Designer Brands Inc. Reports First Quarter 2021 Financial Results

Rhea-AI Summary

Designer Brands Inc. (NYSE: DBI) reported a return to profitability for the first time since COVID-19, with net income of $17.0 million or $0.22 per share. Net sales soared 45.6% to $703.2 million, and comparable sales increased 52.2% in Q1 fiscal 2021. Gross profit surged to $216.1 million from a loss of $26.5 million last year. The gross margin rate improved to 30.7%. Although cash reserves fell to $49.3 million, debt decreased to $337.4 million. The company opened two stores in the U.S. and two in Canada during this quarter.

Positive

• Return to profitability for the first time since COVID-19.
• Net income of $17.0 million, or $0.22 per diluted share.
• Net sales increased by 45.6% to $703.2 million.
• Comparable sales rose by 52.2% compared to a 42.3% decline last year.
• Gross profit improved to $216.1 million from a gross loss of $26.5 million.

Negative

• Cash and cash equivalents decreased to $49.3 million from $250.9 million last year.
• Total debt remains high at $337.4 million despite a decrease from $393.0 million.

Returned to profitability for the first time since the onset of COVID-19

Total gross margin rate improved over the rate from the first quarter of fiscal 2019

Athleisure comparable sales in the U.S. Retail segment were up 92% in the first quarter of fiscal 2021

COLUMBUS, Ohio, May 26, 2021 /PRNewswire/ -- Designer Brands Inc. (NYSE: DBI) (the "Company" and "Designer Brands"), one of North America's largest designers, producers and retailers of footwear and accessories, announced financial results for the three months ended May 1, 2021, compared to the three months ended May 2, 2020.

Roger Rawlins, Chief Executive Officer, stated, "Designer Brands is off to a strong start in fiscal 2021, highlighted by our return to profitability for the first time since the onset of COVID-19 and a positive comparable sales increase of 52% for the first quarter. Our success was driven by green shoots in areas of the business that had been previously affected by the pandemic, synergies from our vertical capabilities coming to life, which allowed us to capitalize on positive trends faster than ever before, and our assortment strategy focused on athleisure, kids and seasonal products.

"We remain focused on leveraging the flexibility of our business model, pivoting our assortment to athleisure to better match the purchasing habits of our customers, enhancing our digital capabilities, and strategically managing costs.  Looking forward, we are optimistic that the positive trends will continue as the market recovers."

First Quarter Results

• Net sales increased 45.6% to $703.2 million in the first quarter of fiscal 2021 compared to the same period last year.
• Comparable sales increased 52.2% for the first quarter of fiscal 2021 versus the 42.3% decrease for the same period last year.
• Gross profit increased to $216.1 million in the first quarter of fiscal 2021 versus a gross loss of $26.5 million last year, and gross margin as a percentage of net sales was 30.7% as compared to negative 5.5% last year and 29.7% for the first quarter of fiscal 2019.
• Reported net income in the first quarter of fiscal 2021 was $17.0 million, or $0.22 per diluted share, including net benefits of $0.10 per diluted share from adjusted items, primarily the change in the valuation allowance on deferred tax assets.
• Adjusted net income in the first quarter of fiscal 2021 was $9.5 million, or $0.12 per diluted share.

Liquidity Highlights

• Cash and cash equivalents totaled $49.3 million at the end of the first quarter of fiscal 2021 compared to $250.9 million for the same period last year, with $289.9 million available for borrowings under our senior secured asset-based revolving credit facility ("ABL Revolver"). Debt totaled $337.4 million at the end of the first quarter of fiscal 2021 compared to $393.0 million debt outstanding for the same period last year.
• The Company ended the quarter with inventories of $540.1 million compared to $533.6 million for the same period last year. Due to strong inventory controls, the Company ended the quarter with total units on hand down 25% as compared to the same period last year.

Store Openings and Closings

During the first quarter of fiscal 2021, we opened two stores and closed five in the U.S., resulting in a total of 516 U.S. stores. In Canada, we opened two stores with one closure resulting in a total of 145 Canadian stores.   

Webcast and Conference Call

The Company is hosting a conference call today at 4:30 pm 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 7184143 approximately ten minutes prior to the start of the call. The conference call will also be broadcast live over the internet and can be accessed through the following link:

https://www.webcaster4.com/Webcast/Page/1213/41070

For those unable to listen to the live webcast, an archived version will be available via the same website address until June 9, 2021. 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: 10155781

About Designer Brands

Designer Brands is one of North America's largest designers, producers and retailers of footwear and accessories. The Company operates a portfolio of retail concepts in nearly 700 locations under the DSW Designer Shoe Warehouse®, The Shoe Company® and Shoe Warehouse® banners. The Company designs and produces footwear and accessories through Camuto Group, a leading manufacturer selling in more than 5,400 stores worldwide. Camuto Group owns licensing rights for the Jessica Simpson® footwear business and footwear and handbag licenses for Lucky Brand®. In partnership with a joint venture with Authentic Brands Group, the Company also owns a stake in Vince Camuto®, Louise et Cie®, and others. 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 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: risks and uncertainty related to the continued outbreak of the coronavirus ("COVID-19"), any future COVID-19 resurgence, and any other adverse public health developments; risks related to losses or disruptions associated with our distribution systems, including our distribution and fulfillment centers and our stores, whether as a result of COVID-19, reliance on third-party providers, cyber-related attacks, or otherwise; our ability to protect the health and safety of our associates and our customers, which may be affected by current or future government regulations related to stay-at-home orders and orders related to the operation of non-essential businesses; 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; maintaining strong relationships with our vendors, manufacturers, licensors, and retailer customers; our ability to anticipate and respond to fashion trends, consumer preferences and changing customer expectations; risks related to restrictions on our ABL Revolver and senior secured term loan that could limit our ability to fund operations; our reliance on our loyalty programs and marketing to drive traffic, sales and customer loyalty; failure to retain our key executives or attract qualified new personnel; risks related to the loss or disruption of our information systems and data and our ability to prevent or mitigate breaches of our information security and the compromise of sensitive and confidential data; our ability to comply with privacy laws and regulations, as well as other legal obligations; our ability to protect our reputation and to maintain the brands we license; uncertain general economic, political and social conditions and the related impacts to consumer discretionary spending; our competitiveness with respect to style, price, brand availability and customer service; our ability to provide customers cost-effective shopping platforms; and uncertainty 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 expectations are described in the Company's Annual Report on Form 10-K for the fiscal year ended January 30, 2021, and risk factors identified in the Company's other filings 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								Change
(dollars in thousands)	May 1, 2021				May 2, 2020				Amount				%
Segment net sales:
U.S. Retail	$	620,658			$	377,073			$	243,585			64.6	%
Canada Retail	40,604				29,329				11,275				38.4	%
Brand Portfolio	57,427				82,113				(24,686)				(30.1)	%
Other	—				13,623				(13,623)				(100.0)	%
Total segment net sales	718,689				502,138				216,551				43.1	%
Elimination of intersegment net sales	(15,534)				(19,355)				3,821				(19.7)	%
Consolidated net sales	$	703,155			$	482,783			$	220,372			45.6	%

 

Comparable Sales
	Three months ended
	May 1, 2021			May 2, 2020
Comparable sales:
U.S. Retail segment	56.3	%		(42.4)	%
Canada Retail segment	10.0	%		(32.4)	%
Brand Portfolio segment - direct-to-consumer channel	6.8	%		92.8	%
Other	NA			(62.0)	%
Total comparable sales	52.2	%		(42.3)	%
NA - Not applicable
Store Count
	May 1, 2021			May 2, 2020
U.S. Retail segment - DSW stores	516			521
Canada Retail segment:
The Shoe Company / Shoe Warehouse stores	118			118
DSW stores	27			27
	145			145
Total number of stores	661			666

 

Gross Profit (Loss)
	Three months ended
	May 1, 2021							May 2, 2020
(dollars in thousands)	Amount				% of Segment Net Sales			Amount				% of Segment Net Sales			Change
Segment gross profit (loss):
U.S. Retail	$	193,113			31.1	%		$	(32,970)			(8.7)	%		$	226,083
Canada Retail	10,835				26.7	%		(2,311)				(7.9)	%		$	13,146
Brand Portfolio	11,926				20.8	%		13,904				16.9	%		$	(1,978)

FAQ

What were Designer Brands' Q1 results for fiscal 2021?

Designer Brands reported a net income of $17.0 million and net sales of $703.2 million, representing a 45.6% increase.

How did comparable sales perform for Designer Brands in Q1 2021?

Comparable sales increased by 52.2% for the first quarter of fiscal 2021.

What is the gross margin for Designer Brands in Q1 2021?

The gross margin rate improved to 30.7% in the first quarter of fiscal 2021.

What is the current debt situation of Designer Brands?

As of the end of Q1 fiscal 2021, Designer Brands has a total debt of $337.4 million.

How did the cash reserves change for Designer Brands in Q1 2021?

Cash and cash equivalents decreased to $49.3 million, down from $250.9 million year-over-year.