Designer Brands Q3 profit falls; owned-brand sales boost revenue

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Designer Brands’ third-quarter same-store sales rose 3%.

The parent company of DSW Designer Shoe Warehouse and The Shoe Company reported weaker-than-expected third-quarter bottom and top-line results and lowered its full-year guidance amid slowing consumer demand.

Designer Brands reported net income of $45.2 million, or $0.65 a share, for the quarter ended Oct. 29, down from $80.2 million, or $1.04 a share, in the year-earlier period. Adjusted earnings came to $0.67 per share, missing analysts’ estimates of $0.72.

Sales inched up 1.4% to $865.0 million from $853.5, below estimates of $877.0 million. Same-store sales rose 3%.

Net sales for Designer Brands’ owned brands increased 25% over last year, in line with the company’s target for owned brands sales to double from 19% of the company’s revenue to almost one-third by 2026.  Owned brand sales  accounted for 26.5% of total net sales in the third quarter compared to 21.5% in the same period last year.

"While we are seeing many of the same pressures across the consumer landscape that most retailers are seeing, our flexible business model continues to support our efforts to navigate a dynamic macro environment," stated CEO Roger Rawlins. The strategic shifts we have made in our business over the past several years are driving a sustainably higher gross margin rate than 2019 as we have a more targeted focus on customer acquisition, optimizing our assortment, and growing the brands we own and control.

The company ended the quarter with more 'normalized' inventory levels of $681.8 million, compared with $602.1 million a year ago.

In May, Designer Brands unveiled its "warehouse reimagined" DSW store format at Hedwig Village in Houston. At about 15,000 sq. ft., the new format is smaller than a traditional DSW, which averages about 25,000 sq. ft., but offers the same amount of inventory due to design optimization.

[Read More: DSW debuts store of the future design]

Designer Brands recently expanded its board, adding Rich Paul and Tami J. Fersko as independent directors. Paul is the CEO and founder of Klutch Sports Group, the powerhouse agency representing some of the biggest athletes across major professional sports.  Fersko serves as the chief operations and supply chain for Centric Brands, a global lifestyle brand collective. 

Designer Brands lowered its full-year EPS guidance to $1.75 to $1.80 from a prior range of $2.05 to $2.15. It still expects full-year same-store sales to increase in the mid-single digits.

The company had a total of 504 U.S. stores and 138 Canadian stores as of October 29, 2022.

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