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Why Shares of Designer Brands Are Down Sharply Again Today

By John Rosevear - Mar 17, 2020 at 10:50AM

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Earnings were good, but the outlook isn't.

What happened

Shares of Designer Brands (DBI -2.45%) were down sharply on Tuesday morning after the company said it will temporarily close stores and cut its dividend in response to the ongoing coronavirus pandemic.

As of 11:30 a.m. EDT, Designer Brands' shares were down about 11.2% from Monday's closing price. 

So what

In a shareholder update released with earnings before the markets opened on Tuesday, Designer Brands said that it will close all of its retail locations in North America at the end of the day on March 17. (Its warehouses will remain open to fulfill online orders.) Designer Brands is the corporate parent of the Designer Shoe Warehouse and Shoe Company retail chains. 

A woman inspects a sneaker in a shoe store.

Image source: Getty Images.

The company also said that it will cut its quarterly dividend from $0.25 per share to $0.10 per share in a bid to preserve cash. 

The updates came as Designer Brands released its full-year 2019 results. They weren't bad: Net income of $94.4 million was a sharp improvement over the $20.4 million loss it posted in the prior year, powered by a 10% increase in net sales. 

But it was the guidance for 2020 that got investors' attention, because the company wouldn't give any, citing uncertainties around the virus pandemic and the state of the broader economy.

Now what

Like just about every brick-and-mortar retailer, Designer Brands has had a brutal March. U.S. retail foot traffic has plummeted as consumers have practiced "social distancing," staying home and avoiding contact with others (such as in stores) in an effort to slow the spread of COVID-19. 

In the near term, the company needs to preserve its cash hoard, currently $115 million, as it tries to weather the storm. But investors will need to wait for a clearer picture of how the company's 2020 will play out. 

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Designer Brands Inc. Stock Quote
Designer Brands Inc.
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