What Happened?
Shares of footwear and accessories discount retailer Designer Brands (NYSE: DBI) jumped 13.8% in the morning session after the company reported improved fourth-quarter 22024 results: Same-Store Sales grew modestly (vs -7.3% in the same quarter last year), and gross margin blew past expectations. This marked the first positive growth in nine quarters, signaling early traction in the company's turnaround efforts.
Despite this, total revenue fell by 5.4% year on year, reflecting continued softness in demand. Looking ahead, management guided for low-single-digit revenue growth in 2025, which was encouraging. However, full year EPS guidance fell significantly short of expectations. Overall, the quarter showed early signs of a recovery, but weak earnings guidance remained a concern.
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What The Market Is Telling Us
Designer Brands’s shares are extremely volatile and have had 47 moves greater than 5% over the last year. But moves this big are rare even for Designer Brands and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 6 months ago when the stock dropped 27.7% on the news that the company reported second-quarter earnings results. Same-store sales missed, leading to a revenue and EPS miss. In addition, its full-year same-store sales and earnings forecasts were lowered and missed analysts' expectations.
Management struck a cautious tone, saying, "We saw sustained pressure on challenged categories such as dress and seasonal in the second quarter...". Overall, this quarter could have been better.
Designer Brands is down 24.7% since the beginning of the year, and at $3.99 per share, it is trading 65.4% below its 52-week high of $11.52 from March 2024. Investors who bought $1,000 worth of Designer Brands’s shares 5 years ago would now be looking at an investment worth $720.14.
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