What happened
Shares of Designer Brands (DBI 4.49%) were moving higher today after the footwear retailer reported first-quarter earnings this morning. Though the company actually missed estimates, it posted increased penetration in its owned brands segment, in line with its long-term strategic goals.
The company also announced a tender offer to buy back $100 million in stock, which could give a significant boost to earnings per share, and said it had reestablished its relationship with Nike, a key supplier.
As a result, the stock was up 19% as of 12:11 p.m. ET.
NYSE: DBI
Key Data Points
So what
In a difficult environment, the DSW parent said comparable sales declined 10.4% and overall revenue fell 10.7% to $742.1 million, which was worse than estimates at $754.3 million.
Designer Brands also experienced weakening margins as gross margin fell from 33.2% to 32%, and it reported adjusted earnings per share of $0.21, down from $0.48, and worse than the consensus at $0.32.
Owned brand penetration grew to 26.7%, which follows recent acquisitions like Keds, Le Tigre, and Topo Athletic, and management said it's making progress on its goal of doubling sales of owned brands by 2026.
Commenting on the macroeconomic challenges in the industry, CEO Doug Howe said: "As the consumer remains cautious, we are approaching the remainder of the year and the trajectory of the recovery in our business with heightened consideration. We are confident in our ability to continue to optimize those factors over which we have control, providing compelling products from our Owned Brands and an ideal national brand assortment to our customers seeking a wide range of styles."
Now what
Due to the weakening consumer environment, the company slashed its full-year guidance as it sees revenue down mid to high single digits compared to an earlier forecast of a mid-single-digit decline. Meanwhile, it now expects earnings per share of $1.20 to $1.50, compared to its prior range of $1.65 to $1.75.
While those numbers aren't encouraging, Designer Brands stock is cheap, trading at a forward P/E of just 6 based on that forecast. That, along with the buyback offer and the Nike news, was enough to push the stock higher today.
