Designer Brands discusses promoting its own brand at Investor Day

On its Investor Day, Designer Brands, Inc., the parent company of DSW, unveiled an ambitious plan to double sales of its own brands by fiscal year 2026 while planning to invest in national brands to enhance the DSW experience.

During Friday’s event at the New York Stock Exchange, Roger Rawlins, CEO, spoke about the evolution of Designer Brands marked by the October 2018 acquisition of Camuto Group. The acquisition was made in partnership with Authentic Brands Group and resulted in Designer Brands owning or obtaining the shoe licensing rights to Vince Camuto, Lucky, Jennifer Lopez, Jessica Simpson and Louise et Cie.

Rawlins noted that around 20 years ago, the company’s flagship DSW chain was founded with the primary goal of offering an unparalleled assortment of brands.

“We were the first company to create this massive assortment of products that we put on the sales floor,” Rawlins said. “We had this off-the-shelf environment where you didn’t have to bring in an associate to help you put the shoes on. They were all there. We also had value. We had fashion and value. It was kind of the number one piece of everything we did.

A second goal for DSW was rapid expansion, with the chain reaching over 700 locations across North America under the DSW name, as well as a few The Shoe Company locations in Canada. In 2021, Designer also hit a milestone with $1 billion in online sales, up from $35 million in the first year of online operations 15 years ago.

Finally, DSW’s success has long benefited from its retention efforts. Rawlins said: “We started our business with a punch program where when you walked in and bought a shoe, like a pizzeria might still have some. You would go ahead and click on it and then after so many times you would win free bucks or shoes. It is an integral part of our operation. This is how we breathe every day as a retail business. Loyalty was rooted in us.

Rawlins said these things helped DSW grow into a $3 billion company over 25 years. However, Designer Brands’ management team recognized in 2016 that the company needed to evolve as mobile phones and other technologies changed consumer behavior.

“We went to our board and said what we’ve spent 20 years doing isn’t going to get us to ‘Next,'” Rawlins said. “We need to evolve our business model primarily for one reason: the consumer is changing.”

He noted that from 2011 to 2017, five companies or groups of companies increased their market share in the footwear space.

First, DSW increased its market share by 20 basis points, with off-price having opened around 300 stores during this period. Second, a group of athletic-inspired retailers defined by Foot Locker, Champs Sports and Dick’s Sporting Goods, Shoe Carnival and Famous Footwear increased market share by 70 basis points, reflecting stronger demand for Athletics. Third, Nordstrom gained 150 basis points during the period as Nordstrom Rack’s expansion accelerated. Fourth, Amazon rose 590 basis points as the platform cemented its position as the top e-commerce player.

However, the strongest growth was in direct-to-consumer (DTC) footwear brands with collective gains of 1,170 basis points from 2011 to 2017. Says Rawlins, “It’s our partners who are going to do it. As we invest a billion dollars in opening stores, they go DTC. Think what the Swoosh (Nike) did. They opened stores. They opened a website. They told people, “We love you,” but then they turned around and sold DTC. Today, around 20%, or one in five pairs of shoes, are purchased directly from a brand. »

Designer Brands decided they needed a stronger DTC approach.

The company explored the acquisition of Nine West Group, acquired by Authentic Brands Group, and eventually acquired Camuto Group, distinguished by its Vince Camuto, Jessica Simpson and Lucky shoe brands. Rawlings said: “That’s who we had to go for. Why? Because we had this foundation that we had invested in for 25 years, this infrastructure called DSW, on which we can overlay Camuto to become DTC. Why go DTC? Because everyone is. We had to change our model significantly. That’s why we acquired Camuto.

He added that Designer Brands’ results in the second half of 2021 and early spring of this year demonstrated the benefits of brand ownership. Says Rawlins, “We are brand builders. We own and control brands that we can take DTC. We also have the top 40 or 50 brands in the world that we’re able to offer consumers, and we’ve built differentiated experiences to make sure they don’t want to take their ball and go play with somebody else. ‘other.

Going forward, Designer Brands’ primary growth goal is to double sales of the eight brands it owns and controls to reach one-third of Designer Brands sales by 2026, with most of this activity taking place within of its own DTC channels. Own brands currently account for 19% of the company’s total turnover. Private label growth should be highly accretive to margins and lead to higher operating margin in the longer term.

At the same time, Designer Brands plans to maintain its sales in national brands.

“If we can grow them more aggressively, that’s fantastic,” Rawlins said of the national brands. “But we just want to make sure we maintain those relationships, and we think the infrastructure we’ve built layered on top of those big national brands is a differentiator.”

He said DSW’s access to products had benefited from the chain’s decision to narrow its assortments to the top 50 brands in recent years. The move helped DSW secure its inventory amid industry supply chain disruption. Says Rawlins, “When you double down on people, they tend to give you a product before others.”

Jim Weinberg, EVP and Chief Merchandising Officer, DSW, added at the event, “We have eliminated undifferentiated brands so that we are more meaningful to those brands than we were before the cut. When customers come to our stores, they see a huge range of products from these brands in a way we’ve never seen before. »

Weinberg highlighted how DSW is “bringing the Adidas brand to life in our reimagined warehouse” as an example of its stronger partnerships with key brands. He highlighted the importance of having strong brands as part of the DSW shopping experience.

“We have an amazing assortment of national brands, and they are,” Weinberg said. “These are really brands. These are brands that spend millions of dollars on marketing. And thanks to these efforts, their brands are highly coveted by our consumers.

He named Birkenstock, UGG, Adidas, New Balance, Crocs and Cole Haan as key brands.

Weinberg also said DSW is partnering with national brands like never before, particularly by leveraging data from its nearly 30 million customers. He said: “We share all this rich data with them. What makes us unique. How customers interact with us differently than they interact with these brands. We not only share customer data, but we also share marketing effectiveness data. We have never collaborated with people this way in the past.

Weinberg also said DSW recognizes that national brands are looking to grow their own DTC business and have “very transparent conversations” exploring “win-win strategies” where the two can grow together. Weinberg said, “They want to grow and we want to grow. But we also showed them how we have a unique proposition that they don’t. That we can reach consumers they can’t reach. And it’s through these transparent conversations that we feel like we’ve made tremendous strides in ensuring these national brand partners stick with us.

At the event, Designer Brands raised its FY2022 EPS outlook from $1.75 to $1.85 to a range of $1.80 to $1.90, reinstated its dividend to 5 cents per share for the first quarter and established a long-term financial outlook.

The outlook for fiscal year 2026 (financial year ended January 30, 2027) includes:

  • Revenue of $4 billion, up from $2 billion in fiscal 2021;
  • Gross profit margin of 35%, compared to 33.4% in fiscal year 2021;
  • Operating margin of 9%, improving by more than 200 basis points;
  • Target EPS range of $2.75 to $2.85, compared to $1.70 for fiscal 2021; and
  • Generating over $1 billion in cash from operations over the next five years.

Photo courtesy of Designer Marks

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