Q3 2024 Designer Brands Inc Earnings Call

Unknown Executive: Customer Support As a result of the continued weakness we've seen, we have proactively pulled back even further on fourth quarter receipts in seasonal as part of our efforts to ensure we are moving forward with a healthy inventory position by the end of the year. Our target for the end of Q4 is to have inventory flat to up low single digits compared to last It is clear more decisive actions are needed to decrease seasonal penetration on an ongoing basis.

As a result of the continued weakness we see we are proactively pulled back even further on fourth quarter receipts in seasonal as part of our efforts to ensure we are moving forward with a healthy inventory position by the end of the year.

Our target for the end of Q4 is to have inventory flat to up low single digits compared to last year.

It is clear more decisive actions are needed to decrease seasonal penetration on an ongoing basis and as such we are planning accordingly for 2025.

Unknown Executive: And as such, we are planning accordingly for 2025. We are committed to more aggressively leveraging consumer insights to lean into our greatest areas of differentiation. This includes prioritizing investments and focusing on areas where we know we differentiate ourselves, including our stores.

We are committed to more aggressively leveraging consumer insights to lean into our greatest areas of differentiation.

This includes prioritizing investments and focusing on areas, where we know we differentiate ourselves including our stores.

Douglas Howe: As we continue to focus on executing on those things within our control, I'm going to briefly walk through our efforts against DSW's three strategic pillars in the third quarter. reinvigorating our assortment, elevating our marketing, and enhancing our omni channel shopping. Starting with our assortment, our top eight brands continue to be a primary driver of positive performance, with sales up 27% compared to the third quarter last year. As anticipated, we saw continued strength in athletics with both adults and kids growing double digits. Our athletic penetration increased by nearly five points versus the prior year, and we see remaining white space in this category.

As we continue to focus on executing on those things within our control I'm going to briefly walk through our efforts against Dsw's three strategic pillars in the third quarter.

Reinvigorating, our assortment elevating our marketing and enhancing our omnichannel shopping experience.

Starting with our assortment our top eight brands continued to be a primary driver of positive performance with sales up 27% compared to the third quarter last year.

As anticipated we saw continued strength in athletic with both adults and kids growing double digit.

Alright, palladic penetration increased by nearly five points versus the prior year and we see remaining white space in this category.

Douglas Howe: Athletic Stocks also continue to perform well up triple digit. Excitingly, we also saw a positive mid single digit comp in women's dress. As we head into the holiday season, we have also made investments in highly giftable brands, including several that will be merchandised in our cozy shop at the front of our store. As I'll detail shortly, we are leaning into holiday like never before DSW, partnering with key national brand partners to be loud, exciting, and most importantly, in stock on the most desirable brands for this time of year. Moving to marketing, our ability to amplify our involved assortment is more critical than ever, and our new chief marketing officer has hit the ground running.

Athletic socks also continued to perform well up triple digits Excitingly. We also saw a positive mid single digit comp in women's dress.

As we head into the holiday season, we have also made investments in highly giftable brand, including several that will be merchandise and our cozy shop at the front of our stores.

As I will detail shortly we are leaning into holiday like never before DSW partnering with key national brand partners to be loud exciting and most importantly in stock on the most desirable brands for this time of year.

Moving to marketing our ability to amplify our evolved assortment is more critical than ever and our new Chief marketing officer has hit the ground running.

Douglas Howe: We've had a number of successes in the third quarter, including. Starting off strong with back to school season, deploying celebrity and influencers to share their picks for the season, and a curated online back to school shopping guide to cater to the needs of students, parents, and teachers of all ages. The approach drove 26.1 billion media impressions compared to 15 billion last year at the same time. Kicking off the fall with an omni-channel campaign titled Fall Trends that guided customers towards the trendiest styles, from over-the-knee boots, to the color red, to fierce animal prints and heavy metal details.

<unk> had a number of successes in the third quarter, including.

Starting off strong with back to school season, deploying celebrities and influencers to share their fixed for the season and a curated online back to school shopping guide to cater to the needs of students parents and teachers of all agent.

The approach drove $26 1 billion media impressions compared to <unk> 15 billion last year at the same time.

Kicking off the fall within Omnichannel campaign, titled Fall trends that guided customers towards the trendiest style from over the knee boots to the color red too fierce animal prints and heavy metal details. The results of these efforts included 67 billion earned media impressions the equivalent of $4 billion in.

Douglas Howe: The results of these efforts included 67 billion earned media impressions, the equivalent of 4 billion in advertising value, from top-tier outlets including the Today Show, US Weekly, and PureWow. Improving and enhancing our social media channels and engagement. September was a top performing month and we are seeing overall channel engagement of 500%, monthly engagement of 4% and a new follower rate of nearly 7%. Cared with our enhanced influencer and content strategy, this resulted in an average of 15 million views across our social content monthly. Helping our DSW brand to rise in the ranks of strategic target audiences, specifically men's and kids footwear consumers, and has improved our brand awareness ranking with these key audiences.

<unk> value from top tier outlet, including the today show U S weekly and pier one.

Improving and enhancing our social media channels and engagement September was the top performing month, and we are seeing overall channel engagement up 500% monthly engagement up 4% and a new fall of a rate of nearly 7%.

Paired with our enhanced Influencer and content strategy. This resulted in an average of 15 million views across our social content monthly.

Helping our DSW brand to rise in the ranks at strategic target audiences.

Typically men's and kid's footwear consumers and has improved our brand awareness ranking with these key audiences.

Douglas Howe: While we believe we are early on in our journey and have more room to improve, these early signs are encouraging.

While we believe we are early on in our journey and have more room to improve ease early signs are encouraging.

Douglas Howe: And finally, bringing on a world-class brand agency, Crispin, as our new brand strategy partner, initiating robust work aimed at elevating the re-energizing DSW brand and improving overall wear. To that end, our efforts around our third pillar to enhance our omni-channel shopping experience for DBI customers remain a core strategic priority. We know that roughly 70% of our customers start their search online and still go to the store. Our stores also remain our largest source of net new customer acquisitions. To fully take advantage of our omni-channel platform in the quarter, DSW leaned into being a back-to-school destination, both online and in particular in stores, where we established a large and impactful visual presence with impressive and attention-grabbing collateral.

And finally.

Bringing on a world class brand agency Crispin as our new brand strategy partner initiating robust work aimed at elevating the Reenergizing DSW brand and improving overall were.

To that end our efforts around our third pillar to enhance our omnichannel shopping experience for DPI customers remain a core strategic priority.

We know that roughly 70% of our customers start their search online and still go to the stores.

Our stores also remain our largest source of net new customer acquisition.

Yes fully take advantage of our Omnichannel platform in the quarter DSW leaned into being a back to school destination, both online and in particular in stores, where we established a large and impactful visual presence with impressive and attention grabbing collateral.

Douglas Howe: So with these new learnings, let's talk about what we're doing in the U.S. to mitigate headwinds as we move through the fourth quarter. Our team has identified that we had a significant opportunity to execute a gifting strategy this holiday. This is largely driven out of our accessories area and encompasses socks, tights, hats, and cold weather wear. It will include a completely reimagined queue line and several updates to our gifting and impulse product offerings that can only be found in store. This will be accompanied by creative collateral to support a gift guide, key trends, prioritize brands, and other relevant holiday messages.

So with these new learnings, let's talk about what we're doing in the U S to mitigate headwinds as we move through the fourth quarter.

Our team has identified that we had a significant opportunity to execute our gifting strategy. This holiday.

This is largely driven out of our accessories area and encompasses sock tight hats and cold weather.

It will include a completely re imagined Q line and several updates to our gifting an impulse product offerings that can only be found in stores.

This will be accompanied by creative collateral to support a gift guide key trend prioritize brand another relevant holiday messaging.

Douglas Howe: We have an action-packed consumer engagement plan that will showcase great value, top trends, and the season's best giftables. And we are amplifying this with a 360-degree holiday campaign that evolves with the customer's needs throughout the extended period. While sales have been relatively in line with projections, we've seen an uptick in margins as we've become less promotional compared to last year.

We have an action packed consumer engagement plan that will showcase great value top trends and the season's best Giftable and we are amplifying. This with a 360 degree holiday campaign that evolved with the customers' needs throughout the extended period.

While sales have been relatively in line with projections, we've seen an uptick in margin as we become less promotional compared to last year.

Douglas Howe: turning to our Canadian business. In Canada, boots are even more impactful to our fall business, especially technical and cold weather. Extremely unseasonable warm weather led to a break in the usual third quarter trends with boots down double digits and sandals sales up nearly 40%. Given the typical boot buying trends in the Canadian market are so unique, and historically have not been impacted by weather, we did not plan inventory down in this geography for the quarter as we did in the U. S. Therefore, we felt an outsized impact. Similar to the U.S., athletic and casual continue to post-positive performance.

Turning to our Canadian business in Canada booths are even more impactful to our fall business, especially technical and cold weather boots.

Extremely unseasonable warm weather led to a break in the usual third quarter trends with boots down double digit and sandal sales up nearly 40%.

Given the typical boot buying trends in the Canadian market are so unique and historically have not been impacted by weather. We did not plan inventory down in this geography for the quarter as we did in the U S.

Therefore, we felt an outsized impact.

Similar to the U S Athletic and casual continues to post positive performance. Despite the break in the usual seasonality the third quarter, Mark nine straight months of market share gains in Canada, driven by strength in kids.

Douglas Howe: Despite the break in the usual seasonality, the third quarter marked nine straight months of market share gains in Canada, driven by strength in kids. This quarter, we open two new shoe company stores in Canada, bringing us to a net eight new store year-to-date on top of the 28 Rubino stores.

This quarter, we opened two new shoe company stores in Canada, bringing us to a net eight new store year to date on top of the 28 Robina stores.

Douglas Howe: Now to our Brand Portfolio section. As referenced on prior earnings calls, our efforts to reduce costs, right size the organization, expand margins, streamline and simplify the way we work remain the top priorities in 2024. To this end, we continue to evaluate our sampling and design process to improve SKU productivity and drive margin improvement. Historically, our adoption rate of design proposals was roughly 20%, and we are energized by significant improvement we've seen with a 50% adoption rate for our spring 25 collection, a number we plan to take even higher over the long term. Successes in these areas led to a meaningful improvement in earnings contribution from the sector.

Now to our brand portfolio segment.

As referenced on prior earnings calls our efforts to reduce costs and rightsize the organization expand margins streamline and simplify the way we work remain the top priorities in 2024 excuse.

To this end, we continue to evaluate our sampling and design process to improve SKU productivity and drive margin improvement.

Historically, our adoption rate of design proposals was roughly 20% and we are energized by a significant improvement we've seen with a 50% adoption rate for our spring 'twenty five collection, a number we plan to take even higher over the long term.

Successes in these areas led to a meaningful improvement in earnings contribution from this segment.

Douglas Howe: As we look forward, we are positioned for continued growth as we build upon this foundation. We continue to be excited about the growth we are seeing in our Topo Athletic and Jessica Simpson brand specific Topo Athletic, of 66% in net sales for the quarter, continues to build momentum as we expand our distribution and raise product awareness, supported by our increase in marketing investment. Furthermore, there is a lot of buzz around the running category and Topo is front and center, driving the excitement and offering customers more comfort.

We look forward we are positioned for continued growth as we build upon this foundation.

We continue to be excited about the growth we're seeing in our total athletic and Jessica Simpson brand specifically.

Hope all athletic of 66% of net sales for the quarter continues to build momentum as we expand our distribution and raise product awareness supported by our increase in marketing investments.

Furthermore, there was a lot of buzz around the running category and Towboat is front and center driving the excitement and offering customers more comfort.

Douglas Howe: Jessica Simpson did well as we saw strength in our special occasion where with sales up 14 As I conclude, I am pleased with the way our business has continued to execute successfully on our strategic priorities. We remain focused on continuing to create the right discipline and performance within our retail and brands businesses and are excited about our long term path to profitable growth. I am confident the steps we are taking will set us up for improved performance over the long term as these headwinds evade.

Jessica Simpson did well as we saw strength in our special occasion wear with sales up 14%.

As I conclude I am pleased with the way our business has continued to execute successfully on our strategic priorities.

We remain focused on continuing to create the right discipline and performance within our retail and brands businesses and are excited about our long term path to profitable growth.

I'm confident the steps we are taking will set us up for improved performance over the long term as these headwinds abate.

Jared Poff: With that, I'll turn it over to Jared. Jared. Thank you, Doug. And good morning, everyone. We continue to be pleased with the results of our investment areas that we believe will support our outperformance versus the market in those areas, even while challenges persist.

Gerry: With that I'll turn it over to Gerry.

Gerry: Sharon.

Gerry: Thank you, Doug and good morning, everyone.

Gerry: We continue to be pleased with the results of our investment areas that we believe will support our outperformance versus the market in those areas, even while challenges persist, let me provide a bit more detail on our financial results from the third quarter, followed by an update to our annual guidance.

Jared Poff: Let me provide a bit more detail on our financial results from the third quarter, followed by an update to our annual guidance. For the third quarter of fiscal 2024, net sales of $777 million. We're down 1.2% versus the prior year period as reported, and we're down 3.1% on a 13 week comparable basis. In our U.S. retail segment, comps were down 2.8% in the third quarter. As mentioned, our performance was bolstered by our back-to-school season, which saw double-digit comps in athletic and kids. Unfortunately, this strong performance was more than offset by negative comps and seasonal categories.

Gerry: For the third quarter of fiscal 2024, net sales of $777 million were down 1.2% versus the prior year period as reported and were down three 1% on a 13 week comparable basis.

Gerry: And our U S retail segment comps were down two 8% in the third quarter as mentioned our performance was bolstered by our back to school season, which saw double digit comps in athletic and kids.

Gerry: Unfortunately, this strong performance was more than offset by negative comps in seasonal categories.

Jared Poff: Our Canada retail segment comps were down 4.6% in the third quarter, driven by unseasonably warm weather during what is usually a heavy boot sales season, as well as continued macro challenges that have led to a reduction in overall consumer discretionary spending activity. Total sales were up double digits as a result of the addition of Rubino locations to our store base. Finally, in our Brand Portfolio Segment, sales were up 18.5% in the third quarter. As a reminder, starting this fiscal year, we have harmonized our approach to how we transact business between our Brand Portfolio Segment and our Retail Segment.

Gerry: Our Canada retail segment comps were down four 6% in the third quarter driven by unseasonably warm weather during what is usually a heavy boot sales season as well as continued macro challenges that had led to a reduction in overall consumer discretionary spending activity.

Gerry: Total sales were up double digits as a result of the addition of rubino locations to our store base.

Gerry: Finally in our brand portfolio segment sales were up 18, 5% in the third quarter as a reminder, starting this fiscal year, we have harmonized our approach to how we transact business between our brand portfolio segment and our retail segments. This change resulted in approximately $15 million of year over year additional.

Jared Poff: This change resulted in approximately $15 million of year-over-year additional sales for our brand segment in the quarter that gets eliminated in consolidation. We saw notable strength in our DTC sites where we have been investing. In particular, Topo.com delivered a triple digit comp. The strength of Topo, however, was offset by a reduction at VC.com, leading to a total comp decline of 7.5% for our brand's DTC site. Consolidated gross margin of 31.8% in the third quarter decreased 80 basis points versus the prior year, primarily driven by lower IMU as a result of our continued penetration shifts into national brands, and specifically more athletic and athleisure footwear.

Gerry: Sales for our brands segment in the quarter that gets eliminated in consolidation.

Gerry: We saw notable strength in our DTC sites, where we have been investing in particular, Tokyo dotcom delivered at a triple digit comp.

Gerry: The strength of telco, however was offset by a reduction at V. C Dot com, leading to a total comp decline of seven 5% for our brands DTC sites.

Gerry: Consolidated gross margin of 31, 8% in the third quarter decreased 80 basis points versus the prior year, primarily driven by lower I am you as a result of our continued penetration shifts international brands, and specifically more athletic and athleisure footwear.

Jared Poff: Our adjusted SG&A was 26.7% of sales, a 220 basis point improvement from the third quarter of last year. This was driven by expense cuts made in response to the challenge top line, including the reversal of management incentive compensation accrual in the quarter, which was slightly offset by expense deleverage as a result of top line decline in sales. As noted last quarter, we are undertaking an expense efficiency initiative with outside consultants.

Gerry: Our adjusted SG&A was 26, 7% of sales a 220 basis point improvement from the third quarter of last year. This was driven by expense cuts made in response to the challenged top line, including the reversal of management incentive compensation accrual in the quarter, which was slightly offset by expense deleverage as a result of top line.

Gerry: Decline in sales.

Gerry: As noted last quarter, we are undertaking an expense efficiency initiative with outside consultants. Our partners have identified a number of opportunities to spend more effectively and we now have a detailed expense savings roadmap that we will begin executing in 2025, and we look forward to sharing more with you in the coming quarters.

Jared Poff: Our partners have identified a number of opportunities to spend more effectively, and we now have a detailed expense savings roadmap that we will begin executing in 2025, and we look forward to sharing more with you in the coming quarters. For the third quarter adjusted operating income was $43.6 million, an improvement over $31.4 million last year, and the first quarterly year over year improvement in the last two years. In the third quarter of 2024, we had $11.6 million of net interest expense compared to $8.8 million last year. Higher interest expense is a direct result of the term loan we installed last year as well as higher interest rates on our ABL.

Gerry: For the third quarter adjusted operating income was $43 $6 million, an improvement over $31 $4 million last year and the first quarterly year over year improvement in the last two years.

Gerry: In the third quarter of 2024, we had $11 $6 million of net interest expense compared to $8 $8 million last year.

Gerry: Higher interest expense as a direct result of the term loan we installed last year as well as higher interest rates on our ABL, we drew on our ABL in the third quarter as our team and the board deemed it prudent to continue our share repurchase activity as evidence of our conviction in our long term strategy.

Jared Poff: We drew on our ABL in the third quarter as our team and the board deemed it prudent to continue our share repurchase activity as evidence of our conviction in our long-term strategy. To that end, we repurchased $50.6 million worth of DBI shares at an average price of $6.59 in Q3, our biggest share repurchase of the year. Our effective tax rate in the third quarter on an adjusted results was 54.8% compared to 34.6% last year. Our third quarter adjusted net income was $14.5 million versus $14.8 million last year or $0.27 in diluted earnings per share versus $0.24 last year.

Gerry: To that end, we repurchased $56 million worth of <unk> shares at an average price of $6.59 in Q3, our biggest share repurchase of the year.

Gerry: Our effective tax rate in the third quarter on an adjusted results was 54, 8% compared to 34, 6% last year.

Gerry: Our third quarter, adjusted net income was $14 $5 million versus $14 $8 million last year, or 27 cents and diluted earnings per share versus 24 cents last year.

Jared Poff: Turning to our inventory, we ended the third quarter with inventories up 6% versus the prior year, mostly driven by the significant lack of demand for seasonal footwear.

Turning to our inventory we ended the third quarter with inventories up 6% versus the prior year, mostly driven by the significant lack of demand for seasonal footwear as.

Jared Poff: As a result, Doug noted that we have pulled back further on fourth quarter receipts for seasonal product to ensure we are moving into a healthy inventory position by the end of the year. We ended the third quarter with $36.2 million of cash and our total liquidity, which includes cash and availability under our ABL revolver was $154.5 million. Total debt outstanding was $536.3 million as of the end of the third quarter.

Speaker Change: As a result, Doug noted that we have pulled back further on fourth quarter receipts for seasonal product to ensure we are moving into a healthy inventory position by the end of the year.

Speaker Change: We ended the third quarter was $36 $2 million of cash and our total liquidity, which includes cash and availability under our ABL revolver was $154 $5 million.

Speaker Change: Total debt outstanding was $536 $3 million as of the end of the third quarter.

Jared Poff: Before I conclude, I want to take a minute to discuss our fiscal 2024 guidance. Through the first half of the year, we had been signaling our confidence and an inflection point in the third quarter, a sentiment bolstered by the positive comps we saw in August as a result of our successful back-to-school efforts. However, the unseasonably warm weather in the September and October period, coupled with sustained consumer pressure, significantly dampened performance in the last two months of the quarter. As we look ahead, we feel it is prudent to give you an update on our expectations for the full 2024 results.

Speaker Change: Before I conclude I want to take a minute to discuss our fiscal 'twenty 'twenty four guidance through.

Speaker Change: Through the first half of the year, we had been signaling our confidence in an inflection point in the third quarter a sentiment bolstered by the positive comps we saw in August as a result of our successful back to school efforts. However, the unseasonably warm weather in the September and October period, coupled with sustained consumer pressure significantly dampened.

Speaker Change: Performance in the last two months of the quarter.

Speaker Change: As we look ahead, we feel it is prudent to give you an update on our expectations for the full 2024 results.

Jared Poff: As a reminder, our guidance includes the headwind of the sales recorded in the 53rd week of fiscal 2023, as well as the lapping of Nike's return to our assortment in the fourth quarter of 2023. Importantly, we do still continue to project our fourth quarter as our strongest comp growth quarter. Should macro conditions remain consistent to what we are seeing now, we would anticipate net sales growth for the year to be down low single digits, which incorporates the impact of the loss of the 53rd week compared to prior guidance of flat to up slightly. We would expect external wholesale sales in our brand portfolio to be down low single digits versus prior guidance of Flattish.

Speaker Change: As a reminder, our guidance includes the headwind of the sales recorded in the 50 <unk> week of fiscal 'twenty twenty-three as well as the lapping of Nike's returned to our assortment in the fourth quarter of 2023 importantly.

Speaker Change: Importantly, we do still continue to project, our fourth quarter is our strongest comp growth quarter.

Speaker Change: Should macro conditions remain consistent to what we're seeing now we would anticipate net sales growth for the year to be down low single digits, which incorporates the impact of the loss of the 53rd week compared to prior guidance of flat to up slightly.

We would expect external wholesale sales in our brand portfolio to be down low single digits versus prior guidance of flattish.

Jared Poff: Additionally, despite depressed sales levels, we have been generating larger profits. And the midpoint of our guidance, excluding the impact of the 53rd week, would contemplate the second consecutive quarter of year over year adjusted operating income growth, leading to an annual diluted earnings per share outlook in the range of 10 cents to 30 cents versus our prior guidance of 50 cents to 60 cents. Our weighted average diluted shares outstanding are anticipated to be approximately $53.5 million for the third quarter and approximately $55.4 million for the full year, given the share repurchase activity that has occurred thus far throughout the year.

Speaker Change: Additionally, despite depressed sales levels, we have been generating larger profits and the midpoint of our guidance excluding the impact of the 53rd week would contemplate the second consecutive quarter of year over year adjusted operating income growth leading to an annual diluted earnings per share outlook in the range.

Speaker Change: 10 cents to 30 cents versus our prior guidance of 50 to 60.

Speaker Change: Our weighted average diluted shares outstanding are anticipated to be approximately $53 5 million for the third quarter and approximately $55 4 million for the full year given the share repurchase activity that has occurred thus far throughout the year.

Jared Poff: At this time, we would like to reaffirm our expectations for capital expenditures to be in the range of $60 million to $65 million for the year. Our estimates also assume an effective tax rate of roughly 32%. I remain confident that our outlined initiatives will continue to deliver improved performance over time. Remaining focused on our core business strategy throughout the holidays will position us for stronger performance over the long term as these external challenges ease.

Speaker Change: At this time, we would like to reaffirm our expectations for capital expenditures to be in the range of $60 million to $65 million for the year.

Speaker Change: Our estimates also assume an effective tax rate of roughly 32%.

Speaker Change: I remain confident that our outlined initiatives will continue to deliver improved performance over time.

Speaker Change: Remaining focused on our core business strategy throughout the holidays will position us for stronger performance over the long term as these external challenges east.

Unknown Executive: With that, we will open the call for questions. Operator. Ladies and gentlemen, we will now begin the question and answer session. to ask a question, you may press star and then one using a telephone keypad. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing. If at any time your question has been addressed and you'd like to withdraw your questions, you may press star and two. again that is star and then one to join the question.

Speaker Change: With that we will open the call for questions.

Speaker Change: Operator.

Ladies and gentlemen, we will now begin the question and answer session.

Speaker Change: To ask a question you May press Star and then one using a telephone keypad.

Speaker Change: If you are using a speakerphone please pick up the handset prior depressing the keys.

Speaker Change: But any time your question, there's been a drop when you'd like to withdraw your questions. You May press star two.

Speaker Change: Again that is star and then wanted to join the question queue at.

Unknown Executive: I will pause momentarily to assemble the roster.

Speaker Change: At this time, we will pause momentarily to assemble the roster.

Jared Poff: Our first question today comes from William Blair. Please go ahead with your questions. Thanks, Jared. Sorry if you mentioned this November trends are just trends generally once the weather kind of cooperated. Did you provide that? What we said is what the midpoint of our guidance implies, and to be perfectly honest, I would say it's indicated or informed by the November trends we're seeing. And kind of through the holiday, what we saw was overall demand slightly below last year, but it was distorted. Stores were actually positive, digital, because we were not chasing excess boot inventory like we were last year, so very different targeted promotions was below last year.

Speaker Change: Our first question today comes from.

Speaker Change: Dylan Carden from William Blair. Please go ahead with your question.

Speaker Change: Thanks.

Speaker Change: Jared sorry, if you mentioned this November trends or just trends generally once the weather kind of cooperated did you provide that.

Speaker Change: Yeah, well, what we said is what were what the midpoint of our guidance implies and to be perfectly honest I would I would say.

Speaker Change: Say it. It's it's indicated are informed by the November trends, we're seeing in on the on kind of through the holiday. What we saw was overall demand slightly below last year, but it was distorted stores were actually positive digital because we were not chasing them.

Speaker Change: <unk> boot inventory like we were last year, so very different targeted promotions was was.

Speaker Change: Below last year, but gross margin dollars and rate, obviously, we're well above last year and we're seeing that trend continue.

Jared Poff: But gross margin dollars and rate, obviously, were well above last year. And we're seeing that trend continue. So our midpoint of the guidance kind of incorporates all of that. Great, thank you.

So our midpoint of the guidance kind of incorporates all of that.

Dylan Carden: And then kind of related to that, are you losing share in Boots? I mean, you know, the industry was also down double digits, you were down, I think you said 27%. And do you care?

Oh, great. Thank you and then kind of related to that or are you losing share in boots. I mean, you know the industry was also down double digits. You were down I think you said, 27% and you care and I guess sort of the implied question and that is you know is just sort of a water bed.

Dylan Carden: And I guess sort of the implied question in that is, you know, it's sort of a waterbed effect to this point where you're kind of seeing gains elsewhere, but losses in other places and kind of keeping you in that disadvantaged position until you get the assortment in a better sort of mixed Yeah, this is Doug Dylan. Thanks for your question. You know, we consciously planned the category down, as we mentioned, 15%. It was almost double that decrease. I mean, we're going to be very strategic about continuing to kind of de-weatherize the business, obviously. So, you know, we're still working through the level of what that would look like.

Speaker Change: In fact at this point, where you kind of seen gains elsewhere, but losses in other places and kind of keeping you. It isn't a disadvantage position until you get the assortment and a better sort of mix.

Doug: Yeah. This is Doug the only thing to your question, we consciously planned the category down as we mentioned, 15% and it was almost double that decrease I mean, we're going to be very strategic about continuing to kind of be weatherize. The business. Obviously so we're.

Doug: We're still working through the level of what that would look like.

Douglas Howe: Fourth quarter is actually even a higher percent of our business in the boot category, obviously, than Q3. And, you know, we have seen a bit of a rebound with the weather as we move through the quarter. And then, as Jared said, we've been particularly pleased with how we've seen that show up in our stores. I think the assortment work that the teams are doing, I would give credit to that, as well as the marketing and messaging. We really showed up for holiday with messaging in our stores. So that's been favorable as well. But again, we're going to continue to be conservative on the seasonal categories, as we've stated.

Doug: Fourth quarter is actually even a higher percent of our business in the boot category. Obviously, then Q3 and we haven't seen a bit of a rebound with the weather as we moved through the quarter and then as Eric said, we've been particularly pleased with how we've seen that show up in our stores I.

Doug: I think the assortment work that the teams are doing I'll give credit to that as well as the marketing and messaging, we really showed up for holiday with messaging in our store. So that's.

Doug: That's been favorable as well, but again, we're going to continue to be conservative on the on the seasonal categories as we've stated.

Dylan Carden: And then to that point, you're not you're not leaving money on the table here by sort of over correcting for boots as the weather has turned, I guess would be one thought. No, we don't believe so at all. I mean, we still saw a slight decrease in traffic, right? So, that's why we're excited about, you know, the marketing that we'll be leaning into in a more aggressive way for next year with regards to just driving that traffic, but not leaving business on the table at all. Awesome, thank you.

Doug: Okay.

Speaker Change: And then to that point, you're not you're not leaving money on the table hereby sort of over correcting for boots as the weather has turned I guess would be the one thought.

Speaker Change: No. We don't believe so at all I mean, we still saw a slight decrease in traffic right. So that's why we're excited about the marketing that we'll be leaning into and a more aggressive way for next year with regards to just driving that traffic, but not leaving not leaving business on the on the table at all.

Speaker Change: Awesome. Thank you.

Speaker Change: Thank you.

Mauricio Vega: Again, if you would like to ask a question, please press star and one. Our next question comes from Mauricio Serna from UBS. Please go ahead with your question. Great. Good morning. Thanks for taking my question. I just wanted to hear, because sorry if I missed it. Did you talk about what was your performance in across your, you know, top eight national brands? What are you seeing there? And also, if you mentioned what was your quarter to date trend? And also, and on the other hand, on the balance sheet, you know, saw, you know, in cash flow, you saw like, you mentioned you did your biggest share repurchase of the year.

Speaker Change: Once again, if you would like to ask a question. Please press star and one.

Speaker Change: Our next question comes from Mauricio Serna from UBS. Please go ahead with your question.

Mauricio Serna: Great. Good morning, Thanks for taking my question just wanted to hear because im sorry, if I missed it.

Mauricio Serna: Did you talk about what was your performance in across your top eight national brands. What are you seeing there.

Uh huh.

Mauricio Serna: And Oh, sorry, if you mentioned what was your quarter to date trends and also and then on the other hand on the balance sheet. You know saw and casually you sounded like you mentioned you did your biggest share repurchase for the year. How are you thinking about debt levels management, considering that you know I guess like the business has been.

Douglas Howe: How are you thinking about, you know, debt levels management, considering that, you know, I guess, like, the business has been a little bit more challenged than expected? Hi, Mauricio. This is Doug. Thanks for your question. I'll take the first two on the brand performance and then quarter to date, and then I'll turn it over to Jared for the debt. Yeah, we did share the performance of the top eight brands. They were up 27% in Q3. It was roughly about 40% of the total. Really proud of the work the team's done on really going out to the relationships with those top brands.

Mauricio Serna: A little bit more challenge than expected.

Mauricio Serna: Hi, Marie says this is Dave. Thanks for your question I'll take the first two on the brand performance in the quarter to date, and then I'll turn it over to Jared for the debt. Yeah. We did share the performance of the top eight brands they were up 27% in Q3 it.

Mauricio Serna: It's roughly about 40% of the total really proud of the work. The team has done on really going out the relationships with those top brands being mindful also that you know, we're not becoming overly relying on any of them think about you know 40% penetration on eight brands. None of them are you know close to 10% of the business. So we think that's a very thoughtful approach.

Douglas Howe: Being mindful also that, you know, we're not becoming overly reliant on any of them. Think about, you know, 40% penetration on eight brands. None of them are, you know, close to 10% of the business. So we think that's a very thoughtful approach. Quarter to date, as Jared said a couple moments ago, is in line with the guidance that we're providing. Again, we saw a little bit of softness in Black Friday and Cyber Monday, but we're seeing an expansion in margin dollars, and that's continuing as we move through December as well, largely due to the fact that we're not as promotional as we were last year because we're in a much better position on inventory.

Mauricio Serna: Quarter to date is Jared as Jared said, a couple of moments ago is in line with with the guidance that we're providing them again, we saw a little bit of softness in black Friday, cyber Monday, but we're seeing an expansion in margin dollars and that's continuing as we move through December as well largely due to the fact that.

We're not as promotional as we were last year, because we're in a much better position on inventory.

Jared Poff: And on kind of debt level management, you know, what we always look at is more of a liquidity management. We've got two big working capital cycles a year. We're actually on the cash generation side of one of those cycles happening right now. Very, very typical and cyclical. We are comfortable with our overall debt levels and more importantly comfortable with our liquidity levels. You know, I would say obviously we want to remain cautious as we just look at the consumer environment out in the future. So, you know, we feel like we've got our capital structure in the right place right now, but always have an eye on that and certainly also an eye on to the interest load that it brings.

Mauricio Serna: And then on the kind of debt level management, you know what what we always look at is more of a liquidity management. We've got two big working capital cycles, a year, we're actually on the cash generation side of one of those cycles happening right now I'm very very typical and cyclical.

Mauricio Serna: We are comfortable with with our overall debt levels and more importantly comfortable with our liquidity levels.

Mauricio Serna: I would say, obviously, we want to remain cautious as we just look at the consumer environment out in the future. So.

Mauricio Serna: We feel like we've got our capital structure in the right place right now, but always have an eye on that and certainly also an eye onto the interest load that that it brings.

Douglas Howe: Can you provide any details on what you've seen with Nike? Yeah, this is Doug. I mean, we continue to be very pleased with the Nike performance. They couldn't be better partners. Really encouraged. I mean, still a net new positive for us. We have now left when they came back to DSW specifically, but again, couldn't be more pleased with the business and the relationship. They've been great partners. Thank you very much.

Speaker Change: Got it very helpful. And then just could you provide any details on what you've seen with Nike I remember like you. We're very excited about a new world just having more product available from that brand. This year and then even when you know when you had the Brian you know a few years before.

Doug: Yeah. This is Doug I mean, we continue to be very pleased with the Nike performance, they couldnt be better partners.

Doug: I'm really encouraged I mean still a net new positive for US we have now lapped.

Doug: Then they came back to DSW, specifically, but again couldn't be more pleased with the business and the relationships they've been great partners.

Speaker Change: Alright, Thank you very much.

Speaker Change: Thank you.

Speaker Change: Yeah.

Speaker Change: Okay.

Douglas Howe: And ladies and gentlemen, at this time, in showing no additional questions, I'd like to turn the floor back over to Doug Howe for closing. I'd like to thank everyone for joining us today, and we look forward to updating you as we continue to make progress on our strategic priorities going forward. Thanks again for joining us.

And ladies and gentlemen at this time in showing no additional questions I'd like to turn the floor back over to you.

Speaker Change: Doug how for closing remarks.

Doug: I'd like to thank everyone for joining us today, and we look forward to updating you as we continue to make progress on our strategic priorities going forward. Thanks again for joining us.

Speaker Change: Okay.

Unknown Executive: Ladies and gentlemen, that does conclude today's conference call and presentation. We do thank you for joining.

Ladies and gentlemen that does conclude today's conference call and presentation. We do thank you for joining you may now disconnect your lines.

Unknown Executive: You may now disconnect.

Speaker Change: [music].