Investors loved Designer Brands Inc.’s third quarter results, sending shares of the shoe retailer up nearly 48.5 percent in Tuesday’s trading session.
Shares of Designer Brands ended the day’s trading session up $2.35 to close at $7.20.
Net income in the quarter ended Nov. 1 jumped 40 percent to $18.2 million on a net sales slip of 3.2 percent to $752.4 million. What was key in the quarter was the sequential improvement from the second quarter, indicating that strategic initiatives put in place, including a repositioning of the DSW banner, are resonating with the shoe retailer’s customer base.
“Our results are an encouraging indicator that we are effectively communicating our value proposition amid the ongoing uncertainty in the external environment. In Q3, we delivered another quarter of sequential improvement supported by healthier traffic, higher store conversion and disciplined expense and inventory management,” the company’s CEO Doug Howe told investors during the Tuesday morning call after posting third quarter earnings results.
One of those initiatives was the “Let Us Surprise You” brand campaign, which Howe said has been performing well, driving strong awareness, and generating $2 billion earned media impressions as of the end of October.
As for key categories, Howe said: “We’re also encouraged by the strong performance of our key focus areas within the fashion business. Boots have generated a strong start to the season, delivering an 8 percent increase in regular-priced product sales in the quarter with our inventory well positioned to capitalize on this trend as the business peaks.”
Howe said the assortment mix is “clearly resonating.” In addition, brown appears to be the “hot color this season with high-quality, tall shaft boots trending.”
The CEO said the shoe retailer’s affordable luxury offering, “while currently a modest portion of sales, achieved impressive year-over-year growth in Q3, underscoring the opportunity to expand and regain market share in this segment.”
In addition, Howe said sales in the athletic category saw performance continuing to improve, delivering a 1 percent comp in adult athletic, representing a 300 basis point increase from last quarter, and an 8 percent comp in kids’ athletic, or an 800 basis point increase from year-ago levels.
Overall, Howe said U.S. retail, comprised of its 497 DSW stores, “strong regular price selling throughout the quarter. As a result, markdown rates improved by 140 basis points.”
In other parts of the business, Howe said Topo Athletic — its performance shoe label known for wide toe boxes — continues to grow, delivering 25 percent growth from year-ago levels, while the Jessica Simpson business “delivered another strong quarter with external wholesale sales increasing roughly 8 percent.”
Looking ahead, Howe said: “Within brands, we are working to drive growth by scaling private label, building a more profitable wholesale model and investing in strategic growth brands.”
The CEO said the retailer has continued to drive efficiency in our digital fulfillment operations. Compared to last year, the retailer fulfilled 15 percent more of its digital demand directly through its logistics center, enhancing operational efficiency and customer satisfaction. “This approach enhances the in-store experience that defines the DSW brand by providing better product availability for in-store consumers, which is contributing to increasing in-store conversion.”
He also spoke about the success of the reimagined DSW store in Framingham, Mass., which showcases immersive experience-driven elements that fit its “Let Us Surprise You” rebrand. Those elements are designed to drive retail differentiation through discovery, personalization and technology enhanced engagement.
Given Framingham’s store success, Designer Brands is rolling out the concept to two additional stores: one at Union Square in New York City, and the other at Easton in Columbus, Ohio.
Howe said Designer Brands is also evaluating which innovation pilots can be scaled across the broader fleet. “These efforts further reflect our commitment to evolving the DSW brand, deepening customer loyalty and leveraging our stores as a true point of differentiation in the marketplace,” he explained.
As for sourcing, the CEO noted that the team continued to navigate the dynamic global environment, mitigating tariff impacts while diversifying the retailer’s supply chain. “We remain focused on expanding sourcing capabilities across multiple regions to reduce risk related to over-reliance on any single country and strengthen our supply chain resilience.”
Howe added the tariff landscape remains uncertain, but noted that the company’s “disciplined approach to diversification” will help it to maintain flexibility while both supporting supply continuity and protecting margins.
