What happened
Shares of Designer Brands (DBI), the retailer formerly known as DSW, were sliding today after the company posted disappointing results in its third-quarter earnings report. The company missed expectations on the bottom line and cut its guidance.
As of 2:22 p.m. EST, the stock was down 17.6%.
Image source: Getty Images.
So what
The DSW parent said comparable sales rose 0.3%, or 7.6% on a two-year basis, showing that same-store sales growth had slowed significantly since a year ago. Total revenue increased 12.4% to $936.3 million, which includes the acquisition of Camuto Group last November, and beat estimates at $935 million.
Farther down the income statement, markdowns and promotions weighed on profitability as gross margin fell 370 basis points to 28.9%. Performance in U.S. retail, which makes up close to 80% of revenue, was even worse, falling 510 basis points to 28.1%. Management also blamed warm weather for the challenges, as did some other retailers in the quarter.
As a result, its adjusted per-share profit fell from $0.70 to $0.67, which missed estimates at $0.74.
CEO Roger Rawlins acknowledged challenges in the period, saying, "We continued to make progress on our strategic initiatives and the integration of our acquisitions. At the same time, we faced several meaningful headwinds during the third quarter that impacted our results and will likely continue for the upcoming quarters."
Now what
Looking ahead, management slashed its earnings guidance significantly for the full year. It now sees EPS of $1.50 to $1.55, down from a previous range of $1.87 to $1.97, and flat comparable sales, compared to its earlier forecast of low single digits.
It's clear that the company doesn't see the recent margin challenges lifting anytime soon. Given that, it's not surprising that the stock is plunging today.
