• Net Sales: $777 million, down 1.2% year-over-year.
• US Retail Segment Comps: Down 2.8% in the third quarter.
• Canada Retail Segment Comps: Down 4.6% in the third quarter.
• Brand Portfolio Segment Sales: Up 18.5% in the third quarter.
• Consolidated Gross Margin: 31.8%, decreased 80 basis points year-over-year.
• Adjusted SG&A: 26.7% of sales, a 220 basis points improvement from last year.
• Adjusted Operating Income: $43.6 million, improved from $31.4 million last year.
• Adjusted Net Income: $14.5 million, or $0.27 per diluted share.
• Inventory: Up 6% versus the prior year.
• Cash and Liquidity: $36.2 million in cash; total liquidity of $154.5 million.
• Total Debt: $536.3 million at the end of the third quarter.
• Share Repurchase: $50.6 million worth of shares repurchased at an average price of $6.59.
• Fiscal 2024 Guidance: Net sales growth expected to be down low single digits; annual diluted EPS outlook revised to $0.10 to $0.30.

• Warning! GuruFocus has detected 7 Warning Signs with DBI.

Release Date: December 10, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Designer Brands Inc (NYSE:DBI) experienced positive comps in August, driven by strong back-to-school sales, particularly in athletic and athleisure categories.
• The company's adjusted operating income improved by approximately 40% compared to the previous year, reaching $43.6 million.
• DBI's top eight brands, primarily in the athleisure category, saw a 27% increase in sales compared to the third quarter of the previous year.
• The company reported a significant increase in media impressions, with $67 billion earned media impressions, up from $15 billion the previous year.
• DBI's brand portfolio segment saw an 18.5% increase in sales, with notable strength in direct-to-consumer sites like topo.com, which delivered a triple-digit comp.

Negative Points

• Overall sales for Designer Brands Inc (NYSE:DBI) were down 1.2% compared to the previous year, with a 2.8% decline in comp sales in the US retail segment.
• The boot category underperformed, with sales down 27%, significantly impacting overall results.
• Unseasonably warm weather and ongoing consumer discretionary spending pullback negatively affected fall seasonal business.
• The Canadian retail segment experienced a 4.6% decline in comps due to warm weather impacting boot sales, a critical category for the region.
• Gross margin decreased by 80 basis points to 31.8% due to lower initial markup (IMU) from a shift towards national brands and athletic footwear.

Q & A Highlights

Q: Can you provide insights into November trends and how they have influenced your guidance? A: Jared Poff, Executive Vice President and CFO, explained that the midpoint of their guidance reflects November trends. Overall demand was slightly below last year, with stores performing positively but digital sales lagging due to targeted promotions. Gross margin dollars and rates were above last year, and these trends are incorporated into their guidance.

Q: Are you losing market share in the boot category, and how are you addressing this? A: Douglas Howe, CEO, stated that they had planned the boot category down by 15%, but it decreased by almost double that. They are strategically working to reduce weather dependency in their business. While they have seen some rebound with weather changes, they remain conservative in seasonal categories.

Q: How did your top eight national brands perform, and what are your current trends? A: Douglas Howe noted that the top eight brands were up 27% in Q3, making up about 40% of total sales. They are cautious not to overly rely on any single brand. Current trends are in line with guidance, with some softness in Black Friday and Cyber Monday but improved margins due to less promotional activity.

Q: How are you managing debt levels given the current business challenges? A: Jared Poff emphasized a focus on liquidity management, noting they are comfortable with current debt and liquidity levels. They remain cautious about the consumer environment but believe their capital structure is appropriately positioned.

Q: Can you provide an update on your partnership with Nike? A: Douglas Howe expressed satisfaction with Nike's performance and partnership, noting it remains a net positive for the company. They have now lapped the period when Nike returned to their stores and continue to see strong results.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.