Designer Brands Q1 revenue drops but owned-brands penetration jumps

The parent company of DSW Designer Shoe Warehouse reported profit and revenue that missed estimates and cut its full-year earnings guidance but  said it made progress in its key growth target. 

In April 2022, Designer Brands said that its owned brands would be the key driver of growth during the next five years, and that it plans to double sales of the brands by fiscal 2026. The company is targeting revenue of $4 billion and earnings per share in the range of $2.75 to $2.85 in fiscal 2026, which ends Jan. 30, 2027. (For the year ended Jan. 29, 2022, net sales totaled $3.2 billion.)

In a statement, Doug Howe, who succeeded  17-year company veteran Roger Rawlins as CEO on April 1, said that the company has made “significant operational progress” on its goal of doubling sales of its owned brands by 2026 over 2021, “with our recent acquisitions of Keds, Le Tigre, and Topo Athletic helping to further expand and diversify our brand portfolio.” Owned brand penetration in the first quarter grew to 26.7%

“We continue to lean further than ever before into our Owned Brands, harnessing key and exciting moments to showcase our brands with engaging events and customer experiences,” he stated.

Designer Brands reported a profit of $11.42 million, or $0.17 cents a share, for the quarter ended April 29, down from $26.18 million, or $0.34 a share, in the year-ago quarter. Adjusted profit came to $0.21 cents a share, below analysts’ estimates of  $0.23 a share.

Net sales fell 10.7% to $742.1 million, missing estimates of $752.1 million.  Comparable sales decreased by 10.4%.

“As the consumer remains cautious, we are approaching the remainder of the year and the trajectory of the recovery in our business with heightened consideration,” Howe said. “We are confident in our ability to continue to optimize those factors over which we have control, providing compelling products from our Owned Brands and an ideal national brand assortment to our customers seeking a wide range of styles."

The retailer cut its 2023 profit view excluding the impact from its Keds purchase to a range of $1.20 a share to $1.50 a share, from its earlier previous  $1.65 to $1.75 a share, compared to the analyst estimate of $1.56 a share.

During the first quarter of 2023, the company closed two stores in the U.S. and opened one new store in Canada, resulting in a total of 499 U.S. stores and 139 Canadian stores as of April 29, 2023.