Designer Brands Inc. Reports First Quarter 2024 Financial Results
Consolidated gross profit margin rose 80 basis points over the same period last year, driven by the Brand Portfolio Segment
Net sales growth in performance and leisure footwear in the
Company reaffirms full year 2024 guidance
"This quarter, we were pleased to deliver results in line with our expectations for this quarter, as we gain traction on our path to returning
Howe continued, "Moving forward, we will continue to prioritize our strategic commitments to revitalize our assortment, elevate marketing, and enhance the in-store and digital experience, while exploring areas to further rationalize our cost base appropriately, streamline our operations, and drive greater efficiencies. We believe that we are on solid footing as we enter the summer months and are pleased to reaffirm our guidance for 2024."
First Quarter Operating Results (Unless otherwise stated, all comparisons are to the first quarter of 2023)
- Net sales increased 0.6% to
$746.6 million . - Total comparable sales decreased by 2.5%.
- Gross profit increased to
$245.1 million versus$237.7 million last year, and gross margin was 32.8% compared to 32.0% for the same period last year. - Reported net income attributable to
Designer Brands Inc. was$0.8 million , or diluted earnings per share ("EPS") of$0.01 , including net after-tax charges of$0.07 per diluted share from adjusted items, primarily related to restructuring and integration costs. - Adjusted net income was
$4.8 million , or adjusted diluted EPS of$0.08 .
Liquidity
- Cash and cash equivalents totaled
$43.4 million at the end of the first quarter of 2024, compared to$50.6 million at the end of the same period last year, with$187.8 million available for borrowings under our senior secured asset-based revolving credit facility, as amended. Debt totaled$476.1 million at the end of the first quarter of 2024 compared to$390.3 million at the end of the same period last year. - The Company ended the first quarter with inventories of
$620.5 million compared to$637.4 million at the end of the same period last year.
Dividend
On
Store Openings and Closings
During the first quarter of 2024, in
Reaffirming 2024 Financial Outlook
The Company is reaffirming the following guidance for the full year 2024:
Metric |
|
Guidance |
Designer Brands Net Sales Growth |
|
Low-single digits |
Adjusted Diluted EPS |
|
|
Forward-looking adjusted diluted EPS for 2024 excludes potential charges or gains that may be recorded during the fiscal year, including among other things: (1) restructuring and integration costs, including severance charges; (2) acquisition-related costs; (3) impairment charges; (4) foreign currency transaction losses; (5) the net tax impact of such items; (6) the change in the valuation allowance on deferred tax assets; and (7) net income (loss) attributable to redeemable noncontrolling interest. A reconciliation of forward-looking non-GAAP earnings guidance to the comparable GAAP measure is not provided, as permitted by Item 10(e)(1)(i)(B) of Regulation S-K, because the impact and timing of these potential charges or gains is inherently uncertain and difficult to predict and is unavailable without unreasonable efforts. In addition, the Company believes that such reconciliations would imply a degree of precision and certainty that could be confusing to investors. Such items are uncertain and could have a substantial impact on GAAP measures of our financial performance.
Webcast and Conference Call
The Company is hosting a conference call today at
https://app.webinar.net/PDZrA5vkbE0
For those unable to listen to the live webcast, an archived version will be available on the Company's investor website until
International: 1-412-317-0088
Passcode: 9545499
Important information may be disseminated initially or exclusively via the Company's investor website; investors should consult the website to access this information.
About
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
Certain statements in this press release may constitute forward-looking statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements by the use of forward-looking words such as "outlook," "could," "believes," "expects," "potential," "continues," "may," "will," "should," "would," "seeks," "approximately," "predicts," "intends," "plans," "estimates," "anticipates," or the negative version of those words or other comparable words. These statements are based on the Company's current views and expectations and involve known and unknown risks, uncertainties, and other factors that may cause actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. These factors include, but are not limited to: uncertain general economic and financial conditions, including concerns of a potential recession in the
SEGMENT RESULTS (unaudited) |
|||||||||||
|
|||||||||||
|
|
|
|
|
|
||||||
|
Three months ended |
|
|
|
|
||||||
(dollars in thousands) |
|
|
|
|
Change |
||||||
|
Amount |
|
% of Segment |
|
Amount |
|
% of Segment |
|
Amount |
|
% |
Segment net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
$ 621,367 |
|
79.6 % |
|
$ 612,886 |
|
80.7 % |
|
$ 8,481 |
|
1.4 % |
Canada Retail |
55,512 |
|
7.1 % |
|
53,955 |
|
7.1 % |
|
1,557 |
|
2.9 % |
Brand Portfolio |
104,130 |
|
13.3 % |
|
92,983 |
|
12.2 % |
|
11,147 |
|
12.0 % |
Total segment net sales |
781,009 |
|
100.0 % |
|
759,824 |
|
100.0 % |
|
21,185 |
|
2.8 % |
Elimination of intersegment net sales |
(34,413) |
|
|
|
(17,742) |
|
|
|
(16,671) |
|
94.0 % |
Consolidated net sales |
$ 746,596 |
|
|
|
$ 742,082 |
|
|
|
$ 4,514 |
|
0.6 % |
|
|||||||||||
(in thousands) |
|
|
Canada Retail(2) |
|
Brand Portfolio |
|
Eliminations |
|
Consolidated |
||
Three months ended |
|
|
|
|
|
|
|
|
|
||
Owned Brands:(1) |
|
|
|
|
|
|
|
|
|
||
Direct-to-consumer |
$ 105,014 |
|
$ 8,360 |
|
$ 13,930 |
|
$ — |
|
$ 127,304 |
||
External customer wholesale, commission income, and other |
— |
|
— |
|
55,787 |
|
— |
|
55,787 |
||
Intersegment wholesale |
— |
|
— |
|
34,413 |
|
(34,413) |
|
— |
||
Total Owned Brands |
105,014 |
|
8,360 |
|
104,130 |
|
(34,413) |
|
183,091 |
||
National brands |
516,353 |
|
47,152 |
|
— |
|
— |
|
563,505 |
||
Total net sales |
$ 621,367 |
|
$ 55,512 |
|
$ 104,130 |
|
$ (34,413) |
|
$ 746,596 |
||
Three months ended |
|
|
|
|
|
|
|
|
|
||
Owned Brands:(1) |
|
|
|
|
|
|
|
|
|
||
Direct-to-consumer |
$ 123,209 |
|
$ 7,872 |
|
$ 10,624 |
|
$ — |
|
$ 141,705 |
||
External customer wholesale, commission income, and other |
— |
|
— |
|
64,617 |
|
— |
|
64,617 |
||
Intersegment wholesale and commission income |
— |
|
— |
|
17,742 |
|
(17,742) |
|
— |
||
Total Owned Brands |
123,209 |
|
7,872 |
|
92,983 |
|
(17,742) |
|
206,322 |
||
National brands |
489,677 |
|
46,083 |
|
— |
|
— |
|
535,760 |
||
Total net sales |
$ 612,886 |
|
$ 53,955 |
|
$ 92,983 |
|
$ (17,742) |
|
$ 742,082 |
|
|
(1) |
"Owned Brands" refers to those brands that we have rights to sell through ownership or license arrangements. |
(2) |
Beginning with the 2023 Form 10-K, we are providing a breakout of Canada Retail segment net sales by brand categories and we have recast the three months ended |
Comparable Sales |
|||
|
Three months ended |
||
|
|
|
|
Change in comparable sales: |
|
|
|
|
(2.3) % |
|
(11.6) % |
Canada Retail segment |
(4.9) % |
|
2.9 % |
Brand Portfolio segment - direct-to-consumer channel |
(1.7) % |
|
8.3 % |
Total |
(2.5) % |
|
(10.4) % |
Store Count |
|||||||
(square footage in thousands) |
|
|
|
||||
|
Number of |
|
Square |
|
Number of |
|
Square |
|
500 |
|
9,939 |
|
499 |
|
10,015 |
Canada Retail segment: |
|
|
|
|
|
|
|
|
122 |
|
626 |
|
114 |
|
601 |
DSW stores |
25 |
|
496 |
|
25 |
|
496 |
Rubino Stores |
28 |
|
149 |
|
— |
|
— |
|
175 |
|
1,271 |
|
139 |
|
1,097 |
Total number of stores |
675 |
|
11,210 |
|
638 |
|
11,112 |
Gross Profit |
|||||||||||||
|
Three months ended |
|
|
||||||||||
(dollars in thousands) |
|
|
|
|
Change |
||||||||
|
Amount |
|
% of Segment |
|
Amount |
|
% of Segment |
|
Amount |
|
% |
|
Basis Points |
Segment gross profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ 198,455 |
|
31.9 % |
|
$ 196,814 |
|
32.1 % |
|
$ 1,641 |
|
0.8 % |
|
(20) |
Canada Retail |
17,385 |
|
31.3 % |
|
17,174 |
|
31.8 % |
|
211 |
|
1.2 % |
|
(50) |
Brand Portfolio |
33,477 |
|
32.1 % |
|
22,085 |
|
23.8 % |
|
11,392 |
|
51.6 % |
|
830 |
Total segment gross profit |
249,317 |
|
31.9 % |
|
236,073 |
|
31.1 % |
|
13,244 |
|
5.6 % |
|
80 |
Net recognition (elimination) of intersegment gross profit |
(4,248) |
|
|
|
1,666 |
|
|
|
(5,914) |
|
|
|
|
Consolidated gross profit |
$ 245,069 |
|
32.8 % |
|
$ 237,739 |
|
32.0 % |
|
$ 7,330 |
|
3.1 % |
|
80 |
Intersegment Eliminations |
|||
|
Three months ended |
||
(in thousands) |
|
|
|
Intersegment recognition and elimination activity: |
|
|
|
Elimination of net sales recognized by Brand Portfolio segment |
$ (34,413) |
|
$ (17,742) |
Cost of sales: |
|
|
|
Elimination of cost of sales recognized by Brand Portfolio segment |
24,093 |
|
13,211 |
Recognition of intersegment gross profit for inventory previously purchased that was subsequently sold to external customers during the current period |
6,072 |
|
6,197 |
|
$ (4,248) |
|
$ 1,666 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited and in thousands, except per share amounts) |
|||
|
|||
|
Three months ended |
||
|
|
|
|
Net sales |
$ 746,596 |
|
$ 742,082 |
Cost of sales |
(501,527) |
|
(504,343) |
Gross profit |
245,069 |
|
237,739 |
Operating expenses |
(238,551) |
|
(220,119) |
Income from equity investments |
2,864 |
|
2,331 |
Impairment charges |
— |
|
(341) |
Operating profit |
9,382 |
|
19,610 |
Interest expense, net |
(11,561) |
|
(6,597) |
Non-operating expenses, net |
(143) |
|
(334) |
Income (loss) before income taxes |
(2,322) |
|
12,679 |
Income tax benefit (provision) |
3,207 |
|
(1,306) |
Net income |
885 |
|
11,373 |
Net loss (income) attributable to redeemable noncontrolling interest |
(102) |
|
42 |
Net income attributable to |
$ 783 |
|
$ 11,415 |
Diluted earnings per share attributable to |
$ 0.01 |
|
$ 0.17 |
Weighted average diluted shares |
59,470 |
|
67,042 |
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited and in thousands) |
|||||
|
|||||
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
Current assets: |
|
|
|
|
|
Cash and cash equivalents |
$ 43,434 |
|
$ 49,173 |
|
$ 50,569 |
Receivables, net |
96,712 |
|
83,590 |
|
100,237 |
Inventories |
620,493 |
|
571,331 |
|
637,396 |
Prepaid expenses and other current assets |
78,224 |
|
73,338 |
|
43,598 |
Total current assets |
838,863 |
|
777,432 |
|
831,800 |
Property and equipment, net |
223,205 |
|
219,939 |
|
227,692 |
Operating lease assets |
728,346 |
|
721,335 |
|
701,670 |
|
133,666 |
|
123,759 |
|
134,770 |
Intangible assets, net |
85,252 |
|
82,827 |
|
75,450 |
Deferred tax assets |
40,868 |
|
39,067 |
|
50,111 |
Equity investments |
62,863 |
|
62,857 |
|
66,151 |
Other assets |
50,540 |
|
49,016 |
|
46,851 |
Total assets |
$ 2,163,603 |
|
$ 2,076,232 |
|
$ 2,134,495 |
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST, AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
Accounts payable |
$ 298,968 |
|
$ 289,368 |
|
$ 288,526 |
Accrued expenses |
182,767 |
|
159,622 |
|
170,759 |
Current maturities of long-term debt |
6,750 |
|
6,750 |
|
— |
Current operating lease liabilities |
161,050 |
|
166,531 |
|
183,074 |
Total current liabilities |
649,535 |
|
622,271 |
|
642,359 |
Long-term debt |
469,328 |
|
420,344 |
|
390,302 |
Non-current operating lease liabilities |
657,625 |
|
646,161 |
|
635,245 |
Other non-current liabilities |
25,253 |
|
24,948 |
|
23,342 |
Total liabilities |
1,801,741 |
|
1,713,724 |
|
1,691,248 |
Redeemable noncontrolling interest |
3,390 |
|
3,288 |
|
3,093 |
Total shareholders' equity |
358,472 |
|
359,220 |
|
440,154 |
Total liabilities, redeemable noncontrolling interest, and shareholders' equity |
$ 2,163,603 |
|
$ 2,076,232 |
|
$ 2,134,495 |
NON-GAAP RECONCILIATION (unaudited and in thousands, except per share amounts) |
|||
|
|||
|
Three months ended |
||
|
|
|
|
Operating expenses |
$ (238,551) |
|
$ (220,119) |
Non-GAAP adjustments: |
|
|
|
CEO transition costs |
— |
|
2,210 |
Restructuring and integration costs |
4,829 |
|
2,120 |
Acquisition-related costs |
486 |
|
1,507 |
Total non-GAAP adjustments |
5,315 |
|
5,837 |
Adjusted operating expenses |
$ (233,236) |
|
$ (214,282) |
Operating profit |
$ 9,382 |
|
$ 19,610 |
Non-GAAP adjustments: |
|
|
|
CEO transition costs |
— |
|
2,210 |
Restructuring and integration costs |
4,829 |
|
2,120 |
Acquisition-related costs |
486 |
|
1,507 |
Impairment charges |
— |
|
341 |
Total non-GAAP adjustments |
5,315 |
|
6,178 |
Adjusted operating profit |
$ 14,697 |
|
$ 25,788 |
Net income attributable to |
$ 783 |
|
$ 11,415 |
Non-GAAP adjustments: |
|
|
|
CEO transition costs |
— |
|
2,210 |
Restructuring and integration costs |
4,829 |
|
2,120 |
Acquisition-related costs |
486 |
|
1,507 |
Impairment charges |
— |
|
341 |
Foreign currency transaction losses |
143 |
|
334 |
Total non-GAAP adjustments before tax effect |
5,458 |
|
6,512 |
Tax effect on above non-GAAP adjustments |
(1,398) |
|
(1,508) |
Valuation allowance change on deferred tax assets |
(136) |
|
(2,117) |
Total non-GAAP adjustments, after tax |
3,924 |
|
2,887 |
Net income (loss) attributable to redeemable noncontrolling interest |
102 |
|
(42) |
Adjusted net income |
$ 4,809 |
|
$ 14,260 |
Diluted earnings per share |
$ 0.01 |
|
$ 0.17 |
Adjusted diluted earnings per share |
$ 0.08 |
|
$ 0.21 |
Non-GAAP Measures
To supplement amounts presented in our consolidated financial statements determined in accordance with accounting principles generally accepted in the
Comparable Sales Performance Metric
We consider the percent change in comparable sales from the same previous year period, a primary metric commonly used throughout the retail industry, to be an important measurement for management and investors of the performance of our direct-to-consumer businesses. We include in our comparable sales metric sales from stores in operation for at least 14 months at the beginning of the applicable year. Stores are added to the comparable base at the beginning of the year and are dropped for comparative purposes in the quarter in which they are closed. Comparable sales include the e-commerce sales of the
CONTACT:
View original content to download multimedia:https://www.prnewswire.com/news-releases/designer-brands-inc-reports-first-quarter-2024-financial-results-302162497.html
SOURCE