Designer Brands(US:DBI)2023-06-08 13:53Financial Data and Key Metrics Changes - Designer Brands reported a net sales decline of 10.7% in Q1 2023, totaling $742.1 million, compared to a robust growth of 18.1% in Q1 2022 [4][45] - Adjusted net income for Q1 2023 was $14.3 million, or $0.21 per diluted EPS, down from $36.7 million, or $0.48 per diluted EPS in the prior year [14][45] - The adjusted SG&A ratio increased to 28.9% of sales from 26.8% in Q1 2022, while adjusted operating profit decreased to 3.5% of sales from 6.6% [14][45] Business Line Data and Key Metrics Changes - The casual category showed strength, with women's casual sales up 7% and men's up 4% compared to the prior year [5] - The clearance business in the U.S. saw a 5% increase in comps on a net basis during the quarter [21] - The men's Crown Vintage business grew by 32% in Q1, driven by casuals [41] Market Data and Key Metrics Changes - U.S. retail comps were down 12% for the quarter, while Canada posted a 3% comp increase on top of a 41% gain last year [45] - Total retail comps decreased by 10% compared to a strong 15% comp in Q1 2022 [45] - Inventory levels decreased to $637.4 million from $672.5 million year-over-year, with a 4% reduction in retail square footage [46] Company Strategy and Development Direction - The company is focusing on increasing its own brands' penetration to 27% of net sales and aims to double sales of its own brands from 2021 to 2026 [6][22] - Designer Brands is working on becoming the exclusive licensee of the Hush Puppies brand in the U.S. and Canada, which is expected to enhance its comfort and casual categories [8] - The company plans to elevate its partnership with Nike, aiming to provide a premium assortment across men, women, and kids [42] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a challenging macroeconomic environment affecting consumer spending, leading to a lower sales and earnings guidance for 2023 [11][15] - The company expects a recovery in consumer discretionary spending may be delayed, but remains optimistic about long-term growth [15][27] - Management noted that the first quarter was more challenging than anticipated, particularly in the seasonal product category [13][20] Other Important Information - The company is integrating recent acquisitions, including Keds, Le Tigre, and Topo Athletic, which are expected to contribute to growth [6][16][24] - The company is planning a Dutch auction tender offer to repurchase up to $100 million in Class A common stock [33][49] - The effective tax rate on adjusted results was 25.7%, down from 29.3% last year [14] Q&A Session Summary Question: Can you elaborate on the elevation of the partnership with Nike? - Management expressed excitement about the changes in the product portfolio and the ongoing dialogue with Nike, aiming to bring back offerings across men's, women's, and kids' categories in Q4 [51][52] Question: What has not materialized in the anticipated trajectory change for Q2? - Management noted that the promotional environment is broadly spread across categories, with strength in casuals but not enough to offset declines in dress and seasonal products [37] Question: What categories are seeing the most increase in promotions? - Management indicated that the increase in promotions is fairly equal across categories, with a focus on managing through the discretionary spending pressures [37]