Caleres Stock Plunges After Q3 Earnings Miss, Weak Guidance
Footwear retailer's profit fell sharply, missing Wall Street estimates by over 55% as costs from the Stuart Weitzman acquisition weigh on near-term outlook.
Shares of Caleres Inc. (CAL) plummeted in premarket trading on Tuesday after the footwear company reported third-quarter earnings that fell dramatically short of analyst expectations and issued a downbeat forecast for the remainder of the year, revealing the heavy costs associated with its recent acquisition of luxury brand Stuart Weitzman.
The St. Louis-based retailer, which owns brands like Sam Edelman and Naturalizer, posted an adjusted earnings per share of $0.38 for the quarter. This figure represented a staggering 55.5% miss compared to the consensus Wall Street estimate of $0.85 and marked a sharp decline from the $1.23 per share reported in the same period last year.
The significant earnings shortfall overshadowed a modest beat on revenue. Caleres generated sales of $790.1 million, surpassing analyst expectations by 2.8%. However, investors focused on the deteriorating profitability and the company's revised outlook, which now anticipates a net loss for the fourth quarter.
In its official quarterly report, the company disclosed that the integration of Stuart Weitzman, acquired from Tapestry, Inc. earlier in the year, was the primary driver of the earnings miss. The deal diluted earnings by approximately $0.60 to $0.65 per share in the third quarter alone. This dilution led Caleres to slash its full-year adjusted earnings guidance to a range of $0.55 to $0.60 per share, a significant reduction that signals persistent pressure on its bottom line.
Following the announcement, Caleres shares plunged as much as 17% in premarket trading, reflecting deep investor concern over the near-term financial impact of the strategic acquisition. The stock had been trading well below its 52-week high of $26.96, and the latest results are likely to intensify pressure on the company's valuation.
The acquisition was intended to bolster Caleres' position in the high-end footwear market, but the immediate financial consequences have proven steep. The company's gross margin contracted by 230 basis points year-over-year to 41.8%, a decline attributed to a combination of integration costs and persistent tariff pressures affecting the broader retail industry.
Management acknowledged the challenges in a statement accompanying the results. "While our revenue growth demonstrates the strength of our brand portfolio, our profitability in the quarter was significantly impacted by the dilutive effects of the Stuart Weitzman acquisition," said Jay Schmidt, CEO of Caleres. "We are taking decisive action to manage costs and integrate the new brand efficiently, but we anticipate these headwinds will continue into the fourth quarter."
The company now projects a full-year GAAP loss per share between $0.13 and $0.18. This forecast stands in stark contrast to the profitable quarters investors had grown accustomed to, raising questions about the timeline for a return to stronger earnings.
Before the earnings release, analysts held a consensus target price of $19.00 for Caleres stock. The sharp downward revision to its earnings outlook may prompt analysts to reassess their models and ratings in the coming days as the market digests the full impact of the acquisition's costs on the company's financial health.