What happened
Shares of Designer Brands (DBI 5.74%) have sprinted higher today, up by 12% as of 12:50 p.m. EST, after getting an upgrade from Wall Street. Susquehanna boosted its rating on the shoe retailer from negative to neutral.
So what
Analyst Sam Poser had downgraded Designer Brands to negative less than a month ago, reducing his price target from $5.50 to $4.30. With the stock trading within a penny of that valuation estimate a couple days ago, Susquehanna is moving "back onto the sidelines." The analyst kept the same $4.30 price target with the new rating.
Image source: Designer Brands.
"Many challenges remain, and nothing about DBI's underlying business has improved," Poser wrote in a research note to investors. "In fact, the excessive number of emails being sent to loyalty members numerous times a day, highlighting discounts, makes for a fleeting margin improvement story."
Now what
Poser says that Designer Brands' management team understands that it needs to pivot more aggressively toward athletic products because the COVID-19 pandemic has altered consumer behavior. The company plans to incorporate the athletic category into its fall lineup, potentially representing 40% to 50% of the product mix. That strategic shift may be challenging, and Designer Brands will need to execute well, according to the analyst.
Designer Brands withdrew its 2020 guidance earlier this year due to ongoing macroeconomic uncertainty related to the public health crisis and has not reinstated any outlook.
