Designer Brands(US:DBI)2025-09-09 13:30Financial Data and Key Metrics Changes - Total sales for the quarter were down 4% year over year, with a 5% decline in comparable sales, reflecting a 280 basis point improvement from the first quarter [4][19] - Adjusted operating expenses were down over $14 million compared to last year, achieving 350 basis points of leverage compared to Q1, supporting year-over-year EPS growth [5][22] - Consolidated gross margin was 43.7% in the second quarter, decreasing by 30 basis points versus the prior year but leveraging 70 basis points from the first quarter [21] Business Line Data and Key Metrics Changes - In the U.S. retail segment, sales declined 4.8% year over year, with comp sales down 4.9%, showing significant improvement from Q1 [19] - Women's dress category posted a positive 5% comp, a 900 basis point improvement from the first quarter, while athletic sales were slightly negative at down 2% [20] - Canadian retail segment sales were up 0.4% year over year, with comps down 0.6%, indicating another significant improvement from Q1 [20] Market Data and Key Metrics Changes - The largest number of signups for the VIP rewards program occurred in stores, with store traffic improving and positively impacting the program [5] - The DoorDash partnership resulted in approximately 85% of transactions being from new customers, bolstering interest in stores across local geographies [7] - The brand portfolio segment saw total sales down 24% compared to last year, primarily due to lower internal sales, but wholesale activity across external retail partners delivered year-over-year growth [9][21] Company Strategy and Development Direction - The company is focusing on two pillars: customer and product, with plans to scale private label and build a more profitable wholesale model [10] - A new brand repositioning campaign, "Let Us Surprise You," aims to enhance customer engagement and brand identity [11] - The company is committed to optimizing inventory availability, reducing choice count by 25% while increasing depth by 15% for key styles [12] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism for the remainder of the year, despite ongoing macroeconomic headwinds and uncertainties related to tariffs [16][24] - The company is focused on disciplined execution and navigating the near-term environment while building a business grounded in brand strength [16] - Management remains committed to their strategy and transformation, encouraged by early signs of positive momentum [17] Other Important Information - The company ended the second quarter with total inventories down 5% year over year and utilized excess cash to pay down debts, ending with total debt outstanding of $516.3 million [23] - The effective tax rate for the second quarter on adjusted results was 10.1%, compared to 20.6% last year [22] Q&A Session Summary Question: Can you elaborate on the interquarter trends and comp sales? - Management noted sequential improvement throughout the quarter, particularly in women's dress and athletic categories, with positive trends continuing into August [28][30] Question: What are the pressures foreseen in Q3 due to tariffs? - Management highlighted concerns about the indirect impact of tariffs on consumer sentiment rather than direct costs, with selective price increases implemented [34][36] Question: How is the new marketing campaign expected to impact store productivity? - The campaign has received positive feedback, and management is focused on optimizing marketing investments while tracking performance closely [40][41] Question: What are the expectations for brand activations in Q4? - Management expressed optimism about the performance of key brands, including Birkenstock and Nike, with a focus on maintaining better in-stock levels [46] Question: Can you elaborate on the deeper assortment strategy? - The strategy involves increasing product availability and depth for key styles while reducing choice count, aimed at improving inventory productivity [51]