PR Newswire | Aug 31, 2021 06:45AM EDT

08/31 05:45 CDT

Designer Brands Inc. Reports Second Quarter 2021 Financial Results<p> Record setting second quarter sales and gross profit at the U.S. Retail segment </p><p> Comparable sales were up 84.9% in the second quarter of fiscal 2021 </p> COLUMBUS, Ohio, Aug. 31, 2021

COLUMBUS, Ohio, Aug. 31, 2021 /PRNewswire/ -- Designer Brands Inc. (NYSE: DBI) (the "Company" and "Designer Brands"), one of North America's largest designers, producers, and retailers of footwear and accessories, announced financial results for the three months ended July 31, 2021, compared to the three months ended August 1, 2020.

Roger Rawlins, Chief Executive Officer, stated, "Our tremendous second quarter results reflect successful execution on our short-term priorities coupled with our strategy to gain market share in athleisure and kids. Our sales results were driven by increased store traffic as we substantially grew our loyal customer base and welcomed core DSW customers back into our stores.

"As we look forward to our strategic growth, we have organized our efforts around three pillars: customer, brand and speed. All three of these pillars interact with one another and simultaneously strengthen each other. We are offering customers the experiences they crave, the speed they demand, and the brands that can rise to those challenges. Given the positive momentum and strength of our strategy, we expect to achieve an adjusted operating income in the second half of fiscal 2021 that will be in-line or slightly better than fiscal 2019 levels."

Second Quarter Results

* Net sales increased 66.9% to $817.3 million in the second quarter of fiscal 2021 compared to the same period last year. * Comparable sales increased 84.9% for the second quarter of fiscal 2021. * Gross profit increased to $284.7 million in the second quarter of fiscal 2021 versus $37.0 million last year, and gross margin as a percentage of net sales was 34.8% as compared to 7.6% for the same period last year and 30.5% for the second quarter of fiscal 2019. * Reported net income in the second quarter of fiscal 2021 was $42.9 million, or $0.55 per diluted share, including net charges of $0.01 per diluted share from adjusted items, primarily related to target acquisition costs, restructuring charges, impairment charges, and the change in the valuation allowance on deferred tax assets. * Adjusted net income in the second quarter of fiscal 2021 was $43.4 million, or $0.56 per diluted share.

Liquidity Highlights

* Cash and cash equivalents totaled $46.5 million at the end of the second quarter of fiscal 2021 compared to $206.7 million for the same period last year, with $364.0 million available for borrowings under our senior secured asset-based revolving credit facility ("ABL Revolver"). Debt totaled $247.1 million at the end of the second quarter of fiscal 2021 compared to $393.0 million debt outstanding for the same period last year. * The Company ended the quarter with inventories of $504.3 million compared to $445.0 million for the same period last year.

Store Openings and ClosingsDuring the second quarter of fiscal 2021, we did not open any new stores; we closed one store in the U.S. and two stores in Canada, resulting in a total of 515 U.S. stores and 143 Canadian stores.

Webcast and Conference CallThe Company is hosting a conference call today at 8:30 a.m. Eastern Time. Investors and analysts interested in participating in the call are invited to dial 1-888-317-6003, or the international dial-in, 1-412-317-6061, and reference conference ID number 1270514 approximately ten minutes prior to the start of the conference call. The conference call will also be broadcast live over the internet and can be accessed through the following link:

https://www.webcaster4.com/Webcast/Page/1213/42454

For those unable to listen to the live webcast, an archived version will be available via the same website address until September 14, 2021. A replay of the teleconference will be available by dialing the following numbers:

U.S.: 1-877-344-7529 Canada: 1-855-669-9658 International: 1-412-317-0088 Passcode: 10159507

About Designer BrandsDesigner Brands is one of North America's largest designers, producers, and retailers of footwear and accessories. The Company operates a portfolio of retail concepts in nearly 700 locations under the DSW Designer Shoe Warehouse(r), The Shoe Company(r), and Shoe Warehouse(r) banners. The Company designs and produces footwear and accessories through Camuto Group, a leading manufacturer selling in more than 5,400 stores worldwide. Camuto Group owns licensing rights for the Jessica Simpson(r) footwear business and footwear and handbag licenses for Lucky Brand(r). In partnership with a joint venture with Authentic Brands Group, the Company also owns a stake in Vince Camuto(r), Louise et Cie(r), and others. More information can be found at www.designerbrands.com.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995Certain statements in this press release may constitute forward-looking statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements by the use of forward-looking words such as "outlook," "could," "believes," "expects," "potential," "continues," "may," "will," "should," "would," "seeks," "approximately," "predicts," "intends," "plans," "estimates," "anticipates," or the negative version of those words or other comparable words. These statements are based on the Company's current expectations and involve known and unknown risks, uncertainties, and other factors that may cause actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. These factors include, but are not limited to: risks and uncertainty related to the continued outbreak of the coronavirus ("COVID-19"), any future COVID-19 resurgence, and any other adverse public health developments; risks related to losses or disruptions associated with our distribution systems, including our distribution and fulfillment centers and our stores, whether as a result of COVID-19, supply chain disruptions, reliance on third-party providers, cyber-related attacks, or otherwise; our ability to protect the health and safety of our associates and our customers, which may be affected by current or future government regulations related to stay-at-home orders and orders related to the operation of non-essential businesses; risks related to our international operations, including international trade, our reliance on foreign sources for merchandise and related supply chain disruptions, exposure to political, economic, operational, compliance, and other risks, and fluctuations in foreign currency exchange rates; maintaining strong relationships with our vendors, manufacturers, licensors, and retailer customers; our ability to anticipate and respond to fashion trends, consumer preferences, and changing customer expectations; risks related to restrictions on our ABL Revolver and senior secured term loan that could limit our ability to fund operations; our reliance on our loyalty programs and marketing to drive traffic, sales, and customer loyalty; failure to retain our key executives or attract qualified new personnel; risks related to the loss or disruption of our information systems and data and our ability to prevent or mitigate breaches of our information security and the compromise of sensitive and confidential data; our ability to comply with privacy laws and regulations, as well as other legal obligations; our ability to protect our reputation and to maintain the brands we license; uncertain general economic, political, and social conditions and the related impacts to consumer discretionary spending; our competitiveness with respect to style, price, brand availability, and customer service; our ability to provide customers cost-effective shopping platforms; and uncertainty related to future legislation, regulatory reform, policy changes, or interpretive guidance on existing legislation. Risks and other factors that could cause our actual results to differ materially from our expectations are described in the Company's Annual Report on Form 10-K for the fiscal year ended January 30, 2021, and risk factors identified in the Company's other filings with the Securities and Exchange Commission. All forward-looking statements speak only as of the time when made. Except as may be required by law, the Company undertakes no obligation to update or revise the forward-looking statements included in this press release to reflect any future events or circumstances.

DESIGNER BRANDS INC.

SEGMENT RESULTS

(unaudited)

Net Sales

Three months ended Change

(dollars in thousands) July 31, August 1, Amount % 2021 2020

Segment net sales:

U.S. Retail $ 723,093 $ 393,977 $ 329,116 83.5 %

Canada Retail 57,585 49,582 8,003 16.1 %

Brand Portfolio 50,529 30,458 20,071 65.9 %

Other - 22,266 (22,266) NM

Total segment net sales 831,207 496,283 334,924 67.5 %

Elimination of intersegment net (13,872) (6,569) (7,303) 111.2 %sales

Consolidated net sales $ 817,335 $ 489,714 $ 327,621 66.9 %

Six months ended Change

(dollars in thousands) July 31, August 1, Amount % 2021 2020

Segment net sales:

U.S. Retail $ 1,343,751 $ 771,050 $ 572,701 74.3 %

Canada Retail 98,189 78,911 19,278 24.4 %

Brand Portfolio 107,956 112,571 (4,615) (4.1) %

Other - 35,889 (35,889) NM

Total segment net sales 1,549,896 998,421 551,475 55.2 %

Elimination of intersegment net (29,406) (25,924) (3,482) 13.4 %sales

Consolidated net sales $ 1,520,490 $ 972,497 $ 547,993 56.3 %

NM - Not meaningful

Comparable Sales

Three months Six months ended ended

July August July 31, August 1, 31, 1, 2020 2021 2020 2021

Comparable sales:

U.S. Retail segment 94.3 % (44.9) % 74.5 % (43.7) %

Canada Retail segment 14.6 % (27.9) % 12.6 % (29.9) %

Brand Portfolio segment - 10.6 % 120.5 % 8.6 % 106.5 %direct-to-consumer channel

Other NA (36.2) % NA (50.4) %

Total comparable sales 84.9 % (42.7) % 68.1 % (42.5) %

NA - Not applicable

Store Count

July 31, 2021 August 1, 2020

Number of Square Number Square(square footage in thousands) Stores Footage of Footage Stores

U.S. Retail segment - DSW stores 515 10,491 522 10,578

Canada Retail segment:

The Shoe Company / Shoe 116 611 117 623Warehouse stores

DSW stores 27 536 27 536

143 1,147 144 1,159

Total number of stores 658 11,638 666 11,737

Gross Profit

Three months ended

July 31, 2021 August 1, 2020 Change

% of % of(dollars in Amount Segment Amount Segment Amount % Basisthousands) Net Net Points Sales Sales

Segmentgross profit(loss):

U.S. Retail $ 256,893 35.5 % $ 40,097 10.2 % $ 216,796 540.7 % 2,530

Canada 18,768 32.6 % 5,650 11.4 % $ 13,118 232.2 % 2,120Retail

Brand 8,533 16.9 % (11,440) (37.6) % $ 19,973 NM NMPortfolio

Other - - % 118 0.5 % $ (118) NM NM

284,194 34,425

Eliminationof 487 2,617intersegmentgross profit

Gross profit $ 284,681 34.8 % $ 37,042 7.6 % $ 247,639 668.5 % 2,720

Six months ended

July 31, 2021 August 1, 2020 Change

% of % of(dollars in Amount Segment Amount Segment Amount % Basisthousands) Net Net Points Sales Sales

Segmentgross profit(loss):

U.S. Retail $ 450,006 33.5 % $ 7,127 0.9 % $ 442,879 6,214.1 % 3,260

Canada 29,603 30.1 % 3,339 4.2 % $ 26,264 786.6 % 2,590Retail

Brand 20,459 19.0 % 2,464 2.2 % $ 17,995 730.3 % 1,680Portfolio

Other - - % (5,310) (14.8) % $ 5,310 NM NM

500,068 7,620

Eliminationof 724 2,962intersegmentgross profit

Gross profit $ 500,792 32.9 % $ 10,582 1.1 % $ 490,210 4,632.5 % 3,180

NM - Not meaningful

Intersegment Eliminations

Three months ended

(in thousands) July 31, August 1, 2021 2020

Elimination of intersegment activity:

Net sales recognized by Brand Portfolio segment $ (13,872) $ (6,569)

Cost of sales:

Cost of sales recognized by Brand Portfolio segment 9,707 4,827

Recognition of intersegment gross profit for inventorypreviously purchased that was subsequently sold to 4,652 4,359external customers during the current period

Gross profit $ 487 $ 2,617

Six months ended

(in thousands) July 31, August 1, 2021 2020

Elimination of intersegment activity:

Net sales recognized by Brand Portfolio segment $ (29,406) $ (25,924)

Cost of sales:

Cost of sales recognized by Brand Portfolio segment 20,642 16,961

Recognition of intersegment gross profit for inventorypreviously purchased that was subsequently sold to 9,488 11,925external customers during the current period

Gross profit $ 724 $ 2,962

DESIGNER BRANDS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited and in thousands, except per share amounts)

Three months ended Six months ended

July 31, August 1, July 31, August 1, 2021 2020 2021 2020

Net sales $ 817,335 $ 489,714 $ 1,520,490 $ 972,497

Cost of sales (532,654) (452,672) (1,019,698) (961,915)

Gross profit 284,681 37,042 500,792 10,582

Operating expenses (224,385) (168,424) (425,199) (355,645)

Income from equity 2,290 2,153 3,998 4,423investment

Impairment charges (1,174) (6,735) (1,174) (119,282)

Operating profit (loss) 61,412 (135,964) 78,417 (459,922)

Interest expense, net (8,072) (3,788) (16,886) (5,946)

Non-operating income (244) 743 562 656(expenses), net

Income (loss) before income 53,096 (139,009) 62,093 (465,212)taxes

Income tax benefit (10,236) 40,795 (2,207) 151,140(provision)

Net income (loss) $ 42,860 $ (98,214) $ 59,886 $ (314,072)

Diluted earnings (loss) per $ 0.55 $ (1.36) $ 0.78 $ (4.36)share

Weighted average diluted 77,619 72,142 77,271 72,028shares

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited and in thousands)

July 31, January 30, August 1, 2021 2021 2020

Assets

Cash and cash equivalents $ 46,458 $ 59,581 $ 206,720

Receivables, net 199,371 196,049 49,240

Inventories 504,316 473,183 445,044

Prepaid expenses and other current 53,616 51,772 69,456assets

Total current assets 803,761 780,585 770,460

Property and equipment, net 271,401 296,469 332,730

Operating lease assets 676,665 700,481 797,413

Goodwill 93,655 93,655 93,655

Intangible assets, net 15,905 15,635 15,663

Deferred tax assets - - 182,866

Equity investment 55,149 58,598 56,690

Other assets 29,513 31,172 23,780

Total assets $ 1,946,049 $ 1,976,595 $ 2,273,257

Liabilities and shareholders' equity

Accounts payable $ 299,322 $ 245,071 $ 224,693

Accrued expenses 222,055 200,326 202,831

Current maturities of long-term debt 62,500 62,500 -

Current operating lease liabilities 190,853 244,786 241,694

Total current liabilities 774,730 752,683 669,218

Long-term debt 184,569 272,319 393,000

Non-current operating lease 645,136 677,735 778,826liabilities

Other non-current liabilities 30,502 30,841 25,586

Total liabilities 1,634,937 1,733,578 1,866,630

Total shareholders' equity 311,112 243,017 406,627

Total liabilities and shareholders' $ 1,946,049 $ 1,976,595 $ 2,273,257equity

DESIGNER BRANDS INC.

NON-GAAP RECONCILIATIONS

(unaudited and in thousands, except per share amounts)

Three months ended Six months ended

July 31, August 1, July 31, August 1, 2021 2020 2021 2020

Operating expenses $ (224,385) $ (168,424) $ (425,199) $ (355,645)

Non-GAAP adjustments:

Integration and 1,094 8,455 2,836 10,203restructuring expenses

Target acquisition 5,333 - 5,333 -costs

Gain on settlement - (8,990) - (8,990)

Adjusted operating $ (217,958) $ (168,959) $ (417,030) $ (354,432)expenses

Operating profit (loss) $ 61,412 $ (135,964) $ 78,417 $ (459,922)

Non-GAAP adjustments:

Integration and 1,094 8,455 2,836 10,203restructuring expenses

Target acquisition 5,333 - 5,333 -costs

Gain on settlement - (8,990) - (8,990)

Impairment charges 1,174 6,735 1,174 119,282

Total non-GAAP 7,601 6,200 9,343 120,495adjustments

Adjusted operating $ 69,013 $ (129,764) $ 87,760 $ (339,427)profit (loss)

Net income (loss) $ 42,860 $ (98,214) $ 59,886 $ (314,072)

Non-GAAP adjustments:

Integration and 1,094 8,455 2,836 10,203restructuring expenses

Target acquisition 5,333 - 5,333 -costs

Gain on settlement - (8,990) - (8,990)

Impairment charges 1,174 6,735 1,174 119,282

Foreign currencytransaction losses 244 (743) (562) (343)(gains)

Total non-GAAPadjustments before tax 7,845 5,457 8,781 120,152effect

Tax effect of (1,871) (1,393) (2,179) (30,531)non-GAAP adjustments

Valuation allowancechange on deferred tax (5,395) - (13,577) -assets

Total adjustments, 579 4,064 (6,975) 89,621after tax

Adjusted net income $ 43,439 $ (94,150) $ 52,911 $ (224,451)(loss)

Diluted earnings (loss) $ 0.55 $ (1.36) $ 0.78 $ (4.36)per share

Adjusted dilutedearnings (loss) per $ 0.56 $ (1.31) $ 0.68 $ (3.12)share

Non-GAAP MeasuresTo supplement amounts presented in our unaudited condensed consolidated financial statements determined in accordance with accounting principles generally accepted in the United States ("GAAP"), the Company uses certain non-GAAP financial measures, including adjusted operating expenses, adjusted operating profit (loss), adjusted net income (loss), and adjusted diluted earnings (loss) per share as shown in the table above. These measures adjust for the effects of: (1) integration and restructuring expenses, including severance charges; (2) impairment charges and a related gain on settlement; (3) target acquisition costs; (4) foreign currency transaction losses (gains); (5) the net tax impact of such items; and (6) the change in the valuation allowance on deferred tax assets. The unaudited reconciliation of adjusted results should not be construed as an alternative to the reported results determined in accordance with GAAP. These financial measures are not based on any standardized methodology and are not necessarily comparable to similar measures presented by other companies. The Company believes these non-GAAP measures provide useful information to both management and investors to increase comparability to prior periods by adjusting for certain items that may not be indicative of core operating measures and to better identify trends in our business. The adjusted financial results are used by management to, and allow investors to, evaluate the operating performance of the Company on a comparable basis, when reviewed in conjunction with the Company's GAAP statements. These amounts are not determined in accordance with GAAP and therefore should not be used exclusively in evaluating the Company's business and operations.

Revised Non-GAAP MeasuresBeginning with the fourth quarter of fiscal 2020, the Company revised its determination of adjusted financial results by eliminating the immaterial adjustments related to COVID-19 incremental costs (credits), net, and amortization of intangible assets. These revisions align with how management currently evaluates the performance of the business. The Company has recast its second quarter of fiscal 2020 non-GAAP financial measures to conform to the revised presentation as set forth in the table above.

CONTACT: Stacy Turnof, DesignerBrandsIR@edelman.com

View original content: https://www.prnewswire.com/news-releases/designer-brands-inc-reports-second-quarter-2021-financial-results-301365637.html

SOURCE Designer Brands Inc.