What Happened?

Shares of footwear and accessories discount retailer Designer Brands (NYSE: DBI) jumped 4.5% in the morning session after the stock extended its positive momentum as the company reported second-quarter results that beat Wall Street's profit expectations. 

Although revenue of $739.8 million was largely in line with analyst estimates, it still marked a 4.2% decline compared to the previous year. The main driver of the positive sentiment was the company's bottom line. Designer Brands posted an adjusted earnings per share of $0.34, which soundly surpassed the forecast of $0.22. Management attributed the strong profit performance to disciplined cost management and specific operational efforts, which helped offset the dip in sales.

After the initial pop the shares cooled down to $4.37, up 3.2% from previous close.

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What Is The Market Telling Us

Designer Brands’s shares are extremely volatile and have had 70 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.

The previous big move we wrote about was 5 days ago when the stock dropped 7.8% on the news that investors appeared to take profits following a significant recent rally. 

The stock had surged an impressive 64% over the previous month, a move attributed to investors rewarding the company for its "recent signs of discipline." However, this short-term gain was set against a backdrop of longer-term challenges. Over the previous year, the stock was down more than 20%, highlighting what one source describes as a "huge long-term challenge" in winning back investor trust. Despite optimism around cost-cutting measures, there had been an expectation that revenue could drop slightly in the next quarter, fueling ongoing skepticism about the company's long-term growth prospects.

Designer Brands is down 17.6% since the beginning of the year, and at $4.37 per share, it is trading 40.9% 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 $649.55.

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