09 Jun Designer Brands’ Q1 Sales Climb 18 Percent
Designer Brands Inc., the parent of DSW, reported sales grew 18.1 percent in the first quarter ended April 30 with same-store sales gaining 15.3 percent. Earnings topped Wall Street’s estimates and the company raised its EPS guidance for the year.
Roger Rawlins, chief executive officer, stated, “We saw robust growth in our Owned Brands in the quarter, both through our direct-to-consumer and wholesale channels and believe we are on a great trajectory to achieve our goal of doubling our Owned Brand sales by 2026. Our strong first quarter 2022 results demonstrate the progress we are making towards our long-range plan that we outlined at our recent Investor Day. In addition, we are further building our relationships with our top National Brands, and our new prototype Warehouse Reimagined store, which opened in May, brings to bear a wealth of capabilities and opportunities that will help us to strengthen these relationships and provide a more seamless omnichannel experience for our customers. In an increasingly direct-to-consumer world, we continue to acquire opportunities to meet customers at a range of touchpoints. Most recently, this includes our partnership with Wolverine and the Hush Puppies brand, our partnership with ABG and the Reebok brand, and our purchase of the ‘shoes.com’ digital domain. These are just a few ways Designer Brands is reaching new customers, partnering differently with our National Brand partners and leveraging new distribution channels that will enable us to deliver long-term shareholder growth.”
First Quarter Operating Results
(all comparisons are to the first quarter of 2021)
- Net sales increased 18.1 percent to $830.5 million;
- Comparable sales increased 15.3 percent;
- Gross profit increased to $275.7 million versus $216.1 million last year, and gross margin, as a percentage of net sales, was 33.2 percent as compared to 30.7 percent last year;
- Reported net income was $26.2 million, or diluted earnings per share (EPS) of $0.34, including net charges of $0.14 per diluted share from adjusted items, primarily related to the loss on extinguishment of debt and write-off of debt issuance costs. In the year-ago period, net earnings were $17 million, or 22 cents a share;
- Adjusted net income was $36.7 million, or diluted EPS, of $0.48, up from earnings of $9.5 million, or 12 cents, a year ago; and
- Adjusted earnings of 48 cents a share topped Wall Street’s consensus estimate of 24 cents. Sales at $830.5 million topped Wall Street’s consensus target of $815.4 million.
Cash and cash equivalents totaled $54.8 million at the end of the first quarter of 2022 compared to $49.3 million at the end of the same period last year, with $238.2 million remaining available for borrowings under its senior secured asset-based revolving credit facility (ABL Revolver). Debt totaled $306.9 million at the end of the first quarter of 2022 compared to $337.4 million at the end of the same period last year. Designer Brands said it anticipates receiving approximately $160 million in the near future from the Internal Revenue Service as a result of the Coronavirus Aid, Relief, and Economic Security Act.
On March 30, 2022, Designer Brands replaced its previous $400.0 million senior secured asset-based revolving credit facility with its current $550.0 million ABL Revolver, which matures in March 2027. Also, Designer Brands settled in full its senior secured term loan during the quarter.
The company ended the quarter with inventories of $672.5 million compared to $540.1 million at the same period last year.
Return to Shareholders
During the first quarter of 2022, Designer Brands repurchased 1.7 million Class A common shares at an aggregate cost of $22.7 million under its share repurchase program. During the second quarter of 2022 through May 27, 2022, the company has repurchased another 1.8 million Class A common shares at an aggregate cost of $24.8 million. As of May 27, 2022, $287.4 million of Class A common shares remain authorized for repurchases under the share repurchase program.
On April 8, 2022, the company announced that the company’s Board of Directors approved the reinstatement of the regular quarterly cash dividend to shareholders. A dividend of $0.05 per share of Class A and Class B common shares was paid on May 6, 2022 to shareholders of record at the close of business on April 22, 2022. In addition, a dividend of $0.05 per share of Class A and Class B common shares will be paid on July 6, 2022 to shareholders of record at the close of business on June 22, 2022.
Store Openings and Closings
During the first quarter of 2022, Designer Brands opened two new stores in the U.S. and no new stores in Canada with no stores closed, resulting in a total of 510 U.S. stores and 140 Canadian stores as of April 30, 2022. During May 2022, Designer Brands opened its new “Warehouse Reimagined” format at a Houston-area DSW store.
Updated Fiscal 2022 Financial Outlook
For the full year, earnings are now expected to be in the range of $1.90 to $2.00 a share, up from previous guidance in the range of $1.80 and $.90. Comparable-store growth is now projected to be up mid-single digits, down from previous guidance calling for high-single digits.