Designer Brands Inc. Reports $777.2M in Net Sales for Third Quarter, Down 1.2% Year-Over-Year

Designer Brands Inc. reported a net sales figure of $777.2 million for the third quarter ended November 2, 2024, a decrease of 1.2% from $786.3 million in the same period last year. The company's gross profit for the quarter was $247.4 million, representing a gross margin of 31.8%, down from 32.6% in the prior year. Net income attributable to Designer Brands Inc. was $13.0 million, or $0.24 per diluted share, compared to $10.1 million, or $0.17 per diluted share, in the same quarter of 2023. The decline in sales was attributed to unseasonably warm weather and ongoing economic uncertainty affecting consumer discretionary spending.

In terms of operational changes, Designer Brands completed the acquisition of Rubino Shoes Inc. on April 8, 2024, for $16.1 million, which has allowed the company to expand its presence in Quebec, Canada. The acquisition contributed $8.1 million to net sales in the third quarter. Additionally, the company transitioned its Brand Portfolio segment to a wholesale model for certain Owned Brands, which has resulted in increased intersegment sales and cost of sales, although it did not impact consolidated net sales.

The U.S. Retail segment saw a decline in net sales to $615.5 million, down 2.6% year-over-year, primarily due to a decrease in comparable sales. The Canada Retail segment, however, experienced a 10.4% increase in net sales, driven by the addition of Rubino and new store openings. The Brand Portfolio segment also reported an 18.5% increase in net sales, largely due to the aforementioned transition to a wholesale model. Overall, comparable sales decreased by 3.1% across all segments.

The company reported a significant increase in impairment charges, totaling $17.8 million for the quarter, which included $9.2 million related to a vacated corporate office and $7.0 million for the write-off of its equity investment in Le Tigre. Interest expense also rose to $11.6 million, up from $8.8 million in the prior year, reflecting a higher average debt balance. As of November 2, 2024, Designer Brands had total assets of $2.08 billion and total liabilities of $1.76 billion, with a cash balance of $36.2 million.

Looking ahead, Designer Brands remains cautious about the economic environment, which could impact consumer spending and overall business performance. The company plans to continue focusing on operational efficiency and strategic growth initiatives, including further integration of recent acquisitions and enhancing both in-store and digital shopping experiences. The management expressed optimism about navigating the current challenges while maintaining a commitment to shareholder value through share repurchases and dividends.