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DSW’s Parent Closes All 666 North American Stores

The parent company behind Designer Shoe Warehouse (DSW) recorded comparable sales growth and an earnings beat in FY19 but remained mum on guidance for FY20 due to the “unprecedented” impact of the coronavirus epidemic.

In a Nutshell: On Tuesday, Designer Brands Inc. temporarily shut down its North American retail operations, closing 666 stores across the U.S. and Canada to help reduce the spread of COVID-19, Designer Brands CEO Roger Rawlins said.

The company’s e-commerce channels will remain operational and its warehouses will work to fulfill online orders under the company’s “emergency preparedness plan.”

“In addition to forcing social distancing by these actions, it will also provide us time to conduct further deep cleaning and sanitization services across our entire store fleet, distribution center, and fulfillment center,” Rawlins said in Designer Brands’ FY19 conference call. “Because this situation is incredibly complex and evolving rapidly, our plans may change.”

March and April are the busiest months of the year for Designer Brands and it anticipates “substantially impacted” operations from the lack of digital traffic on top of the temporary store closruees.

Omnichannel investments made over the past seven years might now pay dividends, Rawlins said.

“While we are shutting the stores down to the consumer walking in day in and day out shopping, we are going to keep them up and operating as fulfillment centers,” Rawlins said. “So, leveraging them as a huge asset, because we are within 20 minutes to 7 percent of the U.S. population. That’s a huge advantage for us.”

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Designer Brands also confirmed its commitment to the launch of its exclusive footwear partnership with Jennifer Lopez this the spring.

Sales: After integrating a new POS system after the holidays, preventing customers from stacking discounts, Designer Brands recorded a lower markdown rate on consolidated net sales of $829.62 million in the fourth quarter. The result was lower than the $839.97 million Wall Street consensus, although net sales including DSW were up 3.5 percent over the prior year.

In FY19, net sales rose 11.2 percent to $3.5 billion with a comparable sales increase of 0.8 percent, in line with the average Wall Street estimate of $3.51 billion.

Earnings: The fourth quarter saw an adjusted diluted loss per share of 5 cents at Designer Brands Inc., a slight improvement on the 6-cent loss estimated by Wall Street analysts.

Full-year adjusted diluted earnings per share (EPS) of $1.53 was also marginally better than the Wall Street consensus of $1.52, a product of $114.3 million in net income for the company.

CEOs Take: Rawlins pointed to strong inventory management that should help to lessen unavoidable headwinds.

“I have a really, really, really good planning merchant organization and we are going to be very diligent in managing the inventories,” Rawlins said. “But I do think the tools we have put in place to help us mitigate a situation like this—it won’t offset all of the impact—but it will allow us to perhaps alleviate some of the marked down pressure we would have felt had we did not have that capability.”