Designer Brands (DBI) 5 Dec 232024 Q3 Earnings call transcript

Good morning, and welcome to the Designer Brands Third Quarter 2023 Earnings Conference Call. [Operator Instructions]. Please note, this event is being recorded. I'd now like to turn the conference over to Ashley Ferland with Edelman Smithfield. Please go ahead.

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

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

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

Denk, are Executive now Chief Joining I'll Jared to us turn the Chief Howe, call Doug today of President over DSW. and Officer; Laura Doug. Poff, Financial Officer;

everyone. Good today. for you morning, us joining Thank

for the heavily line. was most as Macro The dress Because and pressure acutely difficult impact is market since also our first the outsized business and our pandemic. top towards time continue us, on consumers retail had within third our warm segment traffic weather contracted for unseasonably overall to an under impact our seasonal the weighted business. quarter footwear remain headwinds

we as this demonstrate we We level speed the To will several for operate best strategic embark while diligent our in to have faced of fashion our increasing made and roles innovation, that also end, the we with leadership be backfilling position headwinds assortments. believe our the to need even greater organization, regarding newness and future. these journey order in decisions our across on we of business

key by order expectations. year comp communicated Supported we strong During in meaningfully we at Septober our need the a retail full to earnings and sat point the meet a of our year second guidance improve. inflection to quarter assumed throughout balance performance would that call, a our

sequential further, hamper improvement to that the we also something headwinds the noted possibility for could worsen We required.

broad-based quarter, seasonal specifically During dress. within continued growth our a sales well, sales fall Conversely, third weakness business comp delivering in experienced we a of shortfall the the digits. to and mid-single retail portion perform to season, the related particularly Septober, in casual

the the of lean business segment continuing to helped see intentional our also slightly declines. retail rebuild U.S. and within our value into We to clearance offset broader customer Retail

total Clearance down were down our sales significantly than X%. sales, were better X%, only which

dress Company e-commerce none were However, of enough segments, and short notably sites, decreases related dynamic product to these boots. our demand boot expectations, which in was and ] top the felt in their year-over-year. we our line falling specifically our Shoe demand, [ offset This industry-wide. stores, DSW significant by precipitous retail fell Within meaningfully a experienced more include seasonal driven of

boots represent leader We and to and continued material is footwear, been sales this long portion a which a seasonal have QX. of our in market sandals, in

According over market, seasonal quarter third dollar at performance XX% was year was footwear which down on in with to DSW. the total the our Circana, line last in based sales

our represented pressure nearly total represents of business, of third it disproportionate XX% in in seasonal about footwear while the the performance. However, DSW's quarter, on XX% resulting market

and speak across own of As initiatives the our assortment am excited we shortly. newest we meets merchant product-led, of that our get by to evolving end, pursuing customer supply skilled organization, into. her have about We roots strategic mix the category better data-driven and being leaning learn strategic merchant are entire Laura look that product is is leadership quick we will DSW and experienced categories, and the to preferences Denk, in we I trends President all business, consumer brought including the shopping across and To a back team to know continue adapting to our to perform can both more channels, our approach. nonseasonal

We in and down sales Keds, wholesale expectations. performance at legacy XX.X%, our vc.com. line in well as business our brands Brand with Hush Declines expectations Puppy strong our of overall the met our Topo additions as with segment were Portfolio in offset by

and are across traction brand We continue within prioritize we as to sustainable segment. gaining building this momentum our long-term growth portfolio

opportunities portfolio key of portfolio have make be our forward. and to that business moving athleisure the brand-building progress casual brands own seasonal beginning across us growth of At Since doubling to which significant our acquisitions. control sales with we focused white notable made and story the and continues central the with on space, journey, highly our we drove dress the space time, growing DBI's in our to

we specifically, improvement new throughput. sequential X new In in site October, in saw our and Topo shoes, the waterproof runner significant launched DTC a increase including quarter new low trail a we hiker. At and top a

at to posted platform refreshed Up Dede At XXXX in zero-drop cushion which quarter We by moment the as take a want drive increase also collaboration I over and/or lifestyle X Camuto, the Topo's for our continue at Spurred key significant influencer for expand experience comfortable attended the has Buttercup, who Tennessee, million run partners a awareness first-ever ST-X, a history. influencers followers its the helping as to launch, with the Instagram. our Dress Raad, incredibly a highest retail partnership with Vince session and brand us REI, in for the well minimally a to day day pairs largest To Nashville, of gym. celebrate thank vc.com workout in brunch fit full-price successful publicity. we on a the as Topo. to demand by brand natural, signature partner brand nonpromotional

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evolving strategically and assortment listening our to are customers. we way our Another

sales quarter. for comp Year-over-year, vc.com were up the X%

the in own remains our expand wear an both to total Importantly, men's position wide for market women's with addressable Vince and brands opportunity in significant shoes. excellent Camuto

their I very to challenging our thank dedicated Laura, hand for this team want I it environment. in over Before execution to

We in. are digging

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join key DFW's Laura? President, step, some DSW, running and hit updates. in Laura To ground has groundwork laying As has of me on a welcoming first Denk. the Laura priorities for for please strategic elaborate the begun these

customers to therefore, with closely Doug, and you, to everyone. great a today. with and talked issues, brand me of national of the important the our and stores first DSW, brand. to honor also and It management throughout at are. power team to all Thank There's biggest been of visited it's also many priority partners to It's been the work In outs has hello, I've my the my where and DBI learn ins and exciting firsthand business. country. an areas for you witness opportunity the universal and passion speak hear days, associates to has been the XXX with

we footwear industry, I since focus the market. Circana, first market overall to is has the seen DSW's the the a down quarter quarter According lagged decline of XXXX, was year-over-year, in also but total very that third our that this there business the QX elements discipline. where employ while boil and of can of believe I down, are feeling DSW certainly As more pressured brunt a performance

focused on As I work the need unpack to I near key am X areas in and term drive what to we why to improvement. intently prioritize,

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has coming in e-commerce fully we out of products For DBI all instantly early November, sites, top with national as and example, both our relationship. stores couldn't began Nike our rolled Nike September one and is back this brands, through in channels. of and happier in become be online

other also see to to the our national brands into Armour high-quality to offerings. plan In back returning Under pleased collection We spring, we bring DSW. are of

preferred are leader while road. brand footwear We assortment should has DSW need be must the Birkenstock And a but and started growing in DSW and for why industry, their excited consumer remain relevant, be with to in the years retailer. awareness to remind SKECHERS. recent a dominant the We also relationships see we our

with nearly We our industry leading program, power are boasts which still members. award-winning million the VIP XX

among We our been to continuously have new and refreshed potential driving our shopping awareness renewed members. convenient customers assortment and as about, not experience and one, two, loyalty diligent communicate existing

the are must best in conviction on and to of investing we start the As that gain that communications again marketing top broad such, we grow shoes. I awareness funnel

in As audience. step a an in first significantly female funnel to video top October, over marketing, XX% inclusive of of reach of inspiring investment target increased we campaign DSW's

time reads variety to While of of quality translate customer to why our is to top should remind transactions, to tangible more only of Said and the footwear continue and encouraging. of articulate DSW assortment are DSW more the assortment the into today, battle. all unique funnel footwear right for early simply, takes our position the having needs choose half loudly emphasize their needs. they marketing

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an In and Internet invest across modern, experience and pure constantly cannot. our to to we digital stay and relevant store our players opportunities looking addition refreshing evaluating engagement, experience are to footprint selectively conversion in omni provide this to capabilities that and improve evolving

subsequently have certain taken what to customer-first shopping to approach and of approaches them the asking thoughtful experience. aspects testing a new We important is

Oregon in and stores impact. We will aspects, which prioritizing those and analyzing the test from have are feedback biggest Houston, Columbus

this, learning. are We excited and been early encouraging, on in continue customer has the and the to but testing stages are reaction we

and to initiatives Doug, having marketing continue to over fresh, again, this, will the me develop holistic for will Jared? overview forward, refreshed conversation a results. will lead experiences. in-store that we into you for with call Thank financial digital exciting teams I assortment, As join of strategy today. and Jared an And move our new turn a our the

want Doug's morning, Laura, for everyone. industry. time the difficult is to footwear comments you, good as in business a broader our Thank reiterate I and this

through, EPS both leading out top on adjusted fixed quarter. and the As not line flowed fruition The ultimately were improvements risk an bottom the he a $X.XX. mentioned, that this did net anticipating resulted in to base earnings against line weakness we position on of I last call largely that top had and operating and our to came expense materialize called deleverage

of to alleviate and as the on is that expect the business. Based sustainable quarter in this is fourth across to not ongoing aware on given what improvements the year, we have making do this led date, of progress environment. through Our seen we to factors team macro these up pressures wrap the the elements especially uncertainty all situation sales we

provide me on our Let QX results. a more financial bit detail

bright specifically For sales third quarter, X.X% a by wholesale last in sales comps supply year with were year demand unlocked One strong premier comp million. the the to chain last X% channels pent-up vincecamuto.com the decreased X.X% disruptions. spot in the were X.X% up lap and posted channel following year quarter, in last of on expectations down October. business, up top comps down perspective, our of sales from our From XX.X% of a quarter wholesale as for roughly retail was quarter. the $XXX.X we in line with U.S. while that XX% XX.X% Canada DTC down one month comps in

success margin be ways we basis an shaft offset with store up consumer basis strong further was for freight our to gross continues costs. and of extra XX points gross quarter the to increase fixed XX% for into XX.X% than demand points gross fundamentally quarter's by and XXX decrease promotional the deleverage decision a continue said, of margin look boots. Consolidated pricing to quarter and bring stronger primarily in compared pre-pandemic That and will wide occupancy was third XXXX, operating by to lower margin driven in largely consolidated third to by model. the costs, to compared shipping of efficiencies being to our This year, the our last lean driven brand's wide

against mentioned. quarter of XX.X% XX.X% expense, the line Our marketing adjusted fixed third top of the SG&A in primarily third in to an ratio the was with driven pressures compared Laura for from increase increasingly sales expense along base deleverage XXXX, quarter by as an

quarter, and on had expense third was of adjusted our was to interest quarter. adjusted the compared X.X% sales quarter, to XX.X% prior results profit the third $X.X For last year rate effective for XX.X% In million compared operating net the our X% of year. we tax

inventories a $XX.X million, compared third the million our quarter strategic million $X.XX would into or with X% in acquisition our we $X.XX were was Wholesale the the to have Topo $XXX.X EPS to Finally, adjusted last We And aware position the of income such, risk down inventory third year. Headed inventory third XXXX. quarter last XX.X% when second as XX% last of acutely down compared been $XXX.X quarter square up inventory per were we inventory very down third XX% ended of ended year down diluted investments. million for adjusted of year. versus net roughly we the footage were $XX.X or ended basis, net versus quarter. facing. and fall, sequentially the and roughly quarter Keds, retail million On with and from $XXX.X we the

We approach in continue nimble to to remain assortment. our our

inventory a strategically maintaining prioritize promotions Black which in drive deployed we stores Cyber we for and to healthy Friday online. and Monday, As traffic helped position,

compared that $XXX during quarter repurchases. to total While cash of million XXXX, and is $XX.X the through approximately also QX, the $XXX.X share shareholders remain In generated operationally to million. $XX the dividends million is and year. our generation million third of bright through a returned last activities fiscal liquidity a we and we of same environment period Year-to-date, have steady operating cash provided strong current spot. by Year-to-date, challenging, flow net

our operating further loan a from long-term to by our liquidity, for conviction to we of this, activities, like position in in allowing the $XX.X total million. share liquidity term and the addition has opportunistic cash our believe cash with liquidity turbulent arranging revolver strategy. We generating bolstered million which manage showcases This action In while of our return form through cash quarter includes of to to us position availability quarter. the cash, liquidity and in dividends shareholders something in ended second $XXX.X also a we given under DBI's ample meaningful that and solid repurchases, times flow us

of borrowed end our of delayed the covenants and draw draw revolving XXXX, our debt million loans credit on all of $XXX.X strong to XX, January of the the facility. be XX, available Total the $XXX.X relationships taken the million we all of as providers. to under loan $XX On October credit As of remaining XXXX. We quarter, quarter. outstanding had with available million term million we well new $XX with any inside our remain end was of by have

to of receipt of from continue refund our CARES us the IRS. million await due $XX our tax to We remaining the Act

which are work As the as a refund for closed at on has no And the applies channels through now ultimate appropriate adjustments. approval way to and formally the with waiting Department funding. its audit for IRS reminder, our standard Treasury IRS we request the refund this such, simply

our year Given the are quarter's results, full we addressing outlook.

We also XXrd sales down flat be single-digits week. high quarter net the single-digits down single-digits high retail account net when for taking year, are planning now to into low DBI down the be to fourth for implying to DBI comps sales the for

do the expense come all inventory change base a to the in as full larger posture as of originally highly to don't the Septober result expectation see lost a we we demand expected in anticipated of remain will fourth is a to boot necessary. This $X.XX fixed be the to in quarter, we $X.XX. expectations that results is will a promotions communicated. continue While which range materialize keep so, in to top In The anticipate percentage level. line than we an appropriate this in adjusted EPS higher in revised will adjusted in change at sales in our competitive EPS for the substantially change year order

outstanding yield weighted taking we that we for repurchase far actions, million XX occurred and thus has that that immediately to identified in diluted us are address the the are the DSW. issues Doug to approximately fiscal activity given year. With year, fourth be this, Our for million results the for quarter share mentioned, shares Laura anticipated and believe will the are throughout average approximately $XX have areas unique to the future topline and meaningful

Portfolio are anticipate Brand growth and business we we across also discussed this segment, business leader we as finding seasoned And will part as in operating our be current outsized in in look run We an model operating and changes our take this of to looking the have time, This forward, will structure for continue to making horizon. ways QX. always, fixed experienced from to our including expenses further longer-term expense. result to in deleverage operating moving we bring efficiencies and anticipate interest expense our efficiencies including that our will and

As desired. laser-focused business that tactically Doug on noted, and we are as accelerating addressing ongoing strategies that areas not working are are performing our the of

were solutions more and Q&A. dynamic resilient is our enterprise I Operator? team than a With towards results to more to that, disappointing, energized model. ever the our turn to While for build would operator like

Instructions]. [Operator

question of from Bank. is first Deutsche The Gaby Carbone

to comments. on So dig just maybe your brand I awareness wanted in

can your the about you changed target then investments top you you we think kind into little mentioned bit. on you're be of of the You funnel that's a maybe back Maybe impact at from to customer ahead? how moving to all? SG&A the And has dig store? thinking mentioned customer further Do the the bring marketing making eroded a should

as in talked video of your in is which quarter. we Thanks this invested episodic marketing, Gaby, morning, the we for top Good funnel about, question. Yes, Doug. was

of be those able As measure to to know, the impact you take that. time

we into, the just we strength that to kind initial of of has But penetration customer the beyond. I that erosion dramatically by do into continued results, We as it's and leaning area, we an lean did have which obviously. other in continue to we the athletic the that in we'll wanted something our based are first and awareness. casual than know don't quarter that those encouraged move the fact into on our see changed been just of

wanted overall marketing increasing investments. to with there's continue with that through still we regard working balance next as marketing, top funnel to make of performance impact, file of the to we were as we funnel forward. that So year obviously, just well sure top our customer as a knowing of move latency We're

And follow-up. and a to casual it. wanted I Got into just more. if then I dig bit

earlier do with than I more think kind customer came has has how quarter Maybe response changed in your product? the Nike of taking been? you How product then athletic And mentioned month you originally planned. flow other that Nike Nike last all of on about the just transpire? inventory competition at a

Obviously, bit product Great results. in To we did with anticipated, Thank we're initial come originally comment, question. you. Yes. for the originally was earlier QX. pleased the very a which than your Nike planned little

quarter So it it the where started to flow was about has been midway through reaction initial strong. quite in. The

the the it's our one become obviously. quarter, X of just X% Within represented over a top little few the It's brands for of weeks, sales first still handily.

and So up X% that times, ramping we're between and historical still X%. was in

So very results. initial by encouraged

we try QX, which, as we category, to strong business momentum strategy again, our As in through deseasonalize of overall moving forward. to see athletic our part the we really is continue move

this talked add, would I thing one well. Gaby, and about I we've think as And

In excited customer. with addition see very we're to that product to the the resonate Nike itself

the up the or find ended we quantify Nike impact brand their of buying Nike We after drag of also loss feel our other we across certainly would brands. and that a impacted brands way Nike lost but on was the to that, digital else. other somewhere that, demand people think Hard overall exact some definitely DSW Google that way into that other searching of through

So have for top, might that pick as The and algorithms to time. excited take it back, we're back to that well. but it up come what also will mean the you being -- seeing bring

comes question from The next Sole of Jay UBS.

last you that. nobody pressures alleviate? to you the But pressures it? think a Obviously, You mentioned something Is year? macro persist half do that think macro for of ball, about these going that's next mean, have expects might Or this you what -- while. of to crystal you some how in don't expect the due first in would a I

Jay, we're is for saw say obviously don't I what guidance QX, seeing in would our with ball. question. in seasonal. to partially we QX. was to weather. saw Doug. a in point, consistent this is of There impact. kind We which an in have incorporated Yes, We your Thanks your we crystal what think warmer definitely outsized attributable we've

we that into As into sandals, obviously, pivot spring if assortment our move and dramatically changes.

We also and are are very seeing, like would the that, there and choosy we're opportunistic I with said, what into discretionary regards to said the and inventory athletic continue chase the customers be take buoyancy purchases. to Having selective very trend, of looking with to advantage I being say customers very for.

I indicates always fact been of are looking specifically that a customers DSW. think of trends value. still That's the kind core our strength clearance for

reacting We real to But position will continue react and to it, lean we're be in and it a to time. into that. we'll planning conservatively

you Thanksgiving just Can maybe, through the to of seen there color in -- then give could it. sales a And last then a little say, sales that, spike in Got did would put you like And that bit rates week I Or growth you and it. see just Doug, point if normalization of then the helpful. and has finer -- the trended, the around before how back week us a to what talk Monday, sales you've obviously, week mean, that post the trend be little you saw since Cyber maybe a the that. sort then weekend? before? about how on been bit that

make into didn't share, Sure. because Week. for Yes. promotional your we Thanks as to we we Cyber specifically went that were question. lose wanted We sure that very

aggressive very are did there. on we We promotions. nice performance a So see

accomplished said So a definitely there promos through those even coming kind mission out losing that, share. the not of Monday has again, with of then to of continuation been regard and Cyber Tuesday. lull Having

guidance. holidays. Friday weekends we're So been the definitely between bit into there's X our that. But always with the I obviously and But what very I for what lull obviously and There's into seeing of were we Friday, pleased but last still And very we until Black minute. and as quarter coming seeing the Christmas. that. a we're are a very Thanksgiving is historically selective, Black saw We promotional between They're customers being of think incorporated again, out were waiting leaning said.

more. if Okay. And one then ask I can

just can on brand you bit little elaborate the portfolio. a If

brand which the strength? brands, portfolio, that touch be there do the on room Maybe helpful. brands the which you could for within you Within see most is If brands portfolio, would just improvement? the

casual Yes. of in We're and against we're encouraged to space. were towards within to encouraged our our as that his certainly business. just distort very from performed I timing we're part were with portfolio we're with Topo But brand mean, the largely Keds the said athletic seeing what pretty And very what seeing some as from acquisitions, strategy We it that obviously, Jared comments, relates up expectations. comp a strong last year opportunities.

that to forward So we're encouraged overall, plans for our initial but and there of DSW the we in as very particular. encouraged definitely that well. then by TIGRE, that. Again, at saw opportunity, expand as obviously, launched we're part we we going businesses encouraged by And small what results brands Le those by have

the again, but So going optimistic integration, early days, those. through, obviously, we're about

This concludes to conference remarks. our question-and-answer would for to Doug session. Howe over turn like back the closing I

the have the over to Israel would I mention remiss Palestine months. several unfolded that be not tragedies past closing, terrible and in In

powerful those our our and and that recognize partners prayers have and proud designer difficult we positive lifts for around We Thank and uncertain the very this of our of we our us. us associates, all hearts and values belong. many how a time for, is are unite those with I'm recognize suffering supports that customers. you. impacts Our brands, because team cares

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

now may disconnect. You