Designer Brands(DBI)2025-06-10 13:30Financial Data and Key Metrics Changes - For the first quarter of fiscal 2025, net sales were $687 million, down 8% year-over-year, with comparable sales down 7.8% [26] - Consolidated gross margin decreased by nearly 120 basis points to 43%, primarily due to increased markdowns [28] - Adjusted operating income was essentially breakeven compared to $14.7 million last year, with an adjusted net loss of $12.5 million versus a gain of $4.8 million last year [30] Business Line Data and Key Metrics Changes - U.S. Retail segment sales were down 7.7%, with comparable sales down 7.3%, affected by lower traffic [26] - Canadian Retail segment sales declined 2.9%, with comparable sales down 9.2%, reflecting similar consumer sentiment challenges as in the U.S. [27] - Brand Portfolio segment sales were down 7.9%, but operating income grew by over 30% due to expense efficiency measures [28] Market Data and Key Metrics Changes - The first quarter saw a decline in consumer sentiment, with February being the weakest month due to unfavorable weather [5] - DSW gained 10 basis points in athleisure footwear market share during Q1, indicating some market resilience [14] Company Strategy and Development Direction - The company is focusing on enhancing customer value, optimizing product assortments, and diversifying sourcing strategies to mitigate tariff impacts [11][18] - Plans include scaling private label offerings and investing in strategic brands like Topo and Keds to drive growth [10][20] - The company has withdrawn its forward-looking guidance due to the volatile macro environment and consumer sentiment [23][32] Management's Comments on Operating Environment and Future Outlook - Management acknowledged increased uncertainty in consumer behavior and a softer start to the year, leading to a decline in comparable sales [5][25] - The company is committed to disciplined execution and adapting to the current environment while focusing on long-term value creation [24][32] Other Important Information - The company is implementing expense cuts expected to deliver $20 million to $30 million in savings for fiscal 2025 [6][29] - Inventory levels were up 0.5% year-over-year, with a focus on delivering products ahead of tariff increases [31] Q&A Session Summary Question: Can you speak to the relationship between the $20 million to $30 million in savings and the anticipated increase in SG&A? - Management explained that the absence of a bonus accrual this year provided about $10 million in favorability in expenses for Q1, but a headwind of approximately $10 million is expected in Q3 due to last year's bonus reversal [35][36] Question: Can you elaborate on the performance in Canada and the brand portfolio? - Management noted that Canadian consumer sentiment mirrors that of the U.S., with Topo performing strongly, growing 84% in the quarter, while Keds faced some headwinds [38][40] Question: What are the expectations for Q2 and the impact of tariffs? - Management indicated that trends in Q2 are similar to Q1, with concerns about indirect impacts of tariffs on consumer sentiment [45][46] Question: How is the company planning for back-to-school and holiday inventory? - Management expressed cautious optimism for back-to-school, highlighting strong past performance and effective inventory management [55][57] Question: How is the company navigating tariff mitigation strategies? - Management confirmed ongoing efforts to diversify sourcing outside of China and manage pricing increases in collaboration with brand partners [61][62]