“This quarter, we were impacted by a footwear market that contracted for the first time since COVID coupled with unseasonably warm weather, which significantly reduced customer demand for shoes and pressured our heavily seasonal assortment. We saw improved performance in casual and clearance categories this quarter, but this was not enough to offset the broader lack of demand. While macro pressures notably impacted our business, we clearly recognize the need to operate with even greater speed and increase the level of innovation, newness, and fashion into our assortments, returning to our roots as a merchant organization and a fashion footwear retailer”, commented Doug Howe, Chief Executive Officer of Designer Brands.

Third Quarter Results

In the third quarter of fiscal 2023, the company’s net sales were down by 9.1%, totalling 786.3 million US dollars, on a comparable basis to the same period of last year, with total comparable sales decreasing by 9.3% year-over-year.

The US retail segment, which accounted for 78.8% of total sales, recorded a net sales decline of 10.6% to 631.6 million US dollars in the third quarter of the year, while the Canadian retail segment's net sales decreased by 8.1% year-over-year to 75.6 million US dollars, as compared to a similar period of 2022. In addition, net sales in the brand portfolio amounted to 94.1 million US dollars, down by 12.5% from the third quarter of the prior year.

In the three months to the 28^th of October, Designer Brands’ gross profit was 256.4 million US dollars, against 285.5 million US dollars recorded in the same period a year ago; gross margin narrowed accordingly to 32.6% from 33.0% in a similar period of 2022.

The third quarter’s net income attributable to the company totalled 10.1 million US dollars, or diluted earnings per share of 0.17 US dollars, on a comparable basis to 45.1 million US dollars, or diluted earnings per share of 0.65 US dollars per diluted share in the same period of the prior year.

Fiscal 2023 Outlook

Given the challenging macroeconomic context, Designer Brands narrowed its guidance for the full year. It now expects a high-single-digit decline in net sales (excluding Keds), as compared to fiscal 2022 (previous: a mid-to-high single-digit decline in net sales); Keds should add between 60.0 million US dollars to 70.0 million US dollars. The company also anticipates diluted earnings per share in the range of 0.40 US dollars to 0.70 US dollars (previous: between 1.20 US dollars to 1.50 US dollars).