Despite Designer Brands Inc. delivering a solid start to the year on Tuesday, investors were not happy with the company’s overall outlook.
On Thursday, the DSW parent company reaffirmed its guidance for fiscal 2026 with net sales expected to be in the range of down 1 percent to up 1 percent, with diluted earnings per share at between 28 cents to 38 cents.
Analysts are expecting earnings per share for the year at between 35 cents to 45 cents, according to Yahoo Finance, which led the stock to plunge nearly 22 percent at the end of trading on Tuesday.
Dana Telsey, founder and chief executive officer of Telsey Advisory Group, wrote in a research note on Tuesday that the consensus earnings per share forecast among analysts stands 2 cents above the high-end of the reaffirmed guidance range, which factored into the stock movement.
“While the company continues to make structural improvements across inventory management, pricing discipline, sourcing, and channel profitability, the overall macro-operating environment and global footwear space remain challenging,” Telsey wrote. “As such, we view the fiscal year 2026 guide as prudently cautious, with management focusing on navigating the choppy demand environment near-term, while targeting a return to growth and historic profitability levels longer-term.”
Other factors like weather and uncertainty around tariff refunds are raising worries for the company. Doug Howe, chief executive officer of Designer Brands Inc., noted on the company’s first quarter 2026 earnings call with analysts on Tuesday that sales in seasonal categories at its retail stores were impacted by unfavorable weather in the quarter, which was more prevalent in Canada. This was partially offset by revenue at retail being slightly up in the U.S.
“We did see that start to rebound with pretty significant sequential improvement as we moved through May,” the CEO noted as he spoke about what to expect for the second quarter. “I think we’re prudently cautious with regards to our outlook for Q2 which on the retail side would be flat to slightly positive and still seeing a pretty nice increase on the brand [portfolio] side.”
Weather-related headwinds also came into play in the company’s retail division in terms of category performance. Howe told analysts that weather impacted its seasonal sandals business, which was down low single digits in the quarter.
“We also saw softness in the casual and athletic categories as consumers shifted back towards fashion and occasion-based products, following several years of elevated demand in casual and athletic,” the CEO explained. “These trends are not unique to our business, and we are confident that our assortment breadth positions us well to capitalize on these cyclical shifts in consumer preferences.”
As for tariffs, the company noted that it is taking a “cautious approach” to the potential impact of tariff dynamics on its business and assuming a substantial portion of any potential refunds will be offset by increased risk from the new Section 301 tariffs that may begin in August.
“Given that a significant portion of our business relies on partnerships with national brands who have their own tariff exposure, it also remains to be seen how they will respond to the latest developments on tariffs,” Howe noted. “Therefore, we have remained cautious in our approach, and we want to clarify that our earnings guidance excludes these potential impacts.”
