Designer Brands Bet on New Businesses as Q2 Earnings Hit Expectations

Samantha McDonald

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Designer Brands Inc. is betting on its new businesses.

The company, based in Columbus, Ohio, today posted second-quarter adjusted earnings of 48 cents per share — a cent ahead of Wall Street forecasts — on profits of $35.8 million. Although below consensus bets of $872.37 million, revenues for the firm were up 8.2% to $860.19 million.

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Same-store sales declined 0.6%, but CEO Roger Rawlins touted the firm’s rapidly growing enterprise following the acquisition of Camuto Group, continued expansion of Canada-based The Shoe Company and the strength of its flagship brand, Designer Shoe Warehouse.

“I am proud of the work our teams have done, not only delivering a solid quarter but also successfully integrating two significant acquisitions and leveraging the unique strength of each of our businesses to give Designer Brands greater control and flexibility in setting our own destiny in a world full of extraordinary external pressures,” he said. “Each segment delivered what was needed this quarter, but our newest businesses really stood out, exceeding our expectations and moving us closer to the vision laid out at our investor day.”

In March, the company rebranded its corporate name from DSW to Designer Brands, creating a new umbrella organization trading under the ticker DBI and comprising the DSW retail chain, Camuto Group, The Shoe Company and other affiliated businesses.

Camuto was snapped up for $375 million in October in a partnership between then-DSW and brand management firm Authentic Brands Group. ABG acquired a 60% majority stake, DSW took the remainder. Under the terms of the deal, the pair acquired the intellectual property of Camuto’s brands, including Vince Camuto, Louise et Cie, Sole Society and Enzo Angiolini.

Now, as part of the Designer Brands organization, Camuto Group has taken over the design, sourcing and development of DSW’s private-label brands, giving the retailer the ability to lower product costs and capture higher margins. Additionally, the parent company is working on bolstering Camuto’s wholesale business across the DSW and Shoe Company platforms as well as applying its digital expertise to improve the banner’s direct-to-consumer operations.

In a statement accompanying the Q2 report, Rawlins added, “The Camuto Group team has unveiled the DSW Spring 2020 private label offering, and based on the fashion, styles and quality shown, we believe we will be in a solid position to not only see the gross margin benefit as we convert the production of our DSW private label to Camuto Group next spring, but also to increase brand loyalty and further drive sales within our warehouse footprint.”

As for the DSW flagship chain, the company’s three-year priorities are centered on product and experiences. The retailer is also focused on improving its kids’ offerings while providing enhanced shopping experiences including the W Nail Bar and its VIP Loyalty program.

Designer Brands also aims to grow The Shoe Company, relaunching its loyalty program, investing more in marketing and expand into new regions such as Quebec.

“In Canada, the transfer of successful practices at DSW in the U.S. to our Canadian banners fueled continued positive momentum in this business,” Rawlins said. “We were particularly pleased with the growth in Canada of both the loyalty programs and e-commerce sales.”

For the full year, the company’s guidance for adjusted earnings per share is in the range of $1.87 to $1.97 per diluted share. As of 9:30 a.m. ET, DBI’s stock was up 1.6% to $15.20.

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