UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July ~~31, 2021~~30, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the transition period from						to

Commission file number ~~001-32545~~1-32545


DESIGNER BRANDS INC.
(Exact name of registrant as specified in its charter)

Ohio

31-0746639

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

810 DSW Drive,

Columbus,

Ohio

43219

(Address of principal executive offices)

(Zip Code)

Registrant's telephone number, including area code: (614) 237-7100


Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Class A Common Shares, without par value	DBI	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☑ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☑ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐☑	Accelerated filer	☑☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☑ No

Number of shares outstanding of each of the registrant's classes of common stock, as of August ~~24, 2021: 65,266,904~~25, 2022: 56,500,918 Class A common shares and 7,732,743 Class B common shares.

DESIGNER BRANDS INC.

TABLE OF CONTENTS

All references to "we," "us," "our," "Designer Brands," "Designer Brands Inc.," or the "Company" in this Quarterly Report on Form 10-Q for the six months ended July 30, 2022 (this "Form 10-Q") mean Designer Brands Inc. and its subsidiaries.

We have included website addresses throughout this report as inactive textual references only. The information contained on the websites referenced herein is not incorporated into this Form 10-Q.

Table of Contents

Cautionary Statement Regarding Forward-Looking Information for Purposes of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995

Certain statements in this ~~Quarterly Report on~~ Form 10-Q ~~(this "Form 10-Q")~~ may constitute forward-looking statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of ~~1995, which~~1995. Such statements reflect our current views with respect to, among other things, future events and financial performance. You can identify these forward-looking statements by the use of ~~forward-looking~~ words such as "outlook," "could," "believes," "expects," "potential," "continues," "may," "will," "should," "would," "seeks," "approximately," "predicts," "intends," "plans," "estimates," "anticipates," or the negative version of those words or other comparable words. Any forward-looking statements contained in this Form 10-Q are based upon current plans, estimates, expectations, and assumptions relating to our operations, results of operations, financial condition, ~~growth strategy~~ and liquidity. The inclusion of ~~this~~these forward-looking ~~information~~statements should not be regarded as a representation by us or any other person that the future plans, estimates, or expectations contemplated by us will be achieved. Such forward-looking statements are subject to numerous risks, uncertainties and other factors that may cause actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. In addition to ~~those~~other factors ~~described~~discussed elsewhere in this report, under Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the fiscal year ended January ~~30, 2021~~29, 2022 (the ~~"2020~~"2021 Form 10-K"), filed with the Securities and Exchange Commission (the "SEC") on March ~~22, 2021,~~21, 2022, and otherwise in our reports and filings with the SEC, there are a number of important factors that could cause actual results, performance or achievements to differ materially from those discussed in forward-looking statements ~~including,~~that include, but are not limited to, the following:

•risks and ~~uncertainty~~uncertainties related to the ~~continued outbreak of the~~ongoing coronavirus ("COVID-19"), pandemic, any future COVID-19 resurgence, and any other adverse public health developments;

•risks ~~related~~that recent inflationary pressures, including higher freight costs, could have on our results of operations and customer demand based on pricing actions and operating measures taken to ~~losses or disruptions associated with our distribution systems,~~mitigate the impact of inflation;

•uncertain general economic conditions, including ~~our distribution~~inflation and ~~fulfillment centers and our stores, whether as a result of COVID-19,~~ supply chain ~~disruptions, reliance on third-party providers, cyber-related attacks,~~pressures, domestic and global political and social conditions and the potential impact of geopolitical turmoil or ~~otherwise;~~conflict, and the related impacts to consumer discretionary spending;

•our ability to ~~protect the health and safety of~~execute on our ~~associates and our customers, which may be affected by current or future government regulations related to stay-at-home orders and orders related to the operation of non-essential businesses;~~

•risks related to our international operations, including international trade, our reliance on foreign sources for merchandise and related supply chain disruptions, exposure to political, economic, operational, compliance and other risks, and fluctuations in foreign currency exchange rates;

•~~maintaining strong relationships with our vendors, manufacturers, licensors, and retailer customers;~~long-term strategic plans;

•our ability to anticipate and respond to fashion trends, consumer preferences and changing customer expectations;

•our ability to maintain strong relationships with our vendors, manufacturers, licensors, and retailer customers;

•risks related to ~~restrictions~~losses or disruptions associated with our distribution systems, including our distribution centers and fulfillment center and stores, whether as a result of the COVID-19 pandemic, reliance on ~~our senior secured asset-based revolving credit facility ("ABL Revolver") and senior secured term loan ("Term Loan") that could limit our ability to fund operations;~~third-party providers, or otherwise;

•our reliance on our loyalty programs and marketing to drive traffic, sales, and customer loyalty;

•~~failure~~risks related to ~~retain~~cyber security threats and privacy or data security breaches or the potential loss or disruption of our ~~key executives or attract qualified new personnel;~~information systems;

•our ability to protect our reputation and to maintain the brands we license;

•our competitiveness with respect to style, price, brand availability, and customer service;

•risks related to ~~the loss or disruption of~~ our ~~information systems~~international operations, including international trade, our reliance on foreign sources for merchandise, exposure to political, economic, operational, compliance and ~~data~~other risks, and ~~our ability to prevent or mitigate breaches of our information security and the compromise of sensitive and confidential data;~~fluctuations in foreign currency exchange rates;

•our ability to comply with privacy laws and regulations, as well as other legal obligations;

•~~our ability to protect our reputation~~risks associated with climate change and ~~to maintain the brands we license;~~

•~~uncertain general economic, political and social conditions and the related impacts to consumer discretionary spending;~~

•~~our competitiveness with respect to style, price, brand availability and customer service;~~

•~~our ability to provide customers cost-effective shopping platforms;~~other corporate responsibility issues; and

•~~uncertainty~~uncertainties related to future legislation, regulatory reform, policy changes, or interpretive guidance on existing legislation.

If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results, performance, or achievements may vary materially from what we have projected. Furthermore, new factors emerge from time to time, and it is not possible for management to predict all such factors, nor can management assess the impact of any such factor on the business or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statement speaks only as of the date on which such statement is made and, except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events.

~~DESIGNER BRANDS INC.~~

~~TABLE OF CONTENTS~~


			~~Page~~
~~PART I. FINANCIAL INFORMATION~~
~~Item 1. Financial Statements~~
~~Condensed Consolidated Statements of Operations~~			1
~~Condensed Consolidated Statements of Comprehensive Income (Loss)~~			2
~~Condensed Consolidated Balance Sheets~~			3
~~Condensed Consolidated Statements of Shareholders' Equity~~			4
~~Condensed Consolidated Statements of Cash Flows~~			5
~~Notes to the Condensed Consolidated Financial Statements~~			6
~~Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations~~			17
~~Item 3. Quantitative and Qualitative Disclosures About Market Risk~~			26
~~Item 4. Controls and Procedures~~			26
~~PART II. OTHER INFORMATION~~
~~Item 1. Legal Proceedings~~			26
~~Item 1A. Risk Factors~~			26
~~Item 2. Unregistered Sales of Equity Securities and Use of Proceeds~~			27
~~Item 3. Defaults Upon Senior Securities~~			27
~~Item 4. Mine Safety Disclosures~~			27
~~Item 5. Other Information~~			27
~~Item 6. Exhibits~~			27
~~Signature~~			28

~~All references to "we," "us," "our," "Designer Brands," "Designer Brands Inc.," or the "Company" in this Form 10-Q mean Designer Brands Inc. and its subsidiaries.~~

Table of Contents

PART ~~I. FINANCIAL INFORMATION~~I

~~Item 1. Financial Statements~~


ITEM 1. FINANCIAL STATEMENTS

~~DESIGNER BRANDS INC.~~

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

~~(unaudited and in thousands, except per share amounts)~~


		Three months ended				Six months ended
		July 31, 2021		August 1, 2020		July 31, 2021		August 1, 2020
(unaudited and in thousands, except per share amounts)										(unaudited and in thousands, except per share amounts)	Three months ended				Six months ended
											July 30, 2022		July 31, 2021		July 30, 2022		July 31, 2021
Net sales	Net sales	$	817,335	$	489,714	$	1,520,490	$	972,497	Net sales	$	859,319	$	817,335	$	1,689,862	$	1,520,490
Cost of sales	Cost of sales	(532,654)		(452,672)		(1,019,698)		(961,915)		Cost of sales	(563,649)		(532,654)		(1,118,447)		(1,019,698)
Gross profit	Gross profit	284,681		37,042		500,792		10,582		Gross profit	295,670		284,681		571,415		500,792
Operating expenses	Operating expenses	(224,385)		(168,424)		(425,199)		(355,645)		Operating expenses	(228,690)		(224,385)		(452,116)		(425,199)
Income from equity investment		2,290		2,153		3,998		4,423
Income from equity investments										Income from equity investments	2,435		2,290		4,380		3,998
Impairment charges	Impairment charges	(1,174)		(6,735)		(1,174)		(119,282)		Impairment charges	(1,816)		(1,174)		(2,888)		(1,174)
Operating profit (loss)		61,412		(135,964)		78,417		(459,922)
Operating profit										Operating profit	67,599		61,412		120,791		78,417
Interest expense, net	Interest expense, net	(8,072)		(3,788)		(16,886)		(5,946)		Interest expense, net	(2,752)		(8,072)		(5,704)		(16,886)
Loss on extinguishment of debt and write-off of debt issuance costs										Loss on extinguishment of debt and write-off of debt issuance costs	—		—		(12,862)		—
Non-operating income (expenses), net	Non-operating income (expenses), net	(244)		743		562		656		Non-operating income (expenses), net	37		(244)		43		562
Income (loss) before income taxes		53,096		(139,009)		62,093		(465,212)
Income tax benefit (provision)		(10,236)		40,795		(2,207)		151,140
Net income (loss)		$	42,860	$	(98,214)	$	59,886	$	(314,072)
Basic and diluted earnings (loss) per share:
Basic earnings (loss) per share		$	0.59	$	(1.36)	$	0.82	$	(4.36)
Diluted earnings (loss) per share		$	0.55	$	(1.36)	$	0.78	$	(4.36)
Income before income taxes										Income before income taxes	64,884		53,096		102,268		62,093
Income tax provision										Income tax provision	(18,671)		(10,236)		(29,873)		(2,207)
Net income										Net income	$	46,213	$	42,860	$	72,395	$	59,886
Basic and diluted earnings per share:										Basic and diluted earnings per share:
Basic earnings per share										Basic earnings per share	$	0.66	$	0.59	$	1.02	$	0.82
Diluted earnings per share										Diluted earnings per share	$	0.62	$	0.55	$	0.96	$	0.78
Weighted average shares used in per share calculations:	Weighted average shares used in per share calculations:									Weighted average shares used in per share calculations:
Basic shares	Basic shares	72,932		72,142		72,773		72,028		Basic shares	69,604		72,932		71,263		72,773
Diluted shares	Diluted shares	77,619		72,142		77,271		72,028		Diluted shares	73,942		77,619		75,369		77,271

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

Table of Contents

~~DESIGNER BRANDS INC.~~

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME ~~(LOSS)~~

~~(unaudited and in thousands)~~

Three months ended Six months ended
July 31, 2021 August 1, 2020 July 31, 2021 August 1, 2020
Net income (loss) $ 42,860 $ (98,214) $ 59,886 $ (314,072)
Other comprehensive income (loss), net of income taxes:
Foreign currency translation gain (loss) (298) 1,290 245 (2,251)
Unrealized net gain on debt securities — — — 195
Reclassification adjustment for net gains realized in net loss — — — (368)
Total other comprehensive income (loss), net of income taxes (298) 1,290 245 (2,424)
Total comprehensive income (loss) $ 42,562 $ (96,924) $ 60,131 $ (316,496)


	Three months ended				Six months ended
(unaudited and in thousands)	July 30, 2022		July 31, 2021		July 30, 2022		July 31, 2021
Net income	$	46,213	$	42,860	$	72,395	$	59,886
Other comprehensive income (loss), net-
Foreign currency translation gain (loss)	(63)		(298)		(144)		245




Total comprehensive income	$	46,150	$	42,562	$	72,251	$	60,131

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

Table of Contents

~~DESIGNER BRANDS INC.~~

CONDENSED CONSOLIDATED BALANCE SHEETS

~~(unaudited and in thousands)~~


		July 31, 2021		January 30, 2021		August 1, 2020
(unaudited and in thousands)								(unaudited and in thousands)	July 30, 2022		January 29, 2022		July 31, 2021
ASSETS	ASSETS							ASSETS
Current Assets:								Current Assets:
Cash and cash equivalents	Cash and cash equivalents	$	46,458	$	59,581	$	206,720	Cash and cash equivalents	$	50,799	$	72,691	$	46,458

Receivables, net	Receivables, net	199,371		196,049		49,240		Receivables, net	204,880		199,826		199,371
Inventories	Inventories	504,316		473,183		445,044		Inventories	694,010		586,429		504,316
Prepaid expenses and other current assets	Prepaid expenses and other current assets	53,616		51,772		69,456		Prepaid expenses and other current assets	51,558		55,270		53,616
Total current assets	Total current assets	803,761		780,585		770,460		Total current assets	1,001,247		914,216		803,761
Property and equipment, net	Property and equipment, net	271,401		296,469		332,730		Property and equipment, net	242,147		256,786		271,401
Operating lease assets	Operating lease assets	676,665		700,481		797,413		Operating lease assets	646,062		647,221		676,665
Goodwill	Goodwill	93,655		93,655		93,655		Goodwill	93,655		93,655		93,655
Intangible assets, net	Intangible assets, net	15,905		15,635		15,663		Intangible assets, net	20,237		15,527		15,905
Deferred tax assets		—		—		182,866
Equity investment		55,149		58,598		56,690

Equity investments								Equity investments	61,957		55,578		55,149
Other assets	Other assets	29,513		31,172		23,780		Other assets	37,134		31,651		29,513
Total assets	Total assets	$	1,946,049	$	1,976,595	$	2,273,257	Total assets	$	2,102,439	$	2,014,634	$	1,946,049
LIABILITIES AND SHAREHOLDERS' EQUITY	LIABILITIES AND SHAREHOLDERS' EQUITY							LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:								Current Liabilities:
Accounts payable	Accounts payable	$	299,322	$	245,071	$	224,693	Accounts payable	$	337,543	$	340,877	$	299,322
Accrued expenses	Accrued expenses	222,055		200,326		202,831		Accrued expenses	210,469		215,812		222,055
Current maturities of long-term debt	Current maturities of long-term debt	62,500		62,500		—		Current maturities of long-term debt	—		—		62,500
Current operating lease liabilities	Current operating lease liabilities	190,853		244,786		241,694		Current operating lease liabilities	192,130		202,228		190,853
Total current liabilities	Total current liabilities	774,730		752,683		669,218		Total current liabilities	740,142		758,917		774,730
Long-term debt	Long-term debt	184,569		272,319		393,000		Long-term debt	387,441		225,536		184,569
Non-current operating lease liabilities	Non-current operating lease liabilities	645,136		677,735		778,826		Non-current operating lease liabilities	588,064		593,429		645,136
Other non-current liabilities	Other non-current liabilities	30,502		30,841		25,586		Other non-current liabilities	25,844		24,356		30,502
Total liabilities	Total liabilities	1,634,937		1,733,578		1,866,630		Total liabilities	1,741,491		1,602,238		1,634,937
Commitments and contingencies	Commitments and contingencies			0		0		Commitments and contingencies
0Shareholders' equity:
Shareholders' equity:								Shareholders' equity:
Common shares paid-in capital, no par value	Common shares paid-in capital, no par value	998,117		990,153		980,749		Common shares paid-in capital, no par value	1,010,181		1,005,382		998,117
Treasury shares, at cost	Treasury shares, at cost	(515,065)		(515,065)		(515,065)		Treasury shares, at cost	(643,563)		(515,065)		(515,065)
Retained deficit	Retained deficit	(168,899)		(228,785)		(54,138)		Retained deficit	(1,909)		(74,304)		(168,899)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(3,041)		(3,286)		(4,919)		Accumulated other comprehensive loss	(3,761)		(3,617)		(3,041)
Total shareholders' equity	Total shareholders' equity	311,112		243,017		406,627		Total shareholders' equity	360,948		412,396		311,112
Total liabilities and shareholders' equity	Total liabilities and shareholders' equity	$	1,946,049	$	1,976,595	$	2,273,257	Total liabilities and shareholders' equity	$	2,102,439	$	2,014,634	$	1,946,049

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

Table of Contents

~~DESIGNER BRANDS INC.~~

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

~~(unaudited and in thousands, except per share data)~~


		Number of shares			Amounts											Number of shares			Amounts
		Class A common shares	Class B common shares	Treasury shares	Common shares paid in capital		Treasury shares		Retained earnings (deficit)		Accumulated other comprehensive loss		Total
(unaudited and in thousands, except per share amounts)															(unaudited and in thousands, except per share amounts)	Class A Common Shares	Class B Common Shares	Treasury Shares	Common Shares Paid in Capital		Treasury Shares		Retained Deficit		Accumulated Other Comprehensive Loss		Total
Three months ended July 30, 2022															Three months ended July 30, 2022
Balance, April 30, 2022															Balance, April 30, 2022	64,450	7,733	23,825	$	1,006,384	$	(537,771)	$	(48,122)	$	(3,698)	$	416,793
Net income															Net income	—	—	—	—		—		46,213		—		46,213
Stock-based compensation activity															Stock-based compensation activity	122	—	—	7,302		—		—		—		7,302
Repurchase of Class A common shares															Repurchase of Class A common shares	(7,769)	—	7,769	—		(105,792)		—		—		(105,792)
Dividends ($0.05 per share)															Dividends ($0.05 per share)	—		—	(3,505)		—		—		—		(3,505)
Foreign currency translation adjustment															Foreign currency translation adjustment	—	—	—	—		—		—		(63)		(63)
Balance, July 30, 2022															Balance, July 30, 2022	56,803	7,733	31,594	$	1,010,181	$	(643,563)	$	(1,909)	$	(3,761)	$	360,948
Three months ended July 31, 2021	Three months ended July 31, 2021														Three months ended July 31, 2021
Balance, May 1, 2021	Balance, May 1, 2021	65,134	7,733	22,169	$	992,379	$	(515,065)	$	(211,759)	$	(2,743)	$	262,812	Balance, May 1, 2021	65,134	7,733	22,169	$	992,379	$	(515,065)	$	(211,759)	$	(2,743)	$	262,812
Net income		—	—	—	—		—		42,860		—		42,860
Stock-based compensation activity		102	—	—	5,738		—		—		—		5,738

Foreign currency translation adjustment		—	—	—	—		—		—		(298)		(298)
Balance, July 31, 2021		65,236	7,733	22,169	$	998,117	$	(515,065)	$	(168,899)	$	(3,041)	$	311,112
Three months ended August 1, 2020
Balance, May 2, 2020		64,302	7,733	22,169	$	975,304	$	(515,065)	$	44,076	$	(6,209)	$	498,106
Net loss		—	—	—	—		—		(98,214)		—		(98,214)
Stock-based compensation activity		276	—	—	5,445		—		—		—		5,445

Foreign currency translation adjustment		—	—	—	—		—		—		1,290		1,290
Balance, August 1, 2020		64,578	7,733	22,169	$	980,749	$	(515,065)	$	(54,138)	$	(4,919)	$	406,627
Six months ended July 31, 2021
Balance, January 30, 2021		64,666	7,733	22,169	$	990,153	$	(515,065)	$	(228,785)	$	(3,286)	$	243,017
Net income		—	—	—	—		—		59,886		—		59,886
Net Income															Net Income	—	—	—	—		—		42,860		—		42,860
Stock-based compensation activity	Stock-based compensation activity	570	—	—	7,964		—		—		—		7,964		Stock-based compensation activity	102	—	—	5,738		—		—		—		5,738

Foreign currency translation adjustment	Foreign currency translation adjustment	—	—	—	—		—		—		245		245		Foreign currency translation adjustment	—	—	—	—		—		—		(298)		(298)
Balance, July 31, 2021	Balance, July 31, 2021	65,236	7,733	22,169	$	998,117	$	(515,065)	$	(168,899)	$	(3,041)	$	311,112	Balance, July 31, 2021	65,236	7,733	22,169	$	998,117	$	(515,065)	$	(168,899)	$	(3,041)	$	311,112
Six months ended August 1, 2020
Balance, February 1, 2020		64,033	7,733	22,169	$	971,380	$	(515,065)	$	267,094	$	(2,495)	$	720,914
Net loss		—	—	—	—		—		(314,072)		—		(314,072)
Six months ended July 30, 2022															Six months ended July 30, 2022
Balance, January 29, 2022															Balance, January 29, 2022	65,624	7,733	22,169	$	1,005,382	$	(515,065)	$	(74,304)	$	(3,617)	$	412,396
Net income															Net income	—	—	—	—		—		72,395		—		72,395
Stock-based compensation activity															Stock-based compensation activity	604	—	—	11,896		—		—		—		11,896
Repurchase of Class A common shares															Repurchase of Class A common shares	(9,425)	—	9,425	—		(128,498)		—		—		(128,498)
Dividends ($0.05 per share)															Dividends ($0.05 per share)	—	—	—	(7,097)		—		—		—		(7,097)
Foreign currency translation adjustment															Foreign currency translation adjustment	—	—	—	—		—		—		(144)		(144)
Balance, July 30, 2022															Balance, July 30, 2022	56,803	7,733	31,594	$	1,010,181	$	(643,563)	$	(1,909)	$	(3,761)	$	360,948
Six months ended July 31, 2021															Six months ended July 31, 2021
Balance, January 30, 2021															Balance, January 30, 2021	64,666	7,733	22,169	$	990,153	$	(515,065)	$	(228,785)	$	(3,286)	$	243,017
Net Income															Net Income	—	—	—	—		—		59,886		—		59,886
Stock-based compensation activity	Stock-based compensation activity	545	—	—	9,369		—		—		—		9,369		Stock-based compensation activity	570	—	—	7,964		—		—		—		7,964

Dividends ($0.10 per share)		—	—	—	—		—		(7,160)		—		(7,160)
Other comprehensive loss		—	—	—	—		—		—		(2,424)		(2,424)
Balance, August 1, 2020		64,578	7,733	22,169	$	980,749	$	(515,065)	$	(54,138)	$	(4,919)	$	406,627

Foreign currency translation adjustment															Foreign currency translation adjustment	—	—	—	—		—		—		245		245
Balance, July 31, 2021															Balance, July 31, 2021	65,236	7,733	22,169	$	998,117	$	(515,065)	$	(168,899)	$	(3,041)	$	311,112

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

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~~DESIGNER BRANDS INC.~~

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

~~(unaudited and in thousands)~~


		Six months ended					Six months ended
		July 31, 2021		August 1, 2020
(unaudited and in thousands)						(unaudited and in thousands)	July 30, 2022		July 31, 2021
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income (loss)		$	59,886	$	(314,072)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Net income						Net income	$	72,395	$	59,886
Adjustments to reconcile net income to net cash provided by operating activities:						Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	40,257		44,075		Depreciation and amortization	44,146		40,257
Stock-based compensation expense	Stock-based compensation expense	13,365		10,596		Stock-based compensation expense	15,963		13,365
Deferred income taxes	Deferred income taxes	100		(152,988)		Deferred income taxes	(157)		100
Income from equity investment		(3,998)		(4,423)
Distributions received from equity investment		7,447		5,493
Income from equity investments						Income from equity investments	(4,380)		(3,998)
Distributions received from equity investments						Distributions received from equity investments	6,230		7,447
Impairment charges	Impairment charges	1,174		119,282		Impairment charges	2,888		1,174
Gain on settlement		—		(8,990)

Loss on extinguishment of debt and write-off of debt issuance costs						Loss on extinguishment of debt and write-off of debt issuance costs	12,862		—
Other	Other	800		403		Other	3,523		800
Change in operating assets and liabilities:	Change in operating assets and liabilities:					Change in operating assets and liabilities:
Accounts receivable	Accounts receivable	5,859		30,699		Accounts receivable	(3,485)		5,859
Income tax receivable	Income tax receivable	(9,066)		—		Income tax receivable	(1,585)		(9,066)
Inventories	Inventories	(30,114)		186,965		Inventories	(107,873)		(30,114)
Prepaid expenses and other current assets	Prepaid expenses and other current assets	(612)		(847)		Prepaid expenses and other current assets	(2,726)		(612)
Accounts payable	Accounts payable	53,009		(67,282)		Accounts payable	(4,848)		53,009
Accrued expenses	Accrued expenses	21,546		26,693		Accrued expenses	(5,448)		21,546
Operating lease assets and liabilities, net	Operating lease assets and liabilities, net	(63,424)		44,777		Operating lease assets and liabilities, net	(16,641)		(63,424)
Net cash provided by (used in) operating activities		96,229		(79,619)
Net cash provided by operating activities						Net cash provided by operating activities	10,864		96,229
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Cash paid for property and equipment	Cash paid for property and equipment	(13,189)		(22,141)		Cash paid for property and equipment	(27,151)		(13,189)

Sales of available-for-sale investments		—		24,755
Proceeds from settlement		—		4,166
Net cash provided by (used in) investing activities		(13,189)		6,780

Equity investment in Le Tigre						Equity investment in Le Tigre	(8,230)		—
Other						Other	(4,853)		—
Net cash used in investing activities						Net cash used in investing activities	(40,234)		(13,189)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Borrowing on revolving line under Credit Facility		—		251,000
Payments on revolving line under Credit Facility		—		(48,000)
Borrowing under ABL Revolver		342,053		—
Payments on borrowings under ABL Revolver		(425,243)		—

Payments on borrowings under Term Loan		(6,251)		—

Borrowing on revolving lines of credit						Borrowing on revolving lines of credit	1,112,794		342,053
Payments on revolving lines of credit						Payments on revolving lines of credit	(725,353)		(425,243)

Payments for borrowings and prepayment premium under Term Loan						Payments for borrowings and prepayment premium under Term Loan	(238,196)		(6,251)
Payments of debt issuance costs						Payments of debt issuance costs	(2,316)		—
Cash paid for treasury shares						Cash paid for treasury shares	(128,498)		—
Dividends paid	Dividends paid	—		(7,160)		Dividends paid	(7,097)		—

Other	Other	(5,514)		(2,646)		Other	(3,936)		(5,514)
Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	(94,955)		193,194		Net cash provided by (used in) financing activities	7,398		(94,955)
Effect of exchange rate changes on cash balances	Effect of exchange rate changes on cash balances	338		(199)		Effect of exchange rate changes on cash balances	80		338
Net increase (decrease) in cash, cash equivalents and restricted cash		(11,577)		120,156
Net decrease in cash, cash equivalents and restricted cash						Net decrease in cash, cash equivalents and restricted cash	(21,892)		(11,577)
Cash, cash equivalents and restricted cash, beginning of period	Cash, cash equivalents and restricted cash, beginning of period	59,581		86,564		Cash, cash equivalents and restricted cash, beginning of period	74,459		59,581
Cash, cash equivalents and restricted cash, end of period	Cash, cash equivalents and restricted cash, end of period	$	48,004	$	206,720	Cash, cash equivalents and restricted cash, end of period	$	52,567	$	48,004
Supplemental disclosures of cash flow information:	Supplemental disclosures of cash flow information:					Supplemental disclosures of cash flow information:
Cash paid (received) for income taxes	Cash paid (received) for income taxes	$	(3,372)	$	165	Cash paid (received) for income taxes	$	27,971	$	(3,372)
Cash paid for interest on debt	Cash paid for interest on debt	$	13,437	$	5,606	Cash paid for interest on debt	$	6,020	$	13,437
Cash paid for operating lease liabilities	Cash paid for operating lease liabilities	$	162,602	$	62,262	Cash paid for operating lease liabilities	$	113,308	$	162,602
Non-cash investing and financing activities:	Non-cash investing and financing activities:					Non-cash investing and financing activities:
Property and equipment purchases not yet paid	Property and equipment purchases not yet paid	$	2,320	$	1,981	Property and equipment purchases not yet paid	$	6,158	$	2,320
Operating lease liabilities arising from lease asset additions	Operating lease liabilities arising from lease asset additions	$	11,109	$	9,408	Operating lease liabilities arising from lease asset additions	$	7,903	$	11,109
Net increase to operating lease assets and lease liabilities for modifications	Net increase to operating lease assets and lease liabilities for modifications	$	45,723	$	23,195	Net increase to operating lease assets and lease liabilities for modifications	$	77,820	$	45,723

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

Table of Contents

~~DESIGNER BRANDS INC.~~

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(

Table of Contents~~unaudited~~)

1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

Business Operations- Designer Brands Inc. ("we," "us," "our," and the "Company") is one of ~~North America's~~the world's largest designers, producers, and retailers of footwear and accessories. We operate in 3three reportable segments: the U.S. Retail segment, the Canada Retail segment, and the Brand Portfolio segment. The U.S. Retail segment operates the DSW Designer Shoe Warehouse ("DSW") banner through its direct-to-consumer U.S. stores and e-commerce site. The Canada Retail segment operates The Shoe Company ~~Shoe Warehouse,~~ and DSW banners through its direct-to-consumer Canada stores and e-commerce sites. The Brand Portfolio segment earns revenue from the sale of wholesale products to retailers, commissions for serving retailers as the design and buying agent for products under private labels (which we refer to as "First Cost"), and the sale of branded products through the direct-to-consumer e-commerce site at www.vincecamuto.com. An integral part of the Brand Portfolio segment is our equity investment in ABG-Camuto, LLC ("ABG-Camuto"), which is a partnership between Camuto LLC, a wholly-owned subsidiary doing business as "Camuto Group," and Authentic Brands Group LLC, a global brand management and marketing company. Camuto Group has a 40% stake in ABG-Camuto, a joint venture that ~~owns~~holds several intellectual property rights, including, among others, Vince Camuto and Louise et Cie, ~~and others,~~ and focuses on licensing and developing new category extensions to support the global growth of these brands. Camuto Group has a licensing agreement with ABG-Camuto whereby we pay royalties on our net sales from the brands ~~owned~~managed by ABG-Camuto, subject to guaranteed minimums. Camuto Group also ~~owns~~holds footwear and certain handbag licensing rights of Jessica Simpson, Lucky Brand and, through a joint venture, JLO Jennifer Lopez. ~~Our other operating segments are below the quantitative and qualitative thresholds for reportable segments and are aggregated into Other for segment reporting purposes.~~

Basis of Presentation- The accompanying unaudited, condensed consolidated financial statements have been prepared by management in accordance with accounting principles generally accepted in the U.S. ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, we do not include all of the information and footnotes required by GAAP for complete financial statements. The accompanying financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. All such adjustments are of a normal, recurring nature. The condensed consolidated financial position, results of operations and cash flows for these interim periods are not necessarily indicative of the results that may be expected in future periods. The balance sheet at January ~~30, 2021~~29, 2022 has been derived from the audited financial statements at that date. The financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the ~~2020~~2021 Form 10-K.

Fiscal Year- Our fiscal year ends on the Saturday nearest to January 31. References to a fiscal year (e.g., "2022") refer to the calendar year in which the fiscal year begins. This reporting schedule is followed by many national retail companies and typically results in a 52-week fiscal year (including 2022 and 2021), but occasionally will contain an additional week resulting in a 53-week fiscal year (including 2023).

SIGNIFICANT ACCOUNTING POLICIES

Accounting Policies- The complete summary of significant accounting policies is included in the notes to the consolidated financial statements as presented in our ~~2020~~2021 Form 10-K.

~~Impact of COVID-19-~~ In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic. On March 18, 2020, to help control the spread of the virus and protect the health and safety of our customers, employees, and the communities we serve, we temporarily closed all of our stores in the U.S. and Canada. In addition, we took several actions in late March 2020 to reduce costs and operations to levels that were more commensurate with then-current sales, including furloughs and pay reductions. As this continues to be an unprecedented period of uncertainty, we have made and may continue to make adjustments to our operational plans, inventory controls, and liquidity management, as well as changes to our expense and capital expenditure plans.

During the second quarter and into the third quarter of fiscal 2020, we re-opened all of our stores, discontinued the furlough program, and restored pay for our associates that had taken pay reductions. Beginning in July 2020, we initiated an internal reorganization and reduction of our workforce with additional actions taken throughout fiscal 2020 and into the first quarter of fiscal 2021, resulting in the elimination of approximately 1,000 associate positions. The severance charges recorded as a result of this reorganization are included in our severance discussion below.

Although operating results have improved throughout the first half of fiscal 2021, we continue to experience adverse impacts due to COVID-19, including temporary store closures, reduced hours and other requirements in certain areas where government-imposed restrictions were mandated, and global supply chain challenges. Our retail customers in the Brand Portfolio segment have had and are having similar experiences.

~~Table of Contents~~

~~DESIGNER BRANDS INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

(~~unaudited~~)

As a result of the material reduction in net sales and cash flows during fiscal 2020, we updated our impairment analyses for our U.S. Retail and Canada Retail segments at the store-level, which represents the lowest level for which identifiable cash flows are independent of the cash flows of other assets. The carrying amount of the store asset group, primarily made up of operating lease assets, leasehold improvements and fixtures, is considered impaired when the carrying value of the asset group exceeds the expected future cash flows from the asset group. The impairment loss recognized is the excess of the carrying value of the asset or asset group over its fair value (categorized as Level 3 under the fair value hierarchy). Fair value at the store level is typically based on projected discounted cash flows over the remaining lease term. In addition, we evaluated other long-lived assets based on our intent to use such assets going forward. During the three months ended August 1, 2020, we recorded an impairment charge of $6.7 million for the U.S. Retail segment. During the six months ended August 1, 2020, we recorded impairment charges of $92.8 million ($73.1 million and $19.7 million for the U.S. Retail segment and Canada Retail segment, respectively). Also during the six months ended August 1, 2020, we recorded an impairment charge of $6.5 million for the Brand Portfolio segment customer relationship intangible resulting in a full impairment due to the lack of projected cash flows over the remaining useful life (categorized as Level 3 under the fair value hierarchy).

As a result of the material reduction in net sales and cash flows due to the temporary closure of all of our stores, the decrease in net sales from our retailer customers and the decrease in the Company's market capitalization due to the impact of COVID-19 on macroeconomic conditions, we performed an impairment analysis for goodwill and other indefinite-lived intangible assets during the first quarter of fiscal 2020. We calculated the fair value of the reporting units with goodwill primarily based on a discounted cash flow analysis (categorized as Level 3 under the fair value hierarchy). Our analysis concluded that the fair value of the First Cost reporting unit within the Brand Portfolio segment did not exceed its carrying value. Accordingly, during the six months ended August 1, 2020, we recorded an impairment charge of $20.0 million for the First Cost reporting unit in the Brand Portfolio segment, resulting in a full impairment.

The U.S. Retail segment inventory is accounted for using the retail inventory method and is stated at the lower of cost or market. Under the retail inventory method, the valuation of inventories reflects reductions for merchandise marked down with charges to cost of sales. As a result, earnings are negatively impacted as the merchandise is marked down prior to sale. Inventories for the Canada Retail and Brand Portfolio segments are accounted for using moving average cost method and are stated at the lower of cost or net realizable value. For all inventories, we also monitored excess and obsolete inventories in light of the temporary closure of stores during our fiscal 2020 peak spring selling season and reduced traffic experienced since re-opening stores. During the six months ended August 1, 2020, we recorded $64.0 million of additional inventory reserves over the same period of the previous year.

On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"), which, among other things, provided employer payroll tax credits for wages paid to employees who were unable to work over a defined period and options to defer payroll tax payments. Based on our evaluation of the CARES Act, we qualified for certain employer payroll tax credits, which were treated as government subsidies to offset related operating expenses, as well as the deferral of payroll and other tax payments in the future. Similar credits were also available in Canada and continue to be provided. During the three months ended July 31, 2021 and August 1, 2020, the qualified government credits reduced our operating expenses by ~~$1.0 million and $3.5 million~~, respectively, on our condensed consolidated statements of operations. During the six months ended July 31, 2021 and August 1, 2020, the qualified government credits reduced our operating expenses by ~~$3.7 million~~ ~~and $7.9 million, respectively, on our condensed consolidated statements of operations. As of July 31, 2021,~~ ~~we had~~ ~~$10.0 million of~~ deferred qualified payroll and other tax obligations, half of which is included in accrued expenses on the condensed consolidated balance sheets that we expect to pay at the end of fiscal 2021, with the remaining ~~included in other non-current liabilities on the condensed consolidated balance sheets that we expect to pay at the end of fiscal 2022.~~

We recorded our income tax expense, income tax receivable, and deferred tax assets and related liabilities based on management’s best estimates. Additionally, we assessed the likelihood of realizing the benefits of our deferred tax assets. Our ability to recover these deferred tax assets depends on several factors, including our ability to project future taxable income. One of the provisions of the CARES Act allows net operating losses generated within tax years 2018 through 2020 to be carried back up to five years, including years in which the U.S. federal statutory tax rate was 35%, as opposed to the current rate of 21%. In evaluating future taxable income, significant weight is given to positive and negative evidence that is objectively verifiable. As a result of the losses incurred in fiscal 2020 due to COVID-19, we are in a three-year cumulative loss position as of July 31, 2021, which is significant objective negative evidence in considering whether deferred tax assets are realizable. Such objective evidence limits the ability to consider other subjective evidence, such as the projection of future taxable income. A valuation allowance has been recognized as a reserve on the total deferred tax asset balance due to the uncertainty of realization of our loss carry forwards and other deferred tax assets. ~~Our effective tax rate changed from 32.5% for the six months ended~~

~~Table of Contents~~

~~DESIGNER BRANDS INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

(~~unaudited~~)

~~August 1, 2020 t~~o 3.6% for the six months ended July 31, 2021. The rate for the six months ended July 31, 2021 is the result of maintaining a full valuation allowance on deferred tax assets while also recording net discrete tax benefits, primarily as a result of adjustments to our estimated fiscal 2020 return reflecting implemented tax strategies. The rate for the six months ended August 1, 2020 is the result of carry back of losses to a tax year where the U.S. federal statutory tax rate was 35%.

The impacts from the COVID-19 pandemic remain challenging and unpredictable. While trends improved during the first half of fiscal 2021, we cannot reasonably estimate the extent to which our business will continue to be affected by COVID-19 and to what extent the recent improved trends will continue. For instance, restrictions have recently been reinstated in certain locations within the U.S., and it is unclear whether these restrictions will continue and expand or if COVID-19 will result in long-term changes in consumer behavior. The ongoing and prolonged nature of the outbreak may lead to further adjustments to our operations. As such, the ultimate impacts of COVID-19 to our businesses remain highly uncertain and will depend on future developments, including global supply chain disruptions, the variants of COVID-19, and the global availability and use of vaccines, which are highly uncertain and cannot be predicted. As a result, we may have future write-downs or adjustments to inventories, receivables, long-lived assets, intangibles, goodwill, and the valuation allowance on deferred tax assets.

~~Severance-~~ ~~During the three months ended July 31, 2021 and August 1, 2020, we incurred severance cost~~s of $1.2 million and $7.3 million, respectively. During the six months ended July 31, 2021 and August 1, 2020, we incurred severance costs of $2.6 million and $9.0 million, respectively. These costs are included in operating expenses in the condensed consolidated state~~ments of operations. As of July 31, 2021, January 30, 2021 and August 1, 2020, we had accrued severance of~~ ~~$4.9 million, $6.5 million~~ ~~and $8.4 million, respectively, included in accrued expenses on the condensed consolidated balance sheets.~~

~~Gain on Settlement-~~ During the three months ended August 1, 2020, we recognized a gain of $9.0 million, recorded to operating expenses in the condensed consolidated statements of operations, due to a settlement with a vendor for costs incurred on internal-use software that was capitalized and impaired in a previous fiscal year. During the three months ended August 1, 2020, we collected $4.2 million, net of legal costs incurred, and recorded a $4.8 million receivable included in receivables, net, on the condensed consolidated balance sheets, which has been subsequently received.

Principles of Consolidation- The condensed consolidated financial statements include the accounts of Designer Brands Inc. and its subsidiaries, including variable interest entities. All intercompany accounts and transactions have been eliminated in consolidation. All amounts are in U.S. dollars.

Use of Estimates- The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and reported amounts of net sales and expenses during the reporting periods. Certain estimates and assumptions use forecasted financial information based on information reasonably available to ~~us, along with the estimated, but uncertain, future impacts of COVID-19.~~us. Significant estimates and assumptions are required as a part of accounting for sales returns allowances, customer allowances and discounts, gift card breakage income, deferred revenue associated with loyalty programs, valuation of inventories, depreciation and amortization, impairments of long-lived assets, intangibles and goodwill, lease accounting, income taxes, and self-insurance reserves. Although we believe these estimates and assumptions are reasonable, they are based on management's knowledge of current events and actions we may undertake in the future. Changes in facts and circumstances may result in revised estimates and assumptions, and actual results could differ from these estimates.

Table of Contents

Severance- During the three months ended July 30, 2022 and July 31, 2021, we incurred severance costs of $0.3 million and $1.2 million, respectively. During the six months ended July 30, 2022 and July 31, 2021, we incurred severance costs of $1.0 million and $2.6 million, respectively. These costs are included in operating expenses in the condensed consolidated statements of operations. As of July 30, 2022, January 29, 2022, and July 31, 2021, we had accrued severance of $0.9 million, $1.9 million, and $4.9 million, respectively, included in accrued expenses on the condensed consolidated balance sheets.

Income Taxes- We continue to assess the likelihood of realizing the benefits of our deferred tax assets by evaluating historical and projected future operating results, the reversal of existing temporary differences, taxable income in permitted carry back years, and the availability of tax planning strategies. In evaluating future taxable income, significant weight is given to positive and negative evidence that is objectively verifiable. As a result of the losses incurred in 2020 due to the impacts of the COVID-19 pandemic, we were in a three-year cumulative loss position as of July 30, 2022, which was significant objective negative evidence in considering whether deferred tax assets are realizable. Such objective evidence limits the ability to consider other subjective evidence, such as the projection of future taxable income. As of July 30, 2022, a valuation allowance has been maintained as a reserve on substantially all of our net deferred tax assets due to the uncertainty of realization of our loss carry forwards and other deferred tax assets. Given the continued realization of income since 2020 and projected future income, sufficient positive evidence may become available for the release of all or a portion of the valuation allowance within the next twelve months. Such a release would result in a material non-cash income tax benefit in our consolidated statement of operations in the period of release and the recording of additional deferred tax assets on our consolidated balance sheet. However, the exact timing and amount of the valuation allowance releases are subject to change based on the level of profitability achieved in future periods.

For the six months ended July 30, 2022 and July 31, 2021, our effective tax rate was 29.2% and 3.6%, respectively. The rate for the six months ended July 30, 2022 was impacted by permanent tax adjustments, primarily non-deductible compensation. The rate for the six months ended July 31, 2021 was the result of maintaining a full valuation allowance on deferred tax assets along with net discrete tax benefits, primarily as a result of adjustments to our estimated 2020 return reflecting implemented tax strategies.

Cash, Cash Equivalents, and Restricted Cash- Cash and cash equivalents represent cash, money market funds, and credit card receivables that generally settle within three days. Restricted cash ~~represented~~represents cash that is restricted as to withdrawal or usage and consists of a mandatory cash deposit maintained for certain insurance ~~policies.~~policies and letters of credit.

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same such amounts shown in the condensed consolidated statements of cash flows:


(in thousands)	(in thousands)	July 31, 2021		January 30, 2021		August 1, 2020		(in thousands)	July 30, 2022		January 29, 2022		July 31, 2021
Cash and cash equivalents	Cash and cash equivalents	$	46,458	$	59,581	$	206,720	Cash and cash equivalents	$	50,799	$	72,691	$	46,458
Restricted cash, included in prepaid expenses and other current assets	Restricted cash, included in prepaid expenses and other current assets	1,546		—		—		Restricted cash, included in prepaid expenses and other current assets	1,768		1,768		1,546
Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statements of cash flows	Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statements of cash flows	$	48,004	$	59,581	$	206,720	Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statements of cash flows	$	52,567	$	74,459	$	48,004

Equity Investment in Le Tigre- On July 1, 2022, we acquired a 33.3% interest in Le Tigre 360 Global LLC ("Le Tigre"), which manages the Le Tigre brand, for $8.2 million. We account for our investment in Le Tigre, where we exercise significant influence but do not have control, using the equity method. The difference between the purchase price of Le Tigre and our interest in Le Tigre's underlying net equity is comprised of a definite lived tradename intangible asset and equity method goodwill. Our share of net income or loss of Le Tigre and amortization of the intangible asset is included in income from equity investments on the consolidated statements of operations.

Intangible Assets- During the first quarter of 2022, we acquired the rights to the shoes.com tradename for $4.9 million, which was recorded as a definite lived tradename intangible asset with a useful life of 15 years.

Table of Contents

~~DESIGNER BRANDS INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

(~~unaudited~~)

Fair Value- Fair value is defined as the price that would be received in the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities recorded at fair value are categorized using defined hierarchical levels related to the subjectivity associated with the inputs to fair value measurements as follows:

•Level 1 - Quoted prices in active markets for identical assets or liabilities.

•Level 2 - Quoted prices for similar assets or liabilities in active markets or inputs that are observable.

•Level 3 - Unobservable inputs in which little or no market activity exists.

The carrying value of cash and cash equivalents, restricted cash, receivables, and accounts payables approximated their fair values due to their short-term nature. The carrying value of ~~borrowing under our ABL Revolver and our previous senior unsecured revolving credit agreement ("Credit Facility") approximated the carrying value. As of July 31, 2021, the fair value of~~ borrowings under our ~~Term Loan was~~ ~~$250.2 million compared to the carrying value~~revolving lines of ~~$237.5 million. T~~hecredit approximated fair value ~~of debt borrowings was estimated~~ based on ~~current~~its term and variable interest ~~rates offered for similar instruments (categorized as Level 2 under the fair value hierarchy).~~rate.

Impairment of Long-Lived Assets- ~~Refer to section above,~~ ~~Impact of COVID-19, regarding~~During the three and six months ended July 30, 2022, we recorded impairment charges of ~~long-lived assets during fiscal 2020.~~$1.8 million and $2.9 million, respectively, in the Brand Portfolio segment resulting from subleases of abandoned leased spaces. During the ~~three~~three and six months ended July 31, 2021, we recorded an impairment charge of $1.2 million in the U.S. Retail segment for abandoned equipment we ~~are replacing.~~replaced.

2. REVENUE

DISAGGREGATION OF NET SALES

~~Disaggregation of~~

Net ~~Sales-~~Sales by Brand Categories- The following table presents net sales disaggregated by ~~product and service category~~brand categories for each segment:

Three months ended Six months ended
(in thousands) July 31, 2021 August 1, 2020 July 31, 2021 August 1, 2020
Net sales:
U.S. Retail segment:
Women's footwear $ 467,518 $ 253,539 $ 872,818 $ 513,102
Men's footwear 168,218 85,012 300,165 155,367
Kids' footwear 54,112 32,232 108,844 61,415
Accessories and other 33,245 23,194 61,924 41,166
723,093 393,977 1,343,751 771,050
Canada Retail segment:
Women's footwear 30,230 25,329 50,661 41,301
Men's footwear 15,805 13,970 25,333 20,773
Kids' footwear 9,554 8,231 19,067 13,787
Accessories and other 1,996 2,052 3,128 3,050
57,585 49,582 98,189 78,911
Brand Portfolio segment:
Wholesale 42,715 15,563 91,358 82,867
Commission income 2,377 5,018 5,708 10,141
Direct-to-consumer 5,437 9,877 10,890 19,563
50,529 30,458 107,956 112,571
Other — 22,266 — 35,889
Total segment net sales 831,207 496,283 1,549,896 998,421
Elimination of intersegment sales (13,872) (6,569) (29,406) (25,924)
Total net sales $ 817,335 $ 489,714 $ 1,520,490 $ 972,497


(in thousands)	U.S. Retail		Canada Retail		Brand Portfolio		Eliminations		Consolidated
Three months ended July 30, 2022
Owned Brands:(1)
Direct-to-consumer	$	147,877	$	—	$	7,793	$	—	$	155,670
External customer wholesale and commission income	—		—		39,179		—		39,179
Intersegment wholesale and commission income	—		—		19,379		(19,379)		—
Total Owned Brands	147,877		—		66,351		(19,379)		194,849
National brands	586,186		—		—		—		586,186
Canada Retail(2)	—		78,284		—		—		78,284
Total net sales	$	734,063	$	78,284	$	66,351	$	(19,379)	$	859,319
Three months ended July 31, 2021
Owned Brands:(1)
Direct-to-consumer	$	102,152	$	—	$	5,437	$	—	$	107,589
External customer wholesale and commission income	—		—		31,220		—		31,220
Intersegment wholesale and commission income	—		—		13,872		(13,872)		—
Total Owned Brands	102,152		—		50,529		(13,872)		138,809
National brands	620,941		—		—		—		620,941
Canada Retail(2)	—		57,585		—		—		57,585
Total net sales	$	723,093	$	57,585	$	50,529	$	(13,872)	$	817,335

Table of Contents

~~DESIGNER BRANDS INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

(


(in thousands)	U.S. Retail		Canada Retail		Brand Portfolio		Eliminations		Consolidated
Six months ended July 30, 2022
Owned Brands:(1)
Direct-to-consumer	$	287,032	$	—	$	14,320	$	—	$	301,352
External customer wholesale and commission income	—		—		104,135		—		104,135
Intersegment wholesale and commission income	—		—		45,352		(45,352)		—
Total Owned Brands	287,032		—		163,807		(45,352)		405,487
National brands	1,149,776		—		—		—		1,149,776
Canada Retail(2)	—		134,599		—		—		134,599
Total net sales	$	1,436,808	$	134,599	$	163,807	$	(45,352)	$	1,689,862
Six months ended July 31, 2021
Owned Brands:(1)
Direct-to-consumer	$	185,418	$	—	$	10,890	$	—	$	196,308
External customer wholesale and commission income	—		—		67,660		—		67,660
Intersegment wholesale and commission income	—		—		29,406		(29,406)		—
Total Owned Brands	185,418		—		107,956		(29,406)		263,968
National brands	1,158,333		—		—		—		1,158,333
Canada Retail(2)	—		98,189		—		—		98,189
Total net sales	$	1,343,751	$	98,189	$	107,956	$	(29,406)	$	1,520,490

(1) Owned Brands refers to those brands we have rights to sell through ownership or license arrangements.

(2) We currently do not report the Canada Retail segment net sales by brand categories.

Table of Contents~~unaudited~~)

~~Deferred Revenue Liabilities-~~Net Sales by Product and Service Categories- The following table presents net sales disaggregated by product and service

category for each segment:


	Three months ended				Six months ended
(in thousands)	July 30, 2022		July 31, 2021		July 30, 2022		July 31, 2021
Net sales:
U.S. Retail segment:
Women's footwear	$	475,079	$	467,518	$	944,210	$	872,818
Men's footwear	164,122		168,218		309,929		300,165
Kids' footwear	53,185		54,112		106,103		108,844
Accessories and other	41,677		33,245		76,566		61,924
	734,063		723,093		1,436,808		1,343,751
Canada Retail segment:
Women's footwear	43,802		30,230		73,806		50,661
Men's footwear	21,462		15,805		35,890		25,333
Kids' footwear	9,592		9,554		19,409		19,067
Accessories and other	3,428		1,996		5,494		3,128
	78,284		57,585		134,599		98,189
Brand Portfolio segment:
Wholesale	54,136		42,715		141,911		91,358
First Cost commission income	4,422		2,377		7,576		5,708
Direct-to-consumer	7,793		5,437		14,320		10,890
	66,351		50,529		163,807		107,956

Total segment net sales	878,698		831,207		1,735,214		1,549,896
Elimination of intersegment sales	(19,379)		(13,872)		(45,352)		(29,406)
Total net sales	$	859,319	$	817,335	$	1,689,862	$	1,520,490

DEFERRED REVENUE LIABILITIES

We record deferred revenue liabilities, included in accrued expenses on the condensed consolidated balance sheets, for remaining obligations we have to our customers. The following table presents the changes and total balances for gift cards and our loyalty programs:


		Three months ended				Six months ended					Three months ended				Six months ended
(in thousands)	(in thousands)	July 31, 2021		August 1, 2020		July 31, 2021		August 1, 2020		(in thousands)	July 30, 2022		July 31, 2021		July 30, 2022		July 31, 2021
Gift cards:	Gift cards:									Gift cards:
Beginning of period	Beginning of period	$	30,809	$	30,908	$	34,442	$	35,461	Beginning of period	$	32,844	$	30,809	$	36,783	$	34,442
Gift cards redeemed and breakage recognized to net sales	Gift cards redeemed and breakage recognized to net sales	(19,210)		(11,343)		(36,380)		(24,868)		Gift cards redeemed and breakage recognized to net sales	(18,295)		(19,210)		(36,555)		(36,380)
Gift cards issued	Gift cards issued	17,092		10,354		30,629		19,326		Gift cards issued	15,569		17,092		29,890		30,629
End of period	End of period	$	28,691	$	29,919	$	28,691	$	29,919	End of period	$	30,118	$	28,691	$	30,118	$	28,691
Loyalty programs:	Loyalty programs:									Loyalty programs:
Beginning of period	Beginning of period	$	12,955	$	14,568	$	11,379	$	16,138	Beginning of period	$	16,243	$	12,955	$	15,736	$	11,379
Loyalty certificates redeemed and expired and other adjustments recognized to net sales	Loyalty certificates redeemed and expired and other adjustments recognized to net sales	(6,008)		(4,277)		(10,904)		(10,886)		Loyalty certificates redeemed and expired and other adjustments recognized to net sales	(8,179)		(6,008)		(16,060)		(10,904)
Deferred revenue for loyalty points issued	Deferred revenue for loyalty points issued	8,308		4,506		14,780		9,545		Deferred revenue for loyalty points issued	8,724		8,308		17,112		14,780
End of period	End of period	$	15,255	$	14,797	$	15,255	$	14,797	End of period	$	16,788	$	15,255	$	16,788	$	15,255

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3. RELATED PARTY TRANSACTIONS

Schottenstein Affiliates

~~As of July 31, 2021, the Schottenstein Affiliates consist of~~We have transactions with entities owned or controlled by Jay L. Schottenstein, the executive chairman of our Board of Directors, and members of his ~~family.~~family ("Schottenstein Affiliates"). As of July ~~31, 2021,~~30, 2022, the Schottenstein Affiliates beneficially owned approximately ~~17%~~22% of the Company's outstanding common shares, representing approximately ~~52%~~58% of the combined voting power of the Company, consisting of, in the aggregate, ~~4.8~~6.8 million Class A common shares and 7.7 million Class B co~~mmon~~common shares. The following summarizes the related party transactions with the Schottenstein Affiliates for the relevant periods:

Leases- We lease our fulfillment center and certain store locations owned by the Schottenstein Affiliates. During the three months ended July 30, 2022 and July 31, 2021, ~~and August 1, 2020,~~ we recorded rent expense from leases with Schottenstein Affiliates of $2.5 million and $2.7 million, ~~and~~ ~~$2.6 million, respectively.~~ respectively. During the six months ended July 30, 2022 and July 31, 2021, ~~and August 1, 2020,~~ we recorded rent expense from leases with Schottenstein Affiliates of $5.0 million and $5.4 million, ~~and $5.3 million,~~ respectively. As of July 30, 2022, January 29, 2022, and July 31, 2021, ~~January 30, 2021 and August 1, 2020,~~ we had related party current operating lease liabilities of ~~$6.4~~$5.3 million, ~~$8.0~~$6.3 million, and ~~$7.9~~$6.4 million, respectively, and non-current operating lease liabilities of ~~$21.3~~$9.6 million, ~~$24.6~~$18.3 million, and ~~$28.5~~$21.3 million, respectively.

Other Purchases and Services- During the three months ended July ~~31, 2021~~30, 2022 and ~~August 1, 2020, we had other purchases and services we incurred from the Schottenstein Affiliates~~ ~~of $1.1 million and $1.2 million, respectively. During both the six months ended~~ July 31, 2021, ~~and August 1, 2020,~~ we had other purchases and services we incurred from the Schottenstein Affiliates of ~~$2.5~~$1.4 million and $1.1 million, respectively. For both the six months ended July 30, 2022 and July 31, 2021, we had other purchases and services we incurred from the Schottenstein Affiliates of $2.5 million.

Due to Related Parties- Amounts due to Schottenstein Affiliates, other than operating lease liabilities, were immaterial for all periods presented.

~~ABG-Camuto~~Equity Method Investments

ABG-Camuto- We have a 40% interest in our equity investment in ABG-Camuto. We have a licensing agreement with ABG-Camuto, pursuant to which we pay royalties on the net sales of the brands ~~owned~~managed by ABG-Camuto, subject to guaranteed minimums. ~~During~~For both the three months ended July 30, 2022 and July 31, 2021, ~~and August 1, 2020,~~ we recorded royalty expense for amounts paid to ABG-Camuto of ~~$4.6~~$4.6 million. ~~During~~For both the six months ended July 30, 2022 and July 31, 2021, ~~and August 1, 2020,~~ we recorded royalty expense for amounts paid toto ABG-Camuto of ~~$9.2 million~~ ~~and $9.0 million, respectively.~~$9.2 million. Amounts due to ABG-Camuto were immaterial for all periods presented.

~~Table of Contents~~

~~DESIGNER BRANDS INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

(~~unaudited~~)

Le Tigre-

We have a 33.3% interest in our equity investment in Le Tigre. On July 1, 2022, we entered into a license agreement with Le Tigre whereby we pay royalties on our net sales from the Le Tigre brand, subject to guaranteed minimums. The license agreement provides for the exclusive right to design and produce Le Tigre branded footwear to be sold primarily through our DSW and The Shoe Company direct-to-consumer stores and e-commerce sites. Activity with Le Tigre during the six months ended July 30, 2022 was immaterial.

4. EARNINGS ~~(LOSS)~~ PER SHARE

Basic earnings ~~(loss)~~ per share is based on net income ~~(loss)~~ and the weighted average of Class A and Class B common shares outstanding. Diluted earnings per share reflects the potential dilution of common shares adjusted for outstanding stock options and restricted stock units ("RSUs") calculated using the treasury stock method.

The following is a reconciliation between basic and diluted weighted average shares outstanding, as used in the calculation of earnings ~~(loss)~~ per share:


		Three months ended		Six months ended			Three months ended		Six months ended
(in thousands)	(in thousands)	July 31, 2021	August 1, 2020	July 31, 2021	August 1, 2020	(in thousands)	July 30, 2022	July 31, 2021	July 30, 2022	July 31, 2021
Weighted average basic shares outstanding	Weighted average basic shares outstanding	72,932	72,142	72,773	72,028	Weighted average basic shares outstanding	69,604	72,932	71,263	72,773
Dilutive effect of stock-based compensation awards	Dilutive effect of stock-based compensation awards	4,687	—	4,498	—	Dilutive effect of stock-based compensation awards	4,338	4,687	4,106	4,498
Weighted average diluted shares outstanding	Weighted average diluted shares outstanding	77,619	72,142	77,271	72,028	Weighted average diluted shares outstanding	73,942	77,619	75,369	77,271

Table of Contents

For the three months ended July 30, 2022 and July 31, 2021, the number of shares relating to potentially dilutive stock-based compensation awards that were excluded from the computation of diluted earnings per share due to their anti-dilutive effect was 3.1 million and ~~August 1, 2020,~~2.9 million, respectively. For both the six months ended July 30, 2022 and July 31, 2021, the number of shares relating to potentially dilutive stock-based compensation awards that were excluded from the computation of diluted earnings ~~(loss) per share due to their anti-dilutive effect was~~ ~~2.9 million and 5.9 million, respectively. For the six months ended July 31, 2021 and August 1, 2020, the number of shares relating to potentially~~ ~~dilutive stock-based compensation awards that were excluded from the computation of diluted earnings (loss)~~ per share due to their anti-dilutive effect was 3.0 ~~million~~ ~~and 5.5 million, respectively.~~million.

5. STOCK-BASED COMPENSATION

Stock-based compensation expense consisted of the following:


		Three months ended				Six months ended					Three months ended				Six months ended
(in thousands)	(in thousands)	July 31, 2021		August 1, 2020		July 31, 2021		August 1, 2020		(in thousands)	July 30, 2022		July 31, 2021		July 30, 2022		July 31, 2021
Stock options	Stock options	$	132	$	407	$	385	$	870	Stock options	$	—	$	132	$	101	$	385
Restricted and director stock units	Restricted and director stock units	5,776		5,272		12,980		9,726		Restricted and director stock units	7,369		5,776		15,862		12,980
		$	5,908	$	5,679	$	13,365	$	10,596		$	7,369	$	5,908	$	15,963	$	13,365

The following table summarizes the stock-based compensation award share activity for RSUs for the six months ended July ~~31, 2021:~~30, 2022:


		Number of shares
(in thousands)	(in thousands)	Time-Based RSUs	Performance-Based RSUs	(in thousands)	Shares of Time-Based RSUs	Shares of Performance-Based RSUs
Outstanding - beginning of period	Outstanding - beginning of period	6,445	540	Outstanding - beginning of period	6,058	744
Granted	Granted	1,033	—	Granted	1,915	614
Vested	Vested	(512)	(359)	Vested	(641)	(174)
Forfeited	Forfeited	(225)	(17)	Forfeited	(115)	—
Outstanding - end of period	Outstanding - end of period	6,741	164	Outstanding - end of period	7,217	1,184

6. SHAREHOLDERS' EQUITY

Shares- Our Class A common shares are listed for trading under the ticker symbol "DBI" on the New York Stock Exchange. There is currently no public market for the Company's Class B common shares, but the Class B common shares can be exchanged for the Company's Class A common shares at the election of the holder on a share for share basis. Holders of Class A common shares are entitled to 1one vote per share and holders of Class B common shares are entitled to 8eight votes per share on matters submitted to shareholders for approval.

~~Table of Contents~~

~~DESIGNER BRANDS INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

(~~unaudited~~)

The following table provides additional information for our common shares:


		July 31, 2021		January 30, 2021		August 1, 2020
(in thousands)	(in thousands)	Class A	Class B	Class A	Class B	Class A	Class B	(in thousands)	July 30, 2022		January 29, 2022		July 31, 2021
									Class A	Class B	Class A	Class B	Class A	Class B
Authorized shares	Authorized shares	250,000	100,000	250,000	100,000	250,000	100,000	Authorized shares	250,000	100,000	250,000	100,000	250,000	100,000
Issued shares	Issued shares	87,405	7,733	86,835	7,733	86,747	7,733	Issued shares	88,397	7,733	87,793	7,733	87,405	7,733
Outstanding shares	Outstanding shares	65,236	7,733	64,666	7,733	64,578	7,733	Outstanding shares	56,803	7,733	65,624	7,733	65,236	7,733
Treasury shares	Treasury shares	22,169	—	22,169	—	22,169	—	Treasury shares	31,594	—	22,169	—	22,169	—

We have authorized 100 million shares of no par value preferred shares, with no shares issued for any of the periods presented.

~~Accumulated Other Comprehensive Loss-~~Dividends- ~~For~~On August 25, 2022, the Board of Directors declared a quarterly cash dividend payment of $0.05 per share for both Class A and Class B common shares. The dividend will be paid on October 6, 2022 to shareholders of record at the close of business on September 22, 2022, and is expected to be recorded against retained earnings.

Table of Contents

Share Repurchases- On August 17, 2017, the Board of Directors authorized the repurchase of an additional $500 million of Class A common shares under our share repurchase program, which was added to the $33.5 million remaining from the previous authorization. During the six months ended ~~August 1, 2020, changes for~~July 30, 2022, we repurchased 9.4 million Class A common shares at an aggregate cost of $128.5 million, with $206.4 million of Class A common shares that remain authorized under the ~~balances~~program as of ~~each component~~July 30, 2022. The share repurchase program may be suspended, modified or discontinued at any time, and we have no obligation to repurchase any amount of ~~accumulated other comprehensive loss, net of tax, were as follows (for all other periods presented,~~our common shares under the ~~change was due to foreign currency translation adjustments as shown~~program. Shares will be repurchased in the ~~condensed consolidated statements of shareholders' equity):~~open market at times and in amounts considered appropriate based on price and market conditions.

(in thousands) Foreign Currency Translation Available-for-Sale Securities Total
Accumulated other comprehensive income (loss) - beginning of period $ (2,668) $ 173 $ (2,495)
Other comprehensive income (loss) before reclassifications (2,251) 195 (2,056)
Amounts reclassified to non-operating income, net — (368) (368)
Other comprehensive loss (2,251) (173) (2,424)
Accumulated other comprehensive loss - end of period $ (4,919) $ — $ (4,919)

7. RECEIVABLES

Receivables, net, consisted of the following:


(in thousands)	(in thousands)	July 31, 2021		January 30, 2021		August 1, 2020		(in thousands)	July 30, 2022		January 29, 2022		July 31, 2021
Customer accounts receivables:	Customer accounts receivables:							Customer accounts receivables:
Serviced by third-party provider with guaranteed payment	Serviced by third-party provider with guaranteed payment	$	27,638	$	29,615	$	20,268	Serviced by third-party provider with guaranteed payment	$	31,172	$	27,827	$	27,638
Serviced by third-party provider without guaranteed payment	Serviced by third-party provider without guaranteed payment	76		363		739		Serviced by third-party provider without guaranteed payment	126		82		76
Serviced in-house	Serviced in-house	2,665		4,576		6,248		Serviced in-house	2,768		2,783		2,665
Income tax receivable	Income tax receivable	158,890		149,824		—		Income tax receivable	163,825		162,240		158,890
Other receivables	Other receivables	11,295		12,865		23,973		Other receivables	8,076		8,026		11,295
Total receivables	Total receivables	200,564		197,243		51,228		Total receivables	205,967		200,958		200,564
Allowance for doubtful accounts	Allowance for doubtful accounts	(1,193)		(1,194)		(1,988)		Allowance for doubtful accounts	(1,087)		(1,132)		(1,193)
		$	199,371	$	196,049	$	49,240		$	204,880	$	199,826	$	199,371

8. ACCRUED EXPENSES

Accrued expenses consisted of the following:


(in thousands)	July 30, 2022		January 29, 2022		July 31, 2021
Gift cards	$	30,118	$	36,783	$	28,691
Accrued compensation and related expenses	45,687		41,603		49,037
Accrued taxes	30,027		28,327		35,030
Loyalty programs deferred revenue	16,788		15,736		15,255
Sales returns, customer allowances and discounts	21,353		20,671		21,307
Other	66,496		72,692		72,735
	$	210,469	$	215,812	$	222,055

9. DEBT

Debt consisted of the following:


(in thousands)	July 30, 2022		January 29, 2022		July 31, 2021
2020 ABL Revolver	$	—	$	—	$	16,810
2022 ABL Revolver	387,441		—		—
Term Loan	—		231,250		237,500
Total debt	387,441		231,250		254,310
Less unamortized Term Loan debt issuance costs	—		(5,714)		(7,241)
Less current maturities of long-term debt	—		—		(62,500)
Long-term debt	$	387,441	$	225,536	$	184,569

1214

Table of Contents

~~DESIGNER BRANDS INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

(~~unaudited~~)

~~8. GOODWILL AND INTANGIBLE ASSETS~~

~~Goodwill-~~ ~~The following table presents the changes to goodwill by segment:~~

Six months ended
July 31, 2021 August 1, 2020
(in thousands) Goodwill Accumulated Impairments Net Goodwill Accumulated Impairments Net
Beginning of period by segment:
U.S. Retail $ 93,655 $ — $ 93,655 $ 93,655 $ — $ 93,655
Canada Retail 43,086 (43,086) — 41,610 (41,610) —
Brand Portfolio 19,989 (19,989) — 19,989 — 19,989
156,730 (63,075) 93,655 155,254 (41,610) 113,644
Activity by segment:
Canada Retail-
Currency translation adjustment 1,098 (1,098) — (534) 534 —
Brand Portfolio-
Impairment charge — — — — (19,989) (19,989)
1,098 (1,098) — (534) (19,455) (19,989)
End of period by segment:
U.S. Retail 93,655 — 93,655 93,655 — 93,655
Canada Retail 44,184 (44,184) — 41,076 (41,076) —
Brand Portfolio 19,989 (19,989) — 19,989 (19,989) —
$ 157,828 $ (64,173) $ 93,655 $ 154,720 $ (61,065) $ 93,655

~~Intangible Assets-~~ ~~Intangible assets consisted of the following:~~

(in thousands) Cost Accumulated Amortization Net
July 31, 2021
Definite-lived customer relationships $ 1,444 $ (1,444) $ —
Indefinite-lived trademarks and tradenames 15,905 — 15,905
$ 17,349 $ (1,444) $ 15,905
January 30, 2021
Definite-lived customer relationships $ 2,909 $ (2,791) $ 118
Indefinite-lived trademarks and tradenames 15,517 — 15,517
$ 18,426 $ (2,791) $ 15,635
August 1, 2020
Definite-lived customer relationships $ 2,843 $ (2,507) $ 336
Indefinite-lived trademarks and tradenames 15,327 — 15,327
$ 18,170 $ (2,507) $ 15,663

~~Table of Contents~~

~~DESIGNER BRANDS INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

(~~unaudited~~)

~~9. ACCRUED EXPENSES~~

~~Accrued expenses consisted of the following:~~

(in thousands) July 31, 2021 January 30, 2021 August 1, 2020
Gift cards $ 28,691 $ 34,442 $ 29,919
Accrued compensation and related expenses 49,037 49,864 29,422
Accrued taxes 35,030 24,206 22,624
Loyalty programs deferred revenue 15,255 11,379 14,797
Sales returns 19,204 17,333 20,713
Customer allowances and discounts 2,103 4,579 8,644
Other 72,735 58,523 76,712
$ 222,055 $ 200,326 $ 202,831

~~10. DEBT~~

~~Debt consisted of the following:~~

(in thousands) July 31, 2021 January 30, 2021 August 1, 2020
ABL Revolver $ 16,810 $ 100,000 $ —
Term Loan 237,500 243,750 —
Credit Facility — — 393,000
Total debt 254,310 343,750 393,000
Less unamortized Term Loan debt issuance costs (7,241) (8,931) —
Less current maturities of long-term debt (62,500) (62,500) —
Long-term debt $ 184,569 $ 272,319 $ 393,000

2022 ABL Revolver- On ~~August 7, 2020,~~March 30, 2022, we replaced our ~~Credit Facility~~previous senior secured asset-based revolving credit facility ("2020 ABL Revolver") with ~~the~~our current senior secured asset-based revolving credit facility ("2022 ABL ~~Revolver,~~Revolver"), which provides a revolving line of credit of up to ~~$400.0~~$550.0 million, including a Canadian sub-limit of up to ~~$20.0~~$55.0 million, a ~~$50.0~~$75.0 million sub-limit for the issuance of letters of credit, a ~~$40.0~~$55.0 million sub-limit for swing loan advances for U.S. borrowings, and a ~~$2.0~~$5.5 million sub-limit for swing loan advances for Canadian borrowings. Our 2022 ABL Revolver matures in ~~August 2025~~March 2027 and is secured by a first priority lien on substantially all of our personal property assets, including ~~a first priority lien on~~ credit card receivables and ~~inventory~~inventory. The 2022 ABL Revolver may be used to provide funds for working capital, capital expenditures, share repurchases, other expenditures, and ~~a second priority lien on personal property assets that constitute first priority collateral for~~permitted acquisitions as defined by the ~~Term Loan.~~credit facility agreement. The amount of credit available is limited to a borrowing base formulated on, among other things, a percentage of the book value of eligible inventory and credit card receivables, as reduced by certain reserves. As of July ~~31, 2021,~~30, 2022, the 2022 ABL Revolver had a borrowing base of ~~$386.1~~$550.0 million, with ~~$16.8~~$387.4 million in outstanding borrowings and ~~$5.3~~$4.9 million in letters of credit issued, resulting in ~~$364.0~~$157.7 million available for borrowings.

Borrowings and letters of credit issued under the 2022 ABL Revolver accrue interest, at our option, at a rate equal to: (A) a base rate per annum equal to the greatest of (i) the prime rate, (ii) the ~~overnight bank funding rate~~Fed Funds Rate (as defined and subject to a floor of 0%) plus 0.5%, and (iii) the ~~adjusted~~ one-month ~~London Interbank Offered Rate ("LIBOR")~~Adjusted Term SOFR (as defined) plus 1.0%; or (B) ~~an adjusted LIBOR~~a one-month, three-month or six-month Adjusted Term SOFR per annum (subject to a floor of ~~0.75%~~0%), plus, in each instance, an applicable rate to be determined based on average availability, with an interest rate of ~~3.0%~~3.9% as of July ~~31, 2021.~~30, 2022. Commitment fees are based on the unused portion of the 2022 ABL Revolver. Interest expense related to the 2022 ABL Revolver includes interest on borrowings and letters of credit, commitment fees, and the amortization of debt issuance costs.

~~Term Loan-~~ On August 7, 2020, we also entered into a $250.0 million Term Loan. The Term Loan requires minimum quarterly principal payments with the remaining outstanding balance due in August 2025. The Term Loan has limited prepayment requirements under certain conditions. The Term Loan is collateralized by a first priority lien on substantially all of our personal and real property (subject to certain exceptions), including investment property and intellectual property, and by a second priority lien on certain other personal property, primarily credit card receivables and inventory, that constitute first priority collateral for the ABL Revolver.

~~Table of Contents~~

~~DESIGNER BRANDS INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

(~~unaudited~~)

Borrowings under the Term Loan accrue interest, at our option, at a rate equal to: (A) a base rate per annum equal to the greater of (i) 3.25%, (ii) the prime rate, (iii) the overnight bank funding rate plus 0.5%, and (iv) the adjusted one-month LIBOR plus 1.0%, plus, in each instance, 7.5%; or (B) an adjusted LIBOR per annum (subject to a floor of 1.25%), plus 8.5%, with an interest rate ~~of 9.8% (effective interest rate of 11.8% when including the amortization of debt issuance costs) as of July 31, 2021.~~

Debt Covenants- The 2022 ABL Revolver ~~contains~~requires us to maintain a ~~minimum availability~~fixed charge coverage ratio covenant ~~where an event~~ of ~~default shall occur if~~not less than 1:1 when availability is less than the greater of ~~$30.0~~$41.3 million orand 10.0% of the maximum ~~credit~~borrowing amount. The Term Loan includes a springing covenant imposing a minimum earnings before interest, taxes, depreciation, and amortization ("EBITDA") covenant, which arises when liquidity is less than $150.0 million. In addition, the2022 ABL Revolver ~~and the Term Loan each contain~~also contains customary covenants restricting our activities, including limitations on the ability to sell assets, engage in acquisitions, enter into transactions involving related parties, incur additional debt, grant liens on assets, pay dividends or repurchase stock, and make certain other changes. There are specific exceptions to these covenants including, in some cases, upon satisfying specified payment ~~conditions. We are restricted from paying dividends or repurchasing stock until the third quarter of fiscal 2021 at the earliest, after which certain limitations apply. Both the~~conditions based on availability. The 2022 ABL Revolver ~~and the Term Loan contain~~contains customary events of default, including failure to comply with ~~cross-default provisions.~~certain financial and other covenants. Upon an event of default that is not cured or waived within the cure periods, in addition to other remedies that may be available to the lenders, the obligations may be accelerated, outstanding letters of credit may be required to be cash collateralized, and remedies may be exercised against the collateral. As of July ~~31, 2021,~~30, 2022, we were in compliance with all financial covenants.

Termination of Term Loan- On February 8, 2022, we settled in full the $231.3 million principal amount outstanding on that date under our senior secured term loan agreement ("Term Loan"). In connection with this settlement, we incurred a $12.7 million loss on extinguishment of debt, composed of a $6.9 million prepayment premium and a $5.7 million write-off of unamortized debt issuance costs.

~~11.~~

10. COMMITMENTS AND CONTINGENCIES

Legal Proceedings- We are involved in various legal proceedings that are incidental to the conduct of our business. Although it is not possible to predict with certainty the eventual outcome of any litigation, we believe the amount of any potential liability with respect to current legal proceedings will not be material to ~~the~~our results of operations or financial condition. As additional information becomes available, we will assess any potential liability related to pending litigation and revise the estimates as needed.

~~Insurance Recoveries-~~ During fiscal 2020, a third-party vendor experienced a shutdown of services to us that impacted our ability to fulfill orders from customers for a limited period of time. This incident was covered under an insurance policy that provides for reimbursement of lost profits and recognized losses as a result of the outage. During the fourth quarter of fiscal 2020, we recognized an insurance recovery receivable of $3.0 million, recorded as an offset to cost of sales, for recognized losses that we believe are probable of being reimbursed through the insurance policy. Reimbursement for lost profits and any additional recoveries in excess of recognized losses are treated as gain contingencies and will be recognized when realized or realizable. We continue to work with the insurance carrier to reach an agreement on the total amount to be recovered.

Guarantee- We provide guarantees for lease obligations that are scheduled to expire in ~~fiscal~~ 2023 for locations that have been leased to third parties. If a third party does not pay the rent or vacates the premise, we may be required to make full rent payments to the landlord. As of July ~~31, 2021,~~30, 2022, the total future minimum lease payment requirements ~~for~~under these guarantees were approximately ~~$13.3~~$12.0 million.

Table of Contents

~~DESIGNER BRANDS INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

(~~unaudited~~)

~~12.~~11. SEGMENT REPORTING

The following provides certain key financial data by segment reconciled to the condensed consolidated financial statements:

(in thousands) U.S. Retail Canada Retail Brand Portfolio Other Corporate/Eliminations Total
Three months ended July 31, 2021
Net sales:
External customer sales $ 723,093 $ 57,585 $ 36,657 $ — $ — $ 817,335
Intersegment sales — — 13,872 — (13,872) —
Total net sales $ 723,093 $ 57,585 $ 50,529 $ — $ (13,872) $ 817,335
Gross profit $ 256,893 $ 18,768 $ 8,533 $ — $ 487 $ 284,681
Income from equity investment $ — $ — $ 2,290 $ — $ — $ 2,290
Three months ended August 1, 2020
Net sales:
External customer sales $ 393,977 $ 49,582 $ 23,889 $ 22,266 $ — $ 489,714
Intersegment sales — — 6,569 — (6,569) —
Total net sales $ 393,977 $ 49,582 $ 30,458 $ 22,266 $ (6,569) $ 489,714
Gross profit (loss) $ 40,097 $ 5,650 $ (11,440) $ 118 $ 2,617 $ 37,042
Income from equity investment $ — $ — $ 2,153 $ — $ — $ 2,153
Six months ended July 31, 2021
Net sales:
External customer sales $ 1,343,751 $ 98,189 $ 78,550 $ — $ — $ 1,520,490
Intersegment sales — — 29,406 — (29,406) —
Total net sales $ 1,343,751 $ 98,189 $ 107,956 $ — $ (29,406) $ 1,520,490
Gross profit $ 450,006 $ 29,603 $ 20,459 $ — $ 724 $ 500,792
Income from equity investment $ — $ — $ 3,998 $ — $ — $ 3,998
Six months ended August 1, 2020
Net sales:
External customer sales $ 771,050 $ 78,911 $ 86,647 $ 35,889 $ — $ 972,497
Intersegment sales — — 25,924 — (25,924) —
Total net sales $ 771,050 $ 78,911 $ 112,571 $ 35,889 $ (25,924) $ 972,497
Gross profit (loss) $ 7,127 $ 3,339 $ 2,464 $ (5,310) $ 2,962 $ 10,582
Income from equity investment $ — $ — $ 4,423 $ — $ — $ 4,423


(in thousands)	U.S. Retail		Canada Retail		Brand Portfolio		Eliminations		Consolidated
Three months ended July 30, 2022
Net sales:
External customer sales	$	734,063	$	78,284	$	46,972	$	—	$	859,319
Intersegment sales	—		—		19,379		(19,379)		—
Total net sales	$	734,063	$	78,284	$	66,351	$	(19,379)	$	859,319
Gross profit	$	251,143	$	30,974	$	12,294	$	1,259	$	295,670
Income from equity investments	$	—	$	—	$	2,435	$	—	$	2,435
Three months ended July 31, 2021
Net sales:
External customer sales	$	723,093	$	57,585	$	36,657	$	—	$	817,335
Intersegment sales	—		—		13,872		(13,872)		—
Total net sales	$	723,093	$	57,585	$	50,529	$	(13,872)	$	817,335
Gross profit	$	256,893	$	18,768	$	8,533	$	487	$	284,681
Income from equity investment	$	—	$	—	$	2,290	$	—	$	2,290
Six months ended July 30, 2022
Net sales:
External customer sales	$	1,436,808	$	134,599	$	118,455	$	—	$	1,689,862
Intersegment sales	—		—		45,352		(45,352)		—
Total net sales	$	1,436,808	$	134,599	$	163,807	$	(45,352)	$	1,689,862
Gross profit	$	484,210	$	49,847	$	36,136	$	1,222	$	571,415
Income from equity investments	$	—	$	—	$	4,380	$	—	$	4,380
Six months ended July 31, 2021
Net sales:
External customer sales	$	1,343,751	$	98,189	$	78,550	$	—	$	1,520,490
Intersegment sales	—		—		29,406		(29,406)		—
Total net sales	$	1,343,751	$	98,189	$	107,956	$	(29,406)	$	1,520,490
Gross profit	$	450,006	$	29,603	$	20,459	$	724	$	500,792
Income from equity investment	$	—	$	—	$	3,998	$	—	$	3,998

Table of Contents

~~Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations~~


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~Executive Overview and Trends in our Business~~EXECUTIVE OVERVIEW AND TRENDS IN OUR BUSINESS FOR THE SECOND QUARTER OF 2022

~~Operating profit in~~For the second quarter of ~~fiscal 2021 surpassed pre-COVID-19 levels~~2022, consolidated net sales increased 5.1% and comparable sales increased 6.2% over the same period last year with ~~growth~~each of ~~49% compared~~our three segments contributing to these increases. Net sales during the second quarter of ~~2019.~~2022 from our Owned Brands increased 40.4% over the same period last year, with Owned Brands represented 22.7% of consolidated net sales as compared to 17.0% for the same period last year. This growth came despite ~~the lingering effects of COVID-19,~~volatile market conditions, including ~~global supply chain challenges. The volatile macro environment~~increased freight costs and supply chain ~~disruptions have required us~~disruptions. We continue to ~~be nimble and quickly adapt~~make progress on our ~~business model.~~

~~As we look ahead to~~initiatives centered on our ~~strategic growth, we have organized our efforts around~~ three ~~pillars:~~pillars - Customer, Brand, and ~~Speed:~~

•~~Customer-~~ ~~More than ever,~~Speed - as we work towards our customers have a great desire for products and experiences, and we are adding resources to our digital, IT and analytics teams to understand precisely what they want and what can be improved to provide the best possible experience. Undertaking these actions will enable us to better understand our customers, provide improved service, and target new demographics in targeted and personalized ways that we have never deployed before. We are also developing new ideas for how we can provide more value to our VIP rewards members who continue to be the lifeblood of our business and our largest competitive differentiator.

•~~Brand-~~ Controlling our own brand destiny is critical for our growth. As we continue to design some of the best brands in the industry, Vince Camuto, Jessica Simpson, Lucky Brand and JLO Jennifer Lopez, we are combining that with our strong direct-to-consumer distribution through our physical footprint in North America and digital infrastructure. We are also partnering with some of the top brands in the industry to offer one of the largest and most broad assortments. We remain focused on investing in some of the top 50 brands in footwear and will continue to prioritize growing our own brands.

•~~Speed-~~ Moving quickly is of the utmost importance to consumers. We are developing processes to deliver products more quickly. Fulfillment of digital customer orders takes 5 to 7 business days and we are working to improve that to 2 to 3 calendar days while simultaneously finding efficiencies to contain costs. We are optimizing our current infrastructure and expanding our delivery partnerships. We are also working to improve collaboration through technology and processes across our organization and to gain additional efficiencies in our overall development cycle.

~~We have a proven track record of staying ahead of trends to ensure our success, despite some of the challenges we face, including COVID-19 variants and supply chain disruptions.~~

~~Impact of COVID-19~~

In response to the sudden and significant impacts resulting from the COVID-19 pandemic, we took several actions during the first quarter of fiscal 2020 to reduce costs and operations to levels that were more commensurate with then-current sales, including furloughs and pay reductions. As this continues to be an unprecedented period of uncertainty, we have made and may continue to make adjustments to our operational plans, inventory controls, and liquidity management, as well as changes to our expense and capital expenditurelong-term strategic plans.

~~Although operating results have improved throughout~~IMPACT OF THE COVID-19 PANDEMIC ON OUR RESULTS OF OPERATIONS

The COVID-19 pandemic continues to impact the ~~first half of fiscal 2021, we continue to experience adverse impacts due to COVID-19, including temporary store closures, reduced hours~~global economy and ~~other requirements in certain areas where government-imposed restrictions were mandated, and global~~has created supply chain ~~challenges. Our retail customers~~disruptions, inflationary pressures, higher freight and labor costs, and labor shortages. While we experienced continued improvement in ~~the Brand Portfolio segment have had and are having similar experiences. The impacts from the COVID-19 pandemic remain challenging and unpredictable. While trends improved~~our performance during the ~~first half~~second quarter of ~~fiscal 2021,~~2022, we cannot reasonably estimate the extent to which our business will continue to be affected by the COVID-19 pandemic and to what extent the recent improved trends in our business will continue. ~~For instance, restrictions have recently been reinstated~~

We continue to assess the likelihood of realizing the benefits of our deferred tax assets by evaluating historical and projected future operating results, the reversal of existing temporary differences, taxable income in certain locations within the U.S., and it is unclear whether these restrictions will continue and expand or if COVID-19 will result in long-term changes in consumer behavior. The ongoing and prolonged nature of the outbreak may lead to further adjustments to our operations. As such, the ultimate impacts of COVID-19 to our businesses remain highly uncertain and will depend on future developments, including global supply chain disruptions, the variants of COVID-19,permitted carry back years, and the ~~global~~ availability of tax planning strategies. In evaluating future taxable income, significant weight is given to positive and ~~use of vaccines, which are highly uncertain and cannot be predicted.~~negative evidence that is objectively verifiable. As a result of the losses incurred in 2020 due to the impacts of the COVID-19 pandemic, we were in a three-year cumulative loss position as of July 30, 2022, which was significant objective negative evidence in considering whether deferred tax assets are realizable. Such objective evidence limits the ability to consider other subjective evidence, such as the projection of future taxable income. As of July 30, 2022, a valuation allowance has been maintained as a reserve on substantially all of our net deferred tax assets due to the uncertainty of realization of our loss carry forwards and other deferred tax assets. Given the continued realization of income since 2020 and projected future income, sufficient positive evidence may ~~have future write-downs~~become available for the release of all or ~~adjustments to inventories, receivables, long-lived assets, intangibles, goodwill, and~~a portion of the valuation allowance onwithin the next twelve months. Such a release would result in a material non-cash income tax benefit in our consolidated statement of operations in the period of release and the recording of additional deferred tax ~~assets.~~assets on our consolidated balance sheet. However, the exact timing and amount of the valuation allowance releases are subject to change based on the level of profitability achieved in future periods.

~~Financial Summary and Other Key Metrics for the Second Quarter of Fiscal 2021~~FINANCIAL SUMMARY AND OTHER KEY METRICS

For the three months ended July 30, 2022:

•Net sales increased to $859.3 million from $817.3 million for the three months ended July 31, 2021 from $489.7 million for the three months ended August 1, 2020. The 66.9% increase in net sales was primarily driven by an 84.9% increase in comparable sales during the three months ended July 31, 2021, due to the fact that during the three months ended August 1, 2020, many of our stores remained closed or, to the extent they reopened, experienced significantly reduced customer traffic since reopening. The higher net sales due to the increase in total comparable sales were partially offset by store closures, including those serviced in the Other segment. Also, during the first quarter of fiscal 2020, we maintained higher sales returns reserves with stores not being available to accept returns, which resulted in significantly lower net sales. However, sales returns reserves normalized in the second quarter of fiscal 2020 as returns were not as high as expected, resulting in higher net sales. We did not have these significant changes in estimates between the first quarter and second quarter of fiscal 2021 as customer behavior has remained consistent. In addition, the Brand Portfolio segment net sales were higher in the quarter as compared to the second quarter of fiscal 2020 due to increased orders as our retailer customers recover, but still below pre-COVID-19 levels.2021.

~~During the three months ended July 31, 2021, gross~~•Gross profit as a percentage of net sales was ~~34.8% as~~34.4% compared to ~~7.6%~~34.8% for the same period last year. ~~The improvement~~

•Net income was $46.2 million, or $0.62 per diluted share, which included after-tax charges of $2.0 million primarily related to impairment and restructuring charges, offset by the change in ~~gross profit was primarily driven by increased sales as compared to the second quarter~~valuation allowance on deferred tax assets of fiscal 2020. In the second quarter of fiscal 2020, in response to the impacts of COVID-19 on our operations, we addressed the temporary closure of stores and the subsequent reduction in customer traffic upon store re-openings, with aggressive promotional activity. These actions resulted in higher inventory reserves, increased shipping costs associated with higher digital penetration, and the deleverage of distribution and fulfillment and store occupancy expenses on lower sales volume during fiscal 2020. During the second quarter of fiscal 2021, tight inventory positions resulted in fewer promotions. Accordingly, gross profit as a percentage of net sales for the second quarter of fiscal 2021 tracked higher than the pre-COVID-19 rate, which was 30.5% for the second quarter of fiscal 2019.

$2.1 million
.

Net income for the three months ended July 31, 2021 was $42.9 million, or $0.55 ~~earnings~~ per diluted share, which included ~~net~~ after-tax charges of ~~$0.6~~ $6.0 million ~~or $0.01 per diluted share,~~ primarily related to target acquisition costs, restructuring ~~charges,~~charges, and impairment charges, ~~and~~ partially offset by the change in ~~the~~ valuation allowance on deferred tax ~~assets.~~ ~~Net loss for the three months ended August 1, 2020 was $98.2~~assets of $5.4 million, or ~~a loss of $1.36~~$0.01 per diluted share ~~which included~~on a net ~~after-tax charges of $4.1 million, or $0.05 per diluted share, primarily related to impairment charges and integration and restructuring expenses, offset by a gain from a settlement with a vendor.~~basis.

Comparable Sales Performance ~~Metric~~

Metric-

The following table presents the ~~increase (decrease)~~change in comparable sales for each segment and in total:

Three months ended
July 31, 2021 August 1, 2020
Comparable sales:
U.S. Retail segment 94.3 % (44.9) %
Canada Retail segment 14.6 % (27.9) %
Brand Portfolio segment - direct-to-consumer channel 10.6 % 120.5 %
Other NA (36.2) %
Total comparable sales 84.9 % (42.7) %

~~NA - Not applicable~~


	Three months ended
	July 30, 2022		July 31, 2021
Change in comparable sales:
U.S. Retail segment	2.7	%	94.3	%
Canada Retail segment	47.3	%	14.6	%
Brand Portfolio segment - direct-to-consumer channel	43.3	%	10.6	%
Total	6.2	%	84.9	%

Table of Contents

We consider the change in comparable sales from the same previous year period, a primary metric commonly used throughout the retail industry, to be an important indicator of the performance of our retail and direct-to-consumer businesses. We include ~~stores~~ in our comparable sales metric ~~for those~~ stores in operation for at least 14 months at the beginning of the fiscal year. Stores are added to the comparable base at the beginning of the year and are dropped for comparative purposes in the quarter in which they are closed. Comparable sales include stores temporarily closed as a result of the COVID-19 pandemic as management continues to believe that this metric is meaningful to monitor our performance. Comparable sales also include e-commerce sales. Comparable sales for the Canada Retail segment exclude the impact of foreign currency translation and are calculated by translating current period results at the foreign currency exchange rate used in the comparable period of the prior year. Comparable sales for the Brand Portfolio segment include the direct-to-consumer e-commerce site www.vincecamuto.com. ~~Beginning with the third quarter of fiscal 2020, comparable sales no longer include the Other segment due to no longer having activity in the Other segment.~~ The calculation of comparable sales

varies across the retail industry and, as a result, the calculations of other retail companies may not be consistent with our calculation.

Number of ~~Stores~~

Stores-

~~At the end~~As of ~~the second quarter of fiscal~~July 30, 2022 and July 31, 2021, ~~and 2020,~~ we had the following number of stores:


		July 31, 2021	August 1, 2020	July 30, 2022		July 31, 2021

U.S. Retail segment - DSW stores	U.S. Retail segment - DSW stores	515			522		U.S. Retail segment - DSW stores	506	515
Canada Retail segment:	Canada Retail segment:						Canada Retail segment:
The Shoe Company / Shoe Warehouse stores		116			117
The Shoe Company stores							The Shoe Company stores	113	116
DSW stores	DSW stores	27			27		DSW stores	25	27
		143			144			138	143
Total number of stores	Total number of stores	658			666		Total number of stores	644	658

~~Results of Operations~~RESULTS OF OPERATIONS

~~Comparison of the Three Months Ended July 31,~~

SECOND QUARTER OF 2022 COMPARED WITH SECOND QUARTER OF 2021 ~~with the Three Months Ended August 1, 2020~~


(amounts in thousands, except per share amounts)														(amounts in thousands, except per share amounts)	Three months ended
															July 30, 2022				July 31, 2021				Change
		Three months ended													Amount		% of Net Sales		Amount		% of Net Sales		Amount		%
		July 31, 2021				August 1, 2020				Change
(dollars in thousands, except per share amounts)		Amount		% of Net Sales		Amount		% of Net Sales		Amount		%
Net sales	Net sales	$	817,335	100.0	%	$	489,714	100.0	%	$	327,621	66.9	%	Net sales	$	859,319	100.0	%	$	817,335	100.0	%	$	41,984	5.1	%
Cost of sales	Cost of sales	(532,654)		(65.2)		(452,672)		(92.4)		(79,982)		17.7	%	Cost of sales	(563,649)		(65.6)		(532,654)		(65.2)		(30,995)		5.8	%
Gross profit	Gross profit	284,681		34.8		37,042		7.6		247,639		668.5%		Gross profit	295,670		34.4		284,681		34.8		10,989		3.9	%
Operating expenses	Operating expenses	(224,385)		(27.5)		(168,424)		(34.4)		(55,961)		33.2	%	Operating expenses	(228,690)		(26.6)		(224,385)		(27.5)		(4,305)		1.9	%
Income from equity investment		2,290		0.3		2,153		0.4		137		6.4	%
Income from equity investments														Income from equity investments	2,435		0.3		2,290		0.3		145		6.3	%
Impairment charges	Impairment charges	(1,174)		(0.1)		(6,735)		(1.4)		5,561		(82.6)%		Impairment charges	(1,816)		(0.2)		(1,174)		(0.1)		(642)		54.7	%
Operating profit (loss)		61,412		7.5		(135,964)		(27.8)		197,376		NM
Operating profit														Operating profit	67,599		7.9		61,412		7.5		6,187		10.1	%
Interest expense, net	Interest expense, net	(8,072)		(1.0)		(3,788)		(0.8)		(4,284)		113.1	%	Interest expense, net	(2,752)		(0.3)		(8,072)		(1.0)		5,320		(65.9)	%
Non-operating income (expenses), net	Non-operating income (expenses), net	(244)		(0.0)		743		0.2		(987)		NM		Non-operating income (expenses), net	37		—		(244)		—		281		NM
Income (loss) before income taxes		53,096		6.5		(139,009)		(28.4)		192,105		NM
Income tax benefit (provision)		(10,236)		(1.3)		40,795		8.3		(51,031)		NM
Net income (loss)		$	42,860	5.2	%	$	(98,214)	(20.1)	%	$	141,074	NM
Basic and diluted earnings (loss) per share:
Basic earnings (loss) per share		$	0.59			$	(1.36)			$	1.95	NM
Diluted earnings (loss) per share		$	0.55			$	(1.36)			$	1.91	NM
Income before income taxes														Income before income taxes	64,884		7.6		53,096		6.5		11,788		22.2	%
Income tax provision														Income tax provision	(18,671)		(2.2)		(10,236)		(1.3)		(8,435)		82.4	%
Net income														Net income	$	46,213	5.4	%	$	42,860	5.2	%	$	3,353	7.8	%
Basic and diluted earnings per share:														Basic and diluted earnings per share:
Basic earnings per share														Basic earnings per share	$	0.66			$	0.59			$	0.07	11.9	%
Diluted earnings per share														Diluted earnings per share	$	0.62			$	0.55			$	0.07	12.7	%
Weighted average shares used in per share calculations:	Weighted average shares used in per share calculations:													Weighted average shares used in per share calculations:
Basic shares	Basic shares	72,932				72,142				790		1.1	%	Basic shares	69,604				72,932				(3,328)		(4.6)	%
Diluted shares	Diluted shares	77,619				72,142				5,477		7.6	%	Diluted shares	73,942				77,619				(3,677)		(4.7)	%

NM - Not meaningful

1918

Table of Contents

Net Sales- The following summarizes net sales by segment:

Three months ended Change
(dollars in thousands) July 31, 2021 August 1, 2020 Amount % Comparable Sales %
Segment net sales:
U.S. Retail $ 723,093 $ 393,977 $ 329,116 83.5 % 94.3%
Canada Retail 57,585 49,582 8,003 16.1 % 14.6%
Brand Portfolio 50,529 30,458 20,071 65.9 % 10.6%
Other — 22,266 (22,266) NM NA
Total segment net sales 831,207 496,283 334,924 67.5 % 84.9%
Elimination of intersegment net sales (13,872) (6,569) (7,303) 111.2 %
Consolidated net sales $ 817,335 $ 489,714 $ 327,621 66.9 %

~~NA - Not applicable~~

~~NM - Not meaningful~~


	Three months ended
(dollars in thousands)	July 30, 2022				July 31, 2021				Change
	Amount		% of Segment Net Sales		Amount		% of Segment Net Sales		Amount		%		Comparable Sales
Segment net sales:
U.S. Retail	$	734,063	83.5	%	$	723,093	87.0	%	$	10,970	1.5	%	2.7	%
Canada Retail	78,284		8.9	%	57,585		6.9	%	20,699		35.9	%	47.3	%
Brand Portfolio	66,351		7.6	%	50,529		6.1	%	15,822		31.3	%	43.3	%

Total segment net sales	878,698		100.0	%	831,207		100.0	%	47,491		5.7	%	6.2	%
Elimination of intersegment net sales	(19,379)				(13,872)				(5,507)		39.7	%
Consolidated net sales	$	859,319			$	817,335			$	41,984	5.1	%

The improvement in sales ~~including increases~~during the three months ended July 30, 2022 over the same period last year was primarily due to the increase in comparable sales ~~and total consolidated net sales,~~across all segments, with a significant increase from the Canada Retail segment as it was impacted during the three months ended July 31, 2021 over the same period last year was due to the fact that during the three months ended August 1, 2020, many of our stores remained closed or, to the extent they reopened, experienced significantly reduced customer traffic since re-opening. During a portion of the second quarter of fiscal 2021, the Canada Retail segment was impacted by ~~ongoing temporary~~continued mandated closures and restrictions in certain key markets. The ~~higher net sales due to the increase in total~~U.S. Retail segment's comparable sales ~~was partially offset by store closures, including those serviced~~benefited from higher comparable average unit retail prices. In addition, wholesale sales in the ~~Other segment. Also, during the first quarter of fiscal 2020, we maintained~~Brand Portfolio segment were higher ~~sales returns reserves with stores not being available to accept returns, which resulted in significantly lower net sales. However, sales returns reserves normalized~~ in the second quarter of fiscal 2020 as returns were not as high as expected, resulting in higher net sales. We did not have these significant changes in estimates between the first quarter and second quarter of fiscal 2021 as customer behavior has remained consistent. In addition, the Brand Portfolio segment net sales were higher in the quarter2022 as compared to the ~~second quarter of fiscal 2020~~same period last year due to increased orders as our retailer customers ~~recover, but still below pre-COVID-19 levels.~~continue to recover. These increases were partially offset by the impact of stores closed since the end of the second quarter of 2021.

Gross Profit- The following summarizes gross profit ~~(loss)~~ by segment:


		Three months ended
		July 31, 2021				August 1, 2020						Three months ended
(dollars in thousands)	(dollars in thousands)	Amount		% of Segment Net Sales		Amount		% of Segment Net Sales		Change			(dollars in thousands)	July 30, 2022				July 31, 2021				Change
Segment gross profit (loss):
														Amount		% of Segment Net Sales		Amount		% of Segment Net Sales		Amount		%		Basis Points
Segment gross profit:													Segment gross profit:
U.S. Retail	U.S. Retail	$	256,893	35.5	%	$	40,097	10.2	%	$	216,796		U.S. Retail	$	251,143	34.2	%	$	256,893	35.5	%	$	(5,750)	(2.2)	%	(130)
Canada Retail	Canada Retail	18,768		32.6	%	5,650		11.4	%	$	13,118		Canada Retail	30,974		39.6	%	18,768		32.6	%	12,206		65.0	%	700
Brand Portfolio	Brand Portfolio	8,533		16.9	%	(11,440)		(37.6)	%	$	19,973		Brand Portfolio	12,294		18.5	%	8,533		16.9	%	3,761		44.1	%	160
Other		—		—	%	118		0.5	%	$	(118)
		284,194				34,425
Elimination of intersegment gross profit		487				2,617
Gross profit		$	284,681	34.8	%	$	37,042	7.6	%	$	247,639
Total segment gross profit													Total segment gross profit	294,411		33.5	%	284,194		34.2	%	10,217		3.6	%	(70)
Net recognition of intersegment gross profit													Net recognition of intersegment gross profit	1,259				487				772
Consolidated gross profit													Consolidated gross profit	$	295,670	34.4	%	$	284,681	34.8	%	$	10,989	3.9	%	(40)

The ~~improvement~~increase in consolidated gross profit was primarily driven by increased sales during the ~~quarter as compared to the three months ended August 1, 2020. In the~~ second quarter of ~~fiscal 2020,~~2022 over the same period last year, partially offset by higher freight costs. The decrease in ~~response~~U.S. Retail segment gross profit was also impacted by moving our digital fulfillment activities from our Columbus location to ~~the impacts of COVID-19 on~~ our ~~operations, we addressed the temporary closure of stores and the subsequent reduction in customer traffic upon store re-openings with aggressive promotional activity. These actions~~New Jersey location, which resulted in ~~higher inventory reserves, increased shipping~~recognizing approximately $6.0 million of additional distribution costs, associated with higher digital penetration, and the deleverage of distribution and fulfillment and store occupancy expenses on lower sales volume during fiscal 2020. During the second quarter of fiscal 2021, tight inventory positions resulted in being less

~~promotional. Accordingly,~~including accelerated depreciation. Consolidated gross profit as a percentage of consolidated net sales ~~for~~was down slightly due to higher freight costs impacting all of our segments, as well as the ~~second quarter of fiscal 2021 tracked higher than~~U.S. Retail segment with an increase in clearance sales and distribution costs, whereas the ~~pre-COVID-19 rate, which was 30.5% for the second quarter of fiscal 2019. The~~ Canada Retail and Brand Portfolio segments have significantly improved gross profit as a percentage of net sales during the quarter as compared to the same period last year, but remained below pre-COVID-19 levels when compared to the second quarter of fiscal 2019increased due to ~~the deleverage impacts~~being less promotional and improved leverage of ~~lower net sales.~~occupancy costs and royalty expenses on higher sales volume.

~~Elimination~~

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The net recognition of intersegment gross profit consisted of the following:


		Three months ended				Three months ended
(in thousands)	(in thousands)	July 31, 2021		August 1, 2020			(in thousands)	July 30, 2022		July 31, 2021
Elimination of intersegment activity:
Recognition (elimination) of intersegment activity:							Recognition (elimination) of intersegment activity:
Net sales recognized by Brand Portfolio segment	Net sales recognized by Brand Portfolio segment	$	(13,872)	$	(6,569)		Net sales recognized by Brand Portfolio segment	$	(19,379)	$	(13,872)
Cost of sales:	Cost of sales:						Cost of sales:
Cost of sales recognized by Brand Portfolio segment	Cost of sales recognized by Brand Portfolio segment	9,707		4,827			Cost of sales recognized by Brand Portfolio segment	12,554		9,707
Recognition of intersegment gross profit for inventory previously purchased that was subsequently sold to external customers during the current period	Recognition of intersegment gross profit for inventory previously purchased that was subsequently sold to external customers during the current period	4,652		4,359			Recognition of intersegment gross profit for inventory previously purchased that was subsequently sold to external customers during the current period	8,084		4,652
Gross profit		$	487	$	2,617
								$	1,259	$	487

Operating Expenses- For the three months ended July ~~31, 2021,~~30, 2022, operating expenses increased by ~~$56.0~~$4.3 million over the same period last year, primarily driven by an increase in store payroll and marketing expenses in line with the implementation of temporary leaves of absence without pay for a significant number of our employees and reducing pay for nearly all employees not placed on temporary leave for most of the second quarter of fiscal 2020. Operating expenses during the second quarter of fiscal 2020 wereincrease in net sales, partially offset by ~~a gain from a settlement with a vendor of $9.0 million.~~target acquisition costs recognized last year. Operating expenses as a percentage of sales improved to ~~27.5%~~26.6% compared to ~~34.4%~~27.5% in the same period last year ~~but were still elevated compared~~due to the ~~pre-COVID-19 rate for the second quarter of fiscal 2019, which was 26.0%~~improvement in net sales year over year as ~~a percentage of sales, primarily due to higher direct marketing and incentive compensation expense and lower sales in the Brand Portfolio segment.~~we leveraged our fixed costs.

~~Impairment Charges-~~ Interest Expense, net~~During~~- For the three months ended July ~~31, 2021 and August 1, 2020, we evaluated certain long-lived assets based on our intent~~30, 2022, interest expense, net, decreased by $5.3 million over the same period last year, primarily due to ~~use such assets going forward and, as~~the termination of the Term Loan in the first quarter of 2022, which had a ~~result, we recorded impairment charges~~ of ~~$1.2 million~~ ~~and $6.7 million, respectively.~~higher interest rate than the 2022 ABL Revolver.

Income Taxes-~~Our effective tax rate changed from 29.3% for the three months ended August 1, 2020 to~~ ~~19.3% f~~orFor the three months ended July 30, 2022 and July 31, ~~2021.~~2021, our effective tax rate was 28.8% and 19.3%, respectively. The rate for three months ended July 30, 2022 was impacted by permanent tax adjustments, primarily non-deductible compensation. The rate for the three months ended July 31, 2021 iswas the result of maintaining a full valuation allowance on deferred tax assets. ~~The rate for the three months ended August 1, 2020 is the result of carry back of losses to a tax year where the U.S. federal statutory tax rate was 35%.~~

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~~Comparison of the Six Months Ended July 31,~~SIX MONTHS OF 2022 COMPARED WITH SIX MONTHS OF 2021 ~~with the Six Months Ended August 1, 2020~~

Six months ended
July 31, 2021 August 1, 2020 Change
(dollars in thousands, except per share amounts) Amount % of Net Sales Amount % of Net Sales Amount %
Net sales $ 1,520,490 100.0 % $ 972,497 100.0 % $ 547,993 56.3 %
Cost of sales (1,019,698) (67.1) (961,915) (98.9) (57,783) 6.0 %
Gross profit 500,792 32.9 10,582 1.1 490,210 4,632.5%
Operating expenses (425,199) (28.0) (355,645) (36.6) (69,554) 19.6 %
Income from equity investment 3,998 0.3 4,423 0.5 (425) (9.6) %
Impairment charges (1,174) (0.1) (119,282) (12.3) 118,108 (99.0)%
Operating profit (loss) 78,417 5.1 (459,922) (47.3) 538,339 NM
Interest expense, net (16,886) (1.1) (5,946) (0.6) (10,940) 184.0 %
Non-operating income, net 562 0.0 656 0.1 (94) (14.3)%
Income (loss) before income taxes 62,093 4.0 (465,212) (47.8) 527,305 NM
Income tax benefit (provision) (2,207) (0.1) 151,140 15.5 (153,347) NM
Net income (loss) $ 59,886 3.9 % $ (314,072) (32.3) % $ 373,958 NM
Basic and diluted earnings (loss) per share:
Basic earnings (loss) per share $ 0.82 $ (4.36) $ 5.18 NM
Diluted earnings (loss) per share $ 0.78 $ (4.36) $ 5.14 NM
Weighted average shares used in per share calculations:
Basic shares 72,773 72,028 745 1.0 %
Diluted shares 77,271 72,028 5,243 7.3 %


(amounts in thousands, except per share amounts)	Six months ended
	July 30, 2022				July 31, 2021				Change
	Amount		% of Net Sales		Amount		% of Net Sales		Amount		%
Net sales	$	1,689,862	100.0	%	$	1,520,490	100.0	%	$	169,372	11.1	%
Cost of sales	(1,118,447)		(66.2)		(1,019,698)		(67.1)		(98,749)		9.7	%
Gross profit	571,415		33.8		500,792		32.9		70,623		14.1	%
Operating expenses	(452,116)		(26.8)		(425,199)		(28.0)		(26,917)		6.3	%
Income from equity investments	4,380		0.3		3,998		0.3		382		9.6	%
Impairment charges	(2,888)		(0.2)		(1,174)		(0.1)		(1,714)		146.0	%
Operating profit	120,791		7.1		78,417		5.1		42,374		54.0	%
Interest expense, net	(5,704)		(0.3)		(16,886)		(1.1)		11,182		(66.2)	%
Loss on extinguishment of debt and write-off of debt issuance costs	(12,862)		(0.7)		—		—		(12,862)		NM
Non-operating income, net	43		—		562		—		(519)		(92.3)	%
Income before income taxes	102,268		6.1		62,093		4.0		40,175		64.7	%
Income tax provision	(29,873)		(1.8)		(2,207)		(0.1)		(27,666)		1,253.6	%
Net income	$	72,395	4.3	%	$	59,886	3.9	%	$	12,509	20.9	%
Basic and diluted earnings per share:
Basic earnings per share	$	1.02			$	0.82			$	0.20	24.4	%
Diluted earnings per share	$	0.96			$	0.78			$	0.18	23.1	%
Weighted average shares used in per share calculations:
Basic shares	71,263				72,773				(1,510)		(2.1)	%
Diluted shares	75,369				77,271				(1,902)		(2.5)	%

NM - Not meaningful

Net Sales- The following summarizes net sales by segment:

Six months ended Change
(dollars in thousands) July 31, 2021 August 1, 2020 Amount % Comparable Sales %
Segment net sales:
U.S. Retail $ 1,343,751 $ 771,050 $ 572,701 74.3 % 74.5%
Canada Retail 98,189 78,911 19,278 24.4 % 12.6%
Brand Portfolio 107,956 112,571 (4,615) (4.1) % 8.6%
Other — 35,889 (35,889) NM NA
Total segment net sales 1,549,896 998,421 551,475 55.2 % 68.1%
Elimination of intersegment net sales (29,406) (25,924) (3,482) 13.4 %
Consolidated net sales $ 1,520,490 $ 972,497 $ 547,993 56.3 %

~~NA - Not applicable~~

~~NM - Not meaningful~~


	Six months ended
(dollars in thousands)	July 30, 2022			July 31, 2021			Change
	Amount		% of Segment Net Sales	Amount		% of Segment Net Sales	Amount		%		Comparable Sales
Segment net sales:
U.S. Retail	$	1,436,808	82.8%	$	1,343,751	86.7%	$	93,057	6.9	%	7.8	%
Canada Retail	134,599		7.8%	98,189		6.3%	36,410		37.1	%	44.8	%
Brand Portfolio	163,807		9.4%	107,956		7.0%	55,851		51.7	%	31.5	%
Total segment net sales	1,735,214		100%	1,549,896		100.0%	185,318		12.0	%	10.4	%
Elimination of intersegment net sales	(45,352)			(29,406)			(15,946)		54.2	%
Consolidated net sales	$	1,689,862		$	1,520,490		$	169,372	11.1	%

The ~~increases~~improvement in sales during the six months ended July 30, 2022 over the same period last year was primarily due to the increase in comparable sales ~~for~~across all segments, ~~and~~primarily driven by the fact that during the six months ended July 31, 2021, the prolonged COVID-19 pandemic resulted in ~~total consolidated net sales was a result of the temporary closure of all stores beginning in March 2020 through much of the second quarter of fiscal 2020 and, since re-opening, we experienced~~ significantly reduced ~~customer~~store traffic in the U.S. Retail and ~~net sales. During a portion of the first half of fiscal 2021,~~Canada Retail segments, with the Canada Retail segment ~~was~~also impacted by ~~ongoing temporary~~continued mandated closures and restrictions in certain key markets. ~~The~~In addition, wholesale sales in the Brand Portfolio segment were higher ~~net sales~~in the first half of 2022 as compared to the

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same period last year due to ~~the increase in total comparable sales was~~increased orders as our retailer customers continue to recover. These increases were partially offset by ~~store closures, including those serviced in~~ the ~~Other segment.~~impact of stores closed since the end of the second quarter of 2021.

Gross Profit- The following summarizes gross profit ~~(loss)~~ by segment:


		Six months ended
		July 31, 2021				August 1, 2020						Six months ended
(dollars in thousands)	(dollars in thousands)	Amount		% of Segment Net Sales		Amount		% of Segment Net Sales		Change			(dollars in thousands)	July 30, 2022				July 31, 2021				Change
Segment gross profit (loss):
														Amount		% of Segment Net Sales		Amount		% of Segment Net Sales		Amount		%		Basis Points
Segment gross profit:													Segment gross profit:
U.S. Retail	U.S. Retail	$	450,006	33.5	%	$	7,127	0.9	%	$	442,879		U.S. Retail	$	484,210	33.7	%	$	450,006	33.5	%	$	34,204	7.6	%	20
Canada Retail	Canada Retail	29,603		30.1	%	3,339		4.2	%	$	26,264		Canada Retail	49,847		37.0	%	29,603		30.1	%	20,244		68.4	%	690
Brand Portfolio	Brand Portfolio	20,459		19.0	%	2,464		2.2	%	$	17,995		Brand Portfolio	36,136		22.1	%	20,459		19.0	%	15,677		76.6	%	310
Other		—		—	%	(5,310)		(14.8)	%	$	5,310
		500,068				7,620
Elimination of intersegment gross profit		724				2,962
Gross profit		$	500,792	32.9	%	$	10,582	1.1	%	$	490,210
Total segment gross profit													Total segment gross profit	570,193		32.9	%	500,068		32.3	%	70,125		14.0	%	60
Net recognition of intersegment gross profit													Net recognition of intersegment gross profit	1,222				724				498
Consolidated gross profit													Consolidated gross profit	$	571,415	33.8	%	$	500,792	32.9	%	$	70,623	14.1	%	90

The improvement in consolidated gross profit was primarily driven by increased sales during the six months ended July ~~31, 2021~~ ~~as compared to~~30, 2022 over the same period last ~~year. In~~year and being less promotional, partially offset by higher freight costs and distribution costs. Gross profit as a percentage of net sales for the ~~second quarter of fiscal 2020,~~U.S. Retail and Canada Retail segments increased due to being less promotional and improved leverage on occupancy costs, partially offset by higher freight costs in ~~response~~both segments and higher distribution costs in the U.S. Retail segment. The higher distribution costs within the U.S. Retail segment were primarily driven by moving digital fulfillment activities from our Columbus location to ~~the impacts of COVID-19 on~~ our ~~operations, we addressed the temporary closure of stores and the subsequent reduction~~New Jersey location. The improvement in customer traffic upon store re-openings with aggressive promotional activity. These actions resulted in higher inventory reserves, increased shipping costs associated with higher digital penetration, and the deleverage of distribution and fulfillment and store occupancy expenses on lower sales volume during fiscal 2020. During ~~the six months ended July 31, 2021, tight inventory positions resulted in fewer promotions. Accordingly,~~ gross profit as a percentage of net sales for the ~~six months ended July 31, 2021~~ ~~tracked higher than the pre-COVID-19 rate, which was 30.1% for the same period in fiscal 2019. The Canada Retail and~~ Brand Portfolio ~~segments have significantly improved gross profit as a percentage~~segment was primarily driven by the leverage of ~~net~~royalty expenses on higher sales ~~during~~ ~~the six months ended July 31, 2021~~ ~~as compared to the same period last year, but remained below pre-COVID-19 levels when compared to the same period in fiscal 2019 due to the deleverage impacts of lower net sales.~~volume.

~~Elimination~~The net recognition of intersegment ~~gross~~ profit consisted of the following:


		Six months ended				Six months ended
(in thousands)	(in thousands)	July 31, 2021		August 1, 2020			(in thousands)	July 30, 2022		July 31, 2021
Elimination of intersegment activity:
Recognition (elimination) of intersegment activity:							Recognition (elimination) of intersegment activity:
Net sales recognized by Brand Portfolio segment	Net sales recognized by Brand Portfolio segment	$	(29,406)	$	(25,924)		Net sales recognized by Brand Portfolio segment	$	(45,352)	$	(29,406)
Cost of sales:	Cost of sales:						Cost of sales:
Cost of sales recognized by Brand Portfolio segment	Cost of sales recognized by Brand Portfolio segment	20,642		16,961			Cost of sales recognized by Brand Portfolio segment	30,723		20,642
Recognition of intersegment gross profit for inventory previously purchased that was subsequently sold to external customers during the current period	Recognition of intersegment gross profit for inventory previously purchased that was subsequently sold to external customers during the current period	9,488		11,925			Recognition of intersegment gross profit for inventory previously purchased that was subsequently sold to external customers during the current period	15,851		9,488
Gross profit		$	724	$	2,962
								$	1,222	$	724

Operating Expenses- For the six months ended July ~~31, 2021,~~30, 2022, operating expenses increased by ~~$69.6~~$26.9 million over the same period last year, primarily driven by an increase in store payroll and marketing expenses in line with the ~~implementation of temporary leaves of absence without pay for a significant number of our employees and reducing pay for nearly all employees not placed on temporary leave~~increase in ~~response to COVID-19 for most of the first half of fiscal 2020.~~net sales. Operating expenses as a percentage of sales improved to ~~28.0%~~26.8% compared to ~~36.6%~~28.0% in the same period last year, ~~but were still elevated compared~~due to the ~~pre-COVID-19 rate, which was 25.4%~~improvement in net sales year over year as ~~a percentage of sales for~~we leveraged our fixed costs.

Interest Expense, net- For the six months ended July 30, 2022, interest expense, net, decreased by $11.2 million over the same period ~~in fiscal 2019,~~ last year, primarily due to the termination of the Term Loan in the first quarter of 2022, which had a higher ~~direct marketing expense~~interest rate than the 2022 ABL Revolver.

Loss on extinguishment of debt and ~~incentive compensation~~write-off of debt issuance costs- In connection with the settlement of our Term Loan on February 8, 2022, during the six months ended July 30, 2022 we incurred a $12.7 million loss on extinguishment of debt, composed of a $6.9 million prepayment premium and ~~lower sales~~a $5.7 million write-off of unamortized debt issuance costs. As a result of the replacement of the 2020 ABL Revolver during the .six months ended July 30, 2022, we also wrote-off $0.2 million of debt issuance costs.

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~~Impairment Charges-~~Income Taxes- ~~During~~For the six months ended July 30, 2022 and July 31, 2021, ~~we recorded an impairment charge of $1.2 million for abandoned equipment we are replacing. As a result of the material reduction in net sales and cash flows due to the temporary closure of all of~~ our stores during the six months ended August 1, 2020, we performed an impairment analysis at the store-level. In addition, we evaluated other long-lived assets based on our intent to use such assets going forward. During the six months ended August 1, 2020, we recorded impairment charges of $92.8 million for under-performing stores. Also during the six months ended August 1, 2020, we recorded an impairment charge of $6.5 million for the Brand Portfolio segment customer relationship intangible resulting in a full impairment due to the lack of projected cash flows over the remaining useful life. Further, as a result of the material reduction in net sales and cash flows and the decrease in the Company's market capitalization due to the impact of COVID-19 on macroeconomic conditions, we performed an impairment analysis for goodwill and other indefinite-lived intangible assets. Our analysis concluded that the fair value of the First Cost reporting unit within the Brand Portfolio segment did not exceed its carrying value. Accordingly, during the six months ended August 1, 2020, we recorded an impairment charge of $20.0 million for the First Cost reporting unit in the Brand Portfolio segment, resulting in a full impairment.

~~Income Taxes-~~ ~~Our~~ effective tax rate ~~changed from 32.5% for the six months ended August 1, 2020 to~~ was 29.2% and 3.6%, respectively. The rate for the six months ended July ~~31, 2021.~~30, 2022 was impacted by permanent tax adjustments, primarily non-deductible compensation. The rate for the six months ended July 31, 2021 iswas the result of maintaining a full valuation allowance on deferred tax assets ~~while also recording~~along with net discrete tax benefits, primarily as a result of adjustments to our estimated ~~fiscal~~ 2020 return reflecting implemented tax strategies. ~~The rate for the six months ended August 1, 2020 is the result of carry back of losses to a tax year where the U.S. federal statutory tax rate was 35%.~~

~~Seasonality~~

SEASONALITY

Our ~~business is generally subject to~~business consists of two principal selling seasons; the spring season, which includes the first and second fiscal quarters, and the fall season, which includes the third and fourth fiscal quarters. Generally, net sales in the fall season have been slightly higher than the spring season. Our seasonal ~~trends driven by~~results of operations may fluctuate based on the change in weather conditions and our customers' interest in new seasonal styles. ~~New spring styles are primarily introduced in the first quarter and new fall styles are primarily introduced in the third quarter. Since~~Due to the COVID-19 ~~outbreak,~~pandemic, we ~~have~~did not ~~experienced~~experience the typical seasonal trends during 2021 given the changes in customer behavior.

~~Liquidity and Capital Resources~~LIQUIDITY AND CAPITAL RESOURCES

~~Overview~~OVERVIEW

Our primary ongoing operating cash flow requirements are for inventory purchases, payments on lease obligations and licensing royalty commitments, other working capital needs, and capital ~~expenditures, and debt service.~~expenditures. Our working capital and inventory levels fluctuate seasonally. During the six months ended July 30, 2022, we repurchased 9.4 million Class A common shares at an aggregate cost of $128.5 million, with $206.4 million of Class A common shares that remain authorized under the program as of July 30, 2022. During the six months ended July 31, 2021, we did not repurchase any Class A common shares. We anticipate receiving approximately $160.0 million in the near future from the Internal Revenue Service as a result of the Coronavirus Aid, Relief, and Economic Security Act.

We are committed to a cash management strategy that maintains liquidity to adequately support the operation of the business and withstand unanticipated business volatility, including any ongoing impacts of the ~~impact of COVID-19.~~COVID-19 pandemic. We believe that cash generated from our operations, together with our current levels of cash, as well as the use of our 2022 ABL Revolver, are sufficient to maintain our ongoing operations, support seasonal working capital requirements, fund capital expenditures, and ~~meet~~repurchase common shares under our ~~debt service obligations~~share repurchase program over the next 12 ~~months.~~months and beyond.

~~Operating Cash Flows~~The following table presents the key categories of our condensed consolidated statements of cash flows:


	Six months ended
(in thousands)	July 30, 2022		July 31, 2021		Change
Net cash provided by operating activities	$	10,864	$	96,229	$	(85,365)
Net cash used in investing activities	(40,234)		(13,189)		(27,045)
Net cash provided by (used in) financing activities	7,398		(94,955)		102,353
Effect of exchange rate changes on cash balances	80		338		(258)
Net decrease in cash, cash equivalents and restricted cash	$	(21,892)	$	(11,577)	$	(10,315)

OPERATING CASH FLOWS

The decrease in net cash provided by operations was driven by higher spend on working capital as our business continues to recover from the impacts of the COVID-19 pandemic with increases in consolidated inventories, increases in receivables on wholesale sales, and timing of payments to vendors. This was partially offset by the increase in net income recognized in the six months ended July 30, 2022 over the same period last year, after adjusting for non-cash activity including the loss from extinguishment of debt and write-off of debt issuance costs, depreciation and amortization, and stock-based compensation expense.

INVESTING CASH FLOWS

For the six months ended July ~~31, 2021, net cash provided by operations was $96.2 million compared to~~30, 2022, net cash used in ~~operations of $79.6 million for the six months ended August 1, 2020. The change~~investing activities was ~~driven by the net income recognized~~primarily due to capital expenditures relating to infrastructure and information technology ("IT") projects and store improvements as well as our investment in Le Tigre. During the six months ended July 31, 2021, ~~versus a~~the net ~~loss incurred during that same period last year as a result~~cash used in investing activities was due to capital expenditures relating to IT projects and store improvements.

Table of COVID-19, after adjusting for non-cash activity including impairment charges and the change in deferred income taxes. This was partially offset by higher spend on working capital as business recovers from COVID-19 and the measures we implemented last year to manage our working capital to preserve liquidity, including delaying vendor and landlord payments while we renegotiate terms, reducing inventory orders, and significantly cutting costs.Contents

~~Investing Cash Flows~~FINANCING CASH FLOWS

For the six months ended July 31, 2021, our net cash used in investing activities was $13.2 million, which was due to capital expenditures relating to infrastructure and IT projects and store improvements. During the six months ended August 1, 2020, our30, 2022, net cash provided by ~~investing~~financing activities ~~was $6.8 million, which~~ was due to ~~the liquidation~~net receipts of $387.4 million from our ~~available-for-sale securities and the proceeds from a settlement from a vendor~~revolving lines of credit, partially offset by ~~capital expenditures~~the payments of ~~$22.1~~$238.2 million due to the settlement of the Term Loan, the repurchase of 9.4 million Class A common shares at an aggregate cost of $128.5 million, and the payment of dividends of $7.1 million.

~~Financing Cash Flows~~

~~For~~ During the six months ended July 31, 2021, ~~our~~ net cash used in financing activities was ~~$95.0 million compared~~due to ~~net cash provided by financing activities of $193.2 million for the six months ended August 1, 2020. During the six months ended July 31, 2021, we had~~ net payments of $83.2 million ~~from the ABL Revolver~~on our revolving lines of credit and payments on the Term Loan of $6.3 million.During the six months ended August 1, 2020, we had net borrowings of $203.0 million from the Credit Facility as a precautionary measure to increase our cash position and preserve financial flexibility considering the uncertainty from COVID-19.

~~Debt~~DEBT

2022 ABL Revolver- On ~~August 7, 2020,~~March 30, 2022, we replaced ~~the Credit Facility~~our 2020 ABL Revolver with ~~the~~our current 2022 ABL Revolver, which provides a revolving line of credit of up to ~~$400.0~~$550.0 million, including a Canadian sub-limit of up to ~~$20.0~~$55.0 million, a ~~$50.0~~$75.0 million sub-limit for the issuance of letters of credit, a ~~$40.0~~$55.0 million sub-limit for swing loan advances for U.S. borrowings, and a ~~$2.0~~$5.5 million sub-limit for swing loan advances for Canadian borrowings. Our 2022 ABL Revolver matures in ~~August 2025~~March 2027 and is secured by a first priority lien on substantially all of our personal property assets, including ~~a first priority lien on~~ credit card receivables and ~~inventory~~inventory. The 2022 ABL Revolver may be used to provide funds for working capital, capital expenditures, share repurchases, other expenditures, and ~~a second priority lien on personal property assets that constitute first priority collateral for~~permitted acquisitions as defined by the ~~Term Loan.~~credit facility agreement. The amount of credit available is limited to a borrowing base formulated on, among other things, a percentage of the book value of eligible inventory and credit card receivables, as reduced by certain reserves. As of July ~~31, 2021,~~30, 2022, the 2022 ABL Revolver had a borrowing base of ~~$386.1~~$550.0 million, with ~~$16.8~~$387.4 million in outstanding borrowings and ~~$5.3~~$4.9 million in letters of credit issued, resulting in ~~$364.0~~$157.7 million available for borrowings.

Borrowings and letters of credit issued under the ABL Revolver accrue interest, at our option, at a rate equal to: (A) a base rate per annum equal to the greatest of (i) the prime rate, (ii) the overnight bank funding rate plus 0.5%, and (iii) the adjusted one-month London Interbank Offered Rate ("LIBOR") (as defined) plus 1.0%; or (B) an adjusted LIBOR per annum (subject to a floor of 0.75%), plus, in each instance, an applicable rate to be determined based on average availability, with an interest rate of 3.0% as of July 31, 2021. Commitment fees are based on the unused portion of the ABL Revolver. Interest expense related to the ABL Revolver includes interest on borrowings ~~and letters of credit, commitment fees and the amortization of debt issuance costs.~~

Borrowings under the Term Loan accrue interest, at our option, at a rate equal to: (A) a base rate per annum equal to the greater of (i) 3.25%, (ii) the prime rate, (iii) the overnight bank funding rate plus 0.5%, and (iv) the adjusted one-month LIBOR plus 1.0%, plus, in each instance, 7.5%; or (B) an adjusted LIBOR per annum (subject to a floor of 1.25%), plus 8.5%, with an interest rate of ~~9.8% (effective interest rate of 11.8% when including the amortization of debt issuance costs) as of July 31, 2021.~~

Debt Covenants- The 2022 ABL Revolver ~~contains~~requires us to maintain a ~~minimum availability~~fixed charge coverage ratio covenant ~~where an event~~ of ~~default shall occur if~~not less than 1:1 when availability is less than the greater of ~~$30.0~~$41.3 million orand 10.0% of the maximum ~~credit~~borrowing amount. The ~~Term Loan includes a springing covenant imposing a minimum EBITDA covenant, which arises when liquidity is less than $150.0 million. In addition, the~~2022 ABL Revolver ~~and the Term Loan each contain~~also contains customary covenants restricting our activities, including limitations on the ability to sell assets, engage in acquisitions, enter into transactions involving related parties, incur additional debt, grant liens on assets, pay dividends or repurchase stock, and make certain other changes. There are specific exceptions to these covenants including, in some cases, upon satisfying specified payment conditions. We are restricted from paying dividends or repurchasing stock until the third quarter of fiscal 2021 at the earliest, after which certain limitations apply. Both the ABL Revolver and the Term Loan contain customary covenants of default with cross-default provisions. Upon an event of default that is not cured or waived within the cure periods, in addition to other remedies that may be available to the lenders, the obligations may be accelerated, outstanding letters of credit may be required to be cash collateralized and remedies may be exercised against the collateral.conditions based on availability. As of July ~~31, 2021,~~30, 2022, we were in compliance with all financial covenants.

Termination of Term Loan -

~~Capital Expenditure Plans~~On February 8, 2022, we settled in full the $231.3 million principal amount outstanding on that date under our Term Loan. In connection with this settlement, we incurred a $12.7 million loss on extinguishment of debt, composed of a $6.9 million prepayment premium and a $5.7 million write-off of unamortized debt issuance costs.

Refer to Note 9, Debt, of the Condensed Consolidated Financial Statements of this Form 10-Q for further information about our debt arrangements.

CAPITAL EXPENDITURE PLANS

We expect to spend approximately ~~$35.0~~ $65.0 million to ~~$45.0~~$75.0 million for capital expenditures in ~~fiscal 2021,~~2022, of which we invested ~~$13.2~~$27.2 million during the six months ended July ~~31, 2021.~~30, 2022. Our ~~capital expenditures for the remainder of the year~~future investments will depend primarily on the number of ~~store projects, as well as~~stores we open and remodel, infrastructure and IT projects that we undertake, and the timing of these expenditures.

~~Critical Accounting Policies and Estimates~~RECENT ACCOUNTING PRONOUNCEMENTS

There are no recent accounting pronouncements that are expected to have a material impact to our consolidated financial statements when adopted.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of our condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and disclosure of commitments and contingencies at the date of the condensed consolidated financial statements and reported amounts of revenue and expenses during the reporting period. We base these estimates and judgments on factors we believe to be relevant, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. The process of determining significant estimates is fact-specific and takes into account factors such as historical experience, current and expected economic conditions, product mix, and in some cases, actuarial and valuation techniques. We constantly re-evaluate these significant factors and make adjustments where facts and circumstances dictate. While we believe that the factors considered provide a meaningful basis for the accounting policies applied in the preparation of the condensed consolidated financial statements, we cannot guarantee that our estimates and assumptions will be accurate. As the determination of these estimates requires the exercise of judgment, actual results may differ from those estimates, and such differences may be material to our condensed consolidated financial statements. There have been no material changes to the application of critical accounting policies and estimates disclosed in our ~~2020~~2021 Form 10-K.

~~Item 3. Quantitative and Qualitative Disclosures About Market Risk~~


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We have market risk exposure related to interest rates and foreign currency exchange rates. There have been no material changes in our primary risk exposures or management of market risks from those disclosed in our ~~2020~~2021 Form 10-K.

~~Item 4. Controls and Procedures~~


ITEM 4. CONTROLS AND PROCEDURES

~~Evaluation of Disclosure Controls and Procedures~~EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

We, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, performed an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded, as of the end of the period covered by this Form 10-Q, that such disclosure controls and procedures were effective.

~~Changes in Internal Control Over Financial Reporting~~CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

No change was made in our internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d -15(e), during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART ~~II. OTHER INFORMATION~~II

~~Item 1. Legal Proceedings~~


ITEM 1. LEGAL PROCEEDINGS

The information set forth in Note ~~11,~~10, Commitments and Contingencies - Legal Proceedings, of the Condensed Consolidated Financial Statements ofin this Form 10-Q is incorporated herein by reference.

~~Item 1A. Risk Factors~~


ITEM 1A. RISK FACTORS

As of the date of ~~the~~this filing, there have been no material changes to the risk factors as set forth in Part I, Item 1A., Risk Factors, in our ~~2020~~2021 Form 10-K.

2625

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~~Item 2. Unregistered Sales of Equity Securities and Use of Proceeds~~


ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

SHARE REPURCHASE PROGRAM

On August 17, 2017, the Board of Directors authorized the repurchase of an additional $500 million of Class A common shares under our share repurchase program, which was added to the $33.5 million remaining from the previous authorization. The

share repurchase program ~~is subject to the ABL Revolver and Term Loan restrictions and~~ may be suspended, modified or discontinued at any time, and we have no obligation to repurchase

any amount of our common shares under the program. ~~Any share repurchases~~Shares will be ~~completed~~repurchased in the open market at times and in amounts

considered appropriate based on price and market conditions.

The following table sets forth the Class A common shares repurchased during the three months ended July 30, 2022:


(in thousands, except per share amounts)	(a) Total Number of Shares Purchased(1)	(b) Average Price Paid Per Share(2)		(c) Total Number of Shares Purchased as Part of Publicly Announced Programs	(d) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Programs
May 1, 2022 to May 28, 2022	1,829	$	13.56	1,829	$	287,386
May 29, 2022 to July 2, 2022	1,558	$	13.92	1,543	$	265,894
July 3, 2022 to July 30, 2022	4,405	$	13.50	4,397	$	206,437
Total	7,792	$	13.62	7,769

(1) The total number of shares repurchased includes the shares repurchased as part of publicly announced programs and 22,605 shares withheld in connection with tax payments due upon vesting of employee restricted stock awards.

(2) The average price paid per share includes broker commissions paid.

DIVIDENDS

The payment of any future dividends is at the discretion of our Board of Directors and is based on our future earnings, cash flow, financial condition, capital requirements, changes in taxation laws, general economic condition and any other relevant factors. It is anticipated that dividends will be declared on a quarterly basis.

On August 25, 2022, the Board of Directors declared a quarterly cash dividend payment of $0.05 per share for both Class A and Class B common shares. The dividend will be paid on October 6, 2022 to shareholders of record at the close of business on September 22, 2022, and is expected to be recorded against retained earnings.

RESTRICTIONS

The 2022 ABL Revolver ~~and the Term Loan each contain~~contains customary covenants restricting our activities, including limitations on the ability to pay dividends or repurchase stock. WeThere are restricted from paying dividends or repurchasing stock until the third quarter of fiscal 2021 at the earliest, after which certain limitations apply. We currently do not anticipate paying dividends or repurchasing additional shares under our share repurchase program.specific exceptions to these covenants including, in some cases, upon satisfying specified payment conditions based on availability.

~~Item 3. Defaults Upon Senior Securities~~


ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

~~Item 4. Mine Safety Disclosures~~


ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

~~Item 5. Other Information~~


ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

~~Item 6. Exhibits~~

Incorporated by Reference

Exhibit Number

Exhibit Description

Form

File No.

~~Description~~Date of Filing

Exhibit Number

31.1*

Rule 13a-14(a)/15d-14(a) Certification - Principal Executive Officer.

31.2*

Rule 13a-14(a)/15d-14(a) Certification - Principal Financial Officer.

32.1**

Section 1350 Certification - Principal Executive Officer.

32.2**

Section 1350 Certification - Principal Financial Officer.

101*

The following materials from the Designer Brands Inc. Quarterly Report on Form 10-Q for the quarter ended July ~~31, 2021,~~30, 2022, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Statements of Operations; (ii) Condensed Consolidated Statements of Comprehensive ~~Income (Loss);~~Income; (iii) Condensed Consolidated Balance Sheets; (iv) Condensed Consolidated Statements of Shareholders’ Equity; (v) Condensed Consolidated Statements of Cash Flows; and (vi) Notes to Condensed the Consolidated Financial Statements.

104*

Cover Page Interactive Data File, formatted in iXBRL and contained in Exhibit 101.

* Filed herewith

** Furnished herewith

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

DESIGNER BRANDS INC.

Date:

August 31, ~~2021~~2022

By:

/s/ Jared Poff

Jared Poff

Executive Vice President and Chief Financial Officer

(Principal Financial Officer and duly authorized officer)


Note 1	Description of Business and Significant Accounting Policies	7
Note 2	Revenue	9
Note 3	Related Party Transactions	12
Note 4	Earnings Per Share	12
Note 5	Stock-Based Compensation	13
Note 6	Shareholders' Equity	13
Note 7	Receivables	14

Note 8	Accrued Expenses	14
Note 9	Debt	14
Note 10	Commitments and Contingencies	15
Note 11	Segment Reporting	16


PART I
Item 1	Financial Statements	1
	Condensed Consolidated Statements of Operations	1
	Condensed Consolidated Statements of Comprehensive Income	2
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Shareholders' Equity	4
	Condensed Consolidated Statements of Cash Flows	5
	Notes to the Condensed Consolidated Financial Statements	6
Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3	Quantitative and Qualitative Disclosures About Market Risk	25
Item 4	Controls and Procedures	25
PART II
Item 1	Legal Proceedings	25
Item 1A	Risk Factors	25
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	26
Item 3	Defaults Upon Senior Securities	26
Item 4	Mine Safety Disclosures	26
Item 5	Other Information	26
Item 6	Exhibits	27
	SIGNATURES	28


(in thousands)	Foreign Currency Translation		Available-for-Sale Securities		Total
Accumulated other comprehensive income (loss) - beginning of period	$	(2,668)	$	173	$	(2,495)
Other comprehensive income (loss) before reclassifications	(2,251)		195		(2,056)
Amounts reclassified to non-operating income, net	—		(368)		(368)
Other comprehensive loss	(2,251)		(173)		(2,424)
Accumulated other comprehensive loss - end of period	$	(4,919)	$	—	$	(4,919)


(in thousands)	Cost		Accumulated Amortization		Net
July 31, 2021
Definite-lived customer relationships	$	1,444	$	(1,444)	$	—
Indefinite-lived trademarks and tradenames	15,905		—		15,905
	$	17,349	$	(1,444)	$	15,905
January 30, 2021
Definite-lived customer relationships	$	2,909	$	(2,791)	$	118
Indefinite-lived trademarks and tradenames	15,517		—		15,517
	$	18,426	$	(2,791)	$	15,635
August 1, 2020
Definite-lived customer relationships	$	2,843	$	(2,507)	$	336
Indefinite-lived trademarks and tradenames	15,327		—		15,327
	$	18,170	$	(2,507)	$	15,663