Designer Brands Inc. — Second Quarter 2026 Earnings Summary

Financial Performance

• Net sales decreased 1.2% year-over-year to $730.6 million for the quarter ended August 1, 2026.
• Total comparable sales decreased 2.4% year-over-year.
• Reported gross profit increased to $365.4 million from $322.5 million, with gross margin expanding to 50.0% from 43.6%.
• Adjusted gross profit was $350.0 million, with an adjusted gross margin of 47.9% compared to 43.6% in the prior year period.
• Reported net income attributable to Designer Brands Inc. was $17.6 million ($0.31 diluted EPS), compared to $10.5 million ($0.21 diluted EPS) in the prior year.
• Adjusted net income was $19.2 million ($0.34 adjusted diluted EPS), compared to $16.4 million ($0.33 adjusted diluted EPS) in the prior year.
• Consolidated operating profit increased to $54.7 million from $26.1 million, with operating margin expanding to 7.5% from 3.5%.
• Cash and cash equivalents totaled $51.6 million at quarter-end, up from $44.9 million in the prior year.
• Total debt decreased by $93.0 million to $423.1 million from $516.3 million in the prior year.
• Inventories decreased to $594.7 million from $610.9 million in the prior year.

Guidance and Future Outlook

• The Company raised full-year 2026 guidance following strong operating performance and a positive start to the third quarter.
• Revised net sales guidance changed from "Down 1% to Up 1%" to "Flat to Up 1%".
• Revised adjusted diluted EPS guidance increased from "$0.28 - $0.38" to "$0.47 - $0.52".

Business Segments and Product Lines

• Retail segment net sales decreased 2.2% to $671.1 million, with comparable sales down 2.6%.
• Brand Portfolio segment net sales increased 17.9% to $86.3 million, with direct-to-consumer comparable sales up 7.1%.
• Retail segment gross margin was 44.9% (up 120 basis points), while Brand Portfolio gross margin was 29.8% (up 510 basis points).
• Retail segment operating profit was $62.0 million (9.2% margin), down from $68.7 million (10.0% margin) in the prior year.
• Brand Portfolio segment operating profit was $1.0 million (1.1% margin), compared to a loss of $4.0 million (-5.5% margin) in the prior year.
• During the six months ended August 1, 2026, the Company opened 7 new stores, closed 4 stores, and remodeled 3 stores.

Market and Competitive Landscape

• The Company holds leading market share positions in key product categories across women's, men's, and kids' footwear.
• The Company operates over 660 DSW Designer Shoe Warehouse, The Shoe Co., and Rubino stores in North America.
• The Company distributes brands internationally through select wholesale and distributor relationships.

Risks and Challenges

• Forward-looking statements cite risks including uncertain economic conditions, supply chain disruptions, geopolitical instability, and new or increased tariffs.
• Risks include fluctuating interest rates, inflationary pressures, and impacts to consumer discretionary spending.
• Challenges include the ability to anticipate changing consumer preferences, seasonality, and fashion trends.
• Potential risks involve unseasonable weather, climate change evolution, and increased frequency of weather events.
• Risks related to IT systems, cyber security threats, and data security breaches are noted.
• Risks associated with restrictions imposed by credit facilities and reliance on third-party payment processors are identified.

Management Commentary and Tone

• CEO Doug Howe stated results represent "significant improvement in profitability year-over-year" highlighted by "meaningful gross margin expansion" and "impressive sales growth" in the Brand Portfolio segment.
• Management expressed confidence in raising full-year guidance due to "improved retail trends and a positive start to the third quarter."
• The Company remains focused on generating long-term value for shareholders and making progress against its strategic plan.

Other Key Points

• A dividend of $0.05 per share for both Class A and Class B common shares will be paid on October 7, 2026, to shareholders of record as of September 24, 2026.
• The Company has $146.2 million available for borrowings under its senior secured asset-based revolving credit facility.
• The Company recorded $35.5 million in recoveries related to IEEPA tariff costs incurred during the quarter, which were recorded to cost of sales.
• The Company has donated more than thirteen million pairs of shoes to the non-profit Soles4Souls since 2018.
• The Company hosts a conference call and webcast for investors and analysts.