Designer Brands Investor Center

Designer Brands is one of North America’s largest designers, producers and retailers of footwear and accessories. Our business segments include world-class design and sourcing operations, a robust wholesaling business, and more than 1,000 points of distribution.

Designer Brands Inc. Reports First Quarter 2024 Financial Results

Consolidated gross profit margin rose 80 basis points over the same period last year, driven by the Brand Portfolio Segment

Net sales growth in performance and leisure footwear in the U.S. Retail segment outpaced the balance of the footwear market

Company reaffirms full year 2024 guidance

COLUMBUS, Ohio, June 4, 2024 /PRNewswire/ -- Designer Brands Inc. (NYSE: DBI) (the "Company," "we," "us," "our," and "Designer Brands"), one of the world's largest designers, producers, and retailers of footwear and accessories, today announced financial results for the three months ended May 4, 2024.

"This quarter, we were pleased to deliver results in line with our expectations for this quarter, as we gain traction on our path to returning Designer Brands to growth," stated Doug Howe, Chief Executive Officer. "I am proud of the way our teams are embracing the strategic initiatives that we are implementing across the business as we work to transform into a more efficient and synergistic organization. According to Circana, we outperformed the overall market dollar sales in the performance, leisure, and kids categories, which we believe is a testament to the strength of our new strategy."

Howe continued, "Moving forward, we will continue to prioritize our strategic commitments to revitalize our assortment, elevate marketing, and enhance the in-store and digital experience, while exploring areas to further rationalize our cost base appropriately, streamline our operations, and drive greater efficiencies. We believe that we are on solid footing as we enter the summer months and are pleased to reaffirm our guidance for 2024."

First Quarter Operating Results (Unless otherwise stated, all comparisons are to the first quarter of 2023)

  • Net sales increased 0.6% to $746.6 million.
  • Total comparable sales decreased by 2.5%.
  • Gross profit increased to $245.1 million versus $237.7 million last year, and gross margin was 32.8% compared to 32.0% for the same period last year.
  • Reported net income attributable to Designer Brands Inc. was $0.8 million, or diluted earnings per share ("EPS") of $0.01, including net after-tax charges of $0.07 per diluted share from adjusted items, primarily related to restructuring and integration costs.
  • Adjusted net income was $4.8 million, or adjusted diluted EPS of $0.08.

Liquidity

  • Cash and cash equivalents totaled $43.4 million at the end of the first quarter of 2024, compared to $50.6 million at the end of the same period last year, with $187.8 million available for borrowings under our senior secured asset-based revolving credit facility, as amended. Debt totaled $476.1 million at the end of the first quarter of 2024 compared to $390.3 million at the end of the same period last year.
  • The Company ended the first quarter with inventories of $620.5 million compared to $637.4 million at the end of the same period last year.

Dividend

On May 15, 2024, the Company's Board of Directors declared a quarterly cash dividend of $0.05 per share of Class A and Class B common shares. The dividend will be paid on June 18, 2024 to shareholders of record at the close of business on June 5, 2024.

Store Openings and Closings

During the first quarter of 2024, in the United States ("U.S.") we opened one store and in Canada we acquired 28 Rubino stores, opened five stores, and closed one store, resulting in a total of 500 stores in the U.S. and 175 stores in Canada as of May 4, 2024.

Reaffirming 2024 Financial Outlook

The Company is reaffirming the following guidance for the full year 2024:

Metric


Guidance

Designer Brands Net Sales Growth


Low-single digits

Adjusted Diluted EPS


$0.70 - $0.80

Forward-looking adjusted diluted EPS for 2024 excludes potential charges or gains that may be recorded during the fiscal year, including among other things: (1) restructuring and integration costs, including severance charges; (2) acquisition-related costs; (3) impairment charges; (4) foreign currency transaction losses; (5) the net tax impact of such items; (6) the change in the valuation allowance on deferred tax assets; and (7) net income (loss) attributable to redeemable noncontrolling interest. A reconciliation of forward-looking non-GAAP earnings guidance to the comparable GAAP measure is not provided, as permitted by Item 10(e)(1)(i)(B) of Regulation S-K, because the impact and timing of these potential charges or gains is inherently uncertain and difficult to predict and is unavailable without unreasonable efforts. In addition, the Company believes that such reconciliations would imply a degree of precision and certainty that could be confusing to investors. Such items are uncertain and could have a substantial impact on GAAP measures of our financial performance.

Webcast and Conference Call

The Company is hosting a conference call today at 8:30 am Eastern Time. Investors and analysts interested in participating in the call are invited to dial 1-888-317-6003, or the international dial-in, 1-412-317-6061, and reference conference ID number 8115299 approximately ten minutes prior to the start of the conference call. The conference call will also be broadcast live over the internet and can be accessed through the following link, as well as through the Company's investor website at investors.designerbrands.com:

https://app.webinar.net/PDZrA5vkbE0

For those unable to listen to the live webcast, an archived version will be available on the Company's investor website until June 11, 2024. A replay of the teleconference will be available by dialing the following numbers:

U.S.: 1-877-344-7529

Canada: 1-855-669-9658

International: 1-412-317-0088

Passcode: 9545499

Important information may be disseminated initially or exclusively via the Company's investor website; investors should consult the website to access this information.

About Designer Brands

Designer Brands is one of the world's largest designers, producers, and retailers of the most recognizable footwear brands and accessories, transforming and defining the footwear industry through a mission of inspiring self-expression. With a diversified, world-class portfolio of coveted brands, including Crown Vintage, Hush Puppies, Jessica Simpson, Keds, Kelly & Katie, Le TIGRE, Lucky Brand, Mix No. 6, Topo, Vince Camuto and others, Designer Brands designs and produces on-trend footwear and accessories for all of life's occasions, delivered to the consumer through a robust direct-to-consumer omni-channel infrastructure and powerful national wholesale distribution. Powered by a billion-dollar digital commerce business across multiple domains and 675 DSW Designer Shoe Warehouse, The Shoe Company, and Rubino stores in North America, Designer Brands delivers current, in-line footwear and accessories from the largest national brands in the industry and holds leading market share positions in key product categories across Women's, Men's, and Kids'. Designer Brands also distributes its brands internationally through select wholesale and distributor relationships, while also leveraging design and sourcing expertise to build private label product for national retailers. Designer Brands is committed to being a difference maker in the world, taking steps forward to advance diversity, equity, and inclusion in the footwear industry and supporting a global community and the health of the planet by donating more than nine million pairs of shoes to the global non-profit Soles4Souls since 2018. To learn more, visit www.designerbrands.com.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

Certain statements in this press release may constitute forward-looking statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements by the use of forward-looking words such as "outlook," "could," "believes," "expects," "potential," "continues," "may," "will," "should," "would," "seeks," "approximately," "predicts," "intends," "plans," "estimates," "anticipates," or the negative version of those words or other comparable words. These statements are based on the Company's current views and expectations and involve known and unknown risks, uncertainties, and other factors that may cause actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. These factors include, but are not limited to: uncertain general economic and financial conditions, including concerns of a potential recession in the U.S., fluctuating interest rates, inflationary pressures, and the related impacts to consumer discretionary spending, as well as our ability to plan for and respond to the impact of these conditions; our ability to anticipate and respond to rapidly changing consumer preferences, seasonality, customer expectations, and fashion trends; the impact on our consumer traffic and demand, our business operations, and the operations of our suppliers, as we experience unseasonable weather, climate change evolves, and the frequency and severity of weather events increase; our ability to execute on our business strategies, including integrating and growing our Brand Portfolio segment, enhancing in-store and digital shopping experiences, and meeting consumer demands; whether we will be able to successfully and efficiently integrate our recent acquisitions in a manner that does not impede growth; our ability to maintain strong relationships with our vendors, manufacturers, licensors, and retailer customers; risks related to losses or disruptions associated with our distribution systems, including our distribution centers and stores, whether as a result of reliance on third-party providers or otherwise; risks related to cyber security threats and privacy or data security breaches or the potential loss or disruption of our information technology ("IT") systems; risks related to the implementation of new or updated IT systems; our ability to protect our reputation and to maintain the brands we license; our reliance on our loyalty programs and marketing to drive traffic, sales, and customer loyalty; our ability to successfully integrate new hires or changes in leadership and retain our existing management team, and to continue to attract qualified new personnel; risks related to restrictions imposed by our senior secured asset-based revolving credit facility, as amended, and our senior secured term loan credit agreement, as amended, that could limit our ability to fund our operations; our competitiveness with respect to style, price, brand availability, shopping platforms, and customer service; risks related to our international operations and our reliance on foreign sources for merchandise; our ability to comply with privacy laws and regulations, as well as other legal obligations; risks associated with climate change and other corporate responsibility issues; and uncertainties related to future legislation, regulatory reform, policy changes, or interpretive guidance on existing legislation. Risks and other factors that could cause our actual results to differ materially from our forward-looking statements are described in the Company's Annual Report on Form 10-K for the fiscal year ended February 3, 2024 ("2023 Form 10-K") or our other reports made or filed with the Securities and Exchange Commission. All forward-looking statements speak only as of the time when made. Except as may be required by applicable law, the Company undertakes no obligation to update or revise the forward-looking statements included in this press release to reflect any future events or circumstances.

 

DESIGNER BRANDS INC.

SEGMENT RESULTS

(unaudited)



Net Sales






Three months ended





(dollars in thousands)

May 4, 2024


April 29, 2023


Change


Amount


% of Segment
Net Sales


Amount


% of Segment
Net Sales


Amount


%

Segment net sales:












U.S. Retail

$       621,367


79.6 %


$       612,886


80.7 %


$         8,481


1.4 %

Canada Retail

55,512


7.1 %


53,955


7.1 %


1,557


2.9 %

Brand Portfolio

104,130


13.3 %


92,983


12.2 %


11,147


12.0 %

Total segment net sales

781,009


100.0 %


759,824


100.0 %


21,185


2.8 %

Elimination of intersegment net sales

(34,413)




(17,742)




(16,671)


94.0 %

Consolidated net sales

$       746,596




$       742,082




$         4,514


0.6 %

Net Sales by Brand Categories

(in thousands)

U.S. Retail


Canada Retail(2)


Brand Portfolio


Eliminations


Consolidated

Three months ended May 4, 2024










Owned Brands:(1)










Direct-to-consumer

$       105,014


$          8,360


$         13,930


$                 —


$       127,304

External customer wholesale, commission income, and other



55,787



55,787

Intersegment wholesale



34,413


(34,413)


Total Owned Brands

105,014


8,360


104,130


(34,413)


183,091

National brands

516,353


47,152




563,505

Total net sales

$       621,367


$        55,512


$       104,130


$       (34,413)


$       746,596

Three months ended April 29, 2023










Owned Brands:(1)










Direct-to-consumer

$       123,209


$          7,872


$         10,624


$                 —


$       141,705

External customer wholesale, commission income, and other



64,617



64,617

Intersegment wholesale and commission income



17,742


(17,742)


Total Owned Brands

123,209


7,872


92,983


(17,742)


206,322

National brands

489,677


46,083




535,760

Total net sales

$       612,886


$        53,955


$         92,983


$       (17,742)


$       742,082



(1)

"Owned Brands" refers to those brands that we have rights to sell through ownership or license arrangements. 

(2)

Beginning with the 2023 Form 10-K, we are providing a breakout of Canada Retail segment net sales by brand categories and we have recast the three months ended April 29, 2023 on a consistent basis. 

 

Comparable Sales


Three months ended


May 4, 2024


April 29, 2023

Change in comparable sales:




U.S. Retail segment

(2.3) %


(11.6) %

Canada Retail segment

(4.9) %


2.9 %

Brand Portfolio segment - direct-to-consumer channel

(1.7) %


8.3 %

Total

(2.5) %


(10.4) %

 

Store Count

(square footage in thousands)

May 4, 2024


April 29, 2023


Number of
Stores


Square
Footage


Number of
Stores


Square
Footage

U.S. Retail segment - DSW stores

500


9,939


499


10,015

Canada Retail segment:








The Shoe Company stores

122


626


114


601

DSW stores

25


496


25


496

Rubino Stores

28


149




175


1,271


139


1,097

Total number of stores

675


11,210


638


11,112

 

Gross Profit


Three months ended



(dollars in thousands)

May 4, 2024


April 29, 2023


Change


Amount


% of Segment
Net Sales


Amount


% of Segment
Net Sales


Amount


%


Basis Points

Segment gross profit:














U.S. Retail

$     198,455


31.9 %


$     196,814


32.1 %


$         1,641


0.8 %


(20)

Canada Retail

17,385


31.3 %


17,174


31.8 %


211


1.2 %


(50)

Brand Portfolio

33,477


32.1 %


22,085


23.8 %


11,392


51.6 %


830

Total segment gross profit

249,317


31.9 %


236,073


31.1 %


13,244


5.6 %


80

Net recognition (elimination) of intersegment gross profit

(4,248)




1,666




(5,914)





Consolidated gross profit

$     245,069


32.8 %


$     237,739


32.0 %


$         7,330


3.1 %


80

 

Intersegment Eliminations


Three months ended

(in thousands)

May 4, 2024


April 29, 2023

Intersegment recognition and elimination activity:




Elimination of net sales recognized by Brand Portfolio segment

$                (34,413)


$                (17,742)

Cost of sales:




Elimination of cost of sales recognized by Brand Portfolio segment

24,093


13,211

Recognition of intersegment gross profit for inventory previously purchased that was subsequently sold to external customers during the current period

6,072


6,197


$                  (4,248)


$                    1,666

 

DESIGNER BRANDS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited and in thousands, except per share amounts)



Three months ended


May 4, 2024


April 29, 2023

Net sales

$                746,596


$                742,082

Cost of sales

(501,527)


(504,343)

Gross profit

245,069


237,739

Operating expenses

(238,551)


(220,119)

Income from equity investments

2,864


2,331

Impairment charges


(341)

Operating profit

9,382


19,610

Interest expense, net

(11,561)


(6,597)

Non-operating expenses, net

(143)


(334)

Income (loss) before income taxes

(2,322)


12,679

Income tax benefit (provision)

3,207


(1,306)

Net income

885


11,373

Net loss (income) attributable to redeemable noncontrolling interest

(102)


42

Net income attributable to Designer Brands Inc.

$                        783


$                  11,415

Diluted earnings per share attributable to Designer Brands Inc.

$                       0.01


$                       0.17

Weighted average diluted shares

59,470


67,042

 

DESIGNER BRANDS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited and in thousands)



May 4, 2024


February 3, 2024


April 29, 2023

ASSETS






Current assets:






Cash and cash equivalents

$                  43,434


$                  49,173


$                  50,569

Receivables, net

96,712


83,590


100,237

Inventories

620,493


571,331


637,396

Prepaid expenses and other current assets

78,224


73,338


43,598

Total current assets

838,863


777,432


831,800

Property and equipment, net

223,205


219,939


227,692

Operating lease assets

728,346


721,335


701,670

Goodwill

133,666


123,759


134,770

Intangible assets, net

85,252


82,827


75,450

Deferred tax assets

40,868


39,067


50,111

Equity investments

62,863


62,857


66,151

Other assets

50,540


49,016


46,851

Total assets

$             2,163,603


$             2,076,232


$             2,134,495

LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST, AND SHAREHOLDERS' EQUITY






Current liabilities:






Accounts payable

$                298,968


$                289,368


$                288,526

Accrued expenses

182,767


159,622


170,759

Current maturities of long-term debt

6,750


6,750


Current operating lease liabilities

161,050


166,531


183,074

Total current liabilities

649,535


622,271


642,359

Long-term debt

469,328


420,344


390,302

Non-current operating lease liabilities

657,625


646,161


635,245

Other non-current liabilities

25,253


24,948


23,342

Total liabilities

1,801,741


1,713,724


1,691,248

Redeemable noncontrolling interest

3,390


3,288


3,093

Total shareholders' equity

358,472


359,220


440,154

Total liabilities, redeemable noncontrolling interest, and shareholders' equity

$             2,163,603


$             2,076,232


$             2,134,495

 

DESIGNER BRANDS INC.

NON-GAAP RECONCILIATION

(unaudited and in thousands, except per share amounts)



Three months ended


May 4, 2024


April 29, 2023

Operating expenses

$              (238,551)


$              (220,119)

Non-GAAP adjustments:




CEO transition costs


2,210

Restructuring and integration costs

4,829


2,120

Acquisition-related costs

486


1,507

Total non-GAAP adjustments

5,315


5,837

Adjusted operating expenses

$              (233,236)


$              (214,282)

Operating profit

$                   9,382


$                 19,610

Non-GAAP adjustments:




CEO transition costs


2,210

Restructuring and integration costs

4,829


2,120

Acquisition-related costs

486


1,507

Impairment charges


341

Total non-GAAP adjustments

5,315


6,178

Adjusted operating profit

$                  14,697


$                  25,788

Net income attributable to Designer Brands Inc.

$                       783


$                  11,415

Non-GAAP adjustments:




CEO transition costs


2,210

Restructuring and integration costs

4,829


2,120

Acquisition-related costs

486


1,507

Impairment charges


341

Foreign currency transaction losses

143


334

Total non-GAAP adjustments before tax effect

5,458


6,512

Tax effect on above non-GAAP adjustments

(1,398)


(1,508)

Valuation allowance change on deferred tax assets

(136)


(2,117)

Total non-GAAP adjustments, after tax

3,924


2,887

Net income (loss) attributable to redeemable noncontrolling interest

102


(42)

Adjusted net income

$                    4,809


$                  14,260

Diluted earnings per share

$                      0.01


$                      0.17

Adjusted diluted earnings per share

$                      0.08


$                      0.21

 

Non-GAAP Measures

To supplement amounts presented in our consolidated financial statements determined in accordance with accounting principles generally accepted in the U.S. ("GAAP"), the Company uses certain non-GAAP financial measures, including adjusted operating expenses, adjusted operating profit, adjusted net income, and adjusted diluted earnings per share as shown in the table above. These measures adjust for the effects of: (1) CEO transition costs; (2) restructuring and integration costs, including severance charges; (3) acquisition-related costs; (4) impairment charges; (5) foreign currency transaction losses; (6) the net tax impact of such items; (7) the change in the valuation allowance on deferred tax assets; and (8) net income (loss) attributable to redeemable noncontrolling interest. The unaudited adjusted results should not be construed as an alternative to the reported results determined in accordance with GAAP. These financial measures are not based on any standardized methodology and are not necessarily comparable to similar measures presented by other companies. The Company believes that these non-GAAP financial measures provide useful information to both management and investors to increase comparability to prior periods by adjusting for certain items that may not be indicative of core operating measures and to better identify trends in our business. The adjusted financial results are used by management to, and allow investors to, evaluate the operating performance of the Company compared to prior periods, when reviewed in conjunction with the Company's GAAP statements. These amounts are not determined in accordance with GAAP and therefore should not be used exclusively in evaluating the Company's business and operations.

Comparable Sales Performance Metric

We consider the percent change in comparable sales from the same previous year period, a primary metric commonly used throughout the retail industry, to be an important measurement for management and investors of the performance of our direct-to-consumer businesses. We include in our comparable sales metric sales from stores in operation for at least 14 months at the beginning of the applicable year. Stores are added to the comparable base at the beginning of the year and are dropped for comparative purposes in the quarter in which they are closed. Comparable sales include the e-commerce sales of the U.S. Retail and Canada Retail segments. For calculating comparable sales in 2024, periods in 2023 are shifted by one week to compare similar calendar weeks. Comparable sales for the Canada Retail segment exclude the impact of foreign currency translation and are calculated by translating current period results at the foreign currency exchange rate used in the comparable period of the prior year. Comparable sales include the e-commerce net sales of the Brand Portfolio segment from the direct-to-consumer e-commerce sites for Vince Camuto and Topo. Net sales from the direct-to-consumer e-commerce sites for Keds and Hush Puppies will be added to the comparable base for the Brand Portfolio segment beginning with the second quarter of 2024 and the third quarter of 2024, respectively. Stores added as a result of the Rubino acquisition that will have been in operation for at least 14 months at the beginning of 2025, along with its e-commerce sales, will be added to the comparable base beginning with the second quarter of 2025. The calculation of comparable sales varies across the retail industry and, as a result, the calculations of other retail companies may not be consistent with our calculation.

CONTACT: Stacy Turnof, DesignerBrandsIR@edelman.com

SOURCE Designer Brands Inc.

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