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Designer Brands Inc. Reports Fourth Quarter and Fiscal Year 2020 Financial Results

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Sequential improvement in results continued in the fourth quarter

Athletic comparable sales in the U.S. Retail segment were up 19% in fourth quarter fiscal 2020, improved from the 5% increase in the third quarter of this year

COLUMBUS, Ohio, March 16, 2021 /PRNewswire/ -- Designer Brands Inc. (NYSE: DBI) (the "Company" and "Designer Brands"), one of North America's largest designers, producers and retailers of footwear and accessories, announced financial results for the three months ended and fiscal year ended January 30, 2021, compared to the three months ended and fiscal year ended February 1, 2020.

Chief Executive Officer Roger Rawlins, stated, "Designer Brands' fourth quarter continues our story of sequential improvement in unprecedented market conditions. I am proud of our team's exceptional execution of our near-term strategy as we continued to pivot our assortment to athleisure and kids, focused on the Top 50 brands in footwear and leaned even further into our digital-first capabilities.

In 2021, Designer Brands will further stabilize our business by continuing to invest in the premier footwear brands our consumers demand, improving our digital and omni-channel capabilities and leveraging our ability to design and source goods. When demand shifts back to dress and seasonal, our Camuto team will be well-prepared to capitalize on our historical success in these categories while protecting our newly captured market share in the athletic segment. We have a significant amount of inventory open to buy and the capability to flex our business as customer preferences evolve, making us a dominant player with room to grow as the market recovers."

Fourth Quarter Operating Results

  • Net sales decreased 26.6% to $609.4 million in the fourth quarter of fiscal 2020 compared to the same period last year.

  • Comparable sales decreased by 20.1% compared to last year's 0.7% increase.

  • Gross profit decreased to $135.0 million in the fourth quarter of fiscal 2020 versus $205.9 million last year, and gross margin as a percentage of net sales was 22.2% as compared to 24.8% last year. The decrease in the gross profit rate was primarily driven by the significant reduction in customer traffic with the continuing impact of the coronavirus disease ("COVID-19") outbreak resulting in lower sales volume.

  • Reported operating expenses were down 8.3% to $201.6 million versus last year and the reported operating expenses as a percentage of net sales was 33.1%, above last year's level of 26.5%, due to a significantly lower sales volume.

  • Reported net loss was $134.0 million, or $1.85 loss per diluted share, including net charges of $1.32 per diluted share from adjusted items primarily related to impairment and restructuring charges and the valuation allowance established against deferred tax assets.

  • Adjusted net loss was $38.6 million, or $0.53 loss per diluted share.

Full Year Operating Results

  • Net sales decreased 36.0% to $2.2 billion in fiscal 2020 compared to the same period last year.

  • Comparable sales decreased by 34.2% compared to last year's 0.8% increase.

  • Gross profit decreased to $311.2 million in fiscal 2020 versus $999.7 million last year, and gross margin as a percentage of net sales was 13.9% as compared to 28.6% last year. The decline in gross margin was a result of elevated markdown activity during the year in addition to increased shipping expense with higher digital penetration and deleverage on occupancy, fixed distribution costs, and royalty expense related to the decline in net sales.

  • Reported operating expenses were down 13.9% to $753.3 million versus last year and the reported operating expenses as a percentage of net sales was 33.7%, above last year's level of 25.1%.

  • Reported net loss was $488.7 million, or $6.77 loss per diluted share, including net charges of $2.87 per diluted share from adjusted items primarily related to impairment and restructuring charges, a settlement gain with a vendor, and the valuation allowance established against deferred tax assets.

  • Adjusted net loss was $281.7 million, or $3.90 loss per diluted share.

Liquidity Highlights

  • Cash and investments totaled $59.6 million compared to $111.5 million at the end of fiscal 2019, with $294.7 million available for borrowings under our senior secured asset-based revolving credit facility ("ABL Revolver"). Debt totaled $334.8 million at the end of fiscal 2020 compared to $190.0 million debt outstanding for the same period last year.

  • The Company ended the year with inventories of $473.2 million, down 25.2% compared to the same period last year, primarily due to strong inventory controls.

Store Openings and Closings

During fiscal 2020, we opened six stores and closed eight stores in the U.S. resulting in a total of 519 U.S. stores. In Canada, we opened two stores and closed three stores resulting in 144 Canadian stores.

Webcast and Conference Call

The Company is hosting a conference call today at 8:30 am Eastern Time. Investors and analysts interested in participating in the call are invited to dial 888-317-6003, or the international dial in, 412-317-6061, and reference conference ID number 4069853 approximately ten minutes prior to the start of the call. The conference call will also be broadcast live over the internet and can be accessed through the following link:

https://www.webcaster4.com/Webcast/Page/1213/40165

For those unable to listen to the live webcast, an archived version will be available at the same location until March 31, 2021. A replay of the teleconference will be available until March 30, 2021 by dialing the following numbers:

U.S.: 1-877-344-7529
Canada: 1-855-669-9658
International: 1-412-317-0088
Passcode: 10152724

About Designer Brands

Designer Brands is one of North America's largest designers, producers and retailers of footwear and accessories. The Company operates a portfolio of retail concepts in nearly 700 locations under the DSW Designer Shoe Warehouse®, The Shoe Company® and Shoe Warehouse® banners. The Company designs and produces footwear and accessories through Camuto Group, a leading manufacturer selling in more than 5,400 stores worldwide. Camuto Group owns licensing rights for the Jessica Simpson® footwear business and footwear and handbag licenses for Lucky Brand®. In partnership with a joint venture with Authentic Brands Group, the Company also owns a stake in Vince Camuto®, Louise et Cie®, and others. More information can be found at www.designerbrands.com.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

Certain statements in this press release may constitute forward-looking statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements by the use of forward-looking words such as "outlook," "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. These statements are based on the Company's current views and expectations and involve known and unknown 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. These factors include, but are not limited to: risks and uncertainty related to the continued outbreak of COVID-19, any future COVID-19 resurgence, and any adverse public health developments; risks related to losses or disruptions associated with our distribution systems, including our distribution and fulfillment centers and our stores, whether as a result of COVID-19, reliance on third-party vendors, or otherwise; our ability to protect the health and safety of our associates and our customers, which may be affected by current or future government regulations related to stay-at-home orders and orders related to the operation of non-essential businesses; risks related to our international operations, including international trade, our reliance on foreign sources for merchandise, exposure to political, economic, operational, compliance and other risks, and fluctuations in foreign currency exchange rates; maintaining strong relationships with our vendors, manufacturers, licensors, and retailer customers; our ability to anticipate and respond to fashion trends, consumer preferences and changing customer expectations; risks related to restrictions on our ABL Revolver and senior secured term loan that could limit our ability to fund operations; our reliance on our loyalty programs and marketing to drive traffic, sales and customer loyalty; failure to retain our key executives or attract qualified new personnel; risks related to the loss or disruption of our information systems and data and our ability to prevent or mitigate breaches of our information security and the compromise of sensitive and confidential data; our ability to comply with privacy laws and regulations, as well as other legal obligations; our ability to protect our reputation and to maintain the brands we license; uncertain general economic, political and social conditions and the related impacts to consumer discretionary spending; our competitiveness with respect to style, price, brand availability and customer service; our ability to provide customers cost-effective shopping platforms; and uncertainty related to future legislation, regulatory reform, policy changes, or interpretive guidance on existing legislation. Risks and other factors that could cause our actual results to differ materially from our forward-looking statements are described in the Company's latest Annual Report on Form 10-K or other reports filed with the Securities and Exchange Commission. All forward-looking statements speak only as of the time when made. The Company undertakes no obligation to update or revise the forward-looking statements included in this press release to reflect any future events or circumstances.

DESIGNER BRANDS INC.
SEGMENT RESULTS
(unaudited)


Net Sales


Three months ended


Change

(dollars in thousands)

January 30, 2021


February 1, 2020


Amount


%


Comparable
Sales %

Segment net sales:










U.S. Retail

$

527,372



$

658,860



$

(131,488)



(20.0)

%


(19.7)%

Canada Retail

42,150



57,596



(15,446)



(26.8)

%


(27.6)%

Brand Portfolio

52,170



103,296



(51,126)



(49.5)

%


3.2%

Other



28,155



(28,155)



(100.0)

%


NA

Total segment net sales

621,692



847,907



(226,215)



(26.7)

%


(20.1)%

Elimination of intersegment net sales

(12,340)



(18,287)



5,947



(32.5)

%



Net sales

$

609,352



$

829,620



$

(220,268)



(26.6)

%



NA - Not applicable




Twelve months ended


Change

(dollars in thousands)

January 30, 2021


February 1, 2020


Amount


%


Comparable
Sales %

Segment net sales:










U.S. Retail

$

1,800,323



$

2,745,395



$

(945,072)



(34.4)

%


(34.9)%

Canada Retail

182,659



249,017



(66,358)



(26.6)

%


(26.0)%

Brand Portfolio

248,646



448,285



(199,639)



(44.5)

%


38.2%

Other

62,909



122,090



(59,181)



(48.5)

%


(50.4)%

Total segment net sales

2,294,537



3,564,787



(1,270,250)



(35.6)

%


(34.2)%

Elimination of intersegment net sales

(59,818)



(72,100)



12,282



(17.0)

%



Net sales

$

2,234,719



$

3,492,687



$

(1,257,968)



(36.0)

%



Store Count


January 30, 2021


February 1, 2020

U.S. Retail segment - DSW stores

519



521


Canada Retail segment:




The Shoe Company / Shoe Warehouse stores

117



118


DSW stores

27



27



144



145


Total number of stores

663



666


Gross Profit


Three months ended




January 30, 2021


February 1, 2020


Change

(dollars in thousands)

Amount


% of
Segment
Net Sales


Amount


% of
Segment
Net Sales


Amount


%


Basis
Points

Segment gross profit:














U.S. Retail

$

117,980



22.4

%


$

167,620



25.4

%


$

(49,640)



(29.6)

%


(300)

Canada Retail

6,407



15.2

%


14,679



25.5

%


$

(8,272)



(56.4)

%


(1,030)

Brand Portfolio

11,801



22.6

%


20,861



20.2

%


$

(9,060)



(43.4)

%


240

Other



NM



4,422



15.7

%


NM



NM


NM


136,188





207,582










Elimination of
intersegment gross profit

(1,185)





(1,726)










Gross profit

$

135,003



22.2

%


$

205,856



24.8

%


$

(70,853)



(34.4)

%


(260)

NM - Not meaningful




Twelve months ended




January 30, 2021


February 1, 2020


Change

(dollars in thousands)

Amount


% of
Segment
Net Sales


Amount


% of
Segment
Net Sales


Amount


%


Basis
Points

Segment gross profit:














U.S. Retail

$

242,786



13.5

%


$

786,976



28.7

%


$

(544,190)



(69.1)

%


(1,520)

Canada Retail

28,651



15.7

%


79,850



32.1

%


$

(51,199)



(64.1)

%


(1,640)

Brand Portfolio

36,393



14.6

%


114,170



25.5

%


$

(77,777)



(68.1)

%


(1,090)

Other

962



1.5

%


26,065



21.3

%


$

(25,103)



(96.3)

%


(1,980)


308,792





1,007,061










Elimination of
intersegment gross loss
(profit)

2,449





(7,391)










Gross profit

$

311,241



13.9

%


$

999,670



28.6

%


$

(688,429)



(68.9)

%


(1,470)

Intersegment Eliminations


Three months ended


Change

(dollars in thousands)

January 30, 2021


February 1, 2020


Amount


%

Elimination of intersegment activity:








Net sales recognized by Brand Portfolio segment

$

(12,340)



$

(18,287)



$

5,947



(32.5)

%

Cost of sales:








Cost of sales recognized by Brand Portfolio segment

7,912



11,787



(3,875)



(32.9)

%

Recognition of intersegment gross profit for inventory previously purchased that was subsequently sold to external customers during the current period

3,243



4,774



(1,531)



(32.1)

%

Gross profit

$

(1,185)



$

(1,726)



$

541



(31.3)

%




Twelve months ended


Change

(dollars in thousands)

January 30, 2021


February 1, 2020


Amount


%

Elimination of intersegment activity:








Net sales recognized by Brand Portfolio segment

$

(59,818)



$

(72,100)



$

12,282



(17.0)

%

Cost of sales:








Cost of sales recognized by Brand Portfolio segment

42,028



51,068



(9,040)



(17.7)

%

Recognition of intersegment gross profit for inventory previously purchased that was subsequently sold to external customers during the current period

20,239



13,641



6,598



48.4

%

Gross loss (profit)

$

2,449



$

(7,391)



$

9,840



NM


NM - Not meaningful

DESIGNER BRANDS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited and in thousands, except per share amounts)



Three months ended


Twelve months ended


January 30, 2021


February 1, 2020


January 30, 2021


February 1, 2020

Net sales

$

609,352



$

829,620



$

2,234,719



$

3,492,687


Cost of sales

(474,349)



(623,764)



(1,923,478)



(2,493,017)


Gross profit

135,003



205,856



311,241



999,670


Operating expenses

(201,566)



(219,761)



(753,278)



(874,749)


Income from equity investment in ABG-
Camuto

3,004



2,795



9,329



10,149


Impairment charges

(4,243)



(2,947)



(153,606)



(7,771)


Operating profit (loss)

(67,802)



(14,057)



(586,314)



127,299


Interest expense, net

(8,739)



(1,408)



(23,694)



(7,355)


Non-operating income (expenses), net

681



(42)



1,361



(170)


Income (loss) before income taxes

(75,860)



(15,507)



(608,647)



119,774


Income tax benefit (provision)

(58,144)



7,943



119,928



(25,277)


Net income (loss)

$

(134,004)



$

(7,564)



$

(488,719)



$

94,497


Diluted earnings (loss) per share

$

(1.85)



$

(0.11)



$

(6.77)



$

1.27


Weighted average diluted shares

72,389



71,753



72,198



74,605


DESIGNER BRANDS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited and in thousands)



January 30, 2021


February 1, 2020

ASSETS




Cash and cash equivalents

$

59,581



$

86,564


Investments



24,974


Receivables, net

196,049



89,151


Inventories

473,183



632,587


Prepaid expenses and other current assets

51,772



67,534


Total current assets

780,585



900,810


Property and equipment, net

296,469



395,009


Operating lease assets

700,481



918,801


Goodwill

93,655



113,644


Intangible assets, net

15,635



22,846


Deferred tax assets



31,863


Equity investment in ABG-Camuto

58,598



57,760


Other assets

31,172



24,337


Total assets

$

1,976,595



$

2,465,070


LIABILITIES AND SHAREHOLDERS' EQUITY




Accounts payable

$

245,071



$

299,072


Accrued expenses

200,326



194,264


Current maturities of long-term debt

62,500




Current operating lease liabilities

244,786



186,695


Total current liabilities

752,683



680,031


Long-term debt

272,319



190,000


Non-current operating lease liabilities

677,735



846,584


Other non-current liabilities

30,841



27,541


Total shareholders' equity

243,017



720,914


Total liabilities and shareholders' equity

$

1,976,595



$

2,465,070


DESIGNER BRANDS INC.
NON-GAAP RECONCILIATION
(unaudited and in thousands, except per share amounts)



Three months ended


Twelve months ended


January 30, 2021


February 1, 2020


January 30, 2021


February 1, 2020

Reported net income (loss)

$

(134,004)



$

(7,564)



$

(488,719)



$

94,497


Pre-tax Adjustments:








Included in operating expenses:








Integration and restructuring expenses

6,601



4,148



17,620



17,722


Impairment charges

4,243



2,947



153,606



7,771


Gain on settlement





(8,990)




Included in non-operating expenses,
net -








Foreign currency transaction losses (gains)

(680)



43



(1,048)



259


Total pre-tax adjustments

10,164



7,138



161,188



25,752


Tax effect of adjustments

(2,379)



(3,404)



(41,698)



(6,664)


Valuation allowance on deferred tax assets

87,579



(3,949)



87,579



(3,949)


Total adjustments, after tax

95,364



(215)



207,069



15,139


Adjusted net income (loss)

$

(38,640)



$

(7,779)



$

(281,650)



$

109,636


Reported diluted earnings (loss) per share

$

(1.85)



$

(0.11)



$

(6.77)



$

1.27


Adjusted diluted earnings (loss) per share

$

(0.53)



$

(0.11)



$

(3.90)



$

1.47


Non-GAAP Measures

In addition to diluted earnings (loss) per share and net income (loss) determined in accordance with accounting principles generally accepted in the United States ("GAAP"), the Company uses adjusted diluted earnings (loss) per share and adjusted net income (loss), which adjust for the effects of (1) integration and restructuring expenses; (2) impairment charges; (3) gain on settlement; (4) foreign currency transaction losses (gains); (5) the net tax effect of such items; and (6) valuation allowance recorded on deferred tax assets. The unaudited reconciliation of adjusted results should not be construed as an alternative to the reported results determined in accordance with GAAP. These financial measures are not based on any standardized methodology and are not necessarily comparable to similar measures presented by other companies. The Company believes these non-GAAP measures provide useful information to both management and investors to increase comparability to the prior periods by adjusting for certain items that may not be indicative of core operating measures and to better identify trends in our business. The adjusted financial results are used by management to, and allow investors to, evaluate the operating performance of the Company on a comparable basis, when reviewed in conjunction with the Company's GAAP statements. These amounts are not determined in accordance with GAAP and therefore should not be used exclusively in evaluating the Company's business and operations.

Revised Non-GAAP Measures

Beginning with the fourth quarter of fiscal 2020, the Company has revised its determination of adjusted diluted earnings (loss) per share and adjusted net income (loss) by (1) eliminating the immaterial adjustments related to COVID-19 incremental costs (credits), net, and amortization of intangible assets; and (2) including an adjustment to remove the impact of the valuation allowance against deferred tax assets. These revisions are intended to align with how management will evaluate the performance of the business going forward. The Company has recast its historical fiscal 2019 non-GAAP financial measures of adjusted diluted earnings (loss) per share and adjusted net income (loss) to conform to the revised fiscal 2020 presentation as set forth in the table above.

Cision
Cision

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SOURCE Designer Brands Inc.