Designer Brands Stock Gains 49% After Posting Q3 Earnings Beat

Designer Brands Inc. DBI released third-quarter fiscal 2025 results, wherein the top line lagged the Zacks Consensus Estimate and declined year over year. However, the bottom line surpassed estimates and increased year over year. 

The company highlighted another quarter of sequential progress, driven by stronger traffic, better in-store conversion, and disciplined expense and inventory management. Designer Brands emphasized improving trends across key product categories, especially boots, affordable luxury and athletic. 

Its DSW brand repositioning and refreshed marketing campaign continued to gain traction, supported by healthier assortments and improved in-stock levels. Strategic focus remained on elevating the customer experience, enhancing product relevance, and strengthening both retail and brand portfolio operations. The momentum seen through the quarter also carried into the early weeks of the fiscal fourth quarter. As a result, shares of the company jumped 48.5% yesterday.

More on Designer Brands’ Q3 Results

DBI posted adjusted earnings of 38 cents per share, which beat the Zacks Consensus Estimate of 18 cents. Notably, the company recorded earnings of 27 cents in the year-ago period.

Net sales were $752.4 million, down 3.2% year over year. The top line missed the Zacks Consensus Estimate of $763 million. Also, comparable sales (comps) decreased 2.4% year over year compared with the Zacks Consensus Estimate of a 1.7% decline.

Insight Into DBI’s Margins & Expenses

Gross profit amounted to $339.6 million, up 1.7% from $273.4 million in the year-ago quarter. Also, the gross margin increased 210 bps to 45.1% from the prior-year period’s level. 

This increase was mainly driven by intentionally reduced markdowns in the U.S. retail segment and higher order fulfillment through its East Coast logistics center. Despite lower sales, these factors contributed to a $5.8-million year-over-year increase in the gross margin.

Adjusted operating expenses increased year over year by $2.5 million to $296.3 million, representing 39.4% of sales. This reflects a 160 bps deleverage from last year, driven by the lower sales volume.

Adjusted operating income amounted to $46.5 million, up 6.6% from $43.6 million in the year-ago quarter. We note that the adjusted operating margin increased 60 bps year over year to 6.2% in the fiscal third quarter.

Update on Designer Brands’ Segmental Performance

U.S. Retail: Segment sales decreased 0.8% year over year to $610.5 million compared with the Zacks Consensus Estimate of $609 million. Comps were down 1.5% year over year.

Canada Retail: Segment sales decreased 7.5% year over year to $77.3 million, missing the Zacks Consensus Estimate of $84 million. Comps were down 6.6% year over year.

Brand Portfolio: Segment sales of $101.9 million decreased 8.6% year over year. The metric lagged the Zacks Consensus Estimate of $100 million. This was primarily due to a shift in external wholesale sales from the fiscal third quarter to the fourth quarter due to shipment timing.

DBI’s Financial Snapshot: Cash & Debt Overview

As of Nov. 1, 2025, the company reported cash and cash equivalents of $51.4 million compared with $36.2 million at the end of the same period in 2024. It also had $166.9 million available for borrowings under its senior secured asset-based revolving credit facility. 

Debt stood at $469.8 million at the close of the fiscal third quarter, down from $536.3 million at the end of the same period last year. The company reported inventories of $620 million at quarter-end compared with $637 million at the same period last year.

A dividend of 5 cents per share for both Class A and Class B common shares is scheduled to be paid out on Dec. 19, 2025, to shareholders of record at the close of business on Dec. 5, 2025.

Update on DBI's Stores

As of Nov. 1, 2025, the company operated 672 stores compared with 675 as of Nov. 2, 2024.

Designer Brands’ FY25 Guidance

For fiscal 2025, the company expects net sales to decline 3-5%. Adjusted operating profit is projected to between $50 million and $55 million.

DBI Stock's Past 3-Month Performance

Shares of this Zacks Rank #3 (Hold) company have lost 58.9% in the past three months compared with the industry's 3.4% growth.

Key Picks

We have highlighted three better-ranked stocks, namely, FIGS Inc. FIGS, Boot Barn Holdings, Inc. BOOT and Allbirds Inc. BIRD.

FIGS is a direct-to-consumer healthcare apparel and lifestyle brand. It sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for FIGS’ current financial-year earnings and sales indicates growth of 450% and 7%, respectively, from the year-ago actuals. FIGS delivered a trailing four-quarter average earnings surprise of 87.5%.

Boot Barn operates as a lifestyle retail chain devoted to western and work-related footwear, apparel and accessories. It currently carries a Zacks Rank of 2 (Buy). 

The Zacks Consensus Estimate for Boot Barn’s fiscal 2026 earnings and sales implies growth of 20.5% and 16.2%, respectively, from the year-ago actuals. Boot Barn delivered a trailing four-quarter average earnings surprise of 5.4%.

Allbirds is a lifestyle brand with naturally derived materials to make footwear and apparel products. It carries a Zacks Rank of 2 at present.

The Zacks Consensus Estimate for Allbirds’ current financial-year sales and earnings indicates a decline of 15.1% and growth of 19.9%, respectively, from the year-ago actuals. BIRD delivered a trailing four-quarter average earnings surprise of 18.5%.

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This article originally published on Zacks Investment Research (zacks.com).

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