Q2 2021 Designer Brands Inc Earnings Call
About 1% this was a more significant improvement than the rest of the market.
And back to school Athletic and kids, both have seen significant growth in sales penetration as the season began in late July we still have a number of stores working through back to school, especially in the Midwest and northeast, but we are encouraged by our early results. We continue to work to bring freshness to our physical locations and grow basket size.
We started with some smaller initiatives that are scalable over the long term for example, we partnered with staples to instill pop ups in 48 stores for back to school and see this as something we can expand in the future. We've added apparel to select locations in a meaningful way with T shirts that the local market and have sold those items.
Twice as quickly as initial initially expected in Canada, we are doing lids and Claire shop in shops inside our store so customers can accessorize their most recent footwear purchases.
Additionally, we continue to focus more heavily on the top 50 brands in footwear in the second quarter. These brands, which include our vertical brands represented 78% of our sales in the U S and we surpassed our goal to gross sales of the top 50 by 50% compared to 2020 with these brands growing a 100.
Third 12%. Additionally, according to Npd's retail tracking service, we grew the top 50 brands, excluding our private brands.
15 percentage points faster than the rest of the market in the quarter compared to the same period in 2019.
Let's turn to a few examples of how we are ensuring that we have the best products for our customers moving forward.
In August we announced that we will be the exclusive in store distributor of the iconic brand Hush puppies.
Giving us access to a global heritage brand that has exceptional brand awareness and will now be sold only in DSW stores and on Hush puppies Dot com now.
Not only do we anticipate we will capture new customers at DSW by having this brand exclusively at our stores. This will allow us to convert Hush puppies dot com customers into DSW loyalty members as well as offer their digital customers the ability to return product to stores and potentially serve as pickup locations as well.
Hush puppies is the perfect blend of style and comfort something that our customers are demanding we are thrilled to welcome. This fund optimistic colorful branch of our exclusive family and to have an exciting partnership that supports our focus to build a robust assortment of brands.
This is an excellent example of how we can partner with an existing well known brand, while leveraging the infrastructure and loyalty we've already built to deliver exclusivity and brand dominance and we expect more opportunities like this that will allow us to get further in control of our brand destiny and provide differentiated experiences for our customers.
While I am excited about all of this progress I also want to recognize that we continue to operate in a dynamic and volatile environment things are improving as vaccination rates increase we are still facing a number of headwinds, including new COVID-19 variance and the increasing impact of supply chain issues, including delays with inventory receipts.
Now, let's talk a little bit about marketing our best in class VIP loyalty programs remain a key support for our growth for all of <unk>. We have approximately 30 million rewards members as of the end of the quarter.
During the quarter enrollments in our program for DSW grew 18% compared to 2019 building momentum from a 7% increase in the first quarter. This was the highest quarter of sign ups in the history of DSW.
Now, let's move up North and talk a little bit about Canada. The region remained challenged with Covid restrictions, resulting in comps down 16% compared to 2019, however comps were increasingly stronger throughout the quarter as Canada began the recovery that the U S was seen.
It's delayed by a few months.
Digital sales continued to be impressive as customers stuck to online shopping with digital sales up 146% Athletic kids in sandals, all displayed growth when compared to the second quarter of 2019.
Our Canadian operations also migrated to <unk> digital platform in July, which will streamline our e-commerce efforts and carry significant benefits into the future.
I am proud of how we have executed on our stated initiatives from 2020 through the early part of 2021.
And while Covid continues to be top of mind, we have begun the journey to move our company forward and are well positioned for future success as.
As we look ahead to our strategic growth, we have organized our efforts around three pillars customer brand and speed.
We must be obsessed with our customer more than ever before they are a great desire for products and experiences and we're adding resources to our digital and analytics teams to understand precisely what they want and what can be improved to provide the best possible experience.
These actions will enable us to better understand our customers provide improved service and pursue new demographics to bring into the DVI customer family and targeted and personalized ways, we've never deployed before.
And we are dreaming up new ideas for how we can provide more value to our VIP members, who continue to be the lifeblood of our business and our largest competitive differentiator.
Next we know how critical controlling our own brand destiny is for our growth <unk> is absolutely central to this pillar and we saw exciting results in the quarter as sales of <unk> produced brands were up 88% on inventory down 13% more specifically sales.
Jessica Simpson were up 92% compared to 2020 and up 9% compared to 2019.
Retail sales across our key partners are similarly, improving with sales up 140% compared to 2020 and down only 4% compared to 2019.
A key to our success is our focus on design and an eye for key trends in the market.
Great example of this is our Bellini woven strap meal. This best seller has been out of stock several times this year across multiple retailers, we expect to sell upwards of 100000 pairs of this style alone. We're also leaning into our vertically integrated capabilities, allowing us to react much faster to emerging market trends.
And our exclusive brands and are piloting new programs to explore additional opportunities and capture white space in our assortment.
As we continue to design some of the hottest footwear in the industry with Vince <unk>, Jessica Simpson Lucky brand and J Lo we must marry that up with the strong DTC distribution through our unmatched physical footprint across North America and award winning digital infrastructure.
As a reminder, <unk> produced brands come in margins, roughly 1500 basis points higher than other brands, allowing us to sell a world class product with a high level of profitability.
Additionally, given our massive loyalty base and commanding retail market share we can partner with the top brands in the industry to offer one of the largest and most inclusive assortments both in person and online.
We remain heavily invested in the top 50 brands in footwear through Activations and differentiated experiences all centered around our customer.
We will continue to prioritize growing our vertical brands and to evolve our online presence so that as closely coupled with a broad reaching footprint of store fronts that doubled as fulfillment centers or.
Our last pillar speed.
Is of utmost importance in today's world customers today expect that we not only have the latest product in our stores, but we can deliver it to them in an expedited manner. We are developing processes to deliver products more quickly. So we can get them in our customers' hands faster fulfillment has historically taken five to seven business days.
And we're working to improve that to two to three calendar days over the next few years, while finding efficiencies along the way to keep costs contained.
We're looking at optimizing our current infrastructure and expanding our small parcel delivery partnerships to include regional carriers that can respond more quickly and more cost effectively than the limited national carriers. Additionally, part of the strategy within the speed pillar is to improve our west coast fulfillment capabilities.
Speed to market also means faster to market as designers of some of the hottest footwear brands, we need to be early on trend and we anticipate that our direct access to millions of customers and shopping data will give us a leg up on design and development, we're working to improve collaboration through technology and processes around Tbi and.
To squeeze out additional efficiencies in our overall development cycle time.
All three of these pillars interact with one another and our efforts simultaneously strengthen each one we are offering customers the value they want the experiences they crave the speed they demand and the brands that can rise to those challenges we want to be the footwear destination of choice for our customers.
Before turning it over to Jared.
Like to quickly touch on our results as I stated earlier I am so proud of the results we delivered in the second quarter, our comps returned to 2019 levels and our gross profit grew significantly driven by full price selling.
We have seen our Q2 momentum continue into Q3 as back to school has started across the U S.
In closing there remains some uncertainty as we look ahead COVID-19 variance continue to create surges in infection rates in the global supply chain is increasingly challenged as a result. However, we believe we are on track to continue to meet or beat our 2019 performance for the back half of fiscal 2021 share.
We'll provide more color on this in just a moment.
We expect customers will continue to increase and their desire to go out and participate in social occasions, and we are hopeful that vaccination rates will continue to rise we are ready with great product that is differentiated as customers returned to our stores more frequently to date, we remain excited by our progress and our results and we are pushing.
Hard to continue our success into the back half of the year.
As always we will remain nimble and innovative we have a proven track record of staying ahead of trends to ensure our organization's success, we broke into omnichannel early and swiftly and our digital demand continues to be strong even as consumers have returned to physical stores, we saw customer demand going to weigh a at leisure.
And we pivoted rapidly and we still see so much room for growth here and we see athleisure as a core staple in our customers' closets.
We saw our female customers walking out the door to buy their kids shoes elsewhere and prioritized growth in that category that is now one of our primary growth drivers, we see other things on the horizon that will allow us to leverage our direct to consumer and vertical capabilities to own and control brands and secure ourselves for the future growth.
With that I'll turn it over to Jared Jared.
Thank you Roger and good morning, everyone. Our second quarter performance blew away initial expectations across the board. This is a continued example of how we are successfully executing against the strategy. We previously laid out by leveraging the flexibility of our business model pivoting, our assortment to what the customers demanding right now and controlling what.
We can across the business we.
We are optimistic that business will continue to improve in the second half as vaccination rates have the potential to increase following the fda's approval of Pfizer's vaccine and as we see our customers increasingly returning to stores and social occasions.
This optimism is somewhat tempered by the continuing uncertainty with Delta and other variants and the direct impact it is having on the global supply chain, which I'll discuss further a little later.
Please note the financial results that we will reference during the remainder of today's call excludes certain adjustments recorded under GAAP unless specified otherwise for a complete reconciliation of GAAP to adjusted earnings. Please reference our press release.
Turning to our results for the second quarter sales increased 66, 9% to $820.0 million compared to 2022.
Total comps were up 84, 9% in the second quarter, a significant increase from the first quarter comps at 52, 2%.
As Roger mentioned, we saw record level second quarter sales and gross profit in our U S. Retail segment U S. Retail comp sales were up 94, 3% during the second quarter versus the prior year period and sequentially improved from the 56, 3% in the first quarter.
This growth was driven by our near term strategy and improving store traffic year to date traffic as compared to 2019 has continued to improve while store traffic in the second quarter. In total was down 10% to 2019, we saw sequential improvement throughout the quarter with may down roughly 17% in July down just three 6%.
And we saw positive store traffic comps on multiple days.
Our results are continuing to exemplify that our pivot toward athleisure and kids footwear in our U S retail business is working.
During the second quarter athletic comps were up 90% compared to the second quarter, 2020, which I'm proud to say with among the strongest athletic performance in the footwear industry and delivered a sales penetration of 23% versus 17% in 2019.
At leisure sales comps, which includes athletic and casual were up 107% during the quarter compared to the second quarter 2020, and the at leisure penetration was 57% versus 44% in 2019.
Coming into the quarter, we had cautiously planned inventory for seasonal product in the category outperformed our initial expectations and was up 5% versus the same period in 2019.
Our dress category also saw improvement from prior trends, while women's dress was down 40% for the second quarter versus 2019. It was much improved from the first quarter, which was down 57% to 2019.
Similar to womens mens dress was down 30% versus 2019, much improved from the down 56% in the first quarter.
<unk> continues to lag the broader recovery given continued challenges in the trend of working from home and apprehension around social gathering and traveling but we like the trajectory we are seeing.
As demand in stores has accelerated we have not seen a slowdown in digital growth U S. Retail U S. Retail digitally demanded sales for the second quarter were up 21% versus 2020 on top of a roughly 27% increase this same time last year.
Digital demand was 27, 2% of total demand for the second quarter, well above pre COVID-19 levels of 18, 9% in the second quarter of 2019.
Turning to Canada total comps were up 14, 6% in the second quarter above first quarter comps of 10%.
Store traffic comps were down 43% in the second quarter compared to 2019 levels, which in which is an improvement from down 51% in the first quarter.
We saw sequential improvement in traffic throughout the quarter from being down 66% in the first five weeks to being down 29% in the last eight weeks.
As discussed last quarter, Canada experienced much longer lockdowns and restrictions they have more experience in the U S. As such Theyre recovery, while trending very similar to the U S is running about two to three months behind what is being experienced in the U S.
Turning to <unk> I always like to remind everyone that <unk> is a critical part of our long term focus to build our vertical brand strategy as Roger mentioned the performance of Komodo produced brands within DSW has been increasingly strong our customers responding very well to our products as we are offering the right fashion at the right.
Points.
Our ability to quickly turn on production when we saw changes in consumer demand was critical to this success and we will continue to be a differentiator for our business.
Across <unk> in total for the quarter, we continued to ramp up our production to meet consumer demands, but as I mentioned previously we are feeling the impact of the global supply chain pressures.
Specifically, we saw approximately $7 million of our wholesale orders shipped in Q3, mainly due to production delays caused by increased demand with limited factory capacity during peak season, Rolling blackouts, COVID-19 issues and labor shortages.
We anticipate more shifts will occur from Q3 to Q4 based on Covid closures. We are seeing in Vietnam. In addition to further rolling blackouts and labor issues.
We are expecting continued production ramp ups throughout the remainder of the year from both a shift of production from Q2 and an increase in consumer demand.
Please keep in mind, unlike retail consumer pose a written well in advance for wholesale and thus the ability to impact pricing is more limited in the near term.
Total net sales for <unk>, including sales to DSW were $55 million in the second quarter up 65, 9% versus last year.
Wholesale sales were $49.0 million in the second quarter versus $21.0 million last year, including sales to our retail segment, which totaled approximately $19.0 million versus $9.0 million last year.
Our consolidated gross profit increased $253.0 million to.
$291.0 million in the second quarter versus $37 million in the prior year, Arkansas.
Our consolidated gross margin improved to 34, 8% in the second quarter versus 35% in 2019 up 430 basis points.
At our U S. Retail segment gross margin was 35, 5% in the second quarter versus 37% in the second quarter of 2019.
This was driven by strong regular price selling limited promotions and clearance and select price markups, which was notable given our increased penetration of athletic which generally comes with lower initial markup. We also saw leverage in our store occupancy and supply chain cost.
Canada gross margin in the second quarter was 32, 6% versus 34, 7% in 2019. This was primarily due to lower promotional activity and higher content of closeout buys which yielded higher rates versus 2019. This was mitigated by higher shipping expense due to growth in our digital business.
<unk> gross margin rate was 16, 9% in the second quarter down 910 basis points from the second quarter of 2019, primarily related to deleverage from fixed guaranteed minimum royalties are <unk> with.
Without the <unk> gross margin rate would have been up 110 basis points.
We ended the quarter with inventories of $504 million versus $445 million last year, but down in units by 16% and down 28% in units compared to 2019, which was below our initial plan to be closer to flat to 2019. This obviously causes some potential friction as we continued to see our sales ramp.
Positively to 2019.
Accordingly, we are leaning heavily into our own production capabilities at <unk> as well as aggressively working with our vendor partners to get priority access to the inventory that is available our scale and overall relationship size with most of the brands, we carry typically positions us well when chasing limited inventory. Additionally.
Additionally, we have projected several million dollars of increased freight costs across DVI. This fall to expedite inventory that becomes available.
In the second quarter consolidated adjusted SG&A for all of our businesses was up 29% to $218 million versus last year and up two 4% compared to 2019, driven by our continued strategic pivot of redeploying excess gross margin dollars and to increase customer acquisition marketing.
Our adjusted SG&A ratio for the second quarter was 26, 7% of sales slightly above second quarter 2019 level of 24, 9%.
Depreciation and amortization totaled $26.0 million in the second quarter compared to $29.0 million in the prior year.
Adjusted operating profit for designer brands was $69 million in the second quarter versus $59 million in the second quarter of 2019.
I am so proud of the work we've done to have not only returned to profitability last quarter, but we have materially grown profitability this quarter and coupled that with positive cash flow generation.
We had $9.0 million of interest expense during the second quarter compared to $11.0 million in the prior year.
Our effective tax rate was 28, 7% in the second quarter versus 29, 5% last year.
Total weighted average diluted shares during the quarter were $78 million compared to $72 million last year. The increase was primarily driven by the return to positive earnings and the related dilution accounting.
Second quarter reported net income was $51.0 million or <unk> 55 per diluted share, which included after tax charges of $6 million. Excluding these charges adjusted EPS was <unk> 56 per diluted share for the quarter.
We are quite pleased with our liquidity position, which includes cash and availability under our revolver, which at the end of the quarter was $415.0 million versus $215.0 million last year.
We ended the quarter with $248.0 million of debt versus $393 million last year and down $94.0 million since the end of fiscal 2020.
During the quarter, we did not open any stores and closed one in the U S and two in Canada, resulting in a total of 515 U S stores and 143 Canadian stores.
Given the environment. We believe it is still too uncertain to provide detailed long term guidance, we see sales potentially increasing in volatility given variant outbreaks and as discussed we recognize the mounting global supply chain pressures.
<unk> given the levers we have available to pull and our proven ability to strategically pull those levers we do expect to continue meeting or beating our pre COVID-19 profitability performance and deliver an adjusted operating income for fall of fiscal 2021 that will be slightly above fall of 2019 and.
This includes the assumed increases in freight and labor costs as I mentioned earlier.
If the potential impacts of the variance in supply chain pressures mitigate and consumer demand remains as robust as Q2, we believe we could certainly over performed from this number.
But at this time, we feel it is best to take into consideration everything we are seeing currently.
Finally, I would like to call out that our traditional calendar innovation may be skewed due to the various disruptions. We've discussed during this call. Thus we are looking at fall in total which is Q3 and Q4 combined.
With that we will open the call for questions operator.
Thank you we will now begin the question and answer session.
To ask a question Star then one on you touched on as well.
If youre using a speakerphone please pick up your handset before pressing the keys.
If at any time for the question has been addressed you would like to withdraw your question. Please press Star then two.
We ask you please limit yourself to one question and a single follow up.
Today's first question comes from Steve Marotta CL King <unk> Associates. Please go ahead.
Good morning, Roger and Jared Congratulations on the second quarter. Jared can you go over inventory position again, it looks like your inventory is up year over year, which is a somewhat enviable position considering what other footwear.
<unk> have announced.
Can you talk a little bit about competition. It seems like a competitive advantage, but you also mentioned a couple of other.
Items that I was writing as fast as I could add to that.
I know that there are headwinds also in pinch points of course in the supply chain, but maybe you can just disassemble current inventory position a little bit better and also what you would expect from a flow standpoint for the back half. Thanks.
Yes, I'm happy to give that and I'm sure Roger will want to add some color, especially around the composition.
What we reported was we were up over last year, and we were down slightly over last year in units and much of that is.
It's the freshness, the lack of reserves and the overall IMU that we're experiencing so that's kind of that disconnect there.
Not overly concerning but that was that was wide ones up in one's down. The second stat that was provided was just versus 2019 and there we were down in the high <unk>.
What we are seeing is absolutely a lot of flow coming our way we have.
Seen quite a few delays in shipments, but on the flip side, we actually are getting a lot of those shipments and one thing I'm very happy to say is on the athletic side of the World. We had been very aggressive in fact placed.
Quite a bit of over ordering lettic, knowing there was little risk to that product even even if it all showed up so that that has put us in a pretty good position on that front on the seasonal front, that's where we see some potential delay.
And we are very thankful, we've got our <unk> operation that is giving us priority access to the inventory that is coming off the factory lines, we're receiving that now and we're really happy, but that's where I could see some some potential.
And why I mentioned, you might see some traditional shifting from Q3 seasonal selling into Q4 very similar even with sandals that we saw that that that decline not happen into Q2, the way that it normally does so I don't know Roger if there was anything else is Steve I would.
I'd say that when you look at the seasonal category in particular, making certain that we put in sufficient freight into our back half expectation to get that product here.
As Jared said in his comments.
We built that into our plan for the back half but.
Right now day in and day out, it's about athletic and kids and I feel really really good about the way our team has positioned inventory in that piece of the business, which is frankly the key to the.
The game, we are now playing with back to school.
That's really helpful. Also is it possible to tease out.
The gross margin improvement in the second quarter versus 19, what was captured would better full price selling and what was captured with increased.
DSW source to moodle sourced items selling in the store.
Yes.
The name of the game first and foremost was full price selling I mean, not only did we reduce promotions materially.
But we also had the opportunity to increase pricing several times throughout the quarter. Just as we were seeing turns just be so aggressive and so we saw that the consumer followed us there and we really did not experience any hesitation around that.
We did see some a little bit of deleverage on the shipping side of the world, but not not a whole lot.
And then as Roger mentioned there were some additional freight charges, even in Q2, where we had agreed to expedite some freight and just the overall inflationary environment of.
Freight across the board did de lever there. So again net net very very positive, but those are the big under the covers it's Steve I think.
Been trying to.
Figure out how do we share this assortment strategy and what we've done and if you if you break it down I mean are.
<unk> toward athletic kids and seasonal has absolutely paid off our our athletic business up 45%. This is the 2019.
Up 45% of our kids up 55, our seasonal business up five dose. So those are the three big things. We've told you that we were going to distort too. It's worked and then the way in which we've distorted is to get after the top 50 brands, which were 78% of our sales that number was 40% or less just a couple of years ago.
To give you a sense of of how we've leaned into those folks who was up 112% to last year and then you add into that to your question about <unk>, we're leveraging them in a huge way our business was up 88% to last year and <unk> produced brands on inventory down 13.
And that came with an extra 1500 basis points of profit of gross margin. So you add all that stuff up and then you go tell a story to our customer in the way that we've been doing it and you grow your customer file at a rate like you've never seen the strategy that we implemented a couple of years ago its worth.
<unk> and it's just so exciting to see the progress we've made.
Thank you and our next question today comes from Gabby Carbone and the Deutsche Bank. Please go ahead.
Yes.
Hi, congratulations on the nice quarter.
Thanks, Kevin.
I was wondering if you can maybe.
Dig into the increased freight expense.
Expenses that you mentioned.
How should we be thinking about the impact of that versus what you kind of start in the first half of the year are you able to quantify that at all.
Yes, I would say, we saw roughly $5 million to $6 million of increased freight cost.
Deleverage versus 2019 in the first half we baked into a little more than double that for the second half. So that's what we've got currently in our in our projections.
If some of that isn't needed.
We're able to get priority access and can both things in and not have to air Some things then.
That may that may subside, but thats kind of what we have currently baked in.
Got you thanks for that.
Another bigger picture question earlier in the year you mentioned approximately.
<unk> in store as I was kind of makes sense for clothing here over the next four years.
Wonder if there's any update there and maybe how you're just thinking about the overall store fleet.
Yes, yes.
I will remind you and all of the listeners that I also said I'm, 100% positive that that list would change because that was based on.
Looking at projections, when we were in the height of Covid and not knowing what the stores would do and in fact as you just heard on our results the stores have come Roaring back we are.
Blowing past what those initial projections were so.
That number is certainly is not the same number that was on the table before however.
Longer term under the consumer the.
Customer brand and speed pillars that Roger talked about we do know that the shift to digital is continuing and we're going to follow our customer there. We're happy to do that and so longer term. We are looking to see how do we reduce our fixed occupancy related to store to store overhead and so.
One of the ways of doing that without vacating a market is to look at a different square footage solution. We are in the process very far in the process right now is at a redesign we call. It warehouse re imagined some people used to call. It store of the future, but how can we how can we get more productive in a smaller space and still offer that same type of.
Our flexibility so we can service our customer and serve as a fulfillment center so more to come on that front I don't think it's going to be the full 55 stores, but I do think longer term, we want to see a net net reduction in square footage. It just may not be.
Vacating stores as much as we thought.
Thank you and ladies and gentlemen, as a reminder, if you'd like to ask a question. Please press Star then one today's next question comes from Jay sole UBS. Please go ahead.
Great. Thank you so much a lot of great information on the call I just want to make sure I understand the guidance.
Jared is it possible to provide any insight into how youre thinking about sales in Q3, maybe relative to 2019 and also.
Maybe just start with that one.
Yes, Jay Unfortunately, right now and then why we left it at just operating income, we just see too much volatility, especially slippage between Q3 and Q4 that I don't want to I don't want to put ourselves in a box that unfortunately, we may not be aware someone thing.
We should be in Q3, and then overdo. It in Q4, so we're really hesitant to go lower than operating income, but we do feel really good when we look at all the levers we have the Paul we look at how we maneuvered Q1, and Q2 and we saw we saw shifting there between quarters that wasn't traditional but we also saw gross.
Margin play differently.
We just don't feel comfortable right now, giving more more than that but we were excited to reinstate some level of guidance, which was the operating and Jay I think it's.
Important that to.
Sure that this is the first time that I can recall in my 15 years that we actually provided some kind of insight into how we are doing in the next quarter and our comments and we are very pleased with how back to school is playing out and the success that we had as.
We were in Q2, and we saw that spillover into the third quarter. So.
We're not going to provide you the by quarter breakdown, but we still feel very very good about our business and how we are positioned.
Alright, so I understand maybe just on some of the uncertainty that's out there. There's a lot of talk that hopefully factories in Vietnam open up.
Next couple of days and obviously through the next couple of weeks. Obviously, there is a chance that it doesn't happen can you just talk to us about how the how you think about managing through that that potential situation. If theres not a lot of product being made in.
What the company can do given that you do work with so many different vendors to get the goods that you need to be able to drive the business going forward, especially in <unk>.
Can you just talk about your ability to get inventory.
If there are factors that remain closed for an extended period of time beyond what's currently expected.
Yes, Jay.
There isn't a day that goes by I don't think we're I remind Jim and Brook and our team that does all of the buying and planning for our organization to how much I. Appreciate the work they've done to distort to these top 50 brands. So this is how I have been describing it to folks.
When you're in these situations youre going to take care of your family first.
And when I think of how we've transitioned our assortment from carrying seven or 800 labels to now really being focused on these top 50 brands. We are a part of their family and so we anticipate that.
We'll get our food along with everyone else at the table.
In a meaningful way. So when you are running a 112% increases in your top 50 brands you would hope you can have a conversation with those leaders and say Hey can you can you. Please make certain we get our fair share of products. So I think thats priority number one.
And then the second one is leveraging our ability to design and source, our own goods, which Debbie and our team at <unk>.
Is doing a fine job at doing that so it's the combination of those two things will there be some misses here there, yes, but have we demonstrated.
Over the last 24 months and ability to be nimble on our feed and manage whatever comes our way, we absolutely have and Thats Thats my expectation as we go through the back half.
Thank you and our next question today is a follow up from Steve Marotta CL King <unk> Associates. Please go ahead.
Thank you for providing the opportunity for a follow up Roger can you talk a little bit about the current back to school season, how normal do you think is from a piece of sales in comparison to 19 and I understand there are some variances, but if you could.
Quantify them or qualify them a little bit of the cadence and the geography specific to how you would've expected kids to have sold this year.
The normal environment. Thanks.
So Steve I will bring you into the conversation our team had last night.
This is not normal for us because.
Historically, we've always talked to you about septomarginal nine weeks of September and October because we really didn't have a business in July and August other than clearance selling.
And.
When I look at our penetration of kids in this window of time is hitting upwards of 14, 15% based on timing of folks going back to school.
I am really excited about it so I wish I could tell you that I knew how that compared to our history. We don't have any history in this space I mean, it's not much of a distortion. When you again when you hear that kids was up 55% to 2019 in second quarter and.
That gives you a sense of just how different we are playing we are now in the back to school space were in the top 15 in kids, we are killing it in athletic and.
I am just really excited about this and I think we see an opportunity in the future to do a whole heck of a lot more and the example is the staples experience that we've created that we're going to have that in more doors. The things, we're doing with lids too to engage differently. The things we're doing with apparel that will match back to school timing things were due.
Doing with athletic brands to offer their apparel products in our stores. During these kind of windows. Those are all things that I think provide a significant upside in the future to the kids piece of the business, but unfortunately right. Now. This is this is a new normal for US one thing I would add just from quantifying that Steve.
But I think youll find opportunistic is that.
When we look at what is happening this year, there's a very direct correlation that stores around the districts that are returning back to school. The following week that is when we have their heyday, it's one week prior.
In Q2, there had only been 39 of our stores that had had that week and so all the rest of our 515 stores have that week and Q3, so to Roger's point, we don't have history to really go off but what we do know is what we're seeing now and that most of that is a Q3.
Event, not not already behind us.
Great point.
That's very helpful. One last question pertaining to back to school you had plans when you talked about kids to have tagalong sale for the mom or dad that was bringing them back to school shopping how can you talk a little bit about how that is running and what the upsell argue maximizing the upsell opportunity currently or is that still on.
Thanks.
Great question, Steve again conversation were having last night with our team I think there's still upside to that.
<unk>.
And I think what we are seeing is that it is truly an incremental transaction, but then how do we marry those two things together and tie that into our rewards program and provide benefit to mom and dad to come in at the same time and buy for themselves. When they are buying for their child I think we still have I.
I think we still have opportunity there.
Thank you and our next question today comes from Dana Telsey Telsey Advisory Group. Please go ahead hi.
Good morning, and nice to see the progress given the announcement that you made about hush puppies, how you're going to be the exclusive supplier of provider or whatever whichever you want to call. It how do you think of this as an opportunity for other brands and also any update on Canada, and what you're seeing there.
Yes, yes, thanks, Dana I think.
First I have to think Blake and Brendan for their support and their partnership and as we.
We talk about brands and vendor relationships there.
They're as good as it gets for US. So the fact that we were able to sit down and have this conversation and reached an agreement and when you think about the fact that this provides hush puppy access to 30 million rewards members across our platform and we're going to do things for them that we would not do for others.
The fact that we can build differentiated experiences both digitally and in the store. So we're going to be doing some shop in shops to build out the brand in a new way and then at the end of the day, what we're able to provide us the ability to remove friction from transactions. So there will now be return centers for Hush puppy product to come back.
Two a DSW or there will be buy online pickup in store locations within 20 minutes of 70% of the population like those are all things that we'll be able to offer to this consumer.
We think provides not just a great platform for Hush puppies, but for other brands like Hush puppies, that's looking for a growth vehicle and we think we are that vehicles. So hopefully that answered. Your first question as it relates to Canada I'm still really.
Happy with the results we're getting there.
Things have been slower to recover there.
Primarily from a store standpoint, our digital business was still up 140% north of 140% for the quarter and stores have been a little slower to recover and they are back to school has extended really frankly, starting more in third quarter than it has historically, so I'm actually feeling really good about the results we have.
Got up there.
Thank you.
Stan.
Thank you and ladies and gentlemen, this concludes the question and answer session.
The conference back over to Roger Rawlins for any closing remarks.
Thanks, again, everybody for listening in and to all of our associates listening keep up the great work appreciate what Youre doing and everybody have a great day. Thank you.
And ladies and gentlemen. This concludes today's conference call. Thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.