What Happened?
Shares of footwear and accessories discount retailer Designer Brands (NYSE: DBI) jumped 10.2% in the afternoon session after the stock extended its positive momentum as the company reported second-quarter financial results that surpassed analyst expectations for profit, even as sales declined.
The footwear retailer posted an adjusted earnings per share (EPS) of $0.34, which was significantly above the consensus estimate of around $0.22 and an improvement from $0.29 in the same period last year. However, net sales for the quarter fell 4.2% year-over-year to $739.8 million, with comparable sales declining by 5%. Despite the drop in revenue, the company's management highlighted a sequential improvement in comparable sales from the first quarter and a strong start to the back-to-school season. Investors appear to be focused on the strong profitability and earnings beat, signaling confidence in the company's operational initiatives and cost management.
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What Is The Market Telling Us
Designer Brands’s shares are extremely volatile and have had 72 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 previous big move we wrote about was 1 day ago when the stock gained 4.5% on the news that the company reported second-quarter financial results that surpassed analyst expectations for profit, even as sales continued to decline.
The footwear retailer posted an adjusted earnings per share (EPS) of $0.34, decisively beating the consensus estimate of $0.22 by 52.2%. Quarterly revenue came in at $739.8 million, slightly ahead of the $737.9 million Wall Street had forecast. However, the positive earnings surprise was set against a backdrop of continued business challenges. The reported revenue marked a 4.2% decrease from the same quarter last year, and same-store sales, a key metric for retail health, fell by 5.0%. The stock's positive movement suggests that investors are currently prioritizing the strong bottom-line beat over the persistent top-line weakness and shrinking demand the company has faced.
Designer Brands is down 8.9% since the beginning of the year, and at $4.83 per share, it is trading 34.6% below its 52-week high of $7.38 from September 2024. Investors who bought $1,000 worth of Designer Brands’s shares 5 years ago would now be looking at an investment worth $807.69.
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