0001319947-19-000036.txt : 20190829 0001319947-19-000036.hdr.sgml : 20190829 20190829074512 ACCESSION NUMBER: 0001319947-19-000036 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20190829 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Other Events ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20190829 DATE AS OF CHANGE: 20190829 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Designer Brands Inc. CENTRAL INDEX KEY: 0001319947 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-SHOE STORES [5661] IRS NUMBER: 310746639 STATE OF INCORPORATION: OH FISCAL YEAR END: 0201 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-32545 FILM NUMBER: 191063608 BUSINESS ADDRESS: STREET 1: 810 DSW DRIVE CITY: COLUMBUS STATE: OH ZIP: 43219 BUSINESS PHONE: (614) 872-1473 MAIL ADDRESS: STREET 1: 810 DSW DRIVE CITY: COLUMBUS STATE: OH ZIP: 43219 FORMER COMPANY: FORMER CONFORMED NAME: DSW Inc. DATE OF NAME CHANGE: 20050307 8-K 1 q22019form8-k.htm 8-K Document

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 29, 2019
Designer Brands Inc.
(Exact name of registrant as specified in its charter)
     
Ohio 001-32545 31-0746639
(State or other Jurisdiction of Incorporation) (Commission File Number) (IRS Employer Identification No.)

   
810 DSW Drive, Columbus, Ohio 43219 
(Address of Principal Executive Offices) (Zip Code)
Registrant’s telephone number, including area code: (614) 237-7100
 
 N/A
(Former name or former address if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Shares, without par valueDBINew York Stock Exchange
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange
Act. o




Item 2.02 Results of Operations and Financial Condition.
On August 29, 2019, Designer Brands Inc. (the “Company”) issued a press release announcing its consolidated financial results for the second quarter ended August 3, 2019. A copy of the press release is attached as Exhibit 99.1 hereto and incorporated by reference herein.
Pursuant to General Instruction B.2 of Current Report on Form 8-K, the information in this Item 2.02, including Exhibit 99.1, is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Furthermore, the information in this Item 2.02 shall not be deemed to be incorporated by reference into the filings of the Company under the Securities Act of 1933, as amended.
Item 8.01 Other Events.
The press release attached as Exhibit 99.1 also announced the declaration of a dividend of $0.25 per share by the Company’s Board of Directors, to be paid on October 4, 2019 to shareholders of record at the close of business on September 20, 2019. Subject to Item 2.02 of this Current Report on Form 8-K, the description of the dividend set forth in the press release is incorporated by reference herein.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.



Signature  
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.  
Designer Brands Inc.
By:/s/ Michelle C. Krall
Michelle C. Krall
Senior Vice President, General Counsel and Secretary
Date:August 29, 2019


EX-99.1 2 q220198-kexhibit991pre.htm EX-99.1 Document

Exhibit 99.1
Designer Brands Inc. Reports Second Quarter 2019 Financial Results

Second quarter Reported EPS of $0.37 per diluted share, including net charges of $0.11 per diluted share from adjusted items.
Second quarter Adjusted EPS of $0.48 per diluted share.
Comparable sales decreased 0.6% with the acquired businesses performing above expectations and plans are on track to assume U.S. Retail segment private label sourcing.
Repurchased 2.7 million shares in the second quarter of fiscal 2019 and 6.1 million shares year to date; returned $249.2 million to shareholders through share repurchases and dividends over the last 12 months.
Board of Directors declared quarterly dividend of $0.25 per share.

COLUMBUS, Ohio, August 29, 2019 - 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.”




Second Quarter Operating Results
Total revenue increased by 8.2%, including $102.9 million in revenue from the Brand Portfolio segment, which includes $17.7 million in intersegment revenue that is eliminated in consolidation.
Comparable sales decreased 0.6% for second quarter of fiscal 2019 compared to a 9.7% increase in the second quarter of fiscal 2018.
Reported gross profit, as a percent of sales, decreased by 210 bps primarily driven by a benefit recognized in the second quarter of fiscal 2018 as a result of adjusting our loyalty programs deferred revenue due to the relaunch of the DSW VIP rewards program, the inclusion of Camuto Group which operates at a lower gross profit rate, and higher shipping costs in the current year associated with our continued success in engaging with customers across all mediums.
Reported operating expenses, as a percent of revenue, increased by 180 bps, driven by the consolidation of the Brand Portfolio segment and integration and restructuring costs incurred during fiscal 2019.
Reported net income was $27.4 million, or $0.37 per diluted share, including pre-tax charges totaling $9.1 million, or $0.11 per diluted share, primarily from integration and restructuring expenses.
Adjusted net income was $35.8 million, or $0.48 per diluted share.

Six Months Operating Results
Total revenue increased by 15.3%, including $207.5 million in revenue from the Brand Portfolio segment, which includes $28.2 million in intersegment revenue that is eliminated in consolidation.
Comparable sales increased 1.1% compared to last year's 5.8% increase.
Reported gross profit, as a percent of sales, decreased by 90 bps.
Reported operating expenses, as a percent of revenue, increased by 170 bps, driven by the consolidation of the acquired businesses.
Reported net income was $58.6 million, or $0.77 per diluted share, including pre-tax charges totaling $12.4 million, or $0.14 per diluted share, from integration and restructuring expenses.
Adjusted net income was $69.4 million, or $0.91 per diluted share.





Balance Sheet Highlights
Cash and investments totaled $77.3 million compared to $289.1 million at the end of the second quarter last year, and debt totaled $235.0 million compared to no debt outstanding at the end of the second 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 $706.2 million compared to $597.0 million last year. Excluding inventories from the acquisitions, inventories per square foot were flat to last year.
During fiscal 2019, the Company repurchased 6.1 million shares for a total of $125.0 million with $351.6 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 October 4, 2019 to shareholders of record at the close of business on September 20, 2019.


Webcast and Conference Call
The Company is hosting a conference call today at 8:30 am Eastern Time. Investors and analysts interested in participating in the call are invited to dial 888-317-6003, or the international dial in, 412-317-6061, and reference conference ID number 6946807 approximately ten minutes prior to the start of the call. The conference call will also be broadcast live over the internet and can be accessed through the following link:
https://www.webcaster4.com/Webcast/Page/1213/31016
For those unable to listen to the live webcast, an archived version will be available at the same location until October 10, 2019. A replay of the teleconference will be available until September 5, 2019 by dialing the following numbers:
U.S.: 1-877-344-7529
Canada: 1-855-669-9658
International: 1-412-317-0088
Passcode: 10133146





About Designer Brands
Designer Brands is one of North America's largest designers, producers and retailers of footwear and accessories. The Company operates a portfolio of retail concepts in nearly 1,000 locations under the DSW Designer Shoe Warehouse®, The Shoe Company®, and Shoe Warehouse® banners and services footwear departments in the U.S. through its Affiliated Business Group ("ABG"). Designer Brands designs and produces footwear and accessories through Camuto Group, a leading manufacturer selling in more than 5,400 doors worldwide. Camuto Group owns licensing rights for the Jessica Simpson® footwear business, and footwear and handbag licenses for Lucky Brand® and Max Studio®. In partnership with a joint venture with Authentic Brands Group, Designer Brands also owns a stake in Vince Camuto®, Louise et Cie®, Sole Society®, CC Corso Como®, Enzo Angiolini® and others. More information can be found at www.designerbrands.com.


Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
Any statements in this release that are not historical facts are forward-looking statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements by the use of forward-looking words such as "outlook," "believes," "expects," "potential," "continues," "may," "will," "should," "would," "seeks," "approximately," "predicts," "intends," "plans," "estimates," "anticipates," or the negative version of those words or other comparable words. These statements are based on the Company's current expectations and involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. These factors include, but are not limited to: our success in growing our store base and digital demand; our ability to successfully integrate the businesses acquired in fiscal 2018 or realize the anticipated benefits of the acquisitions after we complete our integration efforts; our ability to protect our reputation and to maintain the brands we license; maintaining strong relationships with our vendors, manufacturers and wholesale customers; our ability to anticipate and respond to fashion trends, consumer preferences and changing customer expectations; risks related to the loss or disruption of our distribution and/or fulfillment operations; continuation of agreements with and our reliance on the financial condition of Stein Mart; our ability to execute our strategies; fluctuation of our comparable sales and quarterly financial performance; risks related to the loss or



disruption of our information systems and data; our ability to prevent or mitigate breaches of our information security and the compromise of sensitive and confidential data; failure to retain our key executives or attract qualified new personnel; our reliance on our loyalty programs and marketing to drive traffic, sales and customer loyalty; risks related to leases of our properties; our competitiveness with respect to style, price, brand availability and customer service; our reliance on foreign sources for merchandise and risks inherent to international trade; the imposition of new tariffs on our products; exposure to foreign tax contingencies; uncertainty related to future legislation, regulatory reform, policy changes, or interpretive guidance on existing legislation; uncertain general economic conditions; risks related to holdings of cash and investments and access to liquidity; and fluctuations in foreign currency exchange rates. Additional factors that could cause our actual results to differ materially from our expectations are described in the Company's latest annual or quarterly report, as filed with the Securities and Exchange Commission. All forward-looking statements speak only as of the time when made. The Company undertakes no obligation to revise the forward-looking statements included in this press release to reflect any future events or circumstances.



DESIGNER BRANDS INC.
SEGMENT RESULTS
(unaudited)

Revenue
Three months ended Change
(dollars in thousands)August 3, 2019August 4, 2018Amount Comparable Sales % 
Segment net sales:
U.S. Retail$677,920 $691,757 $(13,837)(2.0)%(1.5)% 
Canada Retail63,306 72,532 (9,226)(12.7)%8.1%  
Brand Portfolio95,422 — 95,422 NM  NA 
Other29,480 29,446 34 0.1 %1.6%  
Total segment net sales866,128 793,735 72,393 9.1 %(0.6)% 
Commission, franchise and other revenue11,771 1,533 10,238 667.8 %
877,899 795,268 82,631 10.4 %
Elimination of intersegment revenue(17,701)— (17,701)NM  
Consolidated total revenue$860,198 $795,268 $64,930 8.2 %

Six months ended Change
(dollars in thousands)August 3, 2019August 4, 2018Amount Comparable Sales % 
Segment net sales:
U.S. Retail$1,369,760 $1,361,541 $8,219 0.6 %0.7%  
Canada Retail115,122 72,532 42,590 58.7 %8.1%  
Brand Portfolio196,289 — 196,289 NM  NA  
Other65,087 70,099 (5,012)(7.1)%2.5%  
Total segment net sales1,746,258 1,504,172 242,086 16.1 %1.1%  
Commission, franchise and other revenue20,676 3,198 17,478 546.5 %
1,766,934 1,507,370 259,564 17.2 %
Elimination of intersegment revenue(28,221)— (28,221)NM  
Consolidated total revenue$1,738,713 $1,507,370 $231,343 15.3 %

NM - Not meaningful
NA - Not applicable

Store Data
August 3, 2019August 4, 2018
(square footage in thousands)Number of Stores Square Footage Number of Stores Square Footage 
U.S. Retail segment - DSW Designer Shoe Warehouse518 10,543 517 10,560 
Canada Retail segment:
The Shoe Company / Shoe Warehouse112 611 113 624 
Town Shoes— — 3895 
DSW Designer Shoe Warehouse27 534 27 534 
139 1,145 178 1,253 
Total operating stores657 11,688 695 11,813 
ABG stores serviced284 289 




Gross Profit(1)
Three months ended
August 3, 2019August 4, 2018Change
(dollars in thousands)
Amount % of Segment Net Sales Amount % of Segment Net Sales Amount Basis Points 
Segment gross profit:
U.S. Retail$208,056 30.7 %$229,601 33.2 %$(21,545)(9.4)%(250)
Canada Retail21,939 34.7 %18,218 25.1 %$3,721 20.4 %960 
Brand Portfolio19,261 20.2 %— — %$19,261 NM  NM 
Other6,041 20.5 %6,676 22.7 %$(635)(9.5)%(220)
255,297 254,495 
Intercompany eliminations(436)— 
Consolidated gross profit$254,861 30.0 %$254,495 32.1 %$366 0.1 %(210)
Six months ended
August 3, 2019August 4, 2018Change
(dollars in thousands)
Amount % of Segment Net Sales Amount % of Segment Net Sales Amount Basis Points 
Segment gross profit:
U.S. Retail$417,947 30.5 %$427,945 31.4 %$(9,998)(2.3)%(90)
Canada Retail37,686 32.7 %18,218 25.1 %$19,468 106.9%  760 
Brand Portfolio41,255 21.0 %— — %$41,255 NM  NM 
Other15,352 23.6 %13,557 19.3 %$1,795 13.2 %430 
512,240 459,720 
Intercompany eliminations(1,343)— 
Consolidated gross profit$510,897 29.7 %$459,720 30.6 %$51,177 11.1 %(90)

(1) Gross profit is defined as net sales, which excludes commission, franchise and other revenue, less cost of sales.



DESIGNER BRANDS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited and in thousands)
August 3, 2019February 2, 2019August 4, 2018
Assets
Cash and cash equivalents$51,762 $99,369 $215,996 
Investments25,504 69,718 73,119 
Accounts receivable, net85,162 68,870 17,259 
Inventories706,168 645,317 596,956 
Prepaid expenses and other current assets55,561 71,945 73,763 
Total current assets924,157 955,219 977,093 
Property and equipment, net402,779 409,576 387,621 
Operating lease assets975,963 — — 
Goodwill116,280 89,513 25,899 
Intangible assets 21,112 46,129 20,285 
Deferred tax assets29,515 30,283 14,235 
Equity investment in ABG-Camuto55,033 58,125 — 
Other assets32,407 31,739 19,883 
Total assets$2,557,246 $1,620,584 $1,445,016 
Liabilities and shareholders' equity
Accounts payable$289,457 $261,625 $229,440 
Accrued expenses173,437 201,535 145,776 
Current operating lease liabilities185,969 — — 
Total current liabilities648,863 463,160 375,216 
Debt235,000 160,000 — 
Non-current operating lease liabilities905,546 — — 
Other non-current liabilities38,590 165,047 150,316 
Total liabilities1,827,999 788,207 525,532 
Total shareholders' equity729,247 832,377 919,484 
Total liabilities and shareholders' equity$2,557,246 $1,620,584 $1,445,016 




DESIGNER BRANDS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited and in thousands, except per share amounts)
Three months ended Six months ended
August 3, 2019August 4, 2018August 3, 2019August 4, 2018
Revenue:
Net sales$849,640 $793,735 $1,719,632 $1,504,172 
Commission, franchise and other revenue10,558 1,533 19,081 3,198 
Total revenue860,198 795,268 1,738,713 1,507,370 
Cost of sales(594,779)(539,240)(1,208,735)(1,044,452)
Operating expenses(226,616)(195,319)(449,422)(363,739)
Income from equity investment in ABG-Camuto2,464 — 4,692 — 
Impairment charges— (36,240)— (36,240)
Operating profit41,267 24,469 85,248 62,939 
Interest income (expense), net(1,972)805 (3,773)1,469 
Non-operating income (expenses), net199 (47,349)(143)(49,486)
Income (loss) before income taxes and loss from equity investment in TSL39,494 (22,075)81,332 14,922 
Income tax provision(12,087)(16,281)(22,731)(27,671)
Loss from equity investment in TSL— — — (1,310)
Net income (loss)$27,407 $(38,356)$58,601 $(14,059)
Diluted earnings (loss) per share$0.37 $(0.48)$0.77 $(0.18)
Weighted average diluted shares74,316 80,265 76,281 80,187 




DESIGNER BRANDS INC.
NON-GAAP RECONCILIATION
(unaudited and in thousands, except per share amounts)
Three months ended Six months ended
August 3, 2019August 4, 2018August 3, 2019August 4, 2018
Reported net income (loss)$27,407 $(38,356)$58,601 $(14,059)
Pre-tax adjustments:
Included in operating expenses:
Lease exit and other termination costs
— 409 — 4,403 
Acquisition-related costs and target acquisition costs— 5,104 — 5,612 
Integration and restructuring expenses9,621 2,708 12,109 2,708 
Amortization of intangible assets(271)114 47 114 
Impairment charges
— 36,240 — 36,240 
Included in non-operating expenses, net:
Fair value adjustments of TSL's previously held assets— 33,988 — 33,988 
Foreign currency transaction losses (gains)(223)13,318 207 15,296 
Total pre-tax adjustments9,127 91,881 12,363 98,361 
Tax effect of adjustments(780)(2,623)(1,605)(4,173)
Tax expense impact as a result of Ebuys exit— — — 2,265 
Total adjustments, after tax8,347 89,258 10,758 96,453 
Adjusted net income$35,754 $50,902 $69,359 $82,394 
Reported diluted earnings (loss) per share$0.37 $(0.48)$0.77 $(0.18)
Adjusted diluted earnings per share$0.48 $0.63 $0.91 $1.02 

Non-GAAP Measures

In addition to diluted earnings per share and net income determined in accordance with accounting principles generally accepted in the United States ("GAAP"), the Company uses adjusted diluted earnings per share and adjusted net income, which adjust for the effects of (i) lease exit and other termination costs; (ii) acquisition-related costs and target acquisition costs; (iii) integration and restructuring expenses; (iv) amortization expense of intangible assets; (v) impairment charges; (vi) fair value adjustments of Town Shoes Limited's ("TSL") previously held assets; (vii) foreign currency transaction losses (gains); and (viii) the net tax expense impact of such items and the net tax expense impact as a result of the Ebuys exit. The unaudited reconciliation of adjusted results should not be construed as an alternative to the reported results determined in accordance with GAAP. These financial measures are not based on any standardized methodology and are not necessarily comparable to similar measures presented by other companies. The Company believes these non-GAAP measures provide useful information to both management and investors to increase comparability to the prior periods by adjusting for certain items that may not be indicative of core operating measures and to better identify trends in our business. The adjusted financial results are used by management to, and allow investors to, evaluate the operating performance of the Company on a comparable basis, when reviewed in conjunction with the Company’s GAAP statements. These amounts are not determined in accordance with GAAP and therefore should not be used exclusively in evaluating the Company’s business and operations.


CONTACT: Allison Malkin, ICR, allison.malkin@icrinc.com