Shares for Designer Brands Inc. are plummeting in Thursday premarket trading following the release of an earnings and sales report that largely missed Wall Street’s expectations.
For the three months ended Aug. 1, the footwear and accessories retailer posted an adjusted loss of $92 million, or an adjusted loss of $1.28 per diluted share, compared with market watchers’ estimates of a loss of 85 cents per share. Revenues sank 42.8% to $489.7 million, while analysts forecasted sales of $596.46 million.
As of 8:30 a.m. ET, DBI’s stock was down more than 18% to $6.70.
In a statement, CEO Roger Rawlins suggested that the Columbus, Ohio-based chain would pivot away from dress, formal and special occasion footwear toward more comfort-driven styles in an effort to cater to shifting consumer preferences as the coronavirus pandemic continues to keep people indoors.
“Given that we have further strengthened our balance sheet, we are well prepared to focus on growing our business’ profitability. In order to serve our customers in the near-term, we are flexing fall inventory receipts away from seasonal and dress products and towards our highest-performing category, athleisure, with an emphasis on comfortable and cozy products,” Rawlins explained. “We have the unique ability to pivot inventory quickly and follow the customer as needs and preferences change in the future.”
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During the quarter, comps dropped 42.7%, versus the prior year’s 0.6% decline. Its inventory fell 37% to $445 million at the end of the period as nearly all units in its brick-and-mortar fleet are back in business.
Designer Brands closed the quarter with $206.7 million in cash and investments, while its debt totaled $393 million. In early August, it replaced its revolving credit facility with a $400 million asset-based lending revolver, with an initial draw of $150 million, and completed a five-year $250 million secured term loan.
“Although the COVID-19 pandemic continues to impact consumer behavior and our business, I am confident in Designer Brands’ playbook to navigate this ever-changing environment,” Rawlins said. “We believe our recent actions to right size our expense structure and obtain additional liquidity, our strategic digital investments, flexible business model and strong vendor partnerships, as well as our status as one of the largest footwear retailers, have firmly positioned Designer Brands to weather the road ahead.”