Designer Brands' Q2 Earnings Miss Estimates, Comps Decline Y/Y

Core Insights - Designer Brands Inc. (DBI) reported second-quarter fiscal 2024 results that fell short of Zacks Consensus Estimates for both earnings and sales, with year-over-year declines noted [1][3][12] Financial Performance - Adjusted earnings were 29 cents per share, missing the Zacks Consensus Estimate of 56 cents, and down from 59 cents in the prior year [3] - Net sales totaled $771.9 million, a decrease of 2.6% year over year, and below the Zacks Consensus Estimate of $819 million [3] - Comparable sales (comps) decreased by 1.4% year over year, compared to an expected decline of nearly 3.7% [3] Margins and Expenses - Gross profit was $252.9 million, down 7.5% from $273.4 million in the previous year, with a gross margin decrease of 170 basis points to 32.8% [4] - The decline in gross margin was attributed to lower initial markups on athletic and athleisure products and the need for promotions to clear seasonal inventory [5] - Adjusted SG&A expenses as a percentage of net sales rose to 28.9%, up 200 basis points from 26.9% in the same quarter last year, primarily due to lower sales and higher fixed costs [6] Segment Performance - U.S. Retail segment sales decreased by 2.6% year over year to $641.7 million, missing the Zacks Consensus Estimate of $652 million [7] - Canada Retail segment sales increased by 6.4% year over year to $74.8 million, but fell short of the Zacks Consensus Estimate of $86 million [7] - Brand Portfolio segment sales were $96 million, up 14% year over year, but also lagged behind the Zacks Consensus Estimate of $121 million [8] Financial Snapshot - Cash and cash equivalents were reported at $38.8 million, down from $46.2 million a year ago, with $155.1 million available for borrowings under a senior secured asset-based revolving credit facility [8] - Debt levels rose significantly to $465.7 million, compared to $331 million in the previous year [9] - Inventories increased to $642.8 million from $606.8 million year over year [9] Shareholder Returns - The company repurchased 2.7 million Class A common shares for a total cost of $18 million during the second quarter, with $69.7 million remaining for future repurchases [10] Store Updates - One store was closed in the U.S. while two were opened in Canada, resulting in a total of 499 U.S. stores and 177 Canadian stores as of August 3, 2024 [11] Guidance - The company revised its financial outlook for fiscal 2024, now expecting flat to low-single-digit sales growth, down from initial projections of low-single-digit growth [12] - Adjusted earnings per share guidance was lowered to a range of 50-60 cents, down from the previous range of 70-80 cents [12]