Designer Brands Inc. CEO Doug Howe gave a glimpse into the footwear company’s business following a third quarter that was hit with warmer-than-normal weather and weakening consumer demand for new shoes.
“The third quarter was difficult for our business,” Howe admitted to analysts on the company’s third-quarter earnings call on Tuesday. “During the third quarter, we experienced a sales shortfall within the fall season, specifically September, particularly related to broad-based weakness in seasonal [boots] and dress.”
“Conversely, a casual portion of our retail business continued to perform well, delivering comp sales growth in the mid-single digits,” Howe said. “We also see the retail customer continuing to lean into value and the intentional rebuild of our clearance business within our U.S. retail segment helped to slightly offset broader declines.”
Other successes for DBI in the third quarter came at the company’s owned brand Topo Athletic, which Designer Brands acquired last year. “We saw a sequential increase in the quarter and a significant improvement in our DTC site throughout,” Howe said. “In October, we launched three new shoes, including a new waterproof trail runner and new low top hiker. We also refreshed the ST-5, which pairs a minimally cushion zero-drop platform with Topo’s signature fit.”
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At Vince Camuto, Howe noted that the brand posted its highest demand day of 2023 in the quarter, as well as the largest full-price non-promotional day in VinceCamuto.com history. The CEO also praised the successful launch of Camuto’s wide-calf boot range in the quarter. “This recent launch has given us yet another proof point that wide cap boots are in high demand,” he said. “Given the limited options available that address this market, we will continue to provide new offerings to capture share.”
And new product like this is key for Laura Denk, as she joined Tuesday’s call to reflect on her first 100 days as president of DSW. “I believe that while DSW is certainly feeling the brunt of a very pressured industry, there are elements of our business where we can employ more focus and discipline,” Denk told analysts.
And for Denk, she has identified three key areas of focus to help drive near-term improvement, including reinvigorating DSW’s assortment, optimizing market investments and enhancing in-store and digital shopping experiences.
“At DSW, and across all of designer brands, it starts and ends with products,” Denk said. “We can’t lose sight of how important an optimal and differentiated assortment is. Maintaining an energizing and trend-right assortment is even more critical today when the customer has substantially more options from brands that are moving more quickly than ever.”
Denk went on to point out DSW’s successes this quarter. She noted that the retailer is seeing “strong demand” for Nike products, which began to come back online in September and were fully restored by early November. “Nike has instantly become one of our top national brands, both in stores and through our e-commerce sites, and we couldn’t be happier with this relationship,” the executive said.
In the spring, Denk said that DSW plans to bring Under Armour back into the mix and that she is excited for the “dominant and growing” relationships with Birkenstock and Skechers. “As we move forward, our teams will continue to develop a holistic strategy that will lead into a fresh, exciting assortment, new marketing initiatives and refreshed in-store and digital experiences,” she added.
This comes as net sales for the DSW-parent company decreased 9.1 percent to $786.3 million in the third quarter of 2023. Comparable sales also decreased by 9.3 percent in the period while adjusted net income was $14.8 million, with an adjusted diluted EPS of 24 cents.
By business segment, U.S. retail sales in Q3 were down 10.6 percent to $631.6 million from $706.4 million at the same time last year. DBI’s Canadian retail segment saw net sales decrease 8.1 percent in the quarter to $75.6 million, down from $82.3 million a year ago. And, the company’s owned-brand portfolio – a big focus for the company – saw net sales decline 12.5 percent to $94.1 million, down from $107.5 million.
Looking ahead, the Columbus, Ohio-based company has updated its full-year guidance. DBI now expects nets sales to be down mid- to high-single digits for full fiscal year 2023. Diluted earnings per share for the full year are expected to be between $1.20 and $1.50.
