Designer Brands Inc., the parent of DSW and Camuto Group, reported comparable sales for the fiscal year increased 0.8 percent in the fourth quarter.
Highlights of the year included:
- Comparable sales for the fiscal year increased 0.8 percent, delivering a two-year comparable sales increase of 6.9 percent;
- Full-year Reported EPS of $1.27 per diluted share, including net charges of $0.26 per diluted share from adjusted items;
- Full-year Adjusted EPS of $1.53 per diluted share;
- Repurchased 7.1 million shares in fiscal 2019 returned $214.2 million to shareholders through share repurchases and dividends over the last 12 months; and
- Board of Directors declared a quarterly dividend of 10 cents per share.
Chief Executive Officer Roger Rawlins, stated, “The impact of COVID-19 on our business and industry is unprecedented, and our thoughts are with those individuals who have been directly affected by the virus. At the direction of government officials to flatten the curve, and in an attempt to safeguard the long-term stability of our business, we have made the difficult decision to temporarily close our North American retail locations as of the close of business today. However, we will continue to serve our customers through our leading e-commerce infrastructure, which we have invested in heavily over the last few years. Our warehouses will remain open to fulfill our online orders, operating under our emergency preparedness plan and all retail employees will be compensated in the near-term.”
Rawlins continued, “In an abundance of caution and to preserve our financial flexibility during this difficult time, we have decided to reduce our dividend for the first quarter of fiscal 2020 to deliver a yield that we believe more appropriately aligns with the current stock price, yet remains near the top of our peer set. We have a solid balance sheet with modest bank debt levels outstanding, and we expect to return to normal investment and distribution policies as we return to normalcy and volatility subsides. Due to the current level of uncertainty, which we expect to continue in the coming months due to the rapidly evolving and unprecedented circumstances surrounding COVID-19, we are refraining from providing 2020 guidance.
“We are focused on preserving the long-term sustainability of our business. While we face new challenges as we progress through this extraordinarily challenging time, we have not lost sight of our overarching goal of becoming the leading footwear and accessories company in North America. We remain focused on strengthening our relationship with our customers and increasing our market share through the execution of our three strategic pillars of (1) developing differentiated products; (2) offering differentiated experiences, both in-store and online; and (3) focusing on new growth opportunities to position Designer Brands well for the long term.”
Full-Year Operating Results
- Net sales increased 9.9 percent to $3.5 billion, including $448.3 million in sales from the Brand Portfolio segment, which includes $72.1 million in intersegment sales that are eliminated in consolidation;
- Comparable sales increased by 0.8 percent compared to last year’s 6.1 percent increase;
- Reported gross profit, as a percent of sales, decreased by 90 bps primarily due to the decline in the U.S. Retail segment, which was driven by higher shipping costs in the current year associated with higher digital penetration and a benefit recognized in fiscal 2018 as a result of adjusting its loyalty programs deferred revenue due to the relaunch of the DSW VIP rewards program;
- The Canada Retail segment gross profit margin improved primarily due to lower clearance activity with improvements in the inventory position and improved leverage in occupancy costs with the exit of the Town Shoe’s banner last year;
- Reported operating expenses, as a percent of net sales, decreased by 60 bps primarily driven by lower incentive compensation and marketing investments in fiscal 2019, and the impact of lease exit charges and acquisition-related costs in fiscal 2018, partially offset by the impact of including Camuto Group in the consolidated results and higher integration and restructuring charges in fiscal 2019;
- Reported net income was $94.5 million, or $1.27 per diluted share, including pre-tax charges totaling $26.8 million, or $0.26 per diluted share, primarily related to integration and restructuring expenses associated with the businesses acquired in fiscal 2018 and impairment charges; and
- Adjusted net income was $114.3 million, or $1.53 per diluted share, against$114.3 million, or $1.66, a year ago.
Balance Sheet Highlights
Cash and investments totaled $111.5 million compared to $169.1 million at the end of fiscal 2018, and debt totaled $190.0 million at the end of fiscal 2019 compared to $160.0 million outstanding at the end of the prior-year reflecting share repurchase activity and payment of dividends in fiscal 2019. The company ended the year with inventories of $632.6 million compared to $645.3 million last year. Excluding inventories from the acquisitions, inventories per square foot decreased by 2.7 percent year-over-year.
During fiscal 2019, the company repurchased 7.1 million shares for a total of $141.6 million with $334.9 million remaining under its share repurchase program. Since 2013, the company has returned $966.8 million to shareholders through dividends and share repurchases.
Regular Dividend
Due to the COVID-19 situation, the company’s Board of Directors declared a quarterly cash dividend of $0.10 per share, a reduction from the previous level of $0.25 per share, in order to preserve the company’s liquidity. The dividend will be paid on April 10, 2020 to shareholders of record at the close of business on March 30, 2020.
Fiscal 2020 Annual Guidance
Given the uncertainty around the impact of COVID-19 on its supply chain and consumer demand in the U.S. and Canada, as well as other mitigation efforts such as store closures, the company is not issuing guidance for fiscal 2020 at this time. The situation is rapidly evolving, and it is challenging to reliably quantify the impact of COVID-19. The company said it will issue an update as visibility increases once there is a return to normalcy.
Logo courtesy Designer Brands