Why Designer Brands Stock Tumbled Today
Shares of Designer Brands (NYSE: DBI), 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.
Should you invest $1,000 in Designer Brands right now?
Before you buy stock in Designer Brands, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Designer Brands wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $704,612!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of June 3, 2024
Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool recommends Designer Brands. The Motley Fool has a disclosure policy.
