Designer Brands Inc.

Good day and welcome to the Designer Brands Incorporated first quarter 2022 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch-tone phone. To withdraw your question, please press star then two. Please note today's event is being recorded. I'd now like to turn the conference over to Jessie Miller. Please go ahead.

Good morning. Earlier today, the company issued a press release comparing results of operations for the 13-week period ended April 30th, 2022 to the 13-week period ended May 1st, 2021. Please note that remarks made about the future expectations, plans, and prospects of the company constitute forward-looking statements. Results may differ materially due to various factors listed in today's press release and the company's public filings with the SEC. The company assumes no obligation to update any forward-looking statements. Joining us today are Roger Rollins, Chief Executive Officer, and Jared Poff, Chief Financial Officer. Now let me turn over the call to Roger.

Thanks, Jessie. Good morning, and thank you, everyone, for joining us today. The strength we saw throughout 2021 continued into the first quarter of 2022. and we are extremely pleased with our performance as it demonstrates the progress we are making towards the long-range plan that we recently outlined at our investor day. I want to take this opportunity to thank our associates for their work that continues to successfully deliver long-term shareholder growth, even in today's challenging operating environment. Their hard work has resulted in market share gains, top-line improvement, and bottom-line results that have exceeded our expectations. Designer brands entered the year in a position of strength after returning to a growth trajectory in 2021. Our engines are back on and all the actions we took since our acquisition of Komodo in 2018 have enabled us to grow our market share across the board. We delivered outstanding results in the first quarter with net sales increasing 18% and adjusted diluted EPS growing 300% versus the first quarter of 2021. Providing value to our shareholders remains a top priority for us. We bought back 1.7 million shares in the first quarter and another 1.8 million so far in the second quarter as of May 27th. At our April 8th investor day, we also announced the reinstatement of our quarterly dividend, which was effective starting in the first quarter of fiscal 2022. And today, announced our upcoming quarterly dividend that will be paid on July 6th. Jared will provide more details on this a little later. We are proud to be providing a return for our shareholders via multiple avenues, from significant EPS growth to consecutive dividends and opportunistic share repurchases. This all demonstrates the successful integration of our business model and our competence in our financial footing. As you've heard us mention many times, we have worked tirelessly to go narrower and deeper within our brand assortment and have made substantial progress on this initiative. We are continuing to build upon our strong, differentiated partnerships with our top national brands. We are pleased to report that our new prototype warehouse reimagined store opened on May 7th at a DSW location in Houston. And we are excited by the initial customer reaction and feedback. Our warehouse reimagined concept allows for the flexibility to further strengthen our relationship with our national brands through shop and shops to provide a more seamless omni-channel experience and to increase capacity. These differentiators give national brands the opportunity to build out a brand story within DSW like nowhere else. I encourage you to find more information about the store and our grand opening, along with the pictures and links to interviews in our first quarter infographic on our investor relations website. In addition to our warehouse reimagined concept, we have been rolling out shop and shops in earnest within DSW stores. and our customers are reacting positively to these new assortment displays. For example, our new Balance Shop and Shop ran from March 6th through April 30th and saw a 10% lift in demand, both from transactions and average dollar sale, resulting in strong overall performance. Other brand spotlights during the quarter included an Adidas Kids Focal Wall, a Crocs Hanging Wall, and a Puma Shop and Shop. For the balance of the year, we are rolling out similar shops for Reebok, Teva, Mix No. 6, and Skechers. Taking a closer look at the top brands, sales of our top 50 brands of footwear within our U.S. retail segment were 77% of total sales for the first quarter of 2022 versus 57% in 2019. Our assortment strategy of narrower and deeper is continuing to work. In spring, the number of SKUs in all stores is up 16% to last year. In addition, the depth of our key items is up 27% to last year as well. This is contributing to our sales and margin improvement. As we mentioned at Investor Day, our own brands are the key driver of growth over the next five years, and we plan to double the sales of these brands by 2026 while maintaining sales of national brands, all guided by keeping the customer top of mind. Our fully integrated design and sourcing engines are turned back on and they are humming. We delivered amazing growth in our owned brands during the quarter. Throughout 2021, we saw customer demand increase for fashion styles as COVID restrictions were dropped, infection rates decreased, and events and socializing started occurring again. As a result, revenue in our owned brands category was up 68% versus the first quarter of 2021. And remember, this is on top of a strong performance last year when owned brands were up 40% versus the prior year. So we continue to see momentum building. Within our own brands, we saw significant growth in both our wholesale channels with revenue up 78% versus the first quarter last year and through our direct-to-consumer channels, which saw revenue up 64% to last year. As mentioned at investor day, We relaunched the Vince Camuto brand, which has been well-received, and we saw strong performance in the first quarter, with revenue up 80% across all of DBI versus the prior year period, driven by substantial growth both in our direct-to-consumer and our wholesale businesses. Our Vince Camuto brand sold through our own channels, including DSW and VinceCamuto.com, was up 76%. while the Vince Camuto brand sold through wholesale was up 81% versus 2021. According to NPD Group, Vince Camuto dollar sales grew eight times faster than the total fashion footwear market, ranking within the top 15 fashion brands for the first quarter. Another initiative we shared with you at Investor Day is our unique partnership we created with Wolverine around the Hush Puppies brand. We are excited that the partnership officially launched last month. We deployed a joint marketing campaign with Hush Puppies, leveraging learnings from our omnichannel platform and collaborating on future designs. We are excited about this partnership, and this is an example of the type of work we can do with top brands. We're eliminating friction for Wolverine by accepting Hush Puppies direct-to-consumer returns at DSW retail locations while we gain guaranteed and exclusive access in our store inventory. And we're receiving great feedback from our customers. we are confident there is a bright future ahead for this partnership. Another example of working differently with top brands is our strategic partnership with ABG. Following their acquisition of Reebok, DBI now has the guaranteed licensing rights to acquire and sell Reebok branded products in our retail channels. We have access to significantly more styles and colors of Reebok product than we had previously, as well as a new costing structure that provides for favorable margins versus our historic margins, where we purchased the product through wholesale. The initial agreement covers five years, and we are very excited to be able to add guaranteed access to such a well-known athletic brand. Our customers are already fans of the brand, with demand for Reebok comping up in the first quarter by 33%. And as we focus on making investments to further the long-range plan we shared at Investor Day, We're excited about the strategic acquisition of the digital domain name Shoes.com and its associated intellectual property. We are working on plans on how to best bring this asset to life, but I am excited about the opportunities this brings to reach new customers, partner differently with national brands, and potentially provide new distribution channels for our owned brands. As you know, it all starts with the customer and meeting them where they are. After almost two years of consumer focus on athletic and comfy, cozy product, we are seeing our customers come back to fashion, especially with all the events like weddings that were postponed until this year. One in three Americans are expected to make a trip to a wedding this year, according to ChainStorage. Our flexible business model continues to allow us to quickly pivot our assortment to match the trends we are seeing. and our historic leadership in fashion makes us a top choice for consumers purchasing fashion footwear. We have gained significant market share in the first quarter. According to the NPD Group, DSW's dollar growth outpaced the remaining total footwear market dollar growth by 15 percentage points for the first quarter. Additionally, DSW grew dollar sales faster than the remaining market in men's, women's, and kid's. We are particularly excited about the growth that we are seeing in our fashion assortment. According to the NPD group, DSW grew sales in fashion footwear four times faster than the remaining market, resulting in market share gains. In Canada, we saw similar trends to DSW in the U.S. For total footwear in April, the market grew 25%, while designer brands in Canada grew 61%, resulting in a 3.2 point share gain. driven by strength in both men's and women's. Our assortment is better balanced than it has ever been before, and we believe this shows that we can quickly pivot our assortment more effectively than anyone in this industry. We continue to see strong performance in our athletic athleisure categories. However, we do recognize this growth will moderate as the consumer comes back to our core fashion category. Grabbing share in the athletic category has been a major focus for designer brands. As a result, we increased our athletic penetration from 18% in the first quarter of 2019 to 27% during 2021. Athletic levels continue to remain healthy at 21% in 2022, above the 2019 levels, despite losing a couple national brands. Our team has done a remarkable job leveraging Adidas, Brooks, New Balance, Reebok, ASICSketchers, and other national brands to fill in the void these exits created in our assortment. In fact, compared to 2019, DSW grew athletic and sport lifestyle footwear dollar sales three times faster than the remaining market for the first quarter. Again, despite the largest national brand eliminating us from their distributions, We grew our athletic business by 26% to 2019 in Q1 and grew our market share in the space, supporting our belief that we are a top point of distribution for the consumer, reinforcing our ability to protect our market share when a brand opts to compete rather than partnering with us. We want to thank the leaders of our athletic brand partners and believe our success with them will allow us to continue growing share in this space. It's clear that we have risen from every challenge presented to us while navigating this complex operating environment and continue to grow. All the foundational changes we made during the pandemic allowed us to optimize our approach to marketing, getting rid of broad-based promotions, and really focusing on targeted digital customer acquisition. As we foster relationships with our customers, we are seeing the benefits of this more targeted approach with strong retention rate, particularly with our loyalty members. Now, our focus is less on acquiring new customers and more about winning back those customers who left during the pandemic. Our marketing approach has driven our overall DSW VIP customer base up 4% versus last year, with significant reacquisition, which is up 83% to last year. Finally, as we navigate this complex operating environment, we are proud to be tracking back to normalized inventory levels and ending the quarter with retail inventories up 19% on a square foot basis compared to the first quarter of 2021. We've been able to quickly react to what is working and what is not working, and therefore should be able to ensure the best mix of inventory. Our improved product-to-market process is helping to shorten production lead times helping to offset the transportation challenges the entire industry is experiencing. As we mentioned at Investor Day, we have already taken two months out of the design and production process and are looking for further improvements as we ramp up our overall production scale. Before I turn it over to Jared, we are excited to announce we have a new president of DSW, Doug Howe. Doug will be responsible for the strategic leadership of the DSW brand, continuing the momentum created over the past year. He brings over 30 years of experience in retail, most recently serving as Chief Merchandising Officer at Kohl's and holding leadership positions across merchandising, design, product development, and planning at Curate Retail Group, Old Navy, Walmart, and May Department Stores. Building and developing elite teams is foundational to achieving our long-range goals of doubling our own brand sales and maintaining national brand sales. and I am confident that Doug's leadership experience will help us advance our business priorities of customers, brands, and speed. Additionally, we just hired a Vince Camuto brand SVP, Max Garbutt. Max was most recently at Crocs for seven years, with his last role as their vice president of global merchandising. He has also held roles at Land's End, Gap, and Old Navy. Max has a proven track record of growth across DTC and wholesale. and we are excited for him to bring that valuable experience as we continue to grow Vince Camuto across all of our channels at DBI. We are thrilled to welcome Doug and Max and look forward to their contributions. In closing, I want to reiterate how proud I am of our strong first quarter performance. We outpaced our initial expectations in the quarter, supported by strong store traffic, and we are pleased to be raising our EPS guidance for the year. With that, I'll turn it over to Jared. Jared?