Designer Brands Inc. Q2 FY2025 earnings call

• Retail Businesses: Saw improved comps, with VIP rewards signups in stores, store conversion up 1%, marketing investments, new DoorDash partnership (85% of DoorDash transactions from new customers), Birkenstock front-of-store takeover, social engagement growth. Focus on customer and product pillars, with DSW brand repositioning including new logo, tagline, and reimagined store in Framingham with new technologies.
• Brands Portfolio: Wholesale activity across external retail partners grew year over year. Focus on scaling private label, building profitable wholesale model, and investing in strategic growth brands. Inventory productivity efforts with reduced choice count and increased depth on key styles.
• Brands Segment: Sourcing team mitigating tariff impact and diversifying supply base. Topo Athletic expanding door count and DTC growth, with no impact on sales/growth rates from price increases due to tariffs.

U.S. Retail: Total sales down 5% year over year with comps down 5%. Women's dress had a positive 5% comp, top eight brands had a 1% positive comp (penetrating 45% of total sales). Athletic adult showed sequential improvement, Kids Athletic had a flat comp. Canadian Retail: Total sales flat year over year, comps down 0.6%, an improvement from Q1. Brands Portfolio: Total sales down 23.8% year over year, but external wholesale up 7%. Topo Athletic had 45% sales growth year over year.

Given ongoing tariff volatility and consumer caution around discretionary spending, Designer Brands withheld full-year guidance. Focus remains on disciplined execution across controllable areas while navigating the near-term environment.

• Tariff environment remains highly unpredictable, posing a risk to supply chain and potential indirect impact on consumer sentiment.
• Macro uncertainty continuing to affect consumer discretionary spending.

Q: Elaborate on interquarter trends, comps during the quarter, and momentum into August A: Doug Howe mentioned sequential improvement through the quarter, with women's dress showing a 900 basis point improvement, athletics (kids and adults) improving, and positive comps in stores turning positive in August. Jared Poff noted focus on digital business profitability, pulling back marketing spend for digital to focus on store differentiation.

Q: Details on Q3 tariff pressure A: Doug Howe stated concern is more about indirect impact of tariffs on consumer sentiment rather than direct impact. Brand partners selectively passing on price increases, with majority of these now customer-facing. Cautiously optimistic about back half.

Q: Brand activations and SG&A from marketing A: Doug Howe mentioned Birkenstock activation performed well, with focus on top eight brands and brand collateral in stores. Jared Poff noted marketing spend is being optimized, with focus on store differentiation, not seeing significant deleverage on marketing SG&A line as it's a pivot for better profitability Q: Elaboration on deepening assortment and SG&A decline buckets A: Doug Howe discussed inventory productivity efforts with reduced choice count and increased depth on key styles. Jared Poff broke down SG&A savings into thirds: professional fees, personnel-related actions, and other items like depreciation/occupancy