What Happened?
Shares of footwear and accessories discount retailer Designer Brands (NYSE: DBI) jumped 9.1% in the afternoon session after the company reported third-quarter adjusted earnings that significantly beat analyst expectations. Designer Brands posted adjusted earnings per share of $0.38, which was more than double the Wall Street consensus estimate of about $0.18. This represented a surge of over 40% compared to the same period in the previous year. The strong profit performance came even as the company's net sales decreased by 3.2%. The beat on the bottom line was driven by a 210-basis point improvement in gross margin and disciplined management of inventory and expenses. The results suggested the company's turnaround efforts were taking hold, boosting investor confidence.
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What Is The Market Telling Us
Designer Brands’s shares are extremely volatile and have had 73 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 14 days ago when the stock gained 6.7% on the news that the company expanded its Board of Directors and declared a quarterly cash dividend. The board grew from eleven to twelve members with the appointment of Deborah Ferrée, the company's Vice Chair and Chief Product Officer, as a new Class II director. This move kept her in her current executive roles. In addition to the board change, Designer Brands announced a quarterly cash dividend of $0.05 per share for both its Class A and Class B common shares. These developments were received positively by investors, signaling stability and a commitment to shareholder returns.
Designer Brands is up 51.6% since the beginning of the year, and at $8.04 per share, has set a new 52-week high. Investors who bought $1,000 worth of Designer Brands’s shares 5 years ago would now be looking at an investment worth $1,098.
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