Earnings call transcript Q4 2022

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Operator

Good day and welcome to the Designer Brands Inc. Fourth Quarter 2022 Earnings Call. [Operator Instructions] This event is being recorded.

I would now like to turn the conference over to Jesse Miller, Head of Investor Relations. Please go ahead.

Jesse Miller

morning. Good XX-week company XX-week release January and to XX-week the operations results XX, a XX, the the January for XX-week and issued today, comparing press of XXXX, XXXX. Earlier ended periods periods ended

Please reference the note, certain recorded remainder will specified unless excludes during under call that GAAP results today's otherwise. we financial adjustments the that of

For release. press please reference a our complete reconciliation of GAAP to adjusted earnings,

Results company the may press future note materially expectations, about plans obligation constitute any statements. that forward-looking SEC. of prospects release filings to please various statements. Additionally, to forward-looking no the the the differ today's due company factors company's remarks and in assumes The update with made listed public and

Financial President Doug DBI Officer; CEO of Joining DSW. of incoming and Executive today us Roger Chief Rawlins, Howe, and are Chief Poff, Officer; Jared

Now, the let to Roger. me over call turn

Roger Rawlins

for year, morning, has today. listening Thank us our this posted proven of Jesse. our Thanks, guidance. a challenging proud at EPS to original are environment. I'm joining everyone, know annual who very that in top allergen the associates delivering adjusted you, of an we I results be this especially the

belief that degree it ice in of of enterprise now were as it over in XXXX, days share brand few have and multinational shared domestic Designer a on people's to the Garrett, is out to I other brands a as XX piece that we our a past In sitting wanted the made evolved the to a progress building described others X retailer Brands. being the We jeopardy. DSW, brands from Doug thoughts over years turning have weather. of Before we retailer selling we

spent aggressively with to they but were their to products opening, directly to would that the through were competing dollars that the retailers were we brands. consumer and as growing direct stores operate supporting billions them that predicted years going of quickly would glaciers Some brands in retailers the and they melt disappear websites take years their away, take others

core we business moved was acquisition the challenge, nearly the grow where bucked allowing our and retail the assortment other an U.S.-based business, attracted team our line, retailers this $XXX to retail of the materially our reach deliver of felt the growing result in market, We in to DSW to first a capabilities, amazing Canadian who DBI's one the of the brand share to of them channel. leading retailers in of XXXX, Company to direct-to-consumer Canada gross diversify becoming million successful most our who of necessary we experienced while it acquisition U.S., businesses infrastructure, As bottom technology and Shoe in including have This our contributing Canadian profit leverage to in been trend expand beyond commanding the market. we because of competencies disciplines our has model. failed meaningfully

X,XXX million to own direct-to-consumer operate channels basis the we the to the X acquisition through and our own vision Additionally, It direct-to-consumer wanted to increase which the and on or footwear to channels. and product design has acquired on differentiated delivering profit goods by Camuto This incremental own ability now to to deliver to control brands the top over allowed owned source our own goods DSW XX%, assortment and organization, our source expanding margin allowed of of and on we through brands. also of these brands and XX women's points us us average. and/or design $XXX our penetration fashion a sold through goods gross led our gross of approximately

retail which today platforms this a in broader our the best much vision to customer wholesale some distribution base brands through world. own finally, expanded the partners, And of our of includes

that dress also XXXX, categories, dominant player were and all the desire We our sales. are to which penetration half roughly our now saw category, casual of but this women's We much evolve team to our we the this attack athleisure we roughly very mix DSW. in still with a back fashion supporting and so our seasonal made, in shared to our of represented and casualize footwear point, category the type shifts to At in was the assortment. assortment XX% our over needed represents XX%, has of footwear. I'm athleisure customer and of upside proud

Canadian footwear at share We've Latigo brands our now market the category of Sopo, own Kids the and launch acquisitions the amazing results, of our portfolio. in Keds, which recent the sit DSW, and through top brands national gained on expanded assortment of

DBI through we additions, build the has footwear so and service to meeting of new seasonal fashion top a just our footwear source ability both of growth as many of this of not these design well, line. With more puzzle now casual the but as the the we and even long-term consumer and for channels; is piece critical bottom our in direct-to-consumer such needs

years, consider occasions. had of our pandemic. and share going That's we the working from limiting along wanted consumer with When in all of fashion We bumps of you a change X way. especially their through to nothing footwear the a were home when they while did as social lot do that

as for leader level but execution melt next acquisitions, build the attracted is and effective across vision set This on own business this the our uniquely take merchant our as success accelerate I firmly to to vision and strategy direct-to-consumer new ensure glacier heights. our culture grows to to ago, doesn't to has our continue Doug up what capabilities retail landscape. DBI believe brands a instead integrate our our I to qualified we year and our he's However, believe recent our a

efficient. business, in the and streamline organization our some recently with have collaboration that conjunction end, to evolution significant and undertaken our operations, actions To of promote our make we more

closely aid in that of to a and I by action. transition, thank all number DBI. fact would personally our for them with employees to We're to affected been sensitive We the like to their them have their are working contributions this

for my have given Board, have and our our all can't and my to deliver they teammates Jay thank wait watch mission built team we inspiring of platforms support to self-expression. to want the me and on the utilize them I

turn will to it I overview Jared that, Doug and quarter. With over past Doug? for the an of

Doug Howe

to some I leadership his Thank that excited on am good want gotten be to and you status, my to but the this over our quarters support current look well you far. I teams morning, has to me and the work more to the next Roger, to you, Thank him shown of even that year. I elevated in individually. I with continuing designer you've everyone. traveling to forward with to speak incredibly I've of taking coming phenomenal Roger forward the appointment, to you its get share news know for role. since to look thus want as I thank to more brands for of

to this continued variables inventory this share to proactive highly well had clearance positioned supported pressured and in with the made and athletic. dynamics levels, continued protecting delivered The by promotional, be we the of towards a critically last in an less business. earlier resurgence were with seasonal ourselves manage in important and year We eye our well promotional market our We our dress amidst decision considering consumer. inventory year the environment. actions we we industry during quarter to the the a season. out quarter athletic constrained macro specifically a elected positions combat and to footwear over was called this control, fourth In we We could In quarter, persist.

specifically business, As implement our ready-to-wear boots such, like the select we chose promotions seasonal in to on in product thoughtful quarter.

clearly business. we outperformance clearance In has us point sales the shown our clearance up while down they XX%. price customer value are this looking selling quarter Our at at time, in were of X%, that was and regular saw for DSW,

carefully sharing, been across discounted are purchasing pressure consumer other Between our see the current customers we and continuing recession, levels to a As less a as under companies looming year. spending we playing us are and space new real inventory enter continuing inflation have to a promotional thoughtful any how product balancing more. are putting are investments, Ultimately, we chase we the in in see we be space to in opportunities while time. about into position

continues partnerships want take is complementary. our moment and be to maintain a to that national owned strategy with goal national I are to strong completely while owned brands our Importantly, our to priority. emphasize brands brand doubling

in continue national to aggressively will growth to XXXX. ways brands, grow foundation will our partners. brand to additions incredibly ourselves strong in position building while to We that continue our recent for a finding in unique we greater even with us put XXXX position own additional have our opportunities our portfolio, an With unlock

be closer achieve to XXXX. exciting is X recent and own which X me our even our get brands we TopoAthletic start strategy our support are brands. and in leading made Let In for kids us months, with to set reasons. notable acquisitions, Latigre, we brand builder that own have This target, to a

demonstrates portfolio. strategy. all own customers secondly, we price we partners of it our our And to And brands make now our highlights or in months it our importance no material ability our national for major the First, ago, strategy. had on brand brand Two product progress athleisure our to represented own own across athletic points to shop.

exclusively to value licensing long-term Wolverine Puppies relationship customer with with wholesale ultimately strong partner largest new to to ways Keds unlocking us Husch Puppies. the Keds Hush Our and being many acquiring in allowed brand soon from has to the

As which running, in acquisition iconic athletic, gives product we a product gives which to reach we Latigra love, acquired that expand simultaneously recently, athletic outside distribution premium our agreement a entered operations. retail brand us most athletic July and channels comfort. Then provides and reminder, our wide future. us the distribute footwear selectively invested continue and into hiking brands licensing an building our with walking, brand in in more Keds Topo in premium an And focuses and for exclusive to of opportunities December, through that on

the agreement ago large brands. -- space, Canada and the us U.S. product for source new and in few U.S. later expansion a opens tuchpuppies.com design our The to own anticipated Canada, future to up critical become just announced and the Puppies where for in license another was Husch exclusive the space this our Brands comfort weeks wholesale the Designer in expected opportunity the year. and effective is operate with highly brand Also white

within penetration margin have progress Prior own incredible brand DSW our All our have outside made our we extremely along store own growing mentioned, Roger base. our As own the accretion delivering to we brands the growing while, keds.com we distribution, fold way. retail we come successful later XXXX, X significant X and Today, progress sixth this Topo notable the independent in e-commerce sense. to Athletic, a the operate DSW, and vincecamuto.com into time now e-commerce year. Schuco, sites, tchpufpies.com, site with had only made have anticipated been

XX% roughly presence, of their through those online of For own a brands that have channel. sales our come personalized that

We other have ways on can this with we continue of are some eCom-Bitespace. to where we capitalize exploring brands our own

we growth As about up for ways. about future, with we connect think to greater in setting thinking how also are our customers ourselves in different the

significant own a are this. Our role brands playing in

the VIP over over allow recent In reach addition X million our programs, last just DBI to customers to year, new broaden customer our our beyond DSW. gaining loyalty us acquisitions

own the a easily are for Amazon, on also Canada. a business presence that new well will of in all to clear at this as customer points us allows TopoAthletic broaden in for who our new significant across brands include reach we brings insights our international while look that existing as engine glean from diversity customer style growth and base. Puppies wholesale other both which price to Designer a a is large All fold accomplishments brand, the has how portfolio. Brands to premium into busy bring customers a we kids DBI now comfort lifestyles. more examples want leverage are a well. set target as in potential penetration will opportunities a our potential expanding of we these with for will touch our They offering Ted to resulting their continue millennials and can These brands our will point. Touch be among

and and long in and ourselves as for consumer making have demand purchasing allow successfully seasonal as to cycles name trends in now our performance and a leaders clear balance us well been Ultimately, this we We economic dress are changes and through will preferences. casual. in athleisure

success X our achieved showcasing Canadian side, of across sales brand the our a continued XX% brand edit national top increase retail nearly Amplify partners for and in U.S. strategy. operations year, and the our the On

us speak in the focus You've about top and recent our quarters heard brands XX in on years intense footwear.

of of today some will to stepping take where our not but from things environments capabilities are strategy, like advantage We to flex like closeout away our are business. in benefit this that other beginning lives

comps our We performance pleased year-over-year. in which results. delivered expenses, We year. XXXX, quarter fiscal managing and while the improved X.X% were to year our healthy during the effectively Turning with of

pressured rates our gross were in promotional XXXX for Although levels well our margin sales and profitability highly above were the this environment, year.

Our on our robust own with gain of growth, nearly of way our goal to by us sales achieving XXXX. to traction strategy continues brand well sales putting total X/X

total prior owned in brands from the year. year, the For in and XX% versus XX% owned to penetration prior DTC XX% XX% grew grew year, to penetration the brand

personally more that Although given QX with casual versus nature brands. felt pressure own saw in the we Lucky struggled bright our spots its being brand and industry more as Vince in Simpson Jessica portfolio dressy XX%, with over-inventoried, up Camuto

XX%; in up up Kelly Crown up of vintage, a performance quarter, DTC with Our XX% lucky, on Emma was and the XX%; fantastic partnership Katy, continued in fourth brands Roberts the QX which the momentum and was heels celebrity QX. and into were which with strongest

to discuss our a in moment a more want moment. just dissect I guidance, take Jared in to which detail will

XXXX. that what mind, that we With that we the the pressure sales that levels. and We year, deliver You'll because be do it said, prudent our customers through clearly believe down to assume for above temporary. is these are the being on continues historical believe facing planning and is will trends to of laser-focused in we notice, earnings we continue first are to we control part can profitability our are --

inventory continue our to carefully. also manage We'll

may We than our anticipated. we in opportunity positioned than sign of pounce that position and and be better inventory have competitors, feel to any we our most are materialize managed to well peers on chase stronger of business

half a Assuming easier well. results anticipated we the in are is second economists year as recovery begin of lap in seeing soft comparisons the a the there landing our predicting, as to we as are

their Before of our I all associates to hard it to pass thank for Jarrod, over I want work.

in executing in times, do well are We am confident I to to ability continue and challenging our so.

over Jared. pass to Jared? that, I'll it With

Jared Poff

quarter once good Thanks, we brand-building during of Doug's capabilities. Doug, of that I to how on posted our morning, am strategy proud business evolved and the results the and and the our model made echo everyone. showcased on briefly our the I We want again Roger progress and comments power year.

the was year we of guidance EPS top top at year strong for Adjusted start and landing the the of the full XXXX. a on very the $X.XX, of provided at

effectively the our expenses quarter perspective, strategy. While brand our successfully saw top some a on our own fourth pressure to line The and versus earnings from I inventory and am team with continued expectations. managed deliver pleased

our to results. Turning

the result also were for year. up an Canada had top and up $XXX.X of the of $X.X full a total promotional U.S. to million were year primarily comps sales full to In posting For to comps comps retail compared consumer XX.X%. XXXX. pressured year, X.X% to X% a On quarter, a increased sales performance as environment. compared billion decreased of X.X% record X.X% competitive XXXX, year, the level highly and last and excellent

on incredibly up XX.X%. We proud performance benscamuto.com are of with our comps

year showing Specifically, for own was XX% XX%. brands DTC growing our had and great a up the

consumer. quarter, the In following a constrained comps were a of fourth comp by in comps pressure retail the X.X%, fourth down X.X%, total were the XXXX. XX.X% driven quarter U.S. of fourth for down the quarter

our XX%. impressive story our down mentioned, sales external quarter was X% inventory, it Doug where, continued being a As the net with wholesale industry on year, as and during Canada's has was the a over growth for as in struggled up up basis, result, prior a business the quarter gain our growth vincecamuto.com, XX.X% for with the posted pleased largest for year. brand. Tenkmuto.com online compared the this continued for XX.X% XX.X% comps they as of were We're an owned to quarter. comps of

we'll forward, presences As we best grow family, with now of keds.com look further. practices to our own DBI online from on our all look our to leverage brands

in clearance decrease of result the start year. the XX.X% a was at our strategy points to a out laid gross we of compared activity intentional year, as that to of XX our For the year, the margin XX.X% basis full prior increase

and pre-pandemic slightly quarter fourth with increased change continues gross compared due clearance basis XXXX. improvement better XXX points XXX significantly level. XXXX. of consolidated XX.X% Importantly, to activity above a our higher gross than This structurally quarter margin points In last basis XXX quarter, year full the promotional margin year-over-year year, up of continues XX.X% was a over quarter. was, fiscal sequential the more be a than to with margin prior consolidated to basis compared however, gross the fourth robust this to the pre-pandemic the be decrease to points Again,

continued to for to XX.X% ratio SG&A The team was fiscal closely year our XX% of adjusted the in XXXX. fiscal and expenses manage compared sales

For expenses year to XX.X% last quarter, to business. the find XX.X% fourth across adjusted was ratio entire SG&A as compared we to opportunities look our back cut the

full sales For was the X.X% year. adjusted compared year, to operating X.X% prior in the of profit

last was net compared For net the expense $XX.X and interest quarter, of XXXX during million year. adjusted We operating $X.X fiscal of the X% of sales to during profit interest quarter. had fourth X.X% million fourth expense

Our quarter. full in effective results our the XX.X% year tax XX.X% rate for on the was fourth adjusted and

$X.XX million Full of income last $X.XX quarter $X.XX million year was last or adjusted year. $X.X net EPS or net year. income $XXX.X versus Fourth diluted diluted adjusted was EPS $X.XX versus

so year. we bringing inventory had our quarters, of signaling throughout plan along. levels made the $XXX.X of up XX% inventory of over On to the up we great end Turning our year. ended versus fourth we improvement levels the year, the a a quarter last $XXX.X the the was were basis, We million retail which down on all our prior progress inventory. Remember, ended with 'XX, to X the foot been fiscal compared million start inventories square at X% notable

we into facility. position, our others in includes and quarter to great head million the cash space. availability cash We our with million liquidity, and total our our about draw to was revolver we on $XXX.X available XXXX, credit As $XXX.X We especially which inventory had $XX.X ended revolving million. our feel compared of under

which we of reminder, the Cares prior final refund a us years as our tax receipt soon continue standard to As million due await the expect the of audits the Act IRS, applicable tax from to of the $XX as approximate conclude. we

acquisition top business, base this our our As we provide look be to an XXXX, to additive neutral but line guidance XXXX, our will I earnings recent in like year. to towards would CED, overall our excluding which on integration is of given

uncertainty continued signs patterns the that With we in spending, of QX. consumer expect we of landing saw soft October this consumer year in half macroeconomic continue of through with and evolving starting the of XXXX to environment first of spending in the a the discretionary pullback

we to growth a return start lapping pullback. we QX, October plan By as modest that

the Specifically, are digits. to the we down U.S. year segment, within for see in our Retail sales mid-single expecting

our We the We the the exit are in being expecting between flat digits for quarterly to wholesale XX% comps time anticipate XXXX expected of X% last down with first year. fourth mid-single sales spring the to excluding by the to to year. XX% CDs, with third external relatively year, half we be to trend business, down throughout fall similar and recovering a and quarters XX% down be to

XX% full the segment, excluding our to external be year, Brand Kids down we by to For expect within Portfolio XX%. wholesale

to which remain This selling but sales the and recovery to to $XX of XXrd vincecamuto.com inclusion retail acquisitions DTC experiencing. that retail flat be is Topo our impact relatively to our the the Within million year. relatively sales segment site our expect Portfolio last given last also year excludes post-COVID Kids fourth over Brand geography at being incorporates to will in continued business, guidance add in we quarter. our the that, flat week anticipate We our XXXX approximately segment, added a of of Canadian

excluding summary, down we to In anticipate Kids net fiscal mid-single Designer be total sales Brands digits XXXX. to

a at acquisition we the as year. did pertains it this on Keds fiscal CEDS, reminder, close the As of beginning to

channels anticipating are $XX sales net acquisition to that DTC, approximately we of such, million across As international add multiple and of million wholesale, Canada. this will $XX

it be to previously, will sales from recognize should we while we to these are in excited this sales, to current no about and related the are year that As we the cost due these noted profitability I the and said impact acquisition material integration. investments incremental anticipating

profitability. Turning our to impacting factors

directionally, While line points. I we to few key providing a are not detailed highlight P&L want guidance, item

at expect of as penetration be look business, to we XXXX. profit but result brands we versus total gross As continued up in supply and of chain down XXXX, dollars rate of margin normalization mid-single the costs gross be owned our digits to a

our XX-week are of all line and zero-based pressures, hard to CADs working SG&A management pare This period, while Therefore, reduce of inflation possible, compensation covering is current the meaningful to back in excluding multiple of also $XX approximately the lines by the expected topo spending budgeting new million. items. Given across including for we acquisition all line the and is discretionary labor, every incentive business P&L.

XXrd $XX expected to Topo are add week SG&A. in approximately million the of

million. On the approximately this contribute week line, the $X $X will million we operating anticipate million XXrd $X contribute also expected to to is Topo year. income

XXXX that at transition the paying kids a for heavy at integration a with mentioned during we kids under Wolverine Thus, breakeven will operating while As is agreement. and this year. investment services anticipating operate are earlier, a business support work contribution robust simultaneously occurring income to DBI, year

will that TSA. the Our in Keds the profitable business of expectation XXXX are off they is fully once become

our the pressures the QX the the With of to in EPS the $X.XX, including tax slightly due flat assumption year. the macro the be is and from on year. the landing is continuing This shares remaining of a relatively perspective, XX.X% acquisitions to year, quarter strongly an half last first XXXX to range balance quarters back the to $X.XX the we the around up with year a rate consumer average of in in to materialize into in weighted soft of decline XXrd primarily From adjusted calendarization from last almost assumed expected XX for approximately all million are the planning of XXXX week. and in to

effective until in recovery an generating the most through We like opportunities a for from of exciting midway we see the reductions last expense become the to environment QX, integration residing macro year deleverage. more of Furthermore, buys, compares potential we to targeted these closeout toughest find Additionally, not faster cost upside in fixed accelerated the XXXX, and expect to the we've quarter. implemented estimates kids.

In conclusion, our structurally about brand results diversification brands we've and and milestones continue revenue support this the of excited improved I'm to our portfolio are streams. board, delivering reached the year and own the across

With that, we'll open the call for questions. Operator?

Operator

We will now for Instructions] concludes conference begin question-and-answer closing the like turn over [Operator Roger remarks. the question-and-answer our to back session. to would any This I session. Rawlins

Roger Rawlins

are Thanks, again, to all that look everybody, and everybody's and for joining the to and team call appreciate success have. the Doug his support forward going

Operator

everybody. conference now you today's has attending The Thank concluded. for Thanks, presentation.

now may disconnect. You

Designer Brands (DBI) 16 Mar 232022 Q4 Earnings call transcript