Designer Brands Inc., the firm behind DSW and The Camuto Group, credits its inventory investments and growing awareness as an athleisure destination for its better-than-expected third quarter earnings along with “record-setting” margin.
The Columbus, Ohio-based footwear and accessories retailer posted a net sales increase of 30.7% to $853.5 million compared to the same period last year. Net income was $80.2 million, or $1.04 diluted earnings per share. And gross profit increased to a record $313.6 million in the third quarter versus $165.7 million last year.
On its third quarter earnings call on Tuesday, Designer Brands CEO Roger Rawlins said the company’s strong performance continued to be driven “by the strategies we outlined back in 2019, following our acquisitions of the Camuto Group and Shoe Company in Canada, with a clear focus towards casualizing our product offerings to meet the demands of the consumer.”
Rawlins noted on the call that the company continues to see strength in athletic and athleisure, kids, and men’s all powered by the retailer’s “top 50 brands in footwear” strategy. Designer Brands’ women’s fashion business has also improved significantly. “We are growing our business through our focus on the top 50 brands in footwear, including our own vertical brands,” he stated on the call. “Over the last three years, we have reduced the number of labels we offer and a focus on the brands we know our customers want. This has resulted in a 25% reduction in the number of labels from whom we buy goods over a three-year period.”
In its U.S. retail segment, the company’s top 50 brands represent 77% of its total sales as compared to 65% in 2019. Additionally, its number one selling item was a top 50 national brand boot with an average unit retail of $144.
The strategy was also credited by Rawlins as helping to circumvent major supply chain issues as many major retailers have been feeling the pinch due to port delays. “We bought product ahead of the season and over ordered in anticipation of inventory cuts, accelerated orders of our owned brands and leveraged our scale and strong relationships with our vendors,” he said on the call. “This has enabled us to get access to additional product and has put us in a better position than most of our peers heading into the fourth quarter.”
Turning to Camuto Group, the company continues to ramp up production as it sees growing demand for its products, and Camuto remains an essential contributor to its long-term strategy of building its own vertical brands. Designer Brands CFO Jared Poff added in today’s earnings call that Camuto’s “production increased by 64% compared to the same time last year, and we are expecting Q4’s year-over-year production to increase over 100% in anticipation of a strong spring.”
Total net sales from Camuto, including sales to DSW, were $103.9 million in the third quarter, up 23.9% versus last year. Wholesale sales were $90.6 million in the third quarter versus $73.7 million last year, including sales to its own retail segments, which totaled approximately $31.6 million versus $21 million last year.
“I am also very happy with the work we’ve done to refocus and streamline our efforts at Camuto,” said Poff. “During 2020, we exited many of our brands that were unprofitable and taking focus away from our core and refocused our efforts around four major go-forward brands. In Q3, three of these four go-forward footwear brands grew wholesale sales compared to 2019.”
And with a soft refresh of the Vince Camuto brand in the third quarter, the company saw a significant positive impact on its vc.com site, which grew 50.4% compared to the third quarter of 2020 and 62% compared to 2019. “Not only were the quarterly sales the highest that the digital site has seen, but we also produced the highest margin rate as well,” maintained Poff. “This is a great example of the synergies we can bring to bear. The combination of the digital retail expertise and infrastructure from DSW, combined with the brand marketing and product knowledge of Camuto, has pushed vc.com to its best quarter ever.”