Q3 2025 Earnings Summary
- Strong performance and partnership with Nike: DBI continues to be very pleased with the performance of Nike products at DSW, considering it a net new positive. The company notes that Nike has been a great partner and the relationship is contributing positively to their business.
- Strategic shift to profitable categories: The company is strategically reducing reliance on underperforming seasonal categories like boots, which were down nearly 27% due to unseasonably warm weather. Instead, they are focusing on growing categories like athletic and athleisure. They are being very strategic about 'de-weatherizing' the business to improve overall performance.
- Positive customer response to marketing and assortment efforts: Despite a slight decrease in traffic, DBI is excited about aggressive marketing efforts planned for next year to drive traffic and sales. They've observed favorable customer responses to their assortment work, marketing, and in-store messaging, particularly during the holiday season, which bodes well for future growth.
- Significant Decline in Boot Sales Beyond Expectations: The company planned for boot sales to be down approximately 15%, but the actual decline was 27% in Q3, indicating weaker-than-expected demand in this key category. This suggests potential loss of market share in boots and challenges in adjusting inventory to meet consumer preferences.
- Decreased Traffic and Softness During Key Shopping Periods: The company experienced a slight decrease in traffic and noted softness in Black Friday and Cyber Monday sales, which may signal ongoing consumer pullback and difficulties in driving store traffic during critical sales periods. This could impact overall revenues and suggests that marketing efforts may not be fully effective.
- Reliance on Top Brands Amid Uncertain Consumer Environment: While the top 8 brands accounted for 40% of total sales and were up 27% in Q3, over-reliance on a few brands could pose a risk if sales from these brands decline. Additionally, the company acknowledges the need to remain cautious due to the uncertain consumer environment, which may impact future performance and raises concerns about liquidity and debt management.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Net Sales Growth | FY 2024 | flat to up slightly | down low single digits | lowered |
External Wholesale Sales in Brand Portfolio | FY 2024 | no prior guidance | down low single digits | no prior guidance |
Annual Diluted EPS | FY 2024 | $0.50 to $0.60 | $0.10 to $0.30 | lowered |
Weighted Average Diluted Shares | FY 2024 | ~58.3 million | ~55.4 million | lowered |
Capital Expenditures | FY 2024 | $65 million to $75 million | $60 million to $65 million | lowered |
Effective Tax Rate | FY 2024 | 30% | 32% | raised |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Shift from Declining Boot Sales to Athletic & Athleisure Growth | Q4 2024: noted shift away from boots with seasonal softness ( ); Q1 2025: highlighted strong athletic and casual gains with boot declines ( ); Q2 2025: planned reduction in boot reliance with double-digit drops and robust athletic growth ( ) | Q3 2025: emphasized boot sales down 27% (worse than planned) due to weather and consumer discretionary pullback while athletic/athleisure sales posted solid year-over-year gains ( ) | Sharper focus on accelerating the pivot toward athletic & athleisure categories while the boot category’s decline is more pronounced. The strategic shift remains consistent but Q3 2025 shows even stronger negative performance in boot sales coupled with bullish athletic growth. |
Brand Partnerships and Portfolio Management | Q4 2024: strong emphasis on rebuilding partnerships (e.g., Nike, Skechers) and portfolio integration ( ); Q1 2025: highlighted top national brands and new leadership initiatives ( ); Q2 2025: investments in growing brands like Topo Athletic and Jessica Simpson ( ) | Q3 2025: reiterated success with the top 8 brands and praised the Nike partnership as a net positive while managing seasonal adjustments within the portfolio ( ) | Consistent positive sentiment on partnerships and portfolio optimization. Focus remains on balanced brand reliance and strategic de-emphasis on underperforming seasonal segments. |
Marketing, Assortment, and Customer Engagement Strategies | Q4 2024: investments in targeted marketing and loyalty programs with store updates ( ); Q1 2025: new CMO appointment and integrated campaigns to re-engage customers ( ); Q2 2025: enhanced influencer programs and omnichannel retail improvements ( ) | Q3 2025: showcased a strong back-to-school campaign, amplified assortment via omnichannel efforts and social media success (e.g. 26.1 billion media impressions, 15 million content views) ( ) | Increased emphasis on integrated omnichannel marketing and digital engagement. The approach now features higher visibility and amplified messaging, reinforcing customer engagement and a streamlined assortment. |
Digital Sales Growth and Omnichannel Performance | Q4 2024: described a robust omnichannel ecosystem with high in-store digital demand fulfillment ( ); Q1 2025: reported mid-single-digit digital growth and enhanced conversion rates ( ); Q2 2025: noted consistent digital upward trends and improved store aesthetics supporting digital performance ( ) | Q3 2025: confirmed continued strength in digital channels with significant social media engagement and DTC site performance (triple-digit comps at topo.com, despite some offset at vc.com) ( ) | Sustained digital growth with strong omnichannel integration. The company continues to leverage both online and physical channels effectively though with some mixed performance across DTC sites. |
Cost Management, Margin Pressure, and SG&A Expense Challenges | Q4 2024: focus on cost savings and streamlined operations amid promotional pressures affecting margins ( ); Q1 2025: reorganization efforts yielded cost cuts and slight margin expansion ( ); Q2 2025: ongoing initiatives to optimize costs and manage SG&A fixed expenses ( ) | Q3 2025: highlighted an expense efficiency initiative and noted improved SG&A performance (220 basis point improvement) even as gross margin declined due to a product mix shift ( ) | Ongoing efforts to reduce costs remain in focus. Despite some margin pressure due to a higher share of national brands and strategic seasonal pullbacks, improvements in SG&A and expense management are gradually materializing. |
Macroeconomic and Consumer Uncertainty Impact | Q4 2024: cited challenging macro backdrop, seasonal weather and volatile consumer spending ( ); Q1 2025: acknowledged economic uncertainty affecting discretionary retail in both U.S. and Canada ( ); Q2 2025: noted muted recovery amid consumer pressure leading to revised guidance ( ) | Q3 2025: reiterated that sustained macro uncertainty and weaker consumer discretionary spending (notably in boot sales) are impacting performance ( ) | Cautious sentiment persists. Continuous headwinds from macroeconomic uncertainty and subdued consumer spending remain an ongoing concern, particularly affecting highly seasonal categories. |
Strategic Acquisitions and Geographic Expansion | Q4 2024: discussed acquisitions like Keds, Topo Athletic and Hush Puppies driving growth; Q1 2025: detailed the Rubino acquisition in Canada and plans to expand Shoe Company stores ( ); Q2 2025: reiterated the Rubino acquisition and Canada expansion initiatives ( ) | Q3 2025: No mention of any acquisitions or geographic expansion in the current commentary | No current commentary indicates a pause or focus on integration. Previously active strategic acquisitions and geographic expansion are not mentioned in Q3 2025, suggesting they may be in a post-acquisition integration phase or deprioritized for the quarter. |
Inventory Management and Forecasting Challenges | Q4 2024: emphasized aggressive inventory right-sizing, proactive promotions, and forecasting challenges amid weather variability ( ); Q1 2025: noted flexibility in inventory with opportunistic buying despite seasonal softness ( ); Q2 2025: managed inventory adjustments amid early athletic receipts and forecast revisions ( ) | Q3 2025: discussed elevated inventories (up 6% year-over-year) due to low seasonal demand and strategic pullback on Q4 seasonal receipts to achieve healthier inventory levels ( ) | Maintained focus on optimizing inventory amid external challenges. The company is actively de-weatherizing its product mix and rebalancing category inventory, signaling cautious but adaptive inventory management practices. |
Calendar Effects on Sales (Loss of 53rd Week) | Q4 2024: highlighted the loss of the 53rd week as a headwind causing year-over-year sales volatility and a $42.5 million sales contribution missing; Q1 2025: discussed calendar shifts causing a 2.5% decline in comparable sales; Q2 2025: quantified the lost week’s impact at over $40 million in sales ( ) | Q3 2025: incorporated the loss of the 53rd week as a factor in Q4 guidance revisions, expecting net sales growth in the low single digits ( ) | Consistent headwind noted across periods. The loss of the additional sales week remains a recurring, predictable drag on sales year-over-year, driving cautious guidance, especially for Q4. |
Leadership and Organizational Changes | Q4 2024: detailed new appointments (Laura Denk, Andrea O'Donnell) and restructuring efforts to streamline operations; Q1 2025: focused on leadership transitions such as hiring a new CMO and cost reduction measures; Q2 2025: mentioned reorganization measures and leadership adjustments ( ) | Q3 2025: Not mentioned in the current discussion | No new updates in Q3 2025. Earlier leadership and restructuring initiatives appear to be stabilized with no further commentary this period, suggesting that the organizational changes are now part of the operational backdrop. |
Debt and Interest Expense Challenges | Q4 2024: reported higher interest expense due to term loans and increased ABL borrowings, with total debt around $434.2 million and managed liquidity ( ); Q1 2025: noted increased net interest expense and detailed liquidity metrics along with a CARES Act refund ( ); Q2 2025: saw elevated interest due to higher rates and term loans with debt at $465.8 million ( ) | Q3 2025: reported net interest expense rising to $11.6 million with total debt at $536.3 million and maintained focus on liquidity management along with an ongoing share repurchase program ( ) | Steady concern over rising interest expenses persists. Debt levels continue to increase, and interest expenses remain a challenge, though proactive liquidity management and share repurchases help mitigate perceptions of financial risk. |
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Top 8 Brands Performance
Q: How did your top 8 national brands perform, and what are you seeing there?
A: The top 8 brands were up 27% in Q3, making up roughly 40% of total sales. We're proud of strengthening relationships with these brands while avoiding over-reliance, as none account for close to 10% of our business. -
Quarter-to-Date Trend and Margins
Q: What is your quarter-to-date trend, especially considering recent periods?
A: Quarter-to-date performance aligns with our guidance. We saw some softness during Black Friday and Cyber Monday but are experiencing an expansion in margin dollars into December, largely because we're less promotional due to better inventory positions. -
Debt Level Management
Q: How are you thinking about debt levels management given business challenges?
A: We're comfortable with our overall debt levels and liquidity. We remain cautious about the consumer environment but feel our capital structure is in the right place, always keeping an eye on the interest load it brings. -
Nike Partnership
Q: Could you provide details on what you've seen with Nike?
A: We're very pleased with Nike's performance; they've been great partners. It's still a net new positive for us, and we've now lapped their return to DSW. We're encouraged by both the business and the relationship. -
Boots Category Performance
Q: Are you losing share in boots, and does it concern you?
A: We consciously planned the boots category down 15%, but the decrease was almost double that. We're strategically de-weatherizing the business. Q4 has a higher percentage in boots, and we've seen a rebound as the weather improves. We'll continue to be conservative on seasonal categories. -
Not Leaving Money on the Table
Q: Are you overcorrecting for boots as the weather has turned?
A: No, we don't believe so. Despite a slight decrease in traffic, we're excited about leaning into aggressive marketing next year to drive traffic. We're not leaving business on the table.