Designer Brands(DBI)2021-08-30 16:00Financial Performance - Operating profit in Q2 fiscal 2021 increased by 49% compared to Q2 2019, surpassing pre-COVID-19 levels [83]. - Net sales rose to $817.3 million in Q2 fiscal 2021, a 66.9% increase from $489.7 million in Q2 fiscal 2020, driven by an 84.9% increase in comparable sales [89]. - Gross profit as a percentage of net sales improved to 34.8% in Q2 fiscal 2021, compared to 7.6% in the same period last year [89]. - Net income for Q2 fiscal 2021 was $42.9 million, or $0.55 per diluted share, a significant recovery from a net loss of $98.2 million, or $1.36 per diluted share, in Q2 fiscal 2020 [90]. - Consolidated net sales for the six months ended July 31, 2021, were $1,520,490, a 56.3% increase from $972,497 for the same period last year [108]. - U.S. Retail segment net sales increased by 74.3% to $1,343,751 compared to $771,050 in the prior year [108]. - Net income for the three months ended July 31, 2021, was $59,886, compared to a net loss of $314,072 for the same period last year [106]. - Gross profit for the six months ended July 31, 2021, was $500.8 million, representing 32.9% of segment net sales, an increase from $490.2 million (31.8%) in the same period last year [111]. Sales and Comparable Performance - Comparable sales for the U.S. Retail segment increased by 94.3% in Q2 fiscal 2021, compared to a decline of 44.9% in Q2 fiscal 2020 [91]. - The Brand Portfolio segment saw a 10.6% increase in comparable sales, recovering from a 120.5% increase in the previous year [91]. - Comparable sales for the U.S. Retail segment increased by 74.5% during the six months ended July 31, 2021 [108]. Operating Expenses and Profitability - Operating expenses for the three months ended July 31, 2021, increased by $56.0 million, but as a percentage of sales improved to 27.5% from 34.4% in the same period last year [102]. - Operating expenses increased by $69.6 million year-over-year, but as a percentage of sales improved to 28.0% from 36.6% in the same period last year [112]. - The Brand Portfolio segment reported a gross profit of $8,533, which is 16.9% of segment net sales, compared to a loss of $11,440 (37.6%) in the prior year [99]. Inventory and Fulfillment - The company maintained tight inventory positions, resulting in less promotional activity during the second quarter of fiscal 2021 [101]. - The company plans to improve fulfillment times for digital orders from 5-7 business days to 2-3 calendar days [84]. Tax and Impairment - The effective tax rate decreased from 29.3% for the three months ended August 1, 2020, to 19.3% for the three months ended July 31, 2021 [104]. - The effective tax rate decreased to 3.6% for the six months ended July 31, 2021, down from 32.5% in the same period last year [115]. - Impairment charges for the three months ended July 31, 2021, were $1.2 million, down from $6.7 million in the same period last year [103]. - The company recorded an impairment charge of $1.2 million for abandoned equipment during the six months ended July 31, 2021 [114]. Liquidity and Financial Position - Net cash provided by operations for the six months ended July 31, 2021, was $96.2 million, a significant recovery from a net cash used of $79.6 million in the same period last year [118]. - Capital expenditures for the six months ended July 31, 2021, totaled $13.2 million, with an expected total spend of $35.0 million to $45.0 million for fiscal 2021 [128]. - The ABL Revolver had a borrowing base of $386.1 million as of July 31, 2021, with $16.8 million outstanding, leaving $364.0 million available for borrowings [122]. - The company expects to maintain sufficient liquidity to support operations and withstand business volatility, including the impact of COVID-19 [117]. - The company was in compliance with all financial covenants as of July 31, 2021 [126]. Market Risks - The company has market risk exposure related to interest rates and foreign currency exchange rates [130]. - There have been no material changes in primary risk exposures or management of market risks from those disclosed in the 2020 Form 10-K [130]. COVID-19 Impact - The company continues to face uncertainties related to COVID-19, including potential impacts on operations and consumer behavior [87].