Does Athleisure Push from Designer Brands work? Analysts speak out – Footwear News

Amid the COVID-19 health crisis, consumers confined indoors have cut spending on dress, formal and special occasion shoes and have turned to active, comfort-oriented styles for everyday wear. In response, Designer Brands Inc. has pivoted its mix of merchandise to sneakers, sandals, slides, and more.

But now, as the economy continues to reopen with a rapid vaccine rollout and federal fiscal stimulus, investors might wonder: Was the company’s push into the lucrative track and field market too small? , too late?

Analysts said the latest quarterly results from Designer Brands suggest a step in the right direction for the retailer, which is seeing a return to profitability for the first time since the start of the pandemic.

“Some investors have expressed concern that Designer Brands has shifted the product mix too aggressively in favor of athletics, just as the consumer turns to more clothing and seasonal items,” the director wrote. General of CL King & Associates, Steven Marotta, in a statement. Remark. “We’re not too alarmed by this, as just catching up with representative industry stocks doesn’t ultimately indicate over-indexing.”

According to the investment research firm, consumers spent more than 75% of their shoe purchases on athleisure styles in the first quarter of 2021, up from around 55% in 2019. Comparatively, in the most recent three-month period , the merchandise mix in DSW stores was 55% athleisure, while in the same period two years ago it was 30%.

“It’s true, some sales were undoubtedly left on the table when the seismic shift of consumers towards athletics during the pandemic increased the top market share, but once that gets back to the median, the mix of DBI will be more representative of market share categories, ”added Marotta, who recommended a“ buy ”and raised the channel’s price target to $ 24 from $ 22. “In the meantime, the company is in a privileged position to simultaneously benefit from the expected growth of dress shoes and a strong season for children and the back to school.”

William Blair analyst Dylan Carden was also bullish on Designer Brands’ rebound. In a distribution rating, it gave parent company DSW a “market performance” rating, noting that its shares have grown 150% in the year to date.

“We expect gradual improvement throughout 2021 as demand returns for clothing styles and occasions, with the company reaching comparable 2019 revenue and margin by next year.” , Carden said. “Over the longer term, we believe the company has potential for gains from integrating Camuto as the company targets exclusive brand penetration of around 30%, compared to around 10% currently. “

For the three months ended May 1, Designer Brands reported adjusted earnings of $ 9.5 million, or adjusted earnings of $ 12 per share, compared to adjusted loss of $ 130.3 million the previous year, or an adjusted loss of $ 1.81 per share. Wall Street had predicted a loss of 18 cents per share. Likewise, revenue rose 45.6% to $ 703.2 million, far exceeding market watchers’ estimates of $ 651 million.

During the company’s conference call with analysts, CEO Roger Rawlins said the company plans to focus more on its own brands, such as Kelly & Katie and Mix No. 6, as well as those in which it holds a stake. like JLo, Vince Camuto, Lucky and Jessica Simpson.

“Having the ability to design and purchase the majority of this product through Camuto and have full control of the supply chain allows us to move these brands more quickly through our DSW channel when demand increases,” a- he said, adding that 15 of the chain’s top 25 items sold in the first quarter were items designed and purchased vertically by Designer Brands. “With a top-notch assortment, we are a footwear powerhouse with the ability to introduce new brands to the market and create long-term growth for us and for the brand. “

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