Designer Brands Inc. (DBI) shares took a nosedive on Wednesday after the company reported lackluster second-quarter earnings, failing to meet analysts’ expectations. The company reported adjusted earnings per share of 29 cents, falling short of the anticipated 53 cents. Revenue also missed the mark, coming in at $771.9 million compared to the consensus estimate of $816.137 million. This translates to a 2.6% decline in net sales and a 1.4% drop in comparable sales for the quarter.
The company attributed the disappointing performance to persistent challenges in dress and seasonal categories, noting that these struggles were partially offset by increased sales of athletic and athleisure brands. Doug Howe, Chief Executive Officer, acknowledged the headwinds, stating, “We saw sustained pressure on challenged categories such as dress and seasonal in the second quarter, which we were able to partially mitigate through providing a greater selection of athletic and athleisure brands in our assortment.”
Further adding to the concerns, Designer Brands reported a decline in gross profit to $252.9 million, down from $273.4 million in the previous year. The gross margin also shrank to 32.8% compared to 34.5% in the prior year.
In light of these disappointing results, Designer Brands has revised its outlook for the fiscal year 2024. The company now anticipates adjusted EPS to be between $0.50 and $0.60, a significant decrease from the previous forecast of $0.70 to $0.80. This revised forecast falls below the current analyst estimate of $0.75. Designer Brands also projects net sales growth to be flat to low-single digits, a downgrade from the previous expectation of low-single-digit growth.
The market reacted negatively to the news, sending DBI shares plummeting by 28.2% to $4.17 in premarket trading on Wednesday. This substantial drop reflects investor concerns about the company’s performance and the revised outlook.
