Designer Brands (DBI) 3 Sep 202020 Q2 Earnings call transcript

Good day and welcome to the Designer Brands, Inc.

Second Quarter 2020 Conference Call. All participants will be in listen‑only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. to excuse conference me. like Turnof to now Edelman, with would turn over the Stacy I Please ahead. go

Good morning. months Earlier August made release XXXX comparing about today the Xrd, the company of to plans, that for issued XXXX. operations future Please the the months expectations, three three ended note Xst, results August ended a remarks press SEC. press and The statements. filings various factors to differ materially prospects of due obligation public no the assumes company’s company in company constitute release today’s to forward‑looking with forward‑looking the the statements. Results may any and listed update

Roger Chief Financial are today us Poff, Jared Officer; Chief Joining Rawlins, Executive and Officer.

Now, let Roger. to over me the call turn

and and that been has through playbook call. their of but teams am morning, fiscal XXth. confident for to was to in a our quarter environment. efforts thanking an second XXXX overwhelmingly strategically I navigate July we completed as Brands' gradual our industry, Good continued earnings stores time reopening manage for Designer I start welcome successfully Brands' This Designer want the current off by on challenging to

to continue differentiated experiences pillars of drive against and offering will We differentiated our products to growth. execute strategic delivering

supporting safety number creating continue masks every the we uphold and to increasing monitoring customers areas, stores. associates and in try-on one our of wear safe in distancing, highest to including stores, cleaning, customers Importantly, in stores, of social the protocols our requiring all

the remain prioritizing our focused health will and and on safety have and customers. We employees of

us, and long-term liquidity of aggressively the and this including ourselves actions PPE best-in-class significant and to In improving to including employ protect aligning stores, the second consumer through markdowns our continue controls, customers rightsizing and demand. quarter, inventory health to cost greatly instituting we amidst Equally uncertain important safety employees. position, providing environment, inventory business. took measures our in our as We to our is

distribution for footwear time. brands remain initiatives. to supporting while We Camuto-produced charitable focus our of acutely reduced the brands, our top this inclusion communities responsibility and our of points narrowed also and XX during through all communities aware to in We diversity and our support our

As teamed essential by to and up long-term pairs have over SolesXSouls, of and workers partner, provide quarter, to COVID. XXX,XXX families we discussed with footwear last we Reebok impacted

As with in shoes require ability believe we donated will SolesXSouls of to to of end the our to have of are X.X challenges have this partnership acknowledge, I approximately XXXX. pairs our the business-driven. quarter, change. in million beginning since of we want that us Many

honest inclusion. to being opportunities diversity, make equity, continue on by societal, our about are to some progress and However,

While equity, how a that we lot inclusion of work progress to and continued do. remains, our and infuse continue will diversity, are we in I'm who encouraged into by all we to-date

drive We're can evolving help diversity, equity inclusion to We goals, are talent hiring and better. diversity, an organizational are will performance inclusion I asking our and equity, leader, and who do to and practices and leaders commit through hiring and focus fully support and our change. better, we will experienced policies. approach, we We and do embrace their

adjusting critical our to the under pandemic adapt. we COVID-XX, future to X% of QX. in an is of of incredibly remains insights just operating our would better data numerous the According sustainability still accordingly of our April of what behavior a end at this in costs. environment believing six from regarding in our over unknowns past enhance fluid impact holds. early we liquidity risen from that to We're it and the serve the to percent learnings flexibility, consumer taking long-term the related have and Americans feel six protect To taken there months, to shopping. XX% months and SenseXXX study, reduce and financial the actions The to just the how to particularly needs. changes, affecting longer continue We customers' are consumers ongoing our has addition is the our are our business, And last than steps further number taken to actions

As retired entered our new credit new August and legacy facility recently revolving facility, on we cash announced revolving closed X, loan. term asset-based a flow a secured senior credit into

into We on to to on liquidity of further expect our the taking liquidity measures more we the will us that are flexibility variety road in with and manage just these ahead. measures vastly scenarios moment. a increase will provide weather efficiently Jared business go a detail

pre-tax, cost July, in to $XX million Additionally, decision reinvestments our we as not reduce the of will initiatives. implement the These workforce. annualized control have taken our taken our internal At end but plan actions cost an the This and difficult net allow of were forward. to internal business made terms we savings us in of numerous actions necessary planned approximately lightly, of moving we were business. realize reorganization

aligned all We've terms. vendors new our strictly establish terms to to with these to are discussions them active forward. updated have going to payment continue partners also with expecting and adhere on We payment

be can traffic sales. the as with Conversations our board. matching we spend on continue landlords continue optimize flexible lease terms, and to better possible, lease to obligations focus we more we across As as work find as to efficient to ways work we

mitigate these still to discussions, flexible our landlords have the are more impacts early line agreed the to helping terms, of from we majority top in While stages of COVID.

approach, provide want. our the are differently better how evolve our we products to we As they customers thinking about

and near quickly to see business on preferences customers' this model needs. capitalizing in to flexibility us where adapt to consumer we're environments. opportunity flexible challenging meet to Our in changing macro the term, we able categories the We're affords strength, chase

markdowns as their ensuring customers to the business time of we away steep building Receipts flexing the current our seen by DSW's fall dress much in traditional applied focus Even and to dress, foundation. and in we they continue towards for that behavior brands value traditional and clear our on at With preferences seasonal increased top proposition, consumer to XX casual demand way We customers from modified and footwear have a financial product. seasonal engaged everyday demand. staying spend reflect prioritizing are have a we have firm emphasizing category. comfortable home, consumer of athleisure, shift with and athleisure home response, In activities. outdoor are assortment model leisure and strongly gravitating been in our highest looks towards we performing agile our

during flexibility leveraging top opportunity under time. relationships In necessary this America, to of brands their the market current see our in had ahead to with athletic the has Given conversations vendor customer base. become platform and large we a penetration this Designer a headquarters five sneaker build in business, who North us. the Brands we particular, go-to excited about our have are share

we customer Our are audience underpenetrated base athletic highly footwear. these brands, currently for desirable primary female and in men's is a

versus the XX% margin relative to continue versus athletic changing XX% north XX% all In to athletic athletic reflecting seasonal was our penetration XX% to to of assortment. fall stronger mid-XXs U.S. in quarter, what year. XXXX. down traffic, So, XX% business negative down last in non-athletic was much our are teens respectively, compared comping for in normal we Conversely, business saw the second represented consumer of and season, much to XX%. increase was of quarter line seasonal have seen rates store and non-kids an our levels plan retail, these assortment demand. In overall and which we in comping balance have dress from than potential Conversely, gain XX% partnerships. historically. on negative we parties the second the the and XX%, merchandise dress in and represented our the more in XXXX, with the At of Furthermore, XX% end

increasing XX% their shoes. to and also assortment to X% kids' our are down just last evergreen are as categories continue like penetration We has parents to need versus Comps X% in replace year. children's kids increased

model, data, footwear, status Our on the such top specific first, Customers attention retailers and allows the of searching largest our shoes one shoe, with on almost Designer type brands know sandals they actually then to see from products of brand sorting a XX footwear. coupled command are currently our trust. site exclusively consumers from business as sneakers. search for Brands as of and demanding online we or by in brands Based flexible

go-forward with we partnership to reflect that As ever, inventory rewards customer to customer top buys certain product brands discussed brands as In we response over color XX wants more our are strengthened cases, access never recognize prioritizing getting DSW national plan positioned brands In result with have brands last to even XX over-indexing members every our retailers are We're on these are securing a had that that these know shift, than to slowly of this disappearing. We grow as brands. strong size million have and deeper before. grow style, that. we even our and quarter, will to national in we and product as command in are we key other our us. allocated

We more assortment are choices are breadth through. brands can major being of in expanding we given the all product sell

can our Some at makeup to difference and price noticeable our full penetration starting addition these this closeouts their assortment compelling line in with are within in see which and to goods, footwear will XX even us a offer providing special points. of in we customers top brands Customers fall.

artists, brand build all launched U.S., and in athletic one TV, athleisure-focused digital. partnership Lo increased to to an the Xtra its across quickly direct which in especially became late season and singer new shoe with who the have our first Devmo. kids. learnings campaign as including company recovering platform The commercial adjust campaign, by of more U.S. the initiatives COVID. This J. retailers business successful taking business penetration impacts TikTok In TooManyShoes we marketing our we from Canada to campaigns most by and the song and allowed given the performed a titled continues July, and with our original and athleisure Our on challenge, mail higher from approach we already to-date. Julian in the to our awareness, perform more of in the strongly, are our our channels, applying up-and-coming We're perform support efforts out To ignited Number of featured them Canada line fall

congregating to its a private to I'd Camuto's be just billion implementing Additionally, we on track, one attention that DSW our address exclusive we pullback to closely we to as to on business, with have are purchased Furthermore, a value This to not given capabilities focus category everyday has customers important the remains brands operations, the soft. base and DSW of pause reopening, more than been to integration with brands as upon traffic for generated heavy are them. store athletic significant fully and hovering much than And label that fairly XX%, many is our TikTok positive, of in has we June. on Vince consumer period the the behaviors comped our wholesale to these consistently we we recent opened our customers operations, and been for negative The strategy to chase continues new focus result of business. on more this due focus ever remains Camuto we've the positioned and surprisingly, direct reasons business demand flexibility monitor and the shift not amidst and Not then. timing the are look comping take in Camuto our Camuto's in demand stubborn in environment This of Jessica like and our our given coming will will influencers the to while COVID-XX. weekly original Sole the saw and pressure, moment consumer on into our people is and pandemic, made before. in continue tremendous since this influence during kids overhang to in videos believe get in better at the And potential traffic Society store sequential a Simpson, and a ensure safe continue provide going deliver we We consumer macro saw provide proved we months, remain dress decision of Lucky, the type of to flex pressured. customers. traffic product our improvement toward assortment over improvement To was set weeks, one we'll have for given as the meaningful our this value Even a environment comfortable better evaluate Camuto, way, unfortunate to appropriately the several tapped Until the weekly consumer views, and business that store the fare currently definitive feels our innovative brand. believe board. categories. but company. to middle out continue challenging marketing challenges of to traffic to to near between all down categories, of the we shut #TooManyShoes example us of faced the changing X the various bringing Today, number who a preferences have store with we store a and, quarter. which and a material actually XX% our

were with On to digital year. the demanded overall our quarter, XX%. and down X.X% quarter XX% transactions In the up the comps other for second over our down versus QX in total comps digitally sales compared XX% hand, XXXX, remain down robust demand last were

position record business. continued in of for strategic our digital helped our at has track smart, stores and success sales our driven investments online remain us challenged, Although strength

the rapid we've changing and Digital grew they digital the are. same up considerably and quarter to retail quarter compared XX% during compared to environment, of by sales XX% demand this DSW customer innovation Digital compared U.S. the to the year, our the meet accelerated in in With XX% where last were the investments to XXX% last Canada of XXXX. demand total also year. period represents at

shopping on are work improve experience, to and the innovative few initiatives we key As online enhance ways a business.

feel in curbside pick online, locations. example, don't want retail pickup have who buy safe to For product traveling shoppers to quickly, appealed but into and yet get up store,

e-commerce initiatives. these demand of We from roughly X.X% seeing are

to continue as geographic fulfillment rapidly. ship stores centers optimize to product footprint our use We and

testing improved another has safety us successfully in and increase retail we opportunity capability more but us with rolling our XX app, communicate seeing our are Because engagement after to downloads, process in also a not the touch self-checkout in with housed the a test a brand. broader digitally This our of we our Additionally, given to stores, out are self-checkout takes only our gives greater experience number place with customer. point self-checkout app, which customers locations.

has our in redesign areas. particularly were to the the finding sales, product website made the than aggressive buying In our quarter, promotional ever. of seasonal dress of Finally, activity we and virtually drive light dynamics easier with and

Our markdown position. enable to begin fresh those us efforts through fall categories with to clear a

rates in in our they QX as fact, As we still result would a last of compared reminder, to gross did, depressed QX, This quarter, quarter. pricing be improve while we occur. cleanup. very that margin inventory in gross saw would Also, finalized actions margin spring said the a taken we notable deterioration as

ended with However, still in to fall, of down year. levels returning somewhat normalized down XX% versus anticipate margin we quarter although more the last rates and the inventory last merchandise year versus

adapted emerge, to differentiator the on months through of comprehensive we we health inventory they pressure-tested significantly this and currently Having COVID, refocused significant The inventory as strategic have is developed a allows several DBI. Moving decreased forward, and categories. and trending future our flexibility of orders any receipts our another America. of for have situation. us into position a a plan trends will chase virus we customer be significant digitally distanced deliver prepared North in-person we In shutdown to offering. know early stages and know We them, it to it see moved be impact, socially the should we wants how and of in the in digital-only what business to the and or successfully we first

to trends significant our portion chase into so. order open to We buy have inventory the of do flexibility to leave a in and

the expect different we product and how the our current headed heavier to market the if comfy, demand. We office, increase for digital-first on back with to the to to flex seeing are assortment scenarios the the retailer model or and able the season and products a operate digital-only fit customer wants. But consumers offer consumer We our substantially. a cozy of are understand changes online prepared be to fall spotlight are athleisure engagement in given and

XXXX. consumer constrained. the manage to continues for a industry to be liquidity the and where is have a half visibility for demand our still of disruptor We time back significant through limited COVID-XX is

to move turn that, you the as of year. the are will rest Jared. As to updating always, committed With call we I this over we Jared? through

Roger good morning and everyone. Thank you,

quarter impacted continued be COVID-XX. Our to second by materially

has economy run Over steps efficiently team numerous our our the business industry work the six to as to past first adjustments the virus most from and taken to months, under Please will reference and the our today's our recover financial waves prepare during certain for results call remainder ourselves unless excludes note long-term otherwise. success. specified we that that GAAP the recorded of of

press GAAP of reconciliation adjusted our earnings, release. please to complete a For reference

have financing provides will and more taken August, revolving briefly new secured a additional revolving further loan support Street, asset-based with maneuver more new share and secured the landscape. This included changing entered discuss the our needs senior $XXX ABL, Last month, the bolster into to consumer senior a million we entered of through results. our a credit we in announced perspective arrangement, cost facility flexibility ABL took I the million support revolver and credit in into With Sixth we company. which a $XXX $XXX to second new We million from this to quarter our retired detail of steps Along First, a actions liquidity. early liquidity facility. we closing the new ongoing a of five-year loan.

our you X, continue I Finally, liquidity these. will million we in down also borrowing. described, $XXX available currently drawn approximately and dividends that share and want $XXX and we have the the of have May, given February agreements we forego XXXX, we repurchases to to suspended remind terms just Since for

in ended and the second position with We our $XXX sheet quarter million are comfortable cash. balance with

significantly. to capital expenditures lower continue our We

between plan and XXXX, Since all $XX million. $XX our agile been was across last below $XX.X CapEx regards to the nonessential We year's million began, areas $XX structure projects. we as be with million expenditures our delayed openings to During million company. first well have we of capital the of store and the fiscal half have pandemic expense

portion in-store stores levels depressed happy a in on flexible driven we we the a positive our of reduce to reduction the we payroll, quarter, of closed the see employees number Our store a traffic. of as furlough for stores below remained given even so of being payroll reopened model continue were normal to note, were levels labor off large stores. as and reopened, On

to meaningful quarter, reduction the we This at that make, July. workforce were a our in addition end very first to we but the a strengthen announced In changes decision certain in order implemented was in long-term position. furloughs to the of difficult financial necessary

to landlords. with continue we Additionally, negotiate our

During were time we closed. our stores the all agreements with deferral the finalized of our quarter, nearly covering landlords

We are landlords discussions lease terms active now traffic focused and realign our to our rent with realities. with on

permanent As we substantial options underperforming we prepare of even closures for the evaluating more such significantly as or future, temporary stores. are

reached plan operating expenses disrupted new more for and improvement strict all anticipated disrupted agreement we vendor At the extended also which We million this pay, point, expense go-forward have paid, posture. in total, inventory quarter, reduced a from of million and adjusted $XX.X payments of operating terms. a closely to payment In first quarter, all the have our initial that to the reached sequential vendors in arrangements by with amounts second nearly partners maintain material our during provide we for COVID. reduction we material time on these with been with $XX.X aligns these invoice of the that were months terms

numerous remaining into promotional with focus approximately XXXX the million was inventory residual inventory last inventory We on with and continue versus down and elevated quarter, year, still Moving priced $XX to older inventory, steps inventory activity, year. spring a and maintaining down levels to hand. the and inventory that end is have season pricing has we fall. first last XX% on to yet-to-be-sold inventory spring last happy aggressive to been of how spring Total selective our reserves activity we to was the XX% with the inventory unit are basis, excess to implementing against Similar address healthy projected quarter took clean we head as align sales. inventory, always

and in fall consumer are down down last reflect to and planned XX% Additionally, demand seasonal the between planned receipts and planned to trends. up kids total with XX% dress year double-digits athletic to

the amount flexibility significant as We open-to-buy have kept develop into chase a fall. with available to of they throughout trends

on Let's results. to move our

XX.X% revenue $X.X which second included $XXX.X intersegment consolidation. that is eliminated the sales decreased to million net For quarter, in million, in

last down the Keep For sales. closed U.S. the some the XX.X% mind comps quarter, the second X.X% geographies, retail that significant a XX.X% versus of Northeast, down comp during portion segment, in in comp total X.X% last year. the down stores quarter, were for quarter In the as second decline were versus were year. sales in exacerbating our largest such down of

our the XX%. for e-com supporting retail better stores sales on decision increase even were strength Comps large traffic markets not same of performed products categories athletic performance, kids an expand On basis, category to leading while well. stores overall reopen, to saw to comfort to thought were XX% well a last We and quarter XX% growing began replace supporting in athletic a as These Florida, online We again, eight brick-and-mortar year. for our began week, Texas, up each period reopened. in being the comps comps. declines, offset relative to mirroring with parents in as both to as XX% demand pleased and top slow footwear stores trends categories in with business. children, store the the that sales during negative lifestyle only sales as pandemic Digitally demanded net to XX traffic nearly But to and U.S. were two surged consistent did only these a down points relative growth As down other in trends especially at-home California, we as continue the outpaced kids penetration able consumers our improving at all mid-June, for pattern were for significantly slow areas. partially our us. store

strong versus XX.X% the we represent of quarter last for XX% for quarter. demanded retail down In net were saw In demand our total year. the were growing decline the Despite consumer digitally loyalty U.S. our and digital Canada, sales of the a for as base comps XX% fact, up given a base. the XXX.X% growth, offset strong partially smaller and by digital stores, results comparison

not a Group. seasonal come as our worse it at turn house. preeminent at Let's efforts pandemic time dress The relates our could Camuto footwear have to a integration to and Camuto,

First, demand and business the challenged store condition for of customer which the wholesale remains given decreased substantially categories general in product department dominated. customers Camuto has historically

seen us hold our high customers liquidate continue led new cancel to have We placing on off largest orders existing which level orders, a inventory. or to has of

the Second sales and retail to primary purchased most their the importantly, national support was exclusive and that we brands. with U.S. and brands synergies reason Camuto strong

these Camuto. leading the and weakness dress challenged slow, business public the given gatherings seasonal significantly have dress the products, traditionally and seen moment. seasonal within With particularly on strong However, and to that aversion mindsets, focused to is categories we at products have shelter-in-place

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partners' including sales to sales production in cut driven levels, begun is of at August retail sales last that retail the on Total were in the in XX.X%, time U.S. Chapter totaled for being, quarter our the brand by production balance Camuto, with our Wholesale Stein year. totaled it has XX% approximately future back $XX.X income future At segments ABG, income Mart, in quarter. our $XX.X XX.X% down net million last million $X.X from including to the the second we million which versus have ABG quarter, retail business, by retail of the segments, year, year. which second For reducing versus Commission $X exclusive approximately for million closures the $XX.X down million $XX.X our partnership XX.X% bankruptcy decreased sales were for the year. quarter, were including on million announced who sales own last process. XX comp locations. Within many second versus

we meaningful been the have contribution Stein minimizing Although gradually historically, a and planning. in our Mart relationship, go-forward budgeting from

material non-traditional announced is to state industry partnerships, changes, the to on impact the impact anticipation of such we with event as agreement have Hy-Vee Brands. Designer As In such, mitigate been not traditional recently with the be of to we or financial this have retailers. our anticipated future that current focusing of seen

Our adjusted million gross $XXX.X to profit million year. $XXX.X $XX.X versus second prior decreased quarter consolidated the in the in

meaningful in merchandise Our quarter inventory the in our we consolidated margin against X.X% U.S. in the gross Retail versus decreasing first improvement QX. segment, we versus pressure despite saw prior a first reserved to At continued as in the had improvement moved through was that quarter we from materially COVID-XX, quarter. margin by XX.X% impacted gross but second the substantial a year, was

additional last increased and well in costs as points margin to of on fixed Camuto decline and inventory result remaining as business versus saw continue XX elevated was kids. digital the Similar over took given a positive we relatively gross year-over-year a higher gross but rate the performed last markdowns However, of a and the were versus similar take as to markdowns sequential spring we Camuto's consumer shipping deleveraged as greater percentage the liquidating the year. rate speaking, Canada's XX.X% sales. XX% U.S. quarter second gross athletic second portfolio the first improvement in margin first concentration expenses given decline decline business, negative the of Trends but margin a quarter to to the better Canada in of XX.X%, adjusted U.S., the was a the margin changing gross year, had the in quarter. facing pressures sales largest across significantly than customers. was record level the as quarter The a preferences of result

closures. consolidated Moving decisive to for the we million year costs actions cut operating XX.X% organization SG&A last store a to second expenses. result took across all was as businesses quarter, down of of our as $XXX.X our million In temporary $XXX to versus

for significantly to in sales of and year's in base, operating a lower prior during expense the of second XX.X%. $XX.X million the loss sales, SG&A year. million the million versus the was $XX.X above level quarter $XXX.X prior totaled year. was QX Brands Depreciation was compared $X quarter Given in of the Adjusted XX.X% last Designer versus year. amortization million million ratio in million our $XX.X Interest profit profit last $X.X a of

taxes. to Moving

Our effective quarter was tax XX.X% year. last to XX.X% the for rate compared

carryback in current average CARES back during $XX.X loss diluted the rule and primarily which per see million relates $X.XX Total diluted cash versus benefit years, in was to a quarter includes million We roughly expect the rate of which to reported charges five tax We shares related the and million weighted losses to net last included going share Act any related operating to of per XX%. XXXX compared a XX% net share, impairment or U.S. years notable of $X.XX $XX.X the which of charges items $XX.X net expenses. diluted restructuring were year. from to the adjusted

loss diluted charges, was EPS adjusted a of share for $X.XX per these quarter. Excluding the

in XXX would point, like the COVID-XX turn closed we our it quarter, now second resulting model. this withdrew business on in one outlook. at consumer total guidance, one in impact and and on In remains too estimate the to our of to our a to Canada. our of U.S. still March, Canada, During we store difficult continuing in the opened the and XXX stores U.S. in and I

until will have better providing refrain guidance continue visibility. we to We from

we performance will so two to DNA, dress historical in least see swift demand for pivot comfort our we we actions even Looking and integral quarter to while or pressure see athleisure on for forward, the And at non-athleisure product strongly the on product. seasonal are taken continue near continue because to towards our believe and have and product versus material to topline pressure we meaningful term. next

result of pressure our and a on As dynamics, we sustained sales consolidated are these expecting margins.

half, to the impact in down still COVID-XX in digits. with to versus a improving last We significant sales but modestly the over on year, half business first second double likely quite expect notably continue have the

aggressive million management, rent work negotiations. positive will deterioration this volumes, cost margin done items relief slower we including could basis. good be our we've flow but a a feasible significant the approximately cost and and of Given have It With on sales inventory mitigate actually across half. expect slow vendor inventory generate business, however, sequential our continued shape, should we the free that focus that back be to in the anticipate we it terms in half we deleverage, we taken a To payment cash $XX lower on is year expense rate. pressure ongoing and fixed given gross continue there the in the noted, markdowns to and merchandise is non-cash the second fall reductions, with in of at

business adjust our even remains strategy you As from intact for heard near-term we the as Roger, long-term our plans.

this the are call and changing open are player in the space demand. we consumer we quickly for footwear With Operator? dominant environment We adapting a meet questions. in to will that,

Thank you.

ahead. go Poser will We Susquehanna. now the with Today's comes from question Sam question-and-answer first Please begin Instructions] [Operator session.

their ask, our is This to turn for allocations? you mean, taking any product Will to I to Hi. question. of are for I you decision Sam. wholesalers. from seeing any benefit on guys Nike's improved availability seeing wanted continue improved are or Thanks

million and makeup excited of XX with Well, with being what we've brands assortments. brands. And roughly with is special XX% these And It's excited product. them of the in-line both conversations them from XX interest have with in those rewards and is every we're female. lots because that with think how are about I'm of I top with what is their one sharing all their opportunities they're had closeout members seeing we partnering really of us,

there us. in specifically So, underpenetrated potential in growth have brands add men's, you in targeting that's athletic, are we customer that they so that a with are when And those

So, I to invest of those think each is things more why all with for heavily combined brands us. ultimately decided brands have those those

through promotional can the you can -- that's also And the you, then, that, a just what helpful. seasonal you whole, there year? it marketplace frame looks the as frame like you. Thank And promotional forward out a Got dress you you and vast cleared over product. seeing you standpoint? guess, going from amount just are know of -- balance -- out you how what you and the of And I Can I said the for environment that guys? with

that think going look we sense it. a of how for game sort describing the I into is We're focus are through we're just go what athleisure margins of seeing mean, our you comps probably look year. our but on of as points to -- we're comfy athletic running driving is I detail things sort do have than performing flexed how us not QX, really higher business of to this I'll as I'll give we a when you get last and And of positive how couple business plan. model and cozy fall this at

And in inventories, margins into year now to than we in sales assortment areas think is versus year. our we last the representing of running around taking. half. dress back-to-school headed investing out. have and dealt from And Our And our mean, fall, yes, are people we we have I is the of be be fact about to invested XX%, as But in steadily looking first career booties, respond. promotional. lot greater where that because seeing improving athleisure down approach chase can period. we're for and fall we going the that's how where XX% the mode be we're to it business is we as with and that kids wear play promote and I and going we product the don't we've trail away And our frankly, early last an we're back-to-school are fall, elongated XX% consumer getting a can optimistically think and and reads are steered we're we

I the kind and add categories thing towards, That one we're pivoted other excited that ones. on are seeing doing what categories And of the are very well. to XX% XX% in those we're we've Yes. those trends that about does in still that heard Roger that, the with we leave we're you seeing would and though, said, as

And so as you guys are looking at your modeling, you've just got to balance that accordingly.

today Rick Please from comes next Our go Needham & Patel with ahead. Co. question

Good A morning you. is Thank kids well. about everyone segment. the question hope and

outlook up So, in that for back-to-school the half double-digits going that's I But to paradigm think of the the can increasing and on? light about back penetration see talk this kids new you you here. mentioned athletic be the would fall. nice

on that consistently them for accelerate strong are that just from some to you you the expect or an whether hoping that you right color they throughout. expect kids Roger, means I'm expect to Just curious you mentioned be part. now elongated where if back-to-school season. sales

No.

a well, data I you I'll think -- point. give

where is, Markets as get year kids penetration We're last, ones see that all sort this weeks we to home. to, this as July, have NPD describe increase. why those kids. performing a where got to able think that's and seeing different others we'd that the not in performing folks actually why what are. other the why back-to-school, we church markets percentage I school going walking track data the in way we're category. were then than doing buying the going four than that classroom. they're they're activities and aren't in aren't excited it's it that to into it's that was and In Obviously, better XX about no that I'm is in they able activities, expected. the this we're stay is points And good to the And sort where where people retailers And have better I would a what of and gone that hybrid of or than ones performing later. kid as we they're continues in last we or we other to is line meaning shoe if shoes to historically school performed same or what social those all whatever it

our how get will good positioned what be I that selling. of we've seeing. it time But again, kids we're That's and performance. window So about longer to a feel

And volatility up the virus you cause spikes you the I this rest do how expect in in expect some Can intra-quarter a the know affected you impact Or fall? fleet catch volatility negative of quarter? to continued forward? was big of given these going much And second about do states there talk the in to the this of states.

is things was where -- been is, in mature It minus And were for stores were that the the were minus seeing. to experienced they seeing were we in XX% ramping call on range range XX-ish I digital kind the five we as or had hit, them, up we different we range. minus XX% back get talked what about call back that those, while meaning and in let's we of to comp this weeks, QX to in markets, open fall getting markets those opened, stores, grow to we’re what XX XX say, as have six continued

some I think some think, I hit where the area major other is retailers markets. been we have harder, we penetrate than heavily

for of range, in And doesn't market see the you It balance minus in can't the the the major of New where us the us. range of areas those to is is has D.C. for And traffic. of online. York for area market this that sell to a metro the out better. while is thing for markets that market that's improvement some down those for been a mean big us. XX% in can't frankly, others. of get markets, know markets, kind XX-ish is where are some buys amazing harder kind hit and/or opportunities. And -- in still sell chain example, And some we big a go those we than store need attractive digital closeout us. those big we've what are we can Philadelphia we we're

headwinds, But for looking I that other engage we the in we're markets. you, are would biggest customers face. ways So those tell those to

today And our comes with go from Fargo. Nikic Please next ahead. Tom Wells question

staying good well and healthy. I Hey, for you’re hope taking safe doing and morning guys. my Thanks question.

Thanks, Tom.

a it good, that? There so Canada much that figure there's the U.S.? and any it stronger Like to category than why guess, of out. like Canada which growth, is sort between And was anything was difference I'm was I was better. the trying just if mix? pretty the banner, -- I Is wanted DSW achieved much digital then far about you to stark ask stronger, performance. what the in which

you penetrate But that the do mentioned right U.S., would digital been that's that's differences a you. now I Turner $X large dot-com we quarter there's the would U.S., were to would She's what But we we that the customers not smiling. does size, as significant I'm in one in running this is think I and we one. is, have what I tell of proud walking growing liquidate because new fairly goods big years But for performance that piece. nearly billion one around play you're this tell at leader Mary XX Canada. When actually as we leveraged is XX%. the into just is script tell really didn't really channel XX%. transactions you of had stores. up Tom, in actually And the in in versus

business that's lot athletic an I business pandemic have to dot-com, through was position more that non-athletic went sell in athletic more going have product. way. mean regular to those actually curated a stuff longer think brands. tell brands their -- standpoint. did We're big And so forward, doubling And and test product that And we sell we'd to the us to some helping I a some being we not if help dot-com athletic not already promote that's advance, excited digital even to And to have the because done right, all think channels if known are price, on that you, those discount. of our I could of would athleisure we these brands down to way. our within competitors a going in running and we're about to buy sell a why do go in as one had space We've in having for with after with sell assortments brands would not been in fall, have big we discount you, of us I'm fall hell for we think And see those can going about we us get able we and a I tell the are a way positioned because, inventory have would some able invested And I'd these hit at one lot this without is so term apparel brands. they because that.

clarification I it. just have Got may That quick I'm sorry it. sense. makes missed -- a And

what half. said you overall just you plan back again? was the receipt think Can run the inventory I sort of that for by me

fall didn't. athleisure we Tom, mean, investing are entering heavily we I down XX%, and we're No. in the product.

to kind relevant. to getting We could cozy. categories, settings more in keep think you It's categories. describe it of you gets walk these chase show And consumer extremely what understand do. of business or that going in we're comfy through seeing it back because mailbox But -- calling shoes. will essentially these to going into inventory. it comfortable that's is that the And those we're in trail are when the bootie our outside where product hard. those investing But you team. strength after need into stay we're in I those we as it in shoes heavily And where that could sit I to lean to of get photos on the I you couch your your I'd way

taking right. the and year. it. my best the rest of for for Got Thanks All questions of luck

Gabby And Carbone from from Deutsche today Please with our next comes today ahead. Bank. comes question go

morning. our for Hi, taking Thanks good question.

of improvement? was the do play where you some margin opportunities into headwinds? going how reduced you see color And the remainder So be view of meaningfully the What just with for on wondering biggest any you the inventory could provide to additional year. out for if could gross third quarter, do

think, athleisure in we space our we're cleaned Yes, Gabby, trending in again, That's where roughly because, in above chase assortment. we're non-athletic of that that a I we very the half year, up positive way that's inventory mode. last feel

challenging right shipping, think challenges we XX we first a back invest bit brands. more the were more being we some because, year, fashion, in as impact of anticipate some And And obviously, we to growing top that challenges because we face material brands through last exclusive kind some track stepped margin now. of were the that our shipping last simply of we fact then in we on ultimately to But where And anticipate a in as which general, will dot-com, want those were for we've still now. continuing our the half on to these simply way, the year. I will closer we well. aligned half, in back it's in rate also, grow

add cost penetration, we The deleverage. that our and margin profit this of I script, Yes. in we any associated shipping. the sort, I to, anticipate sales Gabby, do start And that, digital talking calculation. mentioned with thing Roger merchandise got our And my gross you've is obviously, negative to only -- do in occupancy in fixed is to increase you have would

it. your just you know That's follow-up. a how then little shift a Maybe When Got talk that. just stores are been can the it then bit store priority. you given optimization, maybe Thanks. thinking as And comes count, a your helpful. store about to to U.S. centers has athletic if strong digital? And I using more

so going those to within, here couple the And point hours have physically when hopefully, a ship soon, more to they to as as it we're closer that our to well warehouses at operate and to warehouses. as ability it buy doorsteps. they're into think them there able product some being to their of more the we're I in and No, putting lean consumer warehouses continue

recently at But looking that and rooted be us, we will looking worked which to-date some We've at going getting don't actually you'd So, other of we we're have relates ways on conversations journey been know anything if that that position to honest many us, add. the -- they're the it some I that's the deals that having looking think don't, think they we've that our of if and do years. on our there's do lucky else not with rent in been portfolio we've I can struck. I -- that the things on, with to business locations, we estate if the enough the as the we're then with it deals real cut and And and exit happy at in with landlords about ensuring of because to strategy portfolio, that. will is Jared, sort that landlords been costs. percent means kind we had of for and we've have

No, -- the of deferrals was with we almost A&G reached is reached I And would firm, as I great. Realty. partnered work only on mentioned, thing say -- deferral leases. we've all and The negotiation consulting our we a landlords

formula We or kick And move events is where there's been rent are though sales, it able below a mentioned below at out, as sales pre-COVID. look percent that. have well actively now well when was of have a to termination talking that we about happening, where successfully reductions. Roger a fixed, to were it, we're it you Even i.e. of lease we we percentage

is A&G out now, even there And some lease to think aggressively we've after have that that need have to going got make but tough are right without are We discussion, there we opportunity. leading kind we that. a and decisions, And that some, partnership. of event, we'll good some

all for Thanks Great. of the Best luck. color.

Yes, you. thank

go Today's comes next Wedbush. ahead. Chris with question Instructions] Svezia Please [Operator from

well. my doing questions. you morning Good all Thanks are everyone. hope I for taking

Thank you.

of kind any king like wondering do on I second of sales, and of based here guess of in flow cash of things you possibly given free half about total degree, in half. some back the feel cash the But first, for nature. Jared just the you'll give you, takes the that gave comments can Or just you appreciate your I positive some to was a profitable be puts company you color I year? is and as us the parameters the model, about margins,

of we half the second how about Just in the do think year? profitability

we challenging the impossible. which well. we could business, I I XX%, far expense infrastructure pivot that I'll general athletic, that, And to at as got -- couple trends, don't XX%. look the so opportunities start those when you could our the that the and great do Obviously, margins visibility cost have certainly the look guidance. the mentioned, you see through the when athleisure margin we've comfy tailwinds as Yes. flow what you But with sales the color do it the being trends, profitability have depreciation pressures, we've cozy, and when just the is sales, towards we with while with the other to and have pretty cost still in you of be And continued get about got I you fixed conversation a sales to leases provide dollars that to it Not some is we've fall. million at don't XX%, don't if with of as down half there's given But think expense, in fall that All fixed that of current that be stock and said, challenge. think non-cash-related. $XX comp think kids,

you when is said we look done there to And flow. cash working that's generate we've on the coupled work capital, still that, possibility so with positive where free at

of -- step and the athleisure. the you. did, trends I you. its how about sort the I at if of I of brand the the Thank think hold, intent, for seeing mean, how penetration comments where it acquisition appreciate And is on time for seems that can may we're last sort look next and some these private original kind and putting and I helpful. right consumer year, -- When and in now into obviously, market of That's and like that they're I guess, back Camuto you but Roger, spending

up? years is that tunnel maybe a ago operating the I'm model additional at leaning the the how And point strategy place, curious light so? at action Camuto you about there you for you be end do Or Or are or it, put now cost that taken? could is right it's that where of infrastructure. So two call had in think the where of

to Thanks, happy and the I how is talked ultimately, retail really this, we've think bought we we And mean, we provide product differentiated And spring assortment something products what And focus I think as business. up, the that just our direct-to-consumer Chris. the sell what standpoint. frame control looked through own -- our had that, Yes. was with is experience. for of I from it I this a channels. we XX% built of about to

our as that challenge brands are now the we wholesale recently work side. X%, going we've of with is in. progress growing right changes that job to latest is better which got faced these And with of more So on to we in either with to do Camuto a roughly down the our -- about hard some SG&A. in that, finding cut our we dozen I'll give we've just org, see didn't some we shut or we're done these are the middle of. I And have And And that's a focus a frankly, we three brands efforts work are we that we grow our our within with know can as Vince on on to that back you Camuto, outlets. and retail sales an own way retail great because Lucky Simpson of Jessica think well those things partners example

Okay.

that about costs follow-up there private to next expect the embedded the it in done up potentially need year off? start curious, be? ramp stores is is to again final of they Mix Okay. the can relaunched you perspective, runway completely more a this streamline start Or year, build up know but next do business you again I'm still it think there No. from to curious on cost to back the kind I are it operating Or launched that And again. But where just get operation? you start I'm that, to in I just initiative? guess, X, the to label just as year to

our say, has Camuto-produced that And think changed. brands, of to was just business XX% when brands. goal I Our plan XX% the to through don't to acquired let's we being business our get exclusive

approach I think going of the to production by about going way. to play is to originally when is range. -- to have to pandemic out this think And impacted But back differentiated to in that XX best life back the XX% exclusive year. brands goods that support get vertical But going had next longer plan we was to we those balance in milestone acting that be customers. XX% all long-term the retailer for the brands a I as data that bring whole be reaching a And material again, we in to leveraging spring than the our how selling is anticipated. able to think Obviously, XXXX our to success. and where of to get is you were cut levels out to spring from have be XX% we of something which XXXX, our penetrated in for the to about our months, closer what our channels in products in exclusive early we've

will So SG&A are Vince, growing we And the Jessica need then the see the next focused. over and progress that's event don't where and that kind we of efforts the again, Lucky in we address year. our

Okay. Got it. One final for thing just me. quick

years we DSW, when this? flow, cash just a -- your companies basis, that at reported is benefit how that look we'll should cash benefited Do combined. XXXX? say, loss carry-forwards they whatever Just how for a Is know that benefit ago, net I a these losses? XX%? the flow tax It's on XX%, DSW Is on still, looking there just taxes, at but RBI, were I'm tax the were Jared, many clarification. rate

Yes. Yes.

five of Act really giving exception. you Act years. us that these mean that generating referring of losses losses But and to that year. to to is to changed to up gains. They them five I a the backwards had benefit years only those all this That's the CARES CARES is cash allowing had ability that are apply taxable go us we XXXX in So five forward. last last the years the I'm go backwards go to apply flow is the special The rules over

at we only loss, had can got just three and the that's why the you've are matter our tax years. cash at see -- at that's last we in allowances as lumpiness against benefit. on shake could happens is got look craziness It's going you look really cumulative you So all effective to valuation there totality, rate. we could yet, But looking on you there's possibility, with -- in you the sizable aren't anticipating if to will a for take a a what some the the cash precursor some of some rate then look but tax I say, And in the out very year you've And at and we're that. tax of little a that the just to depending craziness regardless. that's balance real sheet, fall. see in fall, come

Perfect.

Okay.

the Appreciate Thank good. it. All you. best. Sounds

Thank you.

final the team back to for concludes ladies any question-and-answer like this the to And gentlemen, conference session. over I'd turn remarks. and the management

our Again, call. Thanks, and good listening everything fall have of everybody. get day. let's I for Thanks you're know we on associates a for lot after the Have doing it this season. a

you, thank sir. conference today's presentation. attending And all concludes This for We you call. thank today's

You disconnect may now a lines wonderful your and have day.