Designer Brands(US:DBI)2024-09-11 20:19Financial Performance - Net sales for the three months ended August 3, 2024, were $771.9 million, a decrease of 2.9% compared to $792.2 million for the same period in 2023[5]. - Gross profit for the six months ended August 3, 2024, was $497.983 million, down 2.5% from $511.126 million for the same period in 2023[5]. - Operating profit for the three months ended August 3, 2024, was $28.589 million, a decline of 52.9% compared to $60.687 million for the same period in 2023[5]. - Net income attributable to Designer Brands Inc. for the three months ended August 3, 2024, was $13.824 million, a decrease of 62.9% from $37.204 million for the same period in 2023[5]. - Basic earnings per share for the three months ended August 3, 2024, were $0.24, down from $0.57 for the same period in 2023[5]. - Comprehensive income attributable to Designer Brands Inc. for the three months ended August 3, 2024, was $12.847 million, down from $38.481 million for the same period in 2023[6]. - Net income for the six months ended August 3, 2024, was $14,967,000, a decrease of 69.2% compared to $48,628,000 for the same period in 2023[13]. - Net cash provided by operating activities decreased to $21,898,000 from $134,371,000, representing a decline of 83.7% year-over-year[13]. - Operating profit for the three months ended August 3, 2024, was $37.97 million, a decrease of $42.33 million, or 52.7%, compared to $80.30 million for the same period last year[84]. Assets and Liabilities - Total current assets increased to $798.048 million as of August 3, 2024, compared to $777.432 million as of February 3, 2024[8]. - Inventories rose to $642.783 million as of August 3, 2024, from $571.331 million as of February 3, 2024[8]. - Cash and cash equivalents decreased to $38.834 million as of August 3, 2024, from $49.173 million as of February 3, 2024[8]. - Total current liabilities decreased to $619,038 thousand from $622,271 thousand, a reduction of approximately 0.4%[9]. - Long-term debt increased to $458,974 thousand from $420,344 thousand, representing an increase of about 9.3%[9]. - Total liabilities rose to $1,748,070 thousand compared to $1,713,724 thousand, marking an increase of approximately 2.0%[9]. - Shareholders' equity decreased to $355,545 thousand from $359,220 thousand, a decline of about 1.9%[9]. - Total debt as of August 3, 2024, was $472.0 million, an increase from $434.2 million in February 2024 and $334.7 million in July 2023[55]. Cash Flow and Investments - Cash paid for business acquisitions was $16,352,000, significantly lower than $127,496,000 in the previous year, indicating a reduction of 87.2%[13]. - Net cash used in investing activities for the six months ended August 3, 2024, was $41.5 million, primarily due to the acquisition of the Rubino business for $16.4 million and capital expenditures of $29.5 million[97]. - Net cash provided by financing activities for the six months ended August 3, 2024, was $9.6 million, an increase of $3.9 million compared to $5.6 million for the same period in 2023[98]. - The company repurchased Class A common shares totaling 2,665 thousand, costing $17,969 thousand[11]. - The company repurchased 2.7 million Class A common shares at an aggregate cost of $18.0 million during the six months ended August 3, 2024, with $69.7 million remaining available for repurchase[51]. Segment Performance - U.S. Retail segment net sales for the three months ended August 3, 2024, were $641.7 million, compared to $658.5 million for the same period in 2023[39]. - The Canada Retail segment reported net sales of $74.8 million for the three months ended August 3, 2024, up from $70.3 million in the prior year[39]. - The Brand Portfolio segment generated net sales of $95.993 million for the three months ended August 3, 2024, compared to $84.217 million in the same period last year[39]. - For the three months ended August 3, 2024, total net sales reached $771.9 million, a decrease from $792.2 million in the prior year[39]. - The Brand Portfolio segment's net sales increased by 14.0% to $96.0 million, driven by a shift to a wholesale model for certain Owned Brands[76]. Tax and Expenses - The effective tax rate for the six months ended August 3, 2024, was 1.0%, a substantial decrease from 27.4% for the same period in 2023[25]. - The effective tax rate for the three months ended August 3, 2024, was 19.3%, a decrease from 31.4% for the same period in 2023[25]. - Interest expense increased by 59.2% to $11.0 million, compared to $6.9 million in the same quarter last year[74]. - Operating expenses increased by $12.4 million, or 2.6%, primarily due to a $4.2 million increase in marketing expenses and a $2.7 million increase in incentive compensation[80]. Acquisitions and Goodwill - The acquisition of Rubino Shoes Inc. on April 8, 2024, expanded the Canada Retail segment into Quebec, enhancing market presence[18]. - The company completed the acquisition of Keds for a cash consideration of $127,304,000, with the final purchase price allocation finalized as of February 3, 2024[29]. - The company acquired Rubino for $16.4 million in cash, with a contingent consideration of up to $1.5 million based on performance targets over 24 months[31]. - Goodwill from the Rubino acquisition is not expected to be deductible for income tax purposes[34]. - The goodwill from the Keds acquisition was primarily attributed to acquiring an established design and sourcing process for casual footwear, totaling $25.8 million[30]. Market Conditions - Ongoing economic uncertainty, including concerns about a potential recession and inflationary pressures, is impacting consumer spending and sales performance[68]. - The company experienced a decrease in comparable average sales amounts per transaction due to lower units per transaction amid economic uncertainty[68].