Caleres Inc. (NYSE: CAL) shares climbed on Wednesday after the footwear company posted second-quarter earnings that beat Wall Street's expectations and lifted its full-year adjusted earnings outlook. The stock was up 4.41% at $12.56 at the time of publication, according to market data.

The company reported adjusted earnings of 47 cents per share, comfortably ahead of the 37-cent consensus estimate. Sales rose 5.6% year over year to $695.45 million, also topping the $686.73 million analysts had penciled in.

Gross margin was a bright spot. On a GAAP basis, consolidated gross margin expanded by 1,140 basis points to 54.8%, helped by strong Brand Portfolio performance and tariff refunds. Strip out those refunds, and adjusted gross margin still improved by 340 basis points to 46.8%.

Inventory at the end of the quarter stood at $754.2 million. Excluding $69 million tied to Stuart Weitzman, inventory actually declined 1.2%. Cash and cash equivalents were $50.9 million as of Aug. 1.

Famous Footwear Weighs on Results

Not everything is clicking, though. Famous Footwear, the company's value-oriented retail chain, continues to struggle. Second-quarter sales at Famous Footwear fell 6.3%, with comparable sales down 5.9%. The company said comparable sales were flat quarter to date through Labor Day, which suggests some stabilization but not exactly a comeback.

The real growth engine is the Brand Portfolio, which includes names like Naturalizer and Allen Edmonds. Sales there jumped 23.6%, including 8.2% organic growth. International sales surged 57%, or 18.2% on an organic basis. Stuart Weitzman sales came in line with expectations.

Caleres also said it gained market share in total footwear, and its Brand Portfolio gained share in women's fashion footwear. CEO Jay Schmidt noted that fashion footwear continues to show strong momentum.

CEO Commentary

Schmidt said the company delivered a solid second quarter, with broad gains across its Brand Portfolio spanning brands, sales channels and regions. The company also gained market share in women's fashion footwear, citing data from Circana.

But he was candid about Famous Footwear's shortfall. A later back-to-school season and weaker demand for lifestyle athletic products weighed on sales and margins. Comparable-store sales at Famous Footwear were flat quarter to date through Labor Day, which is better than the second quarter but still not where the company wants to be.

Despite the timing shift, Caleres improved profitability and beat its own earnings guidance. Schmidt said fashion footwear is gaining strong momentum, with the company's brands "resonating with consumers."

At Famous Footwear, Caleres is adjusting its product mix to reflect changing demand. The retailer is putting more emphasis on fashion footwear, which continues to significantly outperform lifestyle athletic products quarter to date.

Schmidt described the operating environment as dynamic. He said Caleres plans to build on strength across its Brand Portfolio, improve Famous Footwear's performance and continue rebuilding its earnings power.

Caleres Raises Full-Year Earnings Outlook

Looking ahead, Caleres offered a mixed picture. For the third quarter, it expects adjusted EPS of 62 cents to 70 cents, which is below the 83-cent analyst estimate. The company expects net sales to rise in the low-single digits.

Famous Footwear sales and comparable sales are expected to decline in the low-single digits in Q3.

For the full fiscal 2026, Caleres raised its adjusted EPS outlook to $1.50-$1.65, up from the previous range of $1.40-$1.65. Analysts were looking for $1.62. The company continues to expect net sales growth in the low-to-mid-single digits.

For the full year, Famous Footwear sales and comparable sales are expected to decline in the low-to-mid-single digits.

So the story here is a familiar one in retail: the premium and fashion side is thriving, while the value chain is dragging. But Caleres is betting that shifting Famous Footwear's mix toward fashion will eventually pay off. Investors seem willing to give the company credit for the beat and the raised guidance, at least for now.