Designer Brands's (NYSE:DBI) Q1 Earnings Results: Revenue In Line With Expectations But Stock Drops

Jabin Bastian /
2024/06/04 7:10 am EDT

Footwear and accessories discount retailer Designer Brands (NYSE:DBI) reported results in line with analysts' expectations in Q1 CY2024, with revenue flat year on year at $746.6 million. It made a non-GAAP profit of $0.08 per share, down from its profit of $0.21 per share in the same quarter last year.

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Designer Brands (DBI) Q1 CY2024 Highlights:

  • Revenue: $746.6 million vs analyst estimates of $741.6 million (small beat)
  • EPS (non-GAAP): $0.08 vs analyst expectations of $0.13 (39.4% miss)
  • Reaffirmed full year guidance for sales growth and EPS (EPS of $0.75 at the midpoint slightly below analyst expectations of $0.77)
  • Gross Margin (GAAP): 32.8%, up from 32% in the same quarter last year
  • Locations: 675 at quarter end, up from 638 in the same quarter last year
  • Same-Store Sales fell 2.5% year on year (miss vs. expectations of a slight increase year-on-year)
  • (-10.4% in the same quarter last year)
  • Market Capitalization: $638.3 million

"This quarter, we were pleased to deliver results in line with our expectations for this quarter, as we gain traction on our path to returning Designer Brands to growth," stated Doug Howe, Chief Executive Officer.

Founded in 1969 as a shoe importer and distributor, Designer Brands (NYSE:DBI) is an American discount retailer focused on footwear and accessories.

Footwear Retailer

Footwear sales–like their apparel counterparts–are driven by seasons, trends, and innovation more so than absolute need and similarly face the bigger-picture secular trend of e-commerce penetration. Footwear plays a part in societal belonging, personal expression, and occasion, and retailers selling shoes recognize this. Therefore, they aim to balance selection, competitive prices, and the latest trends to attract consumers. Unlike their apparel counterparts, footwear retailers most sell popular third-party brands (as opposed to their own exclusive brands), which could mean less exclusivity of product but more nimbleness to pivot to what’s hot.

Sales Growth

Designer Brands is a mid-sized retailer, which sometimes brings disadvantages compared to larger competitors benefiting from better economies of scale. On the other hand, it has an edge over smaller competitors with fewer resources and can still flex high growth rates because it's growing off a smaller base than its larger counterparts.

As you can see below, the company's revenue has declined over the last four years, dropping 1.6% annually as its store count and sales at existing, established stores have both shrunk.

Designer Brands Total Revenue

This quarter, Designer Brands grew its revenue by 0.6% year on year, and its $746.6 million in revenue was in line with Wall Street's estimates. Looking ahead, Wall Street expects sales to grow 2.1% over the next 12 months, an acceleration from this quarter.

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Same-Store Sales

Designer Brands's demand has been shrinking over the last eight quarters, and on average, its same-store sales have declined by 4.3% year on year. The company has been reducing its store count as fewer locations sometimes lead to higher same-store sales, but that hasn't been the case here.

Designer Brands Year On Year Same Store Sales Growth

In the latest quarter, Designer Brands's same-store sales fell 2.5% year on year. This decrease was an improvement from the 10.4% year-on-year decline it posted 12 months ago. It's always great to see a business improve its prospects.

Key Takeaways from Designer Brands's Q1 Results

Revenue may have beat slightly but same-store sales missed by a fairly large magnitude. Additionally, the company's EPS missed analysts' expectations and its full-year earnings guidance was also below Wall Street's estimates. Overall, this was a mediocre quarter for Designer Brands. The company is down 9% on the results and currently trades at $10.06 per share.

Designer Brands may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.