Designer Brands Boosts Liquidity With New Borrowings — What This Means for Business

Designer Brands Inc. is taking more steps to boost its liquidity.

The Designer Shoe Warehouse parent announced today that it has retired its existing $400 million facility and entered into a new $400 million asset-based revolver, which matures in August 2025. The new ABL revolver contains a covenant regarding minimum availability and provides additional flexibility to maneuver through an evolving consumer landscape as compared to the original cash flow revolver.

What’s more, Designer Brands announced the closing of a $250 million privately placed senior secured term loan — also maturing in August 2025 — which it said will be used to improve liquidity and support the business’ ongoing needs.

“Since confronted with the challenges posed by COVID-19, we have acted decisively to prioritize the health and safety of our associates and customers and protect the long-term sustainability of our business,” CEO Roger Rawlins said in a statement. “These actions, combined with previously announced steps to manage expenses including the initial furloughs and recent internal organization restructuring, will strengthen our position as we continue to navigate the rapidly evolving consumer landscape.”

Last week, Designer Brands moved forward with an internal reorganization and reduction of its workforce: It cut more than a thousand positions, or approximately 8% of its North America-based roles, affecting 380 corporate employees and upwards of 700 store workers. The company shared that it offered 550 retail associates the opportunity to transfer to a different role within the organization or accept severance payment. With this decision, the chain said it expects annual pre-tax cost savings of about $40 million.

At the end of the second quarter, 517 of the DSW owner’s brick-and-mortar units in the United States and 145 locations in Canada — or 99% of its overall footprint — have reopened to the public. However, Rawlins explained that store traffic “continues to be impacted,” leading the retailer to increase markdowns in the seasonal and dress categories to clean out inventory as fashion’s spring season approaches its end.

Management said that it plans to open back up the remaining four outposts in the U.S. when state and local officials give the green light. In addition, Designer Brands is actively negotiating go-forward lease terms with its landlords regarding future lease payments.

“Given the environment, we are moving quickly to adapt our business model, including pivoting our product assortment away from seasonal and dress and moving deeper into athletic and casual in order to be in a stronger position to meet customers’ current needs in the important fall season,” Rawlins said.

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