Designer Brands Inc. (NYSE: DBI) (the “Company”), one of North America’s largest designers, producers and retailers of footwear and accessories, announced financial results for the three months ended May 2, 2020, compared to the three months ended May 4, 2019.
Roger Rawlins, Chief Executive Officer, stated, “As we said last quarter, the effect of COVID-19 on our industry has been unprecedented and has created many significant near-term challenges. The pandemic necessitated store closures and heavily impacted consumers, resulting in total comparable sales being down 42% during the first quarter.”
First Quarter Operating Results
- Net sales decreased 44.7% to $482.8 million.
- Comparable sales decreased 42.3% for first quarter of fiscal 2020 compared to a 3.0% increase in the first quarter of fiscal 2019.
- Reported consolidated gross profit decreased $285.8 million to a loss of $26.5 million in the first quarter as compared to a profit of $259.3 million in the same period last year. This was primarily driven by increased inventory markdown activity and the resulting increase in inventory reserves of $84.0 million over the same period last year, higher shipping costs associated with an increase in digital penetration, and the deleveraging of distribution and fulfillment and store occupancy expenses on lower sales volume.
- Recorded impairment charges of $112.5 million as a result of the material reduction in net sales and cash flows due to the temporary closure of all stores.
- Reported net loss was $215.9 million, or $3.00 loss per diluted share, including pre-tax charges totaling $112.3 million, or $1.17 per diluted share, primarily related to impairment charges, integration and restructuring expenses and COVID-19 incremental costs, partially offset by governmental credits the Company is able to claim.
- Adjusted net loss was $131.8 million, or $1.83 loss per diluted share.
- Cash and investments totaled $250.9 million at the end of the first quarter compared to $121.9 million for the same period last year. Debt totaled $393.0 million at the end of the first quarter compared to $235.0 million debt outstanding for the same period last year, reflecting net borrowings from our senior revolving credit agreement (the “Credit Facility”).
- During the quarter, the Company amended its $400 million Credit Facility and increased borrowings by $203.0 million as a precautionary measure to increase its cash position and preserve financial flexibility considering uncertainty in the U.S. and global markets resulting from COVID-19. The Company continues to actively pursue further options to increase 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.
- The Company has reached alignment with nearly all major vendors and landlords on past-due amounts and has extended go-forward payment terms.
- The Company ended the quarter with inventories of $533.6 million, down 16.9% compared to the same period last year, primarily due to strong inventory controls and higher inventory reserves versus the prior year.
As of the date of this release, the Company has successfully reopened approximately 90% of its total store base. The Company expects to have nearly all North American stores open by the end of June. The Company has implemented a number of measures to protect the health and safety of its customers and associates as stores are re-opened.
As previously announced on March 17, 2020, the Company is not issuing guidance for fiscal 2020 given the rapidly evolving COVID-19 environment. The Company is not providing an update at this time.