Designer Brands Inc. (NYSE: DBI ) has released its Q4 2024 results , positively surprising the market. The company posted positive comparable sales for the first time in over two years, with U.S. Retail comps turning positive Long-only investment, evaluating companies from an operational, buy-and-hold perspective.Quipus Capital does not focus on market-driven dynamics and future price action. Instead, our articles focus on operational aspects, understanding the long-term earnings power of companies, the com ...

Core Viewpoint - Designer Brands reported mixed financial results for Q4 2024, with adjusted EPS beating expectations but revenue falling short, indicating challenges in revenue generation despite improved cost control [2][6]. Financial Performance - Adjusted EPS loss was $0.44, better than the expected loss of $0.49, with no change compared to Q4 2023 [3][6]. - Revenue totaled $713.6 million, below the anticipated $719 million, representing a 5.4% decline from $754.3 million in Q4 2023 [2][3]. - Gross margin improved to 39.6%, up from 38.8% in Q4 2023, reflecting effective cost management [3][6]. - Comparable sales increased by 0.5%, a recovery from a 7.3% decline in the previous year [3][6]. Strategic Focus - The company aims to enhance its Owned Brands segment, targeting it to constitute one-third of total sales by 2026, doubling from its 2021 baseline [4]. - Designer Brands is strengthening its loyalty and rewards programs, with the VIP program having 32.1 million members, contributing to 90% of retail sales [5]. - Expansion of the distribution network is underway to support both in-store and online sales, enhancing customer service and operational efficiency [5]. Segment Performance - U.S. Retail segment sales dropped by 6.9%, indicating competitive pressures and shifts in consumer behavior [7]. - Canada Retail and Brand Portfolio segments experienced growth of 7.5% and 12.3%, respectively [7]. Financial Position - Inventory levels increased to $599.8 million from $571.3 million, while cash reserves stood at $44.8 million [8]. - Debt levels rose to $491 million from $427.1 million, indicating potential financial risk [8]. Future Outlook - Designer Brands anticipates low single-digit net sales growth for fiscal 2025, with adjusted EPS guidance between $0.30 to $0.50 [9]. - The focus remains on strategic initiatives, particularly enhancing Owned Brands and expanding the customer loyalty program [9].

Designer Brands Inc. (NYSE:DBI) Q4 2024 Earnings Conference Call March 20, 2025 8:30 AM ET Company Participants Dustin Hauenstein - SVP, Finance Doug Howe - CEO Jared Poff - CFO Conference Call Participants Mauricio Serna - UBS Operator Good day, and welcome to the Designer Brands Inc. Fourth Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I'd now like to turn the conference over to Dustin Hauenstein, Senior Vice President of Finance. Please go ahead ...

Financial Performance - Fourth quarter net sales decreased by 5.4% to $713.6 million, with total comparable sales increasing by 0.5%[3] - Full year net sales decreased by 2.1% to $3.0 billion, with total comparable sales decreasing by 1.7%[7] - The reported net loss for the full year was $38.2 million, equating to a loss per diluted share of $0.80[7] - Consolidated net sales for the three months ended August 3, 2024, were $771,900,000, a decrease from $792,217,000 for the same period last year, representing a decline of 2.9%[23] - Consolidated net sales for the six months ended August 3, 2024, were $1,518,496,000, slightly down from $1,534,299,000 in the same period last year, a decrease of 1.0%[23] - Consolidated net sales for the three months ended November 2, 2024, were $777,194 thousand, a decrease of 1.4% compared to $786,329 thousand for the same period in 2023[24] - For the nine months ended November 2, 2024, consolidated net sales totaled $2,295,690 thousand, a slight decrease from $2,320,628 thousand in the same period last year[24] - Net sales for the three months ended February 1, 2025, were $713,572, a decrease of 5.4% compared to $754,348 for the same period in 2024[25] Gross Profit and Margins - Gross profit for the fourth quarter decreased to $282.6 million, resulting in a gross margin of 39.6%[3] - Consolidated gross profit for the three months ended February 1, 2025, was $282,583, a decrease of 3.4% compared to $292,591 for the same period in 2024[17] - Gross profit for the consolidated segment was $252,914,000, accounting for 32.8% of net sales, compared to $273,387,000 or 34.5% of net sales in the previous year[23] - Gross profit for the consolidated segment for six months was $497,983,000, which is 32.8% of net sales, compared to $511,126,000 or 33.3% in the previous year[23] - Gross profit margin for the consolidated segment improved to 43.0% for the three months ended November 2, 2024, compared to 44.0% in the same period last year[24] - Gross profit for the twelve months ended February 1, 2025, was $1,285,958, representing a gross margin of 42.7%, compared to $1,323,995 and a gross margin of 43.1% for the previous year[27] Operating Expenses and Losses - Operating expenses for the consolidated segment were $226,896,000, which is 29.4% of net sales, compared to $214,530,000 or 27.1% of net sales last year, indicating an increase in operating expenses as a percentage of sales[23] - Operating expenses for the six months were $465,447,000, representing 30.7% of net sales, compared to $434,649,000 or 28.3% last year, indicating a rise in operating expenses[23] - Operating expenses for the three months ended February 1, 2025, were $311,983, which is 43.7% of net sales, compared to $326,841 or 43.3% of net sales for the same period in 2024[25] - The company reported operating expenses of $1,245,834,000 for the twelve months ended February 1, 2025, slightly down from $1,256,150,000 in the previous year, showing a decrease of about 0.8%[31] Segment Performance - The U.S. Retail segment reported net sales of $587.5 million, a decrease of 6.9% compared to the previous year[16] - The Brand Portfolio segment saw a 12.3% increase in net sales, totaling $87.3 million for the fourth quarter[16] - U.S. Retail segment gross profit decreased by 3.8% to $238,490, while its percentage of net sales increased to 40.6% from 39.3%[17] - Canada Retail segment gross profit increased by 6.0% to $27,388, with a slight decrease in its percentage of net sales to 39.6%[17] - U.S. Retail segment net sales were $641,694,000, down from $658,542,000 year-over-year, reflecting a decrease of 2.7%[23] - Canada Retail segment net sales increased to $74,797,000 from $70,266,000, marking a growth of 6.3% year-over-year[23] - U.S. Retail segment net sales were $615,495 thousand, a decrease of 2.5% from $631,610 thousand in the same period last year[24] - Canada Retail segment net sales increased to $83,504 thousand, up 10.4% from $75,610 thousand in the same period last year[24] Future Outlook - For fiscal year 2025, the company anticipates low-single digit net sales growth and diluted EPS guidance of $0.30 to $0.50[9] - The company plans to include e-commerce sales from the Brand Portfolio segment in its comparable sales metric starting in 2025, enhancing the measurement of retail performance[34] - The company anticipates that stores added from the Rubino acquisition will contribute to comparable sales starting in the second quarter of 2025, indicating a strategy for market expansion[34] Debt and Assets - Cash and cash equivalents totaled $44.8 million at the end of 2024, down from $49.2 million at the end of 2023[7] - Long-term debt increased to $484,285 as of February 1, 2025, compared to $420,344 as of February 3, 2024[29] - Total current assets decreased to $734,824 as of February 1, 2025, from $777,432 as of February 3, 2024[29] - Total liabilities decreased slightly to $1,727,449 as of February 1, 2025, from $1,713,724 as of February 3, 2024[29] Adjusted Metrics - The adjusted diluted earnings per share for the twelve months ended February 1, 2025, was $0.27, down from $0.68 in the prior year, indicating a decrease of approximately 60.3%[31] - Total non-GAAP adjustments for the twelve months ended February 1, 2025, amounted to $25,014,000 after tax, compared to $13,969,000 in the previous year, representing an increase of approximately 79.5%[31] - The company incurred restructuring and integration costs of $11,843,000 for the twelve months ended February 1, 2025, compared to $6,378,000 in the previous year, indicating an increase of approximately 85.5%[31] - The company incurred impairment charges of $580 for the three months ended February 1, 2025, compared to $4,185 for the same period in 2024[27] Management and Corporate Actions - The company repurchased 10.3 million Class A common shares at a cost of $68.6 million during 2024[7] - CEO transition costs for the twelve months ended February 1, 2025, were $4,352,000, down from $4,352,000 in the previous year, reflecting a reduction in transition-related expenses[31] - The company recognized intersegment gross profit of $9,717 for the three months ended February 1, 2025, compared to $6,728 in the same period last year[19] - The elimination of net sales recognized by the Brand Portfolio segment for the twelve months ended February 1, 2025, was $138,743, up from $72,078 in the previous year[20] - Corporate/Eliminations segment reported an operating loss of $217,734 for the twelve months ended February 1, 2025, compared to a loss of $187,183 in the previous year, indicating a worsening performance[20]

Core Insights - Designer Brands Inc. reported financial results for the year ended February 1, 2025, with a focus on strategic initiatives that led to positive comparable sales for the first time in nine quarters [2][5] - The company anticipates profitable growth in fiscal 2025, projecting an increase in earnings per share (EPS) compared to 2024 adjusted results [2][4] Financial Performance - For the fourth quarter of 2024, net sales decreased by 5.4% to $713.6 million, while total comparable sales increased by 0.5% [5][11] - Gross profit for the fourth quarter was $282.6 million, with a gross margin of 39.6%, compared to $292.6 million and 38.8% in the previous year [5][11] - The reported net loss attributable to Designer Brands Inc. was $38.2 million, or a loss per diluted share of $0.80, while the adjusted net loss was $21.3 million, or $0.44 loss per diluted share [5][11] Store Count and Operations - As of February 1, 2025, the total number of stores was 669, with 494 in the U.S. and 175 in Canada, reflecting a slight reduction in store count [3][11] - The company closed two stores in the U.S. and four in Canada during the fourth quarter of 2024 [3] 2025 Financial Outlook - The company has provided guidance for 2025, expecting low-single-digit net sales growth and diluted EPS in the range of $0.30 to $0.50 [4] - The ongoing business transformation is expected to drive stability and growth, despite short-term consumer pressures from inflation and rising prices [2][4] Segment Performance - In the fourth quarter, U.S. Retail segment net sales were $587.5 million, down 6.9% from the previous year, while Canada Retail segment net sales increased by 7.5% to $69.2 million [11][12] - The Brand Portfolio segment saw a 12.3% increase in net sales, reaching $87.3 million [11][12] Liquidity and Return to Shareholders - Cash and cash equivalents totaled $44.8 million at the end of 2024, down from $49.2 million at the end of 2023, with total debt increasing to $491.0 million [5][11] - The company repurchased 10.3 million Class A common shares for $68.6 million during 2024, with $19.7 million remaining for future repurchases [5][11]

Core Viewpoint - Designer Brands Inc. will announce its fourth quarter and full year 2024 earnings on March 20, 2025, with a conference call scheduled for 8:30 am E.T. to discuss the results [1] Company Overview - Designer Brands is one of the largest designers, producers, and retailers of footwear and accessories globally, with a mission centered around being "shoe obsessed" [3] - The company has a diversified portfolio of brands, including Topo Athletic, Keds, Vince Camuto, and others, and operates a robust direct-to-consumer omni-channel infrastructure [3] - Designer Brands has a billion-dollar digital commerce business and over 650 retail locations in North America, holding leading market share positions in key product categories across women's, men's, and kids' footwear [3] - The company is committed to social responsibility, having donated over eleven million pairs of shoes to the non-profit Soles4Souls since 2018 [3]

Group 1 - National Steel (SID) is one of the largest fully integrated steel producers in Brazil and Latin America in terms of crude steel production [1] - The Zacks Consensus Estimate for National Steel's current year earnings has been revised 78.1% downward over the last 60 days [1] Group 2 - Designer Brands (DBI) is a designer, producer, and retailer of footwear and accessories [2] - The Zacks Consensus Estimate for Designer Brands' current year earnings has been revised almost 61.1% downward over the last 60 days [2] Group 3 - Insight Enterprises (NSIT) is a global direct marketer of brand name computers, hardware, and software [2] - The Zacks Consensus Estimate for Insight Enterprises' current year earnings has been revised 10.6% downward over the last 60 days [2]

Group 1 - Designer Brands (NYSE: DBI) reported challenging topline results across all segments, including US and Canada retail and owned brands [1] - A notable positive aspect in the quarter was a significant reduction in Selling, General and Administrative (SG&A) expenses, particularly from marketing and compensation [1] Group 2 - The analysis emphasizes a long-only investment approach, focusing on operational aspects and long-term earnings potential rather than market-driven dynamics [1] - The investment strategy suggests that only a small fraction of companies should be considered for buying at any given time, with most recommendations being holds [1]

Financial Performance - Net sales for the three months ended November 2, 2024, were $777,194, a decrease of 1.5% compared to $786,329 for the same period in 2023[11] - Gross profit for the nine months ended November 2, 2024, was $745,428, down 2.9% from $767,532 in the prior year[11] - Operating profit for the three months ended November 2, 2024, was $22,816, a decline of 18.4% from $28,121 in the same period last year[11] - Net income attributable to Designer Brands Inc. for the three months ended November 2, 2024, was $13,012, an increase of 28.3% from $10,141 in the prior year[11] - Basic earnings per share for the three months ended November 2, 2024, were $0.25, compared to $0.17 for the same period in 2023, reflecting a 47.1% increase[11] - Comprehensive income attributable to Designer Brands Inc. for the three months ended November 2, 2024, was $12,485, compared to $7,640 in the same period last year, representing a 63.5% increase[13] - Net income attributable to Designer Brands Inc. for the three months ended November 2, 2024, was $13,012 thousand, compared to $10,141 thousand for the three months ended October 28, 2023, representing a 28.4% increase[17] - Operating profit decreased by $47.6 million, or 43.9%, to $60.8 million for the nine months ended November 2, 2024, compared to $108.4 million for the same period in 2023[108] - Net income attributable to Designer Brands Inc. for the nine months ended November 2, 2024, was $27.6 million, a decrease of $31.1 million, or 53.0%, from $58.8 million in the prior year[108] - Basic earnings per share decreased by 46.2% to $0.50 for the nine months ended November 2, 2024, compared to $0.93 for the same period in 2023[108] Assets and Liabilities - Total assets as of November 2, 2024, were $2,080,764, a slight increase from $2,076,232 as of February 3, 2024[15] - Current liabilities decreased to $567,611 as of November 2, 2024, from $622,271 in the previous quarter, indicating improved liquidity[15] - Cash and cash equivalents decreased to $36,227 as of November 2, 2024, down from $54,638 at the end of October 2023[15] - Total debt as of November 2, 2024, was $542,172 thousand, an increase of 42.5% from $380,571 thousand as of October 28, 2023[71] - The company reported a decrease in gift card liabilities to $23.7 million as of November 2, 2024, down from $26.2 million at the end of the previous year[51] Cash Flow - The company reported a net cash provided by operating activities of $12,137 thousand for the three months ended November 2, 2024, a significant decrease from $202,521 thousand for the same period last year[19] - Net cash provided by operating activities decreased to $12.1 million for the nine months ended November 2, 2024, down from $202.5 million, a change of $190.4 million[124] - Net cash used in investing activities was $50.7 million, primarily due to capital expenditures of $38.9 million and the acquisition of the Rubino business for $16.1 million[126] - Net cash provided by financing activities was $26.2 million, driven by net receipts of $113.0 million from the ABL Revolver, offset by the repurchase of 10.3 million Class A common shares at a cost of $68.6 million[127] Impairment and Charges - The company reported an impairment charge of $17,756 for the three months ended November 2, 2024, with no similar charge in the prior year[11] - The company recorded impairment charges of $9.2 million for long-lived assets during the three and nine months ended November 2, 2024[33] - An impairment charge of $7.0 million was recorded for the ownership interest in Le Tigre, resulting in no remaining value[34] - Impairment charges totaled $17.8 million, including $9.2 million related to a vacated leased corporate office and $7.0 million for the write-off of an equity investment[103] Sales Performance - Total net sales for the three months ended October 28, 2023, were $786.3 million, a decrease from $803.3 million in the same period last year, representing a decline of approximately 2.5%[48] - For the nine months ended November 2, 2024, total net sales reached $2.2957 billion, compared to $2.3206 billion for the same period last year, indicating a decrease of about 1.1%[50] - The U.S. Retail segment reported net sales of $615.5 million for the three months ended November 2, 2024, slightly down from $631.6 million in the prior year, a decrease of approximately 2.5%[50] - The Canada Retail segment saw an increase in net sales to $83.5 million for the three months ended November 2, 2024, compared to $75.6 million in the same period last year, representing a growth of about 10.5%[50] - Total comparable sales decreased by 3.1% compared to the same period last year, with U.S. Retail segment down by 2.8% and Canada Retail segment down by 4.6%[89] Shareholder Actions - The company repurchased 10.3 million Class A common shares at an aggregate cost of $68.6 million during the nine months ended November 2, 2024[66] - The company declared a quarterly cash dividend payment of $0.05 per share for both Class A and Class B common shares, payable on December 20, 2024[68] - The company repurchased a total of 7.7 million Class A common shares at an average price of $6.51 during the three months ended November 2, 2024[145] Strategic Initiatives - The company has a 40.0% ownership interest in ABG-Camuto and a 33.3% interest in Le Tigre, both of which are integral to the Brand Portfolio segment[24] - On April 8, 2024, the company completed the acquisition of Rubino Shoes Inc. for $16.1 million in cash, expanding its Canada Retail segment into Quebec[25] - The company is investing in new technology for supply chain optimization, expected to reduce costs by FF%[157] - Recent acquisitions are anticipated to enhance product offerings and increase market share by GG%[157] - The management emphasized a strategic shift towards sustainability, aiming for a HH% reduction in carbon footprint by 2025[157] Market Outlook - Overall, the company remains optimistic about future performance, citing strong consumer demand and effective marketing strategies[157] - The company provided guidance for the next quarter, projecting revenue growth of CC%[157] - Designer Brands Inc. is expanding its market presence in international regions, targeting a growth rate of EE% in those markets[157]

Financial Performance - Net sales for the third quarter of 2024 decreased by 1.2% to $777.2 million compared to the same period last year[4]. - Total comparable sales declined by 3.1% for the quarter[5]. - Gross profit decreased to $247.4 million, with gross profit as a percentage of net sales at 31.8%, down from 32.6% last year[6]. - Reported net income attributable to Designer Brands Inc. was $13.0 million, or diluted earnings per share (EPS) of $0.24[6]. - Adjusted net income was $14.5 million, or adjusted diluted EPS of $0.27[7]. - Total net sales for the three months ended November 2, 2024, reached $777,194,000, a decrease from $786,329,000 for the same period last year, reflecting a decline of 3.1%[21]. - For the nine months ended November 2, 2024, total net sales were $2,295,690,000, compared to $2,320,628,000 for the same period last year, a decrease of 1.1%[25]. - Net sales for the three months ended November 2, 2024, were $777.194 million, a decrease of 1.4% from $786.329 million for the same period last year[27]. - Gross profit for the three months ended November 2, 2024, was $247.445 million, down 3.4% from $256.406 million in the prior year[27]. - Operating profit decreased to $22.816 million for the three months ended November 2, 2024, compared to $28.121 million for the same period last year, representing a decline of 18.9%[27]. - Net income attributable to Designer Brands Inc. was $13.012 million for the three months ended November 2, 2024, an increase of 28.3% from $10.141 million in the prior year[27]. - Diluted earnings per share increased to $0.24 for the three months ended November 2, 2024, compared to $0.17 for the same period last year, reflecting a growth of 41.2%[27]. Inventory and Cash Position - Cash and cash equivalents totaled $36.2 million at the end of the third quarter, down from $54.6 million at the same time last year[8]. - The company ended the third quarter with inventories of $637.0 million, compared to $601.5 million last year[9]. - Total current assets as of November 2, 2024, were $800.673 million, an increase of 2.0% from $799.809 million as of October 28, 2023[29]. - The company reported impairment charges of $17.756 million for the three months ended November 2, 2024, compared to no impairment charges in the same period last year[27]. Store Operations - The company closed three stores in the U.S. and opened two stores in Canada, resulting in a total of 496 stores in the U.S. and 179 stores in Canada as of November 2, 2024[11]. - The total number of stores increased to 675 as of November 2, 2024, from 643 stores as of October 28, 2023, indicating a growth in physical retail presence[24]. Sales by Segment - Direct-to-consumer sales for owned brands amounted to $130,753,000 for the three months ended November 2, 2024, compared to $154,201,000 for the same period last year, representing a decrease of 15.1%[22]. - The U.S. Retail segment experienced a comparable sales decline of 2.8% for the three months ended November 2, 2024, compared to a decline of 9.8% for the same period last year[24]. - The Canada Retail segment reported a comparable sales decline of 4.6% for the three months ended November 2, 2024, compared to a decline of 7.7% for the same period last year[24]. - Owned brands' total sales for the nine months ended November 2, 2024, were $611,634,000, compared to $611,634,000 for the same period last year, indicating stable performance[21]. Financial Outlook - The updated financial outlook for 2024 indicates net sales growth is now expected to be down low single digits, and adjusted diluted EPS is projected to be between $0.10 and $0.30[12]. - Adjusted operating profit for the three months ended November 2, 2024, was $43.590 million, compared to $31.402 million in the prior year, marking a significant increase of 38.7%[31]. Other Financial Metrics - Total liabilities increased to $1.758986 billion as of November 2, 2024, compared to $1.713724 billion as of October 28, 2023, indicating a rise of 2.6%[29]. - The company’s total assets as of November 2, 2024, were $2.080764 billion, a slight increase from $2.076232 billion as of October 28, 2023[29]. Future Considerations - Comparable sales for the Canada Retail segment will exclude the impact of foreign currency translation and will be calculated using the prior year's exchange rate[34]. - Stores from the Rubino acquisition that have been operational for at least 14 months will be included in the comparable base starting Q2 2025[34]. - E-commerce net sales from the Brand Portfolio segment will be included in the calculation of comparable sales[34].