Designer Brands (DBI) 8 Jun 232023 Q1 Earnings call transcript

Good morning, and welcome to the Designer Brands Inc.

First Quarter 2023 Earnings Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded.

to Investor conference Relations. like Fischer, to now of Director would turn over the Justin I Please ahead. go

otherwise. Good GAAP morning. week remainder during Earlier period the release certain XX, comparing financial today, exclude to of ended the unless company of XXXX recorded we Please adjustments for today's issued April operation results XX, call the note XX that the XX the period specified XXXX. April results ending under week a that press reference will

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

prospects the to the press Additionally, today's the please SEC. The any made Results to remarks forward-looking update note due no statements. may forward-looking with in listed release constitute company that assumes and future various about expectations, differ factors materially the plans, and company's obligation company statements. filings of public

us and are Officer; Joining Jared Poff, Howe, Executive Doug Financial Officer. today Chief Chief

to let the me Doug. call over turn Now

begin throughout to want by their team for quester. I the hard our work thanking continued

quarter difficult the pressure on the with our based was being of broad Given said, headwinds. strength fashion, year's face consumer, expected. more this the last our we would return year of first slightly strong anticipated the propelled than That coupled by we was which quarter environment first

team the first In level XX.X% declined first appropriately pleased across segment. with same Brands and was an to inventory our brand environment, up to Designer year. increasingly and the react both I quarter promotional how net stepped our compared manage read to retail the and time, quarter, at last sales our

a we XX.X% a the robust As of XXXX where of growth sales mentioned, was I just year-over-year. net saw first quarter period

up store traffic XX% market. outpacing year, our the last Additionally, retail significantly was US

has continuing segment in in the March fourth and this of Despite retail increased our since trend as are well April customer to of been the the the negative year, February, casual the sequential see down demand trend experiencing that offerings. as we quarter industry

important season. sales our not offset businesses selling [indiscernible] were the casual increase the most significant decreases to in seasonal and our dress in However, enough within

Specifically, were women's we quarter down in in retail sharp products, seasonal in men's X% XX% the sandals, in which a segment. and pullback in saw particularly our down

assortment strength X% DBI men’s overall category up within of we the as X% our and our casual casual they even pivot quickly preferences, of impact consumer quarter. saw flex and quarter leaning move course, drivers the up our and altered offer the compared prior more mitigate women's To in through want. with our changing in brands the ability Conversely, we are promotional to increasing year, to the to we we

during our past further our As at lower quarter. we've this have inventory were strategically value mentioned able price frequently we providing to over building been leverage customer back segment clearance we and the options year, points, offering, the

from XXXX X% were of our the Our strategy national our the US Despite quarter, own net a year. to by on we last against quarter encouraged of basis we clearance amplifying brands comps softness our while long the sales and to business be during to continue making doubling with term the brand up are editing progress partners. XXXX, compared in top

new continue in and to We into particularly category are bright brands, brand spots very integrating casual owned portfolio. see the continue to excited our our in acquisition

XX% the pleased have brands of quarter net growing made in We're the progress with to sales. own DBI we penetration

continue provide total term. DBI the Tigre, Athletic, to that last over Le complement and powerhouse which the As acquired over year, help diversified dress to all us fuel a have growth anticipate will to we brands seasonal and for long reminder, of for our Keds, we a Topo will benefit and

briefly each dive Now into I'd these. like to of

on an with update Keds. start Let's

wholesale positive recently style. the line refresh playful of and expectations. continuing performing on Wolverine's We Hence Keds integrate performance our is growth a with focused year versus last are brand in its pleased through with individual performance to the optimistic expression launched to brand acquisition Keds ownership saw are under date. and honoring

individual habit heritage pays homage strong well champion through multiple as line sell as the recent icon. celebrates Keds within that as style sneaker, recently, with celebrating well experiencing power. offering with focused is collection sneaker new product been which has a is collection of different both in the collaboration points (ph), and our style, original Keds and versatility self-expression our on champion that to distribution with [Court] as in reinterpreted keds.com. first The tennis and is iconic staying Our recreational silhouettes sneaker our launched success very on

and to excited is to to be our it's provides approach, customers Much footwear a in opportunity in own brand summer anticipate school unique versatility us and price season. Keds, we planned It and for offer Le into a like brand late history. back point will reach heritage this to This online athletic another at athletic in forward a furthers stores. offers great with the fashion category. brand time just lifestyle reasonable rich Tigre and and see launch with the

Lastly, and moderating this our category, brand with to weather while we meaningful to and brand. potential Topo. positioning from Designer excited distribution. on remain penetration trends. less of creating Topo's brands into These strengthen about This channels, integration in to that will wholesale the We and volatility three acquisition season, dress and Brands related to gives our athletic international lean across fashion are track already us a intend DTC specialty athletic plans the

dress the saw we categories. fact, brands seasonal In first during in our athletic strength owned quarter, relative to and

stellar announce we three, of an the In to the licensee closing working A exclusive to our the Hush to in excited casual and are brand and addition US Puppies and Canada. addition these own become agreement to that brands. on comfort are we categories

US the and Hush opportunity the sourcing our product meaningful casual and first over in well Our showcased in XXX%. for the opens agreement now, into wholesale brand Hush years retail brings as portfolio. site. to operate the upside up exclusive our will Canada, growth for for robust business independent at for comfort which The Puppies sixth outlet own now which has up our with DSW of be been has model, brand as DSW segment two quarter this design Puppies the us brand hushpuppies.com, growth This also ecommerce and

also want to touch several I brands. on of our legacy the owned performance of

Specifically in category. the casual

we year. denim XX% for in continues driven with western sales in resurgence Lucky spring pleased our momentum to the compared seeing first are Emma media her are with partnership in storytelling First, Roberts, more our with styles by X.X Crown collaboration We've includes as This at drove continue we curated seen The be we prior and drove April. around Vintage and the specially to collection. a latest Lucky of a women's the period DSW million up quarter also sandals trend impressions standout performed over last X% five to of channel style. the and demand celebrity well DTC year. day motivated which the

progress meaningful assortment the serving with made and across expanding space, dress our assortment. categories and expanding customer in beyond our a hybrid male men's the on We casual focus

both results casual DTC Vince up and category for men's We QX. Vince Crown business. with this Camuto within is Camuto's are Vintage XX% seeing encouraging our

step XXX] of of an a is Camuto and technical manner. breadth new the engaging of customer a for technology. construction, assortment include important expanded hybrid. our Several it construction brand dress different our (ph) with versatile in sportier him This journey our an introduction styles as offering are beginning the is casuals Vince [Fly We across types of male of in

Vince casuals. DSW. driven in the men's Turning casual brand by natural dress similar in has been with based up at with Camuto assortment to such canvas, way based is Crown for Vintage materials. five Crown number and a last our year, for the In XX% Vintage, to Crown our other the a the to focus over QX grow brand hybrid materials men's as approach Crown growth Vintage our is currently to the cotton chambray and business overall focus on

Our showed last delivering strength growth and brands many With compared continued solid X.X% our year. ecommerce comp. collectiveownbrands.com’s to in performance and across vincecamuto.com DTC our of

Designer keds.com new addition, topoathletic.com meaningful sales to Brands. delivered and In DTC both

during building generated at titled our and showcase traffic Vince brands celebrities VIP created end treating focus (ph) continue to from the giveaways efforts, and Camuto Experience, an Vince festival and featuring moments jacket. natural influencers including Coachella, own campaign Fashion and head hosting collection, stores handbags The dressed surprise toe Lucky guests, we reflecting we influencers Brands' exclusive were celebrated find engaging of attendants festival for the with in themed to a which for event excitement performances crochet several mirage moment. the that Camuto and brand and Lucky in from their Coachella, Chobello. vibe [Chobello] desert footwear culture at Brands drove homage of to cool the a trucker that styles online. As quarter events, buzz featured customization including Festival festival our to leathers, the to and spring in guests, station

Additionally, things all bright and Simpson sure slides shoe XXXX denim features these their own national complement the that growing in amazing apparel Complementary committed most colors, retail strong was spring-summer of strategy The hot season. and her to mid-April, and inspire largest we brand to customers to base. our and our launch relationships national wedges Simpson collection brands devoted love Jessica silhouettes. brands Jessica this of by platforms, of inspired with and looks to Jessica's initiatives, are celebrated the metallics, our relevant to collection and customer are fabrics,

We of are our national on focused a acting consumers. top as editing distribution point our for amplifying brands and

with in edit athletic this the As excited amplify plan will on are partnership This a strengthens our footwear which part as of October our in position elevate to our strategy, and leader year. we and space. build Nike,

that to assortment. a women's with gives customers Nike will digital us and Our kids offering allow and across athletic an men, our provide physical, premium, partnership

want I to our it will I that more Jared, he in in touch few over detail to Before minutes. quickly discuss guidance hand upon a

the the of last growth While the more balance year year. of and With challenging still leading of of slightly a am outsized than had start am about mindful quarter the this I anticipated, to delivered first market year of the in cautious quarter proud dynamics. top several on in I we quite mind, we've

impactful pressured First, see be a a consumer macroeconomic we anticipated. expected that environment, to by originally continue than to factor is more now a

the year. a first our business is frame selling for [indiscernible] periods biggest as the of quarter one time is of Second, two our critical

coupled have our expectations and continue that an second seen quarter. original promotional to continuing we value, Given lean weakness to the strategy the consumer clearance into in increased we will leverage with across

elements, earnings XXXX. do year. these are later improvement these we trends and of the are temporary in see result sales said, a lowering to That As and expect being believe our we guidance for

to it that, over Jared? With pass Jared. I'll

to macroeconomic challenging path our Thank evolve I organization's date. proud we current of capabilities, ability comments and model the on made to echo environment. of pleased you, I Doug's manage remain the want Doug, to We as the reiterate and everyone. our are good this through progress to brand building how morning, we we with power and demonstrate on our business am have journey the

top it in came As EPS adjusted Doug, you challenging heard slightly below at particularly was first line, $X.XX. from and our quarter, expectations on a the our

the top had quarter communicated that last retail and both first challenges on from in be line. comparison with by difficult coupled year current likely year-over-year With the both quarter the wholesale a our the first most strong we of performance the would our and bottom most far segments, environment,

this to We is feel that the case. continue

to a was retail into and promotional retail environment an most QX not materializing challenging anticipated than to perspective, increasingly the and peers. trajectory change discretionary continue From originally However, as more is the across we constrained our of consumer saw QX projected. react slightly

due of holiday pressured a category seasonal Additionally, in did we an [indiscernible] and as for assuming support expectations. our partners over all-important retail our term had From we expectations, March is weather many This which last a down year stance to which near perspective, wholesale product, inventory dominate met conservative we peak with were adjustments. a a not especially penetrate. to

me let provide our financial results. more a Now bit detail on

industry, the promotional primarily decreased aforementioned the XXXX, as consumers, result a compared tightening retail on $XXX.X XX.X% million quarter to of to For sales the and inventory a pressures environment. highly across first

for down For the quarter driven XX% retail the pressures. on of top quarter, XXXX. of comps same XX% quarter, retail were in XX% the comps the U.S. strong comp down by specifically total first a were

strong had However, of comps quarter robust a comps a were year X%. year. up basis, posting gain Canada last on comp X% XX% a two on top up stacked

decrease up XX% to year's of X%, given particularly quarter Finally, the performance of continued comp comps of first XX%. vincecamuto.com compared with noteworthy gain a was points. positive basis in gross XX.X% Consolidated year, the XXX be to margin which last last was

decrease fall we deleverage deleverage of clearance promotional the also was saw store business, given rebuilding this of of the in environments planned given year doing since While the fixed much been quarter some had occupancy work our we our last cost. and

continues structurally with More basis compared to importantly, XXX robust more to margin be points quarter margins gross first gross the pandemic than up pre of consolidated XXXX.

Our in the XX.X% adjusted was first sales first XXXX. quarter to of of the quarter ratio for SG&A XX.X% compared

cut we as continue Although sales, we to deleveraged in from base business. entire the significant a recognized across expense opportunities a in SG&A with costs XXXX trim have to we decrease have find our

prior For was the first quarter, X.X% compared in adjusted to year. operating the profit sales of X.X%

first was compared million and of net our adjusted rate $X.X XX.X% on our year. effective the quarter, last results we expense For had tax interest XX.X% to

or $XX.X $X.XX income adjusted year. quarter net per $XX.X first was EPS million diluted $X.XX last million or Our versus

last inventories quarter footage we year. of On but million ended last first acquisitions versus XX%, the compared X% million inventory down Topo inventory, and Turning $XXX.X XXXX. been with $XXX.X Wholesale XX% of inventories to the retail a Keds, have we quarter quarter would down square to adjusted the of first up quarter to ended the year. for first ended the basis,

our year, As we manage good uncertainties of second the quarter. inventory the position heading we into about through feel this

million. $XX.X million our We quarter availability was and under total revolver ended which with cash liquidity, cash $XXX.X the of our and includes

As the our $XXX.X the had available of revolving credit of quarter, we to million on draw end facility.

we from as we soon tax reminder, CARES the years the IRS refund which our the of remaining us prior await to continue million tax a $XX of of conclude. standard expect the as audits our to due As applicable Act receipt

Before I a few want on remarks conclude, share I updated guidance. to our

guidance quarter in modest quarter. through our growth of to with the As we half fourth consumer a discussed pullback first third the and year spending the last quarter, original soft assumed landing a a in the return in

performing uncertainty quarter slightly linger, delayed. below may to first that believe continuing and spending the be expectations in the discretionary With recovery our we consumer

are lowering As a we result, our guidance.

appropriate We across expenses our up to inventories the taken tightening the have factors board. under those prudently our including managing manage steps control, and

a As squarely consumer. uncertainty the result, with the discretionary largest lies

$X.XX are Accordingly, guidance we are EPS our range reflect of uncertainty per this of to guiding an adjusted to now to the widening $X.XX and share.

end have year start slower expect, sales and the uncertainty U.S. our of the might into experienced the guidance, our slower start retail than consideration to in largest you remained we As in anticipated year. of QX the segment we for balance the In taken contemplating the the that slightly in recovery high to QX.

a the last growth the However, still returns the range year. normalized more in increasingly year assumes top a when to that fall end return last versus net of to in in comparables that result patterns consumer easier to sales with fall, buying the coupled the

well. Keds year More mid-single specifically, as at our US assumes digits this down Retail sales last sales segment to Brands digits and Designer excluding at down consolidated mid-single are

Designer single Brands, calendar, year single digits year, result retail much The lower extra our relationship, also in sales fiscal high excluding over at than range easier performance buys secured, have week This recover in the comparables we lower the of year, the the still the and On at assumed we improved to year. segment than delivering in end last given down end closeout fall of spring, last albeit low comp sales doesn't Nike would assumes to US last guidance, in newly quickly. the experienced spring. we elevated consumer that consolidated sales digits high our in our last as down opportunistic have Keds, to our the slightly

geography our retail to down sales business touch made post of we year, I the of parts expect relatively be the COVID will now scenarios, experiencing. Regardless digits we've flat guidance within single Canadian to the our that assumptions continued business, range. within low for to on our the other given last in recovery

wholesale still now our XX% year. be Brands entered vincecamuto.com XXXX our down not to to to to given and versus year, by last be fiscal much. with guidance, we our in XX% in anticipate which our Keds approximately posture XX% expect are relatively we Additionally, We DTC conservative segment, original external the the flat to the guidance we revising site down excluding

year. Keds say Keds International As of we expect million Keds has the closed to multiple the reminder, pleased sales we as DTC, to acquisition, we delivering and acquisition that fiscal a to $XX on Since Canada. $XX beginning the including are continue the approximately add to wholesale, expected, at been of net channels, and million across

that we highlighted should anticipating we these and to costs the a noted as in from profitability integration previously, investments it acquisition of sales, related material we'll the are incremental As excited I not sales these current and impact about recognize result year, are be while to a this process.

and our estimated $XX of share. With to arrive million year, $X.XX range for rate of tax an at weighted per shares we EPS guidance the revised approximately XX.X%, average $X.XX

All increase million to and repurchase that own will anticipated to of launch common up offer our in the raise, expect Dutch this After repurchase share and later and significant a $X for intend tender value the investment under stock of effectively impact we at Directors, Class a discussion A existing a that in consideration between guidance related will to debt management discuss. shareholders. thoughtful represents just $XXX our of per we I which allow value our to believe earlier our us share price now We to today authorization. stock discussed efficiently $X of our excludes and announced tender and Dutch auction We the auction offer. Board today, with offer

the of in the details can conditioned is $XXX the offer. accompanying tender to loan release. press offer which tender term be million finalize expiration with the The prior anticipated obtaining we repurchase of to found upon look agreement financing, The

focus segments. times, both uncertain operate value a emphasis an as base for growing to inventory managing our we acquisitions our I on continue well these and we of on and continuing As expense we our our in momentum brand diversify challenging and customers excited revenue will with portfolio, continue navigate and as our levels the looking these I'm investments [indiscernible] about be to our the to retail and wholesale support forward in to made streams. have

Operator? call open the we questions. will that, for With up

you. Thank

We will from Jay ahead. [Operator Instructions] session. first now comes begin Sole question from the UBS. go Please Our question-and-answer

of much. bit elevation you Maybe so if you Thank a I'm little elaborate to Great. off, this with start interested on Nike. just can partnership

maybe I was reversal detail X% together. go back of about mean, to how maybe full a Just I sort if us see sales, level sales Nike of little of are And some you. think, around bit would we us can it be to of that before are and a came you that, have tell X% that Nike sales. Thank with helpful. and give going

Jay. the partners. Yes. excited questions. the This Hey, is Nike the for our product Doug. the just women's, really to across in that excited is obviously among came overall portfolio. -- are Obviously, And Thanks dialogue months. we're teams very happen to making past back It for that men's, That'll them. relationship with several bring Elevating they've changes and about been super in we're kids. be had able We've ongoing the great QX.

share they've be of partners. available across men's, women's. that customer. us, of to and given number kind We'll offer able We're their penetration that I thoughtfully November excited women's three in I and for build partnership, on, business with focusing like think, opportunity, We're obviously said, been Big just stores going digital. kids. So both to back. to market to be great our Again,

other excited with to that our the we'll but very as woe that. we'll and obviously, customer, portfolio continue about partners On them well, evolve

of on And then it. Got follow-up that. just kind maybe

on just want you bit. the touch little a You talked guidance about -- to

QX sort increasingly noticing promotions? where what most maybe you promotional Can the that that perhaps also happened? business that you're categories in are mentioned you sort increase of materialized. And kind in for of anticipating talk about hasn't change the like, you've are the an just You then in when you what you there's hasn't seeing been like, about and seeing and said environment, talk yet trajectory of,

honest Jay. definitely strength Thanks, casualization the seeing the again. equally Doug pretty It's fairly trend is just much just across with casual which continues. we're in spread you. to And men's, mean, be This I That buoyancy us very, And broad more income. in to really Yes. area. women's, being points similar, to kids it's Right? their discretionary with based. she's categories very all

obviously there's into so lean good like that known the to when news that. feel of to We're want that able been value, in through competency. as We've that for always very core control think certainly we that on our obviously that being about thoughtful we is are I promotions rebounds. a manage to be parts our

have lot both But little rebalancing an the of a I and think meaning, We believe done the back as to into casualization. we're brand side the move we reasons that amazing demand. tampered just on inventory, a retail of the had year. of seeing on the bit through job half of Teams side,

an So space move campaign, launch feel there. an excited elevating owned doing for as the marketing to really able relationship good fall as half the really about the We're Nike work back the we first the exciting then our launching be time year. And we be with with teams brand in to [indiscernible]. into to about the obviously, going are of excited athletic said,

it. Got

so you Thank Okay. much.

and back our to questions to more would There Howe Instructions] concludes over any the queue. session. This turn for question the like in Doug are closing answer remarks. no [Operator I conference

to through national our products. Well, continue heard you. elevate Thank excited through portfolio we focused you Consistently, the We're remarks. Nike. relationship on to our hopefully, brand with obviously are

we're As I to forward Tigre. Le looking said, launching

and work we time launched year. today. forward all updating you for brand us Also progress our August space brand our for thank amazing And in that to close next known this to just of hard I'll And our to where began you thanks their I we've look team joining dedication. partners. want by And athletic continued a thanking First of in quarter.

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

now You may disconnect.