By Designer Brands Inc., the parent company of popular footwear brands Keds, Lucky Brand, and Vince Camuto, experienced a significant blow as its stock (DBI) plummeted by 22% in premarket trading on Tuesday. This drop follows the release of weaker-than-expected third-quarter earnings and a subsequent downward revision of its guidance. The Columbus, Ohio-based company attributes its underperformance to a contracting footwear market – the first decline since the onset of the pandemic – coupled with unseasonably warm weather.
Challenges and Strategies
Acknowledging the challenges faced, CEO Doug Howe expressed his thoughts on the matter, stating, “We saw improved performance in casual and clearance categories this quarter, but this was not enough to offset the broader lack of demand.” In light of these market pressures, Designer Brands Inc. has resolved to operate with even greater agility. Their plan includes increasing the level of innovation, newness, and fashion within their assortments while reemphasizing their roots as a merchant organization and a fashion footwear retailer.
Third-Quarter Financials
Designer Brands Inc. reported net income of $10.1 million, or 17 cents per share, representing a significant decline from $45.2 million, or 65 cents per share during the same period last year. Adjusted per-share earnings stood at 24 cents, falling short of the FactSet consensus of 46 cents. Furthermore, sales for the third quarter dipped to $786.3 million compared to $865.0 million a year ago, missing the FactSet consensus of $824.0 million.
Revised Guidance
In light of ongoing pressures within the footwear market, Designer Brands Inc. expects this challenging environment to persist. Consequently, the company has adjusted its full-year guidance for earnings per share (EPS) to a range of 40 cents to 70 cents, down from the previous estimate of $1.20 to $1.50. They also anticipate a decline in sales in the high single digits, as opposed to the earlier projection of a mid-to-high single-digit decrease.
Market Reaction
During the course of this year, Designer Brands Inc.’s stock has experienced a notable increase of 31%. However, the recent news has cast doubt among investors, resulting in a 22% decline in premarket trading. It is worth noting that the broader market, represented by the S&P 500 index (SPX), has seen a 19% gain thus far in 2021.
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