Designer Brands(DBI) - 2025 Q4 - Annual Report

PART I Item 1. Business Designer Brands Inc. operates in three segments: U.S. Retail, Canada Retail, and Brand Portfolio, recently expanding through acquisitions - Designer Brands Inc. operates in three reportable segments: U.S. Retail (DSW), Canada Retail (The Shoe Co., DSW, Rubino), and Brand Portfolio (wholesale, D2C e-commerce for Vince Camuto, Keds, Topo, and design/buying agent commissions)[13] - Acquired Keds business in February 2023, expanding Owned Brands into casual and athleisure footwear, and Rubino Shoes Inc. in April 2024, expanding Canada Retail into Quebec[14] Brand Portfolio Segment Sourcing and Top Suppliers | Category | Percentage | | :------- | :--------- | | Brand Portfolio segment sourced Owned Brands | 9 % | | Top three national brand suppliers | 25 % | VIP Member Statistics | Metric | Value | | :----- | :---- | | Number of VIP members at end of the fiscal year (in millions) | 30.8 | | Percentage of retail segments' net sales generated from VIP members | 86 % | - The Brand Portfolio segment's net sales of Owned Brands represented 23.3% of consolidated net sales in 2024, down from 25.8% in 2023, with five customers making up 38.0% of its segment net sales (excluding intersegment net sales)[23] Merchandise Units Sourced by Country (2024) | Country | 2024 Percentage of Merchandise Units Sourced | | :--- | :--- | | China | 77 % | | Vietnam | 11 % | | India | 5 % | | Cambodia | 5 % | | All other foreign locations | 2 % | - As of February 1, 2025, the company employed approximately 14,000 associates worldwide, with approximately 12,000 in the U.S.[31] - The business consists of two principal selling seasons: spring (Q1, Q2) and fall (Q3, Q4), with fall typically generating slightly higher net sales[51] Item 1A. Risk Factors The company faces significant risks from adverse macroeconomic conditions, intense market competition, operational challenges, and external factors - Adverse global economic conditions, including inflation, economic downturns, and fluctuating interest rates, have negatively impacted consumer discretionary spending and led to a decline in comparable sales in 2024[54] - The footwear market is highly competitive, with increasing competition from online retailers offering improved user experiences, lower shipping costs, and faster delivery[56][57] - Reliance on strong relationships with third-party manufacturers and national brand suppliers is critical; impairment of these relationships or loss of major suppliers could adversely affect the business[59][61] - The company faces risks from cybersecurity threats, privacy or data security breaches, and disruptions of IT systems, which could lead to operational shutdowns, data loss, reputational harm, and significant liabilities[64][66][69] - The ABL Revolver and Term Loan contain customary covenants restricting activities such as asset sales, acquisitions, additional debt, dividends, and stock repurchases, which could limit operational funding[80][81] - International operations and reliance on foreign-sourced merchandise expose the company to risks from political instability, trade barriers, shipping costs, and currency fluctuations, with 77% of Brand Portfolio units sourced from China in 2024[27][82] - The Schottenstein Affiliates beneficially owned approximately 31% of the company's outstanding common shares, representing 67% of the combined voting power, allowing them to substantially influence shareholder votes and potentially delay a change in control[95] Item 1B. Unresolved Staff Comments There are no unresolved staff comments from the Securities and Exchange Commission - No unresolved staff comments[99] Item 1C. Cybersecurity Designer Brands Inc. maintains an information security program, overseen by the Board's Technology Committee and led by the Director of IT Security & Compliance, to manage cybersecurity risks - The company has an information security program integrated into its enterprise risk management process, with oversight delegated to the Technology Committee of the Board[100] - The Director of IT Security & Compliance (DITSC), with over 20 years of cybersecurity expertise, leads the program, which includes policies, security engineering, operations, and cyber threat detection and response[101][103] - A written incident response plan is in place, and tabletop exercises are conducted to enhance preparedness; the DITSC escalates security incidents to the Crisis Committee and General Counsel for material events[102][103] - As of the report date, the company has not identified risks from known cybersecurity threats that have materially affected or are reasonably likely to materially affect its business strategy, results of operations, or financial condition[104] Item 2. Properties Designer Brands Inc. operates a principal corporate office and two owned distribution centers, leases numerous retail stores, and a foreign sourcing office, with a new West Coast Logistics Center commencing operations in March 2025 Company Facilities Overview | Facility | Location | Owned/Leased | Segment | Approximate Square Feet | | :------------------------ | :--------------- | :-------- | :------------------------ | :---------------------- | | Principal corporate office | Columbus, Ohio | Owned | Corporate and U.S. Retail | 178,000 | | Midwest Logistics Center | Columbus, Ohio | Owned | U.S. Retail | 625,000 | | East Coast Logistics Center | Westampton, New Jersey | Leased | U.S. Retail and Brand Portfolio | 683,000 | | U.S. retail stores | 494 various U.S. locations | Leased | U.S. Retail | 9,740,000 | | Canada retail stores | 175 various Canadian locations | Leased | Canada Retail | 1,284,000 | | Primary foreign sourcing office | Dongguan, China | Leased | Brand Portfolio | 102,000 | - During March 2025, the company began operations in a new West Coast Logistics Center in Glendale, Arizona, operated by a third-party, with approximately 276,000 square feet for the U.S. Retail segment[105] Item 3. Legal Proceedings Designer Brands Inc. is involved in various legal proceedings incidental to its business, with management believing potential liability will not be material - The company is involved in various legal proceedings incidental to the conduct of its business[106] - Management believes the amount of any potential liability with respect to current legal proceedings will not be material to the results of operations or financial condition[106] Item 4. Mine Safety Disclosures This item is not applicable to Designer Brands Inc - Not applicable[107] PART II Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Designer Brands Inc.'s Class A common shares are traded on the NYSE, while Class B common shares have no public market but carry eight votes per share; the company declares quarterly cash dividends and has an ongoing share repurchase program - Class A common shares are listed on the NYSE (ticker: DBI) with one vote per share; Class B common shares have no public market but are convertible to Class A on a share-for-share basis and are entitled to eight votes per share[109] - As of March 17, 2025, there were 187 holders of record for Class A common shares and 12 for Class B common shares[109] - On March 13, 2025, the Board declared a quarterly cash dividend payment of $0.05 per share for both Class A and Class B common shares[111] - As of February 1, 2025, $19.7 million of Class A common shares remained available for repurchase under the share repurchase program[112] Issuer Purchases of Equity Securities | Period | Total Number of Shares Purchased (thousands) | Average Price Paid per Share ($) | | :-------------------------------- | :------------------------------------------- | :--------------------------- | | November 3, 2024 to November 30, 2024 | 16 | $5.02 | | December 1, 2024 to January 4, 2025 | 11 | $5.01 | | January 5, 2025 to February 1, 2025 | 1 | $5.47 | | Total | 28 | $5.02 | Five-Year Cumulative Total Return | Company / Index | February 1, 2020 ($) | February 1, 2025 ($) |