Designer Brands Inc. (DBI)·Q1 2026 Earnings Summary

Executive Summary

• Q1 2026 disappointed: revenue declined 8% to $686.9M with comps -7.8%, gross margin compressed 120 bps to 43.0%, and adjusted diluted EPS was -$0.26; management withdrew FY2025 guidance citing volatile macro and tariff uncertainty .
• Results missed S&P Global consensus: revenue $686.9M vs $732.8M*, EPS -$0.26 vs -$0.06*; miss driven by weak traffic, heavier markdowns, and February weather; sequentially, margin rate improved vs Q4 but volume fell further* .
• Cost actions accelerated (SG&A down $20M YoY; full‑year savings $20–$30M), and CapEx was cut to ~$40M (from $45–$55M prior), partially offsetting top-line pressure .
• Strategic positives: Topo +84% YoY and brand portfolio operating income up >30% despite sales down 7.9%; DSW gained athleisure share and conversion rose 60 bps; sourcing diversification targets <50% China by YE25 .

What Went Well and What Went Wrong

• What Went Well

  • Brand portfolio resilience: operating income grew >30% on a 7.9% sales decline; Topo +84% YoY with 1,200 distribution points (+43% vs 1Q24) .
  • Retail execution KPIs: store conversion +60 bps YoY; DSW gained 10 bps athleisure share in Q1 per Circana .
  • Expense discipline: adjusted operating expenses -$20M YoY in Q1; total 2025 savings targeted at $20–$30M .

• What Went Wrong

  • Demand and traffic: consolidated comps -7.8% (U.S. retail -7.3%, Canada -9.2%); February was the weakest month, with weather compounding macro softness .
  • Margin pressure: gross margin fell 120 bps to 43.0% on higher markdowns to clear inventory amid weak traffic .
  • Guidance withdrawn: management rescinded FY2025 outlook given macro/tariff volatility; prior guide was sales up low-single digits and EPS $0.30–$0.50 .

Financial Results

Overall financials (oldest → newest):

Q1 2026 vs S&P Global consensus:

Values marked with * retrieved from S&P Global.

Segment performance (Q1 2026):

Comparable sales (Q1 2026):

Balance sheet & liquidity (Q1 2026):

Operational KPIs & brand highlights (Q1 2026):

Notes: Adjusted loss excludes restructuring and integration costs and impairment charges; see reconciliation .

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “We experienced a softer start to the year, with first-quarter comparable sales declining 8%, directly reflecting continuing weakening in consumer sentiment … February was the weakest month of the quarter” — CEO Doug Howe .
• “We… implemented expense cuts, which helped to deliver a 6% reduction in our operating expenses for the quarter… expected to deliver between $20 million–$30 million in savings over the course of 2025” — CEO/CFO .
• “We have made the decision to withdraw our guidance for the time being” — CEO Doug Howe .
• “Tariffs… have emerged as a significantly more substantial cost than anticipated… we currently expect less than half of our sourcing will come from China by the end of the year, down from 70% at the start of the year” — CEO Doug Howe .
• “Consolidated gross margin of 43%… decreased by nearly 120 basis points… primarily driven by increased markdowns… to respond to the weaker traffic” — CFO Jared Poff .
• “Topo… grew 84%… [and] was in over 1,200 points of domestic distribution, an increase of 43% versus [Q1 2024]” — CEO Doug Howe .

Q&A Highlights

• SG&A and savings: Absence of bonus accrual aided Q1 SG&A by ~$10M; FY25 SG&A expected $20–$30M below 2024; bonus dynamic reverses in Q3 given prior-year reversal timing .
• Q2 outlook and tariffs: Q2 trends similar to exit of Q1; tariff pressure mitigated via factory negotiations, resourcing, selective price increases; aim to maintain IMU in retail while partners pass through some pricing .
• Back-to-school/holiday: Cautiously optimistic on BTS and holiday; kids/athletic categories buoyant; BTS less exposed to tariffs due to diversified sourcing .
• Sourcing path: Options exist to diversify well below 50% China; fully controlling sourcing on <20% of products limits direct levers in national brands .

Estimates Context

• Q1 2026 results missed S&P Global consensus: revenue $686.9M vs $732.8M* (miss ~$45.9M, ~6.3%), adjusted EPS -$0.26 vs -$0.06* (miss ~$0.20). Drivers: lower traffic, weak February, higher markdowns to manage inventory, and macro softness; tariffs contributed uncertainty and cost risk .
• With guidance withdrawn, Street models may need to lower 2H assumptions for comps and margin recovery, partially offset by cost saves ($20–$30M) and lower capex ($~40M) .
  Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

• Demand reset: A broad-based traffic slowdown and February weather shock led to an 8% sales decline and negative comps; absent a macro uptick, DBI likely leans on promotions and cost-out to protect P&L near term .
• Guidance withdrawal is the main negative catalyst; uncertainty around tariffs and consumer health reduces visibility vs. March guidance .
• Margin defense levers are credible: inventory actions, lower capex (~$40M), and $20–$30M SG&A cuts should cushion earnings even if comps remain pressured .
• Mix and brand initiatives are working: Topo’s outsized growth and Keds’ ~700 bps GM lift, plus athleisure share gains and higher conversion, support medium-term margin structure once demand normalizes .
• Sourcing diversification (<50% China by YE) reduces tariff exposure over time; pricing power in select brands provides partial offset .
• Trading setup: Into prints, the withdrawal of guidance and consensus misses argue for caution; watch for sequential comp stabilization in Q2 and gross margin cadence vs promotion levels as near-term stock drivers .
• Medium-term thesis: If cost program and brand portfolio scaling persist while retail regains traffic, DBI’s earnings power improves with operating leverage; monitor VIP relaunch (early 2026) and omnichannel execution as catalysts .