Why Designer Brands (DBI) Stock Is Nosediving

Kayode Omotosho /
2024/03/21 12:33 pm EDT

What Happened:

Shares of footwear and accessories discount retailer Designer Brands (NYSE:DBI) fell 19.4% in the pre-market session after the company reported fourth-quarter results that missed analysts' same-store sales expectations despite a revenue beat. Full-year earnings guidance missed analysts' expectations, and its EPS missed Wall Street's estimates during the quarter. The results reflected the challenges faced in 2023, which management alluded to: 1.) Softening footwear market 2.) Highly promotional retail environment 3.) The impact of unseasonably warm weather on the footwear business. To turn the tide and improve the company's financial position, management highlighted the focus on more "trend-right assortment for customers" coupled with a cost-efficient workforce expansion. Overall, this was a mixed quarter for Designer Brands.

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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%. 

The biggest move we wrote about over the last year was 4 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 "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.

Designer Brands is up 11.4% since the beginning of the year, but at $10 per share it is still trading 21.9% 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 $475.77.

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