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Category: Stock Market and Designer Brands
Date: 11 December 2019 Stock Price: $14.23 We take a look at the 3rd 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.”
Overview of Designer Brands's 3rd quarter 2019 earnings report
The numbers we are interested in (for the quarter):
- Total revenue: $936.264 (up from $833.003 million for the same quarter of the previous year)
- Total revenue increased by 12.4% over the last 12 months
- Net income $43.460 million (up from $39.319 million for the same quarter of the previous year)
- Diluted earnings per share: $0.60 (up from $0.48 for the same quarter of the previous year)
- PE ratio of Designer Brands: 9.6
- Dividend for the quarter: $0.25
- Dividend yield of Designer Brands: 7.1%
- Diluted number of shares in issue: 72.9 million (down from 82.287 million for the same quarter of the previous year)
- Accounts receivable, net: $87.313 million (up from $17.259 million for the same quarter of the previous year)
- Accounts receivable makes up 3.44% of Designer Brands's total assets
- Inventories: $677.696 million (up from $65.313 million for the same quarter of the previous year)
- Inventories makes up 26.7% of Designer Brands' total assets
- Inventories grew by 10.4% over the last 12 months
- Cash and cash equivalents: $87.838 million
- Cash and cash equivalents per share: $1.20
- Cash and cash equivalents makes up 8.5% of Designer Brands' market capital
- Cash and cash equivalents makes up 3.4% of Designer Brands' assets
- Stockholders equity in Designer Brands: $743.181 million
- Stockholders equity per share: $10.19
- Designer Brands is trading at 1.39 times its stockholders equity per share which is outside the expected range of between 2 and 4 times that most firms tend to trade at
Designer Brands' management commentary on the results and earnings guidance
COLUMBUS, Ohio, Dec. 10, 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 November 2, 2019, compared to the three months ended November 3, 2018.
Roger Rawlins, Chief Executive Officer, stated, "We continued to make progress on our strategic initiatives and the integration of our acquisitions. At the same time, we faced several meaningful headwinds during the third quarter that impacted our results and will likely continue for the upcoming quarters.The near-record warm weather during our largest and most profitable quarter affected every segment of our business. And, while we are extremely proud of the results we've achieved, substantially mitigating the very material footwear tariffs that were recently enacted, the mitigation effort itself has had repercussions which have weighed heavy on our results."
Mr. Rawlins continued, "We took proactive actions to protect our topline and delivered positive comps in the third quarter. Our Camuto organization delivered their first positive operating income contribution in the quarter and the incredible Camuto designed and sourced exclusive brand product is being delivered to our warehouses currently and will be customer facing in just a few weeks. And I am excited to see Canada continue to strongly leverage the expertise and infrastructure from our US business as they delivered another stellar quarter."
"We are continuously seeking ways to increase our market share," Mr. Rawlins concluded, "all while reducing costs across our entire organization and mitigating tariffs. We continue to believe our ability to operate a fully integrated supply chain will yield significant benefit and enable us to better compete across all channels and creates a long runway for growth, and in turn, long-term value for our shareholders."
Roger Rawlins, Chief Executive Officer, stated, "We continued to make progress on our strategic initiatives and the integration of our acquisitions. At the same time, we faced several meaningful headwinds during the third quarter that impacted our results and will likely continue for the upcoming quarters.The near-record warm weather during our largest and most profitable quarter affected every segment of our business. And, while we are extremely proud of the results we've achieved, substantially mitigating the very material footwear tariffs that were recently enacted, the mitigation effort itself has had repercussions which have weighed heavy on our results."
Mr. Rawlins continued, "We took proactive actions to protect our topline and delivered positive comps in the third quarter. Our Camuto organization delivered their first positive operating income contribution in the quarter and the incredible Camuto designed and sourced exclusive brand product is being delivered to our warehouses currently and will be customer facing in just a few weeks. And I am excited to see Canada continue to strongly leverage the expertise and infrastructure from our US business as they delivered another stellar quarter."
"We are continuously seeking ways to increase our market share," Mr. Rawlins concluded, "all while reducing costs across our entire organization and mitigating tariffs. We continue to believe our ability to operate a fully integrated supply chain will yield significant benefit and enable us to better compete across all channels and creates a long runway for growth, and in turn, long-term value for our shareholders."
Balance Sheet Highlights
Regular Dividend
The Company's Board of Directors declared a quarterly cash dividend of $0.25 per share. The dividend will be paid on January 3, 2020 to shareholders of record at the close of business on December 20, 2019.
Fiscal 2019 Annual Outlook
The Company lowered its full year outlook for Adjusted EPS in the range of $1.50 to $1.55 per diluted share, compared to its previous range $1.87 to $1.97 per diluted share.
Comparison of Current to Previous Outlook
Current Outlook Previous Outlook
Revenue outlook: Low double-digit growth Low double-digit growth
Comparable sales growth: Low single-digit growth Flat
Tax rate: 24% 27%
Shares outstanding: 75 million 77 million
- Cash and investments totaled $113.8 million compared to $294.3 million at the end of the third quarter last year, and debt totaled $235.0 million compared to no debt outstanding at the end of the third quarter last year, reflecting the funding of the two acquisitions in fiscal 2018 and share repurchase activity.
- The Company ended the quarter with inventories of $677.7 million compared to $624.2 million last year. Excluding inventories from the acquisitions, inventories per square foot decreased 5.6% to last year.
- During fiscal 2019, the Company repurchased 7.1 million shares for a total of $141.6 million with $334.9 million remaining under its share repurchase program.
Regular Dividend
The Company's Board of Directors declared a quarterly cash dividend of $0.25 per share. The dividend will be paid on January 3, 2020 to shareholders of record at the close of business on December 20, 2019.
Fiscal 2019 Annual Outlook
The Company lowered its full year outlook for Adjusted EPS in the range of $1.50 to $1.55 per diluted share, compared to its previous range $1.87 to $1.97 per diluted share.
Comparison of Current to Previous Outlook
Current Outlook Previous Outlook
Revenue outlook: Low double-digit growth Low double-digit growth
Comparable sales growth: Low single-digit growth Flat
Tax rate: 24% 27%
Shares outstanding: 75 million 77 million
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 around $35.60 5 years ago and is currently trading at $14.23. That is a loss of -60% suffered by Designer Brands stockholders over the last 5 years.
The stock of Designer Brands is trading at a lot closer to its 52 week low of $13.88 than it is to its 52 week high of $30.73 which to us is a clear indication that the short term sentiment and momentum of Designer Brands stock is very negative.
The stock of Designer Brands is trading at a lot closer to its 52 week low of $13.88 than it is to its 52 week high of $30.73 which to us is a clear indication that the short term sentiment and momentum of Designer Brands stock is very negative.
Recent coverage of Designer Brands
The extract below discusses the stock price plunge of Designer Brands after the release of their latest earnings report as obtained from Fool.com
Shares of Designer Brands (NYSE:DBI), the retailer formerly known as DSW, were sliding today after the company posted disappointing results in its third-quarter earnings report. The company missed expectations on the bottom line and cut its guidance.
The DSW parent said comparable sales rose 0.3%, or 7.6% on a two-year basis, showing that same-store sales growth had slowed significantly since a year ago. Total revenue increased 12.4% to $936.3 million, which includes the acquisition of Camuto Group last November, and beat estimates at $935 million.
Farther down the income statement, markdowns and promotions weighed on profitability as gross margin fell 370 basis points to 28.9%. Performance in U.S. retail, which makes up close to 80% of revenue, was even worse, falling 510 basis points to 28.1%. Management also blamed warm weather for the challenges, as did some other retailers in the quarter.
As a result, its adjusted per-share profit fell from $0.70 to $0.67, which missed estimates at $0.74. CEO Roger Rawlins acknowledged challenges in the period, saying, "We continued to make progress on our strategic initiatives and the integration of our acquisitions. At the same time, we faced several meaningful headwinds during the third quarter that impacted our results and will likely continue for the upcoming quarters."
Read the full article here
Shares of Designer Brands (NYSE:DBI), the retailer formerly known as DSW, were sliding today after the company posted disappointing results in its third-quarter earnings report. The company missed expectations on the bottom line and cut its guidance.
The DSW parent said comparable sales rose 0.3%, or 7.6% on a two-year basis, showing that same-store sales growth had slowed significantly since a year ago. Total revenue increased 12.4% to $936.3 million, which includes the acquisition of Camuto Group last November, and beat estimates at $935 million.
Farther down the income statement, markdowns and promotions weighed on profitability as gross margin fell 370 basis points to 28.9%. Performance in U.S. retail, which makes up close to 80% of revenue, was even worse, falling 510 basis points to 28.1%. Management also blamed warm weather for the challenges, as did some other retailers in the quarter.
As a result, its adjusted per-share profit fell from $0.70 to $0.67, which missed estimates at $0.74. CEO Roger Rawlins acknowledged challenges in the period, saying, "We continued to make progress on our strategic initiatives and the integration of our acquisitions. At the same time, we faced several meaningful headwinds during the third quarter that impacted our results and will likely continue for the upcoming quarters."
Read the full article here
Designer Brands (NYSE: DBI) latest stock valuation
So based on Designer Brands latest earnings report and the fiscal guidance that they provided what to we value their stock at? Based on the earnings reported and the guidance provided our valuation model provides a target price (full value price) for Designer Brands at $24.00 a stock (down slightly from our 2nd quarter 2019 earnings report valuation of Designer Brands). We therefore believe the stock of Designer Brands is undervalued following the significant decline in the group's stock price after the release of their latest earnings.
We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target (full value) price wich in this case is 24$ . We therefore believe a good entry point into Designer Brands stock is at $21.60 or below. Since the stock of Designer Brands is trading at well below our suggested entry point we rate the stock a buy. We believe that once the initial knee-jerk reaction following their results blow over they will kick upwards to levels closer to our target price in coming weeks and months
We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target (full value) price wich in this case is 24$ . We therefore believe a good entry point into Designer Brands stock is at $21.60 or below. Since the stock of Designer Brands is trading at well below our suggested entry point we rate the stock a buy. We believe that once the initial knee-jerk reaction following their results blow over they will kick upwards to levels closer to our target price in coming weeks and months
Next earnings release of Designer Brands
It is expected that Designer Brands will release their 4th quarter and full fiscal 2019 earnings report in early March 2020