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Category: Designer Brands (DBI)
Date: 10 December 2020 Stock Price of Designer Brands: $7.90 We take a look at the 3rd quarter earnings report for their 2020 fiscal year of shoe and footwear accessories designer and producer, Designer Brands. Net revenues for the quarter declined by 30.1% compared to the same quarter of the prior year, largely due to the impact of the Covid-19 pandemic. The group reported a loss of -$40.6 million.
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- Designer Brands delivered sequential improvement across all of our metrics in the third quarter by successfully leveraging our flexible business model to align with consumer preferences. We have been shifting our assortment to include more athletic and kids product, as well as items from the Top 10 brands in footwear, and see further opportunity to meaningfully grow these categories. "
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.”
Designer Shoe Warehouse store
Overview of Designer Brands' 3rd quarter 2020 earnings report
The numbers we are interested in (for the quarter):
- Net sales: $652.8 (down from $933.8 million for the same quarter of the previous year)
- Net sales decreased by -30% over the last 12 months
- Net loss: -$40.64 million (down from $43.460 million for the same quarter of the previous year)
- Diluted loss per share: -$0.56 (down from $0.^60 for the same quarter of the previous year)
- PE ratio of Designer Brands: Since the group are loss making a PE cannot be calculated right now
- Diluted number of shares in issue: 72.344 million (down from 72.947 million for the same quarter of the previous year)
- Accounts receivable, net: $61.840 million (down from $87.313 million for the same quarter of the previous year)
- Accounts receivable makes up 2.7% of Designer Brands' total assets
- Inventories: $545.9 million (down from $677.7 million for the same quarter of the previous year)
- Inventories makes up 24.5% of Designer Brands' total assets
- Cash and cash equivalents: $114.5 million
- Cash and cash equivalents per share: $1.58
- Cash and cash equivalents makes up 20% of Designer Brands' market capital
- Cash and cash equivalents makes up 5.1% of Designer Brands' assets
- Stockholders equity in Designer Brands: $370.521 million
- Stockholders equity per share: $5.12
- Designer Brands is trading at 1.54 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
- The average price to book value of firms in the S&P 500 is 3.9
Designer Brands management commentary on their 3rd quarter 2020 earnings
COLUMBUS, Ohio, Dec. 9, 2020 /PRNewswire/ -- Designer Brands Inc. (NYSE: DBI) (the "Company"), one of North America's largest designers, producers and retailers of footwear and accessories, announced financial results for the three months ended October 31, 2020, compared to the three months ended November 2, 2019.
Roger Rawlins, Chief Executive Officer, said, "Designer Brands delivered sequential improvement across all of our metrics in the third quarter by successfully leveraging our flexible business model to align with consumer preferences. We have been shifting our assortment to include more athletic and kids product, as well as items from the Top 10 brands in footwear, and see further opportunity to meaningfully grow these categories. Our investment in these areas has resulted in athletic penetration in our U.S. retail business increasing to 26% at the end of the third quarter, up from 17% last year, and kids penetration has grown to 10% from 7% last year. During the quarter, athletic comparable sales turned positive at DSW, growing 5%, outperforming the market and supporting our strategic decision to pivot in this environment."
Roger Rawlins, Chief Executive Officer, said, "Designer Brands delivered sequential improvement across all of our metrics in the third quarter by successfully leveraging our flexible business model to align with consumer preferences. We have been shifting our assortment to include more athletic and kids product, as well as items from the Top 10 brands in footwear, and see further opportunity to meaningfully grow these categories. Our investment in these areas has resulted in athletic penetration in our U.S. retail business increasing to 26% at the end of the third quarter, up from 17% last year, and kids penetration has grown to 10% from 7% last year. During the quarter, athletic comparable sales turned positive at DSW, growing 5%, outperforming the market and supporting our strategic decision to pivot in this environment."
Mr. Rawlins continued, "Fundamentally, our customers know Designer Brands as a dress and seasonal house. As they continue to work from home and avoid large social events, the balance of our assortment will remain challenged. We are pleased to see that a vaccine may be on the horizon, but widespread adoption will take time and our business will continue to feel pressure in the near-term. We have confidence there will be a day our customers feel comfortable going out again, and, when that time comes, we will reap the benefits of the combination of our legacy command of the dress and seasonal market coupled with recent gains we are making in athletic and kids."
Third Quarter Operating Results
Liquidity Highlights
Store Openings and Closings
During the third quarter of fiscal 2020, we opened four stores and closed two in the U.S. resulting in a total of 524 U.S. stores. In Canada, we opened one store with no closures resulting in a total of 145 Canadian stores.
2020 Guidance
We continue to monitor and evaluate the impact of the COVID-19 pandemic and, given the prolonged uncertainty surrounding the impacts of COVID-19, the Company is not providing guidance at this time.
Third Quarter Operating Results
- Net sales decreased 30.1% to $652.9 million in the third quarter of fiscal 2020 compared to the same period last year.
- Comparable sales decreased 30.4% for the third quarter of fiscal 2020 compared to a 0.3% increase in the third quarter of fiscal 2019.
- Gross profit decreased $107.7 million to $165.7 million in the third quarter of fiscal 2020 versus $273.3 million last year, and gross margin as a percentage of net sales was 25.4% as compared to 29.3% in the third quarter of fiscal 2019. The decrease in gross profit was primarily driven by the significant reduction in customer traffic with the continuing impact of COVID-19. The decline in gross margin during the period was also a result of continued elevated markdown activity in addition to the increase in shipping expense and deleverage on occupancy, fixed distribution costs, and royalty expense related to the decline in sales.
- Reported operating expenses were down 8.8% to $196.1 million versus last year and the reported operating expenses as a percentage of net sales was 30.1%, above last year's level of 23.1%, due to a significantly lower sales volume.
- Reported net loss was $40.6 million, or $0.56 loss per diluted share, including net charges of $0.30 per diluted share from adjusted items primarily related to impairment charges.
- Adjusted net loss was $19.0 million, or $0.26 loss per diluted share.
Liquidity Highlights
- Cash and investments totaled $114.5 million at the end of the third quarter of fiscal 2020, compared to $113.8 million for the same period last year, with $295.0 million available for borrowings under our ABL Revolver. Debt totaled $274.6 million at the end of the third quarter of fiscal 2020 compared to $235.0 million debt outstanding for the same period last year.
- The Company ended the quarter with inventories of $546.0 million, down 19% compared to the same period last year, primarily due to strong inventory controls and higher inventory reserves versus the prior year.
Store Openings and Closings
During the third quarter of fiscal 2020, we opened four stores and closed two in the U.S. resulting in a total of 524 U.S. stores. In Canada, we opened one store with no closures resulting in a total of 145 Canadian stores.
2020 Guidance
We continue to monitor and evaluate the impact of the COVID-19 pandemic and, given the prolonged uncertainty surrounding the impacts of COVID-19, the Company is not providing guidance at this time.
Designer Brands (NASDAQ: DBI) stock price history over the last 5 years
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. 5 years ago the stock traded at around $29.30 and is currently trading at $7.90. That is a loss of -73% suffered by Designer Brands stockholders over the last 5 years.
The stock of Designer Brands (DBI) is trading at a lot closer to its 52 week low than it is to its 52 week high 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 (DBI) is trading at a lot closer to its 52 week low than it is to its 52 week high which to us is a clear indication that the short term sentiment and momentum of Designer Brands stock is very negative.
Designer Brands (DBI) stock price history over the last 5 years
Designer Brands (DBI) vs Buckle (BKE) stock price history over the last 5 years
The image below shows the stock price performance of Designer Brands (DBI) and Buckle (BKE) over the last 5 years. Over the 5 year period Designer Brands has had a far more volatile ride than that of Buckle.
The stock of Buckle (BKE) has easily outperformed that of Designer Brands over the last 5 years.
- Buckle (BKE): 8.5%
- Designer Brands: -73%
The stock of Buckle (BKE) has easily outperformed that of Designer Brands over the last 5 years.
Designer Brands (DBI) vs Buckle (BKE) stock price history over the last 5 years
Recent coverage of Designer Brands
The extract below discusses the stock price movements of Designer Brands as obtained from Fool.com
What happened
Shares of Designer Brands (NYSE:DBI) rose 82.4% in November, according to data from S&P Global Market Intelligence. The footwear retail company's stock gained ground thanks to positive coverage from analysts, news of effective coronavirus vaccines, and record momentum for the broader market in the month.
The coronavirus pandemic has been very hard on companies in the brick-and-mortar retail industry, and Designer Brands is no exception. The business's outlook improved thanks to the announcement of multiple highly effective coronavirus vaccines in November, and the beaten-down stock recorded a month of big gains.
So whatDesigner Brands also appears to have gotten a boost early last month thanks to analyst ratings upgrades. Susquehanna's Sam Poser published a note on the company on Nov. 3, raising his stock rating from "negative" to "neutral" and giving it a one-year price target of $4.30 per share. UBS analyst Jay Sole then initiated coverage on the stock with a note published on Nov. 9, giving the stock a "neutral" rating and a price target of $6 per share.
Now whatDesigner Brands stock has continued to climb early in December's trading. The company's share price is up roughly 2% in the month so far.
Read the full article here
What happened
Shares of Designer Brands (NYSE:DBI) rose 82.4% in November, according to data from S&P Global Market Intelligence. The footwear retail company's stock gained ground thanks to positive coverage from analysts, news of effective coronavirus vaccines, and record momentum for the broader market in the month.
The coronavirus pandemic has been very hard on companies in the brick-and-mortar retail industry, and Designer Brands is no exception. The business's outlook improved thanks to the announcement of multiple highly effective coronavirus vaccines in November, and the beaten-down stock recorded a month of big gains.
So whatDesigner Brands also appears to have gotten a boost early last month thanks to analyst ratings upgrades. Susquehanna's Sam Poser published a note on the company on Nov. 3, raising his stock rating from "negative" to "neutral" and giving it a one-year price target of $4.30 per share. UBS analyst Jay Sole then initiated coverage on the stock with a note published on Nov. 9, giving the stock a "neutral" rating and a price target of $6 per share.
Now whatDesigner Brands stock has continued to climb early in December's trading. The company's share price is up roughly 2% in the month so far.
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 $14.30 a stock (down significantly from our 1st quarter 2020 valuation of Designer Brands). We therefore believe the stock of Designer Brands is undervalued following the significant decline in the group's stock price in recent months
We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target price (full value price) wich in this case is $14.30. We therefore believe a good entry point into Designer Brands stock is at $12.90 or below.
Since the stock of Designer Brands is trading at well below our suggested entry point we rate the stock a buy. However this is a risky buy so investors should not invest any money they cannot afford to lose.
We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target price (full value price) wich in this case is $14.30. We therefore believe a good entry point into Designer Brands stock is at $12.90 or below.
Since the stock of Designer Brands is trading at well below our suggested entry point we rate the stock a buy. However this is a risky buy so investors should not invest any money they cannot afford to lose.
Next earnings release of Designer Brands
It is expected that Designer Brands will release their 4th quarter 2020 earnings report in March 2021
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