What Happened?
Shares of footwear and accessories discount retailer Designer Brands (NYSE: DBI) jumped 4.5% in the morning session after the company reported second-quarter financial results that surpassed analyst expectations for profit, even as sales continued to decline.
The footwear retailer posted an adjusted earnings per share (EPS) of $0.34, decisively beating the consensus estimate of $0.22 by 52.2%. Quarterly revenue came in at $739.8 million, slightly ahead of the $737.9 million Wall Street had forecast. However, the positive earnings surprise was set against a backdrop of continued business challenges. The reported revenue marked a 4.2% decrease from the same quarter last year, and same-store sales, a key metric for retail health, fell by 5.0%. The stock's positive movement suggests that investors are currently prioritizing the strong bottom-line beat over the persistent top-line weakness and shrinking demand the company has faced.
After the initial pop the shares cooled down to $4.26, up 2.1% from previous close.
Is now the time to buy Designer Brands? Access our full analysis report here, it’s free.
What Is The Market Telling Us
Designer Brands’s shares are extremely volatile and have had 71 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 about 20 hours ago when the stock dropped 11.1% as investor anxiety rose ahead of its second-quarter earnings report. Analysts are forecasting the footwear retailer's revenue to decline 4.4% year-over-year. This pessimism is compounded by the company's recent history, which includes missing Wall Street's revenue estimates six times in the last two years. Following its last earnings announcement, where Designer Brands missed EPS estimates by $0.20, the stock plunged 15.74% in a single session. Broader financial concerns also weigh on sentiment, as the company has reported a recent revenue decline of nearly 8%, a negative net margin, and a high debt-to-equity ratio, signaling significant financial risk.
Designer Brands is down 19.7% since the beginning of the year, and at $4.26 per share, it is trading 42.3% 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 $687.56.
Unless you’ve been living under a rock, it should be obvious by now that generative AI is going to have a huge impact on how large corporations do business. While Nvidia and AMD are trading close to all-time highs, we prefer a lesser-known (but still profitable) semiconductor stock benefiting from the rise of AI. Click here to access our free report on our favorite semiconductor growth story.
