Designer Brands Shares Sink as Unseasonable Weather, Shrinking Demand Hit Q3 Results

Shares for Designer Brands Inc (DBI) dropped over 31 percent on Tuesday morning following a less than stellar quarter as unseasonable weather and shrinking consumer demand hit the footwear retailer.

Net sales for the DSW-parent company decreased 9.1 percent to $786.3 million in the third quarter of 2023. Comparable sales also decreased by 9.3 percent in the period while adjusted net income was $14.8 million, with an adjusted diluted EPS of $0.24.

By business segment, U.S. retail sales in Q3 were down 10.6 percent to $631.6 million from $706.4 million at the same time last year. DBI’s Canadian retail segment saw net sales decrease 8.1 percent in the quarter to $75.6 million, down from $82.3 million a year ago. And, the company’s owned brand portfolio – a big focus for the company – saw net sales decline 12.5 percent to $94.1 million, down from $107.5 million.

DBI CEO Doug Howe said in a statement that the company was impacted by a footwear market that “contracted for the first time since COVID” coupled with “unseasonably warm weather,” which “significantly reduced customer demand for shoes,” that pressured its heavily seasonal assortment.

“While macro pressures notably impacted our business, we clearly recognize the need to operate with even greater speed and increase the level of innovation, newness, and fashion into our assortments, returning to our roots as a merchant organization and a fashion footwear retailer,” Howe said.

The CEO added that the company saw improved performance in casual and clearance categories this quarter, but it was not enough to offset the broader lack of demand.

Looking ahead, Howe said that he does not anticipate pressures alleviating in the near-term and will continue to adjust accordingly. This has led the Columbus-Ohio based company to update its full year guidance. DBI now expects nets sales to be down mid- to high-single digits for full fiscal year 2023. Diluted earnings per share for the full year are expected to be between $1.20 and $1.50.

“Our team is already executing several initiatives to address areas for improvement within our business,” Howe said. “Ongoing refreshment of our assortment, including new specialty sizes, and new marketing initiatives are two ways we are actively reinforcing our business as the best in shoes.”

“We have also made some difficult decisions regarding leadership across our organization and believe that we are making progress in positioning our business well for the long-term while continuing to generate strong cash flow and ample liquidity,” the CEO added.