Roger Rawlins, Chief Executive Officer, stated, “We continued to make meaningful progress on our long-term brand-building strategy while also delivering solid comparable sales across every segment of our business. Sales of Owned Brands represented 26.5% of total net sales in the third quarter of 2022 compared to 21.5% for the same period last year.
The strategic shifts we have made in our business over the past several years are driving a sustainably higher gross margin rate than in 2019 as we focus more on customer acquisition, optimizing our assortment, and growing the brands we own and control.
“While we are seeing many of the same pressures across the consumer landscape that most retailers are seeing, our flexible business model continues to support our efforts to navigate a dynamic macro environment. We are focused on meeting our customers’ footwear needs while we balance inventory and expenses in order to continue growing market share in this volatile environment.”
Third Quarter Operating Results (all comparisons are to the third quarter of 2021)
- Net sales increased 1.4% to $865.0 million.
- Comparable sales increased 3.0%.
- Gross profit decreased to $285.8 million versus $313.6 million last year, and gross margin as a percentage of net sales was 33.0% as compared to 36.7% last year.
- Reported net income was $45.2 million, or diluted earnings per share (“EPS”) of $0.65.
- Adjusted net income was $46.1 million, or adjusted diluted EPS of $0.67.
Liquidity Highlights
- Cash and cash equivalents totaled $62.5 million at the end of the third quarter of 2022 compared to $83.1 million at the end of the same period last year, with $130.9 million remaining available for borrowings under our senior secured asset-based revolving credit facility. Debt totaled $415.5 million at the end of the third quarter of 2022 compared to $227.9 million at the end of the same period last year. In November 2022, we received $120.3 million of our income tax receivable from the Internal Revenue Service as a result of the Coronavirus Aid, Relief, and Economic Security Act. We anticipate receiving the remaining income tax receivable within the next twelve months.
- The Company ended the quarter with more normalized inventory levels of $681.8 million compared to $602.1 million at the same period last year with accelerated receipts to support fall season demand.
Return to Shareholders
- During the third quarter of 2022, Designer Brands repurchased 1.3 million Class A common shares (2.0% of Class A and Class B common shares at the beginning of the quarter) at an aggregate cost of $19.1 million under its share repurchase program.
- During the nine months ended October 29, 2022, we repurchased 10.7 million Class A common shares (14.6% of Class A and Class B common shares at the beginning of the fiscal year) at an aggregate cost of $147.5 million, with $187.4 million of Class A common shares that remain authorized under the program as of October 29, 2022.
- A dividend of $0.05 per share of Class A and Class B common shares will be paid on December 28, 2022 to shareholders of record at the close of business on December 13, 2022.
Store Openings and Closings
During the third quarter of 2022, we opened 1 new store and closed 3 stores in the U.S. with no changes to the store count in Canada, resulting in a total of 504 U.S. stores and 138 Canadian stores as of October 29, 2022.
