DSW Parent Takes Hit from Warm Weather, Tariffs

Designer Brands realized flat comparable store sales in Q3 against a 7.3 percent increase in the year-ago quarter, which it blamed on warmer weather across the country over the period ended Nov. 2. But the retailer’s promotional activity enabled it to exit the quarter with a “clean inventory position.”

Among specific footwear categories, kids’ comps were up 23 percent in Q3; athletic increased 4 percent and boots rose 3.8 percent on a comp basis, accelerated by promotional activity. Meanwhile, DBI said new merchandise leadership in men’s is helping it drive some recovery in the category where comps fell 6.1 percent in Q3 despite turning flat in October. Further men’s category improvement is projected in Spring 2020.

On tariffs, Designer Brands continues to explore ways to help mitigate an anticipated $20 to $30 million in annualized impact, including dramatically growing the scale of Camuto, where production is planned to increase from approximately 23 million pairs of shoes to more than 40 million pairs. DBI acquired Camuto Group, which owns the footwear licenses for the Jessica Simpson and Lucky Brands, among others, in Nov. 2018. The company has now lowered its outlook on gross margin upside from that deal.

After announcing DBI was lowering its FY EPS guidance by 20 to 22 percent from a prior range, CEO Roger Rawlins told analysts, “We know we have a lot of work ahead of us, particularly in the face of tariff mitigation; however, we do remain encouraged by our ability to provide unique products and experiences both online and in-store to our 30-plus million active rewards members.”