Designer Brands, Inc., the parent company of DSW, The Shoe Co. and Rubino retail brands, and owner of Topo Athletic, Keds, Le Tigre, Hush Puppies, and other footwear brands, reported a “soft start” to 2025 amid an unpredictable macroeconomic environment and deteriorating consumer sentiment.

Soft enough that investors looked to exit the company’s stock, sending DBI shares down 18 percent for the day on Tuesday, June 10.

CEO Doug Howe told participants in the company’s Q1 conference call with analysts that the persistent instability and pressure on consumer discretionary spend has prompted the company to withdraw its 2025 guidance “for the time being.”

First quarter net sales decreased 8.0 percent year-over-year to $686.9 million for the three-month period ended May 3. Comparable store sales (comps) fell 7.8 percent year-over-year (y/y), with U.S. Retail down 7.3 percent, Canada Retail declining 9.2 percent and Brand Portfolio DTC comp sales declining 27.0 percent year-over-year.

First Quarter Comps

February was said to be the weakest month of the quarter with unfavorable weather causing further challenges. Howe said they saw sequential improvement as the quarter progressed.

The tough quarter comes after the company appeared to be moving in the right direction as recently as three months ago.

“Over one year ago, we began to refresh our business, bringing in new leaders, modernizing our assortments, implementing a more compelling marketing approach and rightsizing our brand portfolio organization,” said Howe. “We’ve moved decisively to reset and transform our business and our team to focus on the customer.”

“We began to see the fruits of those changes materialize in the back half of fiscal 2024, posting two consecutive quarters of year over-year adjusted operating income growth and the first positive sales comp at DSW in nine quarters. Heading into fiscal 2025, we were confident in our plans to build on this momentum,” the CEO shared. “However, as the macro environment has evolved rapidly, it has introduced increased uncertainty and reduced planning visibility, particularly around consumer behavior. We are responding with agility and adjusting accordingly to navigate these shifting dynamics.”

Howe said that the company has thoroughly evaluated its cost structure and implemented expense cuts, which helped to deliver a 6 percent reduction in operating expenses for the quarter versus first quarter last year. He said the company shifted its near-term focus to amplifying value in its retail channels, preserving margins, controlling costs and mitigating the impact of tariffs as part of its response to this volatility.

The CEO added that the company expects to deliver between $20 million to $30 million in cost savings over the course of 2025.

“Moving forward, our efforts remain focused on disciplined execution of the initiatives within our control to build a business rooted in the strength of our brand, centered on the customer, and positioned for long-term value creation,” he added.

First Quarter Summary

U.S. Retail
For the first quarter, U.S. Retail reported comps were down 7.3 percent and total sales were down 7.7 percent, reportedly driven by lower traffic, “especially earlier in the quarter where weather had a more material impact.” Howe said this led to a challenging seasonal business across all demographics in the quarter.

Company CFO Jared Poff shared that both in-store and online traffic were pressured through the period, but improved sequentially on a monthly basis. “We also saw fewer returns during the quarter, which we believe underscores the strong work we’ve done with our assortment,” he noted.

“Sales of our top eight brands achieved a flat comp compared to the first quarter last year, performing much stronger than the balance of the assortment and increased penetration growing to 43 percent of sales from 40 percent last year,” Poff added. “Our seasonal product remained pressured and even our strongest categories like Athletic experienced compression with sales down 4 percent.”

“We continue to operate with a laser focus on elevating and optimizing our assortment through strategic partnerships and data-driven insights, helping to improve inventory availability and productivity,” Howe said.

“Compared to last year, we are meaningfully reducing our choice count while simultaneously increasing our depth on key styles throughout the year,” he continued. “The work we’ve done so far has meaningfully improved store conversion rates, up 60 basis points year-over-year, underscoring both the strength of our product offering and how it is resonating at the point of sale.”

Howe said Athletic and Athleisure continue to outperform relative to other categories with minimal disruption, “supported by resilient global demand and a well-diversified sourcing network.” He said they see “notable opportunity” for these categories to grow organically and expand their penetration in the current environment. “In fact, according to Circana data for Q1, DSW gained 10 basis points in Athleisure Footwear market share,” he noted.

Canada Retail
Poff said the Canada Retail segment posted a 2.9 percent y/y sales decline in the first quarter, with comps down 9.2 percent y/y, primarily due to lower traffic due to the compressed consumer spending. Total sales reportedly benefited from the addition of the Rubino business – which is not yet in the comp sales calculation – but also faced exchange rate headwinds, resulting in a decline in total sales versus last year.

“Overall, performance remains challenging as many of the conditions leading to a depressed U.S. consumer are also affecting the Canadian consumer. We are actively evaluating ways to better connect with the Canadian consumer in today’s environment,” Howe suggested.

Brand Portfolio
The company’s Brand Portfolio segment, which includes Topo Athletic, Keds, Le Tigre, Hush Puppies, and other footwear brands, posted Q1 sales of of $95.9 million, down 7.9 percent y/y, with strong underlying performance in several key areas. Poff suggested that most retailers in the [footwear] space [that purchase products from the Brand Portfolio business] are approaching the year with the same level of conservatism as DSW.

“However, thanks to the expense efficiency work that began last year, the Brand Portfolio segment saw a 23 percent reduction in operating expenses, allowing operating income to grow by over 30 percent despite the challenging top line.”

Howe said Topo continued its impressive growth trajectory, growing at 84 percent year-over-year, reinforcing its momentum as an emerging growth brand.  “We continue to advance our brand strategy for our wholesale brands and continue to invest in key brands such as Topo and Keds that are well positioned to long-term growth,” he noted.

“In addition, the focus on operational efficiencies that began last year enabled the Brand Portfolio to grow operating income by over 30 percent over last year despite the decline in total sales,” he added.

In addition to the growth at Topo and Keds, Poff said Jessica [Simpson] also remained a bright spot in our dress and seasonal assortment with sales up 6 percent in wholesale sales to partners outside of DSW.

While it was a challenging quarter for many of our brands, we are pleased that the Topo brand continues to be a stronghold in our assortment, posting 84 percent growth in sales year-over-year,” the CFO said. Howe added that both Topo and Keds demonstrate pricing power and expect demand for these brands to withstand anticipated pricing increases. “We are also reviewing pricing across our portfolio, including our exclusive brands as one lever to help mitigate the impact of tariffs and increased sourcing costs,” he offered.

Topo Athletic
Howe said Topo continues to perform exceptionally well during the quarter. “This was primarily built on the brand’s continued strategic distribution expansion as well as strong sell- through in reorders from existing accounts,” he added.

CEO Howe noted that Topo had over 1,200 points of domestic distribution by the end of the quarter, an increase of 43 percent versus the first quarter of 2024.

“Topo also saw great results in new product launches, most notably the Phantom 4, the brand’s top road shoe and Mountain Racer, the brand’s top trail shoe,” Howe shared. “In addition, the brand had already begun diversifying out of China before the current tariffs took effect, leaving it well positioned to drive margins while continuing to scale revenue.”

Keds
Keds continues to see increased momentum as the company cleaned up the marketplace of excess inventory and relaunched some key styles and franchises with new comfort features.

“Although this produced top-line headwinds, it resulted in gross margin improvement of approximately 700 basis points year-over-year. This improvement was primarily driven by the transition from Wolverine Worldwide production to Designer Brands own production in the first quarter, resulting in a significant reduction in landed cost.

Profitability & Expenses
Gross profit decreased to $295.1 million, or 43.0 percent of net sales, in the first quarter, compared to $330.0 million, or 44.2 percent of net sales, in Q1 last year.

DBI posted an operating loss of $7.3 million in the first quarter, attributed to declining profits in both U.S. and Canada retail, compared to an operating profit of $9.4 million in Q1 last year. Segment operating profits fell nearly 39 percent year-over-year.

Reported net loss attributable to Designer Brands Inc. was $17.4 million, or a loss of 36 cents per diluted share, in the first quarter. Adjusted net loss was $12.5 million, or an Adjusted diluted loss per share of 26 cents for the period.

Balance Sheet & Liquidity Summary
Cash and cash equivalents totaled $46.0 million at quarter-end, compared to $43.4 million at the end of the Q1 period last year, with $125.5 million available for borrowings under a senior secured asset-based revolving credit facility.

Debt totaled $522.9 million at quarter-end, compared to $476.1 million at the end of the Q1 period last year.

The company ended the first quarter with inventories of $623.6 million compared to $620.5 million at the end of the Q1 period last year.

 

 

Return to Shareholders
A dividend of 5 cents per share for both Class A and Class B common shares will be paid on June 18, 2025 to shareholders of record at the close of business on June 5, 2025.

Stores

2025 Financial Outlook
Due to macroeconomic uncertainty stemming primarily from global trade policies, the company has withdrawn its full year 2025 guidance that was provided on March 20, 2025, and is not providing a full year outlook at this time.

Image courtesy Topo Athletic