Shares for Designer Brands Inc. (DBI) closed up more than 3% on Wednesday after the company reported better-than-expected earnings in the second quarter and raised its full-year outlook.
On the company’s earnings call on Wednesday, CEO Roger Rawlins said that while the overall footwear market was slightly softer in the second quarter versus the first quarter of 2022, Designer Brands is still “far outpacing” the major footwear retail indices and is “better positioned than many” to deliver on our fall expectations
In the second quarter, the Columbus, Ohio-based company reported a 5.1% net sales increase to $859.3 million compared to the same period last year. Net income in the quarter was $46.2 million.
This success this quarter is also due in part to the company’s ambitious owned brand strategy. In the second quarter, owned brand sales grew 40% compared to the same period last year. Additionally, owned brands represented 23% of the company’s revenue compared to 17% in the second quarter last year, continuing the significant increases it saw in the first quarter.
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“Our ability to take our brands directly to a consumer through our retail stores and websites is key to our growth, and it delivered a 45% increase to last year while still growing our wholesale distribution by 25%,” Rawlins said on the call. “We are extremely pleased with these results and remain on track to deliver our commitment of doubling the sales of our owned brands by 2026.”
Rawlins added: “The recent addition of Le Tigre to our portfolio of brands, coupled with our recently announced partnership with Reebok, supports our plan to build a very relevant and highly demanded Owned Brands assortment.”
These results come after DBI announced in April a goal for owned brand sales to double from 19% of the company’s revenue to almost one-third by 2026. In 2018, DBI acquired Camuto Group, which designs and develops the Vince Camuto brand and licenses footwear for Jessica Simpson and Lucky Brand.
Doug Howe, who joined the retailer from Kohl’s as EVP in May, said on Wednesday’s call that the gains this quarter were also due to a strong back-to-school season, supported by an increased assortment of athletic and kid’s products. In fact, even without the presence of Nike in its assortment, Howe said the company has seen sales increases compared to 2021. “We are gaining market share,” he said. “We are growing, and we have no intention of taking our foot off the gas.”
What’s more, the return of the retailer’s clearance customer also drove the quarter. Howe noted that growing the company’s clearance customer has been a “strategic focus” as the category is an integral part of its business model. DBI has reacquired approximately 2 million clearance customers year-to-date, resulting in clearance sales being up 5% in the quarter compared to being down 5% in the first quarter of this year, Howe noted.
Looking ahead, the company has raised its guidance for the full year 2022 driven by its share repurchase activity and better-than-anticipated second quarter results. DBI now expects earnings per share for the year of $2.05 to $2.15 compared to its previous guidance of $1.90 to $2.00.
