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Bull of the Day: Designer Brands (DBI)

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Formerly known as Designer Shoe Warehouse (DSW), Designer Brands Inc. (DBI - Free Report) is a retailer that offers brand-name and designer shoes and accessories for men and women; customers can find dress, casual, and athletic footwear, as well as handbags and luggage. DBI is headquartered in Columbus, Ohio.

Q3 Earnings Delight Investors

Back in December, Designer Brands reported third quarter results that came in better-than-expected.

Total sales surged 31% year-over-year to $835.5 million as the shoe retailer continues to bounce back from the pandemic-related disruptions it faced in 2020.

Adjusted earnings grew to $0.86 per share, comparing favorably to the loss of $0.26 recorded in Q3 2020 and profit of $0.67 in Q3 2019. DBI’s bottom line also easily beat the analyst consensus estimate.

Total comparable sales spiked 40.8%, and digital demand at U.S. retail stores rose 12% compared to 2019. Store traffic also improved to down 8% during the period compared to down 10% in Q2 and down almost 30% in Q1.

Notably, Designer Brands’ gross profit margin rebounded over the third quarters of both 2020 and 2019, even with recent supply chain issues and inflation headwinds.

The retailer’s financial health is also on the mend. DBI ended the quarter with total liquidity of $477.8 million vs. $409.5 million for the same period last year.

Can DBI Surge Higher?

Designer Brands Inc. Price and EPS Surprise


Over the past one year, shares of Designer Brands have climbed almost 55% compared to the S&P 500’s increase of 22.4%. Estimates have been rising too, and DBI is a Zacks Rank #1 (Strong Buy) right now.

For fiscal 2021, four analysts have revised their bottom-line estimate upwards over the last 60 days, and the Zacks Consensus Estimate has moved up 54 cents to $1.68 per share. Earnings are expected to climb about 143% compared to the prior year, with sales improving by 43.8%.

Looking ahead, management expects the strong momentum to continue in Q4, and as a result, has raised its profit guidance. Q4 adjusted EPS is now expected to be in the range of $0.10 and $0.15 per share.

CEO Roger Rawlins said on the earnings call that Designer Brands will keep on executing on three strategic initiatives focused on the customer, the brand, and efficiency in order to grow its footprint, improve margins, and increase its bottom line.

DBI jumped 16.5% when it released its report last month. Based on these results and the retailer’s bullish outlook, investors were clearly pricing in the good news. There could even be room for the stock to run too, as it still only trades at 8.4X forward earnings.

If you’re an investor searching for a retail stock to add to your portfolio, make sure to keep DBI on your shortlist.

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