Designer Brands(US:DBI)2021-12-06 16:00Financial Performance - Operating profit in Q3 FY2021 grew by 86% compared to Q3 FY2019, surpassing pre-COVID-19 levels [74]. - Net sales increased to $853.5 million in Q3 FY2021, a 30.7% increase from $652.9 million in Q3 FY2020, driven by a 40.8% increase in comparable sales [78]. - Gross profit as a percentage of net sales improved to 36.7% in Q3 FY2021, up from 25.4% in Q3 FY2020 and higher than the pre-COVID-19 rate of 29.3% in Q3 FY2019 [80]. - Net income for Q3 FY2021 was $80.2 million, or $1.04 per diluted share, compared to a net loss of $40.6 million, or a loss of $0.56 per diluted share in Q3 FY2020 [81]. - Consolidated net sales for the nine months ended October 30, 2021, were $2,373,957, a 46.1% increase from $1,625,367 in the same period last year [95]. - Gross profit for the nine months ended October 30, 2021, was $814,409, representing 34.3% of net sales, compared to $176,238 (10.8%) for the same period last year, marking a 362.1% increase [95]. - U.S. Retail segment net sales increased by 61.3% to $2,053,359 for the nine months ended October 30, 2021, compared to $1,272,951 in the prior year [95]. - Operating profit for the nine months ended October 30, 2021, was $182,725, a significant recovery from an operating loss of $518,512 in the same period last year [95]. - Gross profit for the nine months ended October 30, 2021, was $814.4 million, representing a 34.3% margin, compared to $176.2 million and 10.8% margin for the same period last year [98]. - U.S. Retail segment gross profit increased to $708.1 million, a 34.5% margin, up from $124.8 million and 9.8% margin year-over-year [98]. Sales and Comparable Sales - Comparable sales increased by 43.9% in the U.S. Retail segment and 50.4% in the Brand Portfolio direct-to-consumer channel for Q3 FY2021 [82]. - The Brand Portfolio segment's net sales increased due to higher orders as retailer customers recover, although still below pre-COVID-19 levels [78]. - Comparable sales for the U.S. Retail segment increased by 62.6% for the nine months ended October 30, 2021, reflecting strong recovery trends post-COVID-19 [95]. Operational Challenges - The ongoing COVID-19 pandemic continues to pose challenges, including supply chain disruptions and increased shipping costs, impacting overall business performance [77]. - The company is focusing on three strategic pillars: Customer, Brand, and Speed, to enhance customer experience and operational efficiency [75]. Expenses and Tax Rates - Operating expenses for the nine months ended October 30, 2021, were $637,108, an increase of 15.5% from $551,712 in the same period last year [95]. - The effective tax rate decreased from 39.9% for the three months ended October 31, 2020, to 17.1% for the three months ended October 30, 2021 [93]. - The effective tax rate decreased to 11.8% for the nine months ended October 30, 2021, down from 33.4% in the same period last year [102]. Cash Flow and Capital Expenditures - Net cash provided by operations was $164.3 million for the nine months ended October 30, 2021, compared to a net cash used of $106.3 million in the same period last year [105]. - Capital expenditures for the nine months ended October 30, 2021, were $22.1 million, with an expected total of $35.0 million to $45.0 million for fiscal 2021 [115]. - Net cash used in financing activities was $117.9 million for the nine months ended October 30, 2021, compared to net cash provided of $127.2 million in the same period last year [108]. Impairment Charges - The company recorded impairment charges of $1,174 during the nine months ended October 30, 2021, a substantial decrease from $149,363 in the same period last year [95]. - The company recorded an impairment charge of $1.2 million for abandoned equipment during the nine months ended October 30, 2021 [101]. Risk Management - The company has market risk exposure related to interest rates and foreign currency exchange rates [117]. - There have been no material changes in primary risk exposures or management of market risks since the 2020 Form 10-K [117]. Accounting Policies - The preparation of condensed consolidated financial statements requires management to make estimates and assumptions affecting reported amounts of assets and liabilities [116]. - Significant estimates are based on historical experience, current economic conditions, and product mix, with constant re-evaluation of these factors [116]. - There have been no material changes to the application of critical accounting policies since the 2020 Form 10-K [116].