Designer Brands Inc. Reports Fourth Quarter and Fiscal Year 2022 Financial Results

Owned Brands Net Sales up 32.1% for 2022 Compared to Last Year

2022 Gross Margin Up 400 Basis Points over 2019 as Brand Building Strategy Takes Hold

COLUMBUS, Ohio, March 16, 2023 /CNW/ -- Designer Brands Inc. (NYSE: DBI) (the "Company" and "Designer Brands"), one of the world's largest designers, producers, and retailers of footwear and accessories, announced financial results for the three months and year ended January 28, 2023.

(PRNewsfoto/Designer Brands Inc.)

Roger Rawlins, Chief Executive Officer, stated, "Our 2022 results clearly showcase the power and success of our brand building strategy with our Owned Brands growing over 32% to last year while delivering gross margins 400 basis points higher than those we saw in 2019. These results showcase the successful execution of our strategy. I am incredibly proud of our team and their tireless efforts, and I am excited about what lies ahead for Designer Brands."

Doug Howe, President of DSW and incoming Chief Executive Officer, added, "Looking ahead, we are confident in the strength of our business as we work to integrate new and recognizable names into the Designer Brands family, including Keds, Le Tigre, Topo Athletic, and Hush Puppies. Although we are navigating through a volatile environment, we are well-positioned to offer great value and a diverse assortment of product to our customers as we head into 2023. We will continue to be prudent in managing our expenses and inventory and drive growth in our portfolio of increasingly diversified Owned Brands."

Fourth Quarter Operating Results (Unless otherwise stated, all comparisons are to the fourth quarter of 2021)

• Net sales decreased 7.5% to $760.5 million.

• Comparable sales decreased by 5.5%.

• Gross profit decreased to $222.0 million versus $254.2 million last year, and gross margin was 29.2% as compared to 30.9% last year.

• Reported net income attributable to Designer Brands Inc. was $45.1 million, or diluted earnings per share ("EPS") of $0.66, including net benefits of $0.59 per diluted share from adjusted items, primarily related to the change in valuation allowance on deferred tax assets, partially offset by restructuring and termination costs and CEO transition costs.

• Adjusted net income was $4.7 million, or adjusted diluted EPS of $0.07.

Full Year Operating Results (unless otherwise stated, all comparisons are to full year 2021)

• Net sales increased 3.7% to $3.3 billion.

• Comparable sales increased by 4.4%.

• Gross profit was flat to last year at $1.1 billion, and gross margin was 32.6% as compared to 33.4% last year.

• Reported net income attributable to Designer Brands Inc. was $162.7 million, or diluted EPS of $2.26, including net benefits of $0.41 per diluted share from adjusted items, primarily related to the change in valuation allowance on deferred tax assets, partially offset by the loss on extinguishment of debt and write-off of debt issuance costs, restructuring and termination costs, CEO transition costs, and impairment charges.

• Adjusted net income was $133.7 million, or adjusted diluted EPS of $1.85.

Liquidity Highlights

• Cash and cash equivalents totaled $58.8 million at the end of 2022, compared to $72.7 million at the end of 2021, with $243.9 million available for borrowings under our senior secured asset-based revolving credit facility ("ABL Revolver"). Debt totaled $281.0 million at the end of 2022 compared to $225.5 million at the end of 2021.

• The Company ended the year with inventories of $605.7 million compared to $586.4 million at the end of 2021.

Return to Shareholders

•  For the year ended January 28, 2023, we repurchased 10.7 million Class A common shares (14.6% of Class A and Class B common shares at the beginning of the fiscal year) at an aggregate cost of $147.5 million, with $187.4 million of Class A common shares that remain authorized under the program as of January 28, 2023.

•  A dividend of $0.05 per share of Class A and Class B common shares will be paid on April 14, 2023 to shareholders of record at the close of business on March 31, 2023.

Store Openings and Closings

During the fourth quarter of 2022, we closed three stores in the U.S. with no changes to the store count in Canada, resulting in a total of 501 U.S. stores and 138 Canadian stores at the end of 2022.

Outlook for 2023

The Company has announced the following guidance for the full year 2023:

Metric		Fiscal 2023 Guidance
Net Sales:
Designer Brands net sales growth, excluding Keds		Down mid-single digits
Incremental net sales from Keds acquisition		$75.0 million to $85.0 million
Diluted EPS:
Designer Brands, excluding Keds		$1.65 - $1.75
Contribution from Keds acquisition		~$0.00

Webcast and Conference Call

The Company is hosting a conference call today at 8:30 am Eastern Time. Investors and analysts interested in participating in the call are invited to dial 1-888-317-6003, or the international dial in, 1-412-317-6061, and reference conference ID number 5071723 approximately ten minutes prior to the start of the conference call. The conference call will also be broadcast live over the internet and can be accessed through the following link:

https://app.webinar.net/bkDVPKByrX8

For those unable to listen to the live webcast, an archived version will be available at the same location until March 23, 2023. A replay of the teleconference will be available by dialing the following numbers:

U.S.: 1-877-344-7529
Canada: 1-855-669-9658
International: 1-412-317-0088
Passcode: 2475851

About Designer Brands

Designer Brands is one of the world's largest designers, producers and retailers of the most recognizable footwear brands and accessories, transforming and defining the footwear industry by inspiring self-expression across every facet of its enterprise. Through its portfolio of world-class owned brands, led by the industry-setting Vince Camuto brand, Designer Brands delivers on-trend footwear and accessories through its robust direct-to-consumer omni-channel infrastructure, featuring a billion-dollar digital commerce business and nearly 650 stores across the U.S. and Canada. Its retailing operations under the DSW Designer Shoe Warehouse and The Shoe Company banners deliver current, in-line footwear and accessories from most of the largest national brands in the industry and hold leading market share positions in key product categories across Women's, Men's and Kid's in the U.S. and Canada. Designer Brands also distributes its owned brands through select wholesale relationships while leveraging its design and sourcing expertise to build private label product for national retailers. Designer Brands is also committed to being a difference maker in the world, taking steps forward to advance diversity, equity, and inclusion in the footwear industry and supporting our global community and the health of our planet through donating more than six million pairs of shoes to the global non-profit Soles4Souls. More information can be found at www.designerbrands.com.

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 conditions, including inflationary pressures and rising interest rates, and the related impacts to consumer discretionary spending, as well as supply chain disruptions and pressures; risks and uncertainties related to the ongoing coronavirus ("COVID-19") pandemic, any future COVID-19 resurgence, and any other adverse public health developments; our ability to anticipate and respond to fashion trends, consumer preferences and changing customer expectations; our ability to maintain strong relationships with our vendors, manufacturers, licensors, and retailer customers; risks related to losses or disruptions associated with our distribution systems, including our distribution centers and stores, whether as a result of the COVID-19 pandemic, reliance on third-party providers, or otherwise; our ability to manage our Chief Executive Officer transition, retain our existing management team, and continue to attract qualified new personnel; risks related to cyber security threats and privacy or data security breaches or the potential loss or disruption of our information technology ("IT") systems; risks related to the implementation of an enterprise resource planning system ("ERP") software solution and other IT systems; our reliance on our loyalty programs and marketing to drive traffic, sales, and customer loyalty; our ability to protect our reputation and to maintain the brands we license; our competitiveness with respect to style, price, brand availability, and customer service; risks related to our international operations, including international trade, our reliance on foreign sources for merchandise, exposure to political, economic, operational, compliance and other risks, and fluctuations in foreign currency exchange rates; our ability to comply with privacy laws and regulations, as well as other legal obligations; domestic and global political and social conditions and the potential impact of geopolitical turmoil or conflict; risks associated with climate change and other corporate responsibility issues and uncertainties related to future legislation, regulatory reform, policy changes, or interpretive guidance on existing legislation. Risks and other factors that could cause our actual results to differ materially from our forward-looking statements are described in the Company's latest Annual Report on Form 10-K or other reports filed with the Securities and Exchange Commission. All forward-looking statements speak only as of the time when made. The Company undertakes no obligation to update or revise the forward-looking statements included in this press release to reflect any future events or circumstances.

 

DESIGNER BRANDS INC. SEGMENT RESULTS (unaudited)
Net Sales
	Three months ended
(dollars in thousands)	January 28, 2023				January 29, 2022				Change
	Amount		% of Total Segment Net Sales		Amount		% of Total Segment Net Sales		Amount		%
Segment net sales:
U.S. Retail	$                648,314		84.1 %		$                716,347		84.0 %		$     (68,033)		(9.5) %
Canada Retail	66,353		8.6 %		61,828		7.3 %		4,525		7.3 %
Brand Portfolio	56,450		7.3 %		74,149		8.7 %		(17,699)		(23.9) %
Total segment net sales	771,117		100.0 %		852,324		100.0 %		(81,207)		(9.5) %
Elimination of intersegment net sales	(10,571)				(29,698)				19,127		(64.4) %
Consolidated net sales	$                760,546				$                822,626				$     (62,080)		(7.5) %
	Twelve months ended
(dollars in thousands)	January 28, 2023				January 29, 2022				Change
	Amount		% of Total Segment Net Sales		Amount		% of Total Segment Net Sales		Amount		%
Segment net sales:
U.S. Retail	$             2,791,513		82.0 %		$             2,769,706		84.2 %		$       21,807		0.8 %
Canada Retail	283,241		8.3 %		234,809		7.1 %		48,432		20.6 %
Brand Portfolio	327,715		9.7 %		286,024		8.7 %		41,691		14.6 %
Total segment net sales	3,402,469		100.0 %		3,290,539		100.0 %		111,930		3.4 %
Elimination of intersegment net sales	(87,041)				(93,956)				6,915		(7.4) %
Consolidated net sales	$             3,315,428				$             3,196,583				$     118,845		3.7 %

 

Net Sales by Brand Category
(in thousands)	U.S. Retail		Canada Retail		Brand Portfolio		Eliminations		Consolidated
Three months ended January 28, 2023
Owned Brands:(1)
Direct-to-consumer	$       129,398		$                —		$         13,710		$                 —		$       143,108
External customer wholesale and commission income	—		—		32,169		—		32,169
Intersegment wholesale and commission income	—		—		10,571		(10,571)		—
Total Owned Brands	129,398		—		56,450		(10,571)		175,277
National brands	518,916		—		—		—		518,916
Canada Retail(2)	—		66,353		—		—		66,353
Total net sales	$       648,314		$        66,353		$         56,450		$       (10,571)		$       760,546
Three months ended January 29, 2022
Owned Brands:(1)
Direct-to-consumer	$       121,278		$                —		$           9,260		$                 —		$       130,538
External customer wholesale and commission income	—		—		35,191		—		35,191
Intersegment wholesale and commission income	—		—		29,698		(29,698)		—
Total Owned Brands	121,278		—		74,149		(29,698)		165,729
National brands	595,069		—		—		—		595,069
Canada Retail(2)	—		61,828		—		—		61,828
Total net sales	$       716,347		$        61,828		$         74,149		$       (29,698)		$       822,626
Twelve months ended January 28, 2023
Owned Brands:(1)
Direct-to-consumer	$       569,741		$                —		$         37,840		$                 —		$       607,581
External customer wholesale and commission income	—		—		202,834		—		202,834
Intersegment wholesale and commission income	—		—		87,041		(87,041)		—
Total Owned Brands	569,741		—		327,715		(87,041)		810,415
National brands	2,221,772		—		—		—		2,221,772
Canada Retail(2)	—		283,241		—		—		283,241
Total net sales	$   2,791,513		$      283,241		$       327,715		$       (87,041)		$   3,315,428
Twelve months ended January 29, 2022
Owned Brands:(1)
Direct-to-consumer	$       421,398		$                —		$         27,876		$                 —		$       449,274
External customer wholesale and commission income	—		—		164,192		—		164,192
Intersegment wholesale and commission income	—		—		93,956		(93,956)		—
Total Owned Brands	421,398		—		286,024		(93,956)		613,466
National brands	2,348,308		—		—		—		2,348,308
Canada Retail(2)	—		234,809		—		—		234,809
Total net sales	$   2,769,706		$      234,809		$       286,024		$       (93,956)		$   3,196,583

(1)   "Owned Brands" refers to those brands we have rights to sell through ownership or license arrangements.

(2)   We currently do not report the Canada Retail segment net sales by brand categories.

 

Comparable Sales
	Three months ended				Twelve months ended
	January 28, 2023		January 29, 2022		January 28, 2023		January 29, 2022
Change in comparable sales:
U.S. Retail segment	(8.1) %		36.3 %		2.0 %		55.0 %
Canada Retail segment	15.9 %		42.3 %		28.8 %		20.1 %
Brand Portfolio segment - direct-to-consumer channel	44.4 %		50.9 %		34.5 %		30.9 %
Total	(5.5) %		36.9 %		4.4 %		51.6 %
Store Count
(square footage in thousands)	January 28, 2023				January 29, 2022
	Number of Stores		Square Footage		Number of Stores		Square Footage
U.S. Retail segment - DSW stores	501		10,092		508		10,308
Canada Retail segment:
The Shoe Company stores	113		596		115		607
DSW stores	25		496		25		496
	138		1,092		140		1,103
Total number of stores	639		11,184		648		11,411

 

Gross Profit

Three months ended

(dollars in thousands)

January 28, 2023

January 29, 2022

Change

Amount

% of Segment Net Sales

Amount

% of Segment Net Sales

Amount

%

Basis Points

Segment gross profit:

U.S. Retail

$     188,315

29.0 %

$     225,490

31.5 %

$     (37,175)

(16.5) %

(250)

Canada Retail

...