DBI

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How DBI rewrote its risk factors

10-K ITEM 1A · FY2025 → FY2026

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Our two reportable segments are the Retail segment and the Brand Portfolio segment.
Beginning with this 2025 Annual Report on Form 10-K, we aggregated our previously reported U.S.
Retail operating segment and Canada Retail operating segment into a single reportable segment, the Retail segment, due to the similar nature of their operations and economic characteristics.
This aggregation had no impact on our historical consolidated financial position, results of operations or cash flows.
All prior period segment information has been recast to conform to the current reporting segment presentation.
The following discussion includes a comparison of our results of operations and liquidity and capital resources for 2025 and 2024.
Except where it may be useful in understanding 2025 results, we have omitted discussion of results for 2023, which may be found in Item 7.
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 1, 2025, filed with the SEC on March 24, 2025.
EXECUTIVE OVERVIEW AND TRENDS IN OUR BUSINESS For 2025, net sales decreased 3.9% with a decrease in total comparable sales of 4.3% over last year.
Gross profit as a percentage of net sales for 2025 was 43.6%, an increase of 90 basis points when compared to last year.
EFFECTS OF MACROECONOMIC CONDITIONS AND TARIFFS Macroeconomic conditions influenced by uncertain tariff policies, stock market indices, interest rates, inflation and employment levels, along with geopolitical unrest, continue to persist and create a challenging retail environment.
We believe these ongoing uncertainties have had a negative impact on our operating results and liquidity during 2025 and we may continue to experience the impact of decreased consumer demand for our products and lower direct-to-consumer traffic.
We have enacted certain mitigating actions, including alignment of inventory with current demand levels, expense and capital expenditure reductions, and accelerating sourcing diversification efforts.
Although we have made progress in mitigating the impacts of certain macroeconomic conditions, our actions are not necessarily complete, and they should be viewed as part of the process in which we will continue our efforts to better align our cost structure with our operating results.
We are unable to predict the severity of macroeconomic uncertainty, whether or when such circumstances may improve or worsen, including from one of our quarterly reporting periods to the next, or the full impact such circumstances could have on our business.
These factors ultimately could require us to enact further mitigating operating efficiency measures that could have a material adverse effect on our business, results of operations, and liquidity.
Following its January 2025 inauguration, the U.S. administration has taken action to increase tariffs assessed on most products imported into the U.S.
Various modifications to the U.S. tariffs have been announced, and further changes are expected to be made in the future, including in response to litigation, which has introduced heightened uncertainty regarding the future of global trade and the impact to our cost structure.
Supreme Court rendered a decision invalidating tariffs imposed under the International Emergency Economic Powers Act (the "IEEPA").
Supreme Court did not address refunds or remedies but instead remanded the matter to the U.S.
Court of International Trade to address remedies.
President issued an executive order rescinding the IEEPA tariffs and directing agencies to take measures to cease collection of the tariffs.
Further, following the decision, the U.S.
President imposed a new tariff surcharge of not less than 10% under Section 122 of the Trade Act of 1974 on all imports, subject to certain exceptions.
The tariffs under this statute took effect on February 24, 2026, and will remain in effect for 150 days (the maximum under the statute).
Tariffs have not been previously imposed under this statutory provision, and such tariffs may be increased.
Court of International Trade ruled that companies that paid tariffs imposed under the IEEPA are due refunds.
There remains substantial uncertainty regarding any refund processes and further uncertainty regarding future trade policy actions, and any future tariffs or other trade policy actions could affect our cost structure and supply chain.
All of the products manufactured through the Brand Portfolio segment come from third-party facilities outside of the U.S., with the majority of our units sourced from Asia.
In addition to the merchandise sourced through our Brand Portfolio segment, our Retail segment also sources merchandise from third-party suppliers, with many of these suppliers importing a large portion of their merchandise from Asia.
We are closely monitoring this situation and evaluating the actions we have taken and additional actions we may take in the future, including cost mitigation measures and price adjustments.
For our Brand Portfolio segment, we have adjusted our sourcing diversification by optimizing where we source our products from in an effort to mitigate the risk, maximize flexibility, and decrease costs.
However, sourcing diversification could result in product quality issues, higher product costs, and/or not being able to source the quantity desired on a timely basis and there can be no assurance that we will be able to fully mitigate the impact of such tariffs or new tariffs in Asia or elsewhere.
The ultimate impact of tariffs and other trade policies on our business will depend on several factors, including future measures implemented by the U.S. government and the governments of other countries, the overall magnitude and duration of these measures, and our ability to mitigate effects, which could include higher import costs and our ability to obtain any refund.
Accordingly, our financial position or results of operations may be adversely influenced by political, economic, legal, compliance, social, and business conditions in the U.S. and in other countries.
Future impacts from macroeconomic conditions and tariffs are unknown at this time and could have a material adverse effect on our business, results of operations, and liquidity.
Unfavorable developments may result in future write-downs or adjustments to inventories, receivables, the valuation allowance on deferred tax assets, and may also negatively impact the fair value of our reporting units, indefinite-lived tradenames, and long-lived assets, which could result in us recording impairment charges for amounts below their carrying value.
FINANCIAL SUMMARY AND OTHER KEY METRICS For 2025 : • Net sales decreased to $2.9 billion from $3.0 billion last year. • Gross profit as a percentage of net sales was 43.6% compared to 42.7% in 2024. • Net loss attributable to Designer Brands Inc. was $8.4 million, or $0.17 loss per diluted share, compared to net loss attributable to Designer Brands Inc. of $10.5 million, or $0.20 loss per diluted share, last year.
Comparable Sales Performance Metric- The following table presents the percent change in comparable sales for each segment and in total: 2025 2024 Change in comparable sales: Retail segment (3.9) % (1.5) % Brand Portfolio segment - direct-to-consumer channel (21.9) % (9.5) % Total (4.3) % (1.7) % 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.
Comparable sales include the e-commerce sales of the Retail segment.

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Gone since FY2025

The following discussion includes a comparison of our results of operations and liquidity and capital resources for 2024 and 2023.
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.
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.
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.
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.
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.
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.
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.
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.
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.
EFFECTS OF INFLATION AND GLOBAL ECONOMIC CONDITIONS During 2024, our comparable sales declined as we experienced lower traffic, primarily in the U.S.
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.
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.
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.
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.
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.
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.
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.
Future impacts are unknown at this time and could have a material adverse effect on our business, operations, and results of operations.
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.
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.
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.
Comparable sales include the e-commerce sales of the U.S.
For calculating comparable sales in 2024, periods in 2023 are shifted by one week to compare similar calendar weeks.
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.
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.
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.
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 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.
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) % During 2024, net sales decreased in the U.S.
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.

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Sentence-level comparison of Item 1A in the two most recent 10-Ks (FY2025 ↗, FY2026 ↗). A reworded sentence counts as one dropped and one added, so heavy edits read as low “kept”. Headings and page furniture are stripped; nothing is summarised by a model.

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