DBI - Earnings call transcript Q2 2018

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Operator

Good morning, ladies and gentlemen. Thank you for standing by. At this time, all participants are in a listen-only mode.

As a reminder, today’s conference is being recorded.

Now, I would like to turn the conference over to Christina Cheng, Senior Director of Investor Relations. Ms. ahead. go please Cheng,

Christina Cheng

X, Results welcome periods we Second expectations, comparing may issued for August note our for ending of and Comparable XX, Call. are various X, SEC. August sales materially press constitute remarks plans future and the statement. obligation XXXX X, no that the Earlier operations company calculated today’s prospects we August periods update Please XX-week And various XXXX. today, a forward-looking public to same the any and to about statements. differ due morning in July the Quarter factors XXXX. forward-looking the XX-week DSW’s the of Conference results XXXX made assume to ending Good filings press listed and release with and release XXXX

Chief us Officer; Executive and Roger Jared are Joining Chief Officer. today Rawlins, Financial Poff,

Now, to the call turn over Roger. let me

Roger Rawlins

morning. good And Christina. Thanks,

history We’re operations pleased growth. XX% a X% one strongest margin of XX-month comp, operations. the to and XX% in comp report a and these earnings basis, ongoing growth with rolling healthy On from a delivered expansion XX% earnings our quarters

rewards playing investing of laid in our Every marketing. the the to which segment, fiscal to drove for men’s, As merchandising playing accessories both along and footwear, sandals, we significant athletic at we’ve to warehouses launch comps Retail in our had QX. portion investments distorted inventory athleisure program comp positive our resulted digital The best and online. with the increases talent, marketing XXXX, perspective, US decided of offense our From category strengths. demonstrate a we traffic had our women, in out we increase. in kids and in incredible sales power strategy results a quarter, inventories by in and return this XXXX, of since The

our sales investments this are raised and exit Canadian leverage to momentum for to core America. us the committed time strong for in business XXXX. We order right North chosen Canadian consolidated the our best our provide competencies can forward a going businesses our consequently grow quarter. and and smallest foundation incredible in We earnings this our we’ve acquisition banner to with first on We’ve to focus that outlook the fueling

turn me details our provide to and performance, our long-term guidance call Let plans Canada. in the Jared more to update of financial

Jared Poff

Roger. morning, Thanks, And good everyone.

one Total Let a in this million DSW’s quarter, Roger increased report $XXX operating say and our comp of margin how to business in are XX% echo me XX% growth. with strongest company EPS pleased core history. net and quarters we to revenues the by income expansion, driving

assumed our briefly the operates Bill mall-based, feet. in completed to we Canadian for and a team control and Shoe a sales. interest averaging X,XXX the to banner DSW square the completed Warehouse square of Company, acquisition. the pushed demographic dramatically Company close with stake efforts a a this in Shoes next which full Town XX,XXX Shoe remaining Shoe consistently of past up for competitive mall-based Designer taking these and X,XXX historical given Jordan, business has into XX me We $XX XX averaging our make decision mid-luxury and Let the May DSW the heritage. our And exit to Canadian purchase appointed feet. family quarter. concept business. entire Canada its lion’s minority this account mid-luxury operating each locations three positioning currently XX losses last locations account on The Warehouse retail changed, head of to landscape operation. is the and an XXXX, for to feet. days. difficult he DSW to future XXX Warehouse, retail decided performance, the our comes Shoe square After and Shoe requirements the have leadership decision competitive account two of the business, Collectively, veteran retailer locations over annually. US banners target After full-serviced, The XX% the operating as we banners banners of evaluation averaging focus deteriorated to Unfortunately, a to smaller similar Town business as banner serve turn was million investing footwear share

path shore foreseeable the the the us our a will focus the made team struggle allow And this This such, long-term We undertook see its to but Town the and business, returns to the eliminate go-forward unsuccessful obligations cost Shoes in last Over several decision banner lease and to of to profitability as Town exit banners given model. was banner. up few management growth losses on our to future apply core the that we’ve three or operating closest years, business. future. actions to high either

impacted recorded of reaching the and nearly GAAP from excluded adjusted are charges to by all that have this shut QX the the of integration several a associates have year. process out fiscal to as begun We We end of of results. down operations expect the result

First, a acquisition previously back we which $XX including receivable, equity charge note assets, as in investment, of part resulted million. reassessed XXXX, a of the two-step held process fair and dating into of our value

Shoes sheet. comprehensive accumulated long-term charge value asset. fair reversal projections net the exit of mostly we we its of recorded our balance foreign million was $XX which million exchange banner, [flowed] reflect previously on and goodwill $XX our the to of on Town lower finally, And other decision income, the acquired a to of losses recorded to [ph] based impairment related Next,

million $X costs in transaction quarter. incurred acquisition-related also this We

to release reconciliation the our to GAAP complete table our refer morning. non-GAAP adjusted For please results, of a this press summary in issued

reportable the headquarters segment of in was which as the segment subsidiary the result introduced presented new acquisition, which will its maintain a As for and Retail segments, Canadian Toronto. US the two previously we DSW segment, Retail our

that business operational disciplines improve and year inventory identified DSW and align this priorities merchandising brand closer our key retail the assortment. US made enhancements Canadian which We've strengthen business. aged a we're constrained inventory three processes. we've levels Furthermore, reducing our quarter with headway consistent will previously Long-term in opportunities are Our to more significant experience. and for this banner the levels targeting service full-priced deliver Canada

with First, running online national online benchmark, we're demand penetration currently accelerating below on focused the growth.

our just in will year that create do We capabilities. drawing fast expertise recognize. demand our ship our are this to a country drop substantial and To we integrate program beginning better enable and mobile on digital will exploit the as fully which by retailing boom online is next Canada a re-platform e-commerce growing loyalty to experience,

healthy up Secondly, growth has to for store to over a prospects XX potentially DSW continued with Canada fleet time. XX of locations

also we which to over Shoe real expansion share US to well vendor channel a will improve and from between And have and degree Canadian optimize Our modest Shoe price have gain overlap Company competitor estate store significant time closings continue our positioned economics. moderate Warehouse and potential are solid we their and retail banners of to the third, operation.

the sourcing supply off have We improve kicked expect we chain. across to leverage North to efficiencies study as and American of DSW's [pencil][ph] a size our identify costs we

accretive $XX leadership, we believe slightly Shoes has single-digit operating to adjusted rate. over discussion to annually up The We earn to of to let's operating bring That time. the rest profit our improvement quarter a to said, back Canadian million $XX below financial in of be new our results. generate the and expect our business margin to process forward banner, year, exit a this million Under second commentary business our go results. and potential the low Town refers

$XXX for increased increase of this XX% organic total increased an years. and revenues driven quarter, a our Retail the comparable quarter XX% million business by basis, including from by segment. sales $XX million acquisition seven in the Second strongest sales, excluding comp exits, our XX% in Canadian On consolidation

comp of X% brings operating the $X.XX business we first the improvement Sales drove growth sales. strong spend positive in The quarter's increase banner of us largest season. of in $X.XX of year. customer quarter This digital our expect Shoe quarter the in loss share. Town spring XXXX. and of increased to A end growth and This share includes Warehouse posted this comparable profitability with comp a which XX% are we results average earnings by the first this per categories per traffic launch comp XX% and marketing exit investments new Designers increase since for from driven to program at a the by adjusted time an VIP for resulted customer per by All pleased a activity.

chase Our better to margins, while better regular of open us in-stock liquidity mix higher priced this buy sales drove upside. enabled our and aggressively to a position

increase double-digit the of cross-channel rates Our and resulted growth channel. omni-channel a our industry by some transaction off investments strategy all in paid as digital activity driven the strongest in in

comp our expectations Our the in row increase, Xth positive XX% category quarter footwear comp. a exceeded a with of

robust for demand the seasonal set healthy and distortion customer sandal footwear comp double-digit gain. Our drove

While the casual non-athletic lifestyle consumer across for seasonal demand appetite dress, remained footwear and for improved healthy, athletic offering.

continue we footwear good, and new this and athletic on better, accessories offering the styles quarter. depth, positive turning new the positive core category’s new complementary focus GMM, fresh the digital Under the New excited this the during and grow presence a corner our and After best we sport introducing are Athleisure category assortment delivered lines, and Men’s to reset quarter and casual energizing aligned on our our comp to online. have product time. fashion quarter, with opportunities turned this comfort. are introduced our first including over category we takes dress expanded athletic breadth

for season. XX our We competitive this for locations, been accessories quarter socks back-to-school fourth makes The expand rollout important during to curve. valley has Kids traditionally starting bringing phase and in starting a our also wide us more DSW last back-to-school with with completed year. chain Kids the kids’ sales athletic backpacks We’re new business the the kid of and this season, which finally

accounting investment up as more associates serve this campaign marketing the Part become kids’ We long-term. lined With of this includes gains quarter footwear it footwear needs increasing to our national will made traction awareness. are trained who market, labor support specifically XX% sales a dedicated of important and customer buys young productivity business the an driver families. fit of the kids from to we’ve of have for

kids’ about significantly the Canadian from than the business the penetration more opportunity US. our has kids business a where higher learning We’re

sales $XX million $XX total reported which segment, year Ebuys of of business the other decline. million our exit Gordmans last driving to compared with and to the Turning

last on momentum Our quarter ABG business holiday continued XX% comp increase a and from this lower inventory. posted the

the We with be The with XXX and business marketing ended locations. continue encouraged our Mart. Stein merchandising ABG to initiatives with response the to quarter

and its banners. Canadian our posted our positive comps Canada segment -- Lastly, hit sales Retail across all plan

with line the the the our expectation. by with was top-line fiscal this especially by the achieved expect are the that Shoes close and we profits activity some clearance encouraged XX comp locations Town of Although XXX of in to year. in end ended results with We a of Town quarter banners delivered banner, majority

company gross by the profit, DSW XXX profit Turning as segment. business in of gross a driven the improvements mix and points sales basis the percentage increased

marketing and a XXX subsidiary drove and by improved driven increase gross segment favorable The On margin committed sales sourcing the rate basis. margin are on accounted by and discipline, a XX% clearance planned the DSW lower the of DSW half by accountability, investments and Canadian QX sustainable to for improvement drive a With ABG consolidation basis, leverage our balance. improved of vendor increased approximately markdown, the percentage the points SG&A gross by at this in DSW basis as inventory largely increased sell-throughs occupancy segment and we organic XXX point. of segment. dollar our at costs basis SG&A

profit basis deleverage expense As improvement strong more a by profit than Operating leading point of our expansion operating increased this offset margin. execution a XXX XX% in gross this result to quarter. quarter,

investment With Canadian quarter. subsidiary, seized equity we income the consolidation from of reporting our this starting

income adjusted rate year year, implementation tax last of quarter the from to tax decreased to primarily XX% XX% second Finally, reform. this due

of we targeting our balance to initiative. the key to merchandise productive are a support higher back-to-school sheet, as level we Turning selling season, key inventory the prepare for

per businesses a with above accounting exited increased per and square last that Excluding inventory X%. On foot square year, our foot year two year, inventory from increase. a XX% Retail by a third basis was on inventory last Canadian basis, of for kids

the million at the remaining to inventories year higher acquisition with stake our cash last plan paid the closer cash above $XXX in holiday from key expect remain to million a arrive As will X% be the open of of our $XXX buy receipts we for to Nevertheless, we we continue million. historical period. the rebuild Shoes. cash $XX quarter selling inventory last and meet. capacity We reflects increase investments, in as liquidity ahead Quarter to greater lows, ended end to year's to Town

in business Full position Canadian year that incremental customer expenditures can our for our while to Our to quarter, strategically expertise operations. million year, base. million expand spent from be our and invest us in enables capital leverage $XX including assets strong CapEx $X capital CapEx million our expected Retail acquiring this is this $XX core including our Canadian We acquisition.

are is primarily Kids in plan three to spend new We CapEx XXX DSW net We store and open year. driven the six which store our this budget with our to ended with pilot. on new and warehouses quarter by design the US maintenance, locations

in the full and now on in range to billion comp low expectations for for from new impact range our business. the raising $X.XX our the raised ongoing business and range to EPS total and outlook XXXX. our share of the million. in comps $X.XX the per us to assumes to for X% of EPS revenues our including $X.XX to XXXX. over outlook share outlook to the expect increase This X% balance We revenues ongoing slightly $X.XX our for revenues this expect previous subsidiary Canadian time. our to top-line a to mid-single-digit Based for of Turning we're compared from accretive momentum adjusted We've season, year your Canadians per first to put from spring fiscal grow $X full $XXX

losses variability from wind banner final Town operations Town this down. we a Given of as its result the the its the banner, ongoing as of excludes exit we degree through face

businesses. We will adjusted in but model earnings, call include we'll adjusted this impact as ongoing out from separately our you it our earnings

the other to midpoint the return and adjustments, of for charges GAAP XXXX. since to first earnings earnings the growth double-digit a time Excluding low related a outlook our acquisition implies

and thanks investments for on buying on to Roger strategic accountability that, the inventory made let track execution. With the and to few we've progress a are growth the year-over-year, We call deliver over made our to last share management years, on to focus strong we've renewed turn priorities. me stronger over

Roger Rawlins

offensive consolidating our report objective profitability. we than initiatives XXXX, than in results season. When laid for this we By our strategic our out plan a retail market share while to produced to share to and mindset, I'm Jared. expected increase grew was Thanks, better that expected environment. accelerated top-line our better proud an moving market delivering

initiative are on will which a strategic We with retail model environment. our track in evolve changing business our rapidly

update. Now that we are halfway through XXXX, I'd like to give you an

First, product.

kids Our quarter. inventory investments in at leisure increases drove accounted sales the sales last distorting These focus and year our segment. the XX% to of substantial increase on DSW in second for areas to seasonal three

driving increasing selling. is Our key priced all focus conversion regular stronger better on and in-stock, categories items better across

new is had As I The categories and positive major value the mentioned lifetime quarter. comp all acquiring of earlier, kids addition this customers brand. customer increasing DSW to

capability develop for and will new revenue through exclusive margin make it which design is acquire with manufacturing delivers easier Technology to or stream our footwear decision diversify the better Inc., our to potentially to or an involved capabilities customer our better new owned achieve In warehouses made that expertise give doing can we sourcing owned additional enables owned a channels long-term next competitive more to penetration. In for us direct-to-consumer critical for in then compete us dollars against brand, potential and continue rates who will exclusive and our or through become to enable either more brands a leverage DSW vendors, far up brand, of that strong space build-in significantly in number our offering to have our develop exclusive distribution a enable model, DSW differentiate in increasingly purchase has today decision. greater more exclusive Owning and product we or our us for to margin has so, to these internally ever, market elevate higher brand. through of than level. and will the opening it opportunities superior we us continuing drive through take to brands acquisition sourcing addition, margins while

Second, marketing.

in to We digital our investment continue increase marketing. substantially

possible. our investment growth strong. to the returns redemption perk and in refine will marketing shoe most learn our our We transactions, been member solid per customer marketing with benefit continue rewards Customer and We new drive to program from member, saw rate. activation to has average investments new such as donation spend responds new

pairs with to a are an emotional shoes We close on million this demonstrating donate year half connection customers. to our track to our ability of drive

on will experience US team team rolled quarter. between one, improves out team. model the model better management. will and to Number create we our We satisfaction. key provides while people. aligns execution engagement to inventory our warehouse this this warehouse pattern. new ways. be customer drive sales team operating on orders a and new time, conversion will The clarity the customer in customer our two This focused focus traffic selling better it and model And expect full in Over Third, and selling payroll hours coverage

innovation. Finally,

We develop differentiate service offerings continue that brand. new to will our

Our solid in our second are is third results first and Columbus Nail location W Bar quarter. we the delivering opening

New expanding repair new central five in learn scale in to store increases significantly these learnings continues four out kids’ are This Columbus market grossing highest this from our great adult customers. package we available for important package and This compromising on to encouraging Preliminary will adjustments offering. results how outside make kids’ market to we perform QX. Metro into stores, offering Columbus year. our expansion continue into to rolled new the one introduce choices Last inventory this which evaluating well our of repair a to an and we locations will York the turning Shoe be experience. March, provide to one the fixture market in next service to the locations will and We’re and market without capacity, enabled the of us in country. locations has new footwear handbag

and teams core experience. our for as The office in our of the beginning work. first want of the I to field these year. the driving we locations in home thank initiatives their a closely continue evolve had the tremendous will customer In are monitor year half a continue strategic the to the We laid and quarter out at to hard business. we’ve we second summary,

investments largest business and We strong generate future are confident initiatives. to to dividends, enable pay our key flows will fund our growth cash

committed remain that to me will and over drive long-term sustainable We turn the that, to With a executing Q&A. creates and tempo call with our for operator focus let profitable value growth.

Operator

We [Operator question-and-answer now will begin session. the Instructions].

The first go with & comes Patel Needham Rick from today ahead. question Company. Please

Rick Patel

morning, acquisition you. the hoping execution. with Canadian I you help And Good very more congrats the Thank of to everyone. on a provide assets. how strong model your little was could

So, on there? perspective think to the that, business stores and mind think first And about as anything there think as we any seasonality secondly, to keep how and e-commerce from of for as as is versus is that mix the DSW a accretion is think about color we in the Canada's this we comparable pathway there also seasonality year? -- we about performance to SG&A sales, that to gross it consider of about and margins

Roger Rawlins

holiday sort sort of our for interesting, year up Canada time the of is look this of window. actually it's the start, I'll as the us Rick actually seasonality, you at in

earlier, total Jared it is of driver, is that of the athleisure Simply we've the a is Warehouse. business significant portion what in kids Shoe than because Co different kids experienced DSW. Shoe big mentioned such here the both as a combination business and So and at

of then is big this the August little deal it a -- does in for boot the is US. there than up time us. business period heavily And kind obviously skews here a more what -- So September

in So seen versus some bit at historically increase you'll in fall, you've third see more DSW. see a what little quarter you'll

big are two think Jared? those differences. So the I

Jared Poff

business general Home Yes, guidance, and our and I are model margins. model gross but a from in standpoint there, just we from modeling like operates say at breaking out necessarily a standpoint would SG&A thinner not segment margin

right we smaller our have market to the scale see with relationships vendors, and they them. so, benefit now hope And a as [went with we to][ph] company, do improvements the

over of So think here don't time. US. still in much also deal marketplace And through some the we improvement the I Canadian there's is to down -- have distributors, with there handled footwear which

not businesses that's a the it's purchases, US. tends down the still Canada in the bulk but higher up So, there. And of piece in rate to is in be SG&A than all their it in across here general

So, looking the I that expecting I would certainly modeling single-digit with we perspective. the bring margins also line really a from guided call, digital even mentioned have with low more in are the as operating why are opportunity from they in a on we total. that's Canada standpoint, and say US to them at

see And more couple necessary into kind so of transform years to bring them we experience next investments similar down we to as of that what here. you’ll the something over make the

Roger Rawlins

the one of Rick, I too we business, our and I Mary the has up the think had in and have should how thing direction the learnings kids for with of with we’ve the And that buys had piece rest mentioned kind big really in did is US took the influence our that our of of here can kids US business one be. it there that business. just business big is, the team success impacted here have

So we’re really about excited opportunity. the

Rick Patel

synergies with area, but and the and that sounds And the you digital accelerated, DSW you others? to are Can is owned, if segment side, feel for bigger Canada scale? curious see helpful. there need of do opportunity on where flip the fully reduce potential redundancy areas it leverage be you investments like one like also to new do very now highlight the That’s it’s a

Roger Rawlins

it three session think and Canada to like the other were the one you of up sharing and the there We years biggest a strategy is US. the business the with say, it’s team how take I look digital four progression would when just it digital. I at influenced in day happened the having what’s we in behind, Rick, really does look here up a were

the that given we’ve journey there up here here great mentioned So lot through you grow US on can smaller way. went footprint and call XX% bring that a had opportunity box a that And because that. Shoe to of we to experience it opportunity great a and Co, as doing Shoe model roughly a more grow mean get that than resource then And the a we’ve for from. much kids. all there’s know Warehouse a aggressive whole were in different doors, there’s that of in in and I team the and think we fact athleisure a the penetrates digital US, we’re in the that the plays rural currently as us learning still call here and really model that’s that’s to think also us do what I

wouldn’t this are believe there? we growth is North that about we at do So be question. opportunities there how And America? obviously so your answered Hopefully there excited we look or And acquisition. the

Operator

The Blair. go with next Dylan Carden William ahead. comes question Please from

Dylan Carden

back-to-school how into was kind what playing you of into and moving chase and/or and how then the trended into quarter curious able to how holiday? have sort in those were what you’re guys Just of of was planned upside the much inventory between and

Roger Rawlins

the really calls in of to like, these be Thanks, in available business think for to to full put we’re if I season. the go got is, ourselves when especially kind talking these meaningful past found whenever been in will I as February our We’ve for and that of to going we’ve about this kids in going are business goods we’ve you’re we August’s couple reality Jared cost the way. past mentioned the looking And what’s BOP. able the what troughs after a look BOP Dylan. in we in sale inventory periods, much too say mentioned the earlier after had of stores

aligned season of for that expecting good planned the sale I increases are the goods for we So available fall the have kind with for feel the very we that organization. comp are

of available inventory pretty a women’s Also able buy we so job Jim that to position. think fantastic been chase in and the as much to right now and we our orders team I feeling So and we’re good the my the about to has day open in I done I the we’re think when keeping history that needed store here. to been we’re think closer placing we’ve have

the of I good remaining really, job So team has Jared, done any a think comment? really liquid.

Jared Poff

no, would as is saw at of to [indiscernible] us Yes, the ship pulling in over saw place, go you and getting add two only were especially into And we and I last inventory you the that the righting when athleisure. of in disciplines thing sort years said still down kids those inventory. we beginning year the this we and offense wanted categories to support

when are a still you available basis, for match to Still it from stand. happy So two look we the we very we and low were I general very, at sale expecting to where overall with very comp. goods increase see an think year

Roger Rawlins

Jared. a that’s point, think I good

are the with the team make doing, space, happened be the we're seasonal yesterday investments, you those when athleisure it drove And looked it the for Dylan comp inventories so very think QX, about has sharing results where when just also areas we think so our I to space. categories with, the in was in in in business those going at I the we've been invested category, focused the in that and on our been real we what categories. kids let’s

merchant and our team built like assortment their really plan. our have really, -- I Debbie So how

Operator

Marotta The next and question Associates. C.L. comes Steven King with from

Steven Marotta

ask regarding morning, the children's wanted Good to footwear. Roger and Jared. a just Congratulations terrific a question quarter. I on

just but Can store. bit quarter, in bit in the about If being that’s store that's a of little second either making contribution mom talk how bit well? little that other could kind mom talk of getting child transaction children's children's motive or but categories you from per category and talk is in you're you the bringing how progress the add-ins in you a can the a measured, as purchase add-on what on the not benefiting about that about little into part those moreover, if just the a of you or was unit putting on

Roger Rawlins

we're metric years I share sales; getting the adding at her about kids? we Thanks, we're a result she we're And retaining is, a getting looking transaction, seeing getting her obviously in larger child a is might retaining once three great home. And are had we recall of getting think we're transaction. as when a into closet that's kids it ago about wasn't what you question. the And the of kids, necessarily was her that talked adult it about kids

So best incrementality. of that's proof the

we're So that. at looking

team job marketing monitoring the has of we're we're a great about seeing. result excited and really Our that done

Steven Marotta

a the as imagine Okay, wouldn't you often quarter-to-date back-to-school season about that comps that I I could -- little about there's that that gaining that upside incremental over it marketing bit your around -- the to now in moreover stores? relevant a dynamic that maybe all retaining should you're customer if can and well a I to know sale to different potential for it there the talk upside third are you talk decide you that change speak but the expect now to is kids in unless the trends, quarter? you to the is and if gaining and comp, expectations

Jared Poff

and the way. in take are with we Steve, just three came of one certainly against puts saw be to that launches. haven't a how honest two and us that seen bigger greater so four Roger tough. into inventory so that back-to-school is have the that phase constantly kids there Phase it is Yes, advantage to and To spring play and at opportunity so in business season. a big we phase us looking I well-positioned and far phase We perfectly for our we think big

are important how growing we and increasingly So, to business subsidiary will it of we business now as Roger see looking be said, can forward big our to and back-to-school business work drives. of and a that model Canadian an part our

grow adults in our go But it, holiday excited necessarily Also bigger very we’re So will and do play about. season, way our to about shoes that sale continue the learning we're that. does purchase giftable excited business attached a into there. with the kids than kids shoes so we’re the going

Steven Marotta

little the currently, if other regarding come associated One dilution concerns occurred you address that if margin helpful? Thank you. talk reward be what with about Could could words that with program, question new is would you that penetration just has quick the follow-up a reward. bit or VIP in

Roger Rawlins

I folks’ reduced if you concerns we because program, Steve, look we did think, was about what at was we’ve read did some to with and the what that, ultimately actually brings essentially threshold back that surprised less see we the you We But that to it of the more But of cost it in lowered the people took what got is rewards. earn does it game. pocket. reward. your what into I

we efforts. that’s have focused So where our

to engage beautiful soles results happy rewards do bring our with that transaction. need to best a they’re to in in impact a mission really created keep the brand if also that’s way and see is connection seen, then they engagement that for the margins their don’t as them The and in another we’ve we meaningful going get earn points on consumer, we way, shoes where don’t feet our It’s the something about that we’re or soles inspiring have to the So is they then drives it thing. another self-expression. which being for talking with currently anything program, our of our this with they

organization program and going this lucky has so, more to been, XX will that so example it years way. are not dilute was ago, meaningful One decision someone we’re a whatever DSW. in the It We to at margin. innovative of start a leverage made that rewards how

Operator

comes Please go with Bank. Trussell Deutsche Paul ahead. question from Next

Paul Trussell

meaningful just to the maybe bit understand results, a drivers the more. XQ of Roger, of magnitude want the

and Jared, kids. details from that athleisure, Also, those growth go just sandals, about of XQ you you Are how can Maybe if all, versus especially a each this And is little quarter little you should Thank then at saw provide all contribution think modeling long reasons to to at half maybe more you speak the contributed? conversely maybe ending is few digital strong that what year into to a Xth then and you. least can retail the to street calendar on July if you second guidance already the dealing a was or given kind XQ able with areas you brick XXth for versus around impact than contribution bit that? the bit August from lower details shift, can spoke your mortar growth. implied the and of what comp mentioned quantify some You the speak we business? about online about

Roger Rawlins

tell But this of I I’ll the really results the question. three mentioned is take were by people. these you things part will it that first first driven and I Thanks, earlier. about Paul.

the If that And and assets getting paying we’ve we’re business, talent in this the have at developed talent required, we’ve those invested return. those you folks in look we are off.

hours that think can I and more hero a on another been expanded sort way. our year. more then, has focused of drive we in something is us conversion really, this really season floor, unsung impact we’re so we this think the meaningful should I And for putting program us fall bonus

play I it team associate we wasn't that's get big we going people people ourselves me So to I earn generating? rallying do think to that think and that office? we're we been get we that that of are how this organizing that I a first every how in the do leadership How money result engaged to sale? think are way the as a home success So that in more has one. do brand but got get with drive we this sale? and one the do in How the more element just around

when four will But the in is the year far seasonal on was in mentioned look you as two as at and penetration. a plus front, we they tell we on or we what the or but sandal comp investing second be were where that as product three category still I which obviously mid-teens, is, fantastic. to used double-digit near The nowhere you we're XX, we're had the basis,

in So upside sandals. continued there think I is

fantastic in looking have below is and of do there Jim when the team for I with inventory same the we right the product a and when thing fall, invest rest of and to we're history have think we Kim boots. our And I boots Investment that significantly the we comps. we're got going where And invested we inventory, that's in in penetration we're we again, do. going to to are because and categories. we other what overall is season market continue see athleisure, our know

was charts So as there's the we think Kids as off comp. far upside.

results of what you philanthropic the the we So that the earned did shipping. there I you in the be And product. think really When faster a would get re-launch you look third amazing marketing. such rewards at plan, with then piece around is free

making customers. is from things having to of All and talk of go these not in million you decisions The decisions team were that. those we strategic And driving a like this digital guesses and big you're demand. when are digital making and making did marketing just Amy our -- people rewards programs beauty them feedback based you're your through investment those program, investments the rewards on received through can our XX we’re

of of else at lot Our releases, digital that. year. last was lot for a I I've a I've up that's the quarter looked seen to anyone to haven't exceeded calls, XX% demand listened

results. drive those the again, our to I So three things, that's what's combination think of working

Jared Poff

saw related in an that saw From exact some a almost would offset to I in of QX but actually news we say, bad news shift, that we QX. Paul, was some it good calendar

we think simply of calendar now but their in street significantly we opportunity the don't in has QX. improve guidance, we the right out So an is I because give on from quarterly relatively will a the were calendar of model street say shift for QX neutral alignment everyone spring, I are with is Again where shift. standpoint. really Where to

XXrd seeing we week result a is that also a calendar shifting where fourth picked shift a up. a of bigger a roughly week in million $XX we’ve are than are quarter out we week of decline and as about sales So, in the losing what that

think and out I is all QX. a you available reiterate shifted I’d needs that but on that not percentage Christina is will It calc So, like-for-like calendar. I to help comp at on a basis. our will impacted model on adjusted really be guys focus

talking there. just So I was downwards

Paul Trussell

Thank color. you. helpful Very

Operator

Canaccord. The comes with question Please next ahead. Camilo Lyon go

Camilo Lyon

kind questioning. of of Just line up following a prior on

you’ve second -- quarter phenomenal a quarter had comp as highlighted. performance, clearly You

Just down back the half back to going to a guidance, just implied go comp. you’re low-single-digit so

So what’s plan or XX just clearly help could disparity the you between back X the in understand and half you QX the speaking back comp holding in in and you’re that momentum that perspective? for the the what’s from versus the looking did us qualitatively that you’re to a X.X really

Jared Poff

let see up in take got our our we of want intend same type reactions kind lined able little be that those of I And we investments investments I’m beginning flexibility to be making to you again. to react saw bit to fall. in of and But and and also to at the the a that don’t the will of if we made the spring our the we we’ve year we position took Camilo. that wanting the this know Sure, intentions we

we that in we in So fall are not -- just I from did of program to we headwinds the our VIP like re-launching the a the say spring. will rewards that are things some want out, call

an see out rewards re-launched. going traction VIP So getting we about, three up are there we’ve to banner, was proper disciplines you hands related the that shutting lots we of people’s getting know, other there. in Town of continued But boost we’re as we’re from installed and to down still the but know, nice for as integration banners business on talked that. certificates We think working a some

very on we inventory see conversation to will want this in an the we in in if the the overall we’ll a to make they’re relations, way but not All I Canadian much there’s able again investments our investments see anticipate amount in So, that and our And guidance. that EPS that contact to respond continue have related sure appropriate saw operation. the being spring, flexibility QX. of traction. to have the that to said, we in prudence we They’re our be

Camilo Lyon

as Is -- that those going to two? analyze So low-single-digit plan say into comp, in just season way that you’re calls above chase. anything excess but season your that for fair a that is to in really described

Jared Poff

that is lot a marketing. obviously it’s peak. I chance think actually of it digital with we also which product, are type chasing to same our a seeing But response digital in the bigger great a But marketing for from also other point of people the respond. very reaction a it’s have where chasing, a fall screaming Yes, loudly

yet the that But remains it it same, we we it whether have to good aspirations be have So resonates seen. will.

Camilo Lyon

Is the comps? there to VIP of what the a the quarter quantify initial to program re-launch second way added

Jared Poff

breaking right that we’re think don’t I now. out

Camilo Lyon

And the and benefits you private private brands. label of Roger, then talked about

you’re way you the are the at sourcing in detailed that going pretty Is that yourself business producing on that that afford that’s you contemplating label you. the it deeper have already to into of take the looking element that such business production a You’re for that private you could business currently? you that to what of and say part believe partner

Roger Rawlins

Yes. Thanks, Camilo.

when XXX the would in opened you internally groups that footwear time think been say look industry, been roughly window. because new last happened there’s about points lot that I over DSW industry XXX grown data doors five major you. really years. primarily in happening retail this that at during a that's probably I we have -- the share period talking and are what’s five in market And But we’ve for these what’s

done got locations. which You’ve obviously Nordstrom rack well with their -- and has the adding rack

third is The the player. athletic

one that I been when market at direct on them that our that you growth. all Number here uncertain vendor today. think is technology that That really the four, share about to everybody has that those focused I way go number trend five think in But of look big and one the So and for is the has athleisure obviously, talks the to Amazon. consumer challenge created opportunity enabled a a is partners is sneaker we're players. has

or they are form shape partners, competing some them. while our way also in against So they're

do one is I think about to we’ve do think a really point. this that private we retailers carry in think we to up, way. the We’ve out other at build but that are so built would you very have say I much assortments that done. we hit guys to ceiling And how what brand within brand, we way as our our And larger close differentiate

We have really XX% or total XX%, roughly four X%, years. between for our last of three the been

is margin we to we to we have there and do products of And provides out is think think that one it design, to real think earn for it our we about own ability us think we selling upside channels to gives differentiated also and it -- us talk a And can right growth. the to to be way ultimately we think we assortment, to break source So, way that. have that. a creates new our floor, think on it introduce

all can we're in compete as we those in. are to this at looking So we how ever-changing environment things are retail footwear

Camilo Lyon

the then reconciliation for bit of FX that's on that. FX ongoing of on part Thank explain final Jared, just just Jared. or it I like curious sort one translation. just It the And was the of you I squeeze gains Great. that could non-GAAP deeper? part one business the in you reconciliations. could about you if little seems from of piece, losses for any non-GAAP talked exclusion some if a the

that the So, I'm behind just curious as to exclusion? methodology

Jared Poff

an just as that equity of the OCI earning much the so of us them Yes, been course over investment. had that accumulating accumulated was

them not when part our different held agree of to operations. on would was you So a we forward basis that I that's This with more in related a not something go the out. be time ongoing excluded capacity,

XXXX, sitting I actually when dollars. in it's we the Gosh, buying the that you in Oh! -- news rule at We point cash at that think good investments. acquisition these recognition pre-fund were some some when we the it were the with was in decided they took invested say saw sitting accounting actually because yet time to recognize not there Canadian Additionally, into was it? earnings

and it mark gains we guidance. in you that that XXXX liquidate we accounting the don't per we in didn't and You those that market and till recognize time recognize investments our in favor time we it the between back move investments had to that to bought saw

recognition I of And exclude But be was not so ongoing That you. that would out. would an liquidated the agree we liquidation. with basis, typically that on something we

Operator

go Van The next ahead. Jeff from question with Please FBR. Sinderen Riley B. comes

Jeff Sinderen

morning my Good and congratulations. me let add

on question a Just inventory.

expect up of at magnitude inventory be if QX? wondering should we to similar Just end the

Jared Poff

slated be plan in on really available-for-sale we where not of we Rogers don't far over quarter are line our end QX. look available-for-sale quarter point We day re-echo I at ended for the what are. with over up locations our that it’s by the we But look the And day our of at think is look end a time Yes. and to only. from that inventory what at that as for our we goods goods at -- contest QX,

Roger Rawlins

that has it’s to down rate have it. But Jeff, these interested conversion that warehouse of during would why drop visually walked we’re certain or low-XXs historically or so to that what see walk our I you box walk our a there product that image see -- that capacity, could XX% in these the we to whatever is and our below mid-XXs XX% the consumer from That’s think XX% are I -- you probably in no saying on warehouses in about want into am just trough. of others you we think not and are our with in and the portray in and when you and trough, and we normal this.

these coming time. windows So to people in we us of have

But show, we’re years go floor I our we in doesn’t was damaging have priced and that on have can over sell regular a last our pulling inventory to can think to it the brand. three to products mean going we by Let’s the stock make product the floor, on the level certain we gotten it we that back we’re XXX%. to

So have I but we how to or different going on or might it’s in BOPs and that’s So like look the February are BOP the think August BOP, why, it does seen entire BOPs, a Feb we’re across season? say than what August little it’s the be across past. I’d not real entire quarter you again, focused managing the at what the

Jeff Sinderen

about update follow-up close product And us out this assortment your close point. buys you’re on in then how at I you know part a or out a of thinking the of your small as give can it’s penetration business. But Okay. to any that, relatively

out if sort about wondering at I close was think those QX? sort in we all Just buy that a forward? And type should going special of driver then guess how or merchandise of

Roger Rawlins

we have -- where those say historically stayed about would I been. we Jeff,

that increases we’ve or see been total of But don’t I assortment. to of that space. our being sort where big decreases stay So a in in going driver we’re

Operator

next question go with Please comes Christopher from The Svezia Wedbush. ahead.

Christopher Svezia

I guess you. a point for and clarification Jared guidance, of on first just the

you Just including correct But the or are guidance, numbers, $X.XX to little the $X.XX, Town maybe profits? how on you incorporated from from both out, revenues clarification them about that excludes losses and the just the wind that’s if a stores from Shoes stores me those as I’m revenue closing, excluded that. wrong are revenues

Jared Poff

the excluded -- any all ongoing from banner of from are the Yes, the of aspects operations impact Town guidance.

Christopher Svezia

Okay.

excluded profit? revenues So and from from excluded

Jared Poff

That’s Correct. right.

Christopher Svezia

your about are your inventory you planning how to for drive fall to a component, that to it, chase thinking regard inventory know your I and are I’m But applies last planning With comp? relative the about where more you’re think -- thinking as category for to boot as that comp to just you Or conservatively segment, you can, curious about just planning how you restrictions? and to back into build year. that potential category When half? color expectations there’s any you’re into

Roger Rawlins

take can I that question. Chris. Thanks,

with approach did boots. sandals, taking we with as just a similar we’re think I

we're boot. not there it's are in boot, fashion winter the boots more that now. It’s selling inventory key that So items, on are

and team belief we that organization this she's where track boot the chase then season in consumers boots, sandals, know voting -- then third items So are record for and again demonstrated in throughout we that's to going trends that part. important chase certain at as go did more out key an I a making just you the And and when the the we go -- it love ability we we her we and think throughout the have it. where to quarter have like what of seeing buying and know the boots in-stock and our on has

playing we for did doing it I think season. what like out in the sandal, fall we're just that So again, boots in we're

Christopher Svezia

Okay.

you to business margin profit] going Lastly, or don't is the second stay you back But merchandise DSW I to you [gross the to you for was per continue up half. get expect stores, I merchandise or that think your quarter. just se. to in said building believe margin, decision on And I indicated know in the view

year? whether Just out takes whether for for correct just the you whether sourcing, me clearance, how back if just of it's about I'm puts to talk drivers the it’s wrong and you're maybe the that planning it’s -- half and the

Roger Rawlins

Sure.

drivers was of both as well a the IMU produce IMU of markdown So see operations QX, we in but from IMU it as lot favorability A some favorable markdown combination than upside. sourcing more from favorability. coming did

a So margin DSW overall in for we XQ you saw nice the as our in uptick mentioned, segment. merch

I But slated is a IMU. slightly for little muted, say There segment from like are mute costing favorability. that on positive QX same some For we’ve again now in and if and that actually our expecting margin we see the work with but still coming the expecting great in back a that doing that little merch our in right most for initiatives the -- half, that's we've markdowns. we DSW would of not to merchants type -- materialize more of markdown lower the plan. We're saw should sell-throughs are performance what got we

Christopher Svezia

helpful. That's Okay.

to year-over-year, improvement merchandise given skewed just margin is, than calculation? was point QX that comparisons is one the fair Just QX a

Roger Rawlins

question? your was What sorry. I'm

Christopher Svezia

skewed Is QX it more that? to opportunity the QX is given merch improvement comparisons to margin just for the than

Roger Rawlins

Yes.

Christopher Svezia

appreciate I it.

Okay, Thanks.

Operator

comes go ahead. Wells Gulmi Matthew Fargo. Please The from with next question

Matthew Gulmi

forward? they normal so that and how a not for business for so on Canada structure the Is about points if margin margins spread were gross we Canada US. speak to the that about think going the Just X the should below

Roger Rawlins

mentioned for in general one either expect want or but we of to lower that for to to you we should earlier business, least aren't you at at Canada the a I callers to see profile -- As -- US would I Canadian now. to the margin are say guide margin don't

organization be We and opportunities have that smaller that initiatives in place actually right as relationships then but gone We in we to goods. they have have their our leverage for right market that with distributors working we have to on. now middle some own of the and the to think a we're now for vendors have going

Jared Poff

everyone’s I the margin carry athleisure/kids, more rate products a you said. combination But just those then of assortment your think assortment, a than roughly which do being the also I that you it’s what half on both again product. aware fashion some of think forward of just mix the lower with of

margin So those what are the at look as like. two factors big Canada looks in we

Operator

our for This turn question-and-answer session. any conference over closing concludes to to remarks. like the Roger I back Rawlins would

Roger Rawlins

Thanks to have to from thanks call. a everyone of just in for calling all Canada wanted know lot first we in. up I folks this I listening my on teammates in. say

guys you a have to the in just great And to Great you. everyone QX. family. thank So congrats on

when in all I your then think our buys, And traffic to or team, items, they you driving stay it’s door marketing, looking the them. inspire warehouse in That’s us can way. on they when we are. convert way let’s visit rest keep the to important, of focused those come to ways that they’re a big nimble, website, sale, there obviously just three then merchants be driving find support We let’s for. self-expression. sales what stay teams key drive And

great for let’s keep Have QX it So day. a and thanks everyone up. a great

Operator

This for today’s now attending Thank concluded. conference presentation. is you

disconnect. now may You

Designer Brands (DBI) 28 Aug 182018 Q2 Earnings call transcript