.01 par value per share, is listed for trading under the ticker symbol “CAL” on the New York Stock Exchange. Holders of the common shares are entitled to one vote per share. The Company is also authorized to issue preferred shares with a $1.00 par value per share.
The following table provides additional information regarding the Company’s common and preferred stock:
(in thousands)
February 1, 2025
February 3, 2024
Common
Preferred
Common
Preferred
Authorized shares
100,000
1,000
100,000
1,000
Outstanding shares
33,632
-
35,490
-
Stock Repurchase Programs
On September 2, 2019 and March 10, 2022, the Board of Directors approved stock repurchase programs (“2019 Program" and "2022 Program", respectively) authorizing the repurchase of the Company’s outstanding common stock of up to 5.0 million shares in the 2019 Program and 7.0 million shares in the 2022 Program. The Company can use the repurchase programs to repurchase shares on the open market or in private transactions from time to time, depending on market conditions. The repurchase programs do not have an expiration date. Repurchases of common stock are limited under the Company’s debt agreements. During 2024, 2023 and 2022, the Company repurchased 1,938,324 shares, 763,000 shares and 2,622,845 shares, respectively, under the share repurchase programs. In total, 5.0 million shares have been repurchased under the 2019 Program and there are no additional shares authorized to be repurchased. There are 3,666,055 additional shares authorized to be repurchased under the 2022 Program as of February 1, 2025.
Repurchases Related to Employee Share-based Awards
During 2024, 2023 and 2022, employees tendered 249,678, 449,285 and 246,688 shares, respectively, related to certain share-based awards. These shares were tendered to satisfy tax withholding amounts for restricted stock, stock performance awards and non-qualified stock options. Accordingly, these share repurchases are not considered a part of the Company’s publicly announced stock repurchase programs.
Accumulated Other Comprehensive Loss
The following table sets forth the changes in accumulated other comprehensive loss, net of tax, by component for 2024, 2023 and 2022:
Pension and
Accumulated
Foreign
Other
Other
Currency
Postretirement
Comprehensive
($ thousands)
Translation
Transactions (1)
(Loss) Income
Balance January 29, 2022
$
(788)
$
(7,818)
$
(8,606)
Other comprehensive loss before reclassifications
(425)
(19,776)
(20,201)
Reclassifications:
Amounts reclassified from accumulated other comprehensive loss
-
2,991
2,991
Tax benefit
-
(934)
(934)
Net reclassifications
-
2,057
2,057
Other comprehensive loss
(425)
(17,719)
(18,144)
Balance January 28, 2023
$
(1,213)
$
(25,537)
$
(26,750)
Other comprehensive income (loss) before reclassifications
(10,506)
(10,391)
Reclassifications:
Amounts reclassified from accumulated other comprehensive loss
-
3,552
3,552
Tax benefit
-
(915)
(915)
Net reclassifications
-
2,637
2,637
Other comprehensive income (loss)
(7,869)
(7,754)
Balance February 3, 2024
$
(1,098)
$
(33,406)
$
(34,504)
Other comprehensive loss before reclassifications
(4,691)
(1,284)
(5,975)
Reclassifications:
Amounts reclassified from accumulated other comprehensive loss
-
8,695
8,695
Tax benefit
-
(2,238)
(2,238)
Net reclassifications
-
6,457
6,457
Other comprehensive (loss) income
(4,691)
5,173
Balance February 1, 2025
$
(5,789)
$
(28,233)
$
(34,022)
(1) Amounts reclassified are included in other (expense) income, net. Refer to Note 5 to the consolidated financial statements for additional information related to pension and other postretirement benefits.
15. SHARE-BASED COMPENSATION
The Company has share-based incentive compensation plans under which certain officers, employees and members of the Board of Directors are participants and may be granted restricted stock, stock performance awards, restricted stock units and stock options.
ASC 718, Compensation - Stock Compensation, and ASC 505, Equity, require companies to recognize compensation expense in an amount equal to the fair value of all share-based payments granted to employees over the requisite service period for each award. In certain limited circumstances, the Company’s incentive compensation plan provides for accelerated vesting of the awards, such as in the event of a change in control, qualified retirement, death or disability. The Company has a policy of issuing treasury shares in satisfaction of share-based awards.
Share-based compensation expense of $15.1 million, $14.8 million and $17.3 million was recognized in 2024, 2023 and 2022, respectively, as a component of selling and administrative expenses. The following table details the share-based compensation expense by plan for 2024, 2023 and 2022:
($ thousands)
Expense for share-based compensation plans, net of forfeitures:
Restricted stock
$
12,746
$
12,579
$
10,974
Stock performance awards
1,410
1,183
5,190
Restricted stock units
1,042
1,147
Total share-based compensation expense
$
15,145
$
14,804
$
17,311
The Company issued 80,069, 537,267 and 703,452 shares of common stock in 2024, 2023 and 2022, respectively, for restricted stock grants, stock performance awards issued to employees and common and restricted stock issued to non-employee directors, net of forfeitures and shares withheld to satisfy the tax withholding requirement.
The Company recognized excess tax benefits of $2.6 million, $3.1 million and $0.6 million in 2024, 2023, and 2022, respectively, related to restricted stock vestings and dividends and performance share award vestings. The excess tax benefit or provision for the respective periods were recorded in income tax provision on the Company’s consolidated statements of earnings.
Restricted Stock
Under the Company’s incentive compensation plans, restricted stock of the Company may be granted at no cost to certain officers, key employees and directors. Plan participants are entitled to cash dividends and voting rights for their respective shares. The restricted stock awards limit the sale or transfer of these shares during the requisite service period. Expense for restricted stock grants is recognized on a straight-line basis separately for each vesting portion of the stock award based upon the fair value of the award on the date of grant. The fair value of the restricted stock grants is the quoted market price for the Company’s common stock on the date of grant.
The following table summarizes restricted stock activity for 2024, 2023 and 2022:
Number of
Nonvested
Weighted-
Restricted
Average Grant
Shares
Date Fair Value
Nonvested at January 29, 2022
1,390,397
14.24
Granted
848,678
21.76
Vested
(525,399)
12.87
Forfeited
(109,716)
15.67
Nonvested at January 28, 2023
1,603,960
18.57
Granted
603,121
23.13
Vested
(513,238)
13.73
Forfeited
(181,422)
19.15
Nonvested at February 3, 2024
1,512,421
21.96
Granted
346,686
39.77
Vested
(620,800)
21.08
Forfeited
(96,988)
26.08
Nonvested at February 1, 2025
1,141,319
$
27.60
Of the 346,686 restricted shares granted during 2024, 13,692 shares have a cliff-vesting term of one year and 332,994 shares have a graded-vesting term of three years, with 50% vesting after two years and 50% after three years. Of the 603,121 restricted shares granted during 2023, 23,268 shares have a cliff-vesting term of one year, 7,000 shares have a graded vesting term of three years, with 50% vesting after eighteen months and 50% after three years, 5,800 shares have a graded-vesting term of two years and 567,053 shares have a graded-vesting term of three years, with 50% vesting after two years and 50% after three years. Of the 848,678 restricted shares granted during 2022, 10,470 shares have a cliff-
vesting term of one year, 63,614 shares have a cliff-vesting term of two years and 774,594 shares have a graded-vesting term of three years, with 50% vesting after two years and 50% after three years.
The total grant date fair value of restricted stock awards vested during the years ended February 1, 2025, February 3, 2024 and January 28, 2023 was $13.0 million, $7.0 million and $6.8 million, respectively. The total fair value of restricted stock awards that vested during the years ended February 1, 2025, February 3, 2024 and January 28, 2023 was $23.1 million, $12.2 million and $11.5 million, respectively. As of February 1, 2025, the total remaining unrecognized compensation cost related to nonvested restricted stock grants was $11.5 million, which will be amortized over the weighted-average remaining requisite service period of approximately 1.5 years.
Performance Share Awards
Under the Company’s incentive compensation plans, common stock or cash may be awarded at the end of the performance period at no cost to certain officers and key employees if certain financial goals are met. Under the plan, employees are granted performance share awards at a target number of shares or units, which generally vest over a three-year service period. At the end of the vesting period, the employee will have earned an amount of shares between 0% and 200% of the targeted award, depending on the attainment of certain financial goals for the service period and individual achievement of strategic initiatives over the cumulative period of the award. If the awards are granted in units, the employee will be given an amount of cash ranging from 0% to 200% of the equivalent market value of the targeted award. Expense for performance share awards is recognized based upon the fair value of the awards on the date of grant and the number of shares or cash that are probable to be awarded on a straight-line basis for each performance period of the share award.
During 2024, the Company granted performance share awards for a targeted 165,854 shares, with a weighted-average grant date fair value of $41.05 in connection with the 2024 performance award (2024 - 2026 performance period). During 2023, the Company granted performance share awards for a targeted 276,434 shares, with a weighted-average grant date fair value of $23.12 in connection with the 2023 performance award (2023 - 2025 performance period). The 2024 and 2023 performance awards are payable in common stock for up to 100% of the targeted award and the remainder in cash if any portion exceeds the targeted award. Compensation expense is recognized based on the fair value of the award and the number of shares or units that are probable to be awarded for each tranche in accordance with the vesting schedule of the units over the three-year service period.
In connection with a senior management transition during 2022, the Company approved the accelerated vesting of 30,000 performance-based share awards, representing the maximum payout of two of the four award tranches from the 2020 performance award. The performance conditions had been satisfied for the two award tranches based on the achievement of financial goals for the 2020 and 2021 fiscal periods. The modification to accelerate vesting eliminated the remaining service requirement. These awards had a weighted-average grant date fair value of $13.05 per share, but were revalued using a fair value on the date of modification of $24.31 per share. The modification of these awards resulted in incremental compensation expense of $0.4 million, which is presented in restructuring and other special charges on the consolidated statements of earnings for 2022.
The following table summarizes performance share award activity for 2024, 2023 and 2022:
Number of Nonvested
Number of Nonvested
Performance Share
Performance Share
Awards at Target
Awards at Maximum
Weighted-Average
Level
Level
Grant Date Fair Value
Nonvested at January 29, 2022
390,750
781,500
16.12
Granted
77,750
155,500
21.00
Vested
(172,500)
(345,000)
23.50
Forfeited
(15,000)
(30,000)
14.24
Nonvested at January 28, 2023
281,000
562,000
13.64
Granted
276,434
276,434
23.12
Vested
(273,918)
(547,836)
13.64
Forfeited
(14,868)
(21,950)
18.65
Nonvested at February 3, 2024
268,648
268,648
23.12
Granted
165,854
165,854
41.05
Vested
-
-
-
Forfeited
(21,886)
(21,886)
23.12
Nonvested at February 1, 2025
412,616
412,616
$
30.33
The total fair value of performance share awards that vested during the years ended February 1, 2025, February 3, 2024 and January 28, 2023 was zero, $13.8 million and $2.1 million, respectively. As of February 1, 2025, the remaining unrecognized compensation cost related to nonvested performance share awards for the 2024 performance award was $2.1 million, which will be recognized over the remaining service period of 1.6 years.
During 2022, the Company granted long-term incentive awards payable in cash for the 2022-2024 performance period, with a target value of $8.3 million and a maximum value of $16.6 million. During 2021, the Company granted long-term incentive awards payable in cash for the 2021-2023 performance period, with a target value of $7.3 million and a maximum value of $14.6 million. These awards, which vested after a three-year period, were dependent upon the attainment of certain financial goals of the Company for each of the three years and individual achievement of strategic initiatives over the cumulative period of the award. The estimated value of these awards, which is reflected within other accrued expenses on the consolidated balance sheets, was being accrued over the three-year performance period.
Restricted Stock Units for Non-Employee Directors
Equity-based grants may be made to non-employee directors in the form of restricted stock units (“RSUs”) payable in cash or common stock at no cost to the non-employee director. The RSUs are subject to a vesting requirement (usually one year), earn dividend equivalent units and are payable in cash or common stock on the date the director terminates service or such earlier date as a director may elect, subject to restrictions, based on the then current fair value of the Company’s common stock. Dividend equivalents are paid on outstanding RSUs at the same rate as dividends on the Company’s common stock, are automatically re-invested in additional RSUs and vest immediately as of the payment date for the dividend. Expense related to the initial grant of RSUs is recognized ratably over the vesting period based upon the fair value of the RSUs. The RSUs payable in cash are remeasured at the end of each period. Expense for the dividend equivalents is recognized at fair value immediately. Gains and losses resulting from changes in the fair value of the RSUs payable in cash subsequent to the vesting period and through the settlement date are recognized in the Company’s consolidated statements of earnings. Refer to Note 5 and Note 13 to the consolidated financial statements for information regarding the deferred compensation plan for non-employee directors.
The following table summarizes restricted stock unit activity for the year ended February 1, 2025:
Nonvested
Outstanding
Accrued (3)
RSUs
Weighted-
Number of
Number of
Total
Total
Average
Vested
Nonvested
Number of
Number of
Grant Date
RSUs
RSUs
RSUs (2)
RSUs
Fair Value
February 3, 2024
480,270
52,335
532,605
515,159
$
16.85
Granted (1)
3,972
27,690
31,662
22,534
35.01
Vested
46,842
(46,842)
-
15,512
19.41
Settled
(78,791)
-
(78,791)
(78,791)
41.27
February 1, 2025
452,293
33,183
485,476
474,414
$
28.38
(1) Granted RSUs include 4,278 RSUs resulting from dividend equivalents paid on outstanding RSUs, of which 3,972 related to outstanding vested RSUs and 306 to outstanding nonvested RSUs.
(2) Total number of RSUs as of February 1, 2025 includes 348,761 RSUs payable in shares and 136,715 RSUs payable in cash.
(3) Accrued RSUs include all fully vested awards and a pro-rata portion of nonvested awards based on the elapsed portion of the vesting period.
The following table summarizes RSUs granted, vested and settled during 2024, 2023 and 2022:
($ thousands, except per unit amounts)
Weighted-average grant date fair value of RSUs granted (1)
$
34.40
$
19.92
$
27.09
Fair value of RSUs vested
$
$
1,186
$
RSUs settled
78,791
17,017
114,242
(1) Includes dividend equivalents granted on outstanding RSUs, which vest immediately.
The following table details the RSU compensation (income) expense and the related income tax provision (benefit) for 2024, 2023 and 2022:
($ thousands)
Compensation (income) expense
$
(609)
$
$
Income tax provision (benefit)
(149)
(86)
Compensation (income) expense, net of tax
$
(452)
$
$
The aggregate fair value of RSUs outstanding and currently vested at February 1, 2025 is $8.9 million and $8.3 million, respectively. The liabilities associated with the accrued RSUs totaled $1.1 million and $2.6 million as of February 1, 2025 and February 3, 2024, respectively.
16. COMMITMENTS AND CONTINGENCIES
Environmental Remediation
Prior operations included numerous manufacturing and other facilities for which the Company may have responsibility under various environmental laws for the remediation of conditions that may be identified in the future. The Company is involved in environmental remediation and ongoing compliance activities at several sites and has been notified that it is or may be a potentially responsible party at several other sites.
Redfield
The Company is remediating, under the oversight of Colorado authorities, the groundwater and indoor air at its owned facility in Colorado (the “Redfield site” or, when referring to remediation activities at or under the facility, the “on-site
remediation”) and residential neighborhoods adjacent to and near the property (the “off-site remediation”) that have been affected by solvents previously used at the facility. The on-site remediation calls for the operation of a pump and treat system (which prevents migration of contaminated groundwater off the property) as the final remedy for the site, subject to monitoring and periodic review of the on-site conditions and other remedial technologies that may be developed in the future. In 2016, the Company submitted a revised plan to address on-site conditions, including direct treatment of source areas, and received approval from the oversight authorities to begin implementing the revised plan. The Company received permission from the oversight authorities to convert the pump and treat system to a passive treatment barrier system and completed the conversion during 2023.
Off-site groundwater concentrations have been reducing over time since installation of the pump and treat system in 2000 and injection of clean water beginning in 2003. However, localized areas of contaminated bedrock just beyond the property line continue to impact off-site groundwater. The modified workplan for addressing this condition includes converting the off-site bioremediation system into a monitoring well network and employing different remediation methods in these recalcitrant areas. In accordance with the workplan, a pilot test was conducted of certain groundwater remediation methods and the results of that test were used to develop more detailed plans for remedial activities in the off-site areas, which were approved by the authorities and are being implemented in a phased manner. The results of groundwater monitoring are being used to evaluate the effectiveness of these activities. The Company continues to implement the expanded remedy workplan that was approved by the oversight authorities in 2015 and to work with the oversight authorities on the off-site work plan.
The cumulative expenditures for both on-site and off-site remediation through February 1, 2025 were $34.7 million. The Company has recovered a portion of these expenditures from insurers and other third parties. The reserve for the anticipated future remediation activities at February 1, 2025 is $9.3 million, of which $8.4 million is recorded within other liabilities and $0.9 million is recorded within other accrued expenses. Of the total $9.3 million reserve, $4.9 million is for off-site remediation and $4.4 million is for on-site remediation. The liability for the on-site remediation was discounted at 4.8%. On an undiscounted basis, the on-site remediation liability would be $12.2 million as of February 1, 2025. The Company expects to spend approximately $0.2 million in the next year, $0.1 million in each of the following four years and $11.6 million in the aggregate thereafter related to the on-site remediation.
Other
Various federal and state authorities have identified the Company as a potentially responsible party for remediation at certain other sites. However, the Company does not currently believe that its liability for such sites, if any, would be material.
The Company continues to evaluate its estimated costs in conjunction with its environmental consultants and records its best estimate of such liabilities. However, future actions and the associated costs are subject to oversight and approval of various governmental authorities. Accordingly, the ultimate costs may vary, and it is possible costs may exceed the recorded amounts.
Litigation
The Company is involved in legal proceedings and litigation arising in the ordinary course of business. In the opinion of management, the outcome of such ordinary course of business proceedings and litigation currently pending is not expected to have a material adverse effect on the Company’s results of operations or financial position. Legal costs associated with litigation are generally expensed as incurred.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Col. A
Col. B
Col. C
Col. D
Col. E
Additions
Balance at
Charged to
Charged to Other
Balance at
Beginning
Costs and
Accounts -
Deductions -
End of
Description
of Period
Expenses
Describe
Describe
Period
($ thousands)
YEAR ENDED FEBRUARY 1, 2025
Deducted from assets or accounts:
Allowance for expected credit losses
$
8,820
$
(815)
$
-
$
(318)
(A)
$
8,323
Customer allowances
17,372
24,967
-
26,505
(B)
15,834
Customer discounts
4,125
11,461
-
13,753
(B)
1,833
Inventory markdowns and other
20,935
36,791
-
40,032
(C)
17,694
Deferred tax asset valuation allowance
7,153
(3,747)
-
-
3,406
YEAR ENDED FEBRUARY 3, 2024
Deducted from assets or accounts:
Allowance for expected credit losses
$
8,903
$
1,018
$
-
$
1,101
(A)
$
8,820
Customer allowances
18,624
28,535
-
29,787
(B)
17,372
Customer discounts
3,293
9,904
-
9,072
(B)
4,125
Inventory markdowns and other
43,911
36,485
-
59,461
(C)
20,935
Deferred tax asset valuation allowance
39,540
(32,387)
-
-
7,153
YEAR ENDED JANUARY 29, 2023
Deducted from assets or accounts:
Allowance for expected credit losses
$
9,601
$
(262)
$
-
$
(A)
$
8,903
Customer allowances
17,857
27,559
-
26,792
(B)
18,624
Customer discounts
2,472
11,357
-
10,536
(B)
3,293
Inventory markdowns and other
30,455
53,787
-
40,331
(C)
43,911
Deferred tax asset valuation allowance
58,959
(19,419)
-
-
39,540
(A) Accounts written off, net of recoveries.
(B) Discounts and allowances granted to wholesale customers of the Brand Portfolio segment.
(C) Adjustment upon sale of related inventories.

---

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9ACONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
It is the Chief Executive Officer’s and Chief Financial Officer’s ultimate responsibility to ensure we maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms and is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our disclosure controls and procedures include mandatory communication of material events; automated accounting processing and reporting; management review of monthly, quarterly and annual results; an established system of internal controls; and internal control reviews by our internal auditors.
A control system, no matter how well-conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Furthermore, the design of a control system must reflect the fact there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in
all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to errors or fraud may occur and not be detected. Our disclosure controls and procedures are designed to provide a reasonable level of assurance that their objectives are achieved. As of February 1, 2025, management of the Company, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based upon and as of the date of that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded our disclosure controls and procedures were effective at the reasonable assurance level.
Internal Control Over Financial Reporting
Based on the evaluation of internal control over financial reporting, the Chief Executive Officer and Chief Financial Officer have concluded that there have been no changes in the Company’s internal controls over financial reporting or in other factors during the quarter ended February 1, 2025, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
ITEM 9BOTHER INFORMATION
During the thirteen weeks ended February 1, 2025, no director or Section 16 officer adopted or terminated any “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement”, as each term is defined in Item 408(a) of Regulation S-K.
ITEM 9CDISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
PART III
ITEM 10DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information regarding Directors of the Company is set forth under the caption Proposal 1 - Election of Directors in the Proxy Statement for the Annual Meeting of Shareholders to be held May 22, 2025, which information is incorporated herein by reference.
Information regarding Executive Officers of the Registrant is set forth under the caption Information about our Executive Officers that can be found in Item 1 of this report, which information is incorporated herein by reference.
Information regarding Section 16, Beneficial Ownership Reporting Compliance, is set forth under the caption Delinquent Section 16(a) Reports in the Proxy Statement for the Annual Meeting of Shareholders to be held May 22, 2025, which information is incorporated herein by reference.
Information regarding the Audit Committee and the Audit Committee financial expert is set forth under the caption Board Meetings and Committees in the Proxy Statement for the Annual Meeting of Shareholders to be held May 22, 2025, which information is incorporated herein by reference.
Information regarding the Corporate Governance Guidelines, Code of Business Conduct, and Code of Ethics is set forth under the caption Corporate Governance in the Proxy Statement for the Annual Meeting of Shareholders to be held May 22, 2025, which information is incorporated herein by reference.
ITEM 11EXECUTIVE COMPENSATION
Information regarding Executive Compensation is set forth under the captions Compensation Discussion and Analysis, Executive Compensation, and Compensation of Non-Employee Directors in the Proxy Statement for the Annual Meeting of Shareholders to be held May 22, 2025, which information (other than the information set forth under “Pay Versus Performance”) is incorporated herein by reference.
Information regarding the Culture, Compensation and People Committee Report is set forth under the caption Culture, Compensation and People Committee Report in the Proxy Statement for the Annual Meeting of Shareholders to be held May 22, 2025, which information is incorporated herein by reference.
Information regarding Compensation Committee Interlocks and Insider Participation is set forth under the caption Culture, Compensation and People Committee Interlocks and Insider Participation in the Proxy Statement for the Annual Meeting of Shareholders to be held May 22, 2025, which information is incorporated herein by reference.
ITEM 12SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Information regarding Company Stock Ownership by Directors, Officers and Principal Holders of Our Stock is set forth under the caption Stock Ownership by Directors, Executive Officers and 5% Shareholders in the Proxy Statement for the Annual Meeting of Shareholders to be held May 22, 2025, which information is incorporated herein by reference.
Equity Compensation Plan Information
The following table sets forth aggregate information regarding the Company’s equity compensation plans as of February 1, 2025:
Number of
securities
remaining
available for
future
Number of
issuance
securities to be
Weighted-
under equity
issued upon
average
compensation
exercise of
exercise price
plans
outstanding
of outstanding
(excluding
options,
options,
securities
warrants and
warrants and
reflected in
rights
rights
column (a))
Plan Category
(a)
(b)
(c)
Equity compensation plans approved by security holders
412,616
(1)
$
-
(1)
1,533,281
(2)
Equity compensation plans not approved by security holders
-
-
-
Total
412,616
$
-
1,533,281
(1) Column (a) includes 412,616 performance share units payable in stock, which reflects the maximum number of shares to be issued under the performance share plans. The target number of shares to be issued under the plans is 412,616. Performance share awards were disregarded for purposes of computing the weighted-average exercise price in column
(b). There were no outstanding (vested and nonvested) stock options as of February 1, 2025. This table excludes independent directors’ deferred compensation units and restricted stock units payable in cash.
(2) Represents our remaining shares available for award grants based upon the provisions of the plans, which reflect our practice to reserve shares for outstanding awards. The number of securities available for grant has been reduced for performance share awards payable in stock. Performance share awards are reserved based on the maximum payout level.
Information regarding share-based plans is set forth in Note 15 to the consolidated financial statements and is hereby incorporated by reference.
ITEM 13CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information regarding Certain Relationships and Related Transactions is set forth under the caption Related Party Transactions in the Proxy Statement for the Annual Meeting of Shareholders to be held May 22, 2025, which information is incorporated herein by reference.
Information regarding Director Independence is set forth under the caption Director Independence in the Proxy Statement for the Annual Meeting of Shareholders to be held May 22, 2025, which information is incorporated herein by reference.
ITEM 14PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information regarding our Principal Accountant Fees and Services is set forth under the caption Fees Paid to Independent Registered Public Accountants in the Proxy Statement for the Annual Meeting of Shareholders to be held May 22, 2025, which information is incorporated herein by reference.
PART IV
ITEM 15EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)
(1) and (2) The list of financial statements and Financial Statement Schedules required by this item is included in the Index under Financial Statements and Supplementary Data. All other schedules specified under Regulation S-X have been omitted because they are not applicable, because they are not required or because the information required is included in the financial statements or notes thereto.
(3) Exhibits
Exhibit No.
Description
2.1
Sale and Purchase Agreement, dated February 16, 2025, by and between Caleres, Inc. (the “Company”) and Tapestry, Inc. incorporated herein by reference to Exhibit 2.1 to the Company's Form 8-K filed February 19, 2025.
3.1
Restated Certificate of Incorporation of Caleres, Inc. incorporated herein by reference to Exhibit 3.1 to the Company's Form 8-K filed June 1, 2020.
3.2
Bylaws of the Company as amended through November 5, 2024, incorporated herein by reference to Exhibit 3.1 to the Company’s Form 8-K filed November 7, 2024.
4.1
Description of the Registrant's Securities Registered Pursuant to Section 12 of The Securities Exchange Act of 1934, incorporated herein by reference to Exhibit 4.1 to the Company’s Form 10-K for the year ended February 1, 2020, and filed March 31, 2020.
10.1
First Amendment to Fourth Amended and Restated Credit Agreement, dated as of July 20, 2015 (the “Credit Agreement”), among the Company, as lead borrower for itself and on behalf of certain of its subsidiaries, and Bank of America, N.A., as lead issuing bank, administrative agent and collateral agent, Wells Fargo Bank, National Association, as an issuing bank, Wells Fargo Bank, National Association, as syndication agent, JPMorgan Chase Bank, N.A. and SunTrust Bank, as co-documentation agents, and the other financial
institutions party thereto, as lenders, incorporated herein by reference to Exhibit 10.1 to the Company’s Form 8-K dated and filed July 20, 2015.
10.1a
Second Amendment to Fourth Amended and Restated Credit Agreement, dated August 17, 2016, among the Company, as lead borrower for itself and on behalf of certain of its subsidiaries, and the financial institutions party thereto, incorporated herein by reference to Exhibit 10.1 to the Company’s Form 10-Q for the quarterly period ended July 30, 2016.
10.1b
Third Amendment to Fourth Amended and Restated Credit Agreement, dated January 18, 2019, among the Company, as lead borrower for itself and on behalf of certain of its subsidiaries, and the financial institutions party thereto, incorporated herein by reference to Exhibit 10.1 to the Company’s Form 8-K dated and filed January 23, 2019.
10.1c
Fourth Amendment to Fourth Amended and Restated Credit Agreement, dated April 14, 2020, among the Company, as lead borrower for itself and on behalf of certain of its subsidiaries, and the financial institutions party thereto, incorporated herein by reference to Exhibit 10.1 to the Company’s 8-K dated and filed April 20, 2020.
10.1d
Fifth Amendment to Fourth Amended and Restated Credit Agreement, dated October 5, 2021, among the Company, as lead borrower for itself and on behalf of certain of its subsidiaries, and the financial institutions party thereto, incorporated herein by reference to Exhibit 10.1 to the Company’s 8-K dated and filed October 7, 2021.
10.1e
Sixth Amendment to Fourth Amended and Restated Credit Agreement, dated April 27, 2023, among the Company, as lead borrower for itself and on behalf of certain of its subsidiaries, and the financial institutions party thereto, incorporated herein by reference to Exhibit 10.1 to the Company’s Form 10-Q for the quarterly period ended April 29, 2023, and filed June 6, 2023.
10.2a*
Caleres, Inc. Incentive and Stock Compensation Plan of 2017, incorporated herein by reference to Exhibit A to the Company’s definitive proxy statement dated and filed April 14, 2017.
10.2b*
Form of Performance Award Agreement (for 2021-2023 performance period) under the Company’s Incentive and Stock Compensation Plan of 2017, incorporated herein by reference to Exhibit 10.4e to the Company’s Form 10-K for the year ended January 30, 2021, and filed March 30, 2021.
10.2c*
Form of Performance Award Agreement (for 2022-2024 performance period) under the Company’s Incentive and Stock Compensation Plan of 2017, incorporated herein by reference to Exhibit 10.4e to the Company’s Form 10-K for the year ended January 29, 2022, and filed March 28, 2022.
10.2d*
Form of Restricted Stock Award Agreement (for employee grants commencing March 2019) under the Company’s Incentive and Stock Compensation Plan of 2017, incorporated herein by reference to Exhibit 10.4f to the Company’s Form 10-K for the year ended February 2, 2019, and filed April 2, 2019.
10.2e*
Form of Restricted Stock Award Agreement (for employee grants commencing March 2020) under the Company’s Incentive and Stock Compensation Plan of 2017, incorporated herein by reference to Exhibit 10.4h to the Company’s 10-K for the year ended February 1, 2020, and filed March 31, 2020.
10.2f*
Form of Restricted Stock Award Agreement (for employee grants commencing March 2021) under the Company’s Incentive and Stock Compensation Plan of 2017, incorporated herein by reference to Exhibit 10.4j to the Company’s 10-K for the year ended January 31, 2021, and filed March 30, 2021.
10.2g*
Form of Restricted Stock Award Agreement (for employee grants commencing March 2022) under the Company’s Incentive and Stock Compensation Plan of 2017, incorporated herein by reference to Exhibit 10.4j to the Company’s Form 10-K for the year ended January 29, 2022, and filed March 28, 2022.
10.3a*
Caleres, Inc. Incentive and Stock Compensation Plan of 2022, incorporated herein by reference to Exhibit A to the Company’s definitive proxy statement dated and filed April 14, 2022.
10.3b*
Form of Performance Award Agreement under the Company’s Incentive and Stock Compensation Plan of 2022 (for grants commencing in May 2022), incorporated herein by reference to Exhibit 10.4a to the Company’s Form 10-Q for the quarter ended April 30, 2022, and filed June 7, 2022.
10.3c*
Form of Restricted Stock Award Agreement under the Company’s Incentive and Stock Compensation Plan of 2022 (for grants commencing in May 2022), incorporated herein by reference to Exhibit 10.4b to the Company’s Form 10-Q for the quarter ended April 30, 2022, and filed June 7, 2022.
10.3d*
Form of Performance Award Agreement (for 2023 - 2025 performance period) under the Company’s Incentive and Stock Compensation Plan of 2022, incorporated herein by reference to Exhibit 10.3d to the Company’s Form 10-K for the year ended January 28, 2023, and filed March 28, 2023.
10.3e*
Form of Restricted Award Agreement (for employee grants commencing March 2023) under the Company’s Incentive and Stock Compensation Plan of 2022, incorporated herein by reference to Exhibit 10.3e to the Company’s Form 10-K for the year ended January 28, 2023, and filed March 28, 2023.
10.3f*
Form of Performance Award Agreement (for 2024 - 2026 performance period) under the Company’s Incentive and Stock Compensation Plan of 2022, incorporated herein by reference to Exhibit 10.3f to the Company’s Form 10-K for the year ended February 3, 2024, and filed April 2, 2024.
10.3g*
Form of Restricted Award Agreement (for employee grants commencing March 2024) under the Company’s Incentive and Stock Compensation Plan of 2022, incorporated herein by reference to Exhibit 10.3g to the Company’s Form 10-K for the year ended February 3, 2024, and filed April 2, 2024.
†10.3h*
Form of Performance Award Agreement (for 2025 - 2027 performance period) under the Company’s Incentive and Stock Compensation Plan of 2022, filed herewith.
†10.3i*
Form of Restricted Award Agreement (for employee grants commencing March 2025) under the Company’s Incentive and Stock Compensation Plan of 2022, filed herewith.
10.4a*
Form of Non-Employee Director Restricted Stock Unit Agreement between the Company and its Non-Employee Directors (for grants commencing in 2022), incorporated herein by reference to Exhibit 10.5a to the Company’s Form 10-Q for the quarter ended April 30, 2022, and filed June 7, 2022.
10.4b*
Form of Non-Employee Director Restricted Stock Award Agreement between the Company and its Non-Employee Directors (for grants commencing in 2022), incorporated herein by reference to Exhibit 10.5b to the Company’s Form 10-Q for the quarter ended April 30, 2022, and filed June 7, 2022.
10.5*
Caleres, Inc. Deferred Compensation Plan for Non-Employee Directors, as amended and restated as of May 28, 2015, incorporated herein by reference to Exhibit 10.2 to the Company’s Form 10-Q for the quarter ended May 2, 2015, and filed June 10, 2015.
10.6*
Amendment to the Caleres, Inc. Supplemental Executive Retirement Plan, incorporated herein by reference to Exhibit 10.1 to the Company’s Form 8-K dated December 22, 2022, and filed December 28, 2022.
10.7*
Caleres, Inc. Supplemental Executive Retirement Plan (SERP), as amended and restated as of May 28, 2015, incorporated herein by reference to Exhibit 10.3 to the Company’s Form 10-Q for the quarter ended May 2, 2015, and filed June 10, 2015.
10.8*
Caleres, Inc. Deferred Compensation Plan, as amended and restated as of May 28, 2015, incorporated herein by reference to Exhibit 10.4 to the Company’s Form 10-Q for the quarter ended May 2, 2015, and filed June 10, 2015.
10.9*
Caleres, Inc. Non-Employee Director Share Plan (2009), incorporated herein by reference to Exhibit 10.5 to the Company’s Form 10-Q for the quarter ended May 2, 2015, and filed June 10, 2015.
10.10*
Severance Agreement, dated March 24, 2009 and effective as of April 1, 2009, between the Company and Daniel R. Friedman, incorporated herein by reference to Exhibit 10.16 to the Company’s Form 10-K for the year ended January 31, 2015, and filed March 31, 2015.
10.11*
Form of Amendment letter dated December 18, 2009, to the Severance Agreements between the Company and Daniel R. Friedman, as incorporated herein by reference to Exhibit 10.6 to the Company’s Form 10-Q for the quarter ended July 31, 2010, and filed September 7, 2010.
10.12*
Severance Agreement, effective June 14, 2018, between the Company and John W. Schmidt, incorporated herein by reference to Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended August 4, 2018, and filed September 12, 2018.
10.13*
Severance Agreement, effective January 31, 2022, between the Company and Michael R. Edwards, incorporated herein by reference to Exhibit 10.15 to the Company’s Form 10-K for the year ended January 28, 2023, and filed March 28, 2022.
10.14*
Severance Agreement, effective September 12, 2022, between the Company and Jack P. Calandra, incorporated herein by reference to Exhibit 10.10 to the Company’s Form 10-Q for the quarter ended October 29, 2022, and filed December 6, 2022.
10.15*
Employment Agreement, effective as of January 12, 2023, between the Company and Diane M. Sullivan, incorporated herein by reference to Exhibit 10.15 to the Company’s Form 10-K for the year ended January 28, 2023, and filed March 28, 2023.
10.16*
Caleres, Inc. Nonqualified Restoration Plan, incorporated herein by reference to Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended October 28, 2023, and filed December 5, 2023.
†21
Subsidiaries of the registrant.
†23
Consent of Independent Registered Public Accounting Firm.
†24
Power of attorney (contained on signature page).
†31.1
Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
†31.2
Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
†32.1
Certification of the Chief Executive and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
97.1
Caleres, Inc. Incentive Compensation Recovery Policy, incorporated herein by reference to Exhibit 97.1 to the Company’s Form 10-K for the year ended February 3, 2024, and filed April 2, 2024.
†101.INS
Inline XBRL Instance Document
†101.SCH
Inline XBRL Taxonomy Extension Schema Document
†101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
†101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
†101.PRE
Inline XBRL Taxonomy Presentation Linkbase Document
†101.DEF
Inline XBRL Taxonomy Definition Linkbase Document
†104
Cover Page Interactive Data File, formatted in iXBRL and contained in Exhibit 101.
(b)Exhibits:
See Item 15(a)(3) above. On request, copies of any exhibit will be furnished to shareholders upon payment of the Company’s reasonable expenses incurred in furnishing such exhibits.
(c)Financial Statement Schedules:
See Item 8 above.
*
Denotes management contract or compensatory plan arrangements.
†
Denotes exhibit is filed with this Form 10-K.
ITEM 16FORM 10-K SUMMARY
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CALERES, INC.
By:
/s/ Jack P. Calandra
Jack P. Calandra
Senior Vice President and Chief Financial Officer
Date: April 1, 2025
Know all men by these presents, that each person whose signature appears below constitutes and appoints John W. Schmidt and Jack P. Calandra his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant, on the dates and in the capacities indicated.
Signatures
Date
Title
/s/ John W. Schmidt
President, Chief Executive Officer and Director
John W. Schmidt
April 1, 2025
(Principal Executive Officer)
/s/ Jack P. Calandra
Senior Vice President and Chief Financial Officer
Jack P. Calandra
April 1, 2025
(Principal Financial Officer)
/s/ Todd E. Hasty
Senior Vice President and Chief Accounting Officer
Todd E. Hasty
April 1, 2025
(Principal Accounting Officer)
/s/ Diane M. Sullivan
Diane M. Sullivan
April 1, 2025
Executive Chair
/s/ Lisa A. Flavin
Lisa A. Flavin
April 1, 2025
Director
/s/ Brenda C. Freeman
Brenda C. Freeman
April 1, 2025
Director
/s/ Kyle F. Gendreau
Kyle F. Gendreau
April 1, 2025
Director
/s/ Lori H. Greeley
Lori H. Greeley
April 1, 2025
Director
/s/ Mahendra R. Gupta
Mahendra R. Gupta
April 1, 2025
Director
/s/ Ward M. Klein
Ward M. Klein
April 1, 2025
Director
/s/ Steven W. Korn
Steven W. Korn
April 1, 2025
Director
/s/ Molly Langenstein
Molly Langenstein
April 1, 2025
Director
/s/ Wenda Harris Millard
Wenda Harris Millard
April 1, 2025
Director
/s/ Bruce K. Thorn
Bruce K. Thorn
April 1, 2025
Director

---

ITEM 9A. CONTROLS AND PROCEDURES

---

ITEM 9B. OTHER INFORMATION

---

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

---

ITEM 11. EXECUTIVE COMPENSATION

---

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

---

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

---

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

---

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES