Designer Brands(US:DBI)2025-09-09 13:30Financial Data and Key Metrics Changes - Total sales for the second 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 decreased by 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%, a decrease of 30 basis points year-over-year, but leveraged 70 basis points from the first quarter [21] Business Line Data and Key Metrics Changes - U.S. retail comparable sales were down 5%, with total sales also down 5%, showing improvement correlated with slightly improved consumer sentiment [5][19] - Women's dress category delivered a positive 5% comparable sales, a 900 basis point improvement from the first quarter [8][20] - The brand portfolio segment saw total sales down 24% year-over-year, primarily due to lower internal sales, while external wholesale activity grew year-over-year [9][21] Market Data and Key Metrics Changes - In the Canada retail segment, sales were up 0.4% year-over-year, with comparable sales down 0.6%, indicating significant improvement from Q1 [19] - The adult athletic business showed sequential improvement, while Kids Athletic posted a flat comparable sales, representing a 500 basis point improvement over the prior quarter [8] Company Strategy and Development Direction - The company is focusing on two pillars: customer and product, aiming to drive growth through scaling private label and building a more profitable wholesale model [10] - A new brand repositioning campaign, "Let Us Surprise You," was launched to enhance customer engagement and brand identity [11][40] - The company is committed to optimizing inventory availability, reducing choice count by 25% while increasing depth by 15% for the back half of 2025 [12][51] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism for the remainder of the year, despite ongoing macroeconomic uncertainties and pressures on consumer discretionary spending [16][24] - The company is focused on disciplined execution and navigating the near-term environment while building a business grounded in brand strength [16][24] - Management noted that they are encouraged by early signs of positive momentum and sequential improvement throughout the quarter [17][57] 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 company is prioritizing diversification of its supply base to mitigate tariff impacts and has seen no negative reaction to selective price increases on private label products [15][36] 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 expected pressures from tariffs in Q3? - Management indicated that the primary concern is the indirect impact of tariffs on consumer sentiment rather than direct costs, with selective price increases being implemented [34][36] Question: How is the new marketing campaign expected to impact store productivity? - Management expressed excitement about the campaign's early positive feedback and emphasized the importance of in-store experiences as a core differentiator [40][41] Question: What are the expectations for brand activations in Q4? - Management highlighted strong performance from brands like Birkenstock and noted that the focus will continue on maintaining better in-stock levels and brand partnerships [46] Question: Can you elaborate on the deeper assortment strategy? - Management explained that the strategy involves increasing product availability and depth while reducing choice count, aimed at improving inventory productivity [51]