Designer Brands Inc., the parent of the DSW footwear chain, reported a loss in the fourth quarter ended February 1 as same-store sales declined 20 percent.
Chief Executive Officer Roger Rawlins, stated, “Designer Brands’ fourth quarter continues our story of sequential improvement in unprecedented market conditions. I am proud of our team’s exceptional execution of our near-term strategy as we continued to pivot our assortment to athleisure and kids, focused on the Top 50 brands in footwear and leaned even further into our digital-first capabilities.
“In 2021, Designer Brands will further stabilize our business by continuing to invest in the premier footwear brands our consumers demand, improving our digital and omnichannel capabilities and leveraging our ability to design and source goods. When demand shifts back to dress and seasonal, our Camuto team will be well-prepared to capitalize on our historical success in these categories while protecting our newly captured market share in the athletic segment. We have a significant amount of inventory open to buy and the capability to flex our business as customer preferences evolve, making us a dominant player with room to grow as the market recovers.”
Fourth Quarter Operating Results
- Net sales decreased 26.6 percent to $609.4 million in the fourth quarter of fiscal 2020 compared to the same period last year.
- Comparable sales decreased by 20.1 percent compared to last year’s 0.7 percent increase.
- Gross profit decreased to $135.0 million in the fourth quarter of fiscal 2020 versus $205.9 million last year, and gross margin as a percentage of net sales was 22.2 percent as compared to 24.8 percent last year. The decrease in the gross profit rate was primarily driven by the significant reduction in customer traffic with the continuing impact of COVID-19 resulting in lower sales volume.
- Reported operating expenses were down 8.3 percent to $201.6 million versus last year and the reported operating expenses as a percentage of net sales was 33.1 percent, above last year’s level of 26.5 percent, due to a significantly lower sales volume.
- Reported net loss was $134.0 million, or $1.85 loss per diluted share, including net charges of $1.32 per diluted share from adjusted items primarily related to impairment and restructuring charges and the valuation allowance established against deferred tax assets.
- Adjusted net loss was $38.6 million, or $0.53 loss per diluted share. Results exceeded Wall Street’s consensus estimate calling for a loss of 66 cents a share.
Full Year Operating Results
- Net sales decreased 36.0 percent to $2.2 billion in fiscal 2020 compared to the same period last year.
- Comparable sales decreased by 34.2 percent compared to last year’s 0.8 percent increase.
- Gross profit decreased to $311.2 million in fiscal 2020 versus $999.7 million last year, and gross margin as a percentage of net sales was 13.9 percent as compared to 28.6 percent last year. The decline in gross margin was a result of elevated markdown activity during the year in addition to increased shipping expense with higher digital penetration and deleverage on occupancy, fixed distribution costs, and royalty expense related to the decline in net sales.
- Reported operating expenses were down 13.9 percent to $753.3 million versus last year and the reported operating expenses as a percentage of net sales was 33.7 percent, above last year’s level of 25.1 percent.
- Reported net loss was $488.7 million, or $6.77 loss per diluted share, including net charges of $2.87 per diluted share from adjusted items primarily related to impairment and restructuring charges, a settlement gain with a vendor, and the valuation allowance established against deferred tax assets.
- Adjusted net loss was $281.7 million, or $3.90 loss per diluted share.
- Cash and investments totaled $59.6 million compared to $111.5 million at the end of fiscal 2019, with $294.7 million available for borrowings under our senior secured asset-based revolving credit facility (“ABL Revolver”). Debt totaled $334.8 million at the end of fiscal 2020 compared to $190.0 million debt outstanding for the same period last year.
- The company ended the year with inventories of $473.2 million, down 25.2 percent compared to the same period last year, primarily due to strong inventory controls.
Store Openings and Closings
During fiscal 2020, we opened six stores and closed eight stores in the U.S. resulting in a total of 519 U.S. stores. In Canada, we opened two stores and closed three stores resulting in 144 Canadian stores.
Photo courtesy DSW/Columbus CEO