Designer Brands Inc.

Good day and welcome to the Designer Brands, Inc. 4Q25 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 telephone keypad, and to withdraw your question, please press star then two. Please note today's event is being recorded. I would now like to turn the conference over to Matthew Crummey, SVP of Strategy and FP&A. Please go ahead.

Good morning. Earlier today, the company issued a press release comparing results of operations for the 13-week and 52-week periods ended January 31, 2026, to the 13-week and 52-week periods ended February 1, 2025. Please note that the financial results that we will be referencing during the remainder of today's call exclude certain adjustments recorded under GAAP unless specified otherwise. For a complete reconciliation of GAAP to adjusted earnings, please reference our press release. Additionally, 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 the factors listed in today's press release and the company's public filings with the SEC. Except as may be required by applicable law, the company assumes no obligation to update any forward-looking statements. Joining us today are Doug Howell, Chief Executive Officer, and Seamus Toll, Chief Financial Officer. I'll now turn the call over to Doug.

Good morning, and thank you everyone for joining us today. I'm very proud that our fourth quarter and full fiscal 2025 results reflect disciplined execution and the meaningful progress we've made in strengthening our business. I want to recognize the commitment of our designer brands associates who have remained focused on serving our customers and advancing our strategy. Before discussing our results, I want to give a warm welcome to Seamus Toole, our new Executive Vice President and Chief Financial Officer, who joined us last month. Seamus brings decades of financial and operational leadership experience across complex organizations, and his expertise will be critical as we advance our strategic priorities and drive long-term shareholder value. I'm pleased to have him with us today. Building on the momentum we established throughout the year, we were pleased to deliver another consecutive quarter of sequential improvement. Net sales were flat year over year in the fourth quarter, and consolidated comparable sales improved sequentially by 50 basis points. For the full year, total company sales declined 3.9% compared to last year, coming in towards the high end of our guidance range, and comp sales were down 4.3%. Notably, we delivered full-year adjusted operating income of $65 million, significantly above our guidance range of $50 to $55 million, driven by an improvement in fourth quarter sales trends, continued gross profit expansion, and disciplined expense management that resulted in a $26 million reduction in adjusted operating expenses compared to last year. As I reflect on 2025, I want to acknowledge that the year began with a level of macroeconomic volatility and pressured consumer sentiment that few could have anticipated. I am proud of how our team responded. We executed discipline to meet the needs of our business while remaining committed to our strategy, ultimately closing the year on a strong note. Over the last year, we continue to enhance our retail product strategy by elevating our assortment, improving inventory productivity, and cultivating our relationships with strategic national brand partners. We launched a new DSW brand positioning campaign this past fall and are highly encouraged that it is resonating meaningfully with customers, strengthening brand perception and driving engagement. In 2025, the DSW brand generated 79 billion total impressions, up 10% year over year, signaling strong, sustained interest. Our new brand positioning is beginning to come to licensed stores as well, with several remodels and new store openings completed this past fall that incorporate updated creative and visual elements. Customer feedback and financial performance in these locations have been encouraging. In our brand portfolio segment, we are pleased with the progress we've made to refine our go-to-market strategies and improve the profitability of the business. driving an $8 million increase in segment operating income for the year as we navigated an incredibly complex tariff environment. Before turning to review of our financial performance, I'd like to share an update on a recent organizational change we implemented in the business designed to accelerate execution across key priorities while maintaining a focus on reducing operating expenses. We recently brought our U.S. and Canada retail businesses under a streamlined reporting structure. which will enable better collaboration and integration of operations across our businesses. As part of these changes, we have right-sized our shared services organization to appropriately support the business moving forward. Now let's review the financial highlights from the fourth quarter and full year. Starting with our retail segment, which reflects the aggregation of our U.S. retail and Canada retail operating segments, our total sales for the fourth quarter were flat year over year, with comparable sales down 1.7%, an improvement from down 2.1% in the third quarter. This improvement was driven by strength in the boost category, affordable luxury, and accessories. For the full year, total sales declined 3.4%, with comparable sales declining 3.9%. Comp sales improved throughout the year, driven by positive in-store sales trends. In addition to the momentum we saw in existing stores, we were encouraged by the early learnings from our new stores that opened in 2025. Over the course of the year, we opened 13 stores and remodeled four stores in total. While not all of these projects included the full suite of experimental features, each incorporated enhancements to improve merchandise, customer flow, and overall store experience. The initial customer reaction has been strong, with notably higher conversion and traffic. We will continue refining these concepts as we move forward by leveraging data and customer feedback to scale what works to further elevate the DSW in-store experience across our footprint. In the fourth quarter, we delivered retail operating profit expansion, driven by a gross margin improvement of 140 basis points compared to Q4 of 2024. For the full year, gross margin improved 30 basis points. Turning to our brand portfolio segment, in the early phases, our focus was on margin enhancement and cost discipline. And in 2024, we achieved profitability in the segment for the first time. 2025 was centered on foundational work to refine go-to-market strategies, and despite significant tariff-related disruption, we drove an $8 million increase in segment operating income. On the top line, fourth quarter sales were up over 5%, driven by Topo, which was up 42%, and Jessica Simpson, which grew 17% versus last year. We remain encouraged by the underlying growth trajectory inherent in each of these brands. For the full year, total sales were down 9%, reflecting headwinds in the first half of the year, with performance improving as the year progressed. A clear standout was Topo, which continued to drive impressive growth, up 46% on the year and more than doubling the size of the business compared to two years ago. We further strengthened and diversified our supply chain this year, which enabled us to proactively mitigate the impact of tariffs and external cost pressures and deliver an 80 basis point expansion in brand gross margin for the year. Now I'd like to spend a few minutes discussing our strategic priorities for 2026. As we move forward, we are laser-focused on the following. First, winning with the merchandise that matters most to our customers. Second, amplifying and expanding our DSW brand positioning. Third, elevating our in-store customer experience. And finally, building and scaling our brand portfolio. Let's start with our product strategy and winning with the merchandise that matters most. Our refreshed merchant leadership team has made incredible progress in shaping our 2026 assortment. We are doubling down in areas of strength and leaning into encouraging trends in fashion across dress, boots, and affordable luxury. These categories are resonating with our customers. This will be supplemented by our efforts to build and scale our brand portfolio. We are also planning strong growth in categories adjacent to footwear, such as beauty, wellness, hydration, socks, and sunglasses. To further support our initiative to add newness to our product offerings, we're excited to be working closely with a consumer-focused investment bank focused on emerging consumer brands called Consensus, which runs the Great Brands program, the preeminent platform for emerging consumer brands in North America. This partnership enables us to thoughtfully identify and introduce new, relevant brands within our leading categories, while also expanding into adjacent non-footwear categories that encourage customer discovery and exploration. Through this relationship, we gain early access to emerging brands that align closely with our customer and our brand vision. By infusing our assortment with this targeted newness, we reinforce our let us surprise you brand positioning, strengthen differentiation, and ensure our assortment remains dynamic and aligned with evolving customer preferences. These product strategies are enabled by a heightened focus on end-to-end inventory optimization across planning, allocations, and digital order fulfillment. These efforts are designed to drive healthier margins, improve in-stock rates, support store conversion, and lower supply chain costs in 2026. We've made great strides in amplifying and expanding our DSW brand positioning, energized by the success of last fall's DSW brand campaign. To open 2026, we launched our Let Us Surprise You campaign for spring, designed to broaden our reach, strengthen customer connections, and ignite meaningful brand engagement, anchored by new, fresh creative that debuted on March 1st. At the same time, we continue to invest in strengthening relationships with our most loyal customers. This fall, we are relaunching our loyalty program, which continues to represent roughly 90% of our transactions. With this revamp, we're poised to deliver an even more compelling, differentiated experience that drives long-term engagement and growth. Our stores remain the foundation and an important point of differentiation in our strategy, and we are continuously working to elevate the in-store experience. In 2026, we are bringing our brand positioning and product strategies to life in new and exciting ways across our store base. We're also planning new store openings as well as several remodels. Early indications from last year's work are encouraging, demonstrating how we can deepen engagement through a more immersive, differentiated shopping experience. Finally, turning to our brand's portfolio, we are now entering the third year of the transformation journey that we outlined in 2024. In 2026, we will continue to build and scale our portfolio, a strategy which will in turn supplement our strategic priority of focusing on merchandise that matters. We're very excited about the renewed focus on our exclusive brands, which are only sold at DSW. These brands serve as a strategic tool for us to increase profitability via vertical integration and strengthen the DSW brand. We believe we are well positioned to deliver meaningful sales growth in 2026, highlighted by opportunities to amplify trends in the dress and boot categories. COPO's sales trajectory continues to be strong as the brand executes against ambitious growth plans. We're confident this momentum will continue in 2026. Growth will be driven by core franchises as well as new product launches that further elevate Topo's brand positioning. We expect to continue expansion of the brand's footprint within existing partners as well as opening additional points of distribution with new customers with a particular focus on specialty running. With Keds, 2025 was the year where we sharpened our product design to improve comfort and fit across the assortment, while also focusing on building the profitability of the brand. We're now looking forward to accelerated growth in 2026. We plan to drive this through expanded wholesale distribution with a focus on value, as well as from our direct-to-consumer digital business, where we are seeing positive signs so far this year. Jessica Simpson has capitalized on the recent resurgence of trends in the dress category. Additionally, we have diversified into the boot category and lowered heel heights in key dress styles in an effort to strategically appeal to a larger audience. We are confident that this evolved product strategy will continue to drive momentum with this brand in 2026. Throughout the brand's portfolio, we are pleased with the progress we've made in building a profitable foundation and are looking forward to advancing our efforts to drive sustainable growth in 2026 and beyond. Before I conclude, I want to share a few thoughts on our 2026 guidance. We are currently operating in a volatile macro environment that includes evolving tariffs dynamics and conflict in the Middle East, the latter of which may introduce increased inflationary pressure moving forward. We will continue to monitor these situations closely and remain nimble and adaptable as the year progresses. While there is some uncertainty in the current external environment, in 2026, we do expect to build on the improving trends we generated in the back half of 2025. We anticipate that total sales will be between negative 1 percent and positive 1 percent, driven by strength in our brand portfolio sales, which are anticipated to grow double digits. We also expect to deliver meaningful operating income and EPS growth on the year. Seamus will take you through our 2026 outlook in more detail. Before I close, I want to reiterate how proud I am of our team's disciplined execution and unwavering commitment, which drove sustained sequential improvement throughout the year. Despite a dynamic operating environment, we stayed focused on what we can control and executed against our priorities, and I'm excited to see this momentum continue in 2026. With that, I'll turn it over to Seamus.