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 ~~April 30,~~October 29, 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 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 sstock, ~~tock,~~ as of ~~May 27, 2022: 62,620,533~~November 23, 2022: 55,899,696 Class A common shares and 7,732,743 Class B common shares.

DESIGNER BRANDS INC.

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All references to "we," "us," "our," "Designer Brands," "Designer Brands Inc.," or the "Company" in this Quarterly Report on Form 10-Q for the ~~three months~~quarter ended ~~April 30,~~October 29, 2022 (this "Form 10-Q") mean Designer Brands Inc. and its subsidiaries.

We have included ~~our~~ 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.

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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 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. 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, and liquidity. The inclusion of these forward-looking 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 other factors 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 29, 2022 (the "2021 Form 10-K"), filed with the Securities and Exchange Commission (the "SEC") on March 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 that include, but are not limited to, the following:

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

•risks 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 mitigate the impact of inflation;

•uncertain general economic conditions, including inflation and supply chain pressures, domestic and global political and social conditions and the potential impact of geopolitical turmoil or conflict, and the related impacts to consumer discretionary spending;

•our ability to execute on our 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 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 third-party providers, or otherwise;

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

•risks related to cyber security threats and privacy or data security breaches or the potential loss or disruption of our 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 our international operations, including international trade, our reliance on foreign sources for merchandise, exposure to political, economic, operational, compliance and other risks, and fluctuations in foreign currency exchange rates;

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

•risks associated with climate change and 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.

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PART I


ITEM 1. FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


		Three months ended
(unaudited and in thousands, except per share amounts)						(unaudited and in thousands, except per share amounts)	Three months ended				Nine months ended
	(unaudited and in thousands, except per share amounts)	April 30, 2022		May 1, 2021			October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021
Net sales	Net sales	$	830,543	$	703,155	Net sales	$	865,020	$	853,467	$	2,554,882	$	2,373,957
Cost of sales	Cost of sales	(554,798)		(487,044)		Cost of sales	(579,201)		(539,850)		(1,697,648)		(1,559,548)
Gross profit	Gross profit	275,745		216,111		Gross profit	285,819		313,617		857,234		814,409
Operating expenses	Operating expenses	(223,426)		(200,814)		Operating expenses	(222,232)		(211,909)		(674,348)		(637,108)
Income from equity investment		1,945		1,708
Income from equity investments						Income from equity investments	2,290		2,600		6,670		6,598
Impairment charges	Impairment charges	(1,072)		—		Impairment charges	(1,349)		—		(4,237)		(1,174)
Operating profit	Operating profit	53,192		17,005		Operating profit	64,528		104,308		185,319		182,725
Interest expense, net	Interest expense, net	(2,952)		(8,814)		Interest expense, net	(4,826)		(7,706)		(10,530)		(24,592)
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)		—		Loss on extinguishment of debt and write-off of debt issuance costs	—		—		(12,862)		—
Non-operating income, net		6		806
Non-operating income (expenses), net						Non-operating income (expenses), net	(152)		172		(109)		734
Income before income taxes	Income before income taxes	37,384		8,997		Income before income taxes	59,550		96,774		161,818		158,867
Income tax benefit (provision)		(11,202)		8,029
Income tax provision						Income tax provision	(14,379)		(16,590)		(44,252)		(18,797)
Net income	Net income	$	26,182	$	17,026	Net income	$	45,171	$	80,184	$	117,566	$	140,070
Basic and diluted earnings per share:	Basic and diluted earnings per share:					Basic and diluted earnings per share:
Basic earnings per share	Basic earnings per share	$	0.36	$	0.23	Basic earnings per share	$	0.70	$	1.10	$	1.71	$	1.92
Diluted earnings per share	Diluted earnings per share	$	0.34	$	0.22	Diluted earnings per share	$	0.65	$	1.04	$	1.60	$	1.81
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	72,923		72,613		Basic shares	64,245		73,191		68,924		72,911
Diluted shares	Diluted shares	76,924		76,976		Diluted shares	69,140		77,135		73,287		77,216

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

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


		Three months ended				Three months ended				Nine months ended
(unaudited and in thousands)	(unaudited and in thousands)	April 30, 2022		May 1, 2021			(unaudited and in thousands)	October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021
Net income	Net income	$	26,182	$	17,026		Net income	$	45,171	$	80,184	$	117,566	$	140,070
Other comprehensive income (loss), net-	Other comprehensive income (loss), net-						Other comprehensive income (loss), net-
Foreign currency translation gain (loss)	Foreign currency translation gain (loss)	(81)		543			Foreign currency translation gain (loss)	(2,956)		302		(3,100)		547

Total comprehensive income	Total comprehensive income	$	26,101	$	17,569		Total comprehensive income	$	42,215	$	80,486	$	114,466	$	140,617

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

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CONDENSED CONSOLIDATED BALANCE SHEETS


(unaudited and in thousands)	(unaudited and in thousands)	April 30, 2022		January 29, 2022		May 1, 2021		(unaudited and in thousands)	October 29, 2022		January 29, 2022		October 30, 2021
ASSETS	ASSETS							ASSETS
Current Assets:	Current Assets:							Current Assets:
Cash and cash equivalents	Cash and cash equivalents	$	54,802	$	72,691	$	49,301	Cash and cash equivalents	$	62,507	$	72,691	$	83,069

Receivables, net	Receivables, net	222,297		199,826		213,447		Receivables, net	228,746		199,826		231,391
Inventories	Inventories	672,490		586,429		540,088		Inventories	681,843		586,429		602,101
Prepaid expenses and other current assets	Prepaid expenses and other current assets	49,836		55,270		60,461		Prepaid expenses and other current assets	53,950		55,270		53,756
Total current assets	Total current assets	999,425		914,216		863,297		Total current assets	1,027,046		914,216		970,317
Property and equipment, net	Property and equipment, net	250,123		256,786		284,823		Property and equipment, net	233,515		256,786		263,581
Operating lease assets	Operating lease assets	635,334		647,221		686,704		Operating lease assets	691,032		647,221		664,646
Goodwill	Goodwill	93,655		93,655		93,655		Goodwill	93,655		93,655		93,655
Intangible assets, net	Intangible assets, net	20,355		15,527		16,131		Intangible assets, net	19,273		15,527		16,005

Equity investment		55,118		55,578		57,012
Equity investments								Equity investments	64,246		55,578		56,623
Other assets	Other assets	33,734		31,651		30,843		Other assets	42,611		31,651		29,117
Total assets	Total assets	$	2,087,744	$	2,014,634	$	2,032,465	Total assets	$	2,171,378	$	2,014,634	$	2,093,944
LIABILITIES AND SHAREHOLDERS' EQUITY	LIABILITIES AND SHAREHOLDERS' EQUITY							LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:	Current Liabilities:							Current Liabilities:
Accounts payable	Accounts payable	$	369,147	$	340,877	$	341,819	Accounts payable	$	315,996	$	340,877	$	401,280
Accrued expenses	Accrued expenses	208,282		215,812		195,237		Accrued expenses	213,905		215,812		211,017
Current maturities of long-term debt	Current maturities of long-term debt	—		—		62,500		Current maturities of long-term debt	—		—		62,500
Current operating lease liabilities	Current operating lease liabilities	179,870		202,228		200,666		Current operating lease liabilities	187,619		202,228		206,065
Total current liabilities	Total current liabilities	757,299		758,917		800,222		Total current liabilities	717,520		758,917		880,862
Long-term debt	Long-term debt	306,861		225,536		274,887		Long-term debt	415,467		225,536		165,422
Non-current operating lease liabilities	Non-current operating lease liabilities	579,839		593,429		663,018		Non-current operating lease liabilities	628,820		593,429		622,273
Other non-current liabilities	Other non-current liabilities	26,952		24,356		31,526		Other non-current liabilities	26,059		24,356		31,726
Total liabilities	Total liabilities	1,670,951		1,602,238		1,769,653		Total liabilities	1,787,866		1,602,238		1,700,283
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	1,006,384		1,005,382		992,379		Common shares paid-in capital, no par value	1,012,794		1,005,382		1,000,180
Treasury shares, at cost	Treasury shares, at cost	(537,771)		(515,065)		(515,065)		Treasury shares, at cost	(662,614)		(515,065)		(515,065)
Retained deficit		(48,122)		(74,304)		(211,759)
Retained earnings (deficit)								Retained earnings (deficit)	40,049		(74,304)		(88,715)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(3,698)		(3,617)		(2,743)		Accumulated other comprehensive loss	(6,717)		(3,617)		(2,739)
Total shareholders' equity	Total shareholders' equity	416,793		412,396		262,812		Total shareholders' equity	383,512		412,396		393,661
Total liabilities and shareholders' equity	Total liabilities and shareholders' equity	$	2,087,744	$	2,014,634	$	2,032,465	Total liabilities and shareholders' equity	$	2,171,378	$	2,014,634	$	2,093,944

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

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CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY


		Number of shares			Amounts											Number of shares			Amounts
(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		(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 Earnings (Deficit)		Accumulated Other Comprehensive Loss		Total
Three months ended April 30, 2022
Three months ended October 29, 2022															Three months ended October 29, 2022
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
Net income															Net income	—	—	—	—		—		45,171		—		45,171
Stock-based compensation activity															Stock-based compensation activity	373	—	—	2,613		—		—		—		2,613
Repurchase of Class A common shares															Repurchase of Class A common shares	(1,288)	—	1,288	—		(19,051)		—		—		(19,051)
Dividends ($0.05 per share)															Dividends ($0.05 per share)	—	—	—	—		—		(3,213)		—		(3,213)
Foreign currency translation adjustment															Foreign currency translation adjustment	—	—	—	—		—		—		(2,956)		(2,956)
Balance, October 29, 2022															Balance, October 29, 2022	55,888	7,733	32,882	$	1,012,794	$	(662,614)	$	40,049	$	(6,717)	$	383,512
Three months ended October 30, 2021															Three months ended October 30, 2021
Balance, July 31, 2021															Balance, July 31, 2021	65,236	7,733	22,169	$	998,117	$	(515,065)	$	(168,899)	$	(3,041)	$	311,112
Net income															Net income	—	—	—	—		—		80,184		—		80,184
Stock-based compensation activity															Stock-based compensation activity	375	—	—	2,063		—		—		—		2,063

Foreign currency translation adjustment															Foreign currency translation adjustment	—	—	—	—		—		—		302		302
Balance, October 30, 2021															Balance, October 30, 2021	65,611	7,733	22,169	$	1,000,180	$	(515,065)	$	(88,715)	$	(2,739)	$	393,661
Nine months ended October 29, 2022															Nine months ended October 29, 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	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	—	—	—	—		—		26,182		—		26,182		Net income	—	—	—	—		—		117,566		—		117,566
Stock-based compensation activity	Stock-based compensation activity	482	—	—	4,594		—		—		—		4,594		Stock-based compensation activity	977	—	—	14,509		—		—		—		14,509
Repurchase of Class A common shares	Repurchase of Class A common shares	(1,656)	—	1,656	—		(22,706)		—		—		(22,706)		Repurchase of Class A common shares	(10,713)	—	10,713	—		(147,549)		—		—		(147,549)
Dividends (0.05 per share)		—	—	—	(3,592)		—		—		—		(3,592)
Dividends ($0.15 per share)															Dividends ($0.15 per share)	—	—	—	(7,097)		—		(3,213)		—		(10,310)
Foreign currency translation adjustment	Foreign currency translation adjustment	—	—	—	—		—		—		(81)		(81)		Foreign currency translation adjustment	—	—	—	—		—		—		(3,100)		(3,100)
Balance, April 30, 2022		64,450	7,733	23,825	$	1,006,384	$	(537,771)	$	(48,122)	$	(3,698)	$	416,793
Three months ended May 1, 2021
Balance, October 29, 2022															Balance, October 29, 2022	55,888	7,733	32,882	$	1,012,794	$	(662,614)	$	40,049	$	(6,717)	$	383,512
Nine months ended October 30, 2021															Nine months ended October 30, 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	Balance, January 30, 2021	64,666	7,733	22,169	$	990,153	$	(515,065)	$	(228,785)	$	(3,286)	$	243,017
Net Income		—	—	—	—		—		17,026		—		17,026
Net income															Net income	—	—	—	—		—		140,070		—		140,070
Stock-based compensation activity	Stock-based compensation activity	468	—	—	2,226		—		—		—		2,226		Stock-based compensation activity	945	—	—	10,027		—		—		—		10,027

Foreign currency translation adjustment	Foreign currency translation adjustment	—	—	—	—		—		—		543		543		Foreign currency translation adjustment	—	—	—	—		—		—		547		547
Balance, May 1, 2021		65,134	7,733	22,169	$	992,379	$	(515,065)	$	(211,759)	$	(2,743)	$	262,812

Balance, October 30, 2021															Balance, October 30, 2021	65,611	7,733	22,169	$	1,000,180	$	(515,065)	$	(88,715)	$	(2,739)	$	393,661

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

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


		Three months ended					Nine months ended
(unaudited and in thousands)	(unaudited and in thousands)	April 30, 2022		May 1, 2021		(unaudited and in thousands)	October 29, 2022		October 30, 2021
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	26,182	$	17,026	Net income	$	117,566	$	140,070
Adjustments to reconcile net income to net cash used in operating activities:
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	21,384		20,575		Depreciation and amortization	64,754		59,178
Stock-based compensation expense	Stock-based compensation expense	8,594		7,457		Stock-based compensation expense	22,327		18,646
Deferred income taxes	Deferred income taxes	(87)		320		Deferred income taxes	(260)		822
Income from equity investment		(1,945)		(1,708)
Distributions received from equity investment		2,405		3,294
Income from equity investments						Income from equity investments	(6,670)		(6,598)
Distributions received from equity investments						Distributions received from equity investments	6,230		8,573
Impairment charges	Impairment charges	1,072		—		Impairment charges	4,237		1,174

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		—		Loss on extinguishment of debt and write-off of debt issuance costs	12,862		—
Other	Other	3,485		(341)		Other	4,940		1,598
Change in operating assets and liabilities:	Change in operating assets and liabilities:					Change in operating assets and liabilities:
Accounts receivable	Accounts receivable	(21,941)		(8,160)		Accounts receivable	(25,043)		(18,121)
Income tax receivable	Income tax receivable	(548)		(9,066)		Income tax receivable	(2,979)		(17,110)
Inventories	Inventories	(86,240)		(65,215)		Inventories	(98,789)		(127,513)
Prepaid expenses and other current assets	Prepaid expenses and other current assets	4,784		(8,524)		Prepaid expenses and other current assets	(9,919)		(988)
Accounts payable	Accounts payable	25,713		94,469		Accounts payable	(24,389)		153,511
Accrued expenses	Accrued expenses	(11,406)		(5,439)		Accrued expenses	(1,221)		10,204
Operating lease assets and liabilities, net	Operating lease assets and liabilities, net	(24,986)		(46,044)		Operating lease assets and liabilities, net	(25,706)		(59,152)
Net cash used in operating activities		(40,672)		(1,356)
Net cash provided by operating activities						Net cash provided by operating activities	37,940		164,294
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	(12,248)		(5,641)		Cash paid for property and equipment	(41,928)		(22,061)

Equity investment in Le Tigre						Equity investment in Le Tigre	(8,228)		—
Other	Other	(4,853)		—		Other	(5,853)		—
Net cash used in investing activities	Net cash used in investing activities	(17,101)		(5,641)		Net cash used in investing activities	(56,009)		(22,061)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:

Borrowing on revolving lines of credit	Borrowing on revolving lines of credit	757,640		250,513		Borrowing on revolving lines of credit	1,490,199		349,653
Payments on revolving lines of credit	Payments on revolving lines of credit	(450,779)		(245,670)		Payments on revolving lines of credit	(1,074,733)		(449,653)

Payments for borrowings and prepayment premium under Term Loan	Payments for borrowings and prepayment premium under Term Loan	(238,196)		(3,125)		Payments for borrowings and prepayment premium under Term Loan	(238,196)		(9,376)
Payments of debt issuance costs	Payments of debt issuance costs	(2,316)		—		Payments of debt issuance costs	(2,316)		—
Cash paid for treasury shares	Cash paid for treasury shares	(22,706)		—		Cash paid for treasury shares	(147,549)		—

Dividends paid						Dividends paid	(10,310)		—

Other	Other	(3,875)		(5,307)		Other	(7,849)		(8,487)
Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	39,768		(3,589)		Net cash provided by (used in) financing activities	9,246		(117,863)
Effect of exchange rate changes on cash balances	Effect of exchange rate changes on cash balances	115		306		Effect of exchange rate changes on cash balances	(1,361)		664
Net decrease in cash, cash equivalents and restricted cash		(17,890)		(10,280)
Net increase (decrease) in cash, cash equivalents and restricted cash						Net increase (decrease) in cash, cash equivalents and restricted cash	(10,184)		25,034
Cash, cash equivalents and restricted cash, beginning of period	Cash, cash equivalents and restricted cash, beginning of period	74,459		59,581		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	$	56,569	$	49,301	Cash, cash equivalents and restricted cash, end of period	$	64,275	$	84,615
Supplemental disclosures of cash flow information:	Supplemental disclosures of cash flow information:					Supplemental disclosures of cash flow information:
Cash paid (received) for income taxes		$	62	$	(3,926)
Cash paid for income taxes						Cash paid for income taxes	$	43,027	$	13,228
Cash paid for interest on debt	Cash paid for interest on debt	$	4,097	$	7,042	Cash paid for interest on debt	$	10,355	$	19,339
Cash paid for operating lease liabilities	Cash paid for operating lease liabilities	$	73,621	$	95,079	Cash paid for operating lease liabilities	$	169,328	$	209,045
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	$	7,069	$	2,875	Property and equipment purchases not yet paid	$	6,011	$	3,250
Operating lease liabilities arising from lease asset additions	Operating lease liabilities arising from lease asset additions	$	4,143	$	7,588	Operating lease liabilities arising from lease asset additions	$	12,014	$	13,379
Net increase to operating lease assets and lease liabilities for modifications	Net increase to operating lease assets and lease liabilities for modifications	$	27,621	$	16,760	Net increase to operating lease assets and lease liabilities for modifications	$	164,453	$	72,698

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

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

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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 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 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 holds several intellectual property rights, including, among others, Vince Camuto and Louise et Cie, 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 managed by ABG-Camuto, subject to guaranteed minimums. Camuto Group also holds footwear and certain handbag licensing rights of Jessica Simpson, Lucky Brand and, through a joint venture, JLO Jennifer Lopez.

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 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 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 2021 Form 10-K.

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. 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.

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Severance-During the ~~three~~nine months ended ~~April 30,~~October 29, 2022 and ~~May 1,~~October 30, 2021, we incurred severance costs of ~~$0.7~~$1.2 million and ~~$1.4~~$2.6 million, respectively. These costs are included in operating expenses in the condensed consolidated statements of operations. As of ~~April 30,~~October 29, 2022, January 29, 2022, and ~~May 1,~~October 30, 2021, we had accrued severance of ~~$1.1~~$0.7 million, $1.9 million, and ~~$5.1~~$2.5 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 in the U.S. as of October 29, 2022, which was significant objective negative evidence in considering whether U.S. 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 October 29, 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.

On August 16, 2022, the U.S. enacted the Inflation Reduction Act of 2022, which, among other things, implements a 15% minimum tax on book income of certain large corporations and a 1% excise tax on net stock repurchases. Based on our current analysis of the provisions, we do not believe this legislation will have a material impact on our consolidated financial statements.

For the ~~three~~nine months ended ~~April 30,~~October 29, 2022 and ~~May 1,~~October 30, 2021, our effective tax rate was ~~30.0%~~27.3% and ~~negative 89.2%~~11.8%, respectively. The rate for ~~three~~the nine months ended ~~April 30,~~October 29, 2022 was impacted by permanent tax adjustments, primarily non-deductible compensation. The ~~negative rate~~rate for the ~~three~~nine months ended ~~May 1,~~October 30, 2021 was the result of maintaining a full valuation allowance on deferred tax assets ~~along with~~while also recording 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 represents cash that is restricted as to withdrawal or usage and consists of a mandatory cash deposit maintained for certain insurance 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)	April 30, 2022		January 29, 2022		May 1, 2021		(in thousands)	October 29, 2022		January 29, 2022		October 30, 2021
Cash and cash equivalents	Cash and cash equivalents	$	54,802	$	72,691	$	49,301	Cash and cash equivalents	$	62,507	$	72,691	$	83,069
Restricted cash, included in prepaid expenses and other current assets	Restricted cash, included in prepaid expenses and other current assets	1,767		1,768		—		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	$	56,569	$	74,459	$	49,301	Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statements of cash flows	$	64,275	$	74,459	$	84,615

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 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 ~~three months ended April 30,~~first quarter of 2022, we acquired the rights to the shoes.com tradename for $4.9 million, which was recorded as a ~~definite-lived~~definite lived tradename intangible asset with a useful life of 15 years.

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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 borrowings under our revolving lines of credit approximated fair value based on its term and variable interest rate.

Impairment of Long-Lived Assets- During the three months ended ~~April~~October 29, 2022, we recorded impairment charges of $1.3 million with $0.4 million in the U.S. Retail segment related to an early store closure and $0.9 million in the Brand Portfolio segment resulting from the sublease of an abandoned leased space. During nine months ended October 29, 2022, we recorded impairment charges of $4.2 million, primarily in the Brand Portfolio segment resulting from subleases of abandoned leased spaces. During the nine months ended October 30, ~~2022,~~2021, we recorded an impairment charge of ~~$1.1~~$1.2 million in the ~~Brand Portfolio~~U.S. Retail segment for ~~the sublease of an~~ abandoned ~~leased space.~~equipment we replaced.

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2. REVENUE

DISAGGREGATION OF NET SALES

Net Sales by Brand Categories- The following table presents net sales disaggregated by brand categories for each segment:


(in thousands)	(in thousands)	U.S. Retail		Canada Retail		Brand Portfolio		Eliminations		Consolidated		(in thousands)	U.S. Retail		Canada Retail		Brand Portfolio		Eliminations		Consolidated
Three months ended April 30, 2022
Three months ended October 29, 2022												Three months ended October 29, 2022
Owned Brands:(1)	Owned Brands:(1)											Owned Brands:(1)
Direct-to-consumer	Direct-to-consumer	$	139,155	$	—	$	6,527	$	—	$	145,682	Direct-to-consumer	$	153,311	$	—	$	9,810	$	—	$	163,121
External customer wholesale and commission income	External customer wholesale and commission income	—		—		64,956		—		64,956		External customer wholesale and commission income	—		—		66,530		—		66,530
Intersegment wholesale and commission income	Intersegment wholesale and commission income	—		—		25,973		(25,973)		—		Intersegment wholesale and commission income	—		—		31,118		(31,118)		—
Total Owned Brands	Total Owned Brands	139,155		—		97,456		(25,973)		210,638		Total Owned Brands	153,311		—		107,458		(31,118)		229,651
National Brands		563,590		—		—		—		563,590
National brands												National brands	553,080		—		—		—		553,080
Canada Retail(2)	Canada Retail(2)	—		56,315		—		—		56,315		Canada Retail(2)	—		82,289		—		—		82,289
Total Net Sales		$	702,745	$	56,315	$	97,456	$	(25,973)	$	830,543
Three months ended May 1, 2021
Total net sales												Total net sales	$	706,391	$	82,289	$	107,458	$	(31,118)	$	865,020
Three months ended October 30, 2021												Three months ended October 30, 2021
Owned Brands:(1)	Owned Brands:(1)											Owned Brands:(1)
Direct-to-consumer	Direct-to-consumer	$	83,266	$	—	$	5,453	$	—	$	88,719	Direct-to-consumer	$	114,702	$	—	$	7,726	$	—	$	122,428
External customer wholesale and commission income	External customer wholesale and commission income	—		—		36,440		—		36,440		External customer wholesale and commission income	—		—		61,341		—		61,341
Intersegment wholesale and commission income	Intersegment wholesale and commission income	—		—		15,534		(15,534)		—		Intersegment wholesale and commission income	—		—		34,852		(34,852)		—
Total Owned Brands	Total Owned Brands	83,266		—		57,427		(15,534)		125,159		Total Owned Brands	114,702		—		103,919		(34,852)		183,769
National Brands		537,392		—		—		—		537,392
National brands												National brands	594,906		—		—		—		594,906
Canada Retail(2)	Canada Retail(2)	—		40,604		—		—		40,604		Canada Retail(2)	—		74,792		—		—		74,792
Total Net Sales		$	620,658	$	40,604	$	57,427	$	(15,534)	$	703,155
Total net sales												Total net sales	$	709,608	$	74,792	$	103,919	$	(34,852)	$	853,467

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(in thousands)	U.S. Retail		Canada Retail		Brand Portfolio		Eliminations		Consolidated
Nine months ended October 29, 2022
Owned Brands:(1)
Direct-to-consumer	$	440,343	$	—	$	24,130	$	—	$	464,473
External customer wholesale and commission income	—		—		170,665		—		170,665
Intersegment wholesale and commission income	—		—		76,470		(76,470)		—
Total Owned Brands	440,343		—		271,265		(76,470)		635,138
National brands	1,702,856		—		—		—		1,702,856
Canada Retail(2)	—		216,888		—		—		216,888
Total net sales	$	2,143,199	$	216,888	$	271,265	$	(76,470)	$	2,554,882
Nine months ended October 30, 2021
Owned Brands:(1)
Direct-to-consumer	$	300,120	$	—	$	18,616	$	—	$	318,736
External customer wholesale and commission income	—		—		129,001		—		129,001
Intersegment wholesale and commission income	—		—		64,258		(64,258)		—
Total Owned Brands	300,120		—		211,875		(64,258)		447,737
National brands	1,753,239		—		—		—		1,753,239
Canada Retail(2)	—		172,981		—		—		172,981
Total net sales	$	2,053,359	$	172,981	$	211,875	$	(64,258)	$	2,373,957

(1) Owned Brands ~~include~~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.

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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				Three months ended				Nine months ended
(in thousands)	(in thousands)	April 30, 2022		May 1, 2021			(in thousands)	October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021
Net sales:	Net sales:						Net sales:
U.S. Retail segment:	U.S. Retail segment:						U.S. Retail segment:
Women's footwear	Women's footwear	$	469,131	$	405,300		Women's footwear	$	450,130	$	448,879	$	1,394,340	$	1,321,697
Men's footwear	Men's footwear	145,807		131,947			Men's footwear	151,106		154,523		461,035		454,688
Kids' footwear	Kids' footwear	52,918		54,732			Kids' footwear	65,638		69,159		171,742		178,003
Accessories and other	Accessories and other	34,889		28,679			Accessories and other	39,517		37,047		116,082		98,971
		702,745		620,658				706,391		709,608		2,143,199		2,053,359
Canada Retail segment:	Canada Retail segment:						Canada Retail segment:
Women's footwear	Women's footwear	30,004		20,431			Women's footwear	41,381		34,495		115,187		85,156
Men's footwear	Men's footwear	14,428		9,528			Men's footwear	20,334		17,963		56,224		43,296
Kids' footwear	Kids' footwear	9,817		9,513			Kids' footwear	17,291		19,607		36,700		38,674
Accessories and other	Accessories and other	2,066		1,132			Accessories and other	3,283		2,727		8,777		5,855
		56,315		40,604				82,289		74,792		216,888		172,981
Brand Portfolio segment:	Brand Portfolio segment:						Brand Portfolio segment:
Wholesale	Wholesale	87,775		48,643			Wholesale	95,837		90,558		237,748		181,916
First Cost commission income	First Cost commission income	3,154		3,331			First Cost commission income	1,811		5,635		9,387		11,343
Direct-to-consumer	Direct-to-consumer	6,527		5,453			Direct-to-consumer	9,810		7,726		24,130		18,616
		97,456		57,427				107,458		103,919		271,265		211,875

Total segment net sales	Total segment net sales	856,516		718,689			Total segment net sales	896,138		888,319		2,631,352		2,438,215
Elimination of intersegment sales	Elimination of intersegment sales	(25,973)		(15,534)			Elimination of intersegment sales	(31,118)		(34,852)		(76,470)		(64,258)
Total net sales	Total net sales	$	830,543	$	703,155		Total net sales	$	865,020	$	853,467	$	2,554,882	$	2,373,957

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				Three months ended				Nine months ended
(in thousands)	(in thousands)	April 30, 2022		May 1, 2021			(in thousands)	October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021
Gift cards:	Gift cards:						Gift cards:
Beginning of period	Beginning of period	$	36,783	$	34,442		Beginning of period	$	30,118	$	28,691	$	36,783	$	34,442
Gift cards redeemed and breakage recognized to net sales	Gift cards redeemed and breakage recognized to net sales	(18,260)		(17,170)			Gift cards redeemed and breakage recognized to net sales	(14,341)		(14,483)		(50,896)		(50,863)
Gift cards issued	Gift cards issued	14,321		13,537			Gift cards issued	12,312		12,966		42,202		43,595
End of period	End of period	$	32,844	$	30,809		End of period	$	28,089	$	27,174	$	28,089	$	27,174
Loyalty programs:	Loyalty programs:						Loyalty programs:
Beginning of period	Beginning of period	$	15,736	$	11,379		Beginning of period	$	16,788	$	15,255	$	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	(7,881)		(4,896)			Loyalty certificates redeemed and expired and other adjustments recognized to net sales	(7,974)		(9,025)		(24,034)		(19,929)
Deferred revenue for loyalty points issued	Deferred revenue for loyalty points issued	8,388		6,472			Deferred revenue for loyalty points issued	8,795		10,365		25,907		25,145
End of period	End of period	$	16,243	$	12,955		End of period	$	17,609	$	16,595	$	17,609	$	16,595

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3. RELATED PARTY TRANSACTIONS

Schottenstein Affiliates

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 ~~(the "Schottenstein~~("Schottenstein Affiliates"). As of ~~April 30,~~October 29, 2022, the Schottenstein Affiliates beneficially owned approximately ~~20%~~23% of the Company's outstanding common shares, representing approximately ~~54%~~58% of the combined voting power of the Company, consisting of, in the aggregate, 6.7 million Class A common shares and 7.7 million Class B common shares. The following summarizes the related party transactions with the Schottenstein Affiliates for the relevant periods:

Leases- We lease ~~our~~certain store and office locations that are owned by Schottenstein Affiliates. We also leased a fulfillment center ~~and certain store locations owned by the~~from a Schottenstein ~~Affiliates.~~Affiliate through September 2022 that was not renewed. During the three months ended ~~April 30,~~October 29, 2022 and ~~May 1,~~October 30, 2021, we recorded rent expense from leases with Schottenstein Affiliates of ~~$2.5~~$2.3 million and $2.7 million, respectively. During the nine months ended October 29, 2022 and October 30, 2021, we recorded rent expense from leases with Schottenstein Affiliates of $7.3 million and $8.1 million, respectively. As of ~~April 30,~~October 29, 2022, January 29, 2022, and ~~May 1,~~October 30, 2021, we had related party current operating lease liabilities of ~~$5.7~~$5.4 million, $6.3 million, and ~~$6.8~~$7.1 million, respectively, and non-current operating lease liabilities of ~~$10.6~~$11.5 million, $18.3 million, and ~~$22.9~~$19.3 million,, respectively.

Other Purchases and Services- ~~During~~For both the three months ended ~~April 30,~~October 29, 2022 and ~~May 1,~~October 30, 2021, we had other purchases and services we incurred from the Schottenstein Affiliates of ~~$1.1 million~~$1.2 million. For both the nine months ended October 29, 2022 and ~~$1.4 million, respectively.~~October 30, 2021, we had other purchases and services we incurred from the Schottenstein Affiliates of $3.7 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 managed by ABG-Camuto, subject to guaranteed minimums. For ~~both~~ the three months ended ~~April 30,~~October 29, 2022 and ~~May 1,~~October 30, 2021, we recorded royalty expense for amounts paid to ABG-Camuto of ~~$4.6 million.~~ $4.6 million and $4.4 million, respectively. For the nine months ended October 29, 2022 and October 30, 2021, we recorded royalty expense for amounts paid to ABG-Camuto of $13.7 million and $13.6 million, respectively. Amounts due to ABG-Camuto were immaterial for all periods presented.

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 nine months ended October 29, 2022 was immaterial.

4. EARNINGS PER SHARE

Basic earnings per share is based on net income 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.

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


		Three months ended		Three months ended			Nine months ended
(in thousands)	(in thousands)	April 30, 2022	May 1, 2021		(in thousands)	October 29, 2022	October 30, 2021	October 29, 2022	October 30, 2021
Weighted average basic shares outstanding	Weighted average basic shares outstanding	72,923	72,613		Weighted average basic shares outstanding	64,245	73,191	68,924	72,911
Dilutive effect of stock-based compensation awards	Dilutive effect of stock-based compensation awards	4,001	4,363		Dilutive effect of stock-based compensation awards	4,895	3,944	4,363	4,305
Weighted average diluted shares outstanding	Weighted average diluted shares outstanding	76,924	76,976		Weighted average diluted shares outstanding	69,140	77,135	73,287	77,216

For the three months ended ~~April 30,~~October 29, 2022 and ~~May 1,~~October 30, 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 ~~3.0~~2.7 million and 3.6 million, respectively. For the nine months ended October 29, 2022 and October 30, 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 2.8 million and ~~3.6~~3.0 million, respectively.

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5. STOCK-BASED COMPENSATION

Stock-based compensation expense consisted of the following:


		Three months ended				Three months ended				Nine months ended
(in thousands)	(in thousands)	April 30, 2022		May 1, 2021			(in thousands)	October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021
Stock options	Stock options	$	101	$	253		Stock options	$	—	$	130	$	101	$	515
Restricted and director stock units	Restricted and director stock units	8,493		7,204			Restricted and director stock units	6,364		5,151		22,226		18,131
		$	8,594	$	7,457			$	6,364	$	5,281	$	22,327	$	18,646

The following table summarizes the stock-based compensation award share activity for RSUs for the ~~three~~nine months ended ~~April 30,~~October 29, 2022:


(in thousands)	(in thousands)	Shares of Time-Based RSUs	Shares of Performance-Based RSUs	(in thousands)	Shares of Time-Based RSUs	Shares of Performance-Based RSUs
Outstanding - beginning of period	Outstanding - beginning of period	6,058	744	Outstanding - beginning of period	6,058	744
Granted	Granted	1,344	533	Granted	1,965	617
Vested	Vested	(575)	(174)	Vested	(1,235)	(174)
Forfeited	Forfeited	(74)	—	Forfeited	(232)	—
Outstanding - end of period	Outstanding - end of period	6,753	1,103	Outstanding - end of period	6,556	1,187

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.

The following table provides additional information for our common shares:


(in thousands)	(in thousands)	April 30, 2022		January 29, 2022		May 1, 2021		(in thousands)	October 29, 2022		January 29, 2022		October 30, 2021
		Class A	Class B	Class A	Class B	Class A	Class B		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	88,275	7,733	87,793	7,733	87,303	7,733	Issued shares	88,770	7,733	87,793	7,733	87,780	7,733
Outstanding shares	Outstanding shares	64,450	7,733	65,624	7,733	65,134	7,733	Outstanding shares	55,888	7,733	65,624	7,733	65,611	7,733
Treasury shares	Treasury shares	23,825	—	22,169	—	22,169	—	Treasury shares	32,882	—	22,169	—	22,169	—

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

Dividends- On April 4, 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 was paid on May 6, 2022 to shareholders of record at the close of business on April 22, 2022. A~~s of April 30, 2022, t~~he dividend was accrued and recorded against common shares paid in capital on the condensed consolidated balance sheets and as shown on the condensed consolidated statements of shareholders' equity due to the Company being in a retained deficit position, as required under the Ohio General Corporation Law.

~~On May 19,~~November 17, 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 ~~July 6,~~December 28, 2022 to shareholders of record at the close of business on ~~June 22, 2022. The dividend~~December 13, 2022, and is expected to be recorded against ~~common shares paid in capital due to the Company being in a~~ retained ~~deficit position, as required under the Ohio General Corporation Law.~~

~~Table of Contents~~earnings.

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 ~~three~~nine months ended ~~April 30,~~October 29, 2022, we repurchased ~~1.7~~10.7 million Class A common shares at an aggregate cost of ~~$22.7~~$147.5 million, with ~~$312.2~~$187.4 million of Class A common shares that remain authorized under the program asas of ~~April 30, 2022. During the three months ended May 1, 2021, we did not repurchase any Class A common shares.~~October 29, 2022. The share repurchase program may be suspended, modified or discontinued at any time, and we have no obligation to repurchase any amount of ~~our~~our common shares under the program. Shares will be repurchased in the open market at times and in amounts considered appropriate based on price and market conditions.

7. RECEIVABLES

Receivables, net, consisted of the following:


(in thousands)	(in thousands)	April 30, 2022		January 29, 2022		May 1, 2021		(in thousands)	October 29, 2022		January 29, 2022		October 30, 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	$	50,591	$	27,827	$	38,572	Serviced by third-party provider with guaranteed payment	$	53,304	$	27,827	$	51,574
Serviced by third-party provider without guaranteed payment	Serviced by third-party provider without guaranteed payment	232		82		323		Serviced by third-party provider without guaranteed payment	270		82		960
Serviced in-house	Serviced in-house	3,246		2,783		3,558		Serviced in-house	2,302		2,783		3,113
Income tax receivable	Income tax receivable	162,788		162,240		158,890		Income tax receivable	165,218		162,240		166,934
Other receivables	Other receivables	6,573		8,026		13,305		Other receivables	8,729		8,026		10,043
Total receivables	Total receivables	223,430		200,958		214,648		Total receivables	229,823		200,958		232,624
Allowance for doubtful accounts	Allowance for doubtful accounts	(1,133)		(1,132)		(1,201)		Allowance for doubtful accounts	(1,077)		(1,132)		(1,233)
		$	222,297	$	199,826	$	213,447		$	228,746	$	199,826	$	231,391

In November 2022, we received $120.3 million of our income tax receivable from the Internal Revenue Service as a result of the Coronavirus Aid, Relief, and Economic Security Act. We anticipate receiving the remaining income tax receivable within the next twelve months.

8. ACCRUED EXPENSES

Accrued expenses consisted of the following:

(in thousands) April 30, 2022 January 29, 2022 May 1, 2021
Gift cards $ 32,844 $ 36,783 $ 30,809
Accrued compensation and related expenses 26,693 41,603 29,945
Accrued taxes 32,526 28,327 32,093
Loyalty programs deferred revenue 16,243 15,736 12,955
Sales returns, customer allowances and discounts 23,030 20,671 25,698
Other 76,946 72,692 63,737
$ 208,282 $ 215,812 $ 195,237

~~9. DEBT~~

~~Debt consisted of the following:~~

(in thousands) April 30, 2022 January 29, 2022 May 1, 2021
2020 ABL Revolver $ — $ — $ 104,843
2022 ABL Revolver 306,861 — —
Term Loan — 231,250 240,625
Total debt 306,861 231,250 345,468
Less unamortized Term Loan debt issuance costs — (5,714) (8,081)
Less current maturities of long-term debt — — (62,500)
Long-term debt $ 306,861 $ 225,536 $ 274,887


(in thousands)	October 29, 2022		January 29, 2022		October 30, 2021
Gift cards	$	28,089	$	36,783	$	27,174
Accrued compensation and related expenses	38,815		41,603		29,874
Accrued taxes	30,689		28,327		43,677
Loyalty programs deferred revenue	17,609		15,736		16,595
Sales returns, customer allowances and discounts	21,643		20,671		22,608
Other	77,060		72,692		71,089
	$	213,905	$	215,812	$	211,017

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9. DEBT

~~2022~~

Debt consisted of the following:


(in thousands)	October 29, 2022		January 29, 2022		October 30, 2021
ABL Revolver	$	415,467	$	—	$	—
Term Loan	—		231,250		234,375
Total debt	415,467		231,250		234,375
Less unamortized Term Loan debt issuance costs	—		(5,714)		(6,453)
Less current maturities of long-term debt	—		—		(62,500)
Long-term debt	$	415,467	$	225,536	$	165,422

ABL Revolver- On March 30, 2022, we replaced our previous senior secured asset-based revolving credit facility ~~("2020 ABL Revolver")~~ with our current senior secured asset-based revolving credit facility ("~~2022~~ ABL Revolver"), which provides a revolving line of credit of up to $550.0 million, including a Canadian sub-limit of up to $55.0 million, a $75.0 million sub-limit for the issuance of letters of credit, a $55.0 million sub-limit for swing loan advances for U.S. borrowings, and a $5.5 million sub-limit for swing loan advances for Canadian borrowings. Our ~~2022~~ ABL Revolver matures in March 2027 and is secured by a first priority lien on substantially all of our personal property assets, including credit card receivables and inventory. The ~~2022~~ ABL Revolver may be used to provide funds for working capital, capital expenditures, share repurchases, other expenditures, and permitted acquisitions as defined by the 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 ~~April 30,~~October 29, 2022, the ~~2022~~ ABL Revolver had a borrowing base of $550.0 million, with ~~$306.9~~$415.5 million in outstanding borrowings and ~~$4.9~~$3.6 million in letters of credit issued, resulting in ~~$238.2~~$130.9 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 Fed Funds Rate (as defined and subject to a floor of 0%) plus 0.5%, and (iii) the one-month Adjusted Term SOFR (as defined) plus 1.0%; or (B) a one-month, three-month or six-month Adjusted Term SOFR per annum (subject to a floor of 0%), plus, in each instance, an applicable rate to be determined based on average availability, with an interest rate of ~~2.4%~~5.3% as of ~~April 30,~~October 29, 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.

Debt Covenants- The ~~2022~~ ABL Revolver requires us to maintain a fixed charge coverage ratio covenant of not less than 1:1 when availability is less than the greater of $41.3 million and 10.0% of the maximum borrowing amount. The ~~2022~~ ABL Revolver 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 based on availability. The ~~2022~~ ABL Revolver contains customary events of default, including failure to comply with 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, our obligations under the ~~obligations~~ABL Revolver may be accelerated, outstanding letters of credit may be required to be cash collateralized, and remedies may be exercised against the collateral. As of ~~April 30,~~October 29, 2022, we were in compliance with all financial ~~covenants.~~covenants contained in the ABL Revolver.

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.

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.

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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 ~~April 30,~~October 29, 2022, the total future minimum lease payment requirements under these guarantees were ~~approxim~~approxima~~ately $12.9~~tely $11.2 million.

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11. SEGMENT REPORTING

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


(in thousands)	(in thousands)	U.S. Retail		Canada Retail		Brand Portfolio		Eliminations		Consolidated		(in thousands)	U.S. Retail		Canada Retail		Brand Portfolio		Eliminations		Consolidated
Three months ended April 30, 2022
Three months ended October 29, 2022												Three months ended October 29, 2022
Net sales:												Net sales:
External customer sales												External customer sales	$	706,391	$	82,289	$	76,340	$	—	$	865,020
Intersegment sales												Intersegment sales	—		—		31,118		(31,118)		—
Total net sales												Total net sales	$	706,391	$	82,289	$	107,458	$	(31,118)	$	865,020
Gross profit												Gross profit	$	232,058	$	31,298	$	23,839	$	(1,376)	$	285,819
Income from equity investments												Income from equity investments	$	—	$	—	$	2,290	$	—	$	2,290
Three months ended October 30, 2021												Three months ended October 30, 2021
Net sales:	Net sales:											Net sales:
External customer sales	External customer sales	$	702,745	$	56,315	$	71,483	$	—	$	830,543	External customer sales	$	709,608	$	74,792	$	69,067	$	—	$	853,467
Intersegment sales	Intersegment sales	—		—		25,973		(25,973)		—		Intersegment sales	—		—		34,852		(34,852)		—
Total net sales	Total net sales	$	702,745	$	56,315	$	97,456	$	(25,973)	$	830,543	Total net sales	$	709,608	$	74,792	$	103,919	$	(34,852)	$	853,467
Gross profit	Gross profit	$	233,067	$	18,873	$	23,842	$	(37)	$	275,745	Gross profit	$	258,059	$	28,588	$	32,329	$	(5,359)	$	313,617
Income from equity investment	Income from equity investment	$	—	$	—	$	1,945	$	—	$	1,945	Income from equity investment	$	—	$	—	$	2,600	$	—	$	2,600
Three months ended May 1, 2021
Nine months ended October 29, 2022												Nine months ended October 29, 2022
Net sales:												Net sales:
External customer sales												External customer sales	$	2,143,199	$	216,888	$	194,795	$	—	$	2,554,882
Intersegment sales												Intersegment sales	—		—		76,470		(76,470)		—
Total net sales												Total net sales	$	2,143,199	$	216,888	$	271,265	$	(76,470)	$	2,554,882
Gross profit												Gross profit	$	716,268	$	81,145	$	59,975	$	(154)	$	857,234
Income from equity investments												Income from equity investments	$	—	$	—	$	6,670	$	—	$	6,670
Nine months ended October 30, 2021												Nine months ended October 30, 2021
Net sales:	Net sales:											Net sales:
External customer sales	External customer sales	$	620,658	$	40,604	$	41,893	$	—	$	703,155	External customer sales	$	2,053,359	$	172,981	$	147,617	$	—	$	2,373,957
Intersegment sales	Intersegment sales	—		—		15,534		(15,534)		—		Intersegment sales	—		—		64,258		(64,258)		—
Total net sales	Total net sales	$	620,658	$	40,604	$	57,427	$	(15,534)	$	703,155	Total net sales	$	2,053,359	$	172,981	$	211,875	$	(64,258)	$	2,373,957
Gross profit	Gross profit	$	193,113	$	10,835	$	11,926	$	237	$	216,111	Gross profit	$	708,065	$	58,191	$	52,788	$	(4,635)	$	814,409
Income from equity investment	Income from equity investment	$	—	$	—	$	1,708	$	—	$	1,708	Income from equity investment	$	—	$	—	$	6,598	$	—	$	6,598

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

EXECUTIVE OVERVIEW AND TRENDS IN OUR BUSINESS FOR THE THIRD QUARTER OF 2022

For the ~~first~~third quarter of 2022, ~~consolidated~~ net sales increased ~~18.1%~~1.4% and comparable sales increased ~~15.3%~~3.0% over the same period last ~~year with each of our three segments contributing to these increases.~~year. Net sales during the ~~first~~third quarter of 2022 from our Owned Brands increased ~~68.3%~~25.0% over the same period last year, ~~and~~with Owned Brands representing ~~25.4%~~26.5% of consolidated net sales as compared to ~~17.8%~~21.5% for the same period last year. ~~This growth came despite volatile market conditions, including increased freight costs and supply chain disruptions. We continue to make~~The increase in net sales from our Owned Brands demonstrates progress ~~on our initiatives centered on our three pillars - Customer, Brand, and Speed - as we work~~ towards our long-term ~~strategic plans.~~plan of doubling net sales of our Owned Brands by 2026. Gross profit, operating profit, and net income for the third quarter of 2022 were lower when compared to the same period last year, which had record-setting results, as we were impacted by a more promotional retail environment as the industry experienced a shift from tighter inventory positions to excess inventory, resulting in us also being more promotional. In addition, we strategically increased our clearance assortment in order for us to attract customers who are more value oriented and this allows us to manage our inventory more effectively and proactively.

IMPACT OF THE COVID-19 PANDEMIC AND GLOBAL ECONOMIC CONDITIONS ON OUR RESULTS OF OPERATIONS

The COVID-19 pandemic continues to impact the global economy, ~~and has created~~including disrupted supply chain operations globally, temporary factory closures, labor shortages, vessel, container and other transportation shortages, and port congestion. Such disruptions ~~inflationary pressures, higher freight~~have at times reduced the availability of inventory while at other times have caused excess inventory as the timing of inventory receipts has been disrupted. Disruptions may continue especially in geographic locations where government responses may result in mandated quarantines and ~~labor costs,~~closures of facilities and ~~labor shortages. While~~operations we ~~experienced continued improvement in our performance during~~depend on. Accordingly, it is not clear at this time how long and to what extent the ~~first quarter of 2022,~~pandemic will last and we cannot reasonably estimate the extent to which our business will continue to be affected by the COVID-19 pandemic.

In addition, other changes in economic conditions, most notably inflationary pressures (including increases in the cost of merchandise, transportation, and compensation), rising interest rates, significant foreign currency volatility, and the growing concerns of a potential recession, have also impacted consumer discretionary income levels and spending. In response to such pressures, as well as in an effort to reduce elevated inventory levels, many retailers have become increasingly more promotional in an attempt to offset traffic declines and increase conversion. The continuation of these trends could have a material adverse effect on our business or operating results.

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 in the U.S. as of October 29, 2022, which was significant objective negative evidence in considering whether U.S. 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 October 29, 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 ~~to what extent~~other deferred tax assets. Given the ~~recent improved trends~~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 ~~business will continue.~~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.

FINANCIAL SUMMARY AND OTHER KEY METRICS

For the three months ended ~~April 30,~~October 29, 2022:

•Net sales increased to ~~$830.5~~$865.0 million from ~~$703.2~~$853.5 million for the three months ended ~~May 1,~~October 30, 2021.

•Gross profit as a percentage of net sales was ~~33.2%~~33.0% compared to ~~30.7%~~36.7% for the same period last year.

•Net income was ~~$26.2~~$45.2 million, or ~~$0.34~~$0.65 per diluted share, which included ~~net~~ after-tax ~~charge~~charges of ~~$10.5~~$2.0 million ~~or $0.14 per diluted share,~~ primarily related to impairment and termination costs partially offset by the ~~loss~~change in valuation allowance on ~~extinguishment~~deferred tax assets of ~~debt and write-off of debt issuance costs.~~$1.1 million. Net income for the three months ended ~~May 1,~~October 30, 2021 was ~~$17.0~~$80.2 million, or ~~$0.22~~$1.04 per diluted share, which included ~~net~~ after-tax ~~benefits~~charges of ~~$7.6~~$13.6 million, or ~~$0.10~~$0.18 per diluted share, primarily related to the change in ~~the~~ valuation allowance on deferred tax ~~assets.~~assets.

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Comparable Sales Performance Metric- The following table presents the change in comparable sales for each segment and in total:


		Three months ended					Three months ended
		April 30, 2022		May 1, 2021			October 29, 2022		October 30, 2021
Change in comparable sales:	Change in comparable sales:					Change in comparable sales:
U.S. Retail segment	U.S. Retail segment	13.6	%	56.3	%	U.S. Retail segment	1.1	%	43.9	%
Canada Retail segment	Canada Retail segment	41.4	%	10.0	%	Canada Retail segment	18.8	%	15.2	%
Brand Portfolio segment - direct-to-consumer channel	Brand Portfolio segment - direct-to-consumer channel	19.7	%	6.8	%	Brand Portfolio segment - direct-to-consumer channel	27.0	%	50.4	%
Total	Total	15.3	%	52.2	%	Total	3.0	%	40.8	%

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 in our comparable sales metric 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. 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- As of ~~April 30,~~October 29, 2022 and ~~May 1,~~October 30, 2021, we had the following number of stores:


		April 30, 2022	May 1, 2021	October 29, 2022		October 30, 2021

U.S. Retail segment - DSW stores	U.S. Retail segment - DSW stores	510			516		U.S. Retail segment - DSW stores	504	515
Canada Retail segment:	Canada Retail segment:						Canada Retail segment:
The Shoe Company stores	The Shoe Company stores	115			118		The Shoe Company stores	113	117
DSW stores	DSW stores	25			27		DSW stores	25	27
		140			145			138	144
Total number of stores	Total number of stores	650			661		Total number of stores	642	659

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RESULTS OF OPERATIONS

~~FIRST~~THIRD QUARTER OF 2022 COMPARED WITH ~~FIRST~~THIRD QUARTER OF 2021


		Three months ended
(dollars in thousands, except per share amounts)		April 30, 2022				May 1, 2021				Change
(amounts in thousands, except per share amounts)														(amounts in thousands, except per share amounts)	Three months ended
															October 29, 2022				October 30, 2021				Change
		Amount		% of Net Sales		Amount		% of Net Sales		Amount		%			Amount		% of Net Sales		Amount		% of Net Sales		Amount		%
Net sales	Net sales	$	830,543	100.0	%	$	703,155	100.0	%	$	127,388	18.1	%	Net sales	$	865,020	100.0	%	$	853,467	100.0	%	$	11,553	1.4	%
Cost of sales	Cost of sales	(554,798)		(66.8)		(487,044)		(69.3)		(67,754)		13.9	%	Cost of sales	(579,201)		(67.0)		(539,850)		(63.3)		(39,351)		7.3	%
Gross profit	Gross profit	275,745		33.2		216,111		30.7		59,634		27.6	%	Gross profit	285,819		33.0		313,617		36.7		(27,798)		(8.9)	%
Operating expenses	Operating expenses	(223,426)		(26.9)		(200,814)		(28.5)		(22,612)		11.3	%	Operating expenses	(222,232)		(25.7)		(211,909)		(24.8)		(10,323)		4.9	%
Income from equity investment		1,945		0.2		1,708		0.2		237		13.9	%
Income from equity investments														Income from equity investments	2,290		0.3		2,600		0.3		(310)		(11.9)	%
Impairment charges	Impairment charges	(1,072)		(0.1)		—		—		(1,072)		NM		Impairment charges	(1,349)		(0.2)		—		—		(1,349)		NM
Operating profit	Operating profit	53,192		6.4		17,005		2.4		36,187		212.8%		Operating profit	64,528		7.4		104,308		12.2		(39,780)		(38.1)	%
Interest expense, net	Interest expense, net	(2,952)		(0.4)		(8,814)		(1.2)		5,862		(66.5)	%	Interest expense, net	(4,826)		(0.5)		(7,706)		(0.9)		2,880		(37.4)	%
Loss on extinguishment of debt and write-off of debt issuance costs		(12,862)		(1.5)		—		—		(12,862)		NM
Non-operating income, net		6		0.0		806		0.1		(800)		(99.3)	%
Non-operating income (expenses), net														Non-operating income (expenses), net	(152)		—		172		—		(324)		NM
Income before income taxes	Income before income taxes	37,384		4.5		8,997		1.3		28,387		315.5%		Income before income taxes	59,550		6.9		96,774		11.3		(37,224)		(38.5)	%
Income tax benefit (provision)		(11,202)		(1.3)		8,029		1.1		(19,231)		NM
Income tax provision														Income tax provision	(14,379)		(1.7)		(16,590)		(1.9)		2,211		(13.3)	%
Net income	Net income	$	26,182	3.2	%	$	17,026	2.4	%	$	9,156	53.8%		Net income	$	45,171	5.2	%	$	80,184	9.4	%	$	(35,013)	(43.7)	%
Basic and diluted earnings per share:	Basic and diluted earnings per share:													Basic and diluted earnings per share:
Basic earnings per share	Basic earnings per share	$	0.36			$	0.23			$	0.13	56.5%		Basic earnings per share	$	0.70			$	1.10			$	(0.40)	(36.4)	%
Diluted earnings per share	Diluted earnings per share	$	0.34			$	0.22			$	0.12	54.5%		Diluted earnings per share	$	0.65			$	1.04			$	(0.39)	(37.5)	%
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	72,923				72,613				310		0.4	%	Basic shares	64,245				73,191				(8,946)		(12.2)	%
Diluted shares	Diluted shares	76,924				76,976				(52)		(0.1)	%	Diluted shares	69,140				77,135				(7,995)		(10.4)	%

NM - Not meaningful

Net Sales- The following summarizes net sales by segment:


		Three months ended													Three months ended
(dollars in thousands)	(dollars in thousands)	April 30, 2022				May 1, 2021				Change				(dollars in thousands)	October 29, 2022				October 30, 2021				Change
		Amount		% of Segment Net Sale		Amount		% of Segment Net Sale		Amount		%			Amount		% of Segment Net Sales		Amount		% of Segment Net Sales		Amount		%		Comparable Sales
Segment net sales:	Segment net sales:													Segment net sales:
U.S. Retail	U.S. Retail	$	702,745	82.0	%	$	620,658	86.4	%	$	82,087	13.2	%	U.S. Retail	$	706,391	78.8	%	$	709,608	79.9	%	$	(3,217)	(0.5)	%	1.1	%
Canada Retail	Canada Retail	56,315		6.6	%	40,604		5.6	%	15,711		38.7	%	Canada Retail	82,289		9.2	%	74,792		8.4	%	7,497		10.0	%	18.8	%
Brand Portfolio	Brand Portfolio	97,456		11.4	%	57,427		8.0	%	40,029		69.7	%	Brand Portfolio	107,458		12.0	%	103,919		11.7	%	3,539		3.4	%	27.0	%

Total segment net sales	Total segment net sales	856,516		100.0	%	718,689		100.0	%	137,827		19.2	%	Total segment net sales	896,138		100.0	%	888,319		100.0	%	7,819		0.9	%	3.0	%
Elimination of intersegment net sales	Elimination of intersegment net sales	(25,973)				(15,534)				(10,439)		67.2	%	Elimination of intersegment net sales	(31,118)				(34,852)				3,734		(10.7)	%
Consolidated net sales	Consolidated net sales	$	830,543			$	703,155			$	127,388	18.1	%	Consolidated net sales	$	865,020			$	853,467			$	11,553	1.4	%

The improvement in net sales during the three months ended October 29, 2022 over the same period last year was primarily due to the increase in comparable sales across all segments, offset by store closures since the end of the third quarter of 2021. The decrease in net sales for the U.S. Retail segment was driven by store closures partially offset by the increase in comparable sales, which benefited from higher comparable transactions that more than offset lower comparable average unit retail prices. The increase in net sales for the Canada Retail segment was driven by the increase in comparable sales, which had higher comparable transactions and higher comparable average unit retail prices, partially offset by the unfavorable impact from

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foreign currency translation. The Brand Portfolio segment delivered increases in comparable sales for www.vincecamuto.com and wholesale sales, while commission income decreased.

Gross Profit- The following summarizes gross profit by segment:


	Three months ended
(dollars in thousands)	October 29, 2022				October 30, 2021				Change
	Amount		% of Segment Net Sales		Amount		% of Segment Net Sales		Amount		%		Basis Points
Segment gross profit:
U.S. Retail	$	232,058	32.9	%	$	258,059	36.4	%	$	(26,001)	(10.1)	%	(350)
Canada Retail	31,298		38.0	%	28,588		38.2	%	2,710		9.5	%	(20)
Brand Portfolio	23,839		22.2	%	32,329		31.1	%	(8,490)		(26.3)	%	(890)

Total segment gross profit	287,195		32.0	%	318,976		35.9	%	(31,781)		(10.0)	%	(390)
Net elimination of intersegment gross profit	(1,376)				(5,359)				3,983
Consolidated gross profit	$	285,819	33.0	%	$	313,617	36.7	%	$	(27,798)	(8.9)	%	(370)

The decrease in consolidated gross profit during the three months ended October 29, 2022 over the same period last year was impacted by a more promotional retail environment as the industry experienced a shift from tighter inventory positions to excess inventory, resulting in us being more promotional in both the U.S. Retail and the Brand Portfolio segments as well as our increase in freight costs. The decrease in the U.S. Retail segment gross profit was also impacted by strategically increasing our clearance assortment and moving our digital fulfillment activities from our Columbus location to our New Jersey location, which resulted in recognizing approximately $6.0 million of additional distribution costs, including accelerated depreciation and termination costs. The decrease in the Brand Portfolio segment gross profit was also impacted by lower commission income. As a result, consolidated gross profit as a percentage of consolidated net sales was down 370 basis points.

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


	Three months ended
(in thousands)	October 29, 2022		October 30, 2021
Recognition (elimination) of intersegment activity:
Net sales recognized by Brand Portfolio segment	$	(31,118)	$	(34,852)
Cost of sales:
Cost of sales recognized by Brand Portfolio segment	21,426		22,950
Recognition of intersegment gross profit for inventory previously purchased that was subsequently sold to external customers during the current period	8,316		6,543
	$	(1,376)	$	(5,359)

Operating Expenses- For the three months ended October 29, 2022, operating expenses increased by $10.3 million over the same period last year, primarily driven by an increase in store payroll and marketing expenses. Operating expenses as a percentage of sales were 25.7% compared to 24.8% in the same period last year.

Interest Expense, net- For the three months ended October 29, 2022, interest expense, net, decreased by $2.9 million over the same period last year, primarily due to the termination of the Term Loan in the first quarter of 2022, which had a higher interest rate than the ABL Revolver.

Income Taxes- For the three months ended October 29, 2022 and October 30, 2021, our effective tax rate was 24.1% and 17.1%, respectively. The rate for three months ended October 29, 2022 was impacted by permanent tax adjustments, primarily non-deductible compensation. The rate for the three months ended October 30, 2021 was the result of maintaining a full valuation allowance on deferred tax assets.

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NINE MONTHS OF 2022 COMPARED WITH NINE MONTHS OF 2021


(amounts in thousands, except per share amounts)	Nine months ended
	October 29, 2022				October 30, 2021				Change
	Amount		% of Net Sales		Amount		% of Net Sales		Amount		%
Net sales	$	2,554,882	100.0	%	$	2,373,957	100.0	%	$	180,925	7.6	%
Cost of sales	(1,697,648)		(66.4)		(1,559,548)		(65.7)		(138,100)		8.9	%
Gross profit	857,234		33.6		814,409		34.3		42,825		5.3	%
Operating expenses	(674,348)		(26.4)		(637,108)		(26.9)		(37,240)		5.8	%
Income from equity investments	6,670		0.3		6,598		0.3		72		1.1	%
Impairment charges	(4,237)		(0.2)		(1,174)		—		(3,063)		260.9	%
Operating profit	185,319		7.3		182,725		7.7		2,594		1.4	%
Interest expense, net	(10,530)		(0.4)		(24,592)		(1.0)		14,062		(57.2)	%
Loss on extinguishment of debt and write-off of debt issuance costs	(12,862)		(0.5)		—		—		(12,862)		NM
Non-operating income (expenses), net	(109)		—		734		—		(843)		NM
Income before income taxes	161,818		6.4		158,867		6.7		2,951		1.9	%
Income tax provision	(44,252)		(1.7)		(18,797)		(0.8)		(25,455)		135.4	%
Net income	$	117,566	4.7	%	$	140,070	5.9	%	$	(22,504)	(16.1)	%
Basic and diluted earnings per share:
Basic earnings per share	$	1.71			$	1.92			$	(0.21)	(10.9)	%
Diluted earnings per share	$	1.60			$	1.81			$	(0.21)	(11.6)	%
Weighted average shares used in per share calculations:
Basic shares	68,924				72,911				(3,987)		(5.5)	%
Diluted shares	73,287				77,216				(3,929)		(5.1)	%

NM - Not meaningful

Net Sales- The following summarizes net sales by segment:


	Nine months ended
(dollars in thousands)	October 29, 2022			October 30, 2021			Change
	Amount		% of Segment Net Sales	Amount		% of Segment Net Sales	Amount		%		Comparable Sales
Segment net sales:
U.S. Retail	$	2,143,199	81.5%	$	2,053,359	84.2%	$	89,840	4.4	%	5.5	%
Canada Retail	216,888		8.2%	172,981		7.1%	43,907		25.4	%	33.5	%
Brand Portfolio	271,265		10.3%	211,875		8.7%	59,390		28.0	%	29.6	%
Total segment net sales	2,631,352		100%	2,438,215		100.0%	193,137		7.9	%	7.8	%
Elimination of intersegment net sales	(76,470)			(64,258)			(12,212)		19.0	%
Consolidated net sales	$	2,554,882		$	2,373,957		$	180,925	7.6	%

The improvement in sales during the ~~three~~nine months ended ~~April 30,~~October 29, 2022 over the same period last year was primarily due to the increase in comparable sales across all segments, primarily driven by the fact that during the ~~three~~nine months ended ~~May 1,~~October 30, 2021, the prolonged COVID-19 pandemic resulted in significantly reduced ~~customer~~store traffic in the U.S. Retail and Canada Retail segments with the Canada Retail segment also impacted by ~~continued~~ mandated closures and restrictions in certain key markets. In addition, wholesale sales in the Brand Portfolio segment were higher induring the ~~first quarter of~~nine months ended October 29, 2022 as compared to the same period last year due to increased orders as our retailer customers continue to recover. These increases

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were partially offset by the impact of store closures since the end of the third quarter of 2021 and the unfavorable impact from foreign currency translation of the Canada Retail segment net sales.

Gross Profit- The following summarizes gross profit by segment:


		Three months ended														Nine months ended
(dollars in thousands)	(dollars in thousands)	April 30, 2022				May 1, 2021				Change					(dollars in thousands)	October 29, 2022				October 30, 2021				Change
		Amount		% of Segment Net Sales		Amount		% of Segment Net Sales		Amount		%		Basis Points		Amount		% of Segment Net Sales		Amount		% of Segment Net Sales		Amount		%		Basis Points
Segment gross profit:	Segment gross profit:														Segment gross profit:
U.S. Retail	U.S. Retail	$	233,067	33.2	%	$	193,113	31.1	%	$	39,954	20.7	%	210	U.S. Retail	$	716,268	33.4	%	$	708,065	34.5	%	$	8,203	1.2	%	(110)
Canada Retail	Canada Retail	18,873		33.5	%	10,835		26.7	%	8,038		74.2	%	680	Canada Retail	81,145		37.4	%	58,191		33.6	%	22,954		39.4	%	380
Brand Portfolio	Brand Portfolio	23,842		24.5	%	11,926		20.8	%	11,916		99.9	%	370	Brand Portfolio	59,975		22.1	%	52,788		24.9	%	7,187		13.6	%	(280)

Total segment gross profit	Total segment gross profit	275,782		32.2	%	215,874		30.0	%	59,908		27.8	%	220	Total segment gross profit	857,388		32.6	%	819,044		33.6	%	38,344		4.7	%	(100)
Net recognition (elimination) of intersegment gross profit		(37)				237				(274)
Gross profit		$	275,745	33.2	%	$	216,111	30.7	%	$	59,634	27.6	%	250
Net elimination of intersegment gross profit															Net elimination of intersegment gross profit	(154)				(4,635)				4,481
Consolidated gross profit															Consolidated gross profit	$	857,234	33.6	%	$	814,409	34.3	%	$	42,825	5.3	%	(70)

The ~~improvement~~increase in consolidated gross profit was primarily driven by increased sales during the ~~first quarter of~~nine months ended October 29, 2022 over the same period last year, ~~and being less promotional,~~ partially offset by higher freight ~~costs. Gross profit~~and distribution costs as well as a ~~percentage of net sales for~~shift towards being more promotional in the U.S. Retail and ~~Canada~~Brand Portfolio segments during the third quarter of 2022. Higher distribution costs within the U.S. Retail ~~segments increased due~~segment were primarily driven by moving our digital fulfillment activities from our Columbus location to ~~being less promotional~~our New Jersey location, which resulted in recognizing approximately $16.0 million of additional distribution costs, including accelerated depreciation and ~~improved leverage on occupancy costs, partially offset by higher freight~~termination costs. ~~The improvement in~~As a result, consolidated gross profit as a percentage of consolidated net sales ~~for the Brand Portfolio segment~~ was ~~primarily driven by the leverage of royalty expenses on higher sales volume.~~down 70 basis points.

The net ~~recognition (elimination)~~elimination of intersegment ~~gross~~ profit consisted of the following:

Three months ended
(in thousands) April 30, 2022 May 1, 2021
Recognition (elimination) of intersegment activity:
Net sales recognized by Brand Portfolio segment $ (25,973) $ (15,534)
Cost of sales:
Cost of sales recognized by Brand Portfolio segment 18,169 10,935
Recognition of intersegment gross profit for inventory previously purchased that was subsequently sold to external customers during the current period 7,767 4,836
$ (37) $ 237


	Nine months ended
(in thousands)	October 29, 2022		October 30, 2021
Recognition (elimination) of intersegment activity:
Net sales recognized by Brand Portfolio segment	$	(76,470)	$	(64,258)
Cost of sales:
Cost of sales recognized by Brand Portfolio segment	52,149		43,592
Recognition of intersegment gross profit for inventory previously purchased that was subsequently sold to external customers during the current period	24,167		16,031
	$	(154)	$	(4,635)

Operating Expenses- For the ~~three~~nine months ended ~~April 30,~~October 29, 2022, operating expenses increased by ~~$22.6~~$37.2 million over the same period last year, primarily driven by an increase in store payroll and marketing ~~expenses in line with the increase in net sales.~~expenses. Operating expenses asas a percentage of sales improved to ~~26.9%~~26.4% compared to ~~28.5%~~26.9% in the same period last year, due to the improvement in net sales year over year as we leveraged our fixed costs.

Impairment Charges- During the nine months ended October 29, 2022, we recorded impairment charges of $4.2 million, primarily in the Brand Portfolio segment resulting from subleases of abandoned leased spaces. During the nine months ended October 30, 2021, we recorded an impairment charge of $1.2 million in the U.S. Retail segment for abandoned equipment we replaced.

Interest Expense, net- For the nine months ended October 29, 2022, interest expense, net, decreased by $14.1 million over the same period last year, primarily due to the termination of the Term Loan in the first quarter of 2022, which had a higher interest rate than the ABL Revolver.

Loss on extinguishment of debt and write-off of ~~deferred~~ debt issuance costs- In connection with the settlement of our Term Loan on February 8, 2022, during the ~~three~~nine months ended ~~April 30,~~October 29, 2022 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. As a result of

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the replacement of the ~~2020~~ ABL Revolver during the ~~three~~nine months ended ~~April 30,~~October 29, 2022, we also wrote-off $0.2 million of debt issuance costs.

Income Taxes-For the ~~three~~nine months ended ~~April 30,~~October 29, 2022 and ~~May 1,~~October 30, 2021, our effective tax rate was ~~30.0%~~27.3% and ~~negative 89.2%~~11.8%, respectively. The rate for ~~three~~the nine months ended ~~April 30,~~October 29, 2022 was impacted by permanent tax adjustments, primarily non-deductible compensation. The ~~negative~~ rate for the ~~three~~nine months ended ~~May 1,~~October 30, 2021 was the result of maintaining a full valuation allowance on deferred tax assets ~~along with~~while also recording net discrete tax benefits, primarily as a result of adjustments to our estimated fiscal 2020 return reflecting implemented tax strategies.

SEASONALITY

Our 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 results of operations may fluctuate based on global economic conditions, the change in weather conditions, and our customers' interest in new seasonal styles. Due to the COVID-19 pandemic, we did not experience the typical seasonal trends during 2021 given the changes in customer behavior.

LIQUIDITY AND CAPITAL RESOURCES

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. Our working capital and inventory levels fluctuate seasonally.

During the ~~three~~nine months ended ~~April 30,~~October 29, 2022, we repurchased ~~1.7~~10.7 million Class A common shares at an aggregate cost of ~~$22.7~~$147.5 million, with ~~$312.2~~$187.4 million of Class A common shares that remain authorized under the program asas of ~~April 30, 2022~~.October 29, 2022. During the ~~three~~nine months ended ~~May 1,~~October 30, 2021, we did not repurchase any Class A common shares. In November 2022, we received $120.3 million of our income tax receivable from the Internal Revenue Service as a result of the Coronavirus Aid, Relief, and Economic Security Act. We anticipate receiving the remaining income tax receivable within the next twelve months.

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 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 repurchase common shares under our share repurchase program over the next 12 months and beyond.

The following table presents the key categories of our condensed consolidated statements of cash flows:


		Three months ended							Nine months ended
(in thousands)	(in thousands)	April 30, 2022		May 1, 2021		Change		(in thousands)	October 29, 2022		October 30, 2021		Change
Net cash used in operating activities		$	(40,672)	$	(1,356)	$	(39,316)
Net cash provided by operating activities								Net cash provided by operating activities	$	37,940	$	164,294	$	(126,354)
Net cash used in investing activities	Net cash used in investing activities	(17,101)		(5,641)		(11,460)		Net cash used in investing activities	(56,009)		(22,061)		(33,948)
Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	39,768		(3,589)		43,357		Net cash provided by (used in) financing activities	9,246		(117,863)		127,109
Effect of exchange rate changes on cash balances	Effect of exchange rate changes on cash balances	115		306		(191)		Effect of exchange rate changes on cash balances	(1,361)		664		(2,025)
Net decrease in cash, cash equivalents, and restricted cash		$	(17,890)	$	(10,280)	$	(7,610)
Net increase (decrease) in cash, cash equivalents and restricted cash								Net increase (decrease) in cash, cash equivalents and restricted cash	$	(10,184)	$	25,034	$	(35,218)

OPERATING CASH FLOWS

The ~~increase~~decrease in net cash ~~used in~~provided by operations was driven by higher spend on working capital due to earlier receipts and vendor payments this year compared to last year as ~~our business continues to recover from the~~we experienced continued impacts of the COVID-19 pandemic with ~~increases in consolidated inventories, increases in receivables~~shipping delays and extended vendor payment terms. This higher spend on ~~wholesale sales, and timing of payments to vendors. This~~working capital was partially offset by ~~the~~an increase in net income ~~recognized in~~for the ~~three~~nine months ended ~~April 30,~~October 29, 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 ~~the changes in deferred income taxes.~~amortization, impairment charges, and stock-based compensation expense.

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INVESTING CASH FLOWS

For the ~~three~~nine months ended ~~April 30,~~October 29, 2022, net cash used in investing activities was primarily due to capital expenditures relating to infrastructure and information technology ("IT") projects and store ~~improvements.~~improvements as well as our investment in Le Tigre. During the ~~three~~nine months ended ~~May 1,~~October 30, 2021, the net cash used in investing activities was due to capital expenditures relating to IT projects and store improvements. Capital expenditures for the nine months ended October 29, 2022 exceeded the capital expenditures for the same period last year as we continue to invest in our initiatives centered on our three pillars of Customer, Brand, and Speed.

FINANCING CASH FLOWS

For the ~~three~~nine months ended ~~April 30,~~October 29, 2022, net cash provided by financing activities was due to net receipts of ~~$306.9~~$415.5 million from our revolving lines of credit, partially offset by the payments of $238.2 million due to the settlement of the Term Loan, ~~and~~ the repurchase of ~~1.7~~10.7 million Class A common shares at an aggregate cost of ~~$22.7~~$147.5 million, and the payment of dividends of $10.3 million. During the ~~three~~nine months ended ~~May 1,~~October 30, 2021, ~~we had~~ net ~~borrowings~~cash used in financing activities was due to net payments of ~~$4.8~~$100.0 million ~~from~~on our revolving lines of credit ~~with~~and payments on the Term Loan of ~~$3.1~~$9.4 million.

DEBT

~~2022~~ ABL Revolver- On March 30, 2022, we replaced our ~~2020 ABL Revolver~~previous senior secured asset-based revolving credit facility with our current ~~2022~~ ABL Revolver, which provides a revolving line of credit of up to $550.0 million, including a Canadian sub-limit of up to $55.0 million, a $75.0 million sub-limit for the issuance of letters of credit, a $55.0 million sub-limit for swing loan advances for U.S. borrowings, and a $5.5 million sub-limit for swing loan advances for Canadian borrowings. Our ~~2022~~ ABL Revolver matures in March 2027 and is secured by a first priority lien on substantially all of our personal property assets, including credit card receivables and inventory. The ~~2022~~ ABL Revolver may be used to provide funds for working capital, capital expenditures, share repurchases, other expenditures, and permitted acquisitions as defined by the 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.~~reserves. As of ~~April 30,~~October 29, 2022, the ~~2022~~ ABL Revolver had a borrowing base of $550.0 million, with ~~$306.9~~$415.5 million in outstanding borrowings and ~~$4.9~~$3.6 million in letters of credit issued, resulting in ~~$238.2~~$130.9 million available for borrowings.

Termination of Term Loan - 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 $70.0~~ approximately $55.0 million to ~~$80.0~~$65.0 million for capital expenditures in 2022, of which we invested ~~$12.2~~$41.9 million during the ~~three~~nine months ended ~~April 30,~~October 29, 2022. Our future investments will depend primarily on the number of stores we open and remodel, infrastructure and IT projects that we undertake, and the timing of these expenditures.

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 2021 Form 10-K.


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 2021 Form 10-K.


ITEM 4. 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

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


ITEM 1. LEGAL PROCEEDINGS

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


ITEM 1A. RISK FACTORS

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

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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 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. Shares will be 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 ~~April 30,~~October 29, 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
January 30, 2022 to February 26, 2022 — $ — — $ 334,935
February 27, 2022 to April 2, 2022 1,275 $ 13.71 1,004 $ 321,137
April 3, 2022 to April 30, 2022 652 $ 13.65 652 $ 312,229
Total 1,927 $ 13.69 1,656


(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
July 31, 2022 to August 27, 2022	307	$	14.41	306	$	202,044
August 28, 2022 to October 1, 2022	444	$	15.84	224	$	198,689
October 2, 2022 to October 29, 2022	761	$	14.89	758	$	187,386
Total	1,512	$	14.79	1,288

(1) The total number of shares repurchased includes the shares repurchased as part of publicly announced programs and ~~271,236 shares~~223,987 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 April 4, 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 was paid on May 6, 2022 to shareholders of record at the close of business on April 22, 2022. The dividend was recorded against common shares paid in capital on the condensed consolidated balance sheets and as shown on the condensed consolidated statements of shareholders' equity due to the Company being in a retained deficit position, as required under the Ohio General Corporation Law.

RESTRICTIONS

The ~~2022~~ ABL Revolver contains customary covenants restricting our activities, including limitations on the ability to pay dividends or repurchase stock. There are specific exceptions to these covenants including, in some cases, upon satisfying specified payment conditions based on availability.


ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.


ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.


ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

Incorporated by Reference
Exhibit Number Exhibit Description Form File No. Date of Filing Exhibit Number
10.1

Credit Agreement, dated as of March 30, 2022, among Designer Brands Inc., Designer Brands Canada Inc., certain of domestic and Canadian subsidiaries as borrowers, other loan parties thereto, the lenders party thereto, The Huntington National Bank, as Administrative Agent, The Huntington National Bank, Bank of Montreal and Bank of America, N.A., as Joint Bookrunners and Joint Lead Arrangers, and PNC Bank, National Association, as Documentation Agent.
8-K 001-32545 4/5/2022 10.1
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 April 30, 2022, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Statements of Operations; (ii) Condensed Consolidated Statements of Comprehensive Income (Loss); (iii) Condensed Consolidated Balance Sheets; (iv) Condensed Consolidated Statements of Shareholders’ Equity; (v) Condensed Consolidated Statements of Cash Flows; and (vi) Notes to Condensed Consolidated Financial Statements. - - - -
104* Cover Page Interactive Data File, formatted in iXBRL and contained in Exhibit 101. - - - -


		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	File No.	Date of Filing	Exhibit Number
10.1	Amended and Restated Nonqualified Deferred Compensation Plan	-	-	-	-
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 October 29, 2022, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Statements of Operations; (ii) Condensed Consolidated Statements of Comprehensive 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

2327

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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:

~~June 2,~~December 1, 2022

By:

/s/ Jared Poff

Jared Poff

Executive Vice President and Chief Financial Officer

(Principal Financial Officer and duly authorized officer)

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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	1617
Item 3	Quantitative and Qualitative Disclosures About Market Risk	2125
Item 4	Controls and Procedures	2125
PART II
Item 1	Legal Proceedings	2125
Item 1A	Risk Factors	2125
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	2226
Item 3	Defaults Upon Senior Securities	2226
Item 4	Mine Safety Disclosures	2226
Item 5	Other Information	2326
Item 6	Exhibits	2327
	S I ~~GNATURES~~SIGNATURES	2428


Note 1	Description of Business and S ~~ignificant~~Significant Accounting Policies	7
Note 2	Revenue	9
Note 3	Related Party Transactions	1112
Note 4	Earnings Per Share	1112
Note 5	Stock-Based Compensation	1213
Note 6	Shareholders' Equity	1213
Note 7	Receivables	1314

Note 8	Accrued Expenses	1314
Note 9	Debt	1315
Note 10	Commitments and Contingencies	1415
Note 11	Segment Reporting	1516