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Nike Who? DSW Owner Filling Void Left by Swoosh Split

Designer Brands Inc. is moving on from Nike’s exit by owning its athletic future.

The DSW owner is filling the void left by Nike’s recent departure from their wholesale relationship with the acquisition of Topo Athletic.

Designer Brands president Bill Jordan said the deal, announced Monday, illustrates how the company “continues to control its destiny.”

“Topo represents another exciting growth opportunity for Designer Brands and further propels us to our goal of doubling sales of our owned brands by 2026,” he said, adding that the footwear retail giant “continues to control its destiny with more than 30 million customers in its loyalty programs, more than 700 points of distribution and three online platforms that total more than $1 billion in sales.”

In discussing the prospect of losing Nike, once DSW’s “largest athletic vendor,” last year, DBI CEO Roger Rawlins said DSW planned to grow into categories it hasn’t traditionally carried, such as trailhiking and technical running. With Topo in tow, Designer Brands is positioned to grow its share in a global athletic footwear market size valued at $127.3 billion last year and tapped for a compound annual growth rate (CAGR) of 4.9 percent from 2022 to 2030, according to market intelligence firm Grand View Research.

Jordan said Topo CEO Tony Post has the “visionary leadership” needed to build and scale a meaningful, impactful brand.

“Tony Post’s visionary leadership reminds us why the best athletic shoes must deliver a better experience, so our customers become passionate about our brands,” Jordan said. “Following our most recent year-over-year quarterly sales increase of 25 percent in owned brands and 33 percent within our direct-to-consumer channels, we are confident Topo will continue to strengthen our owned brands portfolio and help extend our reach around the world.”

Like many of its peers, Designer Brands has been growing its athleisure assortment to support customers’ pandemic proclivity for the active, outdoors life. The company’s athletic shoe sales were up 35 percent in 2021’s fourth quarter compared to pre-pandemic levels and 14 percent year over year. Topo’s award-winning shoes, where its women’s styles are priced at $110-$180, could nudge Designer Brands’ owned brand business into the premium athletic category and put it head-to-head with Lululemon and similar higher-end brands. With expertise in running, walking, hiking and overall comfort, Topo has forged a strong reputation and already has national distribution in place.

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Before starting Topo in 2012, Post built his industry credentials with stints as senior vice president of product and marketing at The Rockport Company and CEO of Vibram USA, managing both the U.S. sole business and launching Vibram FiveFingers.

Topo further diversifies Designer Brands’ broader portfolio of owned brands, which includes Vince CamutoJessica Simpson, Crown Vintage, Mix No. 6, Lucky Brand and Kelly & Katie, comprising six of the top 50 fashion brands at Designer Brands and will now also grow in the critical athletic and athleisure space with Topo and the company’s previously announced LeTigre acquisition.

“Topo’s focus on helping people achieve healthy lifestyle goals aligns perfectly with Designer Brands’ mission to inspire self-expression,” Post said. “We found synergy with their management team from our first meeting. They understand our brand mission, they support our strategy and focus around specialty retail and they’re excited about our growing global footprint. Nothing really changes in our strategy, distribution direction or the management team. Designer Brands brings a deep set of resources that will help Topo continue to grow, innovate and deliver a better experience for our customers for years to come.”

Designer Brands saw comparable sales up 3 percent on top of comparable sales of 40.8 percent for the third quarter of 2021, with net sales from its owned brands up over 25 percent year over year, the company reported in its financial results for the three months ended Oct. 29, 2022.

“We continued to make meaningful progress on our long-term brand building strategy while also delivering solid comparable sales across every segment of our business. Sales of owned brands represented 26.5 percent of total net sales in the third quarter of 2022 compared to 21.5 percent for the same period last year,” Rawlins said. “The strategic shifts we have made in our business over the past several years are driving a sustainably higher gross margin rate than 2019 as we have a more targeted focus on customer acquisition, optimizing our assortment, and growing the brands we own and control.”

The Consello Group served as a financial advisor, and Porter Wright Morris & Arthur LLP served as a legal advisor to Designer Brands. Consensus served as a financial advisor, and Goodwin Procter was a legal advisor to Topo.