Q2 2025 Caleres Inc Earnings Call

Speaker #2: Greetings, welcome to the Calares Incorporated's second quarter 2025 earnings call. At this time, all participants will be in listen-only mode. A question and answer session will follow the formal presentation.

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

Speaker #2: If anyone should require operator assistance during today's conference, please press *0 from your telephone keypad. Please note that the conference is being recorded. At this time, I'll turn the conference over to Liz Dunn.

Speaker #2: Senior Vice President, Corporate Development and Strategic Communications. You may begin, Liz.

Speaker #3: Thanks, Bob. Good morning and thank you for joining our second quarter earnings call and webcast. A press release with detailed financial tables, as well as our quarterly slide presentation, are available at calares.com.

Liz Dunn: Thanks, Rob. Good morning and thank you for joining our second quarter earnings call webcast. A press release with detailed financial tables, as well as our quarterly slide presentation, are available at caleres.com. Please be aware today's discussion contains forward-looking statements, which are subject to several risks and uncertainties. Actual results may differ materially due to various risk factors, including those disclosed in the company's Form 10-K and other filings with the U.S. Securities and Exchange Commission. Please refer to today's press release and our SEC filings for more information on risk factors and other factors which could impact forward-looking statements. Copies of these reports are available online. In discussing our operating results, we will be providing and referring to certain non-GAAP financial measures. Additional details on these measures, as well as others featured in today's earnings release and presentation, are available at caleres.com.

Speaker #3: Please be aware, today's discussion contains forward-looking statements, which are subject to several risks and uncertainties. Actual results may differ materially due to various risk factors, including those disclosed in the company's Form 10-K and other filings with the US Securities and Exchange Commission.

Speaker #3: Please refer to today's press release and our SEC filings for more information on risk factors and other factors which could impact forward-looking statements. Copies of these reports are available online.

Speaker #3: In discussing our operating results, we will be providing and referring to certain non-GAAP financial measures. Additional details on these measures, as well as others featured in today's earnings release and presentation, are available at calares.com.

Speaker #3: The company undertakes no obligation to update any information discussed in this call at any time. Joining me today are Jay Schmidt, President and CEO, and Jack Calandra, Senior Vice President and CFO.

Liz Dunn: The company undertakes no obligation to update any information discussed in this call at any time. Joining me today are Jay Schmidt, President and CEO, and Jack Calandra, Senior Vice President and CFO. Our call will begin with prepared remarks, followed by a Q&A session to address any questions you have. With that, I will turn the call over to Jay. Jay?

Speaker #3: Our call will begin with prepared remarks followed by a Q&A session to address any questions you have. With that, I will turn the call over to Jay.

Speaker #3: Jay?

Speaker #4: Thank you, and good morning, everyone. Earlier today, we reported second-quarter sales and earnings. While we did experience headwinds due to market uncertainty, we demonstrated the strength and resilience of our company this quarter.

Jay Schmidt: Thank you and good morning, everyone. Earlier today, we reported second quarter sales and earnings. While we did experience headwinds due to market uncertainty, we demonstrated the strength and the resilience of our company this quarter. Sales trends improved sequentially in both segments of our business, and we saw market share gains in both women's fashion footwear and in shoe chains. Highlights of the second quarter include our lead brands, which in total delivered sales growth in the quarter. We experienced strength in our brand portfolio direct-to-consumer channels. International sales increased by double digits, and we saw solid improvement in July at Famous Footwear, and that improvement continued into August. During the quarter, we worked closely with our factory partners to mitigate as much of the tariffs as possible while leaning into our supply chain agility and passing through moderate price increases.

Speaker #4: Sales trends improved sequentially in both segments of our business, and we saw market share gains in both women's fashion footwear and in shoe chains.

Speaker #4: Highlights of second quarter include our lead brands, which in total delivered sales growth in the quarter. We experienced strength in our brand portfolio direct-to-consumer channels, international sales increased by double digits, and we saw solid improvement in July at famous footwear.

Speaker #4: And that improvement continued into August. During the quarter, we worked closely with our factory partners to mitigate as much of the tariffs as possible while leaning into our supply chain agility and passing through moderate price increases.

Speaker #4: It is important to note that while tariff changes can occur quickly, our mitigation efforts require planning and implementation, which can lag the tariff impact in the short term.

Jay Schmidt: It is important to note that while tariff changes can occur quickly, our mitigation efforts require planning and implementation, which can lag the tariff impact in the short term. Given the new tariffs enacted in August, the work here is ongoing. Jack will speak to tariffs in more detail shortly. As we look to address the changes in the operating environment, we completed our previously announced structural cost savings initiatives that will deliver annualized savings of $15 million, with about half of that coming this year. As I indicated last quarter, we engaged a consulting partner to ensure that as we integrate Stuart Weitzman, we capture all the synergistic opportunities. This partner has examined points of efficiency across our entire portfolio to ensure we are leveraging our greatest capabilities. These efforts are expected to result in additional structural cost savings in 2026 and beyond.

Speaker #4: And given the new tariffs enacted in August, the work here is ongoing. Jack will speak to tariffs in more detail shortly. As we look to address the changes in the operating environment, we completed our previously announced structural cost savings initiatives that will deliver annualized savings of $15 million.

Speaker #4: With about half of that coming this year, as I indicated last quarter, we engaged a consulting partner to ensure that, as we integrate Stewart Weitzman, we capture all the synergistic opportunities.

Speaker #4: This partner has examined points of efficiency across our entire portfolio to ensure we are leveraging our greatest capabilities. These efforts are expected to result in additional structural cost savings in 2026 and beyond.

Speaker #4: As previously announced, we did complete the acquisition of Stewart Weitzman shortly after quarter end. Adding a new lead brand to our portfolio, Stewart Weitzman is an iconic brand with unique resonance with consumers.

Jay Schmidt: As previously announced, we did complete the acquisition of Stuart Weitzman shortly after quarter end, adding a new lead brand to our portfolio. Stuart Weitzman is an iconic brand with unique resonance with consumers. It aligns very well with our areas of strategic focus, having premium contemporary positioning, strong direct-to-consumer penetration, and an established international footprint. We see clear opportunities to improve its operational efficiency while honoring the brand's legacy of design, fit, and quality. As we have said, our focus is on running this business profitably after a transition period. Once the business is fully integrated, we expect immediate expense savings in areas such as distribution, logistics, and media buying, with further structural actions to follow. We look forward to providing more detail when we report our third quarter. Turning now to the results for the second quarter.

While honoring the Brand's Legacy of design, fit and quality.

As we have said, our focus is on running this business profitably after a transition period.

Once the business is fully integrated. We expect immediate expense Savings in areas such as distribution Logistics and media buying with further structural actions to follow.

we look forward to providing more detail when we report our third quarter,

Jay Schmidt: In total, for the second quarter, we achieved adjusted earnings per share of $0.35. Our second quarter sales declined 3.6% year over year. Sales trends improved, but were still negative in both segments of our business, while gross margins were under continued pressure due to tariff disruption, added inventory reserves, and higher clearance promotions at Famous Footwear. Now let's review each of our business segments. Brand portfolio sales declined 3.5% in the quarter. While our lead brands outperformed in both sales and operating margin, our value-priced brands experienced ongoing pressure, which was exacerbated by cancellations related to China manufacturing. Our international and direct-to-consumer businesses were both up in the quarter, as was our retail trend from our wholesale partners. According to Circana, our brand portfolio gained market share in women's fashion footwear during the period.

Turning now to the results for the second quarter.

In total for the second quarter, we achieved adjusted earnings per share of 35 cents.

Our second quarter sales declined 3.6% year-over-year.

Sales Trends improved, but we're still negative in both segments of our business.

Well growth margins were under continued pressure due to tariff. Disruption added inventory reserves and higher clearance promotions at Famous Footwear.

Now, let's review each of our business segments.

Brand portfolio sales declined 3.5% in the quarter.

While our lead brands outperformed in both sales and operating margin, our value price Brands, experienced ongoing pressure which was exacerbated by cancellations related to China Manufacturing.

Our International and direct to Consumer businesses, were both up in the quarter as with our retail trend from our wholesale partners.

According to Sirana, our brand portfolio gained market share in women's fashion footwear during the period.

Jay Schmidt: Consumer demand rates remained solid in key categories, including flats, sandals, sneakers, and dress, all feeding the consumer's desire for newness. Sales for our lead brands, which include Sam Edelman, Allen Edmonds, Naturalizer, and Vionic, increased in total and represented well over 50% sales and operating earnings in the quarter. Sam Edelman delivered a very strong quarter, marked by sales growth domestically and strong double-digit growth internationally. We saw improvement in our China trend, and we saw expansion in the brand's global footprint through new marketplace partnerships and growth in the Middle East. Sam Edelman's innovative marketing broke through in the quarter, with the Nantucket Influencer Event becoming one of the most talked-about events of the season and successfully driving new customers. From a product perspective, strappy dress, casual sandals, and sneakers were strong in the quarter.

Consumer demand rate remains solid, in key categories, including Flats sandals, sneakers and dress.

All feeding the consumer's desire for newness.

Sales for our lead brands, which include Sam Edelman, Allen Edmonds, Naturalizer, and Vionic.

Increased in total and represented well over 50% of sales and operating earnings in the quarter.

Damn Edelman.

Delivered a very strong quarter marked by sales growth domestically and strong double-digit growth internationally.

We saw improvement in our China trend.

And we saw expansion in the Brand's Global footprint through new Marketplace Partnerships and growth in the Middle East.

Sam edelman's Innovative marketing broke through in the quarter, with the Nantucket influencer event, becoming 1 of the most talked about events of the season and successfully driving new customers.

From a product perspective. Strappy dress, casual sandals and sneakers were strong in the quarter.

Jay Schmidt: Early boot selling is encouraging heading into fall, and we are well positioned in tall fashion boots. At quarter end, we had 111 Sam Edelman stores, 57 owned and 54 franchised, with 107 of them internationally. Allen Edmonds also delivered a strong quarter with growth across all retail and wholesale channels. Reduced promotions led to increased gross margins, an outlier for a brand that notably has limited foreign sourcing exposure. From a product perspective, the largest growth came from sneakers, dress, and casual loafers. In the second quarter, Allen Edmonds opened another Port Washington Studio store, bringing the total to 16. These locations continue to outperform the broader 59-store fleet by 700 basis points. Naturalizer had a down quarter due to some sourcing shifts in their wholesale business segment. However, the brand's North American direct-to-consumer business posted growth, benefiting from the strength of casual sandals and newness in dress.

Heading into fall.

And we are well positioned in tall fashion boots.

At quarter end, we had 111, Sam Edelman stores.

57 owned and 54 franchised with 107 of them internationally.

Allen Edmonds also delivered a strong quarter, with growth across all retail and wholesale channels.

Reduced promotions led to increased growth margins.

And outlier for a brand that notably has limited foreign sourcing exposure.

From a product perspective, the largest growth came from sneakers, dress, and casual loafers.

In the second quarter, Allen Edmonds opened another Port Washington Studio store, bringing the total to 16.

These locations continue to outperform the broader 59 Store Fleet by 700 basis points.

Naturalizer had a down quarter due to some sourcing shifts in their wholesale business segments.

However, the Brand's North American direct to Consumer business, posted growth.

Benefiting from the strength of casual sandals, and newness and dress.

Jay Schmidt: The brand's retail sales performance for the quarter was strong, delivering double-digit growth and increasing market share ranking by one spot, as measured by Circana. Early reads on fall are especially encouraging, particularly newness in flats, detailed dress, and tall boots. The upcoming tall boot campaign will be Naturalizer's boldest and most inclusive offering yet, with new styles across several categories and proprietary calf-width options from narrow to extra wide. In Vionic, sales were down modestly in the quarter as the brand cleared through older legacy product into newer, better-performing styles. Sandal selling was strong in the quarter, with the new EV knit footbed finishing as the top sandal style in the second quarter and becoming a new icon style for the brand. The walking category was strong and saw continued growth, driven by the Walk Max and the Walk Strider, our top two styles.

The Brand's retail sales performance for the quarter was strong, delivering double-digit growth and increasing market share ranking by one spot as measured by Circa.

Early reads on Fall are specially encouraging particularly newness and flats detailed dress and tall boots.

The upcoming tall boot campaign will be Naturalizer's boldest and most inclusive offering yet.

With new Styles, across several categories and proprietary cap width options from narrow to extra wide.

In bionic sales were down modestly in the quarter as the brand, cleared through older Legacy product into newer better performing styles.

Sandals selling was strong in the quarter with the new. EV nit footed, finishing as the top sandal style in second quarter and becoming a new icon style for the brand.

The walk-in category was strong and so I'll continued growth driven by the walkmaxx and the walk Strider. Our top 2 styles,

Jay Schmidt: The international business for Vionic was up double digits in the quarter. Shortly after quarter end, Vionic introduced Gabi Reese as its newest wellness ambassador. Gabi's authentic connection to wellness reinforces Vionic's brand positioning, and we look forward to our special edition collaboration dropping in early spring 2026. Beyond our lead brands, we see continued strength in our premium contemporary brands, Vince and Veronica Beard, which reinforces our conviction around the premium contemporary space. As we look at the balance of the year for the brand portfolio, the tariff environment is clearly still uncertain. While we did selectively raise prices, the new increased Southeast Asia tariffs will require us to focus on additional mitigation efforts. We do expect our inventory position to be more aligned with our sales trends, but expect gross margin pressure from tariffs to continue into the back half.

the international business for Vionic was up double digits in the quarter.

shortly after quarter, end Vionic introduced Gabby Reese as its newest, Wellness ambassador

Gabby's to Wellness reinforces vionics brand positioning.

And we look forward to our special edition collaboration dropping in early spring 2026.

Beyond our lead brands, we see continued strength in our premium contemporary brands, Vince and Veronica Beard.

Which reinforces our conviction around the premium contemporary space.

As we look at the balance of the year for the brand portfolio, the tariff environment is clearly still uncertain.

While we did selectively raise prices.

The new increase southeast Asia tariffs will require us to focus on additional mitigation efforts.

We do expect our inventory position to be more aligned with our sales Trends, but expect gross margin pressure from tariffs to continue into the back half.

Jay Schmidt: Beyond that, we will continue to focus on speed, agility, and controlling what we can control to drive improved financial performance. Moving on to Famous Footwear, total sales were down 4.9% during the second quarter, while comp sales declined 3.4%. We gained share in shoe chains and with kids during the quarter, according to Circana. As has been our recent trend, the Famous consumer responded strongly during peak shopping periods. E-commerce sales were up double digits in the quarter, particularly in May and July. Of course, the big news for Back to School at Famous was the launch of Jordan, which we have exclusively in our channel this fall across all stores and online. It quickly became a top 10 brand.

Beyond that, we will continue to focus on speed, agility and controlling, what we can control to drive improved financial performance.

Moving on to Famous Footwear.

Total sales were down 4.9% during the second quarter while comp sales declined. 3.4%

We gained share in shoe chains and with kids during the quarter, according to Cercano.

as has been our recent Trend, the famous consumer responded, strongly during Peak shopping periods,

Quarter, particularly in May and July.

Of course.

The bullet payment.

Was the launch of Jordan.

Which we have exclusively in our Channel. This fall across all stores and online.

It quickly became a top 10 brand.

Jay Schmidt: This performance reinforces Famous's ability to launch leading brands successfully and deliver powerful results, and we will continue to drive Jordan and other trending and highly demanded brands as we move forward into fall. During the quarter, men's performed best, kids was about in line with the overall trend, and women's underperformed. By category, athletics was nearly flat on a comp basis, and fashion declined. Jordan, Adidas, Birkenstock, New Balance, Asics, Reef, and Brooks were top growth brands in the quarter, while Caleres brands outperformed Famous Footwear with flat comp sales. Within the strategically important kids category, penetration was 21% in the quarter, and Famous gained 0.6 points of kids' market share in shoe chains, while total Famous gained 0.1 points. Famous continues to enhance its consumer experience through the Flair format.

This performance reinforces famous visibility to launch leading Brands successfully and deliver powerful results.

And we will continue to drive Jordan and other trending and highly demanded Brands as we move forward into fall.

During the quarter, men's performed, best kids was about in line with the overall trend.

And women's underperformed.

By category, Athletics was nearly flat on a comp basis, and Fashion declined.

Jordan, Adidas, Birkenstock, New Balance, A6, Reef, and Brooks were the top growth brands in the quarter.

While callaris Brands outperformed, the Famous Footwear with flat comp sales.

Within the strategically, important kids category penetration was 21% in the quarter. And famous, gained 6 points of kids market share in shoe chains while total famous gained 0.1 points.

Famous continues to enhance its consumer experience through the flare format.

Jay Schmidt: We ended the second quarter with 55 Flair locations, which generated a three-point sales lift overall and a six-point sales lift for stores converted in the last year. We plan to expand to 57 Flair locations by year-end. This success underscores Famous's ability to amplify elevated brands and products. In addition to Jordan, for Back to School, we added expanded or new assortments from Nike, Adidas, Birkenstock, New Balance, Brooks, Timberland, and Frye. These brands and our other top national brands drove Back to School comp sales up 1% in August, on top of a high single-digit comp in August of last year. Famous Footwear consumer continues to shift their shopping to peak selling periods, and Back to School is one of them, so we are pleased with our performance overall as the season comes to an end.

We ended second quarter was 55 flare locations.

Which generated a 3-point sales flip overall and a 6-point sales lift for stores converted in the last year.

We plan to expand to 57 Flair locations by year-end.

This success underscores famousest ability to amplify elevated Brands and products.

In addition to Jordan for back to school, we added extended or new assortments from Nike.

Adidas.

Birkenstock New Balance Brooks.

Timberland and Fry.

These Brands and our other top National Brands, drove back to school comp sales up 1% in August on top of a high single-digit comp in August of last year.

Famous Footwear, consumer continues to shift their shopping the peak selling periods. And back to school, is 1 of them. So we are pleased with our performance overall as the season comes to an end.

Jay Schmidt: In summary, our near-term strategic focuses are ongoing tariff mitigation, expense and capital discipline, structural cost savings, and integrating Stuart Weitzman, all while continuing to fuel our lead brands and Famous Footwear. Longer term, our priorities are international growth and direct-to-consumer growth for the brand portfolio and Flair-format stores and new powerful brand and product additions at Famous Footwear. We are confident that executing our strategic plans will result in improved financial performance and drive sustained value for our shareholders. I will now hand it over to Jack for a more detailed view of our financial performance. Jack?

In summary, our near-term strategic focuses are ongoing tariff mitigation.

Expense and capital discipline.

Structural cost savings.

And integrating Stewart whitesman all while continuing to fuel or lead Brands and Famous Footwear.

Longer term, our priorities are international growth and direct-to-consumer growth for the brand portfolio.

And flare stores and new powerful brand and product additions at Famous Footwear.

We are confident that executing our strategic plans will result in improved financial performance.

And drive sustained value for our shareholders.

Jack Calandra: Thanks, Jay, and good morning, everyone. During today's call, I'll provide additional details on our second quarter results and some color on third quarter performance to date and expectations. Please note my comments will be on an adjusted basis. For the second quarter, sales were $658.5 million, down 3.6%. Sales were lower in both brand portfolio and Famous, but the trend improved in both segments versus Q1. Brand portfolio sales were down 3.5%. Lead brands grew about 1% in North America and 3.6% on a global basis. Segment sales were weighed down by declines in our more value-oriented brands. We estimate that tariffs negatively impacted Q2 sales by $10 million due to order cancellations and delayed receipts that pushed sales into Q3. Famous sales were down 4.9%, with comparable sales down 3.4%. Comparable sales declined mid-single digits in May and June and improved to a 1% decline in July.

And with that, I will now hand it over to jack for a more detailed view of our financial performance. Jack

Thanks, Jay and good morning everyone.

During today's call, I'll provide additional details on our second quarter results and some color on third quarter performance to date and expectations.

Please note, my comments will be on an adjusted basis.

For the second quarter, sales were $658.5 million, down 3.6%.

Sales were lower in both brand portfolio and famous but the trend improved in both segments versus 1 Q.

Brand portfolio sales were down 3.5%.

Lead Brands grew about 1% in North America and 3.6% on a global basis.

Segment sales were weighed down by declines and are more value-oriented brands.

we estimate that tariffs negatively impacted 2 Q sales by 10 million due to order cancellations and delayed receipts that push sales into 32,

famous sales were down 4.9% with comparable sales down 3.4%

Jack Calandra: As Jay noted, the improving trends continued in August, in which we delivered a positive 1% comp. Consolidated gross margin was 43.4%, down 210 basis points versus last year, and was driven by lower margins in both segments. Brand portfolio gross margin was 40.3%, down 240 basis points to last year due to higher tariff-related costs and additional markdown reserves on excess spring product, somewhat offset by favorable channel mix and other variances. The gross margin impact of tariffs was about 250 basis points, while the impact of markdown reserves was about 120 basis points. Famous gross margin was 43.7%, down 130 basis points to last year due to more days on promotion, a deeper promotional offer, and an unfavorable channel mix. For promotions, we continue to lean into our BOGO offer versus last year's Buy More, Save More program.

Comparable sales declined. Mid single digits in May and June and improved to a 1% decline in July.

As Jane noted, the improving trends continued in August, in which we delivered a positive 1% comp.

Consolidated. Gross margin was 43.4% down. 210 basis points versus last year and was driven by lower margins in both segments.

Brand portfolio, gross margin was 40.3% down 240 basis points to last year.

Due to higher tariff, related costs and additional markdown reserves on excess spring product.

Somewhat offset by favorable Channel mix and other variances.

The gross margin impact of tariffs was about 250 basis points.

While the impact of markdown reserves was about 120 basis points.

Famous gross margin was 43.7%, down, 130 basis points to last year, due to more days on promotion, a deeper, promotional offer, and an unfavorable Channel mix.

Jack Calandra: We also had more BOGO clearance during the quarter as compared with last year. In Q3, we will anniversary the move to BOGO and expect less gross margin headwind from this promotional change going forward. SG&A expenses increased $1.4 million to $269.7 million. As a percentage of sales, SG&A was 41% and deleveraged 170 basis points. On a dollar basis, continued investment in our international business and higher depreciation for store and IT investments were offset by lower incentive compensation expense. Operating earnings were $16 million, and operating margin was 2.4%. Operating margin was 3.1% at brand portfolio and 4.7% at Famous. Net interest expense was $4.5 million, up $1.2 million to last year due to higher average borrowings. The weighted average borrowing rate was down about 50 basis points. Tax rate was 3.7% and included a $2.5 million discrete tax benefit.

For promotions, we continue to lean into our BOGO offer versus last year's Buy More, Save More program.

We also had more BOGO clearance during the quarter as compared with last year.

In 3Q, we will anniversary the move to BOGO and so expect less gross margin headwind from this promotional change going forward.

Sgna expenses, increased 1.4 million to 269.7 million.

As a percentage of sales sgna was 41% and de-lever 170 basis points.

On a dollar basis. Continued investment in our international business,

And higher depreciation for store and it Investments were offset by lower incentive compensation expense.

Operating earnings were 16 million and operating margin was 2.4%.

Operating margin was 3.1% in the Brand portfolio and 4.7% in Famous.

That interest expense was 4.5 million up, 1.2 million to last year due to higher average borrowing.

The weighted average borrowing rate was down about 50 basis points.

Tax rate was 3.7% and included. A 2.5 million discrete tax benefit.

Jack Calandra: Earnings per diluted share were $0.35 versus $0.85 last year. The aforementioned discrete tax benefit added $0.07 to EPS. Trailing 12-month EBITDA was $162.7 million and 6.1% of sales. Turning to the balance sheet, we ended the second quarter with $191.5 million in cash, up $139.7 million versus last year, and $387.5 million in borrowings, up $241 million to last year. We borrowed $120 million just prior to quarter end to complete the Stuart Weitzman acquisition. As a reminder, last year's end-of-quarter borrowings were favorably impacted by a deferred $49 million vendor payment that pushed into Q3. Inventory at quarter end was $693 million, up $32 million or 4.9% to last year. Inventory was up 2% in Famous Footwear and up 8.6% in brand portfolio. Now I'd like to give an update on tariffs.

Earnings per diluted share were 35 cents versus 85 cents last year.

The aforementioned discrete tax benefit added 7 cents to the eps.

Trailing 12-month ibida was 162.7 million and 6.1 of sales.

Turning to the balance sheet. We ended the second quarter with 191.5 million in cash of 139.7 million versus last year.

And 387.5 million in borrowings up 241 million to last year.

We borrowed $120 million just prior to quarter-end to complete the Steward Whitesman acquisition.

And as a reminder, last year's end of quarter, borrowings were favorably impacted by a deferred 49 million, vendor payment that pushed into Q3.

Inventory at quarter-end was $693 million, up $32 million, or 4.9%, from last year.

Inventory was up 2% in famous and up 8.6% in brand portfolio.

Jack Calandra: As I mentioned in our last earnings call, we continue to employ several strategies to mitigate the impact of tariffs on gross margin. These include the mix of sourcing countries, concessions from our factory partners, select price increases, and other strategies to reduce the dutiable value of our goods. That said, there is a lag between when the higher tariffs have taken effect and when these mitigating actions become effective. This was the case with the first round of tariffs in the spring and will also be with the second round of tariffs that went into effect in August. As a result, we expect continued pressure on brand portfolio gross margin in the second half. Given the continued uncertainty from tariffs, we are not providing annual guidance at this time. That said, we are sharing the following information about Q3.

Now, I'd like to give an update on tariffs.

As I mentioned in our last earnings call, we continue to employ several strategies to mitigate the impact of tariffs on gross margin.

These include the mix of sourcing countries.

Concessions. From our Factory partners.

Select price increases.

Other strategies to reduce the dutiable value of our Goods.

There is a lag between when the higher tariffs have taken effect.

and when these mitigating actions become effective,

this was the case with the first round of tariffs in the spring and will also be with the second round of tariffs that went into effect in August.

As a result, we expect continued pressure on the brand portfolio and gross margin in the second half.

Given the continued uncertainty from tariffs, we are not providing annual guidance at this time.

Jack Calandra: For Famous Footwear, as mentioned earlier, comparable sales for August were a positive 1%, and August is the biggest month of the quarter. While we are pleased with our Back to School results, we expect comparable sales in the largely non-promotional months of September and October to be down low single digits. For brand portfolio, August sales, excluding Stuart Weitzman, were up low single digits versus last year. While sales in September and October are difficult to predict in this environment, we do expect continued pressure on gross margin. Specifically, we expect brand portfolio Q3 gross margin, excluding Stuart Weitzman, to be down a similar amount to Q2, with improvement in the trend in Q4 as we realize more of the benefit of our mitigation strategies.

That said, we are sharing the following information about Q3.

For famous, as mentioned earlier, comparable sales for August weighed positive 1% and August is the biggest month of the quarter.

While we are pleased with our back to school results. We expect comparable sales in the largely non-promotional months of September and October to be down, low single digits.

For brand portfolio, August sales, excluding Steward whitesman were up low single digits versus last year.

While sales in September and October are difficult to predict, in this environment, we do expect continued pressure on gross margin.

Specifically, we expect brand portfolio, 3Q, gross margin. Excluding Stewart, whitesman to be down a similar amount to 2q.

With Improvement in the trend in 4 q, as we realize more of the benefit of our mitigation strategies.

Jack Calandra: For SG&A excluding Stuart Weitzman, we expect a modest increase in Q3 versus last year, with more of the benefit in Q4 from the restructuring we just completed. In addition, we are actively exploring other cost savings opportunities. Finally, we are working to finalize the purchase accounting for Stuart Weitzman. We look forward to giving more information on its impact to our 2025 financial results on our Q3 earnings call. With that, I'd like to turn the call over to the operator for questions. Operator?

For sgna. Excluding Stewart, whitesman we've expected a modest increase in 3Q versus last year with more benefits with more of the benefit in 4 q from the restructuring. We just completed

in addition, we are actively exploring other cost savings opportunities.

And finally,

We are working to finalize the purchase accounting for Stuart Whitesman.

We look forward to providing more information on its impact to our 2025 financial results on our Q3 earnings call.

With that, I'd like to turn the call over to the operator for questions.

Rob: Thank you. We'll now be conducting a question and answer session. If you'd like to ask a question at this time, you may press star one from your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to withdraw your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for the first question. Thank you. The first question comes from the line of Ashley Owens with KeyBank Capital Markets. Please proceed with your questions.

Operator.

Thank you. We'll now be conducting a question and answer session.

If you'd like to ask a question at this time, you may press star 1 from your telephone keypad and a confirmation tone will indicate that your line is in the question queue.

You may press star 2. If you'd like to withdraw your question from the queue,

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

1 moment, please while we pull for the first question. Thank you.

Thank you. And the first question comes from the line of Ashley Owens with keybanc. Capital markets. Please receive with your questions.

Ashley Owens: Hi, good morning, and thanks for taking our questions. Just first on maybe the Famous Footwear quarter-to-date stats that you gave us with that growing in August, any additional color on some of the dynamics at play with that? I know competitors get easier in the back half of the year, but you've also shifted the assortment around a little bit, adding in some of those brands that you called out. With Back to School, was it really traffic, AUR, maybe better performance in Flair-format stores? Anything you could say there? Additionally, if there's been any shift in the softness in the women's business that you mentioned, thanks.

Hi, good morning, and thanks for taking our questions. So just first on, maybe the famous quarter to date staff that you gave us that growing in August just any additional color on some of the Dynamics that play with that. You know, Compares easier in the back half of the year but you've also shifted the assortment around a little bit, adding in some of those brands that you called out so was back to school. Was it really traffic a you are maybe better performance than flare anything you could say there and then additionally if there's been any shift in the softness in the Women's Business that you mentioned. Um, thanks

Jack Calandra: Hi, Ashley. This is Jack. Thanks for your question. I'll start, and I'm sure Jay will fill in some additional comments. In terms of Famous's August performance, that plus 1% comp, what we saw by channel is in brick and mortar, we saw improved traffic and conversion with AURs basically flat. On the web part of the business, we saw there also improved traffic. AURs were also higher there, and conversion was flat.

Yeah. Hi Ashley. This is Jack. Thanks for your question. Um, I'll start and I'm sure Jay will fill in some additional comments. But in terms of Famous' August performance, that plus 1 comp, um, what we saw by channel is in brick and mortar we saw improved traffic and conversion, with AURs basically flat.

Jay Schmidt: I think, Ashley, we did see the good effect of our product assortment shift, as you highlighted, with all the brands that we did mention having new or expanded assortments that really did pay off. Obviously, while we don't publish the results, for sure, the Jordan piece continued to trend as we launched it all the way through Back to School. We're very, very pleased with what we saw there. It became a top 10 brand very quickly, as we launched it. We'll continue to work on maximizing all of those brands as we move into third quarter and beyond, as we try to really make the most out of the assortments that the consumers are demanding for.

And then on the web part of the business, we saw there also improved traffic um, aurs were also higher there and conversion was flat.

I think, Ashley, we did the, um, you know, the good effect of our, um, product assortment shift, as you highlighted. Um, with all the brands that we did mention having, um,

Again, new or expanded assortments that really did pay off. And then, obviously, um, what we don't, um, you know, publish the um,

And Beyond.

Um, as we try to um really make the most out of the assortments that the consumers are demanding for.

Ashley Owens: Okay. Great. Just a follow-up really quickly on some of the gross margins. For Famous, you mentioned less headwind as we annualize BOGO. Do you anticipate any other changes from Q3 to Q4, such as deeper discounts or longer promo periods, which took place in Q2? What's embedded there? On the brand portfolio, as we think about the balance of the year, what's going to be the biggest weight? Is it tariffs, or are you anticipating a need for further markdowns or elevated markdowns in promos alongside those tariff-related costs? What's in take for both of those would be helpful. Thank you.

Jay Schmidt: Yeah. I think at this point with Famous Footwear, we do believe that we've gotten through that promotional cycle. That said, we will be, you know, if we go into Q4, we'll continue to take markdowns on clearance, but we don't have any plans to change our promotional cycle from last year. Over on the brand portfolio, we do think that as inventory becomes more aligned with sales, we're going to see less headwind on that inventory markdown piece of the business. As we kind of documented, again, we see more gross margin pressure earlier on, and then that kind of more normalizing as we get into fourth quarter with the results of those tariff mitigation effects. That would be probably, I think, the best, you know, guidance we can give right now on that subject.

Exactly on some of the gross margins. So, one for Famous, you mentioned less headwind as we annualize BOGO. Um, do you anticipate any other changes from Q3 to Q4? Such as deeper discounts or longer promo periods, which took place in Q2? Just what's embedded there. Then on the brand portfolio, um, as we think about the balance of the year, just what's going to be the biggest weight? Is it tariffs, or are you anticipating a need for further markdowns or elevated markdowns in promos alongside those tariff-related costs? Just puts and takes for both of those would be helpful. Thank you.

I think at this point with famous, we do believe that we've gotten through that promotional cycle. Um that said we will be you know, if we go into Q4 we'll continue to take more countdowns on clearance but we don't have any plans to change your promotional cycle from last year. Um over on the brand portfolio, we do think that as inventory becomes more aligned with sales, we're going to see a less headwind on. That inventory, markdown piece of the business. Um, but as we kind of documented again, we see more growth margin pressure earlier on and then that kind of more normalizing as we get into fourth quarter.

Jack Calandra: Yeah. I think the only thing I would add to that, Ashley, is on Famous, while certainly the promotional cadence, we won't have that headwind in the back half. We are starting to see some price increases from our vendors in Famous. Obviously, we plan to pass on those price increases to hold, you know, basically the IMUs. I think the big question there is, what, if any, impact will that have on consumer demand? That would be, I think, the only difference I would also just highlight.

Quarter with the results of the pair of mitigation effects. So that would be probably I think the best, you know, um guidance, we can give right now on that subject. Yeah. I think the only thing I would add to that, Ashley is on famous. Um, while certainly the the promotional Cadence, um, we won't have that headwind, um, in the back half, you know, we are starting to see some some price increases from our vendors in famous. And so, obviously, we plan to pass on those price increases to hold, you know, basically, the Imus. I think the big question there is, what if any impact will that have on consumer demand. So that would be, I think the only difference um, you know, I would also just highlight

Ashley Owens: Okay. Got it. That's super helpful. I'll pass it along. Thank you.

Okay, got it.

Alpha all.

Thank you.

Jay Schmidt: Thank you.

Rob: The next question is from the line of Mitch Kummetz with Seaport Research. Please proceed with your questions.

Jack Calandra: Yes. Thanks for taking my questions. First off, just on the Stuart Weitzman acquisition, is there any kind of color you can provide in terms of its impact on sales and EBIT, and even on your interest expense for the back half of the year?

The next question is from the line of Mitch kovitz with C Port research. Please just see you through your questions.

Uh yes, thanks for taking my questions. Um I guess first off um

just just on, on the store acquisition, is there any any kind of color you can provide

In terms of its impact on sales and EBIT.

uh, and even on your interest expense for the back half of the year,

Liz Dunn: Yeah. Mitch, this is Liz. We're not providing that detail at this time. There's just a number of things that are still in flux. As Jack mentioned, we're still finalizing our purchase accounting, which will have implications for how it flows through our P&L. We will provide a breakout of Stuart through the end of the year, certainly, so that you can see from a comparability standpoint what our underlying business growth laps or what the organic growth and trends are in our business. I would also say there will be a number of things that are exceptional, and we'll be reporting both GAAP and non-GAAP view. As I think we've discussed in the past, purchase accounting requires us to step up some of the value of the inventory. You can read in our documents that a decent amount of working capital came over, about $90 million in inventory.

yeah, Mitch this is

detail at this time, there's just a number of things that are still in flux. As Jack mentioned, we're still finalizing our purchase accounting, which will have implications for, um, you know, how it flows through our p&l. But we will provide a breakout of of, you know, Stuart through the end of the year certainly, uh, so that you can see from a comparability standpoint. Um, what uh, what our underlying business, um,

Liz Dunn: There will be, as I'm sure you can imagine, some need to move through some of that. There will be a lot going on as we move through the back half. Our goal really is to enter 2026 clean, get through the transition, and get the business onto our systems so that we can begin to really make significant improvement in their operating performance, operating margin.

Reflects or what the organic uh, growth and Trends are in our business. And I would also say, you know, there will be a number of things that that are um, exceptional. And uh, and so we'll be reporting, you know, the gaap and non-gaap view. Um, as I think we've discussed in the past, there's a there, uh, purchase accounting requires us to, you know, step up some of the value of the inventory. Uh, uh, you can, you know, read in our documents that a decent amount of working capital came over um, about 90 million in inventory. And so, um, there will be as I'm sure you can imagine some need to move through some of that, so there will be a lot going on, uh, as we move through the back half. But our goal really is to enter 2026, um, clean, uh, get through the transition. Um, and, uh,

Get the the business onto our systems so that we can begin to really make significant Improvement in their operating performance. Um,

Jack Calandra: Yeah. Mitch, with regard to interest expense, as I mentioned, we borrowed about $120 million to close the acquisition. I should point out that, net of the cash we acquired as part of the business, the price was $108 million. Obviously, if you think about that borrowing over the back half, I'd call it probably around a 5.7%, 5.8% borrowing rate. You can do the math there to understand what that interest expense would be. Just as a follow-up on Stuart, Jay, I think in your prepared remarks, you mentioned the return to profitability after this transition integration period, which kind of sounds like it might be done by the end of this year. Do you expect the acquisition to be accretive to earnings next year?

Operating margins. Yeah. And Mitch just regard to interest expense as, as um, as I mentioned, we we borrowed about 120 million dollars, um, to close the acquisition. I should point out that, you know, net of the cash we acquired as part of the business, the the price was 1008 million. Um, but obviously, if you think about that, over that baring over the back half and call it probably around a, you know, 5.758%, um, barring rate. Um, you can do the math there to understand what the what that interest expense would be.

Follow up on Steuart, um, Jay. I think in your prepared remarks, you mentioned the return to profitability after.

This transition immigration period, which kind of sounds like it might be done by the end of this year. So, do you expect the acquisition to be accretive to earnings next year?

Jay Schmidt: We're not, you know, getting that far through, that would be our goal. As we said, we were going through this transition period, which we expect to complete by the end of January. As those immediate expenses would come through, where exactly that will come out, we're not ready to dive to yet, but I think that is the goal right now.

Well, well, we're not, you know, getting that far through that would be our goal. As we said, we were going through this, um, transition period, which we expect to complete by the end of January. And then we said, it does the media expenses would come through where exactly, that will come out. We're not ready to guide to yet, but I think that's um, that is the goal right now.

Jack Calandra: Maybe just real quick on BP, it was mentioned that there was some cancellation and delayed receipts in the quarter. Can you quantify that and those delayed receipts? Is that having a benefit to the third quarter? Also, just quickly on margins for BP, I think you said that the tariff impact was 250 basis points. I know that overall you expect gross margins to be comparable in the third quarter, but is that kind of how we should think about tariffs as well in Q3? Yeah, Mitch, let me take the last question first. What we said was that there was the 250 basis point impact in Q2 versus last year. We expect the overall gross margins of brand portfolio to be down similar to what they were in Q2, which was down that 240 basis points.

And then maybe just real quick on, on VP. Um, it was mentioned that there that, um,

There was some cancellation to and delayed receipts in the quarter, can you quantify that? And

Uh, those delayed receipts is that having a benefit to the third quarter. Um, and then also just quickly on margins for VP, I think you said that the Tariff impact was 250 basis points

Um, I know that overall you expect gross margins to be comparable uh in the third quarter but is that is that kind of how we should think about tariffs as well in 3Q.

uh, yeah, Mitch let me take your um

Jack Calandra: Within that, there should be less of an issue around markdown reserves that we took on the spring product. As we mentioned, part of the issue with these new tariffs is that lag effect between when tariffs are effective and when these mitigating actions and strategies take hold. What you tend to see, and you saw it a little bit in the first half, was a little bit more pressure in the first quarter on gross margin when those tariffs went into effect, and then some improvement in the second quarter. I would expect to see the same in the third and the fourth quarter, where more of that pressure in the third quarter is there, and then the fourth quarter, you see some of that trend improvement as those mitigating actions take effect.

Let me take, let me take the last, the last question first. So what we said was the there was the 250 basis point impact in Q2, um, you know, versus versus last year. And we expect um the overall growth margins of brand portfolio to be down similar to what they were in Q2 which was down that down that 240 basis points. So I mean obviously within that um, you know, there should be less um less of an issue around the markdown reserves. Um, obviously that we took on the spring product, but I think, as we mentioned part of the issue with these new tariffs is again that lag effect between when tariffs are effective. And when these mitigating actions and strategies take hold. And so what you tend to see, you saw it a little bit, the first half was a little bit more pressure in the first quarter on gross margin when those tariffs went into effect and then some improvement in the second quarter.

Jack Calandra: With regard to that $10 million sales impact on BP from tariffs, the split between what was canceled orders and what was delayed sales that we should recover in Q3 is about 50/50. So about $5 million of cancellations and about $5 million in delayed receipts, which we should benefit from in Q3. Great. Thanks, and good luck.

Um, I would expect to see sort of the same in the third and the fourth quarter, where more of that pressure in the third quarter is there. And then the fourth quarter, you see some of that Trend Improvement. As those as those mitigating actions take effect

With regard to that 10 million sales impact, on BP from tariffs, um, the split between what was canceled orders and what was delayed sales that we should recover in Q3 is about 50/50, so about 5 million dollars of cancellations and about 5 million dollars in delayed receipts, which we should benefit from in Q3.

Great thanks. Good luck.

Jay Schmidt: Thank you.

Thank you.

Rob: The next questions are from the line of Dana Telsey with Telsey Advisory Group. Please receive your questions.

Ashley Owens: Hi, good morning, everyone. As you think just broadly about the consumer health of the Famous Footwear customer and the brand portfolio customer, what has anything changed or what are you seeing from them? Brand performance at Famous, how did that look compared to previous quarters? I have a follow-up.

The next question is are from the line of Dana Chelsea with Chelsea Advisory Group. Please just see you with your questions.

Hi, good morning, everyone. As you think broadly about the consumer, the health of the Famous Footwear customer and the BP customer, has anything changed or what are you seeing from them? And then, brand performance as Famous—how did that look compared to previous quarters? And then I have a follow-up.

Jay Schmidt: Hi, Dana. First of all, I'd say in Famous Footwear, when we talk about these brands that had the most growth in the quarter and then continuing in that, in Q2, we're continuing to see our consumer want those highly demanded, national brands that really have, you know, great meaning to them, and they are purchasing those over others. We're continuing to see that as a trend. We're going to be watching the consumer health very closely. As we said, we had a nice Back to School, and that was on top of a very, very successful Back to School a year ago. Clearly, Jordan was a big component to that, as were many of these other brands that we mentioned. What we're really seeing is they continue to want the brands they want first, and that seems to bring the desire into them.

Okay, so, hi Dana. Um, first of all, I'd say in Famous Footwear, when we talk about these brands that had the most growth in the quarter, and then continuing in that, um, in Q2 we're continuing to see our consumer want those highly demanded national brands that...

I really have, um, you know, great, uh,

Jay Schmidt: Some of our most newest and more elevated brands and products are growing faster. Over on the brand side, we're kind of seeing a similar approach. Our lead brands are outperforming, and then some of our premium brands, particularly in what I would say is, in this premium contemporary position, are growing quite a bit. We're continuing to see a lot of action there. There is also a lot of interest in fashion right now, which is really helping drive that, including a return to dress and an early good start to boots. The consumer seems to want what they want. They're very informed. They continue to vote for the brands and products that they want. I think they find value as they can as they work, you know, shop across the landscape. That's what I have to say on that subject.

You know, meaning to them and they are purchasing those over others. So we're continuing to see that as a trend. Um, we're going to be watching the consumer health, very closely as we said, we have a nice back to school and that was on top of a very, very successful back to school. A year ago, clearly Jordan was a big component to that as were many of these other brands that we mentioned. So what we're really seeing is that they continue to want the brands they want first and that seems to bring the desire into them.

And, um, and then some of our premium brands, particularly in, um, what I would say is, um,

Ashley Owens: Thank you. On the mitigation tactics for tariffs, where are you on those? How do you see that progressing going forward? As you wrap to 2026, does it anniversary or how are you thinking about it? I think you mentioned, Jack, about potentially more cost savings. Did I hear that right, or are there other things that you're looking at? Thank you.

In this premium contemporary um, position are growing quite a bit. So we're continuing to see a lot of action there and then also a lot of interest in fashion right now which is really helping drive that including a return to dress in an early, good start to boots. So again, the consumer seems to want what they want. They're very informed, they continue to, um, vote for the brands and products that they want, and then I think they find Value as they can in the um, as they work. Um, you know, chop across the landscape. So that's what I have to say, on that subject.

Thank you. And then on the mitigation tactics for tariffs,

What, where are you on those? How do you see that progressing going forward and as you wrap to 2026

Jay Schmidt: I think that, as previously we had mentioned, we are selective in passing through price increases. We're continuing to negotiate with factory partners on all types of cost savings there. Finally, when we look at it, there was also this whole piece of really looking at our whole company and coming up with additional structural cost savings as we look at efficiency in this back half. We don't think we're going to get it from one place. We think it's going to be a combination of things. Also, we are continuing to look at the mix of sourcing countries as we go forward. I think those are the big ones. The other ones get highly detailed and probably could solve that piece of it.

Does it anniversary, or how? How are you thinking about it? And then I think you mentioned, Jack, about potentially more cost savings. Did I hear that right? Or are there other things that you're looking at? Thank you.

Yeah, so I think that, you know, as as previously we had mentioned, you know, we are selective in passing through price increases, we're continuing to negotiate with Factory Partners, um, on all types of, um, cost savings there. And then finally, um,

When we look at it, there is also um,

Jack Calandra: Yeah. Dana, just to add to Jay's comments on the savings, we did, and I think we mentioned this, we brought a partner in to help us with the integration of Stuart Weitzman. They have validated, and in some cases, increased what are probably the expense opportunities that we can realize upon the integration. We've also asked them to look more broadly at the company's cost structure to look for other structural opportunities and ways for us to work more efficiently. That is work that is in progress, and we're optimistic that should generate additional savings that will likely come in 2026.

this whole piece of, um, of really looking at our whole company and coming up with additional structural cost savings. As we look at efficiency in this back half, so we don't think we're going to get it from 1 place. We think it's going to be a combination of things and then um, and then also we are continuing to look at the mix of sourcing countries as we go forward also. So I think those are the big ones. Um the other ones, get highly detailed and probably it solves that piece of it. Yeah. And Dana just to just to add to Jake's comments on the savings. You know, we did um I think we mentioned this. We brought a partner in to help us with the integration of Stuart whitesman, um, they've validated, um, and in some cases increased what, what are probably the expense opportunities, um, that we can realize upon the integration? Um, but we've also asked them to look more broadly, um, at the company's cost structure to look for other, um, you know, structural opportunities

Ashley Owens: Got it. Just wholesale order trends going forward as you look towards the holidays, how is that going on wholesale order trends? What are you seeing there?

and ways for us to work more efficiently. So that is work that is in progress and we're, you know, optimistic that should that should generate additional savings that will likely. Um, come in 2026.

Got it. And then just wholesale, order, Trends going forward, as you look towards the holidays. How is that going on wholesale order, trends?

What are you seeing there?

Jay Schmidt: As we go forward with our, what I'd say, half of our brand portfolio business is dynamic, as you know, between rapid reorders and speed, between direct to, dropship and direct-to-consumer. It really is very much demanded. We're measuring it in real time. What I can say is that our sell-through has been consistently better than sell-in, and we're optimistic about that. In this quarter, we did outperform in direct-to-consumer channels in the brand portfolio. In fact, DTC was up year over year. We think that's where we're going. For sure, people do want to turn more quickly, and that's true of ourselves as well. Everyone's out, working it and really trying to find all the opportunities right now. I will say, with a good retail trend, it gives people a little more to work with.

Jay Schmidt: Obviously, out in the states there, amongst the retail partners, there is a little more optimism as they look forward.

So um, you know, as we as we go forward, you know, with our um what I'd say half of our brand portfolio business is dynamic as you know between, you know, rapid reorders and speed between direct and drop ship and direct to Consumer. Um and then um, so it really is very much demanded. So we're measuring it in real time. What I can say is that our sell through has been consistently better than sell in and so we're optimistic that, you know, about that. And then in this quarter we did outperform in direct to Consumer channels in the brand portfolio. And in fact D to C was up year-over-year. So we think that's um, where we're going but for sure people do want to turn more quickly and that's true of ourselves as well. So, everyone's out, um, working at and really trying to find all the opportunities right now. But I will say with a good retail Trend, it gives people

Ashley Owens: Thank you.

A little more to work with and obviously there's, you know, out in the states there, amongst the Retail Partners, there is a little more optimism, um, as they look forward.

Thank you.

Rob: Thank you. At this time, we've reached the end of the question and answer session. I'll hand the call over to Jay Schmidt for closing remarks.

Thank you. At this time, we've reached the end of the question-and-answer session, and I'll hand the call over to Jay Schmidt for closing remarks.

Jay Schmidt: Thank you. Before we close, I want to acknowledge the dedication of our entire team during what has proven to be a dynamic and demanding period. Across all functions, our associates have demonstrated resilience and adaptability as we navigated operational challenges and worked to sustain momentum amidst shifting market conditions and remain focused on our long-term strategies.

Thank you, before we close. I want to acknowledge the dedication of our entire team during what has proven to be a dynamic and demanding period.

Across all functions, Associates have demonstrated resilience and adaptability. As we navigated operational challenges and worked at sustained momentum amidst shifting market conditions, we remained focused on our long-term strategies.

Rob: Thank you. This does conclude today's conference. You may disconnect your lines at this time. We thank you for your participation and have a wonderful day.

Thank you for your participation, and have a wonderful day.