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Designer Brands Inc. (DBI - Free Report) released second-quarter fiscal 2023 results, wherein the bottom line beat the Zacks Consensus Estimate but the top line missed the same. Both earnings and net sales declined year over year.
However, Designer Brands has made significant progress on strategic initiatives, achieving several exciting milestones like new collaborations and celebrity partnerships in the quarter. The portfolio of Owned Brands and National Brand partners remained robust in the quarter under review.
The company is encouraged about the launch of its new athletic and athleisure offerings from Le Tigre and Keds. This move, along with a focus on strengthening ties with Nike, is in sync with the growing demand for athletic and athleisure products.
While near-term challenges are likely to persist, management remains confident about its plans to optimize and highlight its exceptional product range.
Designer Brands Inc. Price, Consensus and EPS Surprise
Designer Brands reported fiscal second-quarter adjusted earnings of 59 cents per share, which beat the Zacks Consensus Estimate of 48 cents. The company recorded earnings of 62 cents per share in the year-ago period.
Net sales were $792.2 million, down 7.8% year over year. The top line missed the Zacks Consensus Estimate of $795 million. Also, comparable sales decreased 8.9% year over year in the second quarter. The Zacks Consensus Estimate was a decline of 6.3%.
Gross profit amounted to $273.4 million, down 7.5% from $295.7 million reported in the year-ago quarter. This was primarily driven by lesser revenues. However, the gross margin increased 10 bps to 34.5% from the prior-year period’s level.
Operating expenses declined 6.2% to $214.5 million. As a percentage of net revenues, operating expenses increased 50 bps to 27.1% in the second quarter of fiscal 2023.
Adjusted net income amounted to $39.4 million, down 14.5% from $46.1 million reported in the year-ago quarter.
Image Source: Zacks Investment Research
Segment Details
U.S. Retail: Sales of $658.5 million decreased 10.3% year over year. The figure missed the Zacks Consensus Estimate of $673 million.
Canada Retail: This segment’s sales of $70.3 million declined 10.2% year over year. The figure missed the Zacks Consensus Estimate of $78 million.
Brand Portfolio: Sales of $84.2 million increased 26.9% year over year. The figure surpassed the Zacks Consensus Estimate of $66 million.
Other Financial Details
Designer Brands ended the quarter with debt of $331 million, cash and cash equivalents of $46.2 million with $233.7 million available for borrowings under its senior secured asset-based revolving credit facility and $85 million available for borrowings by Sep 21, 2023, under its new senior secured term loan credit agreement.
Total stockholders' equity was $459.8 million at the end of the quarter under review.
Store Update
During the second quarter, the company closed one store in the United States and one in Canada, resulting in a total of 498 U.S. stores and 138 Canadian stores as of Jul 29, 2023.
Fiscal 2023 Guidance
For fiscal 2023, Designer Brands anticipates net sales (excluding Keds) to be down mid-to high-single digits. Incremental net sales from acquisition of Keds are expected to be in the range of $75-$85 million.
The company’s earnings per share (EPS), excluding Keds, are envisioned in the band of $1.20-$1.50.
Shares of this Zacks Rank #3 (Hold) company have risen 47.2% in the past three months compared with the industry's growth of 6.2%.
The company’s expected EPS growth rate for three to five years is 23.8%.
The Zacks Consensus Estimate for Urban Outfitters’ current fiscal-year earnings and sales indicates growth of 84.6% and 6.9% from the year-ago period’s reported figures. URBN has a trailing four-quarter average earnings surprise of 19.2%.
Abercrombie & Fitch operates as a specialty retailer of premium, high-quality casual apparel. The company currently sports a Zacks Rank #1. ANF delivered a significant earnings surprise in the last reported quarter.
The Zacks Consensus Estimate for Abercrombie & Fitch’s current fiscal-year sales implies growth of 10.1% from the previous year’s reported number. ANF has a trailing four-quarter average earnings surprise of 724.8%.
Skechers U.S.A. designs, develops, markets and distributes footwear. It currently sports a Zacks Rank #1. The company’s expected EPS growth rate for three to five years is 28.3%.
The Zacks Consensus Estimate for Skechers’ current financial-year earnings and sales indicates growth of 42% and 8.7%, respectively, from the previous year’s reported numbers. SKX has a trailing four-quarter average earnings surprise of 39.1%.
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Designer Brands (DBI) Q2 Earnings Beat Estimates, Sales Dip Y/Y
Designer Brands Inc. (DBI - Free Report) released second-quarter fiscal 2023 results, wherein the bottom line beat the Zacks Consensus Estimate but the top line missed the same. Both earnings and net sales declined year over year.
However, Designer Brands has made significant progress on strategic initiatives, achieving several exciting milestones like new collaborations and celebrity partnerships in the quarter. The portfolio of Owned Brands and National Brand partners remained robust in the quarter under review.
The company is encouraged about the launch of its new athletic and athleisure offerings from Le Tigre and Keds. This move, along with a focus on strengthening ties with Nike, is in sync with the growing demand for athletic and athleisure products.
While near-term challenges are likely to persist, management remains confident about its plans to optimize and highlight its exceptional product range.
Designer Brands Inc. Price, Consensus and EPS Surprise
Designer Brands Inc. price-consensus-eps-surprise-chart | Designer Brands Inc. Quote
Let’s Delve Deeper
Designer Brands reported fiscal second-quarter adjusted earnings of 59 cents per share, which beat the Zacks Consensus Estimate of 48 cents. The company recorded earnings of 62 cents per share in the year-ago period.
Net sales were $792.2 million, down 7.8% year over year. The top line missed the Zacks Consensus Estimate of $795 million. Also, comparable sales decreased 8.9% year over year in the second quarter. The Zacks Consensus Estimate was a decline of 6.3%.
Gross profit amounted to $273.4 million, down 7.5% from $295.7 million reported in the year-ago quarter. This was primarily driven by lesser revenues. However, the gross margin increased 10 bps to 34.5% from the prior-year period’s level.
Operating expenses declined 6.2% to $214.5 million. As a percentage of net revenues, operating expenses increased 50 bps to 27.1% in the second quarter of fiscal 2023.
Adjusted net income amounted to $39.4 million, down 14.5% from $46.1 million reported in the year-ago quarter.
Image Source: Zacks Investment Research
Segment Details
U.S. Retail: Sales of $658.5 million decreased 10.3% year over year. The figure missed the Zacks Consensus Estimate of $673 million.
Canada Retail: This segment’s sales of $70.3 million declined 10.2% year over year. The figure missed the Zacks Consensus Estimate of $78 million.
Brand Portfolio: Sales of $84.2 million increased 26.9% year over year. The figure surpassed the Zacks Consensus Estimate of $66 million.
Other Financial Details
Designer Brands ended the quarter with debt of $331 million, cash and cash equivalents of $46.2 million with $233.7 million available for borrowings under its senior secured asset-based revolving credit facility and $85 million available for borrowings by Sep 21, 2023, under its new senior secured term loan credit agreement.
Total stockholders' equity was $459.8 million at the end of the quarter under review.
Store Update
During the second quarter, the company closed one store in the United States and one in Canada, resulting in a total of 498 U.S. stores and 138 Canadian stores as of Jul 29, 2023.
Fiscal 2023 Guidance
For fiscal 2023, Designer Brands anticipates net sales (excluding Keds) to be down mid-to high-single digits. Incremental net sales from acquisition of Keds are expected to be in the range of $75-$85 million.
The company’s earnings per share (EPS), excluding Keds, are envisioned in the band of $1.20-$1.50.
Shares of this Zacks Rank #3 (Hold) company have risen 47.2% in the past three months compared with the industry's growth of 6.2%.
Stocks to Consider
A few better-ranked stocks are Urban Outfitters, Inc. (URBN - Free Report) , Abercrombie & Fitch Co. (ANF - Free Report) and Skechers U.S.A., Inc. (SKX - Free Report) .
Urban Outfitters, which specializes in the retail and wholesale of general consumer products, sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The company’s expected EPS growth rate for three to five years is 23.8%.
The Zacks Consensus Estimate for Urban Outfitters’ current fiscal-year earnings and sales indicates growth of 84.6% and 6.9% from the year-ago period’s reported figures. URBN has a trailing four-quarter average earnings surprise of 19.2%.
Abercrombie & Fitch operates as a specialty retailer of premium, high-quality casual apparel. The company currently sports a Zacks Rank #1. ANF delivered a significant earnings surprise in the last reported quarter.
The Zacks Consensus Estimate for Abercrombie & Fitch’s current fiscal-year sales implies growth of 10.1% from the previous year’s reported number. ANF has a trailing four-quarter average earnings surprise of 724.8%.
Skechers U.S.A. designs, develops, markets and distributes footwear. It currently sports a Zacks Rank #1. The company’s expected EPS growth rate for three to five years is 28.3%.
The Zacks Consensus Estimate for Skechers’ current financial-year earnings and sales indicates growth of 42% and 8.7%, respectively, from the previous year’s reported numbers. SKX has a trailing four-quarter average earnings surprise of 39.1%.