Designer Brands Reports Decline in Financial Performance for Q2 2024

Designer Brands Inc. reported a decline in financial performance for the three months ended August 3, 2024, with net sales of $771.9 million, down 2.6% from $792.2 million in the same period last year. The U.S. Retail segment experienced a decrease in sales to $641.7 million, primarily due to a calendar shift and lower comparable sales, while the Canada Retail segment saw an increase to $74.8 million, driven by the acquisition of Rubino, which contributed $7.5 million in net sales. The Brand Portfolio segment also reported growth, with sales rising to $96.0 million, attributed to a shift from a commission model to a wholesale model for certain Owned Brands.

Gross profit for the quarter was $252.9 million, a decrease of 7.5% from $273.4 million in the prior year, resulting in a gross profit margin of 32.8%, down from 34.5%. The decline in gross profit was linked to changes in product mix and increased promotional pricing, particularly in the U.S. Retail segment. Operating expenses rose to $226.9 million, up from $214.5 million, leading to a significant drop in operating profit to $28.6 million, compared to $60.7 million in the previous year. Net income for the quarter was $14.1 million, down from $37.3 million, with diluted earnings per share decreasing to $0.24 from $0.56.

For the six months ended August 3, 2024, net sales totaled $1.5 billion, a slight decrease from $1.5 billion in the same period last year. Gross profit for the six months was $498.0 million, down from $511.1 million, with a gross profit margin of 32.8%, compared to 33.3% in the prior year. Operating profit for the six months was $38.0 million, significantly lower than $80.3 million in the previous year, while net income fell to $15.0 million from $48.6 million.

Strategically, Designer Brands completed the acquisition of Rubino Shoes Inc. on April 8, 2024, for $16.4 million, expanding its presence in Canada. The company also repurchased 2.7 million Class A common shares at a cost of $18.0 million during the six months ended August 3, 2024. The effective tax rate for the quarter was 19.3%, down from 31.4% in the previous year, attributed to discrete tax benefits and state tax planning initiatives.

As of August 3, 2024, total assets were $2.1 billion, with total liabilities of $1.8 billion, resulting in total shareholders' equity of $355.5 million. The company remains compliant with all financial covenants related to its ABL Revolver and Term Loan.