DSW Store Closures Push Designer Brands to Mixed Quarter

Designer Brands Inc. has posted a mixed first quarter as forced store closures during the period hindered sales.

For the three months ended May 2, the DSW parent’s adjusted net loss was $131.8 million, or $1.83 loss per diluted share, versus the prior year’s income of $33.6 million, or earnings of 43 cents per share. Analysts had expected a loss of 60 cents per share. On the other hand, revenues decreased 44.7% to $482.8 million, narrowly beating forecasts of $481.2 million.

As the coronavirus pandemic spread through the United States, DSW was forced to shutter all of its units starting mid-March, which completely halted foot traffic in stores and led to a significant decline in sales. Total comps plunged 42.3%.

Nevertheless, CEO Roger Rawlins touted the company’s e-commerce platform, which represented 50% of Designer Brands’ business during the quarter, growing 25% from the previous year.

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“Over the past several years, we have made significant investments in our digital infrastructure, and, as a result, we were able to generate strong digital demand during the first quarter,” he said in a statement. “We also leveraged our best-in-class inventory controls to end the quarter with inventory units on hand flat versus last year. We have adjusted our near-term areas of focus to prioritize growing with the top fifty brands in footwear and further emphasizing our everyday value.”

Today, the shoe chain has reopened roughly 90% of its brick-and-mortar fleet as state and local officials ease lockdown restrictions on nonessential retailers. It anticipates that all North American stores will be back in business by the end of June.

Shoppers who pay a visit to their local DSWs will see hand-sanitizing stations at entryways, associates donning masks and signage that implores them to observe social distancing guidelines. The company has also installed one-way aisles for browsing products and designated footwear try-on areas within stores. At checkout lanes, they can expect plexiglass shields at the registers, and they won’t be able to pay with cash — only credit cards, gift cards or other contactless payment options will be accepted.

At the end of the quarter, Designer Brands’ cash and investments totaled $250.9 million. It borrowed $203 million from its $400 million revolving credit facility as a precautionary measure to increase its cash position during the COVID-19 health crisis.

It also opted against providing an outlook for the fiscal year due to current economic uncertainties. The retailer said it has continued to “actively pursue further options” to improve financial flexibility.

“While there is no immediate need to raise capital at the present time, the company intends to evaluate assessing the financing markets and may look to raise capital, when and if the company deems it prudent, to further strengthen its balance sheet,” it shared.

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