Comparable sales up 3.0% on top of comparable sales of 40.8% for the third quarter of 2021

Net sales from our Owned Brands increased 25.0% over the same period last year

In November 2022, received $120.3 million in tax refund reducing debt and increasing liquidity

COLUMBUS, Ohio, Dec. 1, 2022 /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 October 29, 2022.

Roger Rawlins, Chief Executive Officer, stated, "We continued to make meaningful progress on our long-term brand building strategy while also delivering solid comparable sales across every segment of our business. Sales of Owned Brands represented 26.5% of total net sales in the third quarter of 2022 compared to 21.5% for the same period last year. The strategic shifts we have made in our business over the past several years are driving a sustainably higher gross margin rate than 2019 as we have a more targeted focus on customer acquisition, optimizing our assortment, and growing the brands we own and control.

"While we are seeing many of the same pressures across the consumer landscape that most retailers are seeing, our flexible business model continues to support our efforts to navigate a dynamic macro environment. We are focused on meeting our customers' footwear needs while we balance inventory and expenses in order to continue growing market share in this volatile environment."

Third Quarter Operating Results (all comparisons are to the third quarter of 2021)

  • Net sales increased 1.4% to $865.0 million.
  • Comparable sales increased 3.0%.
  • Gross profit decreased to $285.8 million versus $313.6 million last year, and gross margin as a percentage of net sales was 33.0% as compared to 36.7% last year.
  • Reported net income was $45.2 million, or diluted earnings per share ("EPS") of $0.65.
  • Adjusted net income was $46.1 million, or adjusted diluted EPS of $0.67.

Liquidity Highlights

  • Cash and cash equivalents totaled $62.5 million at the end of the third quarter of 2022 compared to $83.1 million at the end of the same period last year, with $130.9 million remaining available for borrowings under our senior secured asset-based revolving credit facility. Debt totaled $415.5 million at the end of the third quarter of 2022 compared to $227.9 million at the end of the same period last year. In November 2022, we received $120.3 million of our income tax receivable from the Internal Revenue Service as a result of the Coronavirus Aid, Relief, and Economic Security Act. We anticipate receiving the remaining income tax receivable within the next twelve months.
  • The Company ended the quarter with more normalized inventory levels of $681.8 million compared to $602.1 million at the same period last year with accelerated receipts to support fall season demand.

Return to Shareholders

  • During the third quarter of 2022, Designer Brands repurchased 1.3 million Class A common shares (2.0% of Class A and Class B common shares at the beginning of the quarter) at an aggregate cost of $19.1 million under its share repurchase program.
  • During the nine months ended October 29, 2022, we repurchased 10.7 million Class A common shares (14.6% of Class A and Class B common shares at the beginning of the fiscal year) at an aggregate cost of $147.5 million, with $187.4 million of Class A common shares that remain authorized under the program as of October 29, 2022.
  • A dividend of $0.05 per share of Class A and Class B common shares will be paid on December 28, 2022 to shareholders of record at the close of business on December 13, 2022.

Store Openings and Closings

During the third quarter of 2022, we opened 1 new store and closed 3 stores in the U.S. with no changes to the store count in Canada, resulting in a total of 504 U.S. stores and 138 Canadian stores as of October 29, 2022.

Updated 2022 Financial Outlook

The Company is updating the following guidance for the full year 2022:

Metric


Previous Guidance


Current Guidance

Designer Brands Comparable Sales Growth


Mid-single digits


Mid-single digits

Diluted EPS


$2.05 - $2.15


$1.75 - $1.80

Webcast and Conference Call

The Company is hosting a conference call today at 8:30 a.m. 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 8112374 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/95ZvEx7rpAl

For those unable to listen to the live webcast, an archived version will be available via the same website address until December 15,2022. 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: 5000482

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 by inspiring self-expression across every facet of its enterprise. Through its portfolio of world-class owned brands, led by the industry-setting Vince Camuto brand, Designer Brands delivers on-trend footwear and accessories through its robust direct-to-consumer omni-channel infrastructure, featuring a billion-dollar digital commerce business and nearly 650 stores across the U.S. and Canada. Its retailing operations under the DSW Designer Shoe Warehouse and The Shoe Company banners deliver current, in-line footwear and accessories from most of the largest national brands in the industry and hold leading market share positions in key product categories across Women's, Men's and Kid's in the U.S. and Canada. Designer Brands also distributes its owned brands through select wholesale relationships while leveraging its design and sourcing expertise to build private label product for national retailers. Designer Brands is also committed to being a difference maker in the world, taking steps forward to advance diversity, equity, and inclusion in the footwear industry and supporting our global community and the health of our planet through donating more than six million pairs of shoes to the global non-profit Soles4Souls. More information can be found at 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: risks and uncertainties related to the ongoing coronavirus ("COVID-19") pandemic, any future COVID-19 resurgence, and any other adverse public health developments; risks that recent inflationary pressures, including higher freight costs, could have on our results of operations and customer demand based on pricing actions and operating measures taken to mitigate the impact of inflation; uncertain general economic conditions, including inflation and supply chain pressures, domestic and global political and social conditions and the potential impact of geopolitical turmoil or conflict, and the related impacts to consumer discretionary spending; our ability to execute on our long-term strategic plans; 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 fulfillment center and stores, whether as a result of the COVID-19 pandemic, reliance on third-party providers, or otherwise; our reliance on our loyalty programs and marketing to drive traffic, sales, and customer loyalty; risks related to cyber security threats and privacy or data security breaches or the potential loss or disruption of our information systems; 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, and 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; 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 January 29, 2022 and in our other filings with the Securities and Exchange Commission. All forward-looking statements speak only as of the time when made. Except as may be required by 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)

October 29, 2022


October 30, 2021


Change


Amount


% of
Segment
Net Sales


Amount


% of
Segment
Net Sales


Amount


%

Segment net sales:












U.S. Retail

$   706,391


78.8 %


$   709,608


79.9 %


$      (3,217)


(0.5) %

Canada Retail

82,289


9.2 %


74,792


8.4 %


7,497


10.0 %

Brand Portfolio

107,458


12.0 %


103,919


11.7 %


3,539


3.4 %

Total segment net sales

896,138


100.0 %


888,319


100.0 %


7,819


0.9 %

Elimination of intersegment net sales

(31,118)




(34,852)




3,734


(10.7) %

Consolidated net sales

$   865,020




$   853,467




$     11,553


1.4 %

 


Nine months ended





(dollars in thousands)

October 29, 2022


October 30, 2021


Change


Amount


% of
Segment
Net Sales


Amount


% of
Segment
Net Sales


Amount


%

Segment net sales:












U.S. Retail

$  2,143,199


81.5 %


$  2,053,359


84.2 %


$     89,840


4.4 %

Canada Retail

216,888


8.2 %


172,981


7.1 %


43,907


25.4 %

Brand Portfolio

271,265


10.3 %


211,875


8.7 %


59,390


28.0 %

Total segment net sales

2,631,352


100.0 %


2,438,215


100.0 %


193,137


7.9 %

Elimination of intersegment net sales

(76,470)




(64,258)




(12,212)


19.0 %

Consolidated net sales

$  2,554,882




$  2,373,957




$   180,925


7.6 %

 

Net Sales by Brand Category

(in thousands)

U.S. Retail


Canada Retail


Brand Portfolio


Eliminations


Consolidated

Three months ended October 29, 2022










Owned Brands:(1)










Direct-to-consumer

$       153,311


$                —


$           9,810


$                 —


$       163,121

External customer wholesale and commission income



66,530



66,530

Intersegment wholesale and commission income



31,118


(31,118)


Total Owned Brands

153,311



107,458


(31,118)


229,651

National brands

553,080





553,080

Canada Retail(2)


82,289




82,289

Total net sales

$       706,391


$        82,289


$       107,458


$        (31,118)


$       865,020

Three months ended October 30, 2021










Owned Brands:(1)










Direct-to-consumer

$       114,702


$                —


$           7,726


$                 —


$       122,428

External customer wholesale and commission income



61,341



61,341

Intersegment wholesale and commission income



34,852


(34,852)


Total Owned Brands

114,702



103,919


(34,852)


183,769

National brands

594,906





594,906

Canada Retail(2)


74,792




74,792

Total net sales

$       709,608


$        74,792


$       103,919


$        (34,852)


$       853,467

Nine months ended October 29, 2022










Owned Brands:(1)










Direct-to-consumer

$       440,343


$                —


$         24,130


$                 —


$       464,473

External customer wholesale and commission income



170,665



170,665

Intersegment wholesale and commission income



76,470


(76,470)


Total Owned Brands

440,343



271,265


(76,470)


635,138

National brands

1,702,856





1,702,856

Canada Retail(2)


216,888




216,888

Total net sales

$   2,143,199


$      216,888


$       271,265


$        (76,470)


$    2,554,882

Nine months ended October 30, 2021










Owned Brands:(1)










Direct-to-consumer

$       300,120


$                —


$         18,616


$                 —


$       318,736

External customer wholesale and commission income



129,001



129,001

Intersegment wholesale and commission income



64,258


(64,258)


Total Owned Brands

300,120



211,875


(64,258)


447,737

National brands

1,753,239





1,753,239

Canada Retail(2)


172,981




172,981

Total net sales

$   2,053,359


$      172,981


$       211,875


$       (64,258)


$   2,373,957



(1)

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

(2)

We currently do not report the Canada Retail segment net sales by brand categories.

 

Comparable Sales


Three months ended


Nine months ended


October 29, 2022


October 30, 2021


October 29, 2022


October 30, 2021

Change in comparable sales:








U.S. Retail segment

1.1 %


43.9 %


5.5 %


62.6 %

Canada Retail segment

18.8 %


15.2 %


33.5 %


13.7 %

Brand Portfolio segment - direct-
to-consumer channel

27.0 %


50.4 %


29.6 %


22.8 %

Total

3.0 %


40.8 %


7.8 %


57.4 %

 

Store Count

(square footage in thousands)

October 29, 2022


October 30, 2021


Number of Stores


Square Footage


Number of Stores


Square Footage

U.S. Retail segment - DSW stores

504


10,188


515


10,457

Canada Retail segment:








The Shoe Company stores

113


596


117


617

DSW stores

25


496


27


536


138


1,092


144


1,153

Total number of stores

642


11,280


659


11,610

 

Gross Profit


Three months ended







(dollars in thousands)

October 29, 2022


October 30, 2021


Change


Amount


% of
Segment
Net Sales


Amount


% of
Segment
Net Sales


Amount


%


Basis Points

Segment gross profit:














U.S. Retail

$    232,058


32.9 %


$    258,059


36.4 %


$    (26,001)


(10.1) %


(350)

Canada Retail

31,298


38.0 %


28,588


38.2 %


2,710


9.5 %


(20)

Brand Portfolio

23,839


22.2 %


32,329


31.1 %


(8,490)


(26.3) %


(890)

Total segment gross profit

287,195


32.0 %


318,976


35.9 %


(31,781)


(10.0) %


(390)

Net recognition of intersegment gross profit

(1,376)




(5,359)




3,983





Consolidated gross profit

$    285,819


33.0 %


$    313,617


36.7 %


$    (27,798)


(8.9) %


(370)

 


Nine months ended







(dollars in thousands)

October 29, 2022


October 30, 2021


Change


Amount


% of
Segment
Net Sales


Amount


% of
Segment
Net Sales


Amount


%


Basis Points

Segment gross profit:














U.S. Retail

$    716,268


33.4 %


$    708,065


34.5 %


$        8,203


1.2 %


(110)

Canada Retail

81,145


37.4 %


58,191


33.6 %


22,954


39.4 %


380

Brand Portfolio

59,975


22.1 %


52,788


24.9 %


7,187


13.6 %


(280)

Total segment gross profit

857,388


32.6 %


819,044


33.6 %


38,344


4.7 %


(100)

Net recognition of intersegment gross profit

(154)




(4,635)




4,481





Consolidated gross profit

$    857,234


33.6 %


$    814,409


34.3 %


$      42,825


5.3 %


(70)

 

Intersegment Eliminations


Three months ended

(in thousands)

October 29, 2022


October 30, 2021

Recognition (elimination) of intersegment activity:




 Net sales recognized by Brand Portfolio segment 

$                  (31,118)


$                  (34,852)

Cost of sales:




Cost of sales recognized by Brand Portfolio segment

21,426


22,950

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

8,316


6,543


$                    (1,376)


$                    (5,359)

 


Nine months ended

(in thousands)

October 29, 2022


October 30, 2021

Recognition (elimination) of intersegment activity:




Net sales recognized by Brand Portfolio segment

$                  (76,470)


$                  (64,258)

Cost of sales:




Cost of sales recognized by Brand Portfolio segment

52,149


43,592

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

24,167


16,031


$                       (154)


$                    (4,635)

 

DESIGNER BRANDS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited and in thousands, except per share amounts)



Three months ended


Nine months ended


October 29, 2022


October 30, 2021


October 29, 2022


October 30, 2021

Net sales

$           865,020


$           853,467


$        2,554,882


$        2,373,957

Cost of sales

(579,201)


(539,850)


(1,697,648)


(1,559,548)

Gross profit

285,819


313,617


857,234


814,409

Operating expenses

(222,232)


(211,909)


(674,348)


(637,108)

Income from equity investments

2,290


2,600


6,670


6,598

Impairment charges

(1,349)



(4,237)


(1,174)

Operating profit

64,528


104,308


185,319


182,725

Interest expense, net

(4,826)


(7,706)


(10,530)


(24,592)

Loss on extinguishment of debt and write-off of debt issuance costs



(12,862)


Non-operating income (expenses), net

(152)


172


(109)


734

Income before income taxes

59,550


96,774


161,818


158,867

Income tax provision

(14,379)


(16,590)


(44,252)


(18,797)

Net income

$              45,171


$              80,184


$            117,566


$            140,070

Diluted earnings per share

$                  0.65


$                  1.04


$                  1.60


$                  1.81

Weighted average diluted shares

69,140


77,135


73,287


77,216

 

DESIGNER BRANDS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited and in thousands)



October 29, 2022


January 29, 2022


October 30, 2021

ASSETS






Current Assets:






Cash and cash equivalents

$                    62,507


$                    72,691


$                    83,069

Receivables, net

228,746


199,826


231,391

Inventories

681,843


586,429


602,101

Prepaid expenses and other current assets

53,950


55,270


53,756

Total current assets

1,027,046


914,216


970,317

Property and equipment, net

233,515


256,786


263,581

Operating lease assets

691,032


647,221


664,646

Goodwill

93,655


93,655


93,655

Intangible assets, net

19,273


15,527


16,005

Equity investments

64,246


55,578


56,623

Other assets

42,611


31,651


29,117

Total assets

$               2,171,378


$               2,014,634


$               2,093,944

LIABILITIES AND SHAREHOLDERS' EQUITY






Current Liabilities






Accounts payable

$                  315,996


$                  340,877


$                  401,280

Accrued expenses

213,905


215,812


211,017

Current maturities of long-term debt



62,500

Current operating lease liabilities

187,619


202,228


206,065

Total current liabilities

717,520


758,917


880,862

Long-term debt

415,467


225,536


165,422

Non-current operating lease liabilities

628,820


593,429


622,273

Other non-current liabilities

26,059


24,356


31,726

Total shareholders' equity

383,512


412,396


393,661

Total liabilities and shareholders' equity

$               2,171,378


$               2,014,634


$               2,093,944

 

DESIGNER BRANDS INC.
NON-GAAP RECONCILIATIONS
(unaudited and in thousands, except per share amounts)



Three months ended


Nine months ended


October 29, 2022


October 30, 2021


October 29, 2022


October 30, 2021

Operating expenses

$              (222,232)


$              (211,909)


$              (674,348)


$              (637,108)

Non-GAAP adjustments:








Restructuring and termination costs

850



2,456


2,836

Target acquisition costs (credits)

400


(2,107)


400


3,226

Adjusted operating expenses

$              (220,982)


$              (214,016)


$              (671,492)


$              (631,046)

Operating profit

$                  64,528


$                104,308


$                185,319


$                182,725

Non-GAAP adjustments:








Restructuring and termination costs

850



2,456


2,836

Target acquisition costs (credits)

400


(2,107)


400


3,226

Impairment charges

1,349



4,237


1,174

Total non-GAAP adjustments

2,599


(2,107)


7,093


7,236

Adjusted operating profit

$                 67,127


$               102,201


$               192,412


$               189,961

Net income

$                 45,171


$                 80,184


$               117,566


$               140,070

Non-GAAP adjustments:








Restructuring and termination costs

850



2,456


2,836

Target acquisition costs (credits)

400


(2,107)


400


3,226

Impairment charges

1,349



4,237


1,174

Loss on extinguishment of debt and write-off of debt issuance costs



12,862


Foreign currency transaction losses (gains)

152


(172)


109


(734)

Total non-GAAP adjustments before tax effect

2,751


(2,279)


20,064


6,502

Tax effect of non-GAAP adjustments

(711)


560


(5,085)


(1,619)

Valuation allowance change on deferred tax assets

(1,070)


(11,873)


(3,565)


(25,450)

Total adjustments, after tax

970


(13,592)


11,414


(20,567)

Adjusted net income

$                  46,141


$                  66,592


$                128,980


$                119,503

Diluted earnings per share

$                      0.65


$                      1.04


$                      1.60


$                      1.81

Adjusted diluted earnings per share

$                      0.67


$                      0.86


$                      1.76


$                      1.55

Non-GAAP Measures

To supplement amounts presented in our unaudited condensed 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) restructuring and termination costs; (2) target acquisition costs (credits); (3) impairment charges; (4) loss on extinguishment of debt and write-off of debt issuance costs; (5) foreign currency transaction losses (gains); (6) the net tax effect of such items; and (7) the change in the valuation allowance on deferred tax assets. The unaudited reconciliation of 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 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 on a comparable basis, 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 change in comparable sales from the same previous year period, a primary metric commonly used throughout the retail industry, to be an important indicator of the performance of our retail and direct-to-consumer businesses. We include in our comparable sales metric stores in operation for at least 14 months at the beginning of the fiscal 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 stores temporarily closed as a result of the COVID-19 pandemic as management continues to believe that this metric is meaningful to monitor our performance. Comparable sales also include e-commerce sales. 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 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.

Cision View original content:https://www.prnewswire.com/news-releases/designer-brands-inc-reports-third-quarter-2022-financial-results-301690885.html

SOURCE Designer Brands Inc.

Copyright 2022 PR Newswire

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