Designer Brands(US:DBI)2021-05-26 22:19Financial Data and Key Metrics Changes - Sales increased by 45.6% to $703.2 million, marking the best quarterly sales performance since the onset of COVID-19 [42] - Total comparable store sales (comps) were up 52.2%, with US retail comps up 56.3% [42][36] - Gross profit increased to $216.1 million from a loss of $26.5 million in the prior year, with a gross margin rate of 30.7% compared to a loss of 5.5% last year [54][55] Business Line Data and Key Metrics Changes - Athleisure category sales increased by 92%, representing 58% of total sales compared to 47% in the same period last year [45] - Seasonal comps were up 56%, while dress category sales were down 10%, accounting for only 10% of sales compared to 22% in 2019 [46][47] - Camuto's net sales were $57.4 million, down 30.1% compared to the same period last year, but production increased by 3% year-over-year due to better-than-expected demand [53][51] Market Data and Key Metrics Changes - Digital demand represented 35% of total demand during the first quarter, up from 22% in the first quarter of 2019 [48] - In Canada, total comps were up 10%, with digital growth of 202% compared to 2019, despite in-store sales being down about 46% compared to 2019 [49][35] Company Strategy and Development Direction - The company is focusing on increasing penetration in the athleisure market, aiming for 55% of its assortment to be athleisure by the second half of the year [37] - A strategic emphasis on owned brands is being pursued, with aspirations to increase penetration from high-single digits to closer to 30% [73] - The company is also planning to relaunch the JLO brand in the fall, indicating a focus on expanding its brand portfolio [89] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about continued recovery as vaccination rates rise and consumer spending increases in categories affected by the pandemic [12][38] - The company anticipates that the positive trends observed in the first quarter will continue, particularly in athleisure and seasonal categories [71][37] - Management noted that they are prepared to make necessary inventory investments as demand returns, while maintaining a conservative inventory strategy [71] Other Important Information - The company ended the quarter with $49.3 million in cash and $289.9 million available to draw on its revolving credit facility, bringing total liquidity to just under $340 million [68] - The effective tax rate on adjusted results was 4.7% in the first quarter, significantly lower than the previous year's rate of 38.4% [66] Q&A Session Summary Question: Can you talk about the penetration of owned brands and where you think that could go? - Management indicated that penetration is currently in the high-single digits to low-double digits, with aspirations to reach closer to 30% [73] Question: How did store traffic levels progress through the quarter? - Management noted sequential improvement in store traffic throughout the first quarter and expects this trend to continue [78] Question: Are you dealing with any supply chain issues? - Management stated that their teams have managed supply chain challenges effectively, ensuring a good inventory position relative to planned sales [81] Question: How should we think about the second quarter compared to 2019? - Management anticipates continued improvement in the business, similar to the acceleration seen in Q1 [84] Question: Can you discuss the strategy for integrating Camuto into the assortment? - Management highlighted opportunities to enhance the athleisure offerings and mentioned plans to relaunch the JLO brand, indicating a focus on growth in this area [89]