Designer Brands, Inc. raised its EPS guidance for the year after reporting sales and earnings topped Wall Street’s targets in the second quarter ended July 30. Comparable sales for the parent of DSW increased 6.2 percent on top of comparable sales growth of 84.9 percent for the second quarter of 2021.

Roger Rawlins, CEO, stated, “Our second quarter was a continuation of the strength we have seen in both our direct-to-consumer and wholesale channels, and we were pleased with our topline results. We are seeing this trend continue into the third quarter as our back-to-school season, a new holiday period for Designer Brands, has been performing well, supported by an increased assortment of athletic and kid’s products.

“We continue to successfully execute against our long-term plan to double sales of our owned brands by 2026 while maintaining sales of our top national brand partners. The recent addition of Le Tigre to our portfolio of brands, coupled with our recently announced partnership with Reebok, supports our plan to build a very relevant and highly demanded owned brands assortment. Our brand-building strategy continues to drive strong financial results and has enabled us to repurchase 7.8 million common shares in the second quarter. As we look forward, we are well-positioned for the back half of the year and are confident in our ability to deliver our updated 2022 guidance.”

Second Quarter Operating Results
(all comparisons are to the second quarter of 2021)

  • Net sales increased 5.1 percent to $859.3 million;
  • Comparable sales increased 6.2 percent;
  • Gross profit increased to $295.7 million versus $284.7 million last year, and gross margin, as a percentage of net sales, was 34.4 percent as compared to 34.8 percent last year;
  • Reported net income was $46.2 million, or diluted earnings per share (EPS) of $0.62; and
  • Adjusted net income was $46.1 million, or an adjusted diluted EPS of $0.62.

EPS of 62 cents per share topped the analyst consensus estimate of 52 cents. Revenue of $859.3 million was ahead of the consensus estimate of $835.92 million.

Liquidity Highlights
Cash and cash equivalents totaled $50.8 million at the end of the second quarter of 2022 compared to $46.5 million at the end of the same period last year, with $157.7 million remaining available for borrowings under our senior secured asset-based revolving credit facility (ABL Revolver). Debt totaled $387.4 million at the end of the second quarter of 2022 compared to $247.1 million at the end of the same period last year. The company anticipates receiving approximately $160.0 million in the future from the IRS as a result of the Coronavirus Aid, Relief and Economic Security Act.

The company ended the quarter with more normalized inventory levels of $694.0 million compared to $504.3 million at the same period last year with accelerated receipts to support fall season demand.

Return to Shareholders
During the second quarter of 2022, Designer Brands repurchased 7.8 million Class A common shares (10.8 percent of Class A and Class B common shares at the beginning of the quarter) at an aggregate cost of $105.8 million under its share repurchase program.

During the six months ended July 30, 2022, it repurchased 9.4 million Class A common shares (12.8 percent of Class A and Class B common shares at the beginning of the fiscal year) at an aggregate cost of $128.5 million, with $206.4 million of Class A common shares that remain authorized under the program as of July 30, 2022.

A dividend of $0.05 per share of Class A and Class B common shares will be paid on October 6, 2022 to shareholders of record at the close of business on September 22, 2022.

Store Openings and Closings
During the second quarter of 2022, it closed four stores in the U.S. and two in Canada with no new stores opened, resulting in a total of 506 U.S. stores and 138 Canadian stores as of July 30, 2022. In May 2022, it opened the new “Warehouse Reimagined” format at a Houston-area DSW store.

Updated 2022 Financial Outlook
Full-year 2022 diluted EPS guidance was raised to a range of $2.05 to $2.15 from $1.90 to $2.00. Same-store sales are still expected to climb in the mid-single-digits.

Photo courtesy Designer Brands/Le Tigre