Designer Brands, Inc., the parent of DSW, reported earnings on an adjusted basis declined 60 percent in the fourth quarter ended January 28 as same-store sales dropped 5.5 percent. Earnings still came ahead of analyst estimates and earnings and sales showed strong improvement overall in 2022.

Adjusted earnings of 7 cents a share in the quarter topped consensus estimates that had called for a loss of 2 cents. Sales of $760.5 million were below Wall Street’s consensus estimate of $793 million.

Roger Rawlins, CEO, stated, “Our 2022 results clearly showcase the power and success of our brand-building strategy with our Owned Brands growing over 32 percent to last year while delivering gross margins 400 basis points higher than those we saw in 2019. These results showcase the successful execution of our strategy. I am incredibly proud of our team and their tireless efforts, and I am excited about what lies ahead for Designer Brands.”

Doug Howe, president of DSW and incoming CEO, added, “Looking ahead, we are confident in the strength of our business as we work to integrate new and recognizable names into the Designer Brands family, including Keds, Le Tigre, Topo Athletic, and Hush Puppies. Although we are navigating through a volatile environment, we are well-positioned to offer great value and a diverse assortment of product to our customers as we head into 2023. We will continue to be prudent in managing our expenses and inventory and drive growth in our portfolio of increasingly diversified Owned Brands.”

Fourth Quarter Operating Results
(unless otherwise stated, all comparisons are to the fourth quarter of 2021)

  • Net sales decreased 7.5 percent to $760.5 million;
  • Comparable sales decreased by 5.5 percent;
  • Gross profit decreased to $222.0 million versus $254.2 million last year, and gross margin was 29.2 percent as compared to 30.9 percent last year;
  • Reported net income attributable to Designer Brands, Inc. was $45.1 million, or diluted earnings per share of $0.66, including net benefits of $0.59 per diluted share from adjusted items, primarily related to the change in the valuation allowance on deferred tax assets, partially offset by restructuring and termination costs and CEO transition costs; and
  • Adjusted net income was $4.7 million, or adjusted diluted EPS of $0.07, down 60.2 percent from $11.7 million, or 15 cents, a year ago.

Full-Year Operating Results
(unless otherwise stated, all comparisons are to the full year 2021)

  • Net sales increased 3.7 percent to $3.3 billion;
  • Comparable sales increased by 4.4 percent;
  • Gross profit was flat to last year at $1.1 billion, and gross margin was 32.6 percent as compared to 33.4 percent last year;
  • Reported net income attributable to Designer Brands Inc. was $162.7 million, or diluted EPS of $2.26, including net benefits of $0.41 per diluted share from adjusted items, primarily related to the change in the valuation allowance on deferred tax assets, partially offset by the loss on extinguishment of debt and write-off of debt issuance costs, restructuring and termination costs, CEO transition costs, and impairment chargesand
  • Adjusted net income was $133.7 million, or adjusted diluted EPS of $1.85, up from $14.4 million, or 19 cents a share.

Designer Brands had guided adjusted EPS in the range of $1.75 – $1.80. The company guidance same-store sales up mid-single- digits.

Liquidity Highlights

  • Cash and cash equivalents totaled $58.8 million at the end of 2022, compared to $72.7 million at the end of 2021, with $243.9 million available for borrowings under our senior secured asset-based revolving credit facility (ABL Revolver). Debt totaled $281.0 million at the end of 2022 compared to $225.5 million at the end of 2021; and
  • The company ended the year with inventories of $605.7 million compared to $586.4 million at the end of 2021.

Return to Shareholders
For the year ended January 28, 2023, we repurchased 10.7 million Class A common shares (14.6 percent of Class A and Class B common shares at the beginning of the fiscal year) at an aggregate cost of $147.5 million, with $187.4 million of Class A common shares that remain authorized under the program as of January 28, 2023.

A dividend of $0.05 per share of Class A and Class B common shares will be paid on April 14, 2023 to shareholders of record at the close of business on March 31, 2023.

Store Openings and Closings
During the fourth quarter of 2022, the company closed three stores in the U.S. with no changes to the store count in Canada, resulting in a total of 501 U.S. stores and 138 Canadian stores at the end of 2022.

Outlook for 2023
The company reported the following guidance for the full year 2023:

  • Designer Brands’ net sales growth, excluding Keds, is expected to be down mid-single-digits;
  • EPS, excluding Keds, is expected in the range of $1.65 to $1.75. Wall Street’s consensus EPS for 2023 had called for $1.76; and
  • The acquisition of Keds is expected to add $75.0 million to $85.0 million and zero per share in EPS contribution.