Designer Brands Q2 2026 Earnings Call Unveils Key Contradictions on Tariff Impact, Topo Growth, SG&A Cuts, and Athleisure Strategy

The above is the analysis of the conflicting points in this earnings call

Date of Call: None provided

Financials Results

• Revenue: $739.8M, down 4.2% YOY; comparable sales down 5% (vs Q1 sales down 8% YOY)
• EPS: $0.34 adjusted diluted EPS, up from $0.29 in the prior year
• Gross Margin: 43.7%, down 30 bps YOY; up 70 bps sequentially vs Q1

Business Commentary:

• Sales and Consumer Sentiment Improvement:
• Designer Brands Inc. reported a 4% year over year decline in total sales for the second quarter, with a 5% decline in comparable sales.

• The company experienced sequential improvement, reflecting the impact of operational efforts and improved consumer sentiment.

• U.S. Retail Sales and Store Traffic:

• The U.S. retail sales were down 5% year over year, with comparable sales also down 5%.

• Sequential improvement in store traffic was observed, driven by slightly improved consumer sentiment and targeted marketing efforts.

• Brand Portfolio Performance:

• The brand portfolio segment saw total sales down 24% compared to last year, largely due to lower internal sales.

• Wholesale activity across external retail partners, like Topo Athletic and Keds, showed year-over-year growth.

• Cost Management and Expense Reduction:

• Designer Brands achieved adjusted operating expenses down over $14 million year over year and a 350 basis points leverage compared to Q1.

• This disciplined cost management supported year-over-year EPS growth.

• DSW Brand Repositioning and Marketing Strategy:

• The company launched a new DSW brand repositioning campaign with a new tagline, "Let Us Surprise You," aiming to enhance brand awareness and customer engagement.
• This was part of an optimized marketing approach to balance spend between top-of-funnel and personalized activations.

Sentiment Analysis:

• Net sales declined 4.2% YOY with comps down 5%, but trends improved sequentially vs Q1. Gross margin fell 30 bps YOY yet rose 70 bps sequentially. Adjusted EPS increased to $0.34 from $0.29. Management cited positive momentum in women’s dress (+5% comp) and store comps turning positive in August, while deliberately pulling back unprofitable digital. Given macro headwinds and tariff uncertainty, the company withheld full-year guidance.

Q&A:

• Question from Mauricio Serna (UBS): Can you elaborate on intra-quarter trends and how comps evolved, including momentum into August?
  Response: Comps improved through the quarter; women’s dress led gains, athletic improved, and store comps turned positive in August while digital was intentionally reduced to boost profitability.

• Question from Mauricio Serna (UBS): By quarter-end were total company comps positive?
  Response: Total comps were still slightly negative at quarter-end, but stores were positive in August; digital pullback is weighing on total comps by design to improve profits.

• Question from Mauricio Serna (UBS): How much tariff pressure do you expect in Q3 and what’s the EPS/gross margin impact?
  Response: Direct tariff impact is modest (brands import ~20%); selective price increases preserve IMU, with the bigger risk being consumer sentiment rather than cost; early signs are manageable.

• Question from Dana Tulsey (Tulsey Group): How will the new 'Let Us Surprise You' campaign affect store productivity, real estate strategy, and marketing spend?
  Response: Campaign launched Sept 2; too early for metrics, focus is on in-store differentiation and optimizing marketing mix by reallocating from unprofitable digital, with no major SG&A deleverage expected.

• Question from Dana Tulsey (Tulsey Group): Which brands are outperforming (e.g., Nike, Birkenstock) and what should we expect for brand activations?
  Response: Top eight brands outperformed (+1% comp; 45% penetration) with stronger in-stocks and partnerships; activations like Birkenstock will continue.

• Question from Mauricio Serna (UBS): Where are you deepening assortment, and can you break down the $20–$30M SG&A savings?
  Response: Assortment depth is increasing (choice count -25%, depth +15%) to improve in-stock and conversion; savings are ~1/3 professional fees, ~1/2 personnel actions, and the rest depreciation/occupancy.