Designer Brands Inc. (NYSE: DBI) reported Q2 EPS of ($1.28), $0.43 worse than the analyst estimate of ($0.85). Revenue for the quarter came in at $489.7 million versus the consensus estimate of $596.46 million.

Second Quarter Operating Results

• Net sales decreased 42.8% to $489.7 million.
• Comparable sales decreased 42.7% for the second quarter of fiscal 2020 compared to a 0.6% decrease in the second quarter of fiscal 2019.
• Reported gross margin as a percentage of net sales was 7.6%, or 8.2% on an adjusted basis, as compared to 30.5% on both a reported and adjusted basis for the same period last year. The decrease in gross profit was primarily driven by the impacts of the COVID-19 outbreak on our operations resulting in the temporary closure of stores and, subsequently, significantly reduced customer traffic upon store re-openings, which we addressed with aggressive promotional activity. The impact of COVID-19 and the actions we took resulted in higher inventory reserves, increased shipping costs in the current quarter associated with higher digital penetration, and the deleveraging of distribution and fulfillment and store occupancy expenses on lower sales volume.
• Reported net loss was $98.2 million, or $1.36 loss per diluted share, including net charges of $0.08 per diluted share from adjusted items.
• Adjusted net loss was $92.0 million, or $1.28 loss per diluted share.

Roger Rawlins, Chief Executive Officer, stated, "Although the COVID-19 pandemic continues to impact consumer behavior and our business, I am confident in Designer Brands' playbook to navigate this ever-changing environment. We believe our recent actions to right size our expense structure and obtain additional liquidity, our strategic digital investments, flexible business model, and strong vendor partnerships as well as our status as one of the largest footwear retailers have firmly positioned Designer Brands to weather the road ahead."

Mr. Rawlins continued, "Given that we have further strengthened our balance sheet, we are well prepared to focus on growing our business' profitability. In order to serve our customers in the near-term, we are flexing fall inventory receipts away from seasonal and dress products and towards our highest performing category, athleisure, with an emphasis on comfortable and cozy products. We have the unique ability to pivot inventory quickly and follow the customer as needs and preferences change in the future. We are confident that we know what the customer wants, and we know how to deliver it to them, be it digitally or in-person and socially distanced, and we will be prepared in any situation."

2020 Guidance

As previously announced on March 17, 2020, the Company is not issuing guidance for fiscal 2020 given continued uncertainty surrounding the impacts of COVID-19. The Company is not providing an update at this time.

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