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Why Designer Brands Stock Jumped 16.5% at the Open Today

By Reuben Gregg Brewer – Dec 7, 2021 at 6:03AM

Key Points

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The footwear retailer reported earnings, and investors liked the news. Here's a quick look at why.

What happened

Shares of shoe retailer Designer Brands (DBI -3.98%) got off on the right foot on Dec. 7, rising as much as 16.5% in the first hour of trading. The big news was the company's third-quarter 2021 earnings update, which was released before the market opened for the day. Here's a quick look at why investors were so pleased.

So what

Designer Brands, which operates the DSW, Shoe Company, and Shoe Warehouse nameplates, posted third-quarter 2021 sales of $853.5 million, up nearly 31% from the same quarter of 2020. That's not shocking, given the pandemic-related disruptions last year. Less flattering is the comparison to 2019, before the pandemic, when third-quarter sales came in at around $934 million. The company was also short of Wall Street's consensus estimate of around $897.5 million.

A person looking at shoes in a store.

Image source: Getty Images.

However, Designer Brands managed to post adjusted earnings of $0.86 per share in the third quarter of 2021, up from a $0.26-per-share loss in 2020 and a $0.67 adjusted profit in 2019. Analysts had been looking for $0.56 per share. So despite the weaker-than-anticipated top line, the shoe retailer put up strong bottom-line results. Investors clearly approved, noting that Designer Brands' gross profit margin improved materially over the third quarters of both 2020 and 2019. And that improvement came about despite the supply chain issues and inflation headwinds that the economy is facing today.

Now what

The good news isn't over just yet, either, with management projecting an adjusted profit of between $0.10 and $0.15 per share in the final stanza of 2021. That would compare to a loss of $0.53 per share in pandemic-hit 2020 and a loss of $0.11 in 2019. So it seems investors are pricing in some good news here, and justifiably so.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool recommends Designer Brands Inc. The Motley Fool has a disclosure policy.

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