Designer Brands ((DBI)) has held its Q4 earnings call. Read on for the main highlights of the call.
The recent earnings call for Designer Brands Inc. conveyed a mixed sentiment, highlighting both positive strides and ongoing challenges. While the company celebrated a return to positive comparable sales and robust performance in its Brand Portfolio segment, it also faced hurdles such as year-over-year sales declines and increased operating expenses. The call underscored successful brand growth initiatives amidst macroeconomic uncertainties and category-specific struggles.
Return to Positive Comps
For the first time in nine quarters, Designer Brands Inc. reported a return to positive comparable sales in the fourth quarter of fiscal 2024. Excluding the impact of the 53rd week, comps were up by 1%, signaling a positive shift in the company’s sales performance.
Strong Performance in Brand Portfolio Segment
The Brand Portfolio segment emerged as a strong performer, with sales up approximately 12% for the fourth quarter and roughly 14% for the full year. This segment achieved operating profitability for the first time, marking a significant milestone for Designer Brands.
Expansion of Gross Margins
Designer Brands successfully expanded its gross margins by 100 basis points in the Brand Portfolio segment. This expansion contributed to a notable improvement in the company’s operating margin, reflecting effective cost management strategies.
Growth in Key Brands
Key brands such as Topo Athletic and Jessica Simpson exceeded expectations, with Topo Athletic witnessing nearly 80% growth and Jessica Simpson over 20% in wholesale sales. This growth underscores the successful brand strategies employed by Designer Brands.
DSW Market Share Gain
DSW, a part of Designer Brands, experienced sales growth that outpaced the broader footwear market. This resulted in a 10 basis point gain in market share, highlighting the brand’s competitive edge in the industry.
Return of Cash to Shareholders
In fiscal 2024, Designer Brands returned $79 million to shareholders through dividends and share repurchases, demonstrating a commitment to delivering value to its investors.
Year-Over-Year Sales Decline
Despite positive developments, the company faced a 2% decline in total sales for the full year, with comparable sales down 1.7%. This decline was in line with the company’s revised guidance.
Impact of 53rd Week
The inclusion of a 53rd week in the previous year led to a 7% decline in sales for the quarter, impacting the year-over-year comparison.
Challenges in Seasonal Categories
Designer Brands encountered weaknesses in seasonal categories, notably a 900 basis point decrease in the boot category, reflecting challenges in adapting to seasonal demand shifts.
Increased Operating Expenses
The company reported an increase in adjusted operating expenses by 40 basis points in the fourth quarter and 50 basis points for the full year, indicating rising operational costs.
Soft Start to 2025
Designer Brands experienced a slower-than-anticipated start to fiscal 2025, with expectations for first-quarter sales to fall below the prior year, signaling cautious optimism for the upcoming year.
Forward-Looking Guidance
Looking ahead, Designer Brands projects low single-digit sales growth for U.S. Retail, mid to high single-digit growth for Canada Retail, and mid single-digit growth for the Brand Portfolio segment in fiscal 2025. The company anticipates an EPS range of $0.30 to $0.50, representing a nearly 50% increase at the midpoint compared to 2024, reflecting a positive outlook despite current challenges.
In summary, Designer Brands Inc.’s earnings call painted a picture of cautious optimism, with positive developments in key segments and brands, offset by challenges in sales declines and operating expenses. The company’s forward-looking guidance suggests a focus on growth and profitability, aiming to navigate through macroeconomic uncertainties and capitalize on its brand strengths.