Designer Brands(US:DBI)2023-12-05 16:27Financial Data and Key Metrics Changes - For the third quarter, sales decreased by 9.1% year-over-year to $786.3 million, with U.S. retail comps down 9.8% and Canada down 7.7% [63] - Adjusted net income was $14.8 million or $0.24 diluted EPS, compared to $46.1 million or $0.67 last year [36] - Consolidated gross margin was 32.6%, a decrease of 40 basis points from the previous year, primarily due to increased promotional pricing [64] - Adjusted SG&A ratio increased to 28.9% of sales from 25.5% in the prior year, driven by deleverage from topline pressures [65] Business Line Data and Key Metrics Changes - The Retail segment, including DSW stores and e-commerce, experienced a sales shortfall, particularly in seasonal and dress categories, while casual footwear saw mid-single-digit comp sales growth [7][8] - The Brand Portfolio segment saw overall sales down 12.5%, with declines in legacy brands offset by strong performance from Keds, Topo, and Hush Puppies [9] - Vince Camuto's e-commerce site, vc.com, reported a 7% comp sales increase for the quarter, driven by demand for wide and extra wide shaft boots [34] Market Data and Key Metrics Changes - The total footwear market declined for the first time since the pandemic, with seasonal footwear down 16% based on dollar sales [51] - DSW's performance lagged behind the overall market, with seasonal footwear representing nearly 40% of its business, leading to disproportionate pressure [51] Company Strategy and Development Direction - The company aims to reinvigorate its assortment, optimize market investments, and enhance shopping experiences both in-store and online [12][22] - There is a focus on building relationships with national brands and expanding offerings in the casual and athleisure segments [28][52] - The company is investing in top-of-funnel marketing to increase brand awareness and attract customers back to stores [59] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing macro headwinds affecting consumer traffic and the overall footwear market, emphasizing the need for speed and innovation [5][33] - The company does not expect sales pressures to alleviate in the near term, with a conservative outlook for the fourth quarter [33][70] - Management expressed confidence in the long-term strategy and the ability to navigate current challenges [54] Other Important Information - The company returned $82.5 million to shareholders through dividends and share repurchases in the third quarter [38] - Total debt outstanding was $375.5 million as of the end of the quarter, with a solid liquidity position of $267.9 million [39][68] Q&A Session Summary Question: Can you elaborate on brand awareness and investments to bring customers back? - Management is working on balancing top-of-funnel marketing with performance marketing, acknowledging the latency impact of such investments [46][74] Question: When do you expect macro pressures to alleviate? - Management indicated that macro pressures are expected to persist into the first half of next year, with customers remaining selective in discretionary purchases [49] Question: How did sales trend around Thanksgiving and Cyber Monday? - There was a lull in sales following Cyber Monday, with customers being selective and waiting until the last minute for purchases [80] Question: Which brands within the portfolio show strength and where is there room for improvement? - Management expressed encouragement with the performance of Keds and Topo, while noting that the brand portfolio largely performed within expectations [82]