Caleres (CAL)

Footwear company Caleres (NYSE:CAL) reported Q4 CY2025 results beating Wall Street’s revenue expectations, with sales up 8.7% year on year to $695.1 million. Its non-GAAP loss of $0.06 per share was 85.1% above analysts’ consensus estimates.

Company Overview

The owner of Dr. Scholl's, Caleres (NYSE:CAL) is a footwear company offering a range of styles.

The Consumer Discretionary sector, by definition, is made up of companies selling non-essential goods and services. When economic conditions deteriorate or tastes shift, consumers can easily cut back or eliminate these purchases. For long-term investors with five-year holding periods, this creates a structural challenge: the sector is inherently hit-driven, with low switching costs and fickle customers. As a result, only a handful of companies can reliably grow demand and compound earnings over long periods, which is why our bar is high and High Quality ratings are rare.

Footwear companies design, manufacture, and market shoes across athletic, casual, and luxury segments. Tailwinds include the global athleisure trend, growing health and fitness awareness driving sneaker demand, and expanding direct-to-consumer digital channels that improve brand control and margins. However, headwinds are notable: the industry faces intense competition and brand-switching behavior, heavy marketing spend requirements to maintain relevance, and exposure to volatile raw material and freight costs. Tariff risk from concentrated overseas manufacturing, primarily in Asia, remains a persistent concern. Additionally, inventory management is challenging given seasonal and trend-driven demand, with markdowns eroding profitability when styles miss consumer expectations.

Caleres's shoe brands compete with Deckers Outdoor (NYSE:DECK) and VF Corp (NYSE:VFC) while Famous Footwear competes with retailers such as Foot Locker (NYSE:FL) and Designer Brands (NYSE:DBI).

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last five years, Caleres grew its sales at a weak 5.4% compounded annual growth rate. This fell short of our benchmark for the consumer discretionary sector and is a poor baseline for our analysis.

Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. Caleres’s performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 1.1% annually.

This quarter, Caleres reported year-on-year revenue growth of 8.7%, and its $695.1 million of revenue exceeded Wall Street’s estimates by 1.4%.

Looking ahead, sell-side analysts expect revenue to grow 4.9% over the next 12 months. While this projection implies its newer products and services will spur better top-line performance, it is still below average for the sector.

Caleres’s operating margin has been trending down over the last 12 months and averaged 3.4% over the last two years. The company’s profitability was mediocre for a consumer discretionary business and shows it couldn’t pass its higher operating expenses onto its customers.

In Q4, Caleres generated an operating margin profit margin of negative 3.8%, down 6.3 percentage points year on year. This contraction shows it was less efficient because its expenses grew faster than its revenue.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Caleres’s full-year EPS flipped from negative to positive over the last five years. This is encouraging and shows it’s at a critical moment in its life.

In Q4, Caleres reported adjusted EPS of negative $0.06, down from $0.33 in the same quarter last year. Despite falling year on year, this print easily cleared analysts’ estimates. Over the next 12 months, Wall Street expects Caleres’s full-year EPS of $0.89 to grow 68.5%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Caleres has shown poor cash profitability relative to peers over the last two years, giving the company fewer opportunities to return capital to shareholders. Its free cash flow margin averaged 1.8%, below what we’d expect for a consumer discretionary business.

Caleres’s free cash flow clocked in at $45.79 million in Q4, equivalent to a 6.6% margin. This result was good as its margin was 3.8 percentage points higher than in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, causing temporary swings. Long-term trends are more important.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Caleres historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 13.9%, somewhat low compared to the best consumer discretionary companies that consistently pump out 25%+.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, Caleres’s ROIC has decreased significantly over the last few years. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

It was good to see Caleres beat analysts’ EPS expectations this quarter. We were also happy its revenue narrowly outperformed Wall Street’s estimates. On the other hand, its EPS guidance for next quarter missed. Overall, this print had some key positives. The stock traded up 9.5% to $9.66 immediately after reporting.

Updated: March 19, 2026 at 7:00 AM EDT

Before investing in or passing on Caleres, we urge you to understand the company’s business quality (or lack thereof), valuation, and the latest quarterly results - in that order.

We see the value of companies helping consumers, but in the case of Caleres, we’re out. While its projected EPS for the next year implies the company’s fundamentals will improve, the downside is its relatively low ROIC suggests management has struggled to find compelling investment opportunities. On top of that, its low free cash flow margins give it little breathing room.

Caleres’s P/E ratio based on the next 12 months is 5.9x. While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $15 on the company (compared to the current share price of $9.66).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.