Footwear Retailers' Q4 Earnings: A Mixed Bag with Designer Brands Leading the Turnaround

The fourth quarter of 2024 brought a stark reminder of the challenges facing footwear retailers, as most companies grappled with declining sales, shifting consumer preferences, and macroeconomic headwinds. Among the pack, Designer Brands (NYSE:DBI) emerged as a relative bright spot, posting its first comparable sales growth in nearly two years. But how did it stack up against peers like Shoe Carnival (NASDAQ:SCVL), Foot Locker (NYSE:FL), and Boot Barn (NYSE:BOOT)? Let’s dissect the numbers and strategies shaping this sector’s future.

Designer Brands: Stabilizing After the Storm

Designer Brands’ Q4 results marked a turning point. While net sales dipped 5.4% to $713.6 million, comparable sales grew 0.5%—the first quarterly increase in nine quarters. Gross margin expanded to 39.6%, reflecting improved inventory management and pricing discipline. The company’s Canadian retail segment, which now operates 175 stores (up from 143 in 2023), saw comparable sales surge 4.7%, underscoring the success of its expansion strategy.

However, challenges linger. The brand portfolio segment—despite a 12.3% sales jump—remains unprofitable, and total inventory rose to $599.8 million, a potential risk if discounts are needed to clear stock. CEO Doug Howe emphasized that 2025 will hinge on “customer-centric strategies” and cost discipline, with EPS guidance set at $0.30–$0.50.

The Rest of the Pack: Mixed Results, Shared Struggles

• Shoe Carnival (SCVL): Q4 revenue fell 6.1% to $262.9 million, missing estimates as it pivots to its Shoe Station banner. Plans to convert 175 stores by 2026 could boost long-term profitability but will reduce 2025 operating income by $20–25 million. Shares dropped 20.8%, reflecting investor skepticism about near-term execution.
• Foot Locker (FL): Revenue declined 5.7% to $2.25 billion, with athletic footwear demand softening. While EBITDA beat expectations, the stock fell 25.5% as investors worried about FL’s ability to adapt to e-commerce trends.
• Boot Barn (BOOT): The standout performer posted 16.9% revenue growth to $608.2 million, fueled by its Western apparel niche. Yet its stock plummeted 40.6%, suggesting overvaluation concerns despite strong execution.

Key Trends and Risks Across the Sector

1. Strategic Rebranding: Both Shoe Carnival and Boot Barn are betting on store conversions to high-margin banners (Shoe Station and Boot Barn, respectively). While these could yield 10–20% sales boosts by 2027, upfront costs will pressure near-term earnings.
2. Inventory Overhang: Rising inventories at DBI (+4.7%) and Boot Barn (+16.9%) highlight a balancing act between restocking for growth and avoiding markdowns.
3. Macroeconomic Uncertainty: With the Fed’s rate cuts in late 2024 and a potential U.S. economic soft landing, retailers face conflicting signals. Boot Barn’s CEO noted “resilient consumer demand in Texas and California,” but nationwide inflation and cautious spending persist.

Conclusion: A Fragile Recovery Requires Precision

Designer Brands’ Q4 turnaround—driven by Canadian expansion and margin improvements—positions it to outperform peers in 2025, provided it executes on inventory management and brand portfolio optimization. However, its $599.8 million inventory pile and reliance on debt ($491 million) pose risks if demand falters.

Meanwhile, competitors like Shoe Carnival and Boot Barn are making bold bets on rebranding, but their stock declines post-earnings reflect investor demand for immediate returns. Foot Locker’s struggles in athletic footwear suggest a sector-wide need to adapt to e-commerce and niche markets.

For investors, the path forward hinges on two factors:
1. Execution of Strategic Initiatives: Can companies like SCVL and BOOT offset rebranding costs with higher margins?
2. Consumer Sentiment: With DBI’s full-year comparable sales down 1.7% in 2024, any uptick in inflation or unemployment could derail recovery efforts.

In short, the footwear sector is a tale of cautious optimism. While DBI’s stabilization offers hope, the road to sustained growth remains littered with macroeconomic potholes and execution risks. Investors should prioritize companies with strong liquidity, like SCVL (no debt for 20 years), and avoid those overexposed to inventory-heavy strategies.