Designer Brands(DBI)2023-03-15 16:00Business Segments and Operations - Designer Brands Inc. operates in three reportable segments: U.S. Retail, Canada Retail, and Brand Portfolio, with the U.S. Retail segment generating revenue through DSW stores and e-commerce, and the Brand Portfolio segment earning revenue from wholesale and direct-to-consumer sales[13] - The company operates three reportable segments: U.S. Retail, Canada Retail, and Brand Portfolio, with e-commerce platforms supporting omni-channel capabilities[13][16] - The company's e-commerce platforms, including www.dsw.com and www.dsw.ca, offer omni-channel capabilities such as Buy Online Pick Up in Store and Curbside Pickup[16] - The company's inventory management strategy focuses on meeting consumer demand while improving efficiency through enhanced systems and processes[22] - The company sources products from third-party manufacturers in China and Brazil, with inventory shipped directly from factories to the East Coast Logistics Center for distribution[26] - The company sources products from third-party manufacturers in China and Brazil, with strict quality and compliance standards[26][27] - The company's fiscal year 2023 includes an additional week, resulting in a 53-week fiscal year[14] Owned Brands and Growth Strategy - The company aims to double net sales from Owned Brands by 2026, targeting approximately one-third of total net sales from Owned Brands, while maintaining national brand sales[17] - Company aims to double net sales from Owned Brands by 2026, targeting one-third of total net sales from Owned Brands[71] - Owned Brands accounted for 8% of total merchandise purchases in 2022, with a long-term goal to reach approximately one-third of total net sales by 2026[18][17] - The top three national brand vendors contributed 22% of total merchandise purchases in 2022[18] - In 2022, 8% of purchases were from Owned Brands, while the top three national brand vendors accounted for 22% of purchases[18] Loyalty Programs and Customer Engagement - In 2022, 89% of retail segments' net sales were generated from VIP loyalty program members, with 32.1 million members enrolled, up from 28.2 million in 2021[20] - The company's VIP rewards programs drive higher-than-average customer spend, with loyalty members accounting for 89% of retail segments' net sales in 2022[19] - Loyalty programs generated 89% of combined U.S. and Canada Retail segments' net sales in 2022, with over 32 million members enrolled as of January 28, 2023[81] - The company's VIP loyalty program had 32.1 million members at the end of fiscal year 2022, generating 89% of retail segments' net sales[20] - Company relies on customer loyalty programs and marketing to drive traffic, with loyalty members contributing significantly to sales[81] - Company relies on customer loyalty programs and marketing to drive traffic, with loyalty members accounting for 89% of U.S. and Canada Retail net sales in 2022[81] Acquisitions and Investments - Designer Brands acquired a 33.3% ownership interest in Le Tigre for 19.1 million on December 13, 2022[29] - The company acquired the Keds business for 2.0 million in 2022 to advance DE&I through a partnership with Pensole and JEMS by Pensole, the first Black-owned footwear factory in the U.S.[46] - The company's associates collected and donated over 74,000 meals during the 2022 holiday season to address food insecurity[43] - The company's associates collected and packed over 74,000 meals during the 2022 holiday season to address food insecurity[43] - Corporate social responsibility (CSR) and sustainability initiatives are critical to brand value, with risks including increased costs and regulatory pressures[84] - Climate change-related regulations and extreme weather events could increase costs and disrupt supply chains, impacting business operations[98] - Climate change-related regulations and extreme weather events could impact supply chains, facilities, and consumer buying patterns[98] Workforce and Employee Benefits - As of January 28, 2023, the company employed approximately 14,000 people worldwide, with 12,000 in the U.S.[34] - As of January 28, 2023, 79% of U.S. associates self-identified as female, and 55% self-identified as people of color[45] - Nearly 79% of U.S. associates self-identified as female, and over 55% as people of color as of January 28, 2023[45] - The company provided up to 4,000 per year for medical access travel benefits for eligible associates in 2022[40] - In 2022, 11,500 associates completed approximately 100,000 learning experiences through the company's online learning platform[41] Competition and Market Risks - Footwear market competition is intense, with competitors influencing pricing, promotions, and marketing strategies[86] - E-commerce competition has increased due to improved user experience, low shipping fees, faster delivery, and favorable return policies, with suppliers launching their own platforms to compete directly[87] - E-commerce competition has intensified due to improved user experience, low shipping fees, faster delivery, and favorable return policies, with suppliers launching their own platforms to compete directly[87] - The company's trademarks and service marks, including DSW and Vince Camuto, are critical to its brand recognition and value[51] - Licensing agreements for key Owned Brands require minimum royalty payments, and failure to meet sales targets could result in additional costs[83] - Licensing agreements for key Owned Brands (e.g., Vince Camuto, Jessica Simpson) require minimum royalty payments, and failure to meet sales targets could result in termination or additional costs[83] International Operations and Trade Risks - International operations in China, Canada, and Brazil are subject to political, economic, and regulatory risks, including currency fluctuations and compliance challenges[90] - International operations in China, Canada, and Brazil are subject to political, economic, and regulatory risks, including currency fluctuations and tax law changes[90] - The company's business is subject to complex trade and customs laws, including tariffs and import restrictions, which could adversely affect operations[50] - The company faces risks from international trade, including COVID-19, political instability, shipping cost increases, and compliance with foreign laws, which could disrupt operations and increase costs[88] Corporate Governance and Shareholder Influence - The Schottenstein Affiliates control approximately 58% of the company's voting power, potentially influencing shareholder decisions and corporate governance[103] - ABL Revolver restricts certain financial activities, including asset sales, acquisitions, and stock repurchases, with a fixed charge coverage ratio covenant[85] - ABL Revolver credit facility has restrictions, including a fixed charge coverage ratio covenant of not less than 1:1 when availability is below $47.3 million or 10% of the maximum credit amount[85]