Designer Brands Stock Is Plunging. DSW Parent's Earnings Were That Bad. -- Barrons.com

Sabrina Escobar

DSW and Keds parent company, Designer Brands, missed quarterly earnings expectations and issued softer-than-expected guidance, sending the stock sliding close to 20% Wednesday.

Designer Brands, which also owns shoe brands Hush Puppies and Vince Camuto, reported second-quarter adjusted earnings of 29 cents a share, well below consensus calls for 53 cents a share, according to FactSet.

"We saw sustained pressure on challenged categories such as dress and seasonal in the second quarter," said CEO Doug Howe in the earnings release.

Revenue also came in short, falling 2.6% year over year to $771.9 million, compared with estimates for $816.1 million.

Designer Brands lowered earnings-per-share guidance for the fiscal year ending January to 50 cents to 60 cents, down from 70 cents to 80 cents. Analysts had expected earnings per share of 75 cents.

Net sales are projected to be either flat from a year ago, or grow by a low-single-digit percentage rate. The company's past forecast called for a low-single digit increase.

Designer Brands stock is plunging 17% to $4.80 in early trading Wednesday, while the S&P 500 is flat. Year to date through Tuesday's close, shares were down 34%.

"We see further deterioration of the core retail business and potentially some slippage here in the brand portfolio as the largest risks," wrote William Blair analyst Dylan Carden, who rates Designer Brands stock at Market Perform.

In 2022, Designer Brands outlined a series of initiatives aimed to put the company back on track for growth, including reaching annual revenue of $4 billion and target earnings per share of up to $2.85 by the fiscal year ending January 2027. Wednesday's results -- particularly this year's guidance -- suggest the company is still far from its goals.

"The company [is] in catch-up mode in the remaining quarters [of the fiscal year], in our view," wrote Dana Telsey, CEO of Telsey Advisory Group. "With a challenging macro and footwear market, visibility remains difficult to achieving the prior FY26 targets on the original timeline."

Telsey rates Designer Brands stock at Market Perform.

Write to Sabrina Escobar at sabrina.escobar@barrons.com

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September 11, 2024 09:41 ET (13:41 GMT)

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