Q2 2025 Designer Brands Inc Earnings Call
Good morning, and welcome to the designer Brands' second quarter 'twenty 'twenty four results conference call. All participants will be in Boston only mode should you need assistance. Please signal a conference specialist by pressing Star then zero on your telephone keypad after today.
Justin <unk>: Presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to Justin <unk> Senior.
Speaker Change: Vice President of Finance. Please go ahead.
Speaker Change: Earlier today, the company issued a press release comparing results of operations for the 13 week period ended August three 2024 to the 13 week period ended July 29 2023.
Speaker Change: Please note that the financial results that we will be referencing during the remainder of today's call excludes certain adjustments recorded under GAAP unless specified otherwise.
Speaker Change: For a complete reconciliation of GAAP to adjusted earnings Please reference our press release.
Speaker Change: Additionally, please note that remarks made about the future expectations plans and prospects of the company constitute forward looking statements.
Speaker Change: Results may differ materially due to the various factors listed in today's press release, and the company's public filings with the SEC.
Speaker Change: The company assumes no obligation to update any forward looking statements.
Speaker Change: Joining us today are Doug Howell, Chief Executive Officer, and Jared Poff, Chief Financial Officer, now, let me turn the call over to Doug.
Doug Howell: Thank you for joining us this morning, I'm pleased to report that during the second quarter. We made continued progress on our plans to return designer brands to grow.
Speaker Change: As anticipated we did see consistent improvement in our topline performance throughout the quarter and have now experienced three consecutive quarters of sequential comp improvement.
Speaker Change: However, with consumers being increasingly mindful of their discretionary spend that improvement has been more muted than anticipated.
Speaker Change: In spite of this as expected our comps have now turned positive as we've moved into the back half of the year and reached our anticipated inflection point.
Speaker Change: We expect positive comps to continue in the back half supported by our strategic initiatives.
Speaker Change: We've been particularly pleased with our back to school business, which is carried this momentum into the third quarter supported by our expanded athletic and athleisure offerings.
Speaker Change: Turning to our results.
Speaker Change: The second quarter, our sales were down approximately 3% versus last year, we saw roughly 1% decline in comparable sales versus last year, a sequential improvement as our efforts to reinforce and grow relationships with our key national partners are paying dividends.
Speaker Change: Eight brands all in the athletic and athleisure categories continued to generate outsized growth in the second quarter up over 30%, which was in line with the growth that we saw from them in Q1 and showcases the benefit of developing keep relationships with key brand partners.
Speaker Change: Further the penetration from these top eight partners climbed to 39% of sales in the quarter, a significant increase over the prior year penetration of 30%.
Speaker Change: While our assortment pivoted, gaining traction or over penetration in dress and seasonal once again pressured results we.
Speaker Change: We remain committed to reducing our reliance on these categories and.
Speaker Change: And we are encouraged by the continued comp improvement as we exited the second quarter stronger than we started.
As I mentioned earlier, we've seen that momentum continue quarter to date, primarily driven by strength in the back to school season.
Speaker Change: Gross margin contracted by 170 basis points to 32, 8% influenced primarily by lower Iron you on athletic and athleisure product as we prioritize growing our penetration in those categories as well as pressure from promotions needed to clear through seasonal inventory.
Speaker Change: As we head into the fall season, we are maintaining our disciplined inventory allocation, which we believe will enable us to be less reliant on promotions to sell through inventory and capitalize on any momentum shifts. We may see that we still expect <unk> to be a continued headwind as our athletic inventory expansion.
Speaker Change: Let's first talk about our retail business.
Chicana DSW: According to Chicana DSW outpaced the overall footwear market by one percentage point in the second quarter.
Chicana DSW: In total our U S retail sales declined roughly 3% versus last year, while posting a 1% decline in comparable sales as we saw increasing pressure on seasonal volume in the spring.
Chicana DSW: However, thanks to our efforts to increase our athletic offerings wait a powerful tailwind with total athletic sales, increasing 16% for the quarter.
Chicana DSW: Allow me to briefly provide an update on the progress that we are seeing across dsw's three strategic pillars.
Chicana DSW: Reinvigorating, our assortment elevating our marketing and enhancing our omnichannel shopping experience.
Chicana DSW: Beginning with our Socs.
Chicana DSW: The pandemic the footwear market has undergone a structural shift to footwear more appropriate for everyday use.
Chicana DSW: And we've made an effort to capture that shift by pivoting our assortment.
Chicana DSW: Prior to the pandemic, our penetration of dressing seasonal was as high as 60% in 2017 compared to roughly 49% today.
Chicana DSW: Conversely athletic and casual was only 32% of our assortment in 2017 versus 42% today, a key driver in our improving overall performance.
Being able to offer a robust collection from Nike the largest kids' athletic brand is also a notable tailwind for us.
Chicana DSW: The strength in athletic this quarter was robust with our adult athletic comps up 15% versus last year, along with kids athletic growing over 25% versus the prior year period.
Chicana DSW: At this time, we expect kids and athletic comparable result continued to strengthen in the third quarter bolstered by the majority of our back to school effort. Following during this time period.
Chicana DSW: As a result of the success in Athleisure. We're also taking a new look at our strategy in adjacent categories.
Chicana DSW: One new initiative, we implemented was an increase of inventory and athletic socks, and we leaned into this newer area. We saw a 52% increase in athletics sock sales in the quarter and expect stock growth trajectory decline further in the back half of the year as we continue to lean into this offering.
Chicana DSW: Although a relatively smaller part of our assortment affordable luxury offerings provide a bit of differentiation in our assortment, while also having the potential to enhance margins.
Chicana DSW: Our recent reinvestment into the space has promoted the differentiated value that DSW can provide to both new and long time customers, who enjoy the treasure Hunt that comes with our Buzzworthy closeout buys and we have seen strong growth as a result.
Chicana DSW: As we reduced our reliance on seasonal on draft, we've taken substantial actions and planning our fall assortment, notably we are planning boots to be down in the double digits versus last year.
Chicana DSW: As we continue to rebalance our assortment to athletic and athleisure, we anticipate he's no one dressed penetration.
Chicana DSW: To continue to further contract over time.
Chicana DSW: Moving to our marketing as we evolve our assortment and our ability to effectively utilize marketing is crucial.
Chicana DSW: In the second quarter, Sarah Crockett joined <unk>, as our new Chief Marketing Officer.
Sarah Crockett: <unk> extensive experience in consumer marketing, having led marketing efforts at dickies back country bans and Burton amongst others.
Sarah Crockett: There is work going forward will augment our efforts to evolve our assortment and enhance our omnichannel experience, which we expect will drive further momentum with new and existing customers.
Sarah Crockett: In the near term our teams are executing our ongoing DSW brand equity building through top of funnel initiatives leaning in heavily to the back to school season.
Sarah Crockett: We've created a digital and <unk>.
Speaker Change: Just to go back to school destination by integrating our marketing message with opportunities in stores, such as leveraging Influencers and using a digital look book to drive engagement.
Speaker Change: We are also capitalizing on the presence of Nike and our marketing given its stature as a cornerstone of the back to school season.
Speaker Change: In addition, we are increasing our presence on social media and new and different ways.
Speaker Change: This includes our renewable content strategy the expansion of our Influencer program and specific targeted enhancement.
Speaker Change: These marketing strategy changes are already driving an improvement in social media performance. What we are seeing a two times lift in performance and recent campaigns.
Speaker Change: Kicked off alone we've seen our engagement rate increase over 450 basis point outpacing the retail industry benchmark by over 100 basis points.
Speaker Change: We've ground video views and organic engagements by over 100%.
Speaker Change: And are consistently gaining new followers.
Speaker Change: Finally, we continue to invest in personalization to further refine and improve our customers' experience with DSW and to more effectively engage lapsed or about the lapsed customers as part of this we are piloting new strategies in our loyalty program.
This brings me to our third strategic pillar of enhancing the shopping experience across DVI sales channel.
Speaker Change: We are encouraged by the success of our digital platform, which continues to lead the business sustaining mid single digit growth for the third consecutive quarter.
Speaker Change: In stores, we are actively upgrading aesthetics with enhanced visual merchandising and promotional signage, which goes hand in hand, with our refreshed assortment and Omnichannel marketing strategy.
Speaker Change: Turning to our Canadian business sales increased by 6% versus last year, driven by the acquisition of Urbino, while comps contracted by roughly 3% as the Canadian market experienced similar pressures to the U S.
Speaker Change: As a reminder, last quarter, we entered into the previously untapped Canadian territory of Quebec, following our acquisition of Rubina.
Speaker Change: Quebec is a new territory for designer brands and we're excited to compete here and extend our reach to another quarter of Canada's population.
Speaker Change: As discussed we intend to continue operating at 28 storefronts under Robina as legacy banner given their established brand in the region.
Speaker Change: As a result, we continue to anticipate no material expenses associated with integrating the <unk> business within our portfolio.
Speaker Change: This quarter, we opened one new shoe company store and one new DSW in Canada, bringing us to a net six new stores year to date on top of the 28 were being our stores.
And we expect to further expand our shoe company store count by two more stores in the third quarter.
Speaker Change: Now to our brand portfolio segment.
Speaker Change: As we shared last quarter, we have implemented new programs and reviews that have supported reducing cost right sizing the organization, increasing margins streamlining and simplifying the way, we work and defining the role purpose and potential of the brands in our portfolio.
Speaker Change: We are elevating our core competencies and leveraging scale ability to develop best in class brands that we expect will over time provide significant returns.
Speaker Change: Our product ideation process is being greatly revamps with a purpose of improving adoption rates and expanding profitability in the coming years.
Speaker Change: We continue to be excited about the growth we're seeing in our brands portfolio with total athletic and Jessica Simpson being just two examples of success we are recognizing.
Speaker Change: Cobalt continues to gain momentum as we grow its recognition with the dedicated running community.
Speaker Change: We are constantly engaging premier fitness and outdoor channels to further expand telcos accessibility nationwide and drove a 109% year over year growth in its wholesale channel in the quarter.
Speaker Change: Jessica Simpson also sustained the momentum you saw in the first quarter with high double digit sales increases as the brand continues to appeal to customers or its colorful and unique style or embracing the Jessica Simpson brand momentum and capitalize on this excitement with expanded wholesale distribution up 70% in the quarter.
Speaker Change: I want to reinforce our message from last quarter, but this year, it's all about execution and discipline within our brands business and we've right sized our inventory and are implementing new ways of working amongst our teams.
Speaker Change: Looking to the future both Jared and I are working closely with our brand portfolio team to identify and pursue prudent investments, where we can deliver the highest returns.
Speaker Change: As I conclude I want to remark on our 2020 for fiscal year outlook.
Speaker Change: As Ive discussed already and as Jared will elaborate upon further in just a moment we are seeing that turnaround we've done scaring beginning to come to fruition and I'm energized by the return of our U S retail business deposit accounts.
Jared Poff: It has been a significant effort to get to this point and I am grateful to all of our team members for diligently pursuing our current strategic initiatives to get us to this place.
Jared Poff: Even with this turnaround gaining traction and you're transitioning is back to growth the ongoing macro uncertainty and the challenges. We saw as a result of a pressured consumer in the second quarter, specifically related to sandals and dress has muted. The overall level of these improvements below what we were expecting at the start of the year.
Jared Poff: Accordingly, we are repositioning our full year earnings guidance at 50 to 60 cents.
Jared Poff: As we shared last quarter, we continue to expect comp sales in the fall to be materially stronger than in the spring and in fact remain positive.
Jared Poff: Notably as mentioned earlier, we have already seen positive comps to start the third quarter as our assortment evolution continues to take hold.
Jared Poff: We expect this to produce an improved EPS in the back half of 2024 versus the back half of 2023, while helping forge a recovery from last year's lackluster boot season.
Jared Poff: We are in a transitional period for designer brands as our refreshed leadership team implements thoughtful strategic and operational improvements.
Jared Poff: And we are excited by the initiatives that have been put in place by our new leaders and look forward to updating you on our continued progress.
With that I'll turn it over to Jack.
Jared Poff: Jaret.
Jaret: Thank you, Doug and good morning, everyone.
Jaret: Turning to our financial performance, we were pleased with the results of our investment areas, primarily our continued penetration grows into athletic and athleisure, which supported notable market share gains in the quarter.
Speaker Change: According to sarcoma athleisure grew 4% in the second quarter versus last year in the footwear market, while fashion declined by 6% to last year.
Speaker Change: Even by our strategic assortment changes DSW drove athleisure sales growth of 8% to last year outpacing the athleisure market by over four percentage points and thus grabbing share in this important and growing category.
This helped us deliver another quarter of sequential improvement in our retail comp sales and while comp sequentially improved for the third consecutive quarter. The level of improvement was below what we were anticipating as the consumer further pulled back on discretionary spend and dress in seasonal footwear, which in spite of our pivot towards athletic and casual <unk>.
Speaker Change: Heavy on our overall results.
Speaker Change: Let me provide a bit more detail on our financial results for the second quarter, followed by an update to our annual guidance.
Speaker Change: For the second quarter of fiscal 2024, net sales of $772 million were down two 6% versus the prior year period as reported and were down one 4% on a 13 week comparable basis.
Speaker Change: And our U S retail segment comps were down one 1% in the second quarter, an improvement compared to down two 3% in the prior quarter down seven 4% in Q4 of last year and down nine 8% in Q3 of last year.
Speaker Change: As mentioned our performance was led by strong double digit comps in both our athletic and kids categories, which was offset by negative comps in our dress and seasonal categories.
Speaker Change: Our Canada retail segment comps were down three 1% in the second quarter driven by continued macro challenges that have led to a reduction in overall consumer discretionary spending activity and.
Speaker Change: In Canada, we continue to invest in branding as well as explore opportunities to expand our geographic footprint and we anticipate these will help drive an improved improvement in results.
Speaker Change: Finally in our brands portfolio segment sales were up 14% in the second quarter.
Speaker Change: As a reminder, starting this fiscal year, we have harmonized our approach to how we transact business between our brand portfolio segment in our retail segments.
Speaker Change: This change resulted in approximately $22 million of year over year additional sales for our brands segment in the quarter that gets eliminated in consolidation.
Speaker Change: We saw notable strength in our DTC sites, where we have been investing in particular turbo dot com delivered a positive comp of 23% and then <unk> dot com reported positive comps of 4%.
Speaker Change: Consolidated gross margin of 32, 8% in the second quarter decreased 170 basis points versus the prior year, primarily driven by slightly lower I M. U as we prioritize growing our penetration of national athletic brands as well as absorbing the impact of elevated promotions that were prevalent across the entire market.
Speaker Change: Our adjusted SG&A was 28, 9% of sales compared to 26, 9% in the second quarter of last year.
This deleveraging was largely a result of a declining top line coupled with the increases of underlying fixed expenses and increased investments in talent and specifically our E Commerce, our e-commerce teams and back to school marketing.
Speaker Change: Partially offset by the cost reductions we implemented at the beginning of the second quarter.
Speaker Change: As we look towards the future we have kicked off a formalized expense efficiency initiative with the help of an outside consultants.
Speaker Change: We will be working to put a multiyear execution plan together that will help us to more meaningfully and sustainably optimize our cost structure moving forward.
Speaker Change: For the second quarter adjusted operating income was $32 5 million compared to $62 6 million in the prior year.
Speaker Change: In the second quarter of 2024, we had $11 million of net interest expense compared to $6 $9 million last year.
Higher interest expense as a direct result of our term loan we installed last year as well as higher interest rates on our ABL.
Speaker Change: Our effective tax rate in the second quarter on our adjusted results was 26% compared to 29, 3% last year.
Speaker Change: Our second quarter adjusted net income was $17 1 million versus $39 $4 million last year or 29 cents and.
Speaker Change: And diluted earnings per share versus 59 last year.
Speaker Change: Higher operating expenses and interest expense weighed on this quarter's results.
Speaker Change: Turning to our inventory we ended the second quarter with inventories up five 9% versus the prior year, mostly driven by athletic as we brought in more receipts earlier this year to support our back to school campaign and our retail segments.
Speaker Change: For the second quarter, we generated $28 million of free cash flow defined as cash provided by operating activities less cash paid for property and equipment, reflecting the receipt of our IRS tax refund.
Speaker Change: We believe our healthy liquidity position, including availability under our ABL support our ability to navigate further potential uncertainty and we do anticipate that we will be free cash flow positive in the back half of the year.
Speaker Change: We ended the second quarter was $38 $8 million of cash and our total liquidity, which includes cash and availability under our ABL revolver was $193 9 million total debt outstanding was $465 $8 million as of the end of the second quarter.
Speaker Change: With our cares act tax refund our teams immediately pay down outstanding balances on our ABL revolver.
Speaker Change: Additionally, in the second quarter, our team and the board deemed it prudent to reengage our share repurchase activity.
Speaker Change: To that end, we repurchased $18 million worth of DVI shares at an average price of $6 74 in Q2, we.
Speaker Change: We will continue to evaluate all opportunities to bolster shareholder value and we believe this recent repurchase activity is evidence of our conviction in our long term strategy.
Speaker Change: Before I conclude I want to take a minute to discuss our fiscal 2020 for guidance.
Speaker Change: We have always expected comps to improve as we work through spring inflected to positive in Q3, and our bottom line to turn to growth over last year for the fall and this is exactly what we've seen year to date and are seeing currently as we start the back half.
Speaker Change: As of the first month of the third quarter, we have inflected to positive comps and expect those to continue.
Speaker Change: As a reminder, this includes the lapping of Nike's return, which we enjoyed during the entire fourth quarter of last year.
Speaker Change: We remain confident in the calendar a nation of the trajectory of our comp trend and expect continued sequential improvement through the balance of the year.
Speaker Change: However, as we've discussed the overall pace and level of recovery has been more muted than expected as a result of a pressured consumer macro pressures on the overall footwear market and a lackluster spring seasonal business at DSW.
Speaker Change: As such we are revising our full year guidance accordingly.
We are adjusting our net sales growth guidance for the full year to be flat to up slightly versus prior guidance of a low single digit increase.
Speaker Change: As a reminder, this does include the headwinds of the sales recorded in the 50 <unk> week of fiscal 2023.
We continue to project, our third quarter is our strongest sales growth quarter and I want to remind you that while we also expect positive comp sales growth in the fourth quarter, our year over year total sales will be negatively impacted by the loss of the 53rd week from the prior year.
Speaker Change: We do believe our assortment and marketing strategies are being rewarded as customers have embraced the updated selection and promotional strategies that we are championing.
Speaker Change: And we have moved even more decisively to position ourselves for success in the back half with the most notable adjustment to our seasonal assortment yet.
We now anticipate external sales and our brand portfolio segment will be flattish as strong growth from Jessica Simpson and telco are offset by declines in our DTC businesses overall.
Speaker Change: Turning to factors impacting our profitability, while continuing to see the investments over last year in people in it that we've discussed previously.
Speaker Change: The expense savings from the reorganization, we executed early in the second quarter has started to materialize.
Speaker Change: With these puts and takes coupled with a more muted top line, we now expect to see flat to slight deleverage in SG&A for the full year.
Speaker Change: We anticipate our effective tax rate of roughly 30% for fiscal 2024 and have updated our annual earnings per share outlook to be in the range of 50 to 60.
Speaker Change: Versus our prior guidance of 70 to 80.
Speaker Change: Our weighted average diluted shares outstanding are anticipated to be approximately $57 8 million for the third quarter and approximately $58 3 million for the year given the share repurchase activity that has occurred thus far throughout the year.
Speaker Change: I remain energized by our plans to return designer brands to earnings growth in the back half of the year, including what is implied with this revised guidance of meaningful growth in EPS over last year.
Speaker Change: Importantly, the third quarter will mark the first quarter of positive comps since the third quarter of 2022, a testament to the fact that our strategies are working.
At this time, we would also like to reaffirm our expectations for capital expenditures to be in the range of $65 million to $75 million for this year.
Speaker Change: I remain confident that we are making the necessary changes to position our organization for growth as the footwear industry evolves by investing in top talent key relationships top of funnel initiatives and modernize infrastructure. We believe that we are increasingly well positioned to continue our recovery.
Speaker Change: With that we will open the call for questions.
Speaker Change: Operator.
Speaker Change: We will now begin the question and answer session.
I'll ask a question you May press Star then one on your telephone keypad.
Speaker Change: If you were using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: At any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Speaker Change: Our first question comes from Dylan Carden with William Blair. Please go ahead.
Speaker Change: Yeah, Hey, guys. This is Alex <unk> on for Dillon, Thanks for taking our questions.
Speaker Change: Firstly, just how would you describe the risk in the guide for the back half you mentioned inflicting positive in comp with boots planned down double digits on easier compares which appears to have been relatively de risked. So could you just give a bit more color on what is contemplated in the larger inflection plan for the second half.
Yes, I mean this is Doug. Thanks for your question I would start by just saying again, we're encouraged by what we saw materialize through Q2 from a momentum perspective, and then and particularly the fact that we moved to a positive comp as we got into Q3. So a lot of that is driven by obviously.
Speaker Change: The penetration growing of athletic and athleisure, but the most significant change we've made as we moved through Faas, we feel like we have derisked the demand plan, because we significantly planned down in our seasonal boot category again, that's a pretty seismic shift with regards to how we're thinking about.
Evolving that assortment as we move through the back half is probably the most dramatic moves that you've made.
Speaker Change: Got it okay. Thank you and then secondly, how.
Speaker Change: How are you or could you adjust or shape the branded portfolio to reflect the trends that you're currently seeing in the business.
Speaker Change: You mentioned earlier in the prepared remarks be emphasizing dress and seasonal products is it within the realm of possibility to buyer that rid of any existing brands as you've reworked the branded portfolio. Thanks.
Speaker Change: Yes.
This is Jared what I would say is if you kind of look at the investments. We've made most recently they have been in brands that are in the growing part of the of the footwear market. So when you look at <unk>. When you look at Cads squarely in the athletic and Athleisure side, and we're actually very energized by what we're seeing on that front. When you look at our legacy dressed brands one they are licensed brands.
We are still very much in the middle of most of this licenses. However, we have done certain things to even lean into where we are winning with those brands. So when you kind of look at our events can move to our brands, specifically and while boots is declining the white cap boot and the oversized boot is actually.
Speaker Change: We are winning and so in those particular areas, but we are finding some opportunities for wins, while still being relatively conservative from overall growth and then lastly, I would comment and Doug may want to chime in.
Doug Howell: Are saying a lot of traction with with Jessica Simpson at the moment and Ironically, that's that they dress focused brand, but she's she's very much has has a a five and a kind of an aesthetic that right. Now is really resonating. So we're doing quite well with that Brian Yes, I would agree with everything that Gary said and again when you look at this.
Speaker Change: Elio is continuing to evolve.
Again, there there are components of that assortment that will continue to lead and differentiate Jared mentioned Wildcat food, that's kind of an <unk> component that we did really well with last year on the wholesale side, we're getting more aggressive about that this year again the investment in telco, we obviously feel really good about that just to remind everyone. Andrea is relatively new to the organization. She started.
Speaker Change: Early this year, but really.
Andrea: First with the progress that we've made and she has made with the team so far today.
Speaker Change: Perfect. Thank you very helpful. That's all for me and I'll pass it on.
Again, if you have a question. Please press Star then one.
Speaker Change: The next question comes from Mauricio Serna with.
Mauricio Serna: UBS. Please go ahead.
Mauricio Serna: Great. Good morning, and thanks for taking my questions, maybe could you quantify how the quarter to date, that's performing and just how comfortable you.
Mauricio Serna: Do you feel about the second half.
Just you know given the Q4 I guess like I don't know, but the implication is that correct.
Speaker Change: It'd be slightly down just because of Oh you know.
50 <unk> week.
Mitch: Yes Mitch.
Mitch: I'll start this is bad so I would say you know again, we don't want to get into a lot of detail on the current quarter, but we did comment that we've moved to a positive comp which was the first time that we've seen that in September of 2022. So again, we think that's a critical inflection point.
Mitch: You already have the back to school business still occurs in the quarter.
Mitch: That Atlantic businessman Athleisure continue to be very buoyant. So that's definitely something we felt very positive about its very early in the in the seasonal business. Obviously, while we are encouraged by some very early reads and it is very early we have the majority of the season ahead of us. So we're focusing on controlling what we can control.
Mitch: Pleased with how the team is evolve the product portfolio of assortment.
Mitch: But there is a little bit of caution out there just with regards to the macro environment, but again really focusing on what we can control distorting. The categories that are that are working and we're positioned in a very good place because of how we play in seasonal.
I would add.
Mitch: Mauricio to answer the end of your question, we do anticipate positive comps throughout the fall.
Speaker Change: But to your point, we do lose a 50 <unk> week in the fourth quarter that was about 40, a little over $40 million in total sales.
Speaker Change: While we still feel pretty strongly even at the lower end of our guidance around Q4 positive comps.
Speaker Change: Depending on where within that guidance we lie.
Speaker Change: You could see a flattish or or.
Speaker Change: You know a bit more pressure on the sales side, just give them, we're losing that 42 million dollar weak.
Speaker Change: Got it and then just very lastly on the gross margin I mean, you talked about you expect for the year SG&A to be lots.
Speaker Change: Lots of slight deleverage how should we think about the gross margin for full year.
Speaker Change: Yeah, I mean, when we look at at full year margins, we kind of have two things going in opposite directions. We continue to see pressure on our IMU just given the move into a higher penetration of national brands, specifically athletic brands and as we've always talked about those certainly come with a bit more pressure on IMU.
Speaker Change: And then the dress brands do but on the flip side, especially as we move into the fall we start seeing leverage on our markdowns if you'd recall fall of last year is when we really.
Speaker Change: Had to clear out boots, because we had invested in growth and certainly did not see that materialize and so we're kind of seeing those those offset to deliver an overall year that.
Speaker Change: Is it a bit flattish end and gross profit.
Understood very helpful. Thank you so much.
Speaker Change: The next question comes from Dana Telsey with Telsey group.
Dana Telsey: Please go ahead hi.
Dana Telsey: Hi, Good morning, everyone as you think about <unk>.
Dana Telsey: Toya levels, and where you expect them to be by the end of the year both on your own branded side.
Speaker Change: Wholesale how do you think how you're thinking about it and what the components of the comps in each of the channels drivers of each what did you see in <unk>.
Speaker Change: T V or conversion traffic transactions, what are you seeing there and how do you think about it going forward given the inflection point that you've seen already thank you.
Speaker Change: Yeah. Thanks, David for your question. This is Doug I'll start and Derek can add some color.
Derek: We're encouraged by the momentum that we're seeing with regards to the change in that trajectory again, we've commented on the fact that we saw digital increased for the third consecutive quarter. We definitely have seen an improvement in traffic at the store component of that as well again, it's a little more muted than we would have anticipated, but it's encouraging are definitely moving in the right direction.
Speaker Change: Yeah.
We did see an uptick in AUR. So again that kind of explains a little bit of negative on traffic and positive AUR was the result, so we're again encouraged by that the.
Speaker Change: The team has done a very good job of managing inventory again, we pulled forward. Some athletic received in order to be able to position ourselves for back to school and obviously thats paying off in dividends as we as we move to a positive comp in Q3, so far.
Speaker Change: Yeah.
Speaker Change: Great and just.
Speaker Change: Any update on feed expenses.
Speaker Change: Yeah, you know Dana we are monitoring that closely obviously direct importing is not a huge piece of <unk> total business it impacts our segments differently.
Speaker Change: We actually are seeing a bit of a different level of impact on our brands business versus.
Speaker Change: The little bit of importing our DSW business does DSW pretty much what they do import arrived in the west coast and we arent seeing nearly the type of container pressures for those deliveries.
Speaker Change: Look at what we what we received and for our brands business.
Speaker Change: Cause of where those infrastructures are.
Speaker Change: They are located in the U S. We actually received those on the East coast.
Speaker Change: We are seeing a pretty substantial increase on a per container load again overall, it's not putting in a lot of volatility to DPI I've just given direct importing is not as huge for all of DDI, but within our segments. We were seeing some of that pressure.
Speaker Change: Thank you.
Speaker Change: And we have a follow up from <unk> <unk> with UBS. Please go ahead.
<unk> <unk>: Okay, just wanted to follow up on SG&A.
<unk> <unk>: Just want to understand like given that you lowered the.
Speaker Change: Kind of like you know projects like Lord knows that the sales guidance is there like any change on the SG&A front, just because of lower sales expectations or is that really essentially what is driving the mix.
Speaker Change: Just want to understand in Cytosorb, essentially driving the lower guidance on the EPS level.
Speaker Change: Yeah.
Speaker Change: And we've kind of talk a little bit about we got a relatively fixed expense structure, especially when you look across our segments and the way that those businesses are organized.
Speaker Change: I would say however that should we start to see.
Speaker Change: Performance come in a little more challenged to start to pivot towards the lower end of our guidance, we do have a bit of flexibility I'd call it probably between five and $10 million.
Speaker Change: SG&A dollars two to flex with that but overall not not a lot of wiggle room that is why as I mentioned in my prepared remarks, we have engaged an outside consultant to really look at our overall expense structure and what I'm, calling a physical therapy, just kind of looking to say how should we be.
Speaker Change: Wired a little bit differently, our expense structure has been dramatically changed over the last few years as we have added new brands that came with entirely existing infrastructures like telco like kids.
Speaker Change: And so we are we are looking at that and anticipate putting together a pretty robust multiyear.
Speaker Change: Execution plan to really get more efficient and look at how we should be wired for our SG&A.
Speaker Change: Got it and then just last week.
Speaker Change: What are your expectations for interest expense.
Interests is relatively in.
In line right now we're just we're projecting just under $40 million of full year interest expense for 24.
Speaker Change: Thank you.
Speaker Change:
Speaker Change: This concludes our question and answer session I would like to turn the conference back over to Doug Howe for any closing remarks.
Doug Howe: Well, thanks again, everyone for joining us today I just want to reiterate that we are energized by the fact that we are seeing the turnaround begin to come to fruition and again I am grateful to all of our team members will continue to pursue the strategic initiatives to get us to this place. We look forward to updating you on our progress as we move through the balance.
Doug Howe: For 2024, thanks again for joining us.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Yes.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [noise].