Shares of footwear and accessories discount retailer Designer Brands (NYSE:DBI) fell 35.6% in the morning session after the company reported third results with revenue falling below Wall Street's estimates, driven by a huge same-store sales decrease, which greatly underperformed expectations. Its full-year earnings forecast also underwhelmed. The commentary was just as bad as the results. Management said that "footwear market that contracted for the first time since COVID coupled with unseasonably warm weather, which significantly reduced customer demand for shoes and pressured our heavily seasonal assortment" and doesn't anticipate that these headwinds will ease. Overall, it was a weaker quarter for the company, with a worrisome outlook for the coming quarters.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Designer Brands? Access our full analysis report here, it's free.
What is the market telling us:
Designer Brands's shares are a little volatile and over the last year have had 39 moves greater than 5%. But moves this big are very rare even for Designer Brands and that is indicating to us that this news had a significant impact on the market's perception of the business.
The biggest move we wrote about over the last year was 3 months ago, when the stock gained 7.1% on the news that the company reported second-quarter results, with revenue coming in slightly ahead of Wall Street's expectations. EPS beat comfortably, driven by better gross and operating margins. On the other hand, same-store sales missed. Looking ahead, the company maintained its previous full year guidance, which is a welcome sign in a choppy retail environment that has seen a number of companies miss and cut guidance. Lastly, the company highlighted new collaborations and partnerships, including a drive to maintain a stronger relationship with Nike amid growing demand for athletic and athleisure offerings. Overall, it was a strong quarter for the company.
Designer Brands is down 4.6% since the beginning of the year, and at $8.80 per share it is trading 31.3% below its 52-week high of $12.81 from December 2023. Investors who bought $1,000 worth of Designer Brands's shares 5 years ago would now be looking at an investment worth $346.71.
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