September 26, 2022

Hualienrainbow

We Bring Good Things to Life

Bear of the Day: Designer Brands (DBI)

Formerly known as Designer Shoe Warehouse (DSW), Designer Brands Inc. (DBI) is a retailer that offers brand-name and designer shoes and accessories for men and women; customers can find dress, casual, and athletic footwear, as well as handbags and luggage. DBI is headquartered in Columbus, Ohio.

Shares Slump After Disappointing Earnings

The DSW parent reported an adjusted loss of $1.83 per share, missing consensus estimates of a loss of $0.74. Total revenue fell 44.7{a38ddb2ded6b05e28c8ae73a8db0e271c21f7193684bd9e4e28acae292f81d99} year-over-year to $482.8 million

Comparable sales plunged 42{a38ddb2ded6b05e28c8ae73a8db0e271c21f7193684bd9e4e28acae292f81d99} compared to a 3{a38ddb2ded6b05e28c8ae73a8db0e271c21f7193684bd9e4e28acae292f81d99} increase in the first quarter of 2019

Gross profit fell to a loss of $26.5 million, primarily driven by an increase in inventory markdown activity and higher shopping costs associated with DBI’s online business.

But, one bright spot was Designer Brands’ digital infrastructure in the quarter; online sales accounted for half of total sales demand and grew 25{a38ddb2ded6b05e28c8ae73a8db0e271c21f7193684bd9e4e28acae292f81d99} over last year.

 CEO Roger Rawlins said in the earnings release that “the effect of COVID-19 on our industry has been unprecedented and has created many significant near-term challenges. The pandemic necessitated store closures and heavily impacted consumers.”

Shares of the footwear retailer are down about 57{a38ddb2ded6b05e28c8ae73a8db0e271c21f7193684bd9e4e28acae292f81d99} since January, and slumped over 4{a38ddb2ded6b05e28c8ae73a8db0e271c21f7193684bd9e4e28acae292f81d99} the day of its earnings release. The S&P 500, on the other hand, has been rebounding since its March lows, only down 4{a38ddb2ded6b05e28c8ae73a8db0e271c21f7193684bd9e4e28acae292f81d99} year-to-date.

Bottom Line

DBI is now a Zacks Rank #5 (Strong Sell).

Four analysts have cut their full year earnings outlook over the past 60 days, and the consensus estimate has fallen well over two dollars to a loss of $2.45 per share; earnings are expected to see a triple-digit decline for the fiscal year, though the bottom line should rebound in the next year.

The company did not provide guidance for the current quarter and fiscal year, following in the footsteps of many other retailers.

Going forward, management will focus on its top footwear brands, but until the underlying uncertainty from the pandemic eases, it may be a rocky ride for Designer Brands for a little while longer.

Investors who are interested in adding a retail peer to their portfolio could consider Boot Barn (BOOT), which is known for their western and cowboy inspired boot selection. BOOT is a #3 (Hold) on the Zacks Rank, and earnings are expected to rebound strongly next year.

Biggest Tech Breakthrough in a Generation

Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.

A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.

See 8 breakthrough stocks now>>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Designer Brands Inc. (DBI) : Free Stock Analysis Report
 
Boot Barn Holdings, Inc. (BOOT) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research