09 Dec DSW’s Parent Sees Strong Sales Bounceback In Third Quarter
Designer Brands reported a profit against a loss in the third quarter ended October 31 as same-store sales improved 40.8 percent year-over-year. The company also said inventory for the retail segments significantly improved to end the third quarter flat to the same period in fiscal 2019.
Roger Rawlins, CEO, stated, “Designer Brands’ outstanding third-quarter results demonstrate the efficacy of our strategic plans that were set in motion prior to the onset of the pandemic and accelerated over the last 18 months. We continue to see strength in our key assortment distortion areas including athletic and athleisure, kid’s, and men’s, all powered by the Top 50 Brands in footwear, as well as a return to growth in our vertical brands. This drove record-setting margin expansion in the third quarter and our expectation is that these areas will continue to drive our long-term margin profile with these shifts being a permanent part of our go-forward model.
“We are energized by the strength of our strategy and our record-setting results, despite unseasonably warm weather and industry-wide supply chain challenges. Looking forward, we are continuing to focus on our three key strategic pillars—customer, brand, and speed—to remove friction, acquire new customers, evolve our assortment to match consumer preferences, and move product to our customers faster and more efficiently.”
Third Quarter Results
- Net sales increased 30.7 percent to $853.5 million in the third quarter of fiscal 2021 compared to the same period last year.
- Comparable sales increased 40.8 percent for the third quarter of fiscal 2021.
- Gross profit increased to a record $313.6 million in the third quarter of fiscal 2021 versus $165.7 million last year, and gross margin as a percentage of net sales was a record 36.7 percent as compared to 25.4 percent for the same period last year and 29.3 percent for the third quarter of fiscal 2019.
- Reported net income in the third quarter of fiscal 2021 was $80.2 million, or $1.04 diluted earnings per share (“EPS”), including net benefits of $0.18 per diluted share from adjusted items, primarily related to the change in the valuation allowance on deferred tax assets.
- Adjusted net income in the third quarter of fiscal 2021 was $66.6 million, or $0.86 diluted EPS, compared to an adjusted net loss of $18.6 million, or $0.26 loss per diluted share, for the third quarter of fiscal 2020.
Adjusted EPS of 86 cents beat Wall Street’s consensus for 56 cents. Sales of $853.5 million missed Wall Street’s consensus of $895.6 million.
Liquidity Highlights
- Cash and cash equivalents totaled $83.1 million at the end of the third quarter of fiscal 2021 compared to $114.5 million for the same period last year, with $394.7 million available for borrowings under our senior secured asset-based revolving credit facility (“ABL Revolver”). Debt totaled $227.9 million at the end of the third quarter of fiscal 2021 compared to $337.1 million debt outstanding for the same period last year.
- The company ended the quarter with inventories of $602.1 million compared to $546.0 million for the same period last year.
Store Openings and Closings
During the third quarter of fiscal 2021, we opened four new stores in the U.S. and one new store in Canada, and it closed four stores in the U.S., resulting in a total of 515 U.S. stores and 144 Canadian stores as of October 30, 2021.
Outlook for Fourth Quarter of Fiscal 2021
The company announced new guidance for the fourth quarter of fiscal 2021. Consolidated net sales are expected to be flat to up low-single-digits compared to the fourth quarter of fiscal 2019. The company expects this to result in a diluted EPS in the range of $0.10 to $0.15 for the fourth quarter of fiscal 2021. The adjusted net loss was 53 cents in the year-ago period.