What Happened:
Shares of footwear and accessories discount retailer Designer Brands (NYSE:DBI) fell 27.7% in the pre-market session after the company reported second-quarter earnings results. Same-store sales missed, leading to a revenue and EPS miss.
In addition, its full-year same-store sales and earnings forecasts were lowered and missed analysts' expectations. Management struck a cautious tone, saying, "We saw sustained pressure on challenged categories such as dress and seasonal in the second quarter...". Overall, this quarter could have been better.
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What is the market telling us:
Designer Brands’s shares are a little volatile and over the last year have had 33 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 9 months ago, when the stock dropped 35.6% on the news that 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 "the 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.
Designer Brands is down 45.3% since the beginning of the year, and at $4.92 per share it is trading 61.6% 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 $287.76.
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