Reported third consecutive quarter of sequential comparable sales improvement
Impressive performance in growing athleisure category, which outpaced the market by over 4 percentage points
COLUMBUS, Ohio, Sept. 11, 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 second quarter ended August 3, 2024.
"This quarter, we further built on our track record of steady improvement as we continued to refine and refresh our strategic initiatives intended to accelerate our ongoing business transformation," stated Doug Howe, Chief Executive Officer. "We saw sustained pressure on challenged categories such as dress and seasonal in the second quarter, which we were able to partially mitigate through providing a greater selection of athletic and athleisure brands in our assortment. During the second quarter, we drove athleisure category sales growth of 8% in the U.S. Retail segment over the same period last year, outpacing overall athleisure market growth by over 4 percentage points, and total U.S. Retail sales outpaced the footwear market by 1 percentage point according to Circana. Our strategy successfully supported a solid start to the back-to-school season, particularly in our kids' category, which helped us to exit the second quarter in a stronger position than we started."
Howe continued, "We continue to believe that our investments across our retail and brand businesses will help us to accelerate growth moving forward as we sharpen our focus and optimize our assortment, our marketing, and our omnichannel customer experience. With shoppers becoming increasingly mindful of their discretionary spending, and trends rapidly evolving, we want to ensure that we remain top of mind as the destination for all their footwear needs."
Second Quarter Operating Results (Unless otherwise stated, all comparisons are to the second quarter of 2023)
Net sales decreased 2.6% to $771.9 million.
Total comparable sales decreased by 1.4%.
Gross profit decreased to $252.9 million versus $273.4 million last year, and gross margin was 32.8% compared to 34.5% last year.
Reported net income attributable to Designer Brands Inc. was $13.8 million, or diluted earnings per share ("EPS") of $0.24, including net after-tax charges of $0.05 per diluted share from adjusted items, primarily related to restructuring, integration, and acquisition costs.
Adjusted net income was $17.1 million, or adjusted diluted EPS of $0.29.
Liquidity
Cash and cash equivalents totaled $38.8 million at the end of the second quarter of 2024, compared to $46.2 million at the end of the same period last year, with $155.1 million available for borrowings under our senior secured asset-based revolving credit facility. Debt totaled $465.7 million at the end of the second quarter of 2024 compared to $331.0 million at the end of the same period last year.
The Company ended the second quarter with inventories of $642.8 million compared to $606.8 million at the end of the same period last year.
Return to Shareholders
During the second quarter of 2024, the Company repurchased 2.7 million Class A common shares at an aggregate cost of $18.0 million. As of August 3, 2024, $69.7 million of Class A common shares remained available for repurchase under the Board-approved share repurchase program.
Store Openings and Closings
During the second quarter of 2024, the Company closed one store in the United States ("U.S.") and opened two stores in Canada, resulting in a total of 499 stores in the U.S. and 177 stores in Canada as of August 3, 2024.
Updated 2024 Financial Outlook
The Company has updated the following guidance for the full year 2024:
Metric
Previous Guidance
Current Guidance
Designer Brands Net Sales Growth
Low-single digits
Flat to low-single digits
Adjusted Diluted EPS
$0.70 - $0.80
$0.50 - $0.60
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 (gains); (5) the net tax impact of such items; (6) the change in the valuation allowance on deferred tax assets; and (7) net income 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 9337169 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/wjDQNwDnZxP
For those unable to listen to the live webcast, an archived version will be available on the Company's investor website until September 18, 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: 4546270
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, Lucky Brand, Mix No. 6, Topo Athletic, 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 676 DSW Designer Shoe Warehouse, The Shoe Co., 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 ten 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, or those of our vendors; 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 ("ABL Revolver"), and our senior secured term loan credit agreement, as amended ("Term Loan"), 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)
August 3, 2024
July 29, 2023
Change
Amount
% of Segment Net Sales
Amount
% of Segment Net Sales
Amount
%
Segment net sales:
U.S. Retail
$ 641,694
79.0 %
$ 658,542
81.0 %
$ (16,848)
(2.6) %
Canada Retail
74,797
9.2 %
70,266
8.6 %
4,531
6.4 %
Brand Portfolio
95,993
11.8 %
84,217
10.4 %
11,776
14.0 %
Total segment net sales
812,484
100.0 %
813,025
100.0 %
(541)
(0.1) %
Elimination of intersegment net sales
(40,584)
(20,808)
(19,776)
95.0 %
Consolidated net sales
$ 771,900
$ 792,217
$ (20,317)
(2.6) %
Six months ended
(dollars in thousands)
August 3, 2024
July 29, 2023
Change
Amount
% of Segment Net Sales
Amount
% of Segment Net Sales
Amount
%
Segment net sales:
U.S. Retail
$ 1,263,061
79.3 %
$ 1,271,428
80.8 %
$ (8,367)
(0.7) %
Canada Retail
130,309
8.2 %
124,221
7.9 %
6,088
4.9 %
Brand Portfolio
200,123
12.5 %
177,200
11.3 %
22,923
12.9 %
Total segment net sales
1,593,493
100.0 %
1,572,849
100.0 %
20,644
1.3 %
Elimination of intersegment net sales
(74,997)
(38,550)
(36,447)
94.5 %
Consolidated net sales
$ 1,518,496
$ 1,534,299
$ (15,803)
(1.0) %
Net Sales by Brand Categories
(in thousands)
U.S. Retail
Canada Retail(2)
Brand Portfolio
Eliminations
Consolidated
Three months ended August 3, 2024
Owned Brands:(1)
Direct-to-consumer
$ 98,040
$ 10,550
$ 13,889
$ —
$ 122,479
External customer wholesale, commission income, and other
—
—
41,520
—
41,520
Intersegment wholesale
—
—
40,584
(40,584)
—
Total Owned Brands
98,040
10,550
95,993
(40,584)
163,999
National brands
543,654
64,247
—
—
607,901
Total net sales
$ 641,694
$ 74,797
$ 95,993
$ (40,584)
$ 771,900
Three months ended July 29, 2023
Owned Brands:(1)
Direct-to-consumer
$ 115,749
$ 10,048
$ 15,776
$ —
$ 141,573
