Designer Brands Inc. posted weaker-than-expected sales in the fourth quarter amid declining consumer demand.
In Q4, net sales for the DSW-parent company decreased 7.5% to $760.5 million, short of analysts’ expectations of $791.81 million. Comparable sales decreased by 5.5% and adjusted net income was $4.7 million, with an adjusted diluted EPS of $0.07, which beat analysts’ expectations.
For the full year, results were largely in line with the company’s previously lowered outlook from December, which took into account headwinds related to a highly promotional environment and inventory excesses, especially in sneakers. Net sales increased 3.7% to $3.3 billion and adjusted net income was $133.7 million, with an adjusted diluted EPS of $1.85. Comparable sales increased by 4.4%.
DSW president and incoming DBI CEO Doug Howe noted that headwinds from Q3 such as inflation and recession fears persisted in Q4 and have prompted consumers to purchase fewer items and spend less. He noted the company’s clearance business outperformed in Q4, with clearance sales up 2% compared to regular price selling which was down 10% as consumers look for value.
“As other companies across our space have been sharing, we are continuing to see a consumer under pressure as we enter the new year,” Howe said in a call with analysts. “Ultimately, we are continuing to be thoughtful about how we are playing in the promotional space while carefully balancing inventory investments, putting us in a position to chase into any opportunities we see in real time.”
Net sales from owned brands, a major focus for the footwear retailer, were up 32.1% in 2022 compared to the prior year, in line with DBI’s goal to double sales from owned brands and Camuto Group national owned and licensed brands to almost one-third of total sales by 2026.
Outgoing CEO Roger Rawlins said the company’s 2022 results are a testament to the chain’s “brand building strategy.” In early February, DBI acquired the Keds brand from Wolverine Worldwide, adding to its existing roster that includes Topo Athletic and Le Tigre, both of which were acquired within the last year. DBI is also expanding its licensing agreement for the Wolverine-owned Hush Puppies brand to become the exclusive licensee for the brand across all channels in the U.S. as well as Canada, and manage its DTC e-commerce and possible wholesale business.
“Although we are navigating through a volatile environment, we are well-positioned to offer great value and a diverse assortment of product to our customers as we head into 2023,” Howe said in a statement. “We will continue to be prudent in managing our expenses and inventory and drive growth in our portfolio of increasingly diversified Owned Brands.”
For 2023, Designer Brands expects net sales to be down in the mid-single digits with diluted EPS between $1.65 and $1.75. This excludes any contributions from the recently acquired Keds brand, which the company expects to deliver incremental net sales of between $75 million and $85 million in 2023.
