Owned Brand penetration grew to 26.7% in the
quarter, highlighting progress on strategic plans
COLUMBUS, Ohio, June 8, 2023
/PRNewswire/ -- Designer Brands Inc. (NYSE: DBI) (the "Company" and
"Designer Brands"), one of the world's largest designers,
producers, and retailers of footwear and accessories, announced
financial results for the three months ended April 29, 2023.
Doug Howe, Chief Executive
Officer, stated, "I am pleased with the quarter we delivered on top
of outsized market-leading growth in the first quarter of last
year, albeit slightly below our initial expectations. We have made
significant operational progress on our goal of doubling sales of
our Owned Brands by 2026 over 2021 with our recent acquisitions of
Keds, Le Tigre, and Topo Athletic
helping to further expand and diversify our brand portfolio. We
continue to lean further than ever before into our Owned Brands,
harnessing key and exciting moments to showcase our brands with
engaging events and customer experiences.
"As the consumer remains cautious, we are approaching the
remainder of the year and the trajectory of the recovery in our
business with heightened consideration. We are confident in our
ability to continue to optimize those factors over which we have
control, providing compelling products from our Owned Brands and an
ideal national brand assortment to our customers seeking a wide
range of styles."
First Quarter Operating Results (Unless otherwise
stated, all comparisons are to the first quarter of 2022)
- Net sales decreased 10.7% to $742.1
million.
- Comparable sales decreased by 10.4%.
- Gross profit decreased to $237.7
million versus $275.7 million
last year, and gross margin was 32.0% compared to 33.2% for the
same period last year.
- Reported net income attributable to Designer Brands Inc. was
$11.4 million, or diluted earnings
per share ("EPS") of $0.17, including
net charges of $0.04 per diluted
share from adjusted items, primarily related to CEO transition,
restructuring, integration, and acquisition costs, partially offset
by the valuation allowance change on deferred tax assets.
- Adjusted net income was $14.3
million, or adjusted diluted EPS of $0.21.
Liquidity
- Cash and cash equivalents totaled $50.6
million at the end of the first quarter of 2023, compared to
$54.8 million at the end of the same
period last year, with $200.3 million
available for borrowings under our senior secured asset-based
revolving credit facility ("ABL Revolver"). Debt totaled
$390.3 million at the end of the
first quarter of 2023 compared to $306.9
million at the end of the same period last year.
- The Company ended the first quarter with inventories of
$637.4 million compared to
$672.5 million at the end of the same
period last year.
Store Openings and Closings
During the first quarter of 2023, we closed two stores in the
U.S. and opened one new store in Canada, resulting in a total of 499 U.S.
stores and 139 Canadian stores as of April
29, 2023.
Updated 2023 Financial Outlook
The Company is updating the following guidance for the full year
2023:
Metric
|
|
Previous
Guidance
|
|
Current
Guidance
|
Net Sales:
|
|
|
|
|
Designer Brands net
sales growth, excluding Keds
|
|
Down mid-single
digits
|
|
Down mid- to
high-single digits
|
Incremental net sales
from Keds acquisition
|
|
$75.0 million to $85.0
million
|
|
$75.0 million to $85.0
million
|
Diluted EPS:
|
|
|
|
|
Designer Brands,
excluding Keds
|
|
$1.65 -
$1.75
|
|
$1.20 -
$1.50
|
Contribution from Keds
acquisition
|
|
~$0.00
|
|
~$0.00
|
The above guidance excludes the impact of the anticipated
modified "Dutch Auction" tender offer to repurchase up to
$100.0 million of our Class A common
shares that we announced today, which we intend to fund through a
new proposed $135.0 million term loan
agreement.
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 0936665
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:
https://app.webinar.net/qdg7QPdQaz8
For those unable to listen to the live webcast, an archived
version will be available at the same location until June 22, 2023. 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: 9230529
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 Keds, Lucky
Brand, Crown Vintage, Vince Camuto,
Topo Athletic, Jessica Simpson,
Le Tigre 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 nearly 640
DSW Designer Shoe Warehouse and The Shoe Company 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 seven million pairs of shoes to the global
non-profit Soles4Souls. 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
conditions, including inflationary pressures and rising interest
rates, and the related impacts to consumer discretionary spending,
as well as supply chain disruptions and pressures; risks and
uncertainties related to the ongoing coronavirus ("COVID-19")
pandemic, any future COVID-19 resurgence, and any other adverse
public health developments; our ability to anticipate and respond
to fashion trends, consumer preferences and changing customer
expectations; 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; our
ability to manage our Chief Executive Officer ("CEO") transition,
retain our existing management team, and continue to attract
qualified new personnel; 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 an enterprise resource planning
system software solution and other IT systems; our reliance on our
loyalty programs and marketing to drive traffic, sales, and
customer loyalty; our ability to protect our reputation and to
maintain the brands we license; our competitiveness with respect to
style, price, brand availability, and customer service; risks
related to our international operations, including international
trade, our reliance on foreign sources for merchandise, exposure to
political, economic, operational, compliance and other risks, and
fluctuations in foreign currency exchange rates; our ability to
comply with privacy laws and regulations, as well as other legal
obligations; domestic and global political and social conditions,
global pandemics, and the potential impact of geopolitical turmoil
or conflict; 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 latest
Annual Report on Form 10-K or other reports filed with the
Securities and Exchange Commission. All forward-looking statements
speak only as of the time when made. 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)
|
April 29,
2023
|
|
April 30,
2022
|
|
Change
|
|
Amount
|
|
% of Total
Segment
Net Sales
|
|
Amount
|
|
% of Total
Segment
Net Sales
|
|
Amount
|
|
%
|
Segment net
sales:
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Retail
|
$
612,886
|
|
80.7 %
|
|
$
702,745
|
|
82.0 %
|
|
$ (89,859)
|
|
(12.8) %
|
Canada
Retail
|
53,955
|
|
7.1 %
|
|
56,315
|
|
6.6 %
|
|
(2,360)
|
|
(4.2) %
|
Brand
Portfolio
|
92,983
|
|
12.2 %
|
|
97,456
|
|
11.4 %
|
|
(4,473)
|
|
(4.6) %
|
Total segment net
sales
|
759,824
|
|
100.0 %
|
|
856,516
|
|
100.0 %
|
|
(96,692)
|
|
(11.3) %
|
Elimination of
intersegment net sales
|
(17,742)
|
|
|
|
(25,973)
|
|
|
|
8,231
|
|
(31.7) %
|
Consolidated net
sales
|
$
742,082
|
|
|
|
$
830,543
|
|
|
|
$ (88,461)
|
|
(10.7) %
|
Net Sales by Brand
Category
|
(in
thousands)
|
U.S. Retail
|
|
Canada
Retail
|
|
Brand
Portfolio
|
|
Eliminations
|
|
Consolidated
|
Three months ended
April 29, 2023
|
|
|
|
|
|
|
|
|
|
Owned
Brands:(1)
|
|
|
|
|
|
|
|
|
|
Direct-to-consumer
|
$
123,209
|
|
$
—
|
|
$
10,624
|
|
$
—
|
|
$
133,833
|
External customer
wholesale and commission
income
|
—
|
|
—
|
|
64,617
|
|
—
|
|
64,617
|
Intersegment wholesale
and commission income
|
—
|
|
—
|
|
17,742
|
|
(17,742)
|
|
—
|
Total Owned
Brands
|
123,209
|
|
—
|
|
92,983
|
|
(17,742)
|
|
198,450
|
National
brands
|
489,677
|
|
—
|
|
—
|
|
—
|
|
489,677
|
Canada
Retail(2)
|
—
|
|
53,955
|
|
—
|
|
—
|
|
53,955
|
Total net
sales
|
$
612,886
|
|
$
53,955
|
|
$
92,983
|
|
$
(17,742)
|
|
$
742,082
|
Three months ended
April 30, 2022
|
|
|
|
|
|
|
|
|
|
Owned
Brands:(1)
|
|
|
|
|
|
|
|
|
|
Direct-to-consumer
|
$
139,155
|
|
$
—
|
|
$
6,527
|
|
$
—
|
|
$
145,682
|
External customer
wholesale and commission
income
|
—
|
|
—
|
|
64,956
|
|
—
|
|
64,956
|
Intersegment wholesale
and commission income
|
—
|
|
—
|
|
25,973
|
|
(25,973)
|
|
—
|
Total Owned
Brands
|
139,155
|
|
—
|
|
97,456
|
|
(25,973)
|
|
210,638
|
National
brands
|
563,590
|
|
—
|
|
—
|
|
—
|
|
563,590
|
Canada
Retail(2)
|
—
|
|
56,315
|
|
—
|
|
—
|
|
56,315
|
Total net
sales
|
$
702,745
|
|
$
56,315
|
|
$
97,456
|
|
$
(25,973)
|
|
$
830,543
|
(1) "Owned
Brands" refers to those brands we have rights to sell through
ownership or license arrangements. Beginning in the first quarter
of 2023,
sales of the Keds brand are included in Owned Brands as a result of
our acquisition of the Keds business. Sales of the Keds brand in
periods prior
to the first quarter of 2023 are not restated as this brand was
considered a national brand during those periods.
|
(2) We
currently do not report the Canada Retail segment net sales by
brand categories.
|
Comparable
Sales
|
|
Three months
ended
|
|
April 29,
2023
|
|
April 30,
2022
|
Change in comparable
sales:
|
|
|
|
U.S. Retail
segment
|
(11.6) %
|
|
13.6 %
|
Canada Retail
segment
|
2.9 %
|
|
41.4 %
|
Brand Portfolio segment
- direct-to-consumer channel
|
8.3 %
|
|
19.7 %
|
Total
|
(10.4) %
|
|
15.3 %
|
Store
Count
|
(square footage in
thousands)
|
April 29,
2023
|
|
April 30,
2022
|
|
Number of
Stores
|
|
Square
Footage
|
|
Number of
Stores
|
|
Square
Footage
|
U.S. Retail segment -
DSW stores
|
499
|
|
10,015
|
|
510
|
|
10,322
|
Canada Retail
segment:
|
|
|
|
|
|
|
|
The Shoe Company
stores
|
114
|
|
601
|
|
115
|
|
607
|
DSW stores
|
25
|
|
496
|
|
25
|
|
496
|
|
139
|
|
1,097
|
|
140
|
|
1,103
|
Total number of
stores
|
638
|
|
11,112
|
|
650
|
|
11,425
|
Gross
Profit
|
|
Three months
ended
|
|
|
|
|
|
|
(dollars in
thousands)
|
April 29,
2023
|
|
April 30,
2022
|
|
Change
|
|
Amount
|
|
% of
Segment
Net Sales
|
|
Amount
|
|
% of
Segment
Net Sales
|
|
Amount
|
|
%
|
|
Basis
Points
|
Segment gross
profit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Retail
|
$ 196,814
|
|
32.1 %
|
|
$ 233,067
|
|
33.2 %
|
|
$ (36,253)
|
|
(15.6) %
|
|
(110)
|
Canada
Retail
|
17,174
|
|
31.8 %
|
|
18,873
|
|
33.5 %
|
|
(1,699)
|
|
(9.0) %
|
|
(170)
|
Brand
Portfolio
|
22,085
|
|
23.8 %
|
|
23,842
|
|
24.5 %
|
|
(1,757)
|
|
(7.4) %
|
|
(70)
|
Total segment gross
profit
|
236,073
|
|
31.1 %
|
|
275,782
|
|
32.2 %
|
|
(39,709)
|
|
(14.4) %
|
|
(110)
|
Net recognition
(elimination) of
intersegment gross profit
|
1,666
|
|
|
|
(37)
|
|
|
|
1,703
|
|
|
|
|
Consolidated gross
profit
|
$ 237,739
|
|
32.0 %
|
|
$ 275,745
|
|
33.2 %
|
|
$ (38,006)
|
|
(13.8) %
|
|
(120)
|
Intersegment
Eliminations
|
|
Three months
ended
|
(in
thousands)
|
April 29,
2023
|
|
April 30,
2022
|
Recognition
(elimination) of intersegment activity:
|
|
|
|
Net sales recognized by
Brand Portfolio segment
|
$
(17,742)
|
|
$
(25,973)
|
Cost of
sales:
|
|
|
|
Cost of sales
recognized by Brand Portfolio segment
|
13,211
|
|
18,169
|
Recognition of
intersegment gross profit for inventory previously purchased
that
was subsequently sold to external customers during the current
period
|
6,197
|
|
7,767
|
|
$
1,666
|
|
$
(37)
|
DESIGNER BRANDS
INC.
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(unaudited and in
thousands, except per share amounts)
|
|
|
Three months
ended
|
|
April 29,
2023
|
|
April 30,
2022
|
Net sales
|
$
742,082
|
|
$
830,543
|
Cost of
sales
|
(504,343)
|
|
(554,798)
|
Gross profit
|
237,739
|
|
275,745
|
Operating
expenses
|
(220,119)
|
|
(223,426)
|
Income from equity
investments
|
2,331
|
|
1,945
|
Impairment
charges
|
(341)
|
|
(1,072)
|
Operating
profit
|
19,610
|
|
53,192
|
Interest expense,
net
|
(6,597)
|
|
(2,952)
|
Loss on extinguishment
of debt and write-off of debt issuance costs
|
—
|
|
(12,862)
|
Non-operating income
(expenses), net
|
(334)
|
|
6
|
Income before income
taxes
|
12,679
|
|
37,384
|
Income tax
provision
|
(1,306)
|
|
(11,202)
|
Net income
|
11,373
|
|
26,182
|
Net loss attributable
to redeemable noncontrolling interest
|
42
|
|
—
|
Net income attributable
to Designer Brands Inc.
|
$
11,415
|
|
$
26,182
|
Diluted earnings per
share attributable to Designer Brands Inc.
|
$
0.17
|
|
$
0.34
|
Weighted average
diluted shares
|
67,042
|
|
76,924
|
DESIGNER BRANDS
INC.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(unaudited and in
thousands)
|
|
|
April 29,
2023
|
|
January 28,
2023
|
|
April 30,
2022
|
ASSETS
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
Cash and cash
equivalents
|
$
50,569
|
|
$
58,766
|
|
$
54,802
|
Receivables,
net
|
100,237
|
|
77,763
|
|
222,297
|
Inventories
|
637,396
|
|
605,652
|
|
672,490
|
Prepaid expenses and
other current assets
|
43,598
|
|
47,750
|
|
49,836
|
Total current
assets
|
831,800
|
|
789,931
|
|
999,425
|
Property and equipment,
net
|
227,692
|
|
235,430
|
|
250,123
|
Operating lease
assets
|
701,670
|
|
700,373
|
|
635,334
|
Goodwill
|
134,770
|
|
97,115
|
|
93,655
|
Intangible assets,
net
|
75,450
|
|
31,866
|
|
20,355
|
Deferred tax
assets
|
50,111
|
|
48,285
|
|
—
|
Equity
investments
|
66,151
|
|
63,820
|
|
55,118
|
Other assets
|
46,851
|
|
42,798
|
|
33,734
|
Total assets
|
$
2,134,495
|
|
$
2,009,618
|
|
$
2,087,744
|
LIABILITIES, REDEEMABLE
NONCONTROLLING
INTEREST AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
Accounts
payable
|
$
288,526
|
|
$
255,364
|
|
$
369,147
|
Accrued
expenses
|
170,759
|
|
190,676
|
|
208,282
|
Current operating
lease liabilities
|
183,074
|
|
190,086
|
|
179,870
|
Total current
liabilities
|
642,359
|
|
636,126
|
|
757,299
|
Long-term
debt
|
390,302
|
|
281,035
|
|
306,861
|
Non-current operating
lease liabilities
|
635,245
|
|
631,412
|
|
579,839
|
Other non-current
liabilities
|
23,342
|
|
24,989
|
|
26,952
|
Total
liabilities
|
1,691,248
|
|
1,573,562
|
|
1,670,951
|
Redeemable
noncontrolling interest
|
3,093
|
|
3,155
|
|
—
|
Total shareholders'
equity
|
440,154
|
|
432,901
|
|
416,793
|
Total liabilities,
redeemable noncontrolling interest, and
shareholders' equity
|
$
2,134,495
|
|
$
2,009,618
|
|
$
2,087,744
|
DESIGNER BRANDS
INC.
|
NON-GAAP
RECONCILIATION
|
(unaudited and in
thousands, except per share amounts)
|
|
|
Three months
ended
|
|
April 29,
2023
|
|
April 30,
2022
|
Operating
expenses
|
$
(220,119)
|
|
$
(223,426)
|
Non-GAAP
adjustments:
|
|
|
|
CEO transition
costs
|
2,210
|
|
—
|
Restructuring and
integration costs
|
2,120
|
|
614
|
Acquisition-related
costs
|
1,507
|
|
—
|
Total non-GAAP
adjustments
|
5,837
|
|
614
|
Adjusted operating
expenses
|
$
(214,282)
|
|
$
(222,812)
|
Operating
profit
|
$
19,610
|
|
$
53,192
|
Non-GAAP
adjustments:
|
|
|
|
CEO transition
costs
|
2,210
|
|
—
|
Restructuring and
integration costs
|
2,120
|
|
614
|
Acquisition-related
costs
|
1,507
|
|
—
|
Impairment
charges
|
341
|
|
1,072
|
Total non-GAAP
adjustments
|
6,178
|
|
1,686
|
Adjusted operating
profit
|
$
25,788
|
|
$
54,878
|
Net income attributable
to Designer Brands Inc.
|
$
11,415
|
|
$
26,182
|
Non-GAAP
adjustments:
|
|
|
|
CEO transition
costs
|
2,210
|
|
—
|
Restructuring and
integration costs
|
2,120
|
|
614
|
Acquisition-related
costs
|
1,507
|
|
—
|
Impairment
charges
|
341
|
|
1,072
|
Loss on extinguishment
of debt and write-off of debt issuance costs
|
—
|
|
12,862
|
Foreign currency
transaction losses (gains)
|
334
|
|
(6)
|
Total non-GAAP
adjustments before tax effect
|
6,512
|
|
14,542
|
Tax effect of non-GAAP
adjustments
|
(1,508)
|
|
(3,639)
|
Valuation allowance
change on deferred tax assets
|
(2,117)
|
|
(360)
|
Total non-GAAP
adjustments, after tax
|
2,887
|
|
10,543
|
Net loss attributable
to redeemable noncontrolling interest
|
(42)
|
|
—
|
Adjusted net
income
|
$
14,260
|
|
$
36,725
|
Diluted earnings per
share
|
$
0.17
|
|
$
0.34
|
Adjusted diluted
earnings per share
|
$
0.21
|
|
$
0.48
|
Non-GAAP Measures
To supplement amounts presented in our consolidated financial
statements determined in accordance with accounting principles
generally accepted in the United
States ("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 other than those
included in CEO transition costs; (3) acquisition-related costs;
(4) impairment charges; (5) loss on extinguishment of debt and
write-off of debt issuance costs; (6) foreign currency transaction
losses and gains; (7) the net tax impact of such items; (8) the
change in the valuation allowance on deferred tax assets; and (9)
net 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 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. 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 for the Brand
Portfolio segment include the direct-to-consumer e-commerce site
www.vincecamuto.com. The e-commerce sales for Topo and the Keds
business will be added to the comparable base beginning with the
first quarter of 2024. 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
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SOURCE Designer Brands Inc.