Designer Brands (DBI) 1 Dec 222022 Q3 Earnings call transcript

Good morning and welcome to the Designer Brands Incorporated third quarter 2022 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today’s presentation, there will be an opportunity to ask questions. Please note this event is being recorded. to conference like Miller. to now would turn over the Jesse I go Please ahead.

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

Chief Officer, us are President Howe, Joining Jared Poff, DSW. Executive and Roger Doug Chief Financial Rawlins, of today Officer,

Roger. me let Now to turn the over call

thank We XXXX, quarter XX%. brand-building our sales with strong last you comp us solid up joining net to of quarter sales X% growth and quarter posted third on consecutive We and for made of of progress year today. results compared comparable which of ended was the everyone morning top material another journey. on Good the

incredibly against with relationships our levels strengthen of sales partners. XXXX progress are to invite of We of that site doubling as by maintaining our lapped as also of continue Investor accomplishments. highlights sales review our top infographic Relations and earnings on term you to quarter tangible third our made plan some brands national these long a record we while we of these proud in results our XXXX, own our we Notably, brands

our source understand be ability growth have to our will years the intimately love. so of design, unique products and our over driver we customers as As owned five you the they know, strategy key we continue sell brand the to can next the

third the in that period year. last XX% the sales share grew owned quarter, to excited compared to brand same We’re

X%. the is What retail growth at and our impressive, more distribution makes websites inventory. at this through time with delivered year this last is stores wholesale industry XX% when also flooded increase sales to grew even and direct-to-consumer coming Our a a

to pressure that we While our see model is differentiator unique industry, our ability brand own and margin us business section in a way. to of the as as confidence continue a just to our brands’ own self-liquidate our across product gives this key strategy our through into Doug extract in owned retail penetration along build inventory dive our possible more excess few clearance much will moments. ability the

end, talent and two have inside of into supply positions brand chief we’ve To the experience. transforming new that the international office, sourcing been a groups and investments sourcing brand-level we’ve leadership, a over years builder, last including Designer Brands, in in world. and As making and we of parts teams been strategic chain new created

in & we leadership strategy. and expertise extensive our executive sourcing leaders, of this The their branding space, and Fung footwear knowledge strong roles lifestyle brings industry, the Li bring on forward brand-building including Both members: brand Group. announced collective, a appointment and the last representing just Group, we Brands, Chain Centric Supply the board Additionally, of sports, new Fersko, and of professional some Paul, week powerhouse agency CEO two Manager global of Rich biggest and Founder across the leading Operations major Sports athletes who Tami and Jones and input to Chief Tami past of Rich and at Klutch look

wildly report clearance back the of planned we happy XXXX efforts since to and initial our quarter successful. As our in quarter guidance, expected on third bring be to were our fiscal calling we’ve be I’m to cylinders, which the introduction been shopper running out strategic was the to were all

a return third back discretionary looking XX% pleased part to time especially spending. our were see industry this business when cut compared up quarter model at the sales large are clearance on of consumers inventory of challenges more critical and full We Our to to were the XXXX. faces strength, to

hold. have we our retail our and and and made be sentiment, seen prior. success impacts profile of specifically, to In we growing delivered substantially macro quarter above keep we gross we third margin legacy material improve the have business, always levels the legacy have our rates XXXX consistently subject saw had structural of our conditions own structural pressures in the Given some levels, in should brands overall and changes we given we materially will those the from changes consumer and these while margin take in

over-inventoried exact industry styles massively assortments. entire lowering and players, potential brands, have of in we especially the many area an own price athletic aggressive the as competitors DXC quarter footwear that We very risk their last our effects this carry the noted First, of industry. become are in was largest of including businesses, impacts retail

two other big to retailers drop Additionally, in last suddenly and saw as you’ve box very widespread in continuing of weeks came on This brands October. consumer and across starting of the many heard drop the discuss, and discretionary demand appears market. be we a much

are range these XXXX within returning back original to impacts, a we our With EPS guidance.

I above of of Howe, across includes as remaining and to still thank improved continuing profile. for implementing adjusted now take this margin business and uncertainty as Jared more to associates into support single-digit Doug? and to closing, In are opportunity given to much minimize it retail the mid sales designer I’ll impact comp EPS nimble President growth in the DSW. our will $X.XX. our over the want Doug this $X.XX possible. to brands. still we the turn of efforts some structurally our around EPS of numbers full-year puts go guidance revised This XXXX to gross details significantly range Our

want and to talk and in everyone. developments first Thank I we you quarter. good the exciting third Roger, this about incredibly morning achieved milestones

national is build synergies and XXXX to the best-in-class Designer as journey our against unique sales brand-builder maintaining brands. long brands continued a strategic continuing strategy owned we retail we and clip exciting differentiator our an doubling infrastructure. and net is between of Our brands’ term Brands’ at deliver by the

widest have well as on two our quarter I quarter. made with brands of by DBI’s goal In path revenue assortment represented and exciting our making to huge want is brands our that customers a some owned quarter, accomplishment our on unique of owned to across brand we’ve progress We DBI they highly approximately way This year. specifically to with the infrastructure. of our elevating builder. a owned love XX% XX% needs to and in the of our total status them brands a to revenue us identify these brands omni third our ability the highlight XXXX. their developed of the and one-third connect in-place in and last compared a present puts That

Crown with media media strongest Emma Roberts This for that ever the seeing billion to In are their at We marketing enthusiastic about included are over invite and we channels. campaign our impressions its have is robust across Crown partnership social content XXX X and and which embrace Vintage in free-spirited shoes vintage-inspired the Vintage, that individuality. social a momentum and the brand press customers received collaboration campaign national social million a with had. very we accessories was its core celebrity a launched we with quarter, [indiscernible], and brand impressions

the our campaign some infographic. imagery see beautiful can of XXXX on QX You

consumer impressions. both Angeles have including we’re impressions, As index over Vintage media generated generating Los interest and period X XX XX%, indicating last year by Nashville the part billion organic that the of up searches up in scores significantly this DSW shops pop-up channels. social on launch, million with trending been in Crown we hosted beyond same Google over

the that proud with Brand, in move we such and other third In as milestones at for number some brand neighborhood our Vintage Additionally, top sold Ugg, women’s the through triple in incredible with Vince brand DSW in in the with Katie continues comfortably sit we of our in in as partners the and as are XX demanded & one at styles Crown and during grew styles met Kelly the digits Sept-ober three fact the Katie fall past Kelly was one the third DSW Camuto. & DSW boots quarter. top Similar, at the Lucky resonate quarter, brands few two and to was winter, it customers can months.

the official about and brand-building continuing brands’ our our with owned look to TIGRE. portfolio progress launch making are of the our excited are Le We in first journey forward we brand, athleisure

announcements exciting future. the in near You upcoming more can expect

continue We stores having in to our true goal online, and us the to of to allowing available assortment broader hold base. best customer both is attract a which possible

to shoppers clearance, our a we to due to product. ways data that to us have market longstanding demand We they products relates in shopped million of the the since as we to and Specifically who have had DBI, know effective At the meet customers how with leverage rich to customer engage. clearance them X reactivated not data. way want of to lack history they pandemic our design with it best

Our Warehouse in another example board. Houston are of the meeting customers’ across Reimagined our needs we store how is

store We shopping light describing have the a relative with with positive experience. the welcoming received feedback feels, and customers bright as overwhelmingly to and customers from store how warm better

and seen nearly a a third Reimagined Brands’ Warehouse important productivity at all have Scan competitive Intimately transactions expanded continuously these such is square shopping Our knowing them brand our and vitally us a as run business. resulted checkout Go launched to engagement. customer a have have listened increase. kiosks. our double-digit we smaller to kids self has massive brands is our in regularly The customer experience, of responded location. allows experience, we store of footage our for have section Also, with speaking Customers and we and advantage sales through increased for which new customer also parts has for evolve Designers shopping this increased in capacity our and and tool

compared delivered increase seasonal last were during DBI, kids on third our increase on this back-to-school quarter especially in last top mentioned and to XXXX. into the third newest for X% earnest sales increased the to we season top the on we year XXXX. we compared in only to a increase to that X% our capitalizing Turning increased Overall year started a pleased with a of in our XXXX, quarter, earnings lean on which X% we XX% attention of as in focus demand last call business

for turn to know as you an season is which me incredibly Let all important us. Sept-ober,

In as as period. the well of brand Our earlier. demanded our time the XX owned brands this women’s owned holding the during exceptionally number during five were Sept-ober, Crown Vintage top mentioned performed category, brands with was boots sold one brands spot

temperatures year. Sept-ober five most period. in our XX% women’s assortment the warmer of last did growth some We across rest much those the the to as of Additionally, see period same boots than compared brands were unplanned posted softness normal

market saw saw and Roger in half demand to traffic year the as we most there QX. to us Additionally look giving year business builds reason the posture October, be and the for ended we apply discretionary the back expectations. consumer starting we referenced, If that in historical of the drop-off coupled original plan promotional a balance of what consumer right now with is October. trend that massively pressure of of of to for bring where is competitive we balance and the is feel branded athletic down to cautious sudden continued the This

to how I time necessary. it that, to impressed Jared. their stepped I’ll and was over the want as read, react up to for pass it to again Before throughout time and Jared, pass the the work Jared? With quarter. with hard over I I team adapt thank really team

morning everyone. and you under call that reference that remainder will recorded financial we of Thank today’s GAAP certain good the note specific adjustments otherwise. excludes results Please during the Doug, unless

reestablishment reference around customer and bear. Designer numbers the our be of and For delivered the while comments business please couldn’t Roger continue earnings, goals strategic that of accomplish. of evolved our and to a of what brand to press have model fruits GAAP echo third business seeing and the Brands, put our diversified adjusted clearance We to demonstrated I come our also important power of teams prouder I in up this critically and results. reconciliation the growth change the We to our owned Doug’s want pride release. quarter we on complete of

Let’s review results. first our

to For the sales to third compared of $XXX quarter, increased the million same X.X% quarter XXXX.

in were all sales saw the up comps our of the comps quarter top of of for third [Indiscernible] comps was XX.X% of XX% were see strong in the continues same XX.X% XX.X% across up gain a the million. on up third were retail we strong last and total quarter, quarter quarter compared year. of XX.X% for XXXX. to the Within prior in posted growth, the X.X% XX.X% and top compared a comp to quarter growth for year, on of year. segments. positive comps to Gross this the Canada X% U.S. profit For prior up $XXX.X

As decreased gross structural above consolidated planned year clearance won business quarter reestablished clearance lapsed in changes and business. last as our strategically and meaningfully that the as made to in previously and our rate profit communicated, we’ve our shopper, coming XXXX intentionally for we given the while back

Our XX%, SG&A basis XX.X%. the XXX rate gross points XXXX’s came consolidated was profit third for the of in $XXX adjusted In rate million. at quarter quarter, above

in Given our sales, sales quarter $XX.X some at relatively basis in adjusted rate. third to with tactics during had we We the mitigation and profit were surface, compared in the of quarter of we sales last sales as line million interest pressures able above soon saw profit third the hold points as of of the million expense increase of operating in macro $X.X expense SG&A implemented the quarter, XXXX’s to XX.X% net our the we X.X% XX.X% ratio operating year. $X.X prior XXX compared to last third year. and Adjusted was million year

Our third the in quarter. tax rate was adjusted XX.X% effective results on

adjusted net million $XX.X per or $X.XX quarter Third share. diluted was income

ended inventory, $XXX.X of third we with inventories Turning last to $XXX.X year. compared to quarter the our million million

planned As quarter. the continue and last ended expect down year; throughout footage versus a the down Inventory end previously accordingly, materially we to quarter the up and elevated to we square decline of they from were at comp at quarter in communicated, to levels flagged with the the quarter inventories our as this end the retail we year as the second compared for on second coming out continued of XX% XX% round third the we year. inventory be up XXXX, basis would of and

to who closer much machine have clear moving had self-liquidating DSW Unlike brands end us clearance perform year year’s our when inventory. through as allows to turn inventory better of than solution to slow the expect last to through inventory, other part we levels. have We to large liquidators to their that business others a needing to

differentiator a needed reestablish model we is we As our a and which clearance is this brand-builder, to business, to why our did. massive

quarter, fourth remains as Importantly position liquidity we move the into our strong.

million quarter roughly outstanding quarter, the were million the year. equivalent shares. Repurchases our of During million million, includes cash year-to-date the facility. the ended credit million. cash repurchased QX at revolving our of draw which in and is XX% we to on with through total available to revolver under liquidity, of XX.X XX our We availability X.X which shares $XX.X $XXX.X beginning with had We $XXX.X our million

we the debt, the tax liquidity. share to IRS due to million well total Act of November, down $XXX pleased million pay immediately was over with used in of that ended from are refund we CARES addition, In which and November million $XXX we $XXX to us received

standard prior audits tax years We as the expect of we soon to the $XX continue of which the conclude. await million the receipt as remaining applicable

we’ve industry a the with however of pleased our an initiatives, we constrained weeks not mentioned, of drop with in excess in two more As the and had a resulted including October. last success macro be strategic pressures, in in inventory consumer the demand could

expect similar persist therefore We year it guidance. to to feel revise dynamics our prudent is full we and

and strategic business in we continue Given macro environment, to closely our effective a our costs and the manage challenging manner.

to in Retail assess we cognizant lower still at the to expected in comp XXXX our $X.XX and retaining the a now in investments this pressure, issued XX% single to is growth as all Non-DBI continue actually year. the sales this the competitive also initial of business We term is want of to backdrop, year the be growth the are the $X.XX XX% anticipated to hyper end year, beginning where longevity $X.XX $X.XX mid top our wholesale come guidance talent cutting critical now macro revising guidance of are but we want range. With in the but with is follows. and full growth line of in to last our prudent near to full is over EPS digits, as owned of adjusted in this better expected squarely of year to our market. brands projected for labor remain we that at be to

very be structural arise. of that to have better changes these the perform continue proud in we We business even our us when to pressures made allow macro

would As this total what in adjusted for revised but a guidance EPS imply, a saw sales higher XXXX comparison, only than bit was XXXX $X.XX. actually DBI

This require targeted athletic our past, at the profit brands which discounts growth in gross strategically streams we our make of across and business term strategic and retail With broad-based profit growth to along discounting, the our rate past sustained owned the more XX the towards keeps issues these to see our change, Brands meaningful in our for digitally margin leverage as brands less continue what versus top direct profile or to sustained in about move more marketing replacing Designer this XXXX. segments progress and business with our means macro national plans. long excited sales, me we approach meaningful diversified continue meaningful mail and focused revenue

and questions. As open the will our lean grow infrastructure brands. navigate strategic nimble this to that, being utilizing owned pillars, challenging adaptable, and we With to call continue our we on Operator? we DXC move environment, for inventory will

question go ahead. Our Jay [Operator Sole instructions] Please comes UBS. from first from

change just the the competitive be will consumer behavior relative it see in the you do quarter change you you’ve you you’ve a so what or competitive little leading XQ in fourth third talk the about in bit see year tell or maybe much. think Maybe Do about Great, fourth do expect the just more the the guidance the and to you margin the full a seen about thank for bit quarter. so than us little into could change the better? much. you you what a environment you that the fourth quarter. Roger, if and little so gross more that’s bit to Thank far seen quarter same, them in getting

Jay. Thanks

DSW to are our talk the at market, our I’m trends over plays, direct-to-consumer continue to as you are The Those which Adidas with in been that is QX material that the those swoosh are for puts get, we people, just being look we’ve experienced has play those a product think XX%, big will up that planned down they things the way, trends inventory customer obviously have, looking a is one to into that clearly, the in that the you and they XX% excess throughout of this, things slowing out with athletic the pumped Doug up sell at responding, consumer but we quoting, the major can and happen, don’t when you macro so of and is the showing think these that are and particular. we inventory. some QX. I and that’s their goods of that. look up over items obviously see that’s on directionally big and we of what clearance goods from and I’m Skechers things QX, are we it’s again, we I through value, what’s amount inflation seen our voting you two secondary expectation, a into the the not pressure how and - that big sold athletic inventory, there that XX% that folks that guidance, be there being that see business, value pass, when when want try driver offers comp. there three that Then are over second being is two XX%, and market was number. we market into on it in posted know have amount excess clear up in the you given see category go is players,

that? in you and first just it perhaps really the the happened there’s is if is it, you to about tough from can of then election Do we’ve and this, the distracting the slowdown, weather of some of consumer issues inflation? was it more October pretty November, Where omicron. talk the second the the that or that think maybe year that of reason the supply happened the maybe half seen pull-forward if compares related, do last weakening and of people, because were half because Got because discussion on slowdown you of that’s chain was stand

our achieved you really whenever for our sandal really team to business was QX, You comp about and at know, don’t a negative weather, goals look the was talk in but boots business we how allow strong our quarter, but so. performed, it still our

second piece seeing DXC what us; then market inventory the the know, sandal they’re back so really of customer things two competitive value, in business they those are is brands but looking through weather for the just us the and is some good, a from because You those is, their we to end comes of at our out lot competing that was voting day, in are it The with there frankly, was are channels. clearly it mentioned. there and I is that’s buying

it, Thank much. Got you okay. so

thanks. You’re welcome,

a you please if have Again then question, press one. star

Gabby question Our ahead. from Please from go Bank. comes Carbone next Deutsche

Thank for Hi, you taking good my questions. morning.

Just wanted back clearance to customer stores. again, coming that’s that back circle been to into your

and can you. into how units traffic Just per transaction. curious you if that’s impacting dig Thank

so customer. into. point, quarter, in definitely Yes, in that Again, definitely more can and talked hi clearance accelerating obviously, lean We we about Roger’s XX% regards that a customer as actually said opportunity to there’s so moved value, throughout are us, back, transcript, towards a so fact with increase saw that our that’s customers overall XX% key is that which differentiator, the and of, model more a proud other we generated had of brands. clearance with significant Then for again regards DSW are the be connote those believe those clearly it for is the model I us we migrating in the the focusing the value. we obviously that quarter, we owned sales again is quarter, on Obviously in as XX% move in two a favorability an regaining increase, our couldn’t Gabby, we as Doug. is volume going at our the with clearance be we customer to those over the that had thing factors was results this so because we the was to value had to and forward, this differentiators

is Gabby, Roger. this

to I to it and our that’s sort is Doug it’s we’ve plan for opportunity pivot that the assortment leveraging years think compete to been and then leverage leaning landscape of that we more different, the into that last now even the keep are to in think those three we the who brands, that’s exclusive continuing you to just ones share, things three it’s at customer one, Jay’s we us where pass owned I to the our for doing if customer. been continue day owned for growing and obviously as game to how prop. work. years. we’re into all the value about comes from point of we’re Doug’s to this, way going a a To are Knowing question, to and is last that’s our script, way about XX% and talking But rooted clearance to and the year-over-year, do especially big brands us in grow competitive think that one thinking and and that what remarkable, is for respond our to our us, said, as thing DSW, lean is

can follow-up. planning I next brand to as discuss the conservatively had just over a wondering I couple DSW pretty outside maybe see next retailers your was we’re inventory plan you’re portfolio of it. for year. if Got how you quick continuing quarters

don’t of the that the plan, you we guidance want and not that now, your we being the ability you I conservative into we always forward-facing inventory do will upside. is Right what but in you’re chase let more if dealing give industry some the we’re over-inventoried, to Yes, get for to year, with next know have until pain happen. view

think be look of and our tradition say, at sell would to is we we’re inventories a managing in business DSW what Shoe a more we’re of have forward, inventory will much history our move I outside as that’s we approach going Company positions tight how manner, our pretty specifically we our we conservative, core approaching and I as and in businesses.

it. Got

Okay, that thank very you well color. for much

Gabby. Thanks

This session. I back remarks. question closing would Rawlins for and to concludes turn our the over to conference answer any Roger like

of know Thanks I listening want have I associates, - we everybody in for and a lot just recap. to

space we of you out that quarter. the there I things XX%, top of your our year of--remember, kind line If accomplished had of top growing grew not see third think and about on in our those you business folks the last this big results X%, quarter by there’s that’s for by lot so a

owned and holiday. direct-to-consumer rate into year that to versus we that just our by amazing four margin meaning up - and the everybody You things doing fantastic put and hope remarkable. XX% team in five XX%, can’t grew what to grew we that strategies Mary Jo thank in control, where our and add and or gross progress the a by channels BPs brands, last penetrated at whole in I XX%, XXXX, Nancy our XXX XX% you last enough. were up grabbing the working, soon. and has are you demonstrated, I the you. over share. years you The keep just doing have and place and growing Thank own Then then market that Talk you’re huge Canada XX% we’ve

attending for concluded. you today’s Thank now has conference The presentation.

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