Why Designer Brands Stock Tumbled Today

The DSW parent came up short on the bottom line.

Shares of Designer Brands (DBI -19.86%), the parent of DSW and other footwear retail brands, were pulling back today after the company reported disappointing results in its first-quarter earnings report.

As of 9:51 a.m. ET, Designer Brands stock was down 18.1% on the news.

Image source: Getty Images.

Designer Brands comes up short

Designer Brands has been in the process of a turnaround for several years, reformulating its portfolio by acquiring brands like Keds and Camuto Group, the parent of Vince Camuto.

However, the results of focusing on owned brands in its new portfolio strategy have been mostly underwhelming as the stock has traded sideways for the last several years.

That pattern continued in the first quarter with revenue rising 0.6% to $746.6 million, which topped the consensus at $741.6 million, while comparable sales fell 2.5%. Gross margin improved from 32% to 32.8%, but overall profits were still below expectations as operating expenses rose 8% and adjusted earnings per share fell from $0.21 to $0.08, missing the consensus at $0.12.

CEO Doug Howe noted market share gains, saying, “We outperformed the overall market dollar sales in the performance, leisure, and kids categories, which we believe is a testament to the strength of our new strategy.”

What’s next for Designer Brands

Designer Brands reaffirmed its guidance for the full year, but investors seemed to be expecting more after several years of investing in the business and making acquisitions.

For the full year, it expects net sales growth in the low single digits and adjusted earnings per share of $0.70 to $0.80.

While the stock trades at a reasonable forward P/E of 12 based on that forecast, it’s clear that management will have to deliver stronger growth in order for the stock to rebound.

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