Breaking News

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

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

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 /PRNewswire/ — 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.

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

17,976


27.1 %


18,537


30.0 %


(561)


(3.0) %


(290)

Brand Portfolio

12,031


21.3 %


13,986


18.9 %


(1,955)


(14.0) %


240

Total segment gross profit

218,322


28.3 %


258,013


30.3 %


(39,691)


(15.4) %


(200)

Net recognition (elimination) of intersegment gross profit

3,669




(3,785)




7,454





Consolidated gross profit

$     221,991


29.2 %


$     254,228


30.9 %


$     (32,237)


(12.7) %


(170)







Twelve 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

$     904,583


32.4 %


$     933,555


33.7 %


$     (28,972)


(3.1) %


(130)

Canada Retail

99,121


35.0 %


76,728


32.7 %


22,393


29.2 %


230

Brand Portfolio

72,006


22.0 %


66,774


23.3 %


5,232


7.8 %


(130)

Total segment gross profit

1,075,710


31.6 %


1,077,057


32.7 %


(1,347)


(0.1) %


(110)

Net recognition (elimination) of intersegment gross profit

3,515




(8,420)




11,935





Consolidated gross profit

$ 1,079,225


32.6 %


$ 1,068,637


33.4 %


$       10,588


1.0 %


(80)

Intersegment Eliminations


Three months ended

(in thousands)

January 28, 2023


January 29, 2022

Recognition (elimination) of intersegment activity:




Net sales recognized by Brand Portfolio segment

$                (10,571)


$                (29,698)

Cost of sales:




Cost of sales recognized by Brand Portfolio segment

6,085


18,447

Recognition of intersegment gross profit for inventory previously purchased that was subsequently sold to external customers during the current period

8,155


7,466


$                    3,669


$                  (3,785)




Twelve months ended

(in thousands)

January 28, 2023


January 29, 2022

Recognition (elimination) of intersegment activity:




Net sales recognized by Brand Portfolio segment

$                (87,041)


$                (93,956)

Cost of sales:




Cost of sales recognized by Brand Portfolio segment

58,234


62,039

Recognition of intersegment gross profit for inventory previously purchased that was subsequently sold to external customers during the current period

32,322


23,497


$                    3,515


$                  (8,420)

DESIGNER BRANDS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited and in thousands, except per share amounts)



Three months ended


Twelve months ended


January 28, 2023


January 29, 2022


January 28, 2023


January 29, 2022

Net sales

$                760,546


$                822,626


$             3,315,428


$             3,196,583

Cost of sales

(538,555)


(568,398)


(2,236,203)


(2,127,946)

Gross profit

221,991


254,228


1,079,225


1,068,637

Operating expenses

(222,034)


(233,574)


(896,382)


(870,682)

Income from equity investments

2,194


2,388


8,864


8,986

Impairment charges

(80)


(546)


(4,317)


(1,720)

Operating profit

2,071


22,496


187,390


205,221

Interest expense, net

(4,344)


(7,537)


(14,874)


(32,129)

Loss on extinguishment of debt and write-off of debt issuance costs



(12,862)


Non-operating expenses, net

(21)


(801)


(130)


(67)

Income (loss) before income taxes

(2,294)


14,158


159,524


173,025

Income tax benefit (provision)

47,394


253


3,142


(18,544)

Net income

45,100


14,411


162,666


154,481

Net loss attributable to redeemable noncontrolling interest

10



10


Net income attributable to Designer Brands Inc.

$                  45,110


$                  14,411


$                162,676


$                154,481

Diluted earnings per share attributable to Designer Brands Inc.

$                       0.66


$                       0.19


$                       2.26


$                       2.00

Weighted average diluted shares

67,922


77,549


72,101


77,268

DESIGNER BRANDS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited and in thousands)



January 28, 2023


January 29, 2022

ASSETS




Current assets:




 Cash and cash equivalents

$                  58,766


$                  72,691

 Receivables, net

77,763


199,826

 Inventories

605,652


586,429

 Prepaid expenses and other current assets

47,750


55,270

Total current assets

789,931


914,216

Property and equipment, net

235,430


256,786

Operating lease assets

700,373


647,221

Goodwill

97,115


93,655

Intangible assets, net

31,866


15,527

Deferred tax assets

48,285


356

Equity investments

63,820


55,578

Other assets

42,798


31,295

Total assets

$             2,009,618


$             2,014,634

LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND SHAREHOLDERS’ EQUITY




Current liabilities:




 Accounts payable

$                255,364


$                340,877

 Accrued expenses

190,676


215,812

 Current operating lease liabilities

190,086


202,228

Total current liabilities

636,126


758,917

Long-term debt

281,035


225,536

Non-current operating lease liabilities

631,412


593,429

Other non-current liabilities

24,989


24,356

Total liabilities

1,573,562


1,602,238

Redeemable noncontrolling interest

3,155


Total shareholders’ equity

432,901


412,396

Total liabilities, redeemable noncontrolling interest, and shareholders’ equity

$             2,009,618


$             2,014,634

DESIGNER BRANDS INC.
NON-GAAP RECONCILIATION
(unaudited and in thousands, except per share amounts)



Three months ended


Twelve months ended


January 28, 2023


January 29, 2022


January 28, 2023


January 29, 2022

Operating expenses

$             (222,034)


$           (233,574)


$             (896,382)


$           (870,682)

Non-GAAP adjustments:








CEO transition costs

3,750



3,750


Restructuring and termination costs

6,989


1,153


9,445


3,989

Acquisition-related costs and target acquisition costs

2,247



2,647


3,226

Total non-GAAP adjustments

12,986


1,153


15,842


7,215

Adjusted operating expenses

$             (209,048)


$           (232,421)


$             (880,540)


$           (863,467)

Operating profit

$                    2,071


$               22,496


$               187,390


$             205,221

Non-GAAP adjustments:








CEO transition costs

3,750



3,750


Restructuring and termination costs

6,989


1,153


9,445


3,989

Acquisition-related costs and target acquisition costs

2,247



2,647


3,226

Impairment charges

80


546


4,317


1,720

Total non-GAAP adjustments

13,066


1,699


20,159


8,935

Adjusted operating profit

$                 15,137


$               24,195


$               207,549


$             214,156

Net income attributable to Designer Brands Inc.

$                 45,110


$               14,411


$               162,676


$             154,481

Non-GAAP adjustments:








CEO transition costs

3,750



3,750


Restructuring and termination costs

6,989


1,153


9,445


3,989

Acquisition-related costs and target acquisition costs

2,247



2,647


3,226

Impairment charges

80


546


4,317


1,720

Loss on extinguishment of debt and write-off of debt issuance costs



12,862


Foreign currency transaction losses

21


801


130


67

Total non-GAAP adjustments before tax effect

13,087


2,500


33,151


9,002

Tax effect of non-GAAP adjustments

(1,428)


(672)


(6,513)


(2,291)

Valuation allowance change on deferred tax assets

(52,089)


(4,500)


(55,654)


(29,950)

Total non-GAAP adjustments, after tax

(40,430)


(2,672)


(29,016)


(23,239)

Net loss attributable to redeemable noncontrolling interest

(10)



(10)


Adjusted net income

$                    4,670


$               11,739


$               133,650


$             131,242

Diluted earnings per share

$                      0.66


$                    0.19


$                      2.26


$                    2.00

Adjusted diluted earnings per share

$                      0.07


$                    0.15


$                      1.85


$                    1.70

Non-GAAP Measures

To supplement amounts presented in our consolidated financial statements determined in accordance with accounting principles generally accepted in the United States (“GAAP”), the Company uses certain non-GAAP financial measures, including adjusted operating expenses, adjusted operating profit, adjusted net income, and adjusted diluted earnings per share as shown in the table above. These measures adjust for the effects of: (1) CEO transition costs; (2) restructuring and termination costs, including severance charges other than those included in CEO transition costs; (3) acquisition-related costs and target acquisition costs; (4) impairment charges; (5) loss on extinguishment of debt and write-off of debt issuance costs; (6) foreign currency transaction losses; (7) the net tax impact of such items; (8) the change in the valuation allowance on deferred tax assets; and (9) net loss attributable to redeemable noncontrolling interest. The unaudited adjusted results should not be construed as an alternative to the reported results determined in accordance with GAAP. These financial measures are not based on any standardized methodology and are not necessarily comparable to similar measures presented by other companies. The Company believes these non-GAAP financial measures provide useful information to both management and investors to increase comparability to prior periods by adjusting for certain items that may not be indicative of core operating measures and to better identify trends in our business. The adjusted financial results are used by management to, and allow investors to, evaluate the operating performance of the Company compared to prior periods, when reviewed in conjunction with the Company’s GAAP statements. These amounts are not determined in accordance with GAAP and therefore should not be used exclusively in evaluating the Company’s business and operations.

Comparable Sales Performance Metric

We consider the change in comparable sales from the same previous year period, a primary metric commonly used throughout the retail industry, to be an important indicator of the performance of our retail and direct-to-consumer businesses. We include in our comparable sales metric stores in operation for at least 14 months at the beginning of the fiscal 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 stores temporarily closed as a result of the COVID-19 pandemic as management continues to believe that this metric is meaningful to monitor our performance. Comparable sales also include e-commerce sales. Comparable sales for the Canada Retail segment exclude the impact of foreign currency translation and are calculated by translating current period results at the foreign currency exchange rate used in the comparable period of the prior year. Comparable sales for the Brand Portfolio segment include the direct-to-consumer e-commerce site www.vincecamuto.com. The calculation of comparable sales varies across the retail industry and, as a result, the calculations of other retail companies may not be consistent with our calculation.

SOURCE Designer Brands Inc.

Originally published at https://www.prnewswire.com/news-releases/designer-brands-inc-reports-fourth-quarter-and-fiscal-year-2022-financial-results-301773410.html
Some images courtesy of https://pixabay.com

The post Designer Brands Inc. Reports Fourth Quarter and Fiscal Year 2022 Financial Results first appeared on TREND MAG.

Fashion - Nu Woman Magazine originally published at Fashion - Nu Woman Magazine