Designer Brands(DBI) - 2025 Q1 - Quarterly Report

Financial Performance - Net sales for the quarter ended May 4, 2024, were $746.6 million, compared to$742.1 million in the same period last year[12] - Gross profit increased to $245.1 million from$237.7 million year-over-year, reflecting improved margins[12] - Operating profit decreased to $9.4 million from$19.6 million in the prior year, primarily due to higher operating expenses[12] - Net income attributable to Designer Brands Inc. was $0.8 million, down significantly from$11.4 million in the previous year[12] - Comprehensive income (loss) attributable to Designer Brands Inc. was a loss of $0.1 million, compared to a gain of$10.6 million in the prior year[14] - Basic earnings per share were $0.01, down from$0.18 in the same period last year[12] - Net income attributable to Designer Brands Inc. for the three months ended May 4, 2024 was $783 thousand, compared to$11.415 million for the same period in 2023[17] - Net sales increased by 0.6% to $746.6 million in Q1 2024 compared to$742.1 million in Q1 2023[74] - Gross profit as a percentage of net sales improved to 32.8% in Q1 2024 from 32.0% in Q1 2023[74] - Comparable sales decreased by 2.5% in Q1 2024, with U.S. Retail segment down 2.3%, Canada Retail segment down 4.9%, and Brand Portfolio segment down 1.7%[74] - Net income attributable to Designer Brands Inc. was $0.8 million in Q1 2024, compared to$11.4 million in Q1 2023[74] - Gross profit increased by 3.1% to $245.1 million in Q1 2024, driven by improvements in product costing and reduced closeout sales[71] - Operating expenses increased by 8.4$238.6 million in Q1 2024, primarily due to higher costs associated with restructuring and integration[77] - Consolidated gross profit increased by $7.330 million (3.1$245.069 million, representing 32.8% of net sales, compared to 32.0% in the same period last year[80] - Operating expenses increased by $18.4 million, primarily due to higher incentive compensation, marketing expenses, and store selling expenses, with operating expenses as a percentage of net sales increasing by 240 basis points[83] - Net sales for the quarter ended May 4, 2024, were$746.6 million, compared to $742.1 million in the same period last year[12] - Gross profit increased to$245.1 million from $237.7 million year-over-year[12] - Operating expenses rose to$238.6 million from $220.1 million, impacting operating profit which decreased to$9.4 million from $19.6 million[12] - Net income attributable to Designer Brands Inc. was$783 thousand, down significantly from $11.4 million in the prior year[12] - Basic and diluted earnings per share were$0.01, compared to $0.18 and$0.17 respectively in the previous year[12] - Comprehensive income (loss) attributable to Designer Brands Inc. was a loss of $120 thousand, compared to a gain of$10.6 million in the prior year[14] - Net income attributable to Designer Brands Inc. for the three months ended May 4, 2024 was $783 thousand, compared to$11.415 million for the same period in 2023[17] - Net sales increased to $746.6 million from$742.1 million for the same period last year, representing a 0.6% growth[74] - Gross profit as a percentage of net sales was 32.8% compared to 32.0% for the same period last year[74] - Comparable sales decreased by 2.5% overall, with U.S. Retail segment down 2.3%, Canada Retail segment down 4.9%, and Brand Portfolio segment down 1.7%[74] - Net income attributable to Designer Brands Inc. was $0.8 million, or$0.01 per diluted share, compared to $11.4 million, or$0.17 per diluted share, in the same period last year[74] - Gross profit increased by 3.1% to $245.1 million, primarily due to improvements in product costing and reduced closeout sales[71] - Operating expenses increased by 8.4$238.6 million, driven by higher costs related to restructuring and integration[77] - Consolidated gross profit increased by $7.330 million (3.1$245.069 million, representing 32.8% of net sales, compared to $237.739 million (32.0$18.4 million, primarily due to higher incentive compensation, increased marketing expenses, and higher store selling expenses, resulting in a 240 basis points increase as a percentage of net sales[83] Balance Sheet and Liquidity - Total assets as of May 4, 2024, stood at $2.16 billion, up from$2.08 billion at the end of the previous quarter[16] - Inventories increased to $620.5 million from$571.3 million at the end of the previous quarter, reflecting higher stock levels[16] - Long-term debt rose to $469.3 million, up from$420.3 million at the end of the previous quarter[16] - Total shareholders' equity decreased to $358.5 million from$359.2 million at the end of the previous quarter[16] - Total shareholders' equity decreased from $359.220 million as of February 3, 2024 to$358.472 million as of May 4, 2024[17] - Cash and cash equivalents decreased from $49.173 million at the beginning of the period to$43.434 million at the end of the period on May 4, 2024[19] - Total assets increased to $2.16 billion as of May 4, 2024, from$2.08 billion at the end of the previous fiscal year[16] - Inventories grew to $620.5 million from$571.3 million, reflecting a potential increase in stock levels[16] - Long-term debt increased to $469.3 million from$420.3 million, indicating higher leverage[16] - Cash and cash equivalents decreased to $43.4 million from$49.2 million, showing a reduction in liquidity[16] - Total shareholders' equity decreased from $359.220 million as of February 3, 2024 to$358.472 million as of May 4, 2024[17] - Cash and cash equivalents decreased from $49.173 million at the beginning of the period to$43.434 million at the end of the period on May 4, 2024[19] Cash Flow - Net cash used in operating activities was $19.680 million for the three months ended May 4, 2024, compared to net cash provided by operating activities of$22.546 million for the same period in 2023[19] - Cash paid for business acquisitions was $16.674 million for the three months ended May 4, 2024, compared to$109.553 million for the same period in 2023[19] - Net cash used in operating activities was $19.680 million, compared to net cash provided by operations of$22.546 million in the same period last year[89] - Net cash used in investing activities was $28.203 million, primarily due to the acquisition of Rubino and capital expenditures of$15.9 million[91] - Net cash provided by financing activities was $42.323 million, primarily due to net receipts of$50.2 million from the ABL Revolver[92] - Net cash used in operating activities was $19.680 million, compared to net cash provided by operations of$22.546 million in the same period last year, primarily due to higher working capital investments[89] - Net cash used in investing activities was $28.203 million, primarily due to the acquisition of Rubino and capital expenditures of$15.9 million[91] - Net cash provided by financing activities was $42.323 million, primarily due to net receipts of$50.2 million from the ABL Revolver, partially offset by payments for taxes and dividends[92] Acquisitions and Investments - The company completed the acquisition of Rubino Shoes Inc. on April 8, 2024, expanding its Canada Retail segment into Quebec[24] - The company acquired Keds for a final purchase price of $118.4 million, including$127.3 million in cash consideration and an $8.9 million adjustment for contingent consideration[35] - The fair value of intangible assets acquired in the Keds acquisition includes$46.9 million for an indefinite-lived tradename and $6.6 million for customer relationships[36] - The company acquired Rubino for$18.1 million, including $16.7 million in cash and$1.5 million in contingent consideration[38] - The preliminary allocation of the Rubino purchase price includes $9.3 million for operating lease assets and$9.9 million for goodwill[39] - The company acquired Rubino for $16.7 million in cash, funded with available cash and borrowings on the ABL Revolver[86] Segment Performance - The company operates in three reportable segments: U.S. Retail, Canada Retail, and Brand Portfolio[22] - Net sales for the three months ended May 4, 2024, totaled$746.6 million, with U.S. Retail segment contributing $621.4 million and Canada Retail segment contributing$55.5 million[42] - Women's footwear accounted for $408.8 million of U.S. Retail segment net sales in Q1 2024, representing a 0.4$104.1 million in Q1 2024, driven by a change in sourcing model for Owned Brands[79] - U.S. Retail segment net sales increased by 1.4% to $621.4 million in Q1 2024, despite a 2.3$55.5 million in Q1 2024, with a 4.9% decline in comparable sales[78] - Gross profit for the U.S. Retail segment increased by $1.641 million (0.8$198.455 million, representing 31.9% of segment net sales, compared to 32.1% in the same period last year[80] - Gross profit for the Brand Portfolio segment increased significantly by $11.392 million (51.6$33.477 million, representing 32.1% of segment net sales, compared to 23.8% in the same period last year[80] - Total net sales for the three months ended May 4, 2024 were $746.6 million, with U.S. Retail segment contributing$621.4 million and Canada Retail segment contributing $55.5 million[42] - U.S. Retail segment net sales for women's footwear were$408.8 million, men's footwear were $129.4 million, and kids' footwear were$50.2 million for the three months ended May 4, 2024[43] - The Brand Portfolio segment saw a 12.0% increase in net sales, primarily due to a change in sourcing model from commission to wholesale[79] - U.S. Retail segment net sales increased by 1.4% to $621.4 million, driven by a calendar shift but offset by a decrease in comparable sales[78] - Canada Retail segment net sales increased by 2.9$55.5 million, driven by new store openings and a calendar shift, partially offset by a decrease in comparable sales[78] - Gross profit for the U.S. Retail segment increased by $1.641 million (0.8$198.455 million, representing 31.9% of segment net sales, compared to $196.814 million (32.1$11.392 million (51.6%) to $33.477 million, representing 32.1$22.085 million (23.8%) in the same period last year[80] Debt and Financing - Long-term debt rose to $469.3 million, up from$420.3 million at the end of the previous quarter[16] - Total debt increased to $482.7 million as of May 4, 2024, up from$434.2 million as of February 3, 2024, primarily due to higher borrowings under the ABL Revolver[61] - The ABL Revolver had a borrowing base of $514.0 million as of May 4, 2024, with$321.3 million in outstanding borrowings and $4.9 million in letters of credit issued, leaving$187.8 million available for borrowings[63] - The Term Loan had an effective interest rate of 13.8% as of May 4, 2024, including the amortization of debt issuance costs[66] - The company was in compliance with all financial covenants under the ABL Revolver and Term Loan as of May 4, 2024[67] - Total debt as of May 4, 2024 was $482.7 million, consisting of$351.3 million in ABL Revolver borrowings and $131.4 million in Term Loan borrowings[61] - The ABL Revolver had a borrowing base of$514.0 million as of May 4, 2024, with $321.3 million in outstanding borrowings and$187.8 million available for borrowings[63] - The Term Loan had an interest rate of 12.4% (effective rate of 13.8% including debt issuance costs) as of May 4, 2024[66] - The company was in compliance with all financial covenants under the ABL Revolver and Term Loan as of May 4, 2024[67] Other Financial Metrics - The company recorded $27.8 million in gift card liabilities and$14.9 million in loyalty program liabilities as of May 4, 2024[45] - Rent expense from leases with Schottenstein Affiliates totaled $2.0 million for the three months ended May 4, 2024[47] - The company recorded$4.8 million in royalty expenses to ABG-Camuto for the three months ended May 4, 2024, representing a 6.7% increase compared to the same period in 2023[49] - Basic earnings per share for the three months ended May 4, 2024 was based on 57,464 thousand weighted average shares outstanding, while diluted earnings per share was based on 59,470 thousand shares, reflecting a dilutive effect of 2,006 thousand shares from stock-based compensation awards[52] - Stock-based compensation expense decreased to $5.6 million for the three months ended May 4, 2024, compared to$11.7 million for the same period in 2023[54] - The company had $87.7 million remaining for Class A common share repurchases under its share repurchase program as of May 4, 2024[57] - Total receivables increased to$96.7 million as of May 4, 2024, up from $83.6 million as of February 3, 2024, driven by growth in customer accounts receivables with payment guarantee by third-party provider[59] - The company provided a guarantee for a lease obligation with total future payments of approximately$3.7 million as of May 4, 2024[69] - The effective tax rate for the three months ended May 4, 2024 was 138.1%, significantly higher than the 10.3% rate for the same period in 2023, primarily due to discrete tax benefits[31] - Severance costs for the three months ended May 4, 2024 were $2.4 million, compared to$2.1 million for the same period in 2023[30] - The company has a 40.0% ownership interest in ABG-Camuto, LLC and a 33.3% ownership interest in Le Tigre 360 Global LLC[23] - The company recorded $2.0 million in rent expense from leases with Schottenstein Affiliates for the three months ended May 4, 2024[47] - The company recorded$4.8 million in royalty expense to ABG-Camuto for the three months ended May 4, 2024[49] - Basic earnings per share for the three months ended May 4, 2024 was based on 57,464 thousand weighted average shares outstanding, while diluted earnings per share was based on 59,470 thousand shares, reflecting a dilutive effect of 2,006 thousand shares from stock-based compensation awards[52] - Stock-based compensation expense for the three months ended May 4, 2024 was $5.6 million, a decrease from$11.7 million in the same period last year[54] - As of May 4, 2024, the company had 50,060 thousand Class A common shares and 7,733 thousand Class B common shares outstanding, with 42,560 thousand Class A shares held in treasury[56] - The company had $87.7 million remaining under its$500 million share repurchase program as of May 4, 2024[57] - Total receivables as of May 4, 2024 were $96.7 million, including$33.4 million in receivables with payment guarantee by third-party provider and $44.9 million in income tax receivable[59] - The company had a guarantee for a lease obligation with total future payments of approximately$3.7 million as of May 4, 2024[69] - Interest expense, net, increased by $5.0 million, driven by higher interest rates on debt and the addition of the Term Loan[84] - Interest expense, net, increased by$5.0 million, driven by higher interest rates on debt, including the ABL Revolver and the addition of the Term Loan[84] Store Operations and Expansion - The company had 675 stores as of May 4, 2024, compared to 638 stores as of April 29, 2023[76] - Total number of stores increased to 675 as of May 4,