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Category: Stock Market and Designer Brands
Date: 3 September 2019 Stock Price: $16.49 We take a look at the 2nd quarter earnings report for their 2019 fiscal year of shoe and footwear accessories designer and producer, Designer Brands
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About Designer Brands
Designer Brands is one of North America’s largest designers, producers and retailers of footwear and accessories. Our primary concept, DSW Designer Shoe Warehouse, offers brand name and designer dress, casual and athletic footwear and accessories. The first store opened in 1991 in Dublin, Ohio. Today, DSW operates more than 500 stores in 44 states.
The Affiliated Business Group operates nearly 290 leased departments for other retailers, such as Stein Mart, in the U.S. Designer Brands also operates several retail concepts in Canada, including The Shoe Company and Shoe Warehouse, which provide a convenient footwear solution for the whole family, as well as DSW Designer Shoe Warehouse – nearly 150 locations in all.
In 2018, the company acquired Camuto Group, the legendary product design and brand development organization best known for the successful Vince Camuto® brand and the footwear licenses of Jessica Simpson® and Lucky Brand®. The partnership transformed Designer Brands into one of the largest footwear companies in North America with global, industry-leading capabilities in product design, development, sourcing and production. A public company since 2005, our stock is traded on the New York City Stock Exchange as “DBI.”
The Affiliated Business Group operates nearly 290 leased departments for other retailers, such as Stein Mart, in the U.S. Designer Brands also operates several retail concepts in Canada, including The Shoe Company and Shoe Warehouse, which provide a convenient footwear solution for the whole family, as well as DSW Designer Shoe Warehouse – nearly 150 locations in all.
In 2018, the company acquired Camuto Group, the legendary product design and brand development organization best known for the successful Vince Camuto® brand and the footwear licenses of Jessica Simpson® and Lucky Brand®. The partnership transformed Designer Brands into one of the largest footwear companies in North America with global, industry-leading capabilities in product design, development, sourcing and production. A public company since 2005, our stock is traded on the New York City Stock Exchange as “DBI.”
Financial overview of Designer Brands's latest earnings report
The numbers we are interested in (for the quarter):
- Consolidated total revenue: $860.198 (up 8.16% from $795.268 million for the same quarter of the previous year)
- Net income (loss): $27.407 million (up from a loss of -$38.356 million for the same quarter of the previous year)
- Net income per share: $0.37 (up from a loss of -0$.41 a share for the same quarter of the previous year)
- Number of shares in issue: 73.4 million (down from 80.265 million for the same quarter of the previous year)
- Accounts receivable, net: $85.162 million (up from $17.259 million for the same quarter of the previous year)
- Accounts receivable makes up 3.3% of the group's total assets
- Inventories: $706.168 million (up from $596.956 million for the same quarter of the previous year)
- Inventories makes up 27.6% of the group's total assets (we get concerned when inventories makes up more than 20% of total assets
- Inventories increased by 18.2% of the course of the last 12 months which is a concern as it raises the question whether the group is struggling to move stock? But the group stated in their results that inventories excluding an acquisition by the group was flat. " The Company ended the quarter with inventories of $706.2 million compared to $597.0 million last year. Excluding inventories from the acquisitions, inventories per square foot were flat to last year."
- Cash and cash equivalents: $51.762 million
- Cash and cash equivalents per share: $0.71
- Cash and cash equivalents makes up 4.2% of the the group's current market capital
- Cash and cash equivalents makes up 2.02% of the group's total assets
- Dividend for the quarter: $0.25
- Dividend yield: 6.06% (assuming the same dividend declared this quarter is paid for each quarter of the fiscal year)
Designer Brands' management commentary on the results and earnings guidance
COLUMBUS, Ohio, Aug. 29, 2019 /PRNewswire/ -- Designer Brands Inc. (NYSE: DBI), one of North America's largest designers, producers and retailers of footwear and accessories, announced financial results for the three months ended August 3, 2019, compared to the three months ended August 4, 2018.
Roger Rawlins, Chief Executive Officer, stated, "I am proud of the work our teams have done, not only delivering a solid quarter, but also successfully integrating two significant acquisitions and leveraging the unique strength of each of our businesses to give Designer Brands greater control and flexibility in setting our own destiny in a world full of extraordinary external pressures. Each segment delivered what was needed this quarter, but our newest businesses really stood out, exceeding our expectations and moving us closer to the vision laid out at our Investor Day.
"In Canada, the transfer of successful practices at DSW in the U.S. to our Canadian banners fueled continued positive momentum in this business," Mr. Rawlins continued. "We were particularly pleased with the growth in Canada of both the loyalty programs and e-commerce sales. Similarly, Camuto Group is delivering exactly what we expected giving us differentiation and bringing added excitement to our retail segments. The Camuto Group team has unveiled the DSW Spring 2020 private label offering and based on the fashion, styles and quality shown, we believe we will be in a solid position to not only see the gross margin benefit as we convert the production of our DSW private label to Camuto Group next Spring, but also to increase brand loyalty and further drive sales within our warehouse footprint."
Regular Dividend
The Company's Board of Directors declared a quarterly cash dividend of $0.25 per share. The dividend will be paid on October 4, 2019 to shareholders of record at the close of business on September 20, 2019.
Roger Rawlins, Chief Executive Officer, stated, "I am proud of the work our teams have done, not only delivering a solid quarter, but also successfully integrating two significant acquisitions and leveraging the unique strength of each of our businesses to give Designer Brands greater control and flexibility in setting our own destiny in a world full of extraordinary external pressures. Each segment delivered what was needed this quarter, but our newest businesses really stood out, exceeding our expectations and moving us closer to the vision laid out at our Investor Day.
"In Canada, the transfer of successful practices at DSW in the U.S. to our Canadian banners fueled continued positive momentum in this business," Mr. Rawlins continued. "We were particularly pleased with the growth in Canada of both the loyalty programs and e-commerce sales. Similarly, Camuto Group is delivering exactly what we expected giving us differentiation and bringing added excitement to our retail segments. The Camuto Group team has unveiled the DSW Spring 2020 private label offering and based on the fashion, styles and quality shown, we believe we will be in a solid position to not only see the gross margin benefit as we convert the production of our DSW private label to Camuto Group next Spring, but also to increase brand loyalty and further drive sales within our warehouse footprint."
Regular Dividend
The Company's Board of Directors declared a quarterly cash dividend of $0.25 per share. The dividend will be paid on October 4, 2019 to shareholders of record at the close of business on September 20, 2019.
Designer Brands (NASDAQ: DBI) stock price history
The image below, obtained from Google shows the stock price history of Designer Brands (NYSE: DBI) for the last 5 years. And its been a pretty torrid time for Designer Brands investors. With the underlying trend in the group's stock price over the last 5 years being mostly negative. The stock traded at above $30, 5 years ago and is currently trading at $16.49. So the value of the stock has basically halved in the last 5 years. It is also currently trading at a lot closer to its 52 week low, than it is to its 52 week high, another indication of recent stock price weakness for the group.
Designer Brands (NYSE: DBI) latest stock valuation
So based on the group's latest earnings report what to we value their stock at? Our valuation models gives a target price (full value price) of $24.70 a share which will place the group ona PE ratio of 16.7 and a dividend yield of 4% which is by no means an expensive valuation. We therefore expect the group's stock price to tick upwards to closer to our target price of $24.70