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What changed in Designer Brands Inc.'s 10-K — 2025 vs 2026

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Paragraph-level year-over-year comparison of Designer Brands Inc.'s 2025 and 2026 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2026 report.

+291 added−271 removedSource: 10-K (2025-03-24) vs 10-K (2024-03-25)

Top changes in Designer Brands Inc.'s 2026 10-K

291 paragraphs added · 271 removed · 197 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

58 edited+12 added−31 removed7 unchanged
Biggest changeCompensation- • We strive to provide market competitive pay targeting the middle of the market in most cases. • We establish a minimum starting pay rate for each U.S. store that exceeds applicable minimum wage requirements. • To be competitive for logistics center talent, we increased the start rates in 2023 and continually monitor local pay practices. • We monitor pay equity and invest in pay processes that allow us to assess whether associates with similar roles and experience earn equal pay for comparable work. • We provide a Compensation Essentials training module that educates and equips managers to facilitate healthy conversations about compensation.
Biggest changeCompensation- • We strive to provide market competitive pay targeting the middle of the market in most cases. • We establish a minimum starting pay rate for each U.S. store that exceeds applicable minimum wage requirements. • We continually monitor local pay practices for each distribution center and adjust accordingly to remain competitive in those markets. • We monitor pay equity and invest in pay processes that allow us to assess whether associates with similar roles and experience earn comparable pay for comparable work. • We require completion of a Compensation Essentials training module that educates and equips managers to facilitate effective conversations about compensation. • Our incentive plans provide additional cash compensation upon the achievement of results that meet or exceed defined goals for eligible store management, logistics centers, and corporate associates. • We provide retirement benefits with a safe harbor 401(k) plan that includes an employer matching contribution of up to 4% of associate contributions.
All full-time and part-time associates are eligible for: • Company paid time off, military, and bereavement pay. • Generous product discounts at DSW, American Eagle Outfitters/Aerie, and American Signature/Value City Furniture. • Free counseling for all associates, their dependents, and their family members, including access to licensed counselors, work/life balance support, and bereavement specialists. • Free accredited general education college courses as well as discounted tuition offerings through multiple partner schools. • Discounted legal support in areas such as civil/criminal needs, family disputes, immigration law, landlord/tenant issues, and basic document preparation. • Free financial help including debt counseling, lease/purchase guidance, taxes, financial planning, and college funding.
All full-time and part-time associates are eligible for: • Company paid time off, military, and bereavement pay. • Generous product discounts at DSW, American Eagle Outfitters/Aerie, and American Signature/Value City Furniture. • Free counseling and support for all associates, their dependents, and their family members, through access to licensed counselors, work/life balance support, and bereavement specialists. • Free accredited general education college courses as well as discounted tuition offerings through multiple partner schools. • Free and/or discounted legal support in areas such as civil/criminal needs, family disputes, immigration law, landlord/tenant issues, and basic document preparation. • Free financial help including debt counseling, lease/purchase guidance, taxes, financial planning, and college funding.
We also invest in pay processes that allow us to assess whether associates with similar roles and experience earn equal pay for comparable work. ASSOCIATE ENGAGEMENT Our culture is a towering strength of Designer Brands, and that culture is built upon and codified by a set of unified values that guide how we aspire to operate as a collective organization.
We also invest in pay processes that allow us to assess whether associates with similar roles and experience earn comparable pay for comparable work. ASSOCIATE ENGAGEMENT Our culture is a towering strength of Designer Brands, and that culture is built upon and codified by a set of unified values that guide how we aspire to operate as a collective organization.
The Designer Brands Foundation's mission is to advance empowerment of individuals, removing barriers, and helping them put their best foot forward in the diverse communities in which we live, serve, and work. The Designer Brands Foundation features three primary areas of focus: 1. Empowerment - Support organizations that prioritize empowerment and build self-confidence without discrimination. 2.
The Designer Brands Foundation's mission is to advance empowerment of individuals, removing barriers, and helping them put their best foot forward in the communities in which we live, serve, and work. The Designer Brands Foundation features three primary areas of focus: 1. Empowerment - Support organizations that prioritize empowerment and build self-confidence without discrimination. 2.
INTELLECTUAL PROPERTY We own numerous trademarks, service marks, and domains in the U.S., Canada, and internationally, such as Crown Vintage ® , DSW ® , DSW Shoe Warehouse ® , DSW Designer Shoe Warehouse ® , Keds ® , Kelly & Katie ® , Mix No.6 ® , Pro-Keds ® , and Topo Athletic ® .
INTELLECTUAL PROPERTY We own numerous trademarks, service marks, and domains in the U.S., Canada, and internationally, such as Crown Vintage ® , DSW ® , DSW Shoe Warehouse ® , DSW Designer Shoe Warehouse ® , Keds ® , Kelly & Katie ® , Mix No.6 ® , Pro-Keds ® , Rubino ® , and Topo Athletic ® .
The values are a creation of our associates, inclusive and representative of our global organization, having resulted from a process wherein associates were invited to join conversations to identify and define our organizational values and subsequently discuss how to integrate them into our culture.
The values are a creation of our associates and representative of our global organization, having resulted from a process wherein associates were invited to join conversations to identify and define our organizational values and subsequently discuss how to integrate them into our culture.
All full-time associates are eligible for: • Company subsidized dental insurance. • Company-provided life and accidental death and dismemberment insurance. • Pay for short-term disability, parental leave, and jury duty. • Voluntary benefits (long-term disability, accident, hospital indemnity and critical illness) and flexible spending accounts. • Adoption assistance with reimbursement of up to $10,000 of eligible expenses for each adoption. • Up to $5,250 in tuition reimbursement annually, plus access to partner schools who offer capped annual tuition to receive a degree at little to no cost when combined with our reimbursement.
All full-time associates are eligible for: • Company subsidized dental insurance. • Company-provided life and accidental death and dismemberment insurance. • Pay for short-term disability, parental leave, and jury duty. • Voluntary benefits (long-term disability, accident, hospital indemnity and critical illness) and flexible spending accounts. • Adoption assistance with reimbursement of up to $10,000 of eligible expenses for each adoption. 4 Table of contents • Up to $5,250 in tuition reimbursement annually, plus access to partner schools who offer capped annual tuition to receive a degree at little to no cost when combined with our reimbursement.
Prior to production, our sourcing offices inspect samples and prototypes of each style and monitor the quality of the production process. We manage our inventory levels based on existing orders and anticipated sales. The manufacturers of our products are required to meet our quality, human rights, local compliance, safety, and other standard requirements.
Prior to production, we inspect samples and prototypes of each style and monitor the quality of the production process. We manage our inventory levels based on existing orders and anticipated sales. The manufacturers of our products are required to meet our quality, human rights, local compliance, safety, and other standard requirements.
These vendors are expected to respect local laws, rules, and regulations of the countries in which they operate and have pledged to follow the standards set forth in the Company's Vendor Code of Conduct, which details our dedication to human rights, labor rights, environmental responsibility, and workplace safety.
These suppliers are expected to respect local laws, rules, and regulations of the countries in which they operate and have pledged to follow the standards set forth in the Company's Vendor Code of Conduct, which details our dedication to human rights, labor rights, environmental responsibility, and workplace safety.
TALENT DEVELOPMENT To help our associates succeed in their roles, we emphasize continuous learning and development opportunities. Training provided through our online learning platform includes nearly 240 resources, including videos, self-paced on-demand learning, and virtual instructor-led sessions. A wide variety of resources are designed to address the needs of our entire workforce, from entry-level associates to our most senior executives.
TALENT DEVELOPMENT To help our associates succeed in their roles, we emphasize continuous learning and development opportunities. Training provided through our online learning platform includes 269 resources, including videos, self-paced on-demand learning, and virtual instructor-led sessions. A wide variety of resources are designed to address the needs of our entire workforce, from entry-level associates to our most senior executives.
These plans include prescription and vision insurance, as well as: • Concierge care coordinators and nurses who can assist with clinical support for health conditions, locate high-quality physicians, advocate to resolve insurance billing issues, connect members to available community resources, and answer member benefit questions. • Free unlimited access to U.S. board-certified physicians, via phone or video, for general medical, dermatology, and mental health services. • Specialty prescription drug medications, with many at no cost. • Concierge support and access to fertility centers across the U.S. as well as up to two cycles of in vitro fertilization or other fertility services in addition to necessary fertility medication and testing. • Expert nurse care coordinator support provided through our maternity program. • Medical access travel benefits for those who must travel greater than 100 miles from home to obtain access to covered medical care.
These plans include prescription and vision insurance, as well as: • Concierge plan advisors who can assist with clinical support for health conditions, locate high-quality physicians, advocate to resolve insurance billing issues, connect members to available community resources, and answer benefits questions. • Free unlimited access to U.S. board-certified physicians, via phone or video, for general medical, dermatology, and mental health services. • Specialty prescription drug medications, with many at no cost. • Concierge support and access to fertility centers across the U.S., as well as up to two cycles of in vitro fertilization or other fertility services in addition to necessary fertility medication and testing. • Expert nurse care coordinator support provided through our maternity program. • Medical access travel benefits for those who must travel greater than 100 miles from home to obtain access to covered medical care.
This reporting schedule is followed by many national retail companies and typically results in a 52-week fiscal year (including 2022), but occasionally will contain an additional week resulting in a 53-week fiscal year (including 2023).
This reporting schedule is followed by many national retail companies and typically results in a 52-week fiscal year (including 2024), but occasionally will contain an additional week resulting in a 53-week fiscal year (including 2023).
As of February 3, 2024, we employed approximately 14,000 associates worldwide, approximately 12,000 of whom are employed in the U.S. TOTAL REWARDS To remain an employer of choice and maintain the strength of our workforce, we continually assess the current business environment and labor market to refine our compensation practices, benefit programs, and other associate resources.
As of February 1, 2025, we employed approximately 14,000 associates worldwide, approximately 12,000 of whom are employed in the U.S. TOTAL REWARDS To remain an employer of choice and maintain the strength of our workforce, we continually assess the current business environment and labor market to refine our compensation practices, benefit programs, and other associate resources.
To support these objectives, our human resources programs aim to: • develop associates to prepare them for critical roles and leadership positions for the future; • reward and support associates through competitive pay, benefits, and perquisite programs; • cultivate an associate-centric culture where our associates feel empowered, valued, inspired, and included; • acquire talent and facilitate internal talent mobility to create a high-performing diverse workforce; • embrace hybrid and remote work arrangements where possible to utilize flexibility as a competitive advantage; and • evolve and invest in technology, tools, and resources to support our associates at work.
To support these objectives, our human resources programs aim to: • develop associates to prepare them for critical roles and leadership positions for the future; • reward and support associates through competitive pay, benefits, and perquisite programs; • cultivate an associate-centric culture where all associates feel empowered, valued, inspired, and included; • acquire talent and facilitate internal talent mobility to create a high-performing workforce; 3 Table of contents • embrace hybrid and remote work arrangements where possible to utilize flexibility as a competitive advantage; and • evolve and invest in technology, tools, and resources to support our associates at work.
All groups are inclusive and open to any associate who wants to join, and associates can join as many groups as they choose. Our BRGs, CIGs, and Diversity Councils provide a unique strategic perspective based on shared experience, background, and allyship while promoting diversity and belonging in our workplace and community in alignment with our business goals.
All groups are inclusive and open to any associate who wants to join, and associates can join as many groups as they choose. Our BRGs, CIGs, and Field Councils provide a unique strategic perspective based on shared experiences, background, and allyship while promoting belonging in our workplace and community in alignment with our business goals.
Our fiscal year ends on the Saturday nearest to January 31. References to a fiscal year (e.g., "2023") refer to the calendar year in which the fiscal year begins.
Our fiscal year ends on the Saturday nearest to January 31. References to a fiscal year (e.g., "2024") refer to the calendar year in which the fiscal year begins.
SOURCING AND DISTRIBUTION We source each of our product lines based on the individual design, style and quality specifications of the products. Our Brand Portfolio segment does not own or operate manufacturing facilities; rather, we use our sourcing offices in China and Brazil to procure our products from third-party manufacturers.
SOURCING AND DISTRIBUTION We source each of our product lines based on the individual design, style, and quality specifications of the products. Our Brand Portfolio segment does not own or operate manufacturing facilities; rather, we primarily use our sourcing office in China to procure our products from third-party manufacturers.
Retail segment operations, the majority of our inventory is shipped directly from suppliers to our distribution center, which is located in Columbus, Ohio, and a West Coast facility that is operated by a third party, where the inventory is then processed, sorted, and shipped to one of our pool locations located throughout the country, and then on to the stores.
Retail segment operations, the majority of our inventory is shipped directly from suppliers to our distribution center located in Columbus, Ohio ("Midwest Logistics Center") and a West Coast facility, previously located in California, that is operated by a third party, where the inventory is then processed, sorted, and shipped to one of our pool locations located throughout the country, and then on to the stores.
In addition, the countries where our products are manufactured or imported from may, from time to time, impose additional duties, 7 Table of contents tariffs, or other restrictions on our imports or adversely modify existing restrictions.
In addition, the countries where our products are manufactured or imported from may, from time to time, impose additional duties, tariffs, or other restrictions on our imports or adversely modify existing restrictions.
Retail and Canada Retail segments are referred to as the "retail segments." The Brand Portfolio segment earns revenue from the wholesale of products to retailers and international distributors, commissions for serving retailers as the design and buying agent for products under private labels, and the sale of branded products through our direct-to-consumer e-commerce sites for the Vince Camuto, Keds, Hush Puppies, and Topo brands.
The Brand Portfolio segment earns revenue from the wholesale of our branded products to retailers and international distributors, the sale of our Vince Camuto, Keds, and Topo brands through direct-to-consumer e-commerce sites, and commissions for serving retailers as the design and buying agent for products under private labels.
RETAIL SEGMENTS BANNERS We offer a wide assortment of dress, casual, and athletic footwear and accessories for women, men and kids under the following banners: • DSW Designer Shoe Warehouse- Our DSW banner, which is offered both in the United States ("U.S.") and in Canada, is the destination for on-trend and fashion-forward footwear and accessory brands at a great value every single day. • The Shoe Company- The Shoe Company banner in Canada offers on-trend footwear and accessory brands that target every-day family styles at a great value every single day.
RETAIL SEGMENTS BANNERS We offer a wide assortment of dress, casual, and athletic footwear and accessories for women, men, and kids in stores and online under the following banners: • DSW Designer Shoe Warehouse- Our DSW banner, which is offered both in the U.S. and in Canada, is the destination for on-trend and fashion-forward footwear and accessory brands at a great value every single day. • The Shoe Co.- The Shoe Co. banner in Canada offers on-trend footwear and accessory brands that target every-day family styles at a great value every single day. • Rubino- Our Rubino banner in Quebec, Canada offers on-trend footwear and accessory brands that target every-day family styles at affordable prices.
Results of the surveys are measured and analyzed with a goal of enhancing the associate experience, strengthening engagement and retention, and driving change. In addition to Company-led surveys, leaders are encouraged to conduct "skip level" touch bases, host roundtable chats, and conduct follow-up activities to better understand associate feedback.
Results of the surveys are measured and analyzed at the team, department and Company-wide levels with a goal of enhancing the associate experience, strengthening engagement and retention, and driving positive change. In addition to Company-led surveys, leaders are encouraged to conduct "skip level" touch bases, host roundtable chats, and conduct follow-up activities throughout the year to better understand associate feedback.
The following table presents the number of members enrolled in our loyalty programs that have made a purchase over the prior two years and the percentage of retail segments' net sales generated from these members: 2023 2022 Number of VIP members at end of the fiscal year (in millions) 32.1 32.1 Percentage of retail segments' net sales generated from VIP members 90 % 89 % DISTRIBUTION AND FULFILLMENT For our U.S.
The following table presents the number of members enrolled in our VIP rewards programs that have made a purchase over the prior two years and the percentage of retail segments' net sales generated from these members: 2024 2023 Number of VIP members at end of the fiscal year (in millions) 30.8 32.1 Percentage of retail segments' net sales generated from VIP members 86 % 90 % DISTRIBUTION For our U.S.
Formal ways for associates, on a voluntary basis, to be involved and ignite innovation and positive change include: • BRGs - associate-led groups organized around a common diversity dimension to foster an inclusive and engaging work environment for all. • CIGs - associate-led groups based on a common passion or interest to drive a sense of community and shared purpose. • Diversity Councils - associate-led groups organized to create a sense of inclusion and belonging for those who work in our stores and logistics centers.
Formal ways for associates, on a voluntary basis, to be involved, ignite innovation, and influence positive changes include: • BRGs - associate-led groups organized around a common dimension to foster an inclusive work environment where everyone belongs. • CIGs - associate-led groups based on a common passion or interest to drive a sense of community and shared purpose. • Field Councils - associate-led groups organized to create a sense of belonging for those who work in our stores and logistics centers.
The following table presents the percentages of the Brand Portfolio segment's purchases of merchandise units sourced by country: 2023 2022 China 76 % 76 % Vietnam 10 % 9 % India 5 % 4 % Cambodia 5 % 1 % Brazil 3 % 9 % All other foreign locations 1 % 1 % COMPETITION The footwear market is highly competitive with few barriers to entry.
The following table presents the percentages of the Brand Portfolio segment's purchases of merchandise units sourced by country: 2024 2023 China 77 % 76 % Vietnam 11 % 10 % India 5 % 5 % Cambodia 5 % 5 % All other foreign locations 2 % 4 % COMPETITION The footwear market is highly competitive with few barriers to entry.
Not only do we strive to create positive impacts within our organization, but we aim to better the communities in which we conduct business. In 2023, we officially launched our charitable Designer Brands Foundation to expand our corporate giving.
PHILANTHROPY THROUGH DESIGNER BRANDS FOUNDATION We are committed to good corporate citizenship. Not only do we strive to create positive impacts within our organization, but we also aim to better the communities in which we conduct business. In 2023, we launched our charitable Designer Brands Foundation to expand our corporate giving.
DIVERSITY, EQUITY, AND INCLUSION From the inside out, DE&I at Designer Brands starts with an inclusive and equitable workplace, one where all associates belong and are empowered to be their authentic selves, bringing their unique backgrounds, perspectives, and experiences to the table. We believe that empowering our differences powers up innovation and ignites positive change.
WE BELONG From the inside out, Designer Brands starts with a workplace where all associates belong and are empowered to be their authentic selves, bringing their unique backgrounds, perspectives, and experiences to the table. We believe that empowering our differences powers up innovation and ignites positive change.
Retail segment operates the DSW Designer Shoe Warehouse ("DSW") banner through its direct-to-consumer U.S. stores and e-commerce site. The Canada Retail segment operates The Shoe Company and DSW banners through its direct-to-consumer Canada stores and e-commerce sites. Together, the U.S.
Retail segment operates the DSW Designer Shoe Warehouse ("DSW") banner through its direct-to-consumer stores and e-commerce site in the United States ("U.S."). The Canada Retail segment operates The Shoe Co., DSW, and Rubino banners through its direct-to-consumer stores and e-commerce sites in Canada.
For example, substantially all of our import operations are subject to complex trade and customs laws, regulations, and tax requirements, such as sanctions orders or tariffs set by governments through mutual agreements or unilateral actions.
GOVERNMENT REGULATIONS Our business activities are global and subject to various federal, state, local, and foreign laws, rules, and regulations. For example, substantially all of our import operations are subject to complex trade and customs laws, regulations, and tax requirements, such as sanctions orders or tariffs set by governments through mutual agreements or unilateral actions.
Community - As the places where our associates live and work are vitally important to us, we support the organizations that put our local communities first and provide opportunities for our associates to give back through volunteering and donations.
Inclusion - Support organizations whose key constituents align with our Business Resource Groups ("BRGs"). 3. Local Community - As the places where our associates live and work are vitally important to us, we support the organizations that put our local communities first and provide opportunities for our associates to give back through volunteering and donations.
For example, we regularly review external market data, internal pay grades, position of pay in the pay range, as well as individual factors such as performance, training, and prior experience related to the work, to ensure fair pay.
To this end, we take several steps to ensure pay rates are fair, competitive, and based on job-related factors. For example, we regularly review external market data, internal pay grades, position of pay in the pay range, as well as individual factors such as performance, training, and prior experience related to the work, to ensure fair pay.
ASSORTMENT In the retail segments, we sell a large assortment of national brands and brands we have rights to sell through ownership or license arrangements, which we refer to as "Owned Brands." We believe that offering a robust assortment of our Owned Brands alongside top national brands within the retail segments provides our customers with a unique assortment and allows us to lean into our integrated business model for providing value.
We believe that offering a robust assortment of our Owned Brands alongside top national brands within the retail segments provides our customers with a unique assortment and allows us to lean into our integrated business model for providing value.
Our VIP rewards programs provide timely customer insights and create stronger customer engagement, while driving a higher-than-average level of customer spend.
VIP rewards programs, which enable members to earn points toward discounts on future purchases. Our VIP rewards programs provide timely customer insights and create stronger customer engagement, while driving a higher-than-average level of customer spend.
Our e-commerce platforms offer customers convenient, 24/7 access to our products through our websites, including mobile-optimized sites, and our mobile DSW application. Our omni-channel capabilities allow customers to order a wide range of styles, sizes, widths and categories. Online orders in the U.S. and Canada can be fulfilled from any one of our stores.
Our e-commerce platforms offer customers convenient, 24/7 access to our products through our websites, including mobile-optimized sites, and our mobile applications. Our omni-channel capabilities allow customers to order a wide range of styles, sizes, widths and categories.
We have a 40.0% ownership interest in ABG-Camuto, a joint venture that owns the intellectual property rights of Vince Camuto and other brands. We are party to a licensing agreement with ABG-Camuto, which grants us the exclusive right to design, source, and sell footwear and handbags under the brands that ABG-Camuto owns.
We are party to a licensing agreement with ABG-Camuto, which grants us the exclusive right to design, source, and sell footwear and handbags under the brands that ABG-Camuto owns. In addition, we own the licensing rights for footwear and handbags of the Lucky Brand and the licensing rights for footwear of the Jessica Simpson brand.
We compete against a diverse group of manufacturers and retailers, including department stores, online retailers, mall-based shoe stores, national chains, independent shoe retailers, single-brand specialty retailers, brand-oriented discounters, multi-channel specialty retailers, and brand suppliers.
We compete against a diverse group of manufacturers and retailers, including online retailers, single-brand specialty retailers, multi-channel specialty retailers, brand suppliers, department stores, mall-based shoe stores, national chains, independent shoe retailers, and brand-oriented discounters. In addition, our wholesale retailer customers sell shoes purchased from competing footwear suppliers with brands that are well known.
The Brand Portfolio segment has five customers that made up 40.0% of its segment net sales in 2023, excluding intersegment net sales, and the loss of any or all of these customers could have a material adverse effect on the Brand Portfolio segment.
The Brand Portfolio segment has five customers that made up 38.0% of its segment net sales in 2024, excluding intersegment net sales, and the loss of any or all of these customers could have a material adverse effect on the Brand Portfolio segment. 2 Table of contents LICENSING RIGHTS We have a 40.0% equity investment ownership interest in ABG-Camuto, LLC ("ABG-Camuto"), a joint venture that owns the intellectual property rights of Vince Camuto and other brands.
Online orders from the U.S. can also be fulfilled from our distribution center located in New Jersey ("East Coast Logistics Center") , which is a shared facility with the Brand Portfolio segment , or directly from our vendors (referred to as "drop ship").
Online orders from the U.S. can also be fulfilled from our distribution center located in New Jersey ("East Coast Logistics Center") , which is a shared facility with the Brand Portfolio segment . Our order routing optimization system determines the best location to fulfill digitally-demanded products, which allows us to optimize our operating profit.
Our associates strive every day to create a welcoming and inclusive environment for themselves and our customers to advance our mission of inspiring self-expression. One of our core strategies is to invest in and support our associates who are key to differentiating our products and experiences in the competitive footwear market.
One of our core talent strategies is to invest in and support our associates who are key to differentiating our products and experiences in the competitive footwear market.
Upon exiting the Company, associates who voluntarily leave the business are provided with an exit survey to help us measure satisfaction and engagement, in addition to identifying the factors that may have contributed to pursuing another opportunity.
Upon exiting the Company, associates who voluntarily leave the business are provided with an exit survey to help us measure satisfaction and engagement, in addition to identifying the factors that may have contributed to pursuing another opportunity. 6 Table of contents We continue to develop opportunities for associate connection and engagement in the evolving workplace environment by listening to our associates and taking actions on what is most important and impactful to them.
Since partnering with Soles4Souls in 2018, we are proud to have donated over 9 million pairs of shoes, including 1.7 million pairs in 2023. In 2023, we focused our store register donation efforts in support of Soles4Souls, generating over $2.1 million in customer-funded donations, which is more than three times the monetary donations we made to Soles4Souls in 2022. 2.
Since partnering with Soles4Souls in 2018, we are proud to have donated over 11 million pairs of shoes, including 1.8 million pairs in 2024. In 2024, we continued to enhance our shoe donation experience and Soles4Souls store register donation efforts with store register donations generating over $1.6 million in customer-funded donations. 2.
Refer to Note 3 , Revenue , of the consolidated financial statements of this Form 10-K, for the Brand Portfolio segment's total net sales attributable to each channel.
We also earn commission-based income for serving retailers as their design and buying agent, while leveraging our overall design and sourcing infrastructure. Refer to Note 3 , Revenue , of the consolidated financial statements of this Form 10-K, for the Brand Portfolio segment's total net sales attributable to each channel.
AVAILABLE IN FORMATION Information about Designer Brands, including its reports filed with or furnished to the Securities and Exchange Commission ("SEC"), is available through our website at www.designerbrands.com. Such reports are accessible at no charge through our website and are made available as soon as reasonably practicable after such material is filed with or furnished to the SEC.
Such reports are accessible at no charge through our website and are made available as soon as reasonably practicable after such material is filed with or furnished to the SEC. The SEC also maintains a website that contains reports, proxy statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov.
During 2023, over 8,000 associates completed approximately 80,000 learning experiences through our online learning platfor m. We invest resources in professional development and growth as a means of improving associate performance, engagement, and retention.
During 2024, approximately 7,100 associates completed over 84,000 learning experiences through our online learning platfor m. We invest resources in professional development and growth as a means of improving associate performance, engagement, and retention. We believe that our continued focus on frequent and constructive performance feedback, talent reviews, succession planning, and retention have contributed to a strong internal promotion rate.
Our order routing optimization system determines the best location to fulfill digitally-demanded products, which allows us to optimize our operating profit. To further meet customer demand of how they receive products, we provide our customers options to Buy Online Pick Up in Store, Buy Online Ship to Store, and Curbside Pickup in the majority of our locations.
To further meet customer demand of how they receive products, we provide our customers the option to buy online and pick up in stores for the majority of our store locations.
Our inventory management strategy is focused on continuing to meet consumer demand, while improving our efficiency over the long term by enhancing systems and processes. BRAND PORTFOLIO SEGMENT BRANDS The Brand Portfolio segment designs, develops, and sources footwear and accessories of our Owned Brands for the sale of wholesale merchandise to our retail segments and our other retailer customers.
We manage our inventory levels based on anticipated sales and the delivery requirements of our customers. Our inventory management strategy is focused on continuing to meet consumer demand, while improving our efficiency over the long term by enhancing systems and processes.
Our inclusive benefits approach provides support and resources needed to care for them and their loved ones. We invest in comprehensive health and wellbeing benefits that help attract and retain the talent necessary to achieve our goals, some of which are highlighted below.
We invest in comprehensive health and wellbeing benefits, some of which are highlighted below, that help attract and retain the talent necessary to achieve our goals. Comprehensive health insurance coverage is available to full-time and Affordable Care Act eligible part-time associates through multiple medical plans.
Refer to Note 3 , Revenue , of the consolidated financial statements of this Form 10-K for the disaggregation of net sales. 1 Table of contents The following table presents certain data about the sourcing of our merchandise for our retail segments: 2023 2022 Number of unrelated third-party merchandise vendors at end of fiscal year 412 420 Percentage of purchases from: Brand Portfolio segment sourced Owned Brands 9 % 8 % Top three national brand vendors 21 % 22 % LOYALTY PROGRAMS We invite customers to join our VIP rewards programs, which enable members to earn points toward discounts on future purchases.
The following table presents certain data about the sourcing of our merchandise for our retail segments: 2024 2023 Number of unrelated third-party merchandise suppliers at end of fiscal year 392 412 Percentage of purchases from: Brand Portfolio segment sourced Owned Brands 9 % 9 % Top three national brand suppliers 25 % 21 % REWARD PROGRAMS We invite our U.S. and Canada retail customers to join our DSW and The Shoe Co.
We consider our trademarks, service marks, and domains to have significant value and to be important to building our name recognition. SEASONALITY Our business consists of two principal selling seasons: the spring season, which includes the first and second fiscal quarters, and the fall season, which includes the third and fourth fiscal quarters.
SEASONALITY Our business consists of two principal selling seasons: the spring season, which includes the first and second fiscal quarters, and the fall season, which includes the third and fourth fiscal quarters. Typically, net sales are slightly higher in the fall season than in the spring season.
Two Ten Footwear Foundation - Two Ten provides scholarships and financial aid as well as free counseling and community resources to people working in the footwear industry. Many of our own associates have been beneficiaries of Two Ten's programs. We support Two Ten with corporate financial donations and subject matter expertise to continue to enrich their community program offerings. 3.
Many of our own associates have been beneficiaries of Two Ten's programs. We support Two Ten with corporate financial donations and subject matter expertise to continue to enrich their community programs. 5 Table of contents 3. Hometown Partnerships - We continue to expand our existing local nonprofit partnerships through volunteering and grants from our Designer Brands Foundation.
Typically, net sales are slightly higher in the fall season than in the spring season. However, this may not hold true when net sales are influenced by global economic conditions, changes in weather conditions, the timing of acquisitions, and our customers' interest in new seasonal styles.
However, this may not hold true when net sales are influenced by global economic conditions, changes in weather conditions, the timing of acquisitions, and our customers' interest in new seasonal styles. AVAILABLE IN FORMATION Information about Designer Brands, including its reports filed with or furnished to the Securities and Exchange Commission ("SEC"), is available through our website at www.designerbrands.com.
Likewise, returns may be shipped to us or brought back to any of our locations.
Likewise, returns may be shipped to us or brought back to any of our store locations. 1 Table of contents ASSORTMENT In the retail segments, we sell a large assortment of national brands and Owned Brands.
We are committed to continuing to walk the walk and aspiring to create conditions for everyone to put their best foot forward without barriers and to reach their highest potential.
We are committed to continuing to walk the talk and aspire to create conditions for everyone to put their best foot forward without barriers to reach their highest potential. We believe that paying our associates fairly enables us to deliver on our goal of creating an environment where we can all be ourselves, contribute ideas, and do our best work.
DBI Gives, our philanthropic Community Interest Group ("CIG"), aims to inspire community involvement and enhance associate engagement through volunteering and three primary areas of partnership: 1. Soles4Souls - Soles4Souls creates sustainable jobs and provides relief through the distribution of shoes and clothing around the world, while giving shoes and garments a second life.
With the Designer Brands Foundation in place, we have been able to significantly expand our Company's giving through the following: 1. Soles4Souls - Soles4Souls creates sustainable jobs and provides relief through the distribution of shoes and clothing around the world, while giving shoes and garments a second life.
In addition to disaggregating our net sales between Owned Brands and national brands, we disaggregate our net sales for our retail segments into four primary categories: women's footwear, men's footwear, kids' footwear, and accessories and other.
We disaggregate our net sales for our retail segments into non-athletic women's, men's and kids' footwear, athletic footwear, and accessories and other. Refer to Note 3 , Revenue , of the consolidated financial statements of this Form 10-K for the disaggregation of net sales.
Our DE&I principles are also reflected in our associate training programs, which address our policies against harassment, bullying, and bias in the workplace. 6 Table of contents We strive to maintain a diverse and inclusive workforce.
We proudly support nine BRGs, three CIGs, and two Field Councils (one in the U.S. and one in Canada). Our value of We Belong is also reflected in our associate training programs, which address our policies against harassment, bullying, and bias in the workplace.
Our inventory can also be shipped directly to our customers from our East Coast Logistics Center . For our Canada Retail segment, we engage a logistics service provider to receive and distribute inventory to our stores. Through our ship-from-store capability, both in the U.S. and in Canada, inventory is shipped directly from our stores to customers.
During March 2025, the West Coast facility in California was replaced with our new distribution center located in Arizona ("West Coast Logistics Center"), which is also operated by a third party. For our Canada Retail segment, we engage a logistics service provider to receive and distribute inventory to the majority of our stores. Inventory management is important to our business.
We also earn commission-based income for serving retailers as their design and buying agent, while leveraging our overall design and sourcing infrastructure. In addition, we sell our branded products on direct-to-consumer e-commerce sites for the Vince Camuto, Keds, Hush Puppies, and Topo brands.
BRAND PORTFOLIO SEGMENT BRANDS The Brand Portfolio segment designs, develops, and sources footwear and accessories of our Owned Brands for the sale of wholesale merchandise to our retail segments and our other retailer customers. In addition, we sell our branded products on direct-to-consumer e-commerce sites for the Vince Camuto, Keds, and Topo brands.
Removed
Through our U.S. drop ship program, inventory is shipped from our vendors' warehouses directly to our customers. Inventory management is important to our business. We manage our inventory levels based on anticipated sales and the delivery requirements of our customers.
Added
On February 4, 2023, we completed the acquisition of the Keds business ("Keds") from Wolverine World Wide, Inc. This acquisition expanded the reach of our Owned Brands offerings, which refers to those brands that we have rights to sell through ownership or license arrangements, into casual and athleisure footwear in the wholesale and direct-to-consumer e-commerce channels.
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Using 2021 net sales as a baseline, we have a long-term goal of doubling the net sales from our Owned Brands by 2026 for all of our segments combined, while maintaining our net sales of national brands in our retail segments.
Added
Keds is included within our Brand Portfolio segment. On April 8, 2024, we completed the acquisition of Rubino Shoes Inc. ("Rubino"), a retailer of branded footwear, handbags, and accessories that operates Rubino banner stores and an e-commerce site in Quebec, Canada. The acquisition of Rubino has allowed our Canada Retail segment to expand into the province of Quebec.
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We expect this long-term goal will result in approximately one-third of our total net sales coming from Owned Brands by 2026. During 2023 and 2022, the net sales of Owned Brands represented 25.8% and 25.5%, respectively, of consolidated net sales, compared to a baseline of 19.6% from 2021.
Added
Online orders in the U.S. and Canada, for the DSW and The Shoe Co. banners, can be fulfilled from our stores or directly from our suppliers for certain products (referred to as "drop ship").
Removed
We believe that increasing net sales from our Owned Brands products will not only drive growth and expand our gross margin but will also elevate our presence as a brand builder.
Added
During 2024 and 2023, the net sales of Owned Brands for all of our segments combined represented 23.3% and 25.8%, respectively, of consolidated net sales.
Removed
Refer to Note 3 , Revenue , of the consolidated financial statements of this Form 10-K, for the disaggregation of net sales. 2 Table of contents Equity Investments and Licensing Rights- Our equity investments in ABG-Camuto, LLC ("ABG-Camuto") and Le Tigre 360 Global LLC ("Le Tigre") are an integral part of the Brand Portfolio segment.
Added
HUMAN CAPITAL MANAGEMENT We believe the strength of our workforce is critical to our success. Our associates strive every day to create a welcoming and inclusive environment for themselves and our customers to advance our mission of being shoe obsessed.
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In July 2022, we acquired a 33.3% ownership interest in Le Tigre, which manages the Le Tigre brand. We are also party to a license agreement with Le Tigre, which grants us the exclusive right to design, source, and sell Le Tigre-branded footwear.
Added
Health & Wellbeing- We understand the importance of taking care of our associates and believe that every associate's journey is unique. We approach health and wellbeing design with a focus on building equitable benefits that support and provide valuable resources needed to care for our associates and their loved ones.
Removed
In addition, we own the licensing rights for footwear and handbags of the Lucky Brand and the licensing rights for footwear of the Jessica Simpson brand and, beginning in 2023, the Hush Puppies brand. Acquisitions- On December 13, 2022, we acquired a 79.4% ownership interest in Topo Athletic LLC ("Topo").
Added
Associate Relief Funding - In 2024, we established our DBI Cares Associate Relief Fund to provide financial assistance to DBI associates experiencing unexpected hardships and emergencies. In addition, we partner with Two Ten Footwear Foundation ("Two Ten") to provide scholarships and financial aid, as well as free counseling and community resources, to people working in the footwear industry.
Removed
Topo is a designer of specialty athletic footwear that sells its Topo branded products at wholesale to retailers and international distributors and through its direct-to-consumer e-commerce site. The Topo acquisition provides us with expanded capabilities within the athletic footwear market.
Added
Through our grants and associate led affinity groups, we aim to support and better the communities in which we live, serve, and work. In 2024, we issued our first round of public community grants totaling $89,000 to nonprofits across the U.S.
Removed
On February 4, 2023, we acquired the Keds business ("Keds"), including the Keds brand, inventory, and inventory-related accounts payable, from Wolverine World Wide, Inc. The Keds business designs, sources, and sells branded footwear at wholesale to retailers and international distributors and through its direct-to-consumer e-commerce sites.
Added
Our DBI Gives volunteerism-focused Community Interest Group ("CIG") led multi-city volunteer opportunities for associates to come together and participate in community clean ups during Earth Month, as well as gift collection and wrapping during the holiday season.
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In addition, our wholesale retailer customers sell shoes purchased from competing footwear suppliers with brands that are well known. 3 Table of contents CHIEF EXECUTIVE OFFICER TRANSITION In January 2023, we announced our succession process relating to the Company's Chief Executive Officer ("CEO") role whereby our former CEO, Roger Rawlins, stepped down from his role as CEO and as a member of the Company's Board of Directors (the "Board") effective April 1, 2023, at which time Doug Howe, who previously served as Executive Vice President of the Company and President of DSW, assumed the CEO role and joined the Board.
Added
In 2024, we launched the We Belong Microlearning development initiative which aims to create more welcoming workplaces by providing easily digestible training sessions. We believe in taking strides and making progress towards unity and belonging, turning values into actions. Each step we take brings us closer to realizing our vision.
Removed
As previously disclosed, Mr. Rawlins commenced service as a strategic advisor to the Company and the Board effective April 1, 2023 and will continue in this role through April 1, 2024 under the terms of a transition and consulting agreement. HUMAN CAPITAL MANAGEMENT We believe the strength of our workforce is critical to our success.
Added
One of the things our associates tell us is important to them is recognition. Our "Inspire Greatness" recognition program provides various means to recognize and reward associate accomplishments and work anniversaries, both one-on-one with the associates and during large meeting celebrations.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThese adverse economic conditions include inflation, slower growth or recession, new or increased tariffs and other barriers to trade, changes to fiscal and monetary policy, higher interest rates, high unemployment, decreased consumer confidence in the economy, public health threats, international hostilities, foreign currency exchange rate fluctuations, conditions affecting the retail environment for products we sell, and other matters that influence consumer confidence. 8 Table of contents Throughout 2023, a downturn in global economic conditions, most notably the growing concerns of a potential recession, rising interest rates, inflationary pressures, and significant foreign currency volatility, adversely impacted discretionary consumer income levels and spending for our customers.
Biggest changeThese adverse economic conditions include inflation, economic downturns, recession or slower economic growth, new or increased tariffs and other barriers to trade, changes to fiscal and monetary policy, higher interest rates, high unemployment, decreased consumer confidence in the economy, public health threats, supply chain disruptions, international hostilities, foreign currency exchange rate fluctuations, conditions affecting the retail environment for products we sell, and other matters that influence consumer confidence.
We compete against a diverse group of manufacturers and retailers, including department stores, online retailers, mall-based shoe stores, national chains, independent shoe retailers, single-brand specialty retailers, brand-oriented discounters, multi-channel specialty retailers, and brand suppliers. In addition, our wholesale retailer customers sell shoes purchased from competing footwear suppliers with brands that are well known.
We compete against a diverse group of manufacturers and retailers, including online retailers, single-brand specialty retailers, multi-channel specialty retailers, brand suppliers, department stores, mall-based shoe stores, national chains, independent shoe retailers, and brand-oriented discounters. In addition, our wholesale retailer customers sell shoes purchased from competing footwear suppliers with brands that are well known.
Security breaches can also occur as a result of non-technical issues, including intentional or inadvertent actions by our associates, our third-party vendors, or their personnel, or other parties.
Security breaches can also occur as a result of non-technical issues, including intentional or inadvertent actions by our associates, our third-party vendors, their personnel, or other parties.
Risks associated with these initiatives include any increased public focus, including by governmental and nongovernmental organizations, new laws and regulations, increased costs associated with sustainability efforts and/or compliance with laws and regulations, as well as increased pressure to expand our CSR and sustainability disclosures in these areas, make commitments, set targets, or establish additional goals and take actions to achieve such targets and goals.
Risks associated with these initiatives include any increased public focus, including by governmental and nongovernmental organizations, new laws and regulations, increased costs associated with sustainability efforts and/or compliance with laws and regulations, as well as increased pressure to expand our CSR and ESG disclosures in these areas, make commitments, set targets, or establish additional goals and take actions to achieve such targets and goals.
Any of these incidents could lead to interruptions or shutdowns of our platform, disruptions in our ability to process customer orders or to track, record, or analyze the sale of our products, loss or corruption of data, or unauthorized access to or acquisition of personal information or other sensitive information, such as our intellectual property.
Any of these incidents could lead to interruptions or shutdowns of our platform, disruptions in our ability to process customer orders or to track, record, or analyze the sale of our products, loss or corruption of data, loss of funds, or unauthorized access to or acquisition of personal information or other sensitive information, such as our intellectual property.
Our success is largely dependent on our ability to provide our customers with a merchandise assortment that they want and our ability to provide a consistent, high-quality customer experience. We believe that maintaining and enhancing the reputation and recognition of our banners and our Owned Brands are critical to our ability to expand and retain our customer base.
Our success is largely dependent on our ability to provide our customers with a merchandise assortment that they want and our ability to provide a consistent, high-quality customer experience. We believe that maintaining and enhancing the reputation and recognition of our banners and our Owned Brands is critical to our ability to expand and retain our customer base.
Our amended and restated articles of incorporation authorize our Board to issue up to 100 million preferred shares and to determine the powers, preferences, privileges, rights, including voting rights, qualifications, limitations, and restrictions on those shares, without any further vote or action by the shareholders.
Our amended and restated articles of incorporation authorize our Board of Directors (the "Board") to issue up to 100 million preferred shares and to determine the powers, preferences, privileges, rights, including voting rights, qualifications, limitations, and restrictions on those shares, without any further vote or action by the shareholders.
Properties of this Form 10-K, as well as locations operated by our vendors, may be subject to natural disasters, other extreme weather conditions, and negative climate change patterns. Weather-related risks, including resource scarcity, rationing, or unexpected costs from increases in fuel or raw material prices, could disrupt our operations.
Properties of this Form 10-K, as well as locations operated by our vendors, may be subject to natural disasters, other extreme weather conditions, and negative climate change patterns, which may be exacerbated by climate change. Weather-related risks, including resource scarcity, rationing, or unexpected costs from increases in fuel or raw material prices, could disrupt our operations.
We require our business partners to operate in compliance with applicable laws and regulations and our internal requirements. However, we do not control such third parties or their labor and business practices. The violation of labor or other laws by any one of our vendors could have a material adverse effect on our business.
We require our business partners to operate in compliance with applicable laws and regulations and our internal requirements. However, we do not control such third parties or their labor and business practices. The violation of labor or other laws by any one of our suppliers could have a material adverse effect on our business.
If we fail to maintain strong relationships with these vendors or if they fail to ensure the quality of merchandise that they supply to us, our ability to provide our customers with merchandise they want at favorable prices may be limited, which could have a material adverse effect on our business.
If we fail to maintain strong relationships with these suppliers or if they fail to ensure the quality of merchandise that they supply to us, our ability to provide our customers with merchandise they want at favorable prices may be limited, which could have a material adverse effect on our business.
Because our business is heavily weighted towards dress and seasonal products, unseasonably warm temperatures during our fall selling season or unseasonably cool weather during our spring selling season may diminish demand for our seasonal merchandise. We experienced this during 2023 with respect to unseasonably warm weather during our fall selling season, which adversely impacted our results of operations.
Because our business is heavily weighted towards dress and seasonal products, unseasonably warm temperatures during our fall selling season or unseasonably cool weather during our spring selling season may diminish demand for our seasonal merchandise. We experienced this during 2024 with respect to unseasonably warm weather during our fall selling season, which adversely impacted our results of operations.
Our reputation could be damaged if we do not, or are perceived to not, act responsibly with respect to sustainability matters, which could also have a material adverse effect on our business, results of operations, financial position, and cash flows.
Our reputation could be damaged if we do not, or are perceived to not, act responsibly with respect to these matters, which could also have a material adverse effect on our business, results of operations, financial position, and cash flows.
Moreover, natural disasters such as earthquakes, hurricanes, wildfires and tsunamis, whether occurring in the U.S. or abroad, and their related consequences and effects, including energy shortages and public health issues, could disrupt our operations.
Moreover, natural disasters such as hurricanes, flooding, wildfires and earthquakes, whether occurring in the U.S. or abroad, and their related consequences and effects, including energy shortages and public health issues, could disrupt our operations.
The success of our business depends on our ability to obtain products from our vendors, including third-party manufacturers and national brand vendors, on a timely basis, on acceptable terms, and to our specifications.
The success of our business depends on our ability to obtain products from our suppliers, including third-party manufacturers and national brand suppliers, on a timely basis, on acceptable terms, and to our specifications.
Our operating results depend on the orderly operation of our receiving, distribution, and fulfillment processes, which in turn depend on vendors' adherence to shipping schedules and our effective management of our facilities.
Our operating results depend on the orderly operation of our receiving, distribution, and fulfillment processes, which in turn depend on suppliers' adherence to shipping schedules and our effective management of our facilities.
Decisions by national brand vendors not to sell to us or to limit the availability of the products they sell to us could have a negative impact on our business.
Decisions by national brand suppliers to not sell to us or to limit the availability of the products they sell to us could have a negative impact on our business.
We rely on the flow of goods through ports worldwide on a consistent basis from factories and suppliers. Disruptions at ports could create significant risks for our business, particularly if these disruptions occur during peak importing times.
We rely on the flow of goods through ports worldwide on a consistent basis from factories and suppliers. Potential or actual disruptions at ports could create significant risks for our business, particularly if these disruptions occur during peak importing times.
For example, the California Consumer Privacy Act of 2018 ("CCPA") imposes certain restrictions and disclosure obligations on businesses that collect personal information about California residents and provides for a private right of action, as well as penalties for noncompliance.
For example, the California Consumer Privacy Act of 2018 ("CCPA") imposes certain restrictions and disclosure obligations on businesses that collect personal information about California residents and provides for a private right of action, as well as penalties for 14 Table of contents noncompliance.
If we are unable to offer suitable alternatives to satisfy product demand, sales could decline, which could have a material adverse effect on our operating results. 10 Table of contents Losses or disruptions associated with our distribution systems, including our distribution centers and stores, could have a material adverse effect on our business and operations.
If we are unable to offer suitable alternatives to satisfy product demand, sales could decline, which could have a material adverse effect on our operating results. Losses or disruptions associated with our distribution systems, including our distribution centers and stores, could have a material adverse effect on our business and operations.
Advances in computer capabilities, increasingly sophisticated tools and methods used by hackers and cyber terrorists, new discoveries in the field of cryptography, the potential use of artificial intelligence by cyber-attackers to develop malicious 12 Table of contents code and launch sophisticated phishing attempts, or other developments may result in our or our vendors' failure or inability to adequately protect personal or other sensitive information.
Advances in computer capabilities, continually evolving and increasingly sophisticated tools and methods used by hackers and cyber terrorists, new discoveries in the field of cryptography, the potential use of artificial intelligence by cyber-attackers to develop malicious code and launch sophisticated phishing attempts, or other developments may result in our or our vendors' failure or inability to adequately protect personal or other sensitive information.
Negative public perception about us or the products we carry, whether justified or not, could impair our reputation, subject us to litigation, damage our brands, or have a material adverse effect on our business. 13 Table of contents We hold exclusive licensing rights that allow us to design, source, and sell footwear for certain of our key Owned Brands, including Vince Camuto, Jessica Simpson, Lucky Brand, Hush Puppies, and Le Tigre.
Negative public perception about us or the products we carry, whether justified or not, could impair our reputation, subject us to litigation, damage our brands, or have a material adverse effect on our business. 11 Table of contents We hold exclusive licensing rights that allow us to design, source, and sell footwear for certain of our key Owned Brands, including Vince Camuto, Jessica Simpson, and Lucky Brand.
We rely on our strong relationships with vendors to purchase products, including third-party manufacturers and national brand vendors.
We rely on our strong relationships with suppliers to purchase products, including third-party manufacturers and national brand suppliers.
If these third-party manufacturers do not perform their obligations, cease working with us, fail to meet our product safety, social compliance, or quality standards, or are unable to provide us with the materials and services that we need, at prices and on terms that are acceptable to us, then we could experience product delays and shortages.
If these third-party manufacturers cease working with us, fail to meet our product safety, social compliance, or quality standards, or are unable to provide us with the materials and services that we need, at prices and on terms that are acceptable to us, then we could experience product delays and shortages.
The requirements to keep our IT systems operating at peak performance may be higher than anticipated and could strain our capital resources, as well as impact our ability to manage any system upgrades, implement new systems, make management process changes for newly implemented systems, integrate new businesses from transition service arrangements, and prevent any information security breaches.
The requirements to keep our IT systems operating at peak performance may be higher than anticipated and could strain our capital resources, as well as impact our ability to manage any system upgrades, implement new systems, make management process changes for newly implemented systems, and prevent any information security breaches.
We are dependent on our customer loyalty programs and marketing to drive traffic, sales, and loyalty, and any decrease in membership or purchases from members could have a material adverse effect on our business. Customer traffic is influenced by our marketing methods and our loyalty programs. We rely on our loyalty programs to drive customer traffic, sales, and purchase frequency.
We are dependent on our customer retail reward programs and marketing to drive traffic, sales, and loyalty, and any decrease in membership or purchases from members could have a material adverse effect on our business. Customer traffic is influenced by our marketing methods and our reward programs.
Risks may also include, among others, public health threats, which has in the past materially adversely impacted our business; inclement weather and natural disasters; international hostilities, acts of war, including the ongoing war in Ukraine and the Israel-Hamas war, the recent militant attacks on cargo vessels in the Red Sea, which ultimately could adversely impact supplier deliveries or freight costs, or terrorism; increases in shipping costs; transportation delays and interruptions, including increased inspections of import shipments by domestic authorities or the occurrence of international trade disruptions; work stoppages; expropriation or nationalization; changes in foreign government administration and governmental policies; changes in import duties or quotas; cost and difficulties associated with managing operations outside of the U.S.; possible adverse tax consequences from changes in tax laws or the unfavorable resolution of tax assessments or audits; and greater difficulty in enforcing intellectual property rights.
Risks may also include, among others, public health threats, which has in the past materially adversely impacted our business; inclement weather and natural disasters; international hostilities, including the ongoing war in Ukraine and conflicts in the Middle East, militant attacks on cargo vessels in the Red Sea, which ultimately could adversely impact supplier deliveries or freight costs, or terrorism; increases in shipping costs; transportation delays and interruptions, including increased inspections of import shipments by domestic authorities or the occurrence of international trade disruptions; labor or supply shortages; work stoppages; expropriation or nationalization; changes in foreign government administration and governmental policies; changes in import duties or quotas; increases in tariffs, sanctions, and other trade barriers or restrictions; cost and difficulties associated with managing operations outside of the U.S.; possible adverse tax consequences from changes in tax laws or the unfavorable resolution of tax assessments or audits; and greater difficulty in enforcing intellectual property rights.
If we experience an information security breach, our insurance may not be sufficient to cover the impact to our business.
If we experience a material information security breach, our insurance may not be sufficient to cover the impact to our business.
During 2023, three key national brand vendors together supplied approximately 21% of our retail segments merchandise, with no individual vendor providing more than 10% of our retail merchandise. The loss of, or a reduction in the amount and quality of merchandise supplied by, any of our high-volume vendors could have an adverse effect on our business.
During 2024, three key national brand suppliers together supplied approximately 25% of our retail segments merchandise, with no individual supplier providing more than 10% of our retail merchandise. The loss of, or a reduction in the amount and quality of merchandise supplied by, any of our high-volume suppliers could have an adverse effect on our business.
Entities owned by or controlled by Jay L. Schottenstein, the Executive Chairman of our Board, and members of his family (the "Schottenstein Affiliates") directly control or substantially influence the outcome of matters submitted for shareholder votes, and their interests may differ from other shareholders.
Schottenstein, the Executive Chairman of our Board, and members of his family (the "Schottenstein Affiliates") directly control or substantially influence the outcome of matters submitted for shareholder votes, and their interests may differ from other shareholders.
Among other things, these provisions establish a staggered board, require a super-majority vote to remove directors, and establish certain advance notice procedures for nomination of candidates for election as directors and for shareholder proposals to be considered at shareholders' meetings.
Among other things, these provisions establish a staggered board, require a super-majority vote to remove directors, and establish certain advance notice procedures for nomination of candidates for election as directors and for shareholder proposals to be considered at shareholders' meetings. Entities owned by or controlled by Jay L.
As of February 3, 2024, the Schottenstein Affiliates beneficially owned approximately 26% of the Company's outstanding common shares, representing 62% of the combined voting power, consisting of, in the aggregate, 7.1 million Class A common shares (which are entitled to one vote per share) and 7.7 million Class B common shares (which are entitled to eight votes per share).
As of February 1, 2025, the Schottenstein Affiliates beneficially owned approximately 31% of the Company's outstanding common shares, representing 67% of the combined voting power, consisting of, in the aggregate, 7.2 million Class A common shares (which are entitled to one vote per share) and 7.7 million Class B common shares (which are entitled to eight votes per share).
Businesses, including our suppliers, can easily launch e-commerce websites and mobile platforms at nominal costs by using commercially available software or partnering with any of a number of successful digital marketplace providers. Some of our suppliers use such platforms to compete with us by allowing consumers to purchase products directly through the supplier.
Businesses, including our suppliers, can easily launch e-commerce websites and mobile platforms at nominal costs by using commercially available software or partnering with various successful digital marketplace providers. Some of our suppliers use such platforms to compete with us by allowing consumers to purchase products directly from them.
State laws are changing rapidly, and new legislation proposed or enacted in a number of other states imposes, or has the potential to impose, additional obligations on companies that process confidential, sensitive and personal information, and will continue to shape the data privacy environment nationally.
State laws are changing rapidly, and new legislation proposed or enacted in a number of other states imposes, or has the potential to impose, additional obligations on companies that process confidential, sensitive and personal information, and will continue to shape the data privacy environment nationally. The U.S. federal government is also significantly focused on privacy matters.
As of February 3, 2024, we had 32.1 million members enrolled in our loyalty programs who have made at least one purchase over the last two years. In 2023, shoppers in the loyalty programs generated approximately 90% of the combined U.S. Retail and Canada Retail segments' net sales.
As of February 1, 2025, we had 30.8 million members enrolled in our VIP reward programs who have made at least one purchase over the last two years. In 2024, shoppers in the reward programs generated approximately 86% of the combined U.S. Retail and Canada Retail segments' net sales.
ITEM 1A. RISK FACTORS Investing in our Class A common shares involves a high degree of risk. In addition to the other information in this Form 10-K and in our other public filings, investors should carefully consider the following risk factors. The risks described below are not the only risks we face or may face.
ITEM 1A. RISK FACTORS Investing in our Class A common shares involves a high degree of risk. In addition to the other information in this Form 10-K and in our other public filings, investors should carefully consider the following risk factors.
The continuation of these trends could have a material adverse effect on our business or operating results. Moreover, we are unable to predict the severity of macroeconomic uncertainty, whether or when such circumstances may improve or worsen, or the full impact such circumstances could have on our business.
Moreover, we are unable to predict the severity of macroeconomic uncertainty, whether or when such circumstances may improve or worsen, or the full impact such circumstances could have on our business.
Consumer spending on discretionary items, including our products, generally declines during periods of economic uncertainty, when disposable income is reduced, or when there is a reduction in consumer confidence. During 2023, our net sales declined as we experienced overall lower direct-to-consumer traffic and we became more promotional in an increasingly competitive landscape.
Throughout 2024, our comparable sales declined as we experienced overall lower direct-to-consumer traffic. Consumer spending on discretionary items, including our products, generally declines during periods of economic uncertainty, when disposable income is reduced, or when there is a reduction in consumer confidence.
We do not intend to list the Class B common shares on any securities exchange or any automated quotation system. As a result, a secondary market for the Company's Class B common shares may not develop, and we do not expect any market makers to participate in a secondary market.
As a result, a secondary market for the Company's Class B common shares may not develop, and we do not expect any market makers to participate in a secondary market.
We, and our third-party vendors, have been subject to cyber, phishing, and social engineering attacks and other security incidents in the past and may continue to be subject to such attacks in the future.
Security incidents, such as ransomware attacks, are becoming increasingly prevalent and severe, as well as increasingly difficult to detect. We, and our third-party vendors, have been subject to cyber, phishing, and social engineering attacks and other security incidents in the past and may continue to be subject to such attacks in the future.
The U.S. federal government is also significantly focused on privacy matters. 15 Table of contents We are subject to other consumer protection laws and the regulatory environment is increasingly demanding with frequent new and changing requirements concerning cybersecurity, information security, and privacy, which may be inconsistent from one jurisdiction to another.
We are subject to other consumer protection laws and the regulatory environment is increasingly demanding with frequent new and changing requirements concerning cybersecurity, information security, and privacy, which may be inconsistent from one jurisdiction to another.
These strategic initiatives, investments, or acquisitions could involve various inherent risks and the benefits sought may not be realized, or these strategic initiatives, investments, or acquisitions may not create value or may harm our brand and adversely affect our business, financial condition, and results of operations. 11 Table of contents The loss or disruption of IT services could affect our operations and have a material adverse effect on our business.
These strategic initiatives, investments, or acquisitions could involve various inherent risks, and the benefits sought may not be realized, or these strategic initiatives, acquisitions, or investments may not create value or may harm our brand and adversely affect our business, financial condition, and results of operations.
There is also increased focus, including by investors, customers, and other stakeholders, on CSR and other sustainability matters, including the use of plastic, energy, waste, and worker safety.
There is also increased focus, including by customers, investors, and other stakeholders, on these matters, including the use of plastic, energy, waste, worker safety, and products, offerings, and marketing towards certain demographics.
Any of these events could result in decreased demand for our products and disruptions in our sales channels and manufacturing and distribution networks, including those of our vendors, which could have a material adverse effect on our business, financial condition, and results of operations. 16 Table of contents Legislative or regulatory initiatives related to environmental, social, and governance ("ESG") matters could have a material adverse effect on our business.
Any of these events could result in decreased demand for our products and disruptions in our sales channels and manufacturing and distribution networks, including those of our vendors, which could have a material adverse effect on our business, financial condition, and results of operations.
In addition, the integration process may strain our financial and managerial controls and reporting systems and procedures and may also result in the diversion of management and financial resources from core business objectives. Our integration efforts may not be successful, or we may not realize the anticipated benefits after we complete our integration efforts.
In addition, the integration process may strain our financial and managerial controls and reporting systems and procedures and may also result in the diversion of management and financial resources from core business objectives.
Our IT systems are an integral part of our strategies for efficiently operating our business, managing operations, and protecting against security risks related to our electronic processing and transmitting of confidential customer and associate data.
The loss or disruption of IT services could affect our operations and have a material adverse effect on our business. Our IT systems are an integral part of our strategies for efficiently operating our business, managing operations, and protecting against security risks related to our electronic processing and transmitting of confidential customer and associate data.
Opportunities may arise in the area of potential competitive business activities that may be attractive to the Schottenstein Affiliates and us. Our amended and restated articles of incorporation provide that the Schottenstein Affiliates are under no obligation to communicate or offer any corporate opportunity to us.
Our amended and restated articles of incorporation provide that the Schottenstein Affiliates are under no obligation to communicate or offer any corporate opportunity to us.
The IT networks and systems owned, operated, controlled, or used by us or our vendors may be susceptible to damage, disruptions or shutdowns, software or hardware vulnerabilities, data breaches, security incidents, supply-side attacks, failures during the process of upgrading or replacing software, databases, or components, power outages, natural disasters, hardware failures, attacks by computer hackers, telecommunication failures, user errors, user malfeasance, computer viruses, unauthorized access, phishing or social engineering attacks, ransomware attacks, distributed denial-of-service attacks, brute force, robocalls, and other real or perceived cyberattacks or catastrophic events, any of which may not be prevented by our efforts to secure our computer systems.
The IT networks and systems operated by us or our vendors may be susceptible to damage, disruptions, data breaches, failures during the process of upgrading or replacing software, databases, or components, power outages, natural disasters, hardware failures, user errors or malfeasance, unauthorized access or attacks, including actions of foreign actors and insider attacks, phishing or denial-of-service attacks, the introduction of computer viruses and/or malicious or destructive code, ransomware or other malware attacks, and other real or perceived cyberattacks or catastrophic events, any of which may not be prevented by our efforts to secure our computer systems.
Any CSR or sustainability metrics that we currently or may in the future disclose, whether based on the standards we set for ourselves or those set by others, or our failure to achieve any CSR or sustainability metrics that we currently or may in the future disclose, may influence our reputation and the value of the brands that we offer.
Any metrics related to these topics that we disclose, whether based on the standards we set for ourselves or those set by others, or our failure to achieve any metrics that we disclose, may influence our reputation and the demand for the brands that we sell.
Loyalty members earn points toward discounts on future purchases through our VIP rewards programs in the U.S. and Canada. We employ a variety of marketing methods, including email, direct mail, and social media, to communicate product offerings and various promotions and discounts to all of our customers, as well as exclusive offers to our rewards members.
We employ a variety of marketing methods, including email, direct mail, and social media, to communicate product offerings and various promotions and discounts to all of our customers, as well as exclusive offers to our rewards members.
Upon an event of default that is not cured or waived within the applicable cure period, in addition to other remedies that may be available to the lenders, our obligations may be accelerated, outstanding letters of credit may be required to be cash collateralized, and remedies may be exercised against the collateral.
Upon an event of default that is not cured or waived within the applicable cure period, in addition to other remedies that may be available to the lenders, our obligations may be accelerated, outstanding letters of credit may be required to be cash collateralized, and remedies may be exercised against the collateral. 13 Table of contents RISKS RELATING TO EXTERNAL FACTORS Our international operations and reliance on foreign-sourced merchandise exposes us to risks associated with international matters.
RISKS RELATING TO EXTERNAL FACTORS Our international operations and reliance on foreign-sourced merchandise exposes us to risks associated with international matters. We have key international operations in various locations, including Canada, China, and Brazil, and we face risks inherent in sourcing our merchandise from third-party manufacturers and national brand vendors with foreign operations.
We have key international operations in various locations, including Canada and China, and we face risks inherent in sourcing our merchandise from third-party manufacturers and national brand suppliers with foreign operations.
The interests of the Schottenstein Affiliates may differ from or be opposed to the interests of other shareholders, and the Schottenstein Affiliates' level of ownership and voting power in the Company may have the effect of delaying or preventing a subsequent change in control of the Company that may be favored by other shareholders. 17 Table of contents The Schottenstein Affiliates engage in a variety of businesses, including, but not limited to, business and inventory liquidations, apparel companies, and real estate investments.
The interests of the Schottenstein Affiliates may differ from or be opposed to the interests of other shareholders, and the Schottenstein Affiliates' level of ownership and voting power in the Company may have the effect of delaying or preventing a subsequent change in control of the Company that may be favored by other shareholders.
Furthermore, as a "controlled company" within the meaning of the New York Stock Exchange (the "NYSE") rules, the Company qualifies for, and in the future may opt to rely on, exemptions from certain corporate governance requirements, including having a majority of independent directors, as well as having nominating and corporate governance and compensation committees composed entirely of independent directors.
Furthermore, as a "controlled company" within the meaning of the New York Stock Exchange (the "NYSE") rules, the Company qualifies for, and in the future may opt to rely on, exemptions from certain corporate governance requirements, including having a majority of independent directors, as well as having nominating and corporate governance and compensation committees composed entirely of independent directors. 16 Table of contents We do not expect a trading market for the Company's Class B common shares to develop and, therefore, any investment in the Company's Class B common shares may be effectively illiquid, unless such shares are converted into the Company's Class A common shares.
Our ABL Revolver and Term Loan contain restrictions that could limit our ability to fund operations, which could adversely affect our business. Funds drawn under our ABL Revolver may be used for working capital purposes, capital expenditures, share repurchases, other expenditures, and permitted acquisitions, as defined in the ABL Revolver.
Funds drawn under our ABL Revolver may be used for working capital purposes, capital expenditures, share repurchases, other expenditures, and permitted acquisitions, as defined in the ABL Revolver.
If we experience significant delays in receiving product, this could result in canceled orders by retailer customers, unanticipated inventory shortages, or receipt of seasonal product after the peak selling season, which could have a material adverse effect on our business and operations.
If we experience significant delays in receiving product, this could result in canceled orders by retailer customers, unanticipated inventory shortages, or receipt of seasonal product after the peak selling season, which could have a material adverse effect on our business and operations. 9 Table of contents In addition, if our merchandise is not delivered to customers in a timely fashion or is damaged or lost during the delivery process, our customers could become dissatisfied and cease shopping on our websites, which could adversely affect our business and operating results.
We cannot ensure that all of our integration efforts will be completed on a timely basis, as planned, or without substantial expense, delay, or other operational problems. Until we make substantial progress with our integration efforts, we also face the risk that we may not be able to effectively manage the business and achieve planned results.
Until we make substantial progress with our integration efforts, we also face the risk that we may not be able to effectively manage the business and achieve planned results.
RISKS RELATING TO MACROECONOMIC AND INDUSTRY CONDITIONS A downturn in global economic conditions or a decline in consumer confidence in the economy has adversely affected discretionary consumer spending and may continue to do so, which has impacted, and likely will continue to impact, our business.
Our actual results could differ materially from those anticipated in the forward-looking statements and estimates as a result of specific factors, including the risks and uncertainties described below. 7 Table of contents RISKS RELATING TO MACROECONOMIC AND INDUSTRY CONDITIONS A downturn in global economic conditions or a decline in consumer confidence in the economy has adversely affected discretionary consumer spending and may continue to do so, which has impacted, and likely will continue to impact, our business.
Competitive pricing pressure has been exacerbated by a more promotional retail environment as the industry experienced a shift from tighter inventory positions to excess inventory and as macroeconomic conditions impact discretionary consumer spending. These factors ultimately could require us to enact mitigating operating efficiency measures that could have a material adverse effect on our business, operations, and results of operations.
Competitive pricing pressure has been exacerbated by a more promotional retail environment as macroeconomic conditions impact discretionary consumer spending. The continuation of these trends could have a material adverse effect on our business or operating results.
In addition, any negative brand image, widespread product defects, financial distress, or negative publicity related to our vendors could have a material adverse effect on our reputation and on our business.
In addition, any negative brand image, widespread product defects, financial distress, or negative publicity related to our suppliers could have a material adverse effect on our reputation and on our business. We cannot guarantee that any supplier will have sufficient production capacity, meet our delivery expectations, or meet our product safety, social compliance, or quality standards.
The ABL Revolver requires us to maintain a fixed charge coverage ratio of not less than 1:1 when availability is less than the greater of $47.3 million or 10.0% of the maximum borrowing amount. 14 Table of contents Our ABL Revolver and Term Loan also contain customary covenants restricting our activities, including limitations on our ability to sell assets, engage in acquisitions, enter into transactions involving related parties, incur additional debt, grant liens on assets, pay dividends, repurchase stock, and make certain other changes.
Our ABL Revolver and Term Loan also contain customary covenants restricting our activities, including limitations on our ability to sell assets, engage in acquisitions, enter into transactions involving related parties, incur additional debt, grant liens on assets, pay dividends, repurchase stock, and make certain other changes.
If we were to experience a local or regional disaster or other business continuity event or concurrent events, we could experience operational challenges, depending upon how a local or regional event may affect our human capital across our operations or regarding particular aspects of our operations, such as key executive officers or personnel.
In addition, the physical changes caused by climate change could result in changes in regulations, consumer preferences, production capabilities, availability of raw materials and costs, which could in turn affect our business, operating results, and financial condition. 15 Table of contents If we were to experience a local or regional disaster or other business continuity event or concurrent events, we could experience operational challenges, depending upon how a local or regional event may affect our human capital across our operations or regarding particular aspects of our operations, such as key executive officers or personnel.
State, federal, and foreign governments have enacted and are continuing to enact laws and regulations governing the collection, use, retention, sharing, transfer, and security of personally identifiable information and data.
Additionally, defending against these lawsuits and proceedings may involve significant expense and diversion of management's attention and resources. We are subject to stringent and changing privacy laws, regulations and standards. State, federal, and foreign governments have enacted and are continuing to enact laws and regulations governing the collection, use, retention, sharing, transfer, and security of personally identifiable information and data.
Despite our or our vendors' security measures, we or our vendors may suffer a cyberattack, hackers or other unauthorized parties may gain access to or exfiltrate personal information or other sensitive data, and any such data compromise or unauthorized access may not be discovered in a timely fashion.
Despite our or our vendors' security measures, we may be unable to 10 Table of contents anticipate cyberattacks or implement adequate preventative measures and could suffer the impacts of a cyberattack, unauthorized access to personal information or other sensitive data, and any such data compromise or unauthorized access may not be discovered in a timely fashion and could persist for an extended period of time.
The CCPA provides for civil penalties for violations and creates a private right of action for certain data breaches that is expected to increase data breach litigation.
The CCPA provides for civil penalties for violations and creates a private right of action for certain data breaches that is expected to increase data breach litigation. In addition, the California Privacy Rights Act amended and expanded the CCPA and placed additional restrictions on the "sharing" of personal information for purposes of cross-context behavioral advertising.
RISKS RELATING TO OUR BUSINESS AND OPERATIONS We may be unable to anticipate and respond to rapidly changing consumer preferences, customer expectations, and fashion trends, which could have a material adverse effect on our business.
Competitors with other revenue sources may also devote more resources to marketing and promotional campaigns, adopt more aggressive pricing policies, and devote more resources to websites, mobile platforms and applications, and systems development. 8 Table of contents RISKS RELATING TO OUR BUSINESS AND OPERATIONS We may be unable to anticipate and respond to rapidly changing consumer preferences, customer expectations, and fashion trends, which could have a material adverse effect on our business.
We typically do not have long-term supply contracts with our vendors, and the loss of any of our major vendors could disrupt our operations and adversely affect our business.
The loss of any of our major suppliers could disrupt our operations and adversely affect our business.
Failure to mitigate these risks could reduce e-commerce sales, damage our reputation, and have a material adverse effect on our business. The implementation of new or updated IT systems could result in significant disruptions to our operations.
Failure to mitigate these risks could reduce e-commerce sales, damage our reputation, and have a material adverse effect on our business. We face risks related to our electronic processing of sensitive and confidential personal and business data.
Our third-party vendors have been and may be the victim of cyber-related attacks that could lead to operational disruptions that could have an adverse effect on our ability to fulfill customer orders. Security incidents, such as ransomware attacks, are becoming increasingly prevalent and severe, as well as increasingly difficult to detect.
Our third-party vendors may be the victim of cyber-related attacks. If they fail to deter, detect, or report cyber incidents in a timely manner, we may suffer from financial and other harm, including to our information, operations, and reputation, and such incidents could lead to operational disruptions that could have an adverse effect on our ability to fulfill customer orders.
Any negative publicity about us or the significant brands we offer may reduce demand for our merchandise. Failure to comply with ethical, social, product, labor, health and safety, accounting, or environmental standards could also jeopardize our reputation and potentially lead to various adverse consumer actions.
Failure to comply with ethical, social, product, labor, health and safety, accounting, or environmental regulations and standards could also jeopardize our reputation and potentially lead to various adverse consumer actions, in addition to potential investigations or actions against us by governmental entities, fines, penalties, or other liabilities.
Consequently, it is possible that, should we need to access any additional funds from our ABL Revolver, such funds may not be available in full.
Consequently, it is possible that, should we need to access any additional funds from our ABL Revolver, such funds may not be available in full. The ABL Revolver requires us to maintain a fixed charge coverage ratio of not less than 1:1 when availability is less than the greater of $47.3 million or 10.0% of the maximum borrowing amount.
The expected synergies and contributions to our business as a result of these and other investments may not materialize. Further, such integrations may disrupt our business or divert the attention of our management. Achieving the expected benefits depends in large part on our successful integration of any new operations, systems, and personnel in a timely and efficient manner.
For example, in the first quarter of 2024, we acquired Rubino. The expected contribution to our business as a result of this and other acquisitions or investments may not materialize. Further, such integrations may disrupt our business or divert the attention of our management.
There is growing concern that climate change may increase both the frequency and severity of extreme weather conditions and natural disasters. In addition, the physical changes caused by climate change could result in changes in regulations, consumer preferences, production capabilities, availability of raw materials and costs, which could in turn affect our business, operating results, and financial condition.
There is growing concern that climate change may increase both the frequency and severity of extreme weather conditions and natural disasters.
We do not expect a trading market for the Company's Class B common shares to develop and, therefore, any investment in the Company's Class B common shares may be effectively illiquid, unless such shares are converted into the Company's Class A common shares. There is currently no public market for the Company's Class B common shares.
There is currently no public market for the Company's Class B common shares. We do not intend to list the Class B common shares on any securities exchange or any automated quotation system.
The value of the brands we sell may also depend on the success of our corporate social responsibility ("CSR") and sustainability initiatives, which require Company-wide coordination and alignment.
The demand for the brands we sell may also depend on how we are viewed relative to corporate social responsibility ("CSR") and environmental, social, and governance ("ESG") positions, which may not align with the expectations of our customers, investors, and other stakeholders.
Removed
Our actual results could differ materially from those anticipated in the forward-looking statements and estimates as a result of specific factors, including the risks and uncertainties described below.
Added
The risks described below are not the only risks we face or may face, and investors should not interpret the disclosure of a risk to imply that the risk has not already materialized.
Removed
Competitors with other revenue sources may also be able to devote more resources to marketing and promotional campaigns, adopt more aggressive pricing policies, and devote more resources to websites, mobile platforms and applications, and systems development.
Added
We believe the decrease in comparable sales is a result of ongoing consumer concern of negative and/or uncertain economic conditions, most notably the concern of economic volatility, fluctuations in interest rates, inflationary pressures, and changes in employment levels.
Removed
Our business may be adversely affected if we are unable to provide our customers with cost-effective shopping platforms that are able to respond and adapt to rapid changes in technology.
Added
These factors ultimately could require us to enact further mitigating operating efficiency measures that may not be successful and could have a material adverse effect on our business, operations, and results of operations.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeAlthough the risks from cyber threats have not materially affected our business strategy, results of operations, or financial condition to date, we continue to closely monitor cyber risk. We may not be successful in preventing or mitigating a cybersecurity incident that could have a material adverse effect on us.
Biggest changeHowever, there can be no assurance that the Company, or third parties on which it relies, will not experience a cybersecurity threat or incident in the future, and we continue to closely monitor cyber risk. We may not be successful in preventing or mitigating a cybersecurity incident that could have a material adverse effect on us.
The Board has delegated its responsibility for cybersecurity risk oversight to the Technology Committee of the Board, which is responsible for (i) regularly reviewing with management significant cybersecurity, privacy, and IT risks or exposures, and our policies and processes with respect to risk assessment and risk management of the same; (ii) regularly reviewing with management an assessment of the steps management has taken to monitor and control such risks; and (iii) regularly reporting to the full Board on such matters.
The Board has delegated its responsibility for cybersecurity risk oversight to the Technology Committee of the Board, which is responsible for (i) regularly reviewing with management significant cybersecurity, privacy, artificial intelligence, and IT risks or exposures, and our policies and processes with respect to risk assessment and risk management of the same; (ii) regularly reviewing with management an assessment of the steps management has taken to monitor and control such risks; and (iii) regularly reporting to the full Board on such matters.
Employees undergo security awareness training when hired and annually. 18 Table of contents GOVERNANCE The DITSC is the Company's management position with primary responsibility for the development, operation, and maintenance of our information security program.
Employees undergo security awareness training when hired and annually. 17 Table of contents GOVERNANCE The DITSC is the Company's management position with primary responsibility for the development, operation, and maintenance of our information security program.
Depending on the severity of the security incident, the DITSC and the Crisis Committee are to escalate the security incident to the Chief Legal Officer and the Principal Accounting Officer, who will assess materiality in consultation with outside counsel. The Chief Legal Officer will notify the Technology Committee and the Board of any potential material incident.
Depending on the severity of the security incident, the DITSC and the Crisis Committee are to escalate the security incident to the Company's General Counsel and the Principal Accounting Officer, who will assess materiality in consultation with outside counsel. The General Counsel will notify the Technology Committee and the Board of any potential material incident.
Removed
The DITSC has over 20 years of experience in cybersecurity, including over 15 years of experience in the Cyber Defense and Electronic Warfare section of the U.S. Army. The DITSC has obtained multiple subject matter certifications, including the Global Information Assurance Certification.
Added
The DITSC offers over 20 years in cybersecurity expertise, cultivated through service in the United States Air Force and subsequent roles in both public and private sectors across diverse industries. The DITSC has obtained multiple industry specific certifications, including the Certified Information Systems Security Professional and Certified Information Security Manager.
Added
As of the date of this report, the Company has not identified risks from known cybersecurity threats that have materially affected or are reasonably likely to materially affect the Company, including its business strategy, results of operations, or financial condition.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeMost of the store leases are for a fixed term with options for extension periods, exercisable at our option. (2) The Shoe Company and DSW stores in Canada average approximately 7,800 square feet. Most of the store leases are for a fixed term with options for extension periods, exercisable at our option.
Biggest change(3) The Shoe Co., Rubino, and DSW stores in Canada average approximately 7,300 square feet. Most of the store leases are for a fixed term with options for extension periods, exercisable at our option.
ITEM 2. PROPERTIES The following table summarizes the location and general use of our principal properties as of February 3, 2024 that we consider to be material to our business and that we believe will meet our operational needs for the foreseeable future: Facility Location Owned/Leased Segment Approximate Square Feet Principal corporate office Columbus, Ohio Owned Corporate and U.S.
ITEM 2. PROPERTIES The following table summarizes the location and general use of our principal properties as of February 1, 2025 that we consider to be material to our business and that we believe will meet our operational needs for the foreseeable future: Facility Location Owned/Leased Segment Approximate Square Feet Principal corporate office Columbus, Ohio Owned Corporate and U.S.
Retail 178,000 Distribution center Columbus, Ohio Owned U.S. Retail 625,000 East Coast Logistics Center Westampton, New Jersey Leased U.S. Retail and Brand Portfolio 683,000 U.S. retail stores (1) 499 various U.S. locations Leased U.S.
Retail 178,000 Distribution centers: (1) Midwest Logistics Center Columbus, Ohio Owned U.S. Retail 625,000 East Coast Logistics Center Westampton, New Jersey Leased U.S. Retail and Brand Portfolio 683,000 U.S. retail stores (2) 494 various U.S. locations Leased U.S.
Removed
Retail 9,958,000 Canada retail stores (2) 143 various Canadian locations Leased Canada Retail 1,114,000 Showrooms Six various U.S. locations Leased Brand Portfolio 94,000 Foreign sourcing offices One location in China and one location in Brazil Leased Brand Portfolio 117,000 (1) Our DSW U.S. stores average approximately 20,000 square feet.
Added
Retail 9,740,000 Canada retail stores (3) 175 various Canadian locations Leased Canada Retail 1,284,000 Primary foreign sourcing office Dongguan, China Leased Brand Portfolio 102,000 (1) During March 2025, we began operations in the new West Coast Logistics Center in Glendale, Arizona.
Added
The West Coast Logistics Center is operated by a third-party and includes dedicated leased space of approximately 276,000 square feet for the U.S. Retail segment. (2) Our DSW U.S. stores average approximately 19,700 square feet. Most of the store leases are for a fixed term with options for extension periods, exercisable at our option.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe following table sets forth the Class A common shares repurchased during the three months ended February 3, 2024: (in thousands, except per share amounts) (a) Total Number of Shares Purchased (1) (b) Average Price Paid per Share (c) Total Number of Shares Purchased as Part of Publicly Announced Programs (d) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Programs October 29, 2023 to November 25, 2023 55 $ 10.07 — $ 87,677 November 26, 2023 to December 30, 2023 78 $ 8.80 — $ 87,677 December 31, 2023 to February 3, 2024 59 $ 8.42 — $ 87,677 192 $ 9.06 — (1) The total number of shares repurchased represents shares withheld in connection with tax payments due upon vesting of employee restricted stock awards.
Biggest changeThe following table sets forth the Class A common shares repurchased during the three months ended February 1, 2025: (in thousands, except per share amounts) (a) Total Number of Shares Purchased (1) (b) Average Price Paid per Share (c) Total Number of Shares Purchased as Part of Publicly Announced Programs (d) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Programs November 3, 2024 to November 30, 2024 16 $ 5.02 — $ 19,709 December 1, 2024 to January 4, 2025 11 $ 5.01 — $ 19,709 January 5, 2025 to February 1, 2025 1 $ 5.47 — $ 19,709 28 $ 5.02 — (1) The total number of shares repurchased represents shares withheld in connection with tax payments due upon vesting of employee restricted stock awards. 19 Table of contents RESTRICTIONS The ABL Revolver and the Term Loan contain customary covenants restricting our activities, including limitations on the ability to pay dividends or repurchase stock.
SHARE REPURCHASE PROGRAM On August 17, 2017, the Board authorized the repurchase of an additional $500.0 million of Class A common shares under our share repurchase program, which was added to the $33.5 million remaining from the previous authorization. A s of February 3, 2024 , $87.7 million of Class A common shares remained available for repurchase under the program.
SHARE REPURCHASE PROGRAM On August 17, 2017, the Board authorized the repurchase of an additional $500.0 million of Class A common shares under our share repurchase program, which was added to the $33.5 million remaining from the previous authorization. A s of February 1, 2025, $19.7 million o f Class A common shares remained available for repurchase under the program.
On March 14, 2024, the Board declared a quarterly cash dividend payment of $0.05 per share for both Class A and Class B common shares. The dividend will be paid on April 12, 2024 to shareholders of record as of the close of business on March 29, 2024.
On March 13, 2025, the Board declared a quarterly cash dividend payment of $0.05 per share for both Class A and Class B common shares. The dividend will be paid on April 11, 2025 to shareholders of record as of the close of business on March 28, 2025.
The comparison of the cumulative total returns for each investment assumes that $100 was invested on February 2, 2019 and that all dividends were reinvested. This comparison includes the period beginning February 2, 2019 and ended February 3, 2024.
The comparison of the cumulative total returns for each investment assumes that $100 was invested on February 1, 2020 and that all dividends were reinvested. This comparison includes the period beginning February 1, 2020 and ended February 1, 2025.
As of March 18, 2024, there were 191 holders of record of our Class A common shares and 12 holders of record of our Class B common shares.
As of March 17, 2025, there were 187 holders of record of our Class A common shares and 12 holders of record of our Class B common shares.
There are specific exceptions to these covenants including, in some cases, upon satisfying specified payment conditions based on availability. 20 Table of contents PERFORMANCE GRAPH The following graph compares our cumulative total shareholder return on our Class A common shares with the cumulative total returns of the Standard and Poor's ("S&P") MidCap 400 Index and the S&P MidCap 400 Retail Index, both of which are published indices.
PERFORMANCE GRAPH The following graph compares our cumulative total shareholder return on our Class A common shares with the cumulative total returns of the Standard and Poor's ("S&P") MidCap 400 Index and the S&P MidCap 400 Retail Index, both of which are published indices.
Company / Index February 2, 2019 February 1, 2020 January 30, 2021 January 29, 2022 January 28, 2023 February 3, 2024 Designer Brands Inc. $ 100.00 $ 56.20 $ 49.14 $ 51.30 $ 42.75 $ 38.23 S&P MidCap 400 Index $ 100.00 $ 110.86 $ 131.31 $ 146.48 $ 151.24 $ 162.50 S&P MidCap 400 Retail Index $ 100.00 $ 98.98 $ 172.76 $ 174.98 $ 161.91 $ 176.94
Company / Index February 1, 2020 January 30, 2021 January 29, 2022 January 28, 2023 February 3, 2024 February 1, 2025 Designer Brands Inc. $ 100.00 $ 87.43 $ 91.28 $ 76.07 $ 68.02 $ 38.14 S&P MidCap 400 Index $ 100.00 $ 118.45 $ 132.14 $ 136.43 $ 146.58 $ 174.13 S&P MidCap 400 Retail Index $ 100.00 $ 174.54 $ 176.79 $ 163.57 $ 178.76 $ 235.55
Removed
RESTRICTIONS The ABL Revolver and the Term Loan contain customary covenants restricting our activities, including limitations on the ability to pay dividends or repurchase stock.
Added
There are specific exceptions to these covenants including, in some cases, upon satisfying specified payment conditions based on availability.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe net recognition of intersegment gross profit consisted of the following: (in thousands) 2023 2022 Intersegment recognition and elimination activity: Net sales recognized by Brand Portfolio segment $ (72,078) $ (87,041) Cost of sales: Cost of sales recognized by Brand Portfolio segment 51,213 58,234 Recognition of intersegment gross profit for inventory previously purchased that was subsequently sold to external customers during the current period 24,146 32,322 $ 3,281 $ 3,515 25 Table of contents OPERATING EXPENSES Operating expenses increased by $10.7 million during 2023 over last year, primarily driven by an increase in marketing expenses as we invested more in brand awareness, the additional operating expenses from the acquired Topo and Keds businesses, and the additional week during 2023, partially offset by a decrease in incentive compensation in line with lower net sales.
Biggest changeGross profit as a percentage of net sales increased 450 basis points for the Brand Portfolio segment in 2023 when compared to 2022, primarily due to the change in mix of products sold, improved inventory positions, lower freight costs, and the leverage of higher sales on royalty expense since the acquired businesses do not have any royalty obligations. 27 Table of contents The net recognition of intersegment gross profit consisted of the following: (in thousands) 2023 2022 Intersegment recognition and elimination activity: Net sales recognized by Brand Portfolio segment $ (72,078) $ (87,041) Cost of sales: Cost of sales recognized by Brand Portfolio segment 51,213 58,234 Recognition of intersegment gross profit for inventory previously purchased that was subsequently sold to external customers during the current period 24,146 32,322 $ 3,281 $ 3,515 OPERATING EXPENSES The following table summarizes operating expenses by segment: (dollars in thousands) 2023 2022 Change Amount % of Segment Net Sales Amount % of Segment Net Sales Amount % Basis Points Segment operating expenses: U.S.
LOSS ON EXTINGUISHMENT OF DEBT AND WRITE-OFF OF DEBT ISSUANCE COSTS In connection with the settlement of our previous senior secured term loan agreement ("Previous Term Loan") on February 8, 2022, we incurred a $12.7 million loss on extinguishment of debt, composed of a $6.9 million prepayment premium and a $5.7 million write-off of unamortized debt issuance costs.
LOSS ON EXTINGUISHMENT OF DEBT AND WRITE-OFF OF DEBT ISSUANCE COSTS In connection with the settlement of our previous senior secured term loan agreement on February 8, 2022, we incurred a $12.7 million loss on extinguishment of debt, composed of a $6.9 million prepayment premium and a $5.7 million write-off of unamortized debt issuance costs.
The decrease in comparable sales for the Canada Retail segment was impacted primarily by lower comparable average sales amount per transaction. Net sales for the Brand Portfolio segment increased due to the net sales added from the acquired Topo and Keds businesses partially offset by lower wholesale sales as retailer customers pulled back on orders.
The decrease in comparable sales for the Canada Retail segment was impacted primarily by lower comparable average sales amount per transaction. Net sales for the Brand Portfolio segment increased due to the net sales added from the acquired Topo and Keds businesses partially offset by lower wholesale sales as retail customers pulled back on orders.
We believe that cash generated from our operations, together with our current levels of cash, as well as the availability under our ABL Revolver and Term Loan, are sufficient to maintain our ongoing operations, support seasonal working capital requirements, fund acquisitions and capital expenditures, repurchase common shares under our share repurchase program, and meet our debt service obligations over the next 12 months and beyond.
We believe that cash generated from our operations, together with our current levels of cash, as well as the availability under our ABL Revolver, are sufficient to maintain our ongoing operations, support seasonal working capital requirements, fund acquisitions and capital expenditures, repurchase common shares under our share repurchase program, and meet our debt service obligations over the next 12 months and beyond.
Retail $ 2,533,849 80.5 % $ 2,791,513 82.0 % $ (257,664) (9.2) % (9.5)% Canada Retail 264,229 8.4 % 283,241 8.3 % (19,012) (6.7) % (5.9)% Brand Portfolio 348,976 11.1 % 327,715 9.7 % 21,261 6.5 % 6.0% Total segment net sales 3,147,054 100.0 % 3,402,469 100.0 % (255,415) (7.5) % (9.0)% Elimination of intersegment net sales (72,078) (87,041) 14,963 (17.2) % Consolidated net sales $ 3,074,976 $ 3,315,428 $ (240,452) (7.3) % 24 Table of contents During 2023, net sales decreased in the U.S.
Retail $ 2,533,849 80.5 % $ 2,791,513 82.0 % $ (257,664) (9.2) % (9.5)% Canada Retail 264,229 8.4 % 283,241 8.3 % (19,012) (6.7) % (5.9)% Brand Portfolio 348,976 11.1 % 327,715 9.7 % 21,261 6.5 % 6.0% Total segment net sales 3,147,054 100.0 % 3,402,469 100.0 % (255,415) (7.5) % (9.0)% Elimination of intersegment net sales (72,078) (87,041) 14,963 (17.2) % Consolidated net sales $ 3,074,976 $ 3,315,428 $ (240,452) (7.3) % During 2023, net sales decreased in the U.S.
LIQUIDITY AND CAPITAL RESOURCES OVERVIEW Our primary ongoing operating cash flow requirements are for inventory purchases, payments on lease obligations and licensing royalty commitments, other working capital needs, capital expenditures, and debt service. Our working capital and inventory levels fluctuate seasonally.
LIQUIDITY AND CAPITAL RESOURCES OVERVIEW Our primary ongoing operating cash flow requirements are for inventory purchases, payments on lease obligations and licensing royalty commitments, other working capital needs, c apital expenditures, and debt service. Our working capital and inventory levels fluctuate seasonally.
The amended ABL Revolver provides a revolving line of credit of up to $600.0 million, including a Canadian sub-limit of up to $60.0 million, a $75.0 million sub-limit for the issuance of letters of credit, a $60.0 million sub-limit for swing-loan advances for U.S. borrowings, and a $6.0 million sub-limit for swing-loan advances for Canadian borrowings.
DEBT ABL Revolver- The ABL Revolver provides a revolving line of credit of up to $600.0 million, including a Canadian sub-limit of up to $60.0 million, a $75.0 million sub-limit for the issuance of letters of credit, a $60.0 million sub-limit for swing-loan advances for U.S. borrowings, and a $6.0 million sub-limit for swing-loan advances for Canadian borrowings.
INTEREST EXPENSE, NET For 2023, interest expense, net, increased by $17.3 million over last year, primarily driven by overall higher interest rates on our debt, with higher rates on the ABL Revolver over last year and the addition of the Term Loan, and a higher average debt balance during 2023.
INTEREST EXPENSE, NET For 2023, interest expense, net, increased by $17.3 million over 2022, primarily driven by overall higher interest rates on our debt, with higher rates on the ABL Revolver over 2022 and the addition of the Term Loan, and a higher average debt balance during 2023.
Comparable Sales Performance Metric- The following table presents the percent change in comparable sales for each segment and in total: 2023 2022 Change in comparable sales: U.S.
Comparable Sales Performance Metric- The following table presents the percent change in comparable sales for each segment and in total: 2024 2023 Change in comparable sales: U.S.
There are specific exceptions to these covenants including, in some cases, upon satisfying specified payment conditions based on availability. As of February 3, 2024, we were in compliance with all financial covenants contained in the ABL Revolver and the Term Loan.
There are specific exceptions to these covenants including, in some cases, upon satisfying specified payment conditions based on availability. As of February 1, 2025, we were in compliance with all financial covenants contained in the ABL Revolver and the Term Loan.
Retail segment (9.5) % 2.0 % Canada Retail segment (5.9) % 28.8 % Brand Portfolio segment - direct-to-consumer channel 6.0 % 34.5 % Total (9.0) % 4.4 % 22 Table of contents We consider the percent change in comparable sales from the same previous year period, a primary metric commonly used throughout the retail industry, to be an important measurement for management and investors of the performance of our direct-to-consumer businesses.
Retail segment (1.4) % (9.5) % Canada Retail segment (2.2) % (5.9) % Brand Portfolio segment - direct-to-consumer channel (9.5) % 6.0 % Total (1.7) % (9.0) % We consider the percent change in comparable sales from the same previous year period, a primary metric commonly used throughout the retail industry, to be an important measurement for management and investors of the performance of our direct-to-consumer businesses.
Retail segment was largely driven by a decrease in comparable transactions of approximately 5%, driven by lower traffic, and a decrease in the comparable average sales amounts per transaction of approximately 5% as we were more promotional than we were during the same period last year.
Retail segment was largely driven by a decrease in comparable transactions of approximately 5%, driven by lower traffic, and a decrease in the comparable average sales amounts per transaction of approximately 5% as we were more promotional than we were during 2022.
In addition, state, local or foreign jurisdictions may enact tax laws that could result in further changes to taxation and materially affect our financial position and results of operations. As of February 3, 2024, our deferred tax assets were reserved with a valuation allowance of $12.1 million. We also had gross unrecognized tax benefits of $16.4 million.
In addition, state, local or foreign jurisdictions may enact tax laws that could result in further changes to taxation and materially affect our financial position and results of operations. As of February 1, 2025, our deferred tax assets were reserved with a valuation allowance of $12.5 million. We also had gross unrecognized tax benefits of $10.2 million.
At any time that liquidity is less than $100.0 million, the Term Loan requires a maximum consolidated net leverage ratio as of the last day of each fiscal month, calculated on a trailing twelve-month basis, of (1) 2.25 to 1.00 for any trailing twelve-month period through February 3, 2024, and (2) 2.50 to 1.00 thereafter.
At any time that liquidity is less than $100.0 million, the Term Loan requires a maximum consolidated net leverage ratio as of the last day of each fiscal month of 2.50 to 1.00, calculated on a trailing twelve-month basis.
These factors ultimately could require us to enact mitigating operating efficiency measures that could have a material adverse effect on business, operations, and results of operations.
These factors ultimately could require us to enact further mitigating operating efficiency measures that may not have the intended effect and could have a material adverse effect on our business, operations, and results of operations.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES As discussed in Note 1, Description of Business and Significant Accounting Policies , of the consolidated financial statements included in this Form 10-K, the preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and disclosure of commitments and contingencies at the date of the consolidated financial statements and reported amounts of revenue and expenses during the reporting period.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS The information related to recently issued accounting pronouncements as set forth in Note 1, Description of Business and Significant Accounting Policies - Recently Issued Accounting Pronouncements , of the consolidated financial statements included in this Form 10-K is incorporated herein by reference. 31 Table of contents CRITICAL ACCOUNTING POLICIES AND ESTIMATES As discussed in Note 1, Description of Business and Significant Accounting Policies , of the consolidated financial statements included in this Form 10-K, the preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and disclosure of commitments and contingencies at the date of the consolidated financial statements and reported amounts of revenue and expenses during the reporting period.
In addition, the ABL Revolver includes a FILO Term Loan of up to $30.0 million, which was drawn in full on February 28, 2023. The FILO Term Loan may be repaid in full, but not in part, so long as certain payment conditions are satisfied. Once repaid, no portion of the FILO Term Loan may be reborrowed.
In addition, the ABL Revolver includes a first-in last-out term loan ("FILO Term Loan") of up to $30.0 million. The FILO Term Loan may be repaid in full, but not in part, so long as certain payment conditions are satisfied. Once repaid, no portion of the FILO Term Loan may be reborrowed.
Retail and Canada Retail segments. Comparable sales exclude the 53 rd week of sales in 2023 and, specifically for the Canada Retail segment, the impact of foreign currency translation, which is calculated by translating current period results at the foreign currency exchange rate used in the comparable period of the prior year.
Comparable sales for the Canada Retail segment exclude the impact of foreign currency translation and are calculated by translating current period results at the foreign currency exchange rate used in the comparable period of the prior year.
We determined that the fair value of the indefinite-lived tradename within the Canada Retail segment was in excess of the carrying value and a 10% decrease in fair value would not result in an impairment charge.
We have determined that the fair value of each of the indefinite-lived tradenames was in excess of the carrying value and a 10% decrease in fair value would not result in an impairment charge.
As of February 3, 2024, $87.7 million of Class A common shares remained available for repurchase under the share repurchase program. 26 Table of contents The following table summarizes our material undiscounted cash requirements for 2024 and future fiscal years thereafter, and provides reference for each item to the relevant note of the consolidated financial statements of this Form 10-K: (in thousands) Note Reference 2024 Future Fiscal Years Thereafter Total Debt maturities Note 12 $ 6,750 $ 427,445 $ 434,195 Fixed minimum lease payments Note 13 $ 191,281 $ 762,073 $ 953,354 Noncancelable purchase obligations Note 14 $ 18,852 $ 11,137 $ 29,989 Guaranteed minimum royalty payments Note 14 $ 36,097 $ 143,649 $ 179,746 In addition to the above, we have an exclusive call option and the noncontrolling interest holders have a put option with respect to our purchase of the remaining 20.6% ownership interest in Topo upon the occurrence of certain events or after a period of three years following the close of the transaction, which was December 13, 2022.
As of February 1, 2025, $19.7 million of Class A common shares remained available for repurchase under the share repurchase program. 29 Table of contents The following table summarizes our material undiscounted cash requirements for 2025 and future fiscal years thereafter, and provides reference for each item to the relevant note of the consolidated financial statements of this Form 10-K: (in thousands) Note Reference 2025 Future Fiscal Years Thereafter Total Debt maturities Note 12 $ 6,750 $ 489,715 $ 496,465 Fixed minimum lease payments Note 13 $ 198,646 $ 755,304 $ 953,950 Noncancelable purchase obligations Note 14 $ 12,715 $ 6,113 $ 18,828 Guaranteed minimum royalty payments Note 14 $ 36,409 $ 107,240 $ 143,649 In addition to the above, we have an exclusive call option and the noncontrolling interest holders have a put option with respect to our purchase of the remaining 20.6% ownership interest in Topo upon the occurrence of certain events or after a period of three years following the close of the transaction, which was December 13, 2022.
Management's Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended January 28, 2023, filed with the SEC on March 16, 2023. 21 Table of contents EXECUTIVE OVERVIEW AND TRENDS IN OUR BUSINESS For 2023, net sales decreased 7.3% and total comparable sales decreased 9.0% over last year.
Management's Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended February 3, 2024, filed with the SEC on March 25, 2024. EXECUTIVE OVERVIEW AND TRENDS IN OUR BUSINESS For 2024, net sales decreased 2.1% with total comparable sales down 1.7% over last year.
Retail segment - DSW stores 499 501 Canada Retail segment: The Shoe Company stores 118 113 DSW stores 25 25 143 138 Total number of stores 642 639 23 Table of contents RESULTS OF OPERATIONS The following table presents our consolidated results of operations with associated percentages of net sales: (amounts in thousands, except per share amounts) 2023 2022 Change Amount % of Net Sales Amount % of Net Sales Amount % Net sales $ 3,074,976 100.0 % $ 3,315,428 100.0 % $ (240,452) (7.3) % Cost of sales (2,100,090) (68.3) (2,236,203) (67.4) 136,113 (6.1) % Gross profit 974,886 31.7 1,079,225 32.6 (104,339) (9.7) % Operating expenses (907,041) (29.4) (896,382) (27.1) (10,659) 1.2 % Income from equity investments 9,390 0.3 8,864 0.3 526 5.9 % Impairment charges (4,834) (0.2) (4,317) (0.1) (517) 12.0 % Operating profit 72,401 2.4 187,390 5.7 (114,989) (61.4) % Interest expense, net (32,171) (1.0) (14,874) (0.5) (17,297) 116.3 % Loss on extinguishment of debt and write-off of debt issuance costs — — (12,862) (0.4) 12,862 NM Non-operating expenses, net (33) — (130) — 97 (74.6) % Income before income taxes 40,197 1.4 159,524 4.8 (119,327) (74.8) % Income tax benefit (provision) (10,981) (0.4) 3,142 0.1 (14,123) NM Net income 29,216 1.0 162,666 4.9 (133,450) (82.0) % Net loss (income) attributable to redeemable noncontrolling interest (154) — 10 — (164) NM Net income attributable to Designer Brands Inc. $ 29,062 1.0 % $ 162,676 4.9 % $ (133,614) (82.1) % Earnings per share attributable to Designer Brands Inc.: Basic earnings per share $ 0.47 $ 2.41 $ (1.94) (80.5) % Diluted earnings per share $ 0.46 $ 2.26 $ (1.80) (79.6) % Weighted average shares used in per share calculations: Basic shares 61,296 67,603 (6,307) (9.3) % Diluted shares 63,375 72,101 (8,726) (12.1) % NM - Not meaningful NET SALES The following table summarizes net sales by segment: (dollars in thousands) 2023 2022 Change Amount % of Segment Net Sales Amount % of Segment Net Sales Amount % Comparable Sales % Segment net sales: U.S.
The effective tax rate for 2023 differed from the statutory rate primarily due to non-deductible compensation offset by other permanent adjustments. 2023 COMPARED WITH 2022 The following table presents our consolidated results of operations with associated percentages of net sales: (amounts in thousands, except per share amounts) 2023 2022 Change Amount % of Net Sales Amount % of Net Sales Amount % Net sales $ 3,074,976 100.0 % $ 3,315,428 100.0 % $ (240,452) (7.3) % Cost of sales (1,750,981) (56.9) (1,860,731) (56.1) 109,750 (5.9) % Gross profit 1,323,995 43.1 1,454,697 43.9 (130,702) (9.0) % Operating expenses (1,256,150) (40.8) (1,271,854) (38.4) 15,704 (1.2) % Income from equity investments 9,390 0.3 8,864 0.3 526 5.9 % Impairment charges (4,834) (0.2) (4,317) (0.1) (517) 12.0 % Operating profit 72,401 2.4 187,390 5.7 (114,989) (61.4) % Interest expense, net (32,171) (1.0) (14,874) (0.5) (17,297) 116.3 % Loss on extinguishment of debt and write-off of debt issuance costs — — (12,862) (0.4) 12,862 NM Non-operating expenses, net (33) — (130) — 97 (74.6) % Income before income taxes 40,197 1.4 159,524 4.8 (119,327) (74.8) % Income tax benefit (provision) (10,981) (0.4) 3,142 0.1 (14,123) NM Net income 29,216 1.0 162,666 4.9 (133,450) (82.0) % Net loss (income) attributable to redeemable noncontrolling interest (154) — 10 — (164) NM Net income attributable to Designer Brands Inc. $ 29,062 1.0 % $ 162,676 4.9 % $ (133,614) (82.1) % Earnings per share attributable to Designer Brands Inc.: Basic earnings per share $ 0.47 $ 2.41 $ (1.94) (80.5) % Diluted earnings per share $ 0.46 $ 2.26 $ (1.80) (79.6) % Weighted average shares used in per share calculations: Basic shares 61,296 67,603 (6,307) (9.3) % Diluted shares 63,375 72,101 (8,726) (12.1) % NM - Not meaningful 26 Table of contents NET SALES The following table summarizes net sales by segment: (dollars in thousands) 2023 2022 Change Amount % of Segment Net Sales Amount % of Segment Net Sales Amount % Comparable Sales % Segment net sales: U.S.
As of February 3, 2024, we had goodwill of $93.7 million, $25.8 million, and $4.3 million for the U.S. Retail, Keds, and Topo reporting units, respectively. As of the fourth quarter measurement date, we determined the fair value of the U.S.
As of February 1, 2025, we had goodwill of $93.7 million, $25.8 million, $6.6 million, and $4.3 million for the U.S. Retail, Keds, Rubino, and Topo reporting units, respectively.
Gross profit as a percentage of net sales decreased 290 basis points for the Canada Retail segment when compared to the same period last year, primarily due to a mix shift in sales towards lower margin products and the deleveraging effect of lower sales on fixed occupancy costs.
Gross profit as a percentage of net sales decreased 160 basis points for the Canada Retail segment in 2023 when compared to 2022, primarily due to a mix shift in sales towards lower margin products.
As we periodically reassess estimated future cash flows and asset fair values, changes in our estimates and assumptions may cause us to realize material impairment charges in the future. 30 Table of contents Policy Judgments and Estimates Effect if Actual Results Differ from Assumptions Income Taxes- We determine the aggregate amount of income tax provision or benefit to accrue and the amount that will be currently receivable or payable based upon tax statutes of each jurisdiction in which we do business.
To the extent that these future projections or our strategies change, the conclusion regarding impairment may differ from our current estimates. 33 Table of contents Policy Judgments and Estimates Effect if Actual Results Differ from Assumptions Income Taxes- We determine the aggregate amount of income tax provision or benefit to accrue and the amount that will be currently receivable or payable based upon tax statutes of each jurisdiction in which we do business.
For 2022, the net cash used in investing activities was primarily due to capital expenditures of $55.0 million relating to infrastructure and IT projects, new stores, store improvements, the acquisition of Topo for $19.1 million, and our investment in Le Tigre for $8.2 million. 27 Table of contents FINANCING CASH FLOWS For 2023, the net cash provided by financing activities was due to proceeds from the issuance of the Term Loan of $135.0 million and the net receipts of $20.0 million from our ABL Revolver, partially offset by the repurchase of 9.7 million Class A common shares at an aggregate cost of $102.2 million, including transaction costs and excise tax, payments of $17.5 million for taxes for stock-based compensation shares withheld, payments of dividends of $12.2 million, and payments of debt issuance costs of $10.7 million.
For 2023, net cash provided by financing activities was due to proceeds from the issuance of the Term Loan of $135.0 million and the net receipts of $20.0 million from our ABL Revolver, partially offset by the repurchase of 9.7 million Class A common shares at an aggregate cost of $102.2 million, payments of $17.5 million for taxes for stock-based compensation shares withheld, payments of dividends of $12.2 million, and payments of debt issuance costs of $10.7 million.
As of February 3, 2024, the revolving line of credit (excluding the FILO Term Loan) had a borrowing base of $437.0 million, with $271.1 million in outstanding borrowings a nd $5.0 million in letters of credit issued, resulting in $160.9 million av ailable for borrowings.
As of February 1, 2025, the revolving line of credit (excluding the FILO Term Loan) had a borrowing base of $471.4 million, with $340.1 million in outstanding borrowings and $4.0 million in letters of credit issued, resulting in $127.3 million available for borrowings.
INVESTING CASH FLOWS For 2023, net cash used in investing activities was primarily due to the acquisition of Keds for $127.3 million and capital expenditures of $55.0 million relating to infrastructure and IT projects, new stores, and store improvements.
INVESTING CASH FLOWS For 2024, net cash used in investing activities was primarily due to capital expenditures of $50.9 million relating to infrastructure and IT projects and new stores, including relocations, and the acquisition of Rubino for $16.1 million.
Impairment of Goodwill and Other Indefinite Lived Intangible Assets- We evaluate goodwill and other indefinite-lived intangible assets for impairment annually during our fourth quarter, or more frequently if an event occurs or circumstances change, such as material deterioration in performance or a significant and sustained decline in our stock price, that would indicate that impairment may exist.
If the reduction to inventories for markdowns, shrink, and aged inventories were to increase by 10%, cost of sales would increase by approximately $4.0 million. 32 Table of contents Policy Judgments and Estimates Effect if Actual Results Differ from Assumptions Impairment of Goodwill and Other Indefinite-Lived Intangible Assets- We evaluate goodwill and other indefinite-lived intangible assets for impairment annually during our fourth quarter, or more frequently if an event occurs or circumstances change, such as material deterioration in performance or a significant and sustained decline in our stock price, that would indicate that impairment may exist.
As of February 3, 2024, we had indefinite-lived tradenames of $46.9 million and $14.8 million within the Brand Portfolio segment and Canada Retail segment, respectively.
As of February 1, 2025, we had indefinite-lived tradenames of $46.9 million and $18.5 million within the Brand Portfolio segment and Canada Retail segment, respectively. The Brand Portfolio segment includes the indefinite-lived tradename of Keds and the Canada Retail segment includes the indefinite-lived tradenames of The Shoe Co. and Rubino.
Retail and Topo reporting units were in excess of their carrying value and a 10% decrease in fair value would not result in an impairment charge.
As of the fourth quarter measurement date, we determined for each of the reporting units that the fair value was in excess of their carrying value and a 10% decrease in fair value would not result in an impairment charge.
Risk Factors of this Form 10-K and included elsewhere in this Form 10-K. The following discussion includes a comparison of our results of operations and liquidity and capital resources for 2023 and 2022. Except where it may be useful in understanding 2023 results, we have omitted discussion of results for 2021, which may be found in Item 7.
Risk Factors of this Form 10-K and included elsewhere in this Form 10-K. 20 Table of contents The following discussion includes a comparison of our results of operations and liquidity and capital resources for 2024 and 2023.
Consumer spending on discretionary items, including our products, generally declines during periods of economic uncertainty, when disposable income is reduced, or when there is a reduction in consumer confidence. We are unable to predict the severity of macroeconomic uncertainty, whether or when such circumstances may improve or worsen, or the full impact such circumstances could have on our business.
We are unable to predict the severity of macroeconomic uncertainty, whether or when such circumstances may improve or worsen, or the full impact such circumstances could have on our business.
Gross profit as a percentage of net sales for 2023 was 90 basis points lower when compared to last year, primarily due to promotional pricing and the deleveraging effect of lower sales on fixed store occupancy costs, which more than offset lower logistics costs, including freight, shipping, and distribution.
Gross profit as a percentage of net sales decreased 90 basis points for the U.S. Retail segment when compared to 2022, primarily due to being more promotional, partially offset by lower logistics costs including freight and shipping.
If the reduction to inventories for markdowns, shrink, and aged inventories were to increase by 10%, cost of sales would increase by approximately $4.1 million. 29 Table of contents Policy Judgments and Estimates Effect if Actual Results Differ from Assumptions Asset Impairment of Long-Lived Assets- We periodically evaluate the carrying amount of our long-lived assets, primarily property and equipment and operating lease assets, when events and circumstances warrant such a review to ascertain if any assets have been impaired.
Asset Impairment of Long-Lived Assets- We periodically evaluate the carrying amount of our long-lived assets, primarily property and equipment and operating lease assets, when events and circumstances warrant such a review to ascertain if any assets have been impaired.
PLANS FOR CAPITALIZED COSTS During 2024, we expect to spend approximately $65.0 million to $75.0 million that will be capitalized for property and equipment and implementation costs for cloud computing arrangements accounted for as service contracts.
Refer to Note 12, Debt , of the consolidated financial statements of this Form 10-K for further information about our debt arrangements. PLANS FOR CAPITALIZED COSTS During 2025, we expect to spend approximately $45.0 million to $55.0 million that will be capitalized for property and equipment and implementation costs for cloud computing arrangements accounted for as service contracts.
For 2022, the net cash used in financing activities was due to the payment of $238.2 million for the settlement of the Previous Term Loan, the repurchase of 10.7 million Class A common shares at an aggregate cost of $147.5 million, and the payment of dividends of $13.5 million, partially offset by the net receipts of $281.0 million from our revolving lines of credit.
For 2023, net cash used in investing activities was primarily due to the acquisition of Keds for $127.3 million and capital expenditures of $55.0 million relating to infrastructure and IT projects, new stores, and store improvements. 30 Table of contents FINANCING CASH FLOWS For 2024, net cash used in financing activities was due to the repurchase of 10.3 million Class A common shares at an aggregate cost of $68.6 million, payments of dividends of $10.5 million, and payments on the Term Loan of $6.8 million, partially offset by the net receipts of $69.0 million from our ABL Revolver.
The following table presents the key categories of our consolidated statements of cash flows: (in thousands) 2023 2022 Change Net cash provided by operating activities $ 162,399 $ 201,426 $ (39,027) Net cash used in investing activities (182,493) (88,117) (94,376) Net cash provided by (used in) financing activities 10,479 (128,479) 138,958 Effect of exchange rate changes on cash balances 22 (523) 545 Net decrease in cash, cash equivalents, and restricted cash $ (9,593) $ (15,693) $ 6,100 OPERATING CASH FLOWS The decrease in net cash provided by operations was largely driven by the receipt of $120.3 million of our income tax receivable from the Internal Revenue Service during 2022 and the decrease in net income recognized in 2023 over last year, after adjusting for non-cash activity including depreciation and amortization and the loss on extinguishment of debt and write-off of debt issuance costs.
The following table presents the key categories of our consolidated statements of cash flows: (in thousands) 2024 2023 Change Net cash provided by operating activities $ 82,236 $ 162,399 $ (80,163) Net cash used in investing activities (62,673) (182,493) 119,820 Net cash provided by (used in) financing activities (22,094) 10,479 (32,573) Effect of exchange rate changes on cash balances (1,890) 22 (1,912) Net decrease in cash and cash equivalents $ (4,421) $ (9,593) $ 5,172 OPERATING CASH FLOWS The decrease in net cash provided by operations was largely driven by the decrease in net income recognized after adjusting for non-cash activity, including depreciation and amortization, stock-based compensation expense, changes in deferred income taxes and impairment charges, and higher spend on working capital.
O ur future investments will depend primarily on the number of stores we open and remodel, infrastructure and IT projects that we undertake, and the timing of these expenditures. 28 Table of contents RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS The information related to recently issued accounting pronouncements as set forth in Note 1, Description of Business and Significant Accounting Policies - Recently Issued Accounting Pronouncements , of the consolidated financial statements included in this Form 10-K is incorporated herein by reference.
O ur future investments will depend primarily on the number of stores we open and remodel, infrastructure and IT projects that we undertake, and the timing of these expenditures.
The calculation of comparable sales varies across the retail industry and, as a result, the calculations of other retail companies may not be consistent with our calculation. Number of Stores- At the end of the last two fiscal years, we had the following number of stores: February 3, 2024 January 28, 2023 U.S.
Number of Stores- At the end of the last two fiscal years, we had the following number of stores: February 1, 2025 February 3, 2024 U.S.
Gross profit as a percentage of net sales increased 450 basis points for the Brand Portfolio segment when compared to the same period last year, primarily due to the change in mix of products sold, improved inventory positions, lower freight costs, and the leverage of higher sales on royalty expense since the acquired businesses do not have any royalty obligations.
Gross profit as a percentage of net sales for 2024 was 40 basis points lower when compared to last year primarily due to a change in mix of products sold as we expanded our athletic and casual offerings, which have lower margins than the seasonal and dress categories.
FINANCIAL SUMMARY AND OTHER KEY METRICS For 2023: • Net sales decreased to $3.1 billion from $3.3 billion last year. • Gross profit as a percentage of net sales was 31.7% compared to 32.6% last year. • Net income attributable to Designer Brands Inc. was $29.1 million, or $0.46 per diluted share, which included net after-tax charges of $14.0 million, or $0.22 per diluted share, primarily related to restructuring and integration costs, impairment charges, and CEO transition costs, compared to $162.7 million, or $2.26 per diluted share, last year, which included net after-tax benefits of $29.0 million, or $0.41 per diluted share, primarily related to the change in valuation allowance on deferred tax assets, partially offset by the loss on extinguishment of debt and write-off of debt issuance costs, restructuring and termination costs, impairment charges, and CEO transition costs.
Future impacts are unknown at this time and could have a material adverse effect on our business, operations, and results of operations. 21 Table of contents FINANCIAL SUMMARY AND OTHER KEY METRICS For 2024: • Net sales decreased to $3.0 billion from $3.1 billion last year. • Gross profit as a percentage of net sales was 42.7% compared to 43.1% in 2023 and 43.9% in 2022. • Net loss attributable to Designer Brands Inc. was $10.5 million, or $0.20 loss per diluted share, compared to net income attributable to Designer Brands Inc. of $29.1 million, or $0.46 earnings per diluted share, last year.
Retail $ 794,266 31.3 % $ 904,583 32.4 % $ (110,317) (12.2) % (110) Canada Retail 84,794 32.1 % 99,121 35.0 % (14,327) (14.5) % (290) Brand Portfolio 92,545 26.5 % 72,006 22.0 % 20,539 28.5 % 450 Total segment gross profit 971,605 30.9 % 1,075,710 31.6 % (104,105) (9.7) % (70) Net recognition of intersegment gross profit 3,281 3,515 (234) Consolidated gross profit $ 974,886 31.7 % $ 1,079,225 32.6 % $ (104,339) (9.7) % (90) The decrease in consolidated gross profit was primaril y driven by the decrease in consolidated net sales over the same period last year, partially offset by lower freight and shipping costs and lower distribution costs in the U.S.
Retail $ 1,109,002 43.8 % $ 1,246,884 44.7 % $ (137,882) (11.1) % (90) Canada Retail 119,167 45.1 % 132,292 46.7 % (13,125) (9.9) % (160) Brand Portfolio 92,545 26.5 % 72,006 22.0 % 20,539 28.5 % 450 Total segment gross profit 1,320,714 42.0 % 1,451,182 42.7 % (130,468) (9.0) % (70) Net recognition of intersegment gross profit 3,281 3,515 (234) Consolidated gross profit $ 1,323,995 43.1 % $ 1,454,697 43.9 % $ (130,702) (9.0) % (80) The decrease in consolidated gross profit was primarily driven by the decrease in consolidated net sales during 2023 over 2022, partially offset by lower freight and shipping costs.
Retail segment as we realized the benefit of moving our digital fulfillment activities from our Ohio location to our New Jersey location. Gross profit as a percentage of net sales decreased 110 basis points for the U.S.
Retail segment primarily due to a decrease of $17.9 million in depreciation and amortization expense and $8.4 million distribution costs as we realized the benefit of moving our digital fulfillment activities from our Ohio location to our New Jersey location and a decrease of $12.8 million in store selling expenses and the remaining decrease primarily in lower incentive compensation in line with lower net sales.
During 2022, we recorded impairment charges of $4.3 million, primarily in the Brand Portfolio segment, resulting from subleases of abandoned leased spaces.
During 2022, we recorded impairment charges of $4.3 million, primarily due to subleases of vacated leased spaces. 28 Table of contents OPERATING PROFIT The following table summarizes operating profit (loss) by segment: (dollars in thousands) 2023 2022 Change Amount % of Segment Net Sales Amount % of Segment Net Sales Amount % Basis Points Segment operating profit (loss): U.S.
Operating expenses, as a percentage of net sales, increased 240 basis points over the same period last year due to the lower net sales as we deleveraged our increased costs. IMPAIRMENT CHARGES During 2023, we recorded impairment charges of $4.8 million, primarily in the Brand Portfolio segment resulting from an abandoned leased space.
Retail segment store. During 2023, we recorded impairment charges of $4.8 million, primarily related to a vacated leased space. OPERATING PROFIT The following table summarizes operating profit (loss) by segment: (dollars in thousands) 2024 2023 Change Amount % of Segment Net Sales Amount % of Segment Net Sales Amount % Basis Points Segment operating profit (loss): U.S.
Comparable sales include the e-commerce sales of the Brand Portfolio segment from the direct-to-consumer e-commerce site for the Vince Camuto brand.
Comparable sales include the e-commerce net sales of the Brand Portfolio segment from the direct-to-consumer e-commerce sites. The calculation of comparable sales varies across the retail industry and, as a result, the calculations of other retail companies may not be consistent with our calculation.
The e-commerce sales for Topo, Keds, and Hush Puppies will be added to the comparable base for the Brand Portfolio segment beginning with the first quarter of 2024, the second quarter of 2024, and the third quarter of 2024, respectively.
Stores added as a result of the Rubino acquisition that will have been in operation for at least 14 months at the beginning of 2025, along with its e-commerce sales, will be added to the comparable base for the Canada Retail segment beginning with the second quarter of 2025.
Removed
During 2023, net sales from our Owned Brands decreased 6.2% over last year, with Owned Brands representing 25.8% of consolidated net sales as compared to 25.5% for last year.
Added
Beginning in the fourth quarter of 2024, we changed our financial statement presentation related to expenses associated with distribution and fulfillment and store occupancy for the U.S. Retail and Canada Retail segments.
Removed
At the beginning of 2023, we completed the acquisition of Keds, expanding our Owned Brands' reach into casual and athleisure footwear in the wholesale and direct-to-consumer e-commerce channels and complementing the additions of Le Tigre and Topo during 2022.
Added
These expenses were previously included within cost of sales and are now included within operating expenses in order to present all of our operating segments on a consistent basis. Also beginning in the fourth quarter of 2024, we changed the presentation of segment performance by including an operating profit measurement for our reportable segments.
Removed
We believe these acquisitions represent significant steps taken toward our long-term goal of net sales from our Owned Brands reaching one-third of total sales by 2026.
Added
Prior period reclassifications were made to conform to the current period presentation in the consolidated statements of operations. For 2023 and 2022, the reclassifications resulted in a decrease to cost of sales and an increase to operating expenses. These reclassifications did not change operating profit, net income, or earnings per share attributable to Designer Brands Inc.
Removed
EFFECTS OF INFLATION AND GLOBAL ECONOMIC CONDITIONS Throughout 2023, a downturn in global economic conditions, most notably the growing concerns of a potential recession, rising interest rates, inflationary pressures, changes in employment levels, and significant foreign currency volatility, has adversely impacted discretionary consumer income levels and spending for our customers.
Added
As a result of the prior period reclassifications, we have included a discussion of the results of operations of 2023 compared with 2022. A discussion of 2022 liquidity and capital resources may be found in Item 7.
Removed
As it relates to our business, during the second half of 2022 and continuing into 2023, our net sales declined as we experienced lower traffic and became more promotional under a more competitive landscape. Competitive pricing pressure has been exacerbated by a more promotional retail environment as macroeconomic conditions continue to impact discretionary consumer spending.
Added
During April 2024, we completed the acquisition of Rubino, which allowed our Canada Retail segment to expand into the province of Quebec. Beginning in 2024, we changed how the Brand Portfolio segment sources certain Owned Brands for the U.S.
Removed
Retail segment when compared to the same period last year, primarily due to the deleveraging effect of lower sales on fixed occupancy costs as well as being more promotional, partially offset by lower logistics costs including freight, shipping, and distribution.
Added
Retail segment by transacting using a wholesale model, where intersegment sales and cost of sales are recorded, whereas in 2023 and prior we transacted on a commission model, where intersegment sales were based on a percentage of product cost.
Removed
During 2023, the following significant transactions impacted our liquidity: • On February 4, 2023, we completed the acquisition of Keds for $127.3 million in cash consideration, funded with available cash and borrowings on the ABL Revolver. • On February 28, 2023, the ABL Revolver was amended to increase the available capacity under the revolving line of credit from $550.0 million to $600.0 million and to add a first-in last-out term loan ("FILO Term Loan") of up to $30.0 million, which was drawn in full, subject to a borrowing base. • On June 23, 2023, we entered into a Term Loan and borrowed $135.0 million during 2023. • We repurchased an aggregate of 9.7 million Class A common shares, including open market purchases and purchases under a modified "Dutch Auction" tender offer, at an aggregate cost of $102.2 million, including transaction costs and excise tax.
Added
This change resulted in an increase in Brand Portfolio intersegment net sales, cost of sales, gross profit, and gross profit as a percentage of net sales and a corresponding increase in the amount of eliminated intersegment net sales, cost of sales, and gross profit with no impact to consolidated net sales, cost of sales, and gross profit.
Removed
These were partially offset by lower spend on working capital due to the decreased investment in inventory with the slowdown in net sales, as discussed above in the results of operations, and the timing of payments on current liabilities.
Added
EFFECTS OF INFLATION AND GLOBAL ECONOMIC CONDITIONS During 2024, our comparable sales declined as we experienced lower traffic, primarily in the U.S. Retail segment. Consumer spending on discretionary items, including our products, generally declines during periods of economic uncertainty, when disposable income is reduced, or when there is a reduction in consumer confidence.
Removed
DEBT ABL Revolver- On March 30, 2022, we replaced our previous senior secured asset-based revolving credit facility with our current ABL Revolver, which was subsequently amended on February 28, 2023 and June 23, 2023.
Added
We believe the decrease in comparable sales is a result of ongoing consumer concern of negative and/or uncertain economic conditions, most notably the concern of economic volatility, including an economic downturn, fluctuations in interest rates, inflationary pressures, and changes in employment levels.
Removed
Termination of Previous Term Loan - On February 8, 2022, we settled in full the $231.3 million principal amount outstanding on that date under our Previous Term Loan.
Added
Adverse global economic conditions and disruptions to our business, along with a sustained decline in our stock price, may lead to triggering events that may indicate that the carrying value of certain assets, including inventories, accounts receivables, equity investments, long-lived assets, intangibles, and goodwill, may not be recoverable.
Removed
In connection with this settlement, during 2022 we incurred a $12.7 million loss on extinguishment of debt, composed of a $6.9 million prepayment premium and a $5.7 million write-off of unamortized debt issuance costs. Refer to Note 12, Debt , of the consolidated financial statements of this Form 10-K for further information about our debt arrangements.
Added
In February and March 2025, the U.S. administration announced new tariffs on all imports from China. All of the products manufactured through the Brand Portfolio segment come from third-party facilities outside of the U.S., with 77% of units sourced from China during 2024. In addition to the merchandise sourced through our Brand Portfolio segment, our U.S.
Removed
To the extent that these future projections or our strategies change, the conclusion regarding impairment may differ from our current estimates.
Added
Retail and Canada Retail segments also source merchandise from domestic third-party suppliers with many of these suppliers importing a large portion of their merchandise from China. We are closely monitoring this situation and evaluating the actions we plan to take, which may include cost-mitigation measures, sourcing strategies, and price adjustments.
Removed
The goodwill for the Keds reporting unit was a result of the acquisition of Keds in 2023 with the final allocation of the total considerations completed in the fourth quarter of 2023, and its fair value was in excess of its carrying value by approximately 9% as of the fourth quarter measurement date.
Added
However, there can be no assurance that we will be able to fully mitigate the impact of such tariffs or new tariffs in China or elsewhere.
Removed
The indefinite-lived tradename within the Brand Portfolio segment was a result of the acquisition of Keds with the final allocation of the total considerations completed in the fourth quarter of 2023, and its fair value was in excess of its carrying value by approximately 10% as of the fourth quarter measurement period.
Added
Retail and Canada Retail segments. For calculating comparable sales in 2024, periods in 2023 are shifted by one week to compare similar calendar weeks.
Added
Retail segment - DSW stores 494 499 Canada Retail segment: The Shoe Co. stores 121 118 Rubino stores 28 — DSW stores 26 25 175 143 Total number of stores 669 642 22 Table of contents RESULTS OF OPERATIONS 2024 COMPARED WITH 2023 The following table presents our consolidated results of operations with associated percentages of net sales: (amounts in thousands, except per share amounts) 2024 2023 Change Amount % of Net Sales Amount % of Net Sales Amount % Net sales $ 3,009,262 100.0 % $ 3,074,976 100.0 % $ (65,714) (2.1) % Cost of sales (1,723,304) (57.3) (1,750,981) (56.9) 27,677 (1.6) % Gross profit 1,285,958 42.7 1,323,995 43.1 (38,037) (2.9) % Operating expenses (1,245,834) (41.4) (1,256,150) (40.8) 10,316 (0.8) % Income from equity investments 13,145 0.5 9,390 0.3 3,755 40.0 % Impairment charges (18,336) (0.6) (4,834) (0.2) (13,502) 279.3 % Operating profit 34,933 1.2 72,401 2.4 (37,468) (51.8) % Interest expense, net (45,291) (1.6) (32,171) (1.0) (13,120) 40.8 % Non-operating expenses, net (372) — (33) — (339) 1,027.3 % Income (loss) before income taxes (10,730) (0.4) 40,197 1.4 (50,927) NM Income tax benefit (provision) 755 — (10,981) (0.4) 11,736 NM Net income (loss) (9,975) (0.4) 29,216 1.0 (39,191) NM Net income attributable to redeemable noncontrolling interest (574) — (154) — (420) 272.7 % Net income (loss) attributable to Designer Brands Inc. $ (10,549) (0.4) % $ 29,062 1.0 % $ (39,611) NM Earnings (loss) per share attributable to Designer Brands Inc.: Basic earnings (loss) per share $ (0.20) $ 0.47 $ (0.67) NM Diluted earnings (loss) per share $ (0.20) $ 0.46 $ (0.66) NM Weighted average shares used in per share calculations: Basic shares 53,657 61,296 (7,639) (12.5) % Diluted shares 53,657 63,375 (9,718) (15.3) % NM - Not meaningful NET SALES The following table summarizes net sales by segment: (dollars in thousands) 2024 2023 Change Amount % of Segment Net Sales Amount % of Segment Net Sales Amount % Comparable Sales % Segment net sales: U.S.
Added
Retail $ 2,466,101 78.3 % $ 2,533,849 80.5 % $ (67,748) (2.7) % (1.4)% Canada Retail 283,023 9.0 % 264,229 8.4 % 18,794 7.1 % (2.2)% Brand Portfolio 398,881 12.7 % 348,976 11.1 % 49,905 14.3 % (9.5)% Total segment net sales 3,148,005 100.0 % 3,147,054 100.0 % 951 — % (1.7)% Elimination of intersegment net sales (138,743) (72,078) (66,665) 92.5 % Consolidated net sales $ 3,009,262 $ 3,074,976 $ (65,714) (2.1) % 23 Table of contents During 2024, net sales decreased in the U.S.
Added
Retail segment, primarily due to the decrease in comparable sales of $35.0 million and the additional week of sales during 2023. The decrease in comparable sales for the U.S. Retail segment was largely driven by a decrease in comparable transactions with lower traffic and a lower conversion rate.
Added
Net sales increased in the Canada Retail segment due to the addition of Rubino, with $24.6 million of net sales during the period, as well as $7.9 million from the net new stores opened since the end of 2023, partially offset by the decrease in comparable sales of $5.7 million due to lower average sales amounts per transaction, the unfavorable impact from foreign currency translation of $5.0 million, and the additional week of sales in 2023.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

3 edited+0 added−0 removed3 unchanged
Biggest changeWe currently do not utilize hedging instruments to mitigate these market risks. INTEREST RATE RISK As of February 3, 2024 , we had $301.1 million and $133.1 million outstanding on our ABL Revolver and Term Loan, respectively.
Biggest changeWe currently do not utilize hedging instruments to mitigate these market risks. INTEREST RATE RISK As of February 1, 2025, we had $370.1 million and $126.4 million outstanding on our ABL Revolver and Term Loan, respectively.
A hypothetical 10% movement in the exchange rate would result in an immaterial impact of foreign currency revaluation recorded to non-operating expenses, net, within the consolidated statements of operations. 31 Table of contents
A hypothetical 10% movement in the exchange rate would result in an immaterial impact of foreign currency revaluation recorded to non-operating expenses, net, within the consolidated statements of operations. 34 Table of contents
The impact of a hypothetical 100 basis point increase in interest rates on our outstanding borrowings would result in approximately $4.0 million of additional expense over a 12-month period based on the balance as of February 3, 2024.
The impact of a hypothetical 100 basis point increase in interest rates on our outstanding borrowings would result in approximately $5.0 million of additional expense over a 12-month period based on the balance as of February 1, 2025.

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