Core Viewpoint - Rosen Law Firm is investigating potential securities claims on behalf of shareholders of Designer Brands Inc. due to allegations of materially misleading business information issued to the public [1]. Group 1: Investigation and Legal Action - Shareholders who purchased Designer Brands securities may be entitled to compensation through a class action lawsuit without any out-of-pocket fees [2]. - The Rosen Law Firm is preparing a class action to seek recovery of investor losses [2]. Group 2: Financial Performance and Market Reaction - Designer Brands reported a soft start to 2025, citing an unpredictable macro environment and deteriorating consumer sentiment, leading to the withdrawal of its 2025 guidance [3]. - Following the announcement of these financial results, Designer Brands' stock fell by 18.2% on June 10, 2025 [3]. Group 3: Rosen Law Firm's Credentials - The Rosen Law Firm has a strong track record in securities class actions, having achieved significant settlements and being recognized as a leader in the field [4]. - In 2019, the firm secured over $438 million for investors, and it has consistently ranked among the top firms for securities class action settlements since 2013 [4].

Core Viewpoint - Rosen Law Firm is investigating potential securities claims on behalf of shareholders of Designer Brands Inc. due to allegations of materially misleading business information issued by the company [1] Group 1: Company Performance - Designer Brands reported a soft start to 2025, citing an unpredictable macro environment and deteriorating consumer sentiment [3] - The company decided to withdraw its 2025 guidance amid persistent instability and pressure on consumer discretionary spending [3] - Following the announcement of these results, Designer Brands' stock fell by 18.2% on June 10, 2025 [3] Group 2: Legal Action - Shareholders who purchased Designer Brands securities may be entitled to compensation through a class action lawsuit without any out-of-pocket fees [2] - The Rosen Law Firm is preparing a class action to seek recovery of investor losses [2] - Interested investors can join the prospective class action by submitting a form or contacting the firm directly [2] Group 3: Rosen Law Firm's Credentials - Rosen Law Firm has a strong track record in securities class actions, having achieved the largest settlement against a Chinese company at the time [4] - The firm has been ranked in the top 4 for securities class action settlements since 2013 and recovered hundreds of millions of dollars for investors [4] - In 2019, the firm secured over $438 million for investors, showcasing its effectiveness in litigation [4]

Core Viewpoint - Designer Brands Inc. is under investigation for potential securities fraud and unlawful business practices following a significant drop in stock price after the company withdrew its 2025 guidance due to a challenging macroeconomic environment and declining consumer sentiment [1][3]. Financial Performance - On June 10, 2025, Designer Brands reported its financial results for Q1 2025 and announced the withdrawal of its 2025 guidance, attributing this decision to a "soft start to 2025" and "deteriorating consumer sentiment" [3]. - Following the announcement, Designer Brands' stock price decreased by $0.68 per share, representing an 18.23% decline, closing at $3.05 per share on the same day [3]. Legal Investigation - Pomerantz LLP is investigating claims on behalf of investors regarding potential securities fraud or other unlawful business practices by Designer Brands and its officers and/or directors [1].

Core Viewpoint - Designer Brands Inc. is under investigation for potential securities fraud and unlawful business practices following a significant drop in stock price after the withdrawal of its 2025 guidance due to a challenging macro environment and consumer sentiment [1][2]. Financial Performance - On June 10, 2025, Designer Brands reported a soft start to 2025 and announced the withdrawal of its 2025 guidance, attributing this decision to an unpredictable macro environment and deteriorating consumer sentiment [2]. - The company's stock price fell by $0.68 per share, or 18.23%, closing at $3.05 per share on the same day [2]. Legal Investigation - Pomerantz LLP is investigating claims on behalf of investors of Designer Brands regarding possible securities fraud or other unlawful business practices by the company and its officers and/or directors [1].

Group 1 - The investment strategy focuses on long-only investment, evaluating companies from an operational and buy-and-hold perspective, rather than market-driven dynamics [1] - The articles emphasize understanding the long-term earnings power of companies and the competitive dynamics within their industries [1] - The majority of recommendations will be holds, indicating a cautious approach to investment opportunities [1] Group 2 - A small fraction of companies are deemed suitable for a buy recommendation at any given time, highlighting a selective investment strategy [1] - Hold articles are intended to provide valuable information for future investors and introduce skepticism in a generally bullish market [1]

Group 1 - Designer Brands Inc. operates DSW and various owned and licensed shoe brands, positioning itself as a value player in the market [1] - The company has been attempting to balance between national labels and in-house labels, indicating a strategy to appeal to a broader customer base [1] Group 2 - The focus of the analysis is primarily on small- to mid-cap companies, which are often overlooked by investors, while also occasionally reviewing large-cap companies for a comprehensive market perspective [1]

[PART I. FINANCIAL INFORMATION](index=2&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) This part presents the company's unaudited financial statements, management's analysis, market risk disclosures, and evaluation of internal controls [Item 1. Financial Statements](index=4&type=section&id=Item%201%20Financial%20Statements) Presents the unaudited condensed consolidated financial statements for the three months ended May 3, 2025, and related notes [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Details the company's revenues, costs, and profitability, showing a shift from net income to a net loss year-over-year | Metric (in thousands, except per share) | May 3, 2025 | May 4, 2024 | Change (Amount) | Change (%) | | :-------------------------------------- | :---------- | :---------- | :-------------- | :--------- | | Net sales | $686,909 | $746,596 | $(59,687) | (8.0)% | | Gross profit | $295,126 | $330,011 | $(34,885) | (10.6)% | | Operating profit (loss) | $(7,262) | $9,382 | $(16,644) | NM | | Loss before income taxes | $(19,122) | $(2,322) | $(16,800) | 723.5% | | Net income (loss) attributable to DBI | $(17,424) | $783 | $(18,207) | NM | | Diluted earnings (loss) per share | $(0.36) | $0.01 | $(0.37) | NM | [Condensed Consolidated Statements of Comprehensive Loss](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) Outlines the net loss and the impact of foreign currency translation adjustments on comprehensive loss | Metric (in thousands) | May 3, 2025 | May 4, 2024 | | :-------------------- | :---------- | :---------- | | Net income (loss) | $(17,136) | $885 | | Foreign currency translation gain (loss) | $3,498 | $(903) | | Comprehensive loss | $(13,638) | $(18) | | Comprehensive loss attributable to Designer Brands Inc. | $(13,926) | $(120) | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Summarizes the company's assets, liabilities, and shareholders' equity at the end of the reporting period | Metric (in thousands) | May 3, 2025 | February 1, 2025 | May 4, 2024 | | :-------------------- | :---------- | :--------------- | :---------- | | Total current assets | $773,743 | $734,824 | $838,863 | | Total assets | $2,091,536 | $2,009,224 | $2,163,603 | | Total current liabilities | $607,915 | $590,351 | $649,535 | | Total liabilities | $1,821,023 | $1,727,449 | $1,801,741 | | Total shareholders' equity | $266,940 | $278,491 | $358,472 | [Condensed Consolidated Statements of Shareholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Equity) Details the changes in shareholders' equity resulting from net loss, dividends, and other transactions | Metric (in thousands) | Balance, Feb 1, 2025 | Net loss attributable to DBI | Stock-based compensation | Dividends ($0.05/share) | Foreign currency translation gain | Balance, May 3, 2025 | | :-------------------- | :------------------- | :--------------------------- | :----------------------- | :---------------------- | :-------------------------------- | :------------------- | | Total Shareholders' Equity | $278,491 | $(17,424) | $4,772 | $(2,397) | $3,498 | $266,940 | - The company declared a quarterly cash dividend of **$0.05 per share** for both Class A and Class B common shares, payable on June 18, 2025[46](index=46&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Reports the cash inflows and outflows from operating, investing, and financing activities during the period | Cash Flow Category (in thousands) | Three months ended May 3, 2025 | Three months ended May 4, 2024 | Change | | :-------------------------------- | :----------------------------- | :----------------------------- | :----- | | Net cash used in operating activities | $(20,366) | $(19,680) | $(686) | | Net cash used in investing activities | $(7,229) | $(28,203) | $20,974 | | Net cash provided by financing activities | $27,672 | $42,323 | $(14,651) | | Net increase (decrease) in cash and cash equivalents | $1,273 | $(5,739) | $7,012 | [Notes to the Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) Provides supplementary information and disclosures related to the company's financial statements [Note 1. Description of Business and Significant Accounting Policies](index=10&type=section&id=Note%201%20Description%20of%20Business%20and%20Significant%20Accounting%20Policies) - Designer Brands Inc. operates in three reportable segments: U.S. Retail (DSW), Canada Retail (The Shoe Co., DSW, Rubino), and Brand Portfolio (wholesale and direct-to-consumer for Vince Camuto, Keds, Topo)[21](index=21&type=chunk) - The company incurred severance costs of **$1.7 million** for the three months ended May 3, 2025, a decrease from $2.4 million in the prior year period[26](index=26&type=chunk) - The effective tax rate for Q1 2025 was **10.4%**, primarily due to state minimum tax expense on pre-tax loss and permanent non-deductible compensation[28](index=28&type=chunk) - The high rate in Q1 2024 (**138.1%**) was due to discrete tax benefits[28](index=28&type=chunk) - Impairment charges of **$2.953 million** were recorded in Q1 2025, including $1.0 million for underperforming Canadian stores and $2.0 million for an equity security, with no comparable charges in Q1 2024[30](index=30&type=chunk) | Metric | May 3, 2025 | May 4, 2024 | | :----- | :---------- | :---------- | | Effective Tax Rate | 10.4% | 138.1% | [Note 2. Acquisition](index=12&type=section&id=Note%202%20Acquisition) - On April 8, 2024, Designer Brands Inc. acquired Rubino Shoes Inc. for **$16.144 million in cash**, expanding its Canada Retail segment into Quebec[33](index=33&type=chunk) Rubino Acquisition - Fair Value of Assets and Liabilities Acquired (in thousands) | Category | Amount | | :-------------------------------- | :----- | | Inventories | $7,245 | | Operating lease assets | $9,334 | | Goodwill | $7,067 | | Intangible assets | $5,116 | | Other assets | $2,443 | | Accounts payable and other current liabilities | $(5,727) | | Operating lease liabilities | $(9,334) | | **Total** | **$16,144** | [Note 3. Revenue](index=12&type=section&id=Note%203%20Revenue) Net Sales Disaggregated by Product and Service Categories (in thousands) | Segment/Category | May 3, 2025 | May 4, 2024 | | :--------------- | :---------- | :---------- | | U.S. Retail segment: | | Non-athletic footwear | $367,932 | $403,838 | | Athletic footwear | $175,165 | $184,525 | | Accessories and other | $30,143 | $33,004 | | **Total U.S. Retail** | **$573,240**| **$621,367**| | Canada Retail segment: | | Non-athletic footwear | $29,679 | $31,062 | | Athletic footwear | $22,064 | $22,476 | | Accessories and other | $2,162 | $1,974 | | **Total Canada Retail** | **$53,905** | **$55,512** | | Brand Portfolio segment: | | Wholesale | $84,498 | $88,670 | | Direct-to consumer | $10,355 | $13,930 | | Other | $1,045 | $1,530 | | **Total Brand Portfolio** | **$95,898** | **$104,130**| | **Total Net Sales** | **$686,909**| **$746,596**| Deferred Revenue Liabilities (in thousands) | Category | May 3, 2025 (End of Period) | May 4, 2024 (End of Period) | | :------- | :-------------------------- | :-------------------------- | | Gift cards | $25,829 | $27,811 | | Reward programs | $13,894 | $14,948 | [Note 4. Related Party Transactions](index=14&type=section&id=Note%204%20Related%20Party%20Transactions) - The company leases certain store and office locations from Schottenstein Affiliates, incurring **$1.8 million in rent expense** for Q1 2025, down from $2.0 million in Q1 2024[37](index=37&type=chunk) - Designer Brands Inc. holds a **40.0% ownership interest** in ABG-Camuto, LLC and paid $4.8 million in royalty expense to ABG-Camuto for both Q1 2025 and Q1 2024[39](index=39&type=chunk) [Note 5. Earnings (Loss) Per Share](index=14&type=section&id=Note%205%20Earnings%20(Loss)%20Per%20Share) - **7.5 million** potentially dilutive stock-based compensation awards were excluded from diluted EPS calculation in Q1 2025 due to their anti-dilutive effect, compared to 2.8 million in Q1 2024[41](index=41&type=chunk) Weighted Average Shares Used in Per Share Calculations (in thousands) | Share Type | May 3, 2025 | May 4, 2024 | | :--------- | :---------- | :---------- | | Basic shares | 48,243 | 57,464 | | Diluted shares | 48,243 | 59,470 | [Note 6. Stock-Based Compensation](index=14&type=section&id=Note%206%20Stock-Based%20Compensation) Stock-Based Compensation Expense (in thousands) | Period | Amount | | :----- | :----- | | Three months ended May 3, 2025 | $6,103 | | Three months ended May 4, 2024 | $5,554 | Restricted Stock Units (RSU) Activity (in thousands) - Three months ended May 3, 2025 | Activity | Time-Based RSUs | Performance-Based RSUs | | :------- | :-------------- | :--------------------- | | Outstanding - beginning of period | 4,743 | 1,013 | | Granted | 6,036 | 856 | | Vested | (795) | (204) | | Forfeited| (242) | (497) | | Outstanding - end of period | 9,742 | 1,168 | [Note 7. Shareholders' Equity](index=15&type=section&id=Note%207%20Shareholders'%20Equity) - Class A common shares are listed on the NYSE (DBI), while Class B common shares, convertible to Class A, have no public market[44](index=44&type=chunk) - Class A holders get one vote per share, Class B holders get **eight votes per share**[44](index=44&type=chunk) Common Shares Information (in thousands) | Share Type | May 3, 2025 (Class A) | May 3, 2025 (Class B) | Feb 1, 2025 (Class A) | Feb 1, 2025 (Class B) | May 4, 2024 (Class A) | May 4, 2024 (Class B) | | :--------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Authorized shares | 250,000 | 100,000 | 250,000 | 100,000 | 250,000 | 100,000 | | Issued shares | 93,802 | 7,733 | 93,113 | 7,733 | 92,620 | 7,733 | | Outstanding shares | 40,900 | 7,733 | 40,211 | 7,733 | 50,060 | 7,733 | | Treasury shares | 52,902 | — | 52,902 | — | 42,560 | — | [Note 8. Receivables](index=15&type=section&id=Note%208%20Receivables) Receivables, net (in thousands) | Category | May 3, 2025 | February 1, 2025 | May 4, 2024 | | :------- | :---------- | :--------------- | :---------- | | Customer accounts receivables: | | With payment guarantee by third-party provider | $27,535 | $25,030 | $33,388 | | Without payment guarantee | $12,554 | $11,213 | $7,956 | | Income tax receivable | — | — | $44,990 | | Other receivables | $16,955 | $14,579 | $10,863 | | Total receivables | $57,044 | $50,822 | $97,197 | | Allowance for credit losses | $(885) | $(451) | $(485) | | **Receivables, net** | **$56,159** | **$50,371** | **$96,712** | [Note 9. Property and Leases](index=16&type=section&id=Note%209%20Property%20and%20Leases) - During Q1 2025, the company commenced operations of a new distribution center, resulting in an additional **$22.4 million operating lease** and **$31.8 million in finance leases** for equipment[48](index=48&type=chunk) Property and Equipment, net (in thousands) | Category | May 3, 2025 | February 1, 2025 | May 4, 2024 | | :------- | :---------- | :--------------- | :---------- | | Total property and equipment | $1,186,976 | $1,149,147 | $1,172,578 | | Accumulated depreciation and amortization | $(956,417) | $(940,948) | $(949,373) | | **Property and equipment, net** | **$230,559**| **$208,199** | **$223,205**| Lease Liabilities (in thousands) | Category | May 3, 2025 | February 1, 2025 | May 4, 2024 | | :------- | :---------- | :--------------- | :---------- | | Operating lease assets | $719,749 | $701,621 | $728,346 | | Finance lease assets | $31,182 | — | — | | Current operating lease liabilities | $158,171 | $159,924 | $161,050 | | Current finance lease liabilities | $2,923 | — | — | | Non-current operating lease liabilities | $650,438 | $635,076 | $657,625 | | Non-current finance lease liabilities | $28,859 | — | — | [Note 10. Accrued Expenses](index=17&type=section&id=Note%2010%20Accrued%20Expenses) Accrued Expenses (in thousands) | Category | May 3, 2025 | February 1, 2025 | May 4, 2024 | | :------- | :---------- | :--------------- | :---------- | | Gift cards | $25,829 | $28,963 | $27,811 | | Accrued compensation and related expenses | $26,263 | $16,969 | $36,645 | | Accrued taxes | $30,601 | $22,843 | $25,923 | | Customer returns and allowances | $19,973 | $18,053 | $21,521 | | Reward programs deferred revenue | $13,894 | $14,126 | $14,948 | | Current finance lease liabilities | $2,923 | — | — | | Other | $61,724 | $51,199 | $55,919 | | **Total Accrued Expenses** | **$181,207**| **$152,153** | **$182,767**| [Note 11. Debt](index=17&type=section&id=Note%2011%20Debt) - The ABL Revolver provides a revolving line of credit up to **$600.0 million**, maturing in March 2027[53](index=53&type=chunk)[86](index=86&type=chunk) - As of May 3, 2025, **$125.5 million was available** for borrowings[53](index=53&type=chunk)[86](index=86&type=chunk) - The Term Loan, entered into on June 23, 2023, matures in March 2027 or June 2028, with an outstanding balance of **$124.7 million** as of May 3, 2025[55](index=55&type=chunk)[87](index=87&type=chunk) - The company was in compliance with all financial covenants for both the ABL Revolver and Term Loan as of May 3, 2025[57](index=57&type=chunk)[88](index=88&type=chunk) Debt (in thousands) | Category | May 3, 2025 | February 1, 2025 | May 4, 2024 | | :------- | :---------- | :--------------- | :---------- | | ABL Revolver | $403,255 | $370,090 | $351,296 | | Term Loan | $124,687 | $126,375 | $131,437 | | **Total debt** | **$527,942**| **$496,465** | **$482,733**| [Note 12. Commitments and Contingencies](index=18&type=section&id=Note%2012%20Commitments%20and%20Contingencies) - The company is involved in various legal proceedings but believes any potential liability will not be material to its results of operations or financial condition[58](index=58&type=chunk) [Note 13. Segment Reporting](index=19&type=section&id=Note%2013%20Segment%20Reporting) - Designer Brands Inc. operates in three reportable segments: U.S. Retail, Canada Retail, and Brand Portfolio, with the CEO identified as the Chief Operating Decision Maker (CODM)[59](index=59&type=chunk) Segment Net Sales (in thousands) | Segment | May 3, 2025 | May 4, 2024 | | :------ | :---------- | :---------- | | U.S. Retail | $573,240 | $621,367 | | Canada Retail | $53,905 | $55,512 | | Brand Portfolio | $95,898 | $104,130 | | **Total Segment Net Sales** | **$723,043**| **$781,009**| Segment Operating Profit (in thousands) | Segment | May 3, 2025 | May 4, 2024 | | :------ | :---------- | :---------- | | U.S. Retail | $39,608 | $64,201 | | Canada Retail | $365 | $3,168 | | Brand Portfolio | $2,591 | $1,956 | | **Total Segment Operating Profit** | **$42,564** | **$69,325** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Provides management's analysis of financial performance, liquidity, and operational results for the first quarter of 2025 [Executive Overview and Trends in Our Business](index=21&type=section&id=Executive%20Overview%20and%20Trends%20in%20Our%20Business) - For Q1 2025, net sales decreased by **8.0%** and total comparable sales decreased by **7.8%** compared to the same period last year[63](index=63&type=chunk) - Gross profit as a percentage of net sales was **43.0%** in Q1 2025, a **120 basis point decrease** from 44.2% in Q1 2024, with margin rates down across all segments[63](index=63&type=chunk) [Effects of Macroeconomic Conditions and Tariffs](index=21&type=section&id=Effects%20of%20Macroeconomic%20Conditions%20and%20Tariffs) - Macroeconomic conditions negatively impacted operating results and liquidity in Q1 2025, leading to **decreased consumer discretionary spending**[64](index=64&type=chunk) - The company is implementing mitigating actions such as inventory alignment, expense reductions, and accelerating sourcing diversification efforts to counter these impacts[64](index=64&type=chunk)[65](index=65&type=chunk) - New and paused tariffs, particularly on goods from Asia, introduce uncertainty, prompting the Brand Portfolio segment to accelerate sourcing diversification[65](index=65&type=chunk) [Financial Summary and Other Key Metrics](index=21&type=section&id=Financial%20Summary%20and%20Other%20Key%20Metrics) - Q1 2025 net loss included **$4.9 million ($0.10 per diluted share)** in net after-tax charges, primarily from restructuring, integration, and impairment costs, compared to $4.0 million ($0.07 per diluted share) in Q1 2024[67](index=67&type=chunk) Key Financial Metrics (in millions, except per share) | Metric | May 3, 2025 | May 4, 2024 | | :----- | :---------- | :---------- | | Net sales | $686.9 | $746.6 | | Gross profit as % of net sales | 43.0% | 44.2% | | Net loss (income) attributable to DBI | $(17.4) | $0.8 | | Diluted EPS | $(0.36) | $0.01 | Change in Comparable Sales (%) | Segment | May 3, 2025 | May 4, 2024 | | :------ | :---------- | :---------- | | U.S. Retail segment | (7.3)% | (2.3)% | | Canada Retail segment | (9.2)% | (4.9)% | | Brand Portfolio segment - direct-to-consumer channel | (27.0)% | (1.7)% | | **Total** | **(7.8)%** | **(2.5)%** | Number of Stores | Segment | May 3, 2025 | May 4, 2024 | | :------ | :---------- | :---------- | | U.S. Retail segment - DSW stores | 494 | 500 | | Canada Retail segment: | | The Shoe Co. stores | 121 | 122 | | Rubino stores | 28 | 28 | | DSW stores | 26 | 25 | | **Total number of stores** | **669** | **675** | [Results of Operations](index=23&type=section&id=Results%20of%20Operations) [Net Sales](index=24&type=section&id=Net%20Sales) - U.S. Retail net sales decreased primarily due to a **7.3% decline in comparable sales**, driven by a 10% decrease in comparable transactions[72](index=72&type=chunk) - Canada Retail net sales decreased due to a **9.2% decline in comparable sales** and a $2.2 million unfavorable foreign currency impact, partially offset by the Rubino acquisition[72](index=72&type=chunk) - Brand Portfolio net sales decreased due to lower wholesale activity (**$4.2 million**) and reduced direct-to-consumer sales[72](index=72&type=chunk) Segment Net Sales (in thousands) | Segment | May 3, 2025 | May 4, 2024 | Change (Amount) | Change (%) | Comparable Sales Change (%) | | :------ | :---------- | :---------- | :-------------- | :--------- | :-------------------------- | | U.S. Retail | $573,240 | $621,367 | $(48,127) | (7.7)% | (7.3)% | | Canada Retail | $53,905 | $55,512 | $(1,607) | (2.9)% | (9.2)% | | Brand Portfolio | $95,898 | $104,130 | $(8,232) | (7.9)% | (27.0)% | | **Total Segment Net Sales** | **$723,043**| **$781,009**| **$(57,966)** | **(7.4)%** | **(7.8)%** | | Consolidated Net Sales | $686,909 | $746,596 | $(59,687) | (8.0)% | | [Gross Profit](index=24&type=section&id=Gross%20Profit) - U.S. Retail gross profit decreased due to lower net sales and reduced margin rates, influenced by product mix changes and increased promotional activity[73](index=73&type=chunk) - Canada Retail gross profit decreased as declines in legacy banners offset Rubino's contribution, with margin rates lowered by Rubino's lower margins[73](index=73&type=chunk) - Brand Portfolio gross profit decreased due to lower net sales and higher freight costs from supply chain rerouting[73](index=73&type=chunk)[74](index=74&type=chunk) Segment Gross Profit (in thousands) | Segment | May 3, 2025 (Amount) | May 3, 2025 (% of Segment Net Sales) | May 4, 2024 (Amount) | May 4, 2024 (% of Segment Net Sales) | Change (Amount) | Change (%) | Basis Points Change | | :------ | :------------------- | :----------------------------------- | :------------------- | :----------------------------------- | :-------------- | :--------- | :------------------ | | U.S. Retail | $242,796 | 42.4% | $274,408 | 44.2% | $(31,612) | (11.5)% | (180) | | Canada Retail | $25,404 | 47.1% | $26,374 | 47.5% | $(970) | (3.7)% | (40) | | Brand Portfolio | $26,671 | 27.8% | $33,477 | 32.1% | $(6,806) | (20.3)% | (430) | | **Total Segment Gross Profit** | **$294,871** | **40.8%** | **$334,259** | **42.8%** | **$(39,388)** | **(11.8)%**| **(200)** | | Consolidated Gross Profit | $295,126 | 43.0% | $330,011 | 44.2% | $(34,885) | (10.6)% | (120) | [Operating Expenses](index=25&type=section&id=Operating%20Expenses) - U.S. Retail operating expenses decreased due to lower store selling and marketing expenses, but increased as a percentage of net sales due to deleverage[76](index=76&type=chunk) - Canada Retail operating expenses increased primarily due to the Rubino acquisition, leading to an increase as a percentage of net sales[76](index=76&type=chunk) - Brand Portfolio operating expenses decreased due to lower marketing and personnel overhead costs, resulting in a decrease as a percentage of net sales[76](index=76&type=chunk) Segment Operating Expenses (in thousands) | Segment | May 3, 2025 (Amount) | May 3, 2025 (% of Segment Net Sales) | May 4, 2024 (Amount) | May 4, 2024 (% of Segment Net Sales) | Change (Amount) | Change (%) | Basis Points Change | | :------ | :------------------- | :----------------------------------- | :------------------- | :----------------------------------- | :-------------- | :--------- | :------------------ | | U.S. Retail | $203,188 | 35.4% | $210,207 | 33.8% | $(7,019) | (3.3)% | 160 | | Canada Retail | $25,039 | 46.5% | $23,206 | 41.8% | $1,833 | 7.9% | 470 | | Brand Portfolio | $26,507 | 27.6% | $34,385 | 33.0% | $(7,878) | (22.9)% | (540) | | Corporate | $47,128 | | $55,695 | | $(8,567) | (15.4)% | | | **Consolidated Operating Expenses** | **$301,862** | **43.9%** | **$323,493** | **43.3%** | **$(21,631)** | **(6.7)%** | **60** | [Impairment Charges](index=25&type=section&id=Impairment%20Charges) - The company recorded **$1.0 million** in impairment charges for underperforming Canadian stores and a **$2.0 million** impairment for an equity security in Q1 2025[77](index=77&type=chunk) [Operating Profit](index=26&type=section&id=Operating%20Profit) - Consolidated operating profit shifted to a loss of **$7.262 million** in Q1 2025 from a profit of $9.382 million in Q1 2024[79](index=79&type=chunk) Segment Operating Profit (in thousands) | Segment | May 3, 2025 (Amount) | May 3, 2025 (% of Segment Net Sales) | May 4, 2024 (Amount) | May 4, 2024 (% of Segment Net Sales) | Change (Amount) | Change (%) | Basis Points Change | | :------ | :------------------- | :----------------------------------- | :------------------- | :----------------------------------- | :-------------- | :--------- | :------------------ | | U.S. Retail | $39,608 | 6.9% | $64,201 | 10.3% | $(24,593) | (38.3)% | (340) | | Canada Retail | $365 | 0.7% | $3,168 | 5.7% | $(2,803) | (88.5)% | (500) | | Brand Portfolio | $2,591 | 2.7% | $1,956 | 1.9% | $635 | 32.5% | 80 | | **Total Segment Operating Profit** | **$42,564** | **5.9%** | **$69,325** | **8.9%** | **$(26,761)** | **(38.6)%**| **(300)** | | Consolidated Operating Profit (Loss) | $(7,262) | (1.1)% | $9,382 | 1.3% | $(16,644) | NM | NM | [Income Taxes](index=26&type=section&id=Income%20Taxes) - The effective tax rate for Q1 2025 was **10.4%**, primarily due to state minimum tax expense on quarterly pre-tax loss and permanent non-deductible compensation[80](index=80&type=chunk) | Metric | May 3, 2025 | May 4, 2024 | | :----- | :---------- | :---------- | | Effective Tax Rate | 10.4% | 138.1% | [Liquidity and Capital Resources](index=26&type=section&id=Liquidity%20and%20Capital%20Resources) - The company believes its cash from operations and ABL Revolver availability are sufficient to cover requirements for the next 12 months[81](index=81&type=chunk) - Net cash used in operating activities slightly increased due to net loss, partially offset by improved working capital management[83](index=83&type=chunk) - Net cash used in investing activities decreased significantly due to reduced capital expenditures (**$8.7 million**) and the absence of a large acquisition[84](index=84&type=chunk) - Net cash provided by financing activities decreased, primarily due to lower net receipts from the ABL Revolver[85](index=85&type=chunk) - The ABL Revolver had **$125.5 million available** for borrowings as of May 3, 2025, and the Term Loan had an outstanding balance of **$124.7 million**[86](index=86&type=chunk)[87](index=87&type=chunk) - The company expects to spend approximately **$35.0 million to $45.0 million** on capitalized costs in 2025[90](index=90&type=chunk) Condensed Consolidated Statements of Cash Flows - Key Categories (in thousands) | Cash Flow Category | May 3, 2025 | May 4, 2024 | Change | | :----------------- | :---------- | :---------- | :----- | | Net cash used in operating activities | $(20,366) | $(19,680) | $(686) | | Net cash used in investing activities | $(7,229) | $(28,203) | $20,974 | | Net cash provided by financing activities | $27,672 | $42,323 | $(14,651) | | Net increase (decrease) in cash and cash equivalents | $1,273 | $(5,739) | $7,012 | [Recent Accounting Pronouncements](index=28&type=section&id=Recent%20Accounting%20Pronouncements) - The company is evaluating the impact of ASU 2024-03, 'Income Statement Expense Disaggregation Disclosures,' effective for its 2027 Annual Report[31](index=31&type=chunk)[91](index=91&type=chunk) [Critical Accounting Policies and Estimates](index=28&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - Management makes significant estimates for financial statements, including customer returns, inventory valuation, depreciation, impairments, leases, and income taxes[25](index=25&type=chunk)[92](index=92&type=chunk) - The company does not believe it is more likely than not that goodwill or indefinite-lived tradenames are impaired as of May 3, 2025[93](index=93&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=29&type=section&id=Item%203%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Discloses the company's primary market risk exposures related to interest rates and foreign currency exchange rates - The company's market risk exposure is related to interest rates and foreign currency exchange rates[94](index=94&type=chunk) - No material changes in primary risk exposures or management of market risks have occurred since the 2024 Form 10-K[94](index=94&type=chunk) [Item 4. Controls and Procedures](index=29&type=section&id=Item%204%20Controls%20and%20Procedures) Confirms the effectiveness of disclosure controls and procedures and notes no material changes in internal controls [Evaluation of Disclosure Controls and Procedures](index=29&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) - The CEO and CFO concluded that the company's disclosure controls and procedures were **effective** as of May 3, 2025[95](index=95&type=chunk) [Changes in Internal Control Over Financial Reporting](index=29&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) - **No material changes** in internal control over financial reporting occurred during the last fiscal quarter[96](index=96&type=chunk) [PART II. OTHER INFORMATION](index=29&type=section&id=PART%20II%20OTHER%20INFORMATION) This part covers legal proceedings, risk factors, share repurchases, and other required disclosures [Item 1. Legal Proceedings](index=29&type=section&id=Item%201%20Legal%20Proceedings) States that potential liabilities from various legal proceedings are not expected to be material - The company is involved in various legal proceedings but believes any potential liability will not be material to its results of operations or financial condition[58](index=58&type=chunk)[98](index=98&type=chunk) [Item 1A. Risk Factors](index=29&type=section&id=Item%201A%20Risk%20Factors) Updates risk factors, highlighting the potential adverse effects of recent changes to U.S. trade policy and tariffs - No material changes to risk factors were noted, except for the impact of recently announced changes to **U.S. trade policy and tariffs**[99](index=99&type=chunk)[100](index=100&type=chunk) - New and paused tariffs, particularly on imports from Asia, introduce significant uncertainty and could **materially adversely affect the business**[100](index=100&type=chunk) - The company is monitoring the situation and evaluating actions such as cost mitigation and sourcing diversification to reduce risk[100](index=100&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=31&type=section&id=Item%202%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Details the company's share repurchase program, dividend declarations, and related debt covenant restrictions [Share Repurchase Program](index=31&type=section&id=Share%20Repurchase%20Program) - As of May 3, 2025, **$19.7 million** of Class A common shares remained authorized for repurchase under the company's share repurchase program[101](index=101&type=chunk) - **No Class A common shares were repurchased** during the three months ended May 3, 2025[101](index=101&type=chunk) [Dividends](index=31&type=section&id=Dividends) - On May 15, 2025, the Board declared a quarterly cash dividend of **$0.05 per share** for both Class A and Class B common shares, payable on June 18, 2025[102](index=102&type=chunk) [Restrictions](index=31&type=section&id=Restrictions) - The ABL Revolver and Term Loan contain covenants that restrict the company's ability to pay dividends or repurchase stock[103](index=103&type=chunk) [Item 3. Defaults Upon Senior Securities](index=31&type=section&id=Item%203%20Defaults%20Upon%20Senior%20Securities) Reports that there were no defaults upon senior securities during the period - No defaults upon senior securities were reported[104](index=104&type=chunk) [Item 4. Mine Safety Disclosures](index=31&type=section&id=Item%204%20Mine%20Safety%20Disclosures) States that this disclosure requirement is not applicable to the company - This item is not applicable[105](index=105&type=chunk) [Item 5. Other Information](index=31&type=section&id=Item%205%20Other%20Information) Confirms no directors or officers adopted or terminated Rule 10b5-1 trading plans during the quarter - No directors or executive officers adopted or terminated any Rule 10b5-1 trading plans or non-Rule 10b5-1 trading arrangements during the three months ended May 3, 2025[106](index=106&type=chunk) [Item 6. Exhibits](index=32&type=section&id=Item%206%20Exhibits) Lists the exhibits filed with the Form 10-Q, including officer certifications and iXBRL data - Exhibits include Rule 13a-14(a)/15d-14(a) Certifications, Section 1350 Certifications, and iXBRL formatted financial statements[107](index=107&type=chunk) [SIGNATURE](index=33&type=section&id=SIGNATURE) Indicates the report's formal authorization by the company's Chief Financial Officer - The report was signed by Jared A. Poff, Executive Vice President, Chief Financial Officer and Chief Administrative Officer, on June 10, 2025[111](index=111&type=chunk)

Core Insights - Designer Brands (DBI) reported a quarterly loss of $0.26 per share, significantly missing the Zacks Consensus Estimate of $0.01, marking an earnings surprise of -2,700% [1] - The company generated revenues of $686.91 million for the quarter ended April 2025, falling short of the Zacks Consensus Estimate by 6.67% and down from $746.6 million year-over-year [2] - Designer Brands has underperformed the market, with shares down approximately 30.2% year-to-date compared to the S&P 500's gain of 2.1% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.36 on revenues of $796.9 million, while for the current fiscal year, the estimate is $0.40 on revenues of $3.07 billion [7] - The estimate revisions trend for Designer Brands is mixed, resulting in a Zacks Rank 3 (Hold), indicating expected performance in line with the market [6] Industry Context - The Retail - Apparel and Shoes industry, to which Designer Brands belongs, is currently ranked in the bottom 35% of over 250 Zacks industries, suggesting potential challenges ahead [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact Designer Brands' stock performance [5]

Financial Data and Key Metrics Changes - For the first quarter of fiscal 2025, net sales were $687 million, down 8% year-over-year, with comparable sales down 7.8% [28] - Consolidated gross margin decreased by nearly 120 basis points to 43%, primarily due to increased markdowns [30] - Adjusted operating income was essentially breakeven compared to $14.7 million last year, with an adjusted net loss of $12.5 million versus a gain of $4.8 million last year [32] Business Line Data and Key Metrics Changes - U.S. Retail segment sales were down 7.7%, with comparable sales down 7.3%, affected by lower traffic [28][9] - Canadian Retail segment sales declined 2.9%, with comparable sales down 9.2%, reflecting similar consumer sentiment challenges as in the U.S. [10][28] - Brand Portfolio segment sales were down 7.9%, but operating income grew by over 30% due to expense efficiency measures [30][12] Market Data and Key Metrics Changes - The first quarter saw a decline in consumer sentiment, with February being the weakest month due to unfavorable weather [6] - DSW gained 10 basis points in athleisure footwear market share during Q1, indicating some market resilience [16] Company Strategy and Development Direction - The company is focusing on enhancing customer value, optimizing product assortments, and diversifying sourcing strategies to mitigate tariff impacts [20][21] - Plans to reestablish private label brands as margin drivers and invest in growth brands like Topo and Keds are ongoing [20][22] - The company is adapting to a volatile environment by implementing cost-cutting measures expected to save $20 million to $30 million in 2025 [8][31] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the current macroeconomic challenges while acknowledging increased uncertainty in consumer behavior [6][25] - The decision to withdraw forward-looking guidance was made due to the unpredictable environment and cautious consumer sentiment [25][34] Other Important Information - The company ended the quarter with total inventories up 0.5% year-over-year, maintaining flexibility to respond to demand [33] - Total debt outstanding was $522.9 million, with total liquidity at $171.5 million [33] Q&A Session Summary Question: Can you elaborate on the $20 million to $30 million in savings related to SG&A? - Management explained that the savings are due to a lack of bonus accrual this year and additional cuts implemented, resulting in a projected reduction in SG&A for the full year [36][38] Question: What are the expectations for the Canadian and brand portfolio performance? - Management noted that Canadian consumer sentiment mirrors that of the U.S., with Topo performing exceptionally well, growing 84% in the quarter [39][43] Question: What trends are observed in Q2 and the impact of tariffs? - Management indicated that Q2 trends are similar to Q1, with ongoing concerns about the indirect impact of tariffs on consumer sentiment [47][48] Question: How is the company planning for back-to-school and holiday inventory? - Management expressed cautious optimism for back-to-school, highlighting strong inventory management and a diversified sourcing strategy [58][60]

Financial Data and Key Metrics Changes - For the first quarter of fiscal 2025, net sales were $687 million, down 8% year-over-year, with comparable sales down 7.8% [26] - Consolidated gross margin decreased by nearly 120 basis points to 43%, primarily due to increased markdowns [28] - Adjusted operating income was essentially breakeven compared to $14.7 million last year, with an adjusted net loss of $12.5 million versus a gain of $4.8 million last year [30] Business Line Data and Key Metrics Changes - U.S. Retail segment sales were down 7.7%, with comparable sales down 7.3%, affected by lower traffic [26] - Canadian Retail segment sales declined 2.9%, with comparable sales down 9.2%, reflecting similar consumer sentiment challenges as in the U.S. [27] - Brand Portfolio segment sales were down 7.9%, but operating income grew by over 30% due to expense efficiency measures [28] Market Data and Key Metrics Changes - The first quarter saw a decline in consumer sentiment, with February being the weakest month due to unfavorable weather [5] - DSW gained 10 basis points in athleisure footwear market share during Q1, indicating some market resilience [14] Company Strategy and Development Direction - The company is focusing on enhancing customer value, optimizing product assortments, and diversifying sourcing strategies to mitigate tariff impacts [11][18] - Plans include scaling private label offerings and investing in strategic brands like Topo and Keds to drive growth [10][20] - The company has withdrawn its forward-looking guidance due to the volatile macro environment and consumer sentiment [23][32] Management's Comments on Operating Environment and Future Outlook - Management acknowledged increased uncertainty in consumer behavior and a softer start to the year, leading to a decline in comparable sales [5][25] - The company is committed to disciplined execution and adapting to the current environment while focusing on long-term value creation [24][32] Other Important Information - The company is implementing expense cuts expected to deliver $20 million to $30 million in savings for fiscal 2025 [6][29] - Inventory levels were up 0.5% year-over-year, with a focus on delivering products ahead of tariff increases [31] Q&A Session Summary Question: Can you speak to the relationship between the $20 million to $30 million in savings and the anticipated increase in SG&A? - Management explained that the absence of a bonus accrual this year provided about $10 million in favorability in expenses for Q1, but a headwind of approximately $10 million is expected in Q3 due to last year's bonus reversal [35][36] Question: Can you elaborate on the performance in Canada and the brand portfolio? - Management noted that Canadian consumer sentiment mirrors that of the U.S., with Topo performing strongly, growing 84% in the quarter, while Keds faced some headwinds [38][40] Question: What are the expectations for Q2 and the impact of tariffs? - Management indicated that trends in Q2 are similar to Q1, with concerns about indirect impacts of tariffs on consumer sentiment [45][46] Question: How is the company planning for back-to-school and holiday inventory? - Management expressed cautious optimism for back-to-school, highlighting strong past performance and effective inventory management [55][57] Question: How is the company navigating tariff mitigation strategies? - Management confirmed ongoing efforts to diversify sourcing outside of China and manage pricing increases in collaboration with brand partners [61][62]