Designer Brands(DBI)2019-06-04 13:01Financial Performance - Total revenue increased to $878.5 million for the three months ended May 4, 2019, up 23.4% from $712.1 million for the same period last year[113]. - Comparable sales increased by 3.0%, driven by strong growth in digital demand[113]. - Net income for the three months ended May 4, 2019, was $31.2 million, or $0.40 per diluted share, representing a 28.4% increase from $24.3 million, or $0.30 per diluted share, for the same period last year[115]. - Operating profit for the three months ended May 4, 2019, was $43.98 million, a 14.3% increase from $38.47 million for the same period last year[118]. - Consolidated net sales for the three months ended May 4, 2019, were $869,992 thousand, representing a 22.5% increase from $710,437 thousand in the same period last year[120]. - Gross profit for the three months ended May 4, 2019, was $256,036 thousand, a 24.8% increase from $205,225 thousand, with a gross profit margin of 29.4% compared to 28.9% in the prior year[123]. Capital Expenditures and Investments - Capital expenditures during the three months ended May 4, 2019, were $24.9 million, compared to $18.2 million for the same period last year[116]. - The company plans to spend approximately $75,000 thousand to $85,000 thousand on capital expenditures in fiscal 2019, with plans to open 17 to 21 new stores[139]. - Capital expenditures for the three months ended May 4, 2019, were $24,900 thousand, contributing to a net cash used in investing activities of $6,200 thousand[133]. Profitability and Cost Management - Gross profit as a percentage of net sales was 29.4%, an increase of 50 basis points from 28.9% in the previous year[114]. - The Brand Portfolio segment, including the newly acquired Camuto Group, is expected to lower product costs and enhance profit growth starting fiscal 2020[111]. - Operating expenses as a percentage of total revenue increased by 180 basis points year-over-year, primarily due to acquired businesses and restructuring costs[125]. Tax and Cash Flow - The effective tax rate decreased from 31.9% to 25.4% for the three months ended May 4, 2019, mainly due to additional valuation allowances[127]. - Net cash used in operations was $3,000 thousand for the three months ended May 4, 2019, compared to net cash provided by operations of $25,300 thousand in the same period last year[132]. Segment Performance - The Canada Retail segment achieved positive operating profit for the first quarter of fiscal 2019, marking the first time in five years that it reached profitability at the start of the year[110]. - U.S. Retail segment net sales increased by $22,056 thousand, or 3.3%, with comparable sales growth of 3.0% driven by higher transactions despite a decline in average dollar sales per transaction[120][121]. Financial Position and Risk Management - As of May 4, 2019, the company had $235,000 thousand outstanding under its Credit Facility, with $161,900 thousand available for borrowings[137]. - The company remains in compliance with all financial covenants of its Credit Facility as of May 4, 2019[138]. - The company has market risk exposure related to interest rates and foreign currency exchange rates, with no hedging instruments currently utilized to mitigate these risks[144]. - As of May 4, 2019, the company had $235.0 million outstanding on its revolving line of credit, which is based on a variable interest rate, exposing it to interest rate market risks[145]. - A hypothetical 100 basis point increase in interest rates would not result in a material additional expense over a 12-month period based on the current balance[145]. - The company is exposed to foreign exchange rate risk primarily through operations in Canada, where the functional currency is the Canadian dollar[146]. - A hypothetical 10% movement in exchange rates could result in a $3.1 million foreign currency translation fluctuation recorded in accumulated other comprehensive loss[146]. - The same 10% movement in exchange rates could also lead to $2.1 million of foreign currency revaluation recorded in nonoperating expenses[146].