DBI Q2 Deep Dive: Store Performance, Brand Refresh, and Cost Controls Shape Outlook

September 10, 2025 at 01:31 AM EDT

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Footwear and accessories discount retailer Designer Brands (NYSE: DBI) met Wall Street’s revenue expectations in Q2 CY2025, but sales fell by 4.2% year on year to $739.8 million. Its non-GAAP profit of $0.34 per share was 52.2% above analysts’ consensus estimates.

Is now the time to buy DBI? Find out in our full research report (it’s free).

Designer Brands (DBI) Q2 CY2025 Highlights:

Revenue: $739.8 million vs analyst estimates of $737.9 million (4.2% year-on-year decline, in line)
Adjusted EPS: $0.34 vs analyst estimates of $0.22 (52.2% beat)
Adjusted Operating Income: $30.26 million vs analyst estimates of $26.84 million (4.1% margin, 12.7% beat)
Operating Margin: 3.6%, in line with the same quarter last year
Locations: 668 at quarter end, down from 676 in the same quarter last year
Same-Store Sales fell 5% year on year (-1.4% in the same quarter last year)
Market Capitalization: $214.8 million

StockStory’s Take

Designer Brands’ second quarter saw a positive market reaction as the company delivered results that met Wall Street’s revenue expectations and significantly surpassed non-GAAP profit forecasts. Management pointed to sequential improvement versus earlier quarters, citing disciplined cost management and targeted operational initiatives. CEO Doug Howe credited improved store traffic, higher conversion rates, and a focus on core product categories—especially women’s dress shoes and top-performing brands—as key factors. Howe highlighted, “Our strong assortment and improved in-stock levels resonated with customers,” noting that the VIP rewards program, which drives most transactions, benefited from in-store signups.

Looking forward, Designer Brands’ outlook is shaped by ongoing macroeconomic uncertainty and the impact of tariffs on both consumer sentiment and input costs. Management is cautiously optimistic, emphasizing continued investments in omnichannel marketing, deeper brand partnerships, and inventory optimization. Howe stated, “We are excited about the DSW brand repositioning that we recently launched,” underlining efforts to revitalize store experiences and marketing. CFO Jared Poff explained that expense reduction initiatives will persist as the company navigates a volatile retail environment, with a focus on profitable growth and disciplined execution.

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to improved store execution, stronger brand partnerships, and expense discipline, while highlighting the early impact of new marketing and product strategies.

Store traffic and conversion: Sequential improvement in store traffic and a 1% increase in conversion rates were driven by refreshed product assortments and better inventory availability, as management prioritized in-store experiences and fulfillment.
Brand partnerships drive sales: The top eight brands, including Birkenstock and Nike, outperformed the broader assortment with penetration rising to 45% of total sales. Women’s dress shoes saw a 900 basis point improvement in comps, signaling effective category focus.
Inventory and assortment strategy: The company reduced product choice count by 25% while increasing depth by 15% on key styles, aiming to address customer size availability and improve store productivity.
Omnichannel and digital optimization: Management scaled back unprofitable digital sales and redirected marketing spend to drive higher returns, leveraging partnerships like DoorDash to attract new customers—85% of which were new to DSW.
Expense management: Adjusted operating expenses fell by over $14 million year over year, with cost savings attributed to lower professional fees, personnel actions, and tighter control of marketing and occupancy costs.

Drivers of Future Performance

Designer Brands’ near-term outlook hinges on disciplined cost controls, strategic marketing, and the ability to manage tariff-related risks while driving in-store engagement.

Brand refresh and store innovation: The DSW brand repositioning and immersive store formats, featuring enhanced services and technology, are expected to deepen customer loyalty and differentiate the retail experience, with early feedback described as “very positive.”
Expense discipline amid macro headwinds: Management is targeting $20 million to $30 million in annual expense reductions, focusing on professional fees, personnel, and other overhead. This discipline is central to maintaining profitability against ongoing consumer and tariff uncertainties.
Strategic inventory management: By consolidating product assortments and building depth in high-demand categories, the company aims to reduce out-of-stock incidents and improve regular-priced sales, which management views as critical for margin resilience.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will closely watch (1) the traction of the new DSW brand campaign and immersive store formats, (2) sustained improvement in store traffic and conversion rates, and (3) the company’s ability to manage costs and navigate tariff-related pressures. Progress in digital profitability and further expansion of brand partnerships will also be important markers for execution.

Designer Brands currently trades at $4.31, up from $4.17 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free).

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