DSW parent company income, sales fall as unseasonably warm weather hurts demand
Designer Brands Inc. cut its full-year guidance amid disappointing third-quarter earnings and sales.
The footwear giant and parent company of DSW said its performance was impacted by a footwear market that contracted for the first time since COVID coupled with unseasonably warm weather, which significantly reduced customer demand for shoes and put pressure on its heavily seasonal assortment.
Designer Brands posted net income of $10.1 million, or $0.17 a share, for the quarter ended Oct. 28, down from $45.2 million, or $0.65 a share, in the year-ago period. Adjusted earnings came to $0.24 a share, missing analysts’ estimates of $0.46 a share.
Net sales decreased 9.3% to $786.3 million from $865.0 million a year ago, which was well below the $824.0 million analysts had expected. Total comparable sales decreased by 9.3%.
By business segment, U.S. retail sales fell 10.6% to $631.6 million. Net sales fell 8.1% to $75.6 million in the Canadian segment.
In DSW's owned brands portfolio, which has been a key focus for the company, sales were down 12.5% to $94.1 million. (In February, the company expanded its owned brands stable with the addition of iconic sneaker brand Keds, supplementing its recent additions of Le Tigre and Topo Athletic.)
"We saw improved performance in casual and clearance categories this quarter, but this was not enough to offset the broader lack of demand,” stated Doug Howe, who has served as CEO since April. “While macro pressures notably impacted our business, we clearly recognize the need to operate with even greater speed and increase the level of innovation, newness, and fashion into our assortments, returning to our roots as a merchant organization and a fashion footwear retailer."
Looking ahead, Howe said the company does not anticipate pressures alleviating in the near-term. Designer Brands slashed its full-year earnings guidance to a range of $0.40 to $0.70, compared to its previous range of $1.20 to $1.50. It expects sales to be down in the high-single digits, compared with prior guidance of down mid-to-high single digits
“Our team is already executing several initiatives to address areas for improvement within our business,” Howe said. “Ongoing refreshment of our assortment, including new specialty sizes, and new marketing initiatives are two ways we are actively reinforcing our business as the best in shoes.”
“We have also made some difficult decisions regarding leadership across our organization and believe that we are making progress in positioning our business well for the long-term while continuing to generate strong cash flow and ample liquidity,” he added.
During the third quarter, the company opened one store in the U.S. and six stores in Canada, resulting in a total of 499 U.S. stores and 144 Canadian stores as of Oct. 28.
In addition, Designer Brands designs and produces footwear and accessories through Camuto Group, a leading manufacturer selling in more than 5,400 stores worldwide.
Camuto Group owns licensing rights for the Jessica Simpson footwear business and footwear and handbag licenses for Lucky Brand. In partnership with a joint venture with Authentic Brands Group, the company also owns a stake in Vince Camuto, Louise et Cie and others.