Designer Brands Inc. — Call Transcript 2026

Good day, and welcome to the Designer Brands Inc first quarter 2026 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Matthew Crummy, Senior Vice President. Please go ahead. Good morning. Earlier today, the company issued a press release comparing results of operations for the 13-week period ended May 2nd, 2026, to the 13-week period ended May 3rd, 2025. Please note that the financial results that we will be referencing during the remainder of today's call exclude certain adjustments recorded under GAAP, unless specified otherwise. Contemplated within the results are immaterial corrections to prior year periods related to inadvertent errors due to a misapplication of duty rates applied to our Topo branded products imported into the United States, as outlined in our press release. For a complete reconciliation of GAAP to adjusted earnings, please reference our press release. Additionally, please note that remarks made about the future expectations, plans, and prospects of the company constitute forward-looking statements. Results may differ materially due to various factors listed in today's press release and the company's public filings with the SEC. Except as may be required by applicable law, the company assumes no obligation to update any forward-looking statements. Joining us today are Doug Howe, Chief Executive Officer, and Sheamus Toal, Chief Financial Officer. I'll now turn the call over to Doug. Good morning, and thank you everyone for joining us today. We are pleased with our start to fiscal 2026, with first quarter net sales growth in line with our plans, and earnings per share exceeding our expectations, driven by strong margin expansion. Importantly, we continue to build on the momentum we generated in the back half of fiscal 2025, highlighted by solid execution across our strategic priorities and strong growth in our Brand Portfolio segment. Before I get into some additional detail on our business performance, I'd like to thank our Designer Brands associates for their continued hard work, focus, and commitment to serving our customers and advancing our strategic priorities. I'm proud of how our team's executed throughout the first quarter, while continuing to navigate a dynamic consumer environment. For the first quarter, net sales increased 1% year-over-year, and consolidated comparable sales decreased by 1%. Performance was led by our Brand Portfolio segment that delivered strong growth of 19% versus the prior year, and Retail segment sales were stable, approximately flat to last year. In addition to improved sales trends, we drove meaningful gross profit expansion, with gross margin increasing 240 basis points versus last year and gross profit increasing by $21 million. We also leveraged adjusted operating expenses by 50 basis points year-over-year as we continue to drive efficiency throughout the business. Importantly, the margin improvement we delivered in the first quarter reflects more than just favorable mix. It is being driven by the structural changes we've made across inventory management, pricing, discipline sourcing, and channel profitability over the last several quarters. We believe these actions are helping create a more durable earnings model for the business going forward. Notably, we generated adjusted operating income of $19 million and adjusted EPS of $0.07, representing a significant improvement versus last year and ahead of our expectations. I'm encouraged by the strong start to the year and the progress we are making in implementing our strategic initiatives amidst an uncertain external environment. Let me discuss our results in a bit more detail. Starting with our Retail segment, which as a reminder, reflects the aggregation of our U.S. retail and Canada retail operating segments. Our total sales for the first quarter were approximately flat year-over-year, with comparable sales down slightly. Sales in seasonal categories were impacted by unfavorable weather in the quarter, which was more prevalent in Canada. In the U.S., revenue was up slightly, and according to Circana data, in Q1, DSW held in footwear market share versus last year. Traffic trends improved. We also continued to see strong regular price sales, supported by our enhanced assortment and effective inventory management. From a product perspective, we shared on our last call that in 2026, we are focused on winning with the merchandise that matters most to our consumers, and we saw encouraging response across several categories in the first quarter. Our dress business was strong in Q1, up approximately 4%. Affordable luxury continues its significant growth trajectory with the category enhancing relevance and driving differentiation within the assortment. On our last earnings call, we also spoke about an opportunity to increase market share in categories adjacent to footwear. We were pleased to drive double-digit sales growth in these categories during the first quarter, led by strong performance across the accessories assortment. At the same time, weather-related headwinds impacted our 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. These trends are not unique to our business. We are confident that our assortment breadth positions us well to capitalize on these cyclical shifts in consumer preferences. Performance of our top 10 brands was generally in line with our retail trend during the quarter, with growth across several strategic partners offset by the category headwinds I mentioned earlier. These strategic brand partners continue to play an important role in driving customer engagement and in reinforcing the strength and relevance of our assortment. Our marketing team amplified our assortment strength by building on our Let Us Surprise You platform in Q1. We continued to curate our DSW brand positioning throughout the quarter, driving increased engagement and impressions across PR and social channels. We also rolled out an evolved influencer strategy with elevated storytelling-driven campaigns intending to strengthen DSW's authority as a destination for seasonally relevant, occasion-based dressing through trusted influencer recommendations. We intend to continue building on these marketing initiatives through Q2, driving brand relevance as we support key seasonal categories across the business. We were encouraged to see positive momentum in our stores, with improving traffic and sales trends and demand that outpaced the broader footwear market in the quarter. We believe these trends reflect the progress we are making in refining our assortment and enhancing the customer experience across our store base. We've mentioned, we are planning several new store openings as well as several remodels this year, as we continue focusing on delivering a more elevated and distinctive in-store experience. Turning to our Brand Portfolio segment, on our last call, we talked about our focus on building and scaling our Brand Portfolio in 2026. We were pleased with the strong start to the year, with Q1 sales increasing 19% and operating income improving by $13 million versus last year. Within our exclusive brands business, we continued to build on our strong partnership with the DSW team. Newness across the assortment resonated well with consumers during the quarter. We remain confident in our ability to build on momentum in categories where we are seeing meaningful growth opportunities at DSW throughout the year. Topo continued its strong momentum and grew 32% during the quarter, in line with our expectations. Growth was driven by strong demand across core franchises, successful new product introductions, momentum in specialty running, and expanded distribution partnerships that further strengthened the brand's positioning within the category. Jessica Simpson also delivered another strong quarter, growing 35% versus last year, benefiting from continued strength in dress trends and positive response to the evolution of the assortment, including lower heel heights across key styles. Keds generated encouraging growth of 35%, benefiting from expanded distribution and momentum from newness across the assortment in both digital and wholesale channels as we entered the year with a sharper assortment and cleaner inventory levels. Across the portfolio, we remain focused on supporting profitable, sustainable growth while leveraging the strategic advantages of vertical integration and sourcing capabilities, as well as our strong retail partnerships. We continue scaling the Brand Portfolio segment, we believe this diversified operating model enhances both profitability and flexibility across our organization. Before I conclude, I want to share a few thoughts on our 2026 guidance. Based on our strong first quarter performance, we now expect full year EPS to trend toward the high end of the guidance range we shared on our last call. We have also had a solid start to Q2, with results trending in line with our expectations. Sheamus will share more detail on the assumptions underlying guidance in a moment. Overall, we are pleased with the progress we are driving across the business. Importantly, we continue to deliver sequential improvement in both top-line trends and profitability while remaining disciplined in our execution. I'm proud of the work our teams are doing to strengthen the foundation of Designer Brands, I remain confident that our strategic actions position us well for long-term profitable growth. With that, I'll turn it over to Sheamus. Thank you, Doug. Good morning, everyone. We were pleased to deliver a strong start to fiscal 2026, with another quarter of improved operating performance trends. First quarter consolidated net sales of $696 million were up 1.4% versus last year, with comparable store sales down 1.1%. In our Retail segment, first quarter sales were approximately flat versus last year, with comparable store sales down 1.2%. We continue to see strength in average unit retail and traffic trends improved meaningfully with traffic comps improving sequentially by over 500 basis points compared to Q4. As Doug mentioned, we experienced some weather-related headwinds in Q1 that impacted sales trends, particularly in our Canada retail business. In our Brand Portfolio segment, first quarter sales increased 19.4% compared to last year, driven by strong growth in external wholesale sales and continued momentum across Topo, Jessica Simpson, and Keds, with each brand contributing meaningful growth during the quarter. In addition, intercompany sales were also up 24% for the quarter. As a reminder, these intercompany sales are eliminated through consolidation. Consolidated gross margin in the first quarter was 45.3%, representing a 240 basis point improvement versus last year, driven primarily by stronger IMU, fewer markdowns, and continued optimization of our promotional strategy. We also continued to see benefits from our focus on channel profitability and fulfillment optimization within retail. As a result of these drivers of margin expansion and the strong increase in Brand Portfolio sales, consolidated gross profit increased by $20.8 million compared to last year. For the first quarter, adjusted operating expenses were 42.9% of sales, leveraging 50 basis points versus last year, driven by the cost reduction actions and organizational changes implemented during 2025 and diligent expense management during the quarter. For the first quarter, adjusted operating income was $19.4 million, compared to an adjusted operating loss of $1.1 million last year, with the improvement primarily driven by gross profit expansion, as discussed earlier. In the first quarter, we had $10.1 million of net interest expense compared to $12 million last year. Our adjusted effective tax rate for the quarter was 54.5%, compared to 0% last year. First quarter adjusted net income was $3.8 million, or $0.07 per diluted share, compared to an adjusted net loss of $13 million last year, or a loss of $0.27 per diluted share in the prior year. Turning to inventory, we ended the first quarter with total inventories down 6% compared to last year as we continued to tightly manage inventory levels and focus on improving productivity across the assortment. Importantly, inventory remains clean entering the second quarter, with healthy composition across key growth categories. We ended the quarter with $50 million of cash compared to $46 million in Q1 of last year, and total liquidity of $189 million. We continued to prioritize balance sheet strength during the quarter and further reduced debt levels, with total debt outstanding of $475 million compared to $523 million at the end of Q1 last year. I'd like to spend a few moments on our outlook. As Doug mentioned in his remarks, while we continue to expect sales for the fiscal year in line with our original guidance, given the strong results in Q1, we now expect full-year earnings per share to trend towards the high end of our annual guidance range. In Q2, quarter-to-date performance is supportive of our approach to our annual sales guidance. The quarter began with unfavorable weather that impacted demand for seasonal products. Results improved sequentially week over week in May as weather has normalized and we anticipate total sales to be flat to slightly up for the quarter. That being said, there remains a moderate amount of uncertainty with tariffs and the macro environment. We are taking a cautious approach to the potential impact of tariff dynamics on our 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. We have remained cautious in our approach, and we want to clarify that our earnings guidance excludes these potential impacts. Looking ahead to the balance of the year, as a reminder, we continue to anticipate sales and earnings growth to be stronger in the first half of the year. Within the second half of the year, we expect earnings to be pressured in the third quarter as we lap strong performance and return to a normalized level of incentive-based compensation. We anticipate adjusted earnings per share in the fourth quarter will improve notably year-over-year. To conclude, we're encouraged by the continued improvement in our operating performance and the momentum we have built over the last several quarters. While the macro environment remains dynamic, we remain focused on discipline execution, inventory productivity, expense management, and driving profitable growth across both our Retail and Brand Portfolio segments. We believe that the progress that we've made over the last year continues to strengthen the foundation of the business and positions Designer Brands for sustainable, profitable growth over the long term. With that, we will open the call for questions. Operator? We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Mauricio Serna with UBS. Please go ahead. Great. Good morning. Thanks for taking my question. Just a couple of things to start on the Q2 outlook you just laid out, flat to slightly up. How does that look between the Retail segment and Brand Portfolio? How are you thinking about that, when you think about the two segments? Then, nice to see the very strong performance and the gross margin and your initiatives really coming to fruition. On that front, how much more room do you see for gross margin improvement due to all these initiatives that you've implemented over the last year? Thank you. Morning, Mauricio. This is Doug. Thanks for your question. I'll start, and then I'll turn it over to Sheamus to add a little bit of additional color on the financial aspect of it. As it relates to May, we have been encouraged by the trend that we've seen sequentially through the month. As we said, similar to Q1, there was a pretty large headwind, more impacted in the Canadian business, obviously more prevalent in the Canadian business than it even was in the U.S. We did see that start to rebound with pretty significant sequential improvement as we moved through May. Again, I think we're prudently cautious with regards to our outlook for Q2, which on the retail side would be flat to slightly positive. Still seeing a pretty nice increase on the brand side for Q2. That was a pretty stellar performance that brands delivered in Q1, obviously up 19%. Again, we see a similar trend continuing into Q2. On the gross margin piece of it, a lot of it is structural with regards to the actions that the team has been working on. 240 basis point expansion on overall consolidated gross margin. On the retail side of note, about 65% of the favorability was related to lower markdowns and about 35% related to IMU. It's not just mix. It's a combination of really focusing on channel profitability, removing some of the stacking of promotions that we're doing that were just not OI accretive, taking a look at the shipping threshold on the digital platform. Then obviously the teams have done a stellar job managing inventory. We ended the quarter with 6% less inventory than last year. Just lower reliance on clearance markdowns and pulling back on a little bit of the promotionality of it as well. That's the high level as it relates to the GM aspect. Anything to add, Sheamus? I think, as Doug mentioned, the great thing about the margin improvement is we've seen it from a number of different areas, whether it's improved IMU, improved markdowns, improved promotional cadence. What we've talked about consistently is we see that as a bigger opportunity in the first half of the year. We're seeing that in Q1. We expect to see that in Q2. As we move into the back half of the year and begin to lap some of the significant improvements that we had last year, those margin improvements relative to prior year results become a little bit more challenging. In Q2, we are expecting to see continued margin improvement. Got it. Very helpful. A couple of other things. Just below the operating line, how should we think about interest expenses, tax rate, and share count just for housekeeping of our models? Thank you. In terms of the overall guidance, obviously we gave expectations for the full year in terms of EPS to give you some color in terms of the OpEx expenses. There are some puts and takes as you think about it relative to last year. As I commented on margin, I think we see a similar trend in terms of OpEx in the back half of the year, where last year we had some significant benefits and reductions. We are anticipating that there will be some pressure on those expenses as we move into the back half of the year. For example, in Q3, as we layer in our full incentive compensation programs and stock comp programs, there's upwards of a $10 million impact in terms of OpEx in the quarter relative to putting some of those programs back in full effect. They're obviously variable based upon results and profitability, but last year had no expenses in the quarter. We are anticipating the gross expense to increase as a result of that. In terms of tax rate, this quarter was a relatively unusual quarter in terms of the tax rate being 54.5%, that's due to a combination of factors, one being some fixed state and local taxes, and the second being as we again layer in various executive comp expenses that are excluded for tax deductibility purposes and become permanent differences. Those permanent items, when calculated on a relatively low taxable income, can skew the rate to a higher than normal rate, and that's what we saw in Q2. For the full year, we're anticipating some impact of that, but it lessens. I would expect our full year tax rate to be in the low 40s in terms of the percentage, and that's what we have built into our guidance expectations that we laid out earlier in the year, and as you know, are continuing to reiterate those expectations for the full year in terms of EPS. Got it. In terms of the share count? Share count, we're continuing to anticipate based upon shifting back to profitability this year, that the share count will include the fully diluted calculations. We're expecting share count to be approximately 58 million shares as we move through the year. Got it. Thank you so much. Again, if you have a question, please press star then one. This concludes our question and answer session. I would like to turn the conference back over to Doug Howe for any closing remarks. In closing, I just want to reiterate that we are successfully transforming our business. The strategic actions that we've taken are delivering results, and we're seeing clear momentum across those priorities. Our strategy is working, winning with the merchandise that matters most to our customers, amplifying DSW's brand positioning, elevating our in-store experience, and building a scalable, profitable Brand Portfolio. None of this progress would be possible without the dedication and the hard work of our associates. Their commitment continues to drive our success, and I want to express my sincere appreciation for everything that they do every day. I'd also like to thank everyone who joined us on today's call for your continued interest and your support. We remain focused, we are confident in our direction, and we're excited about the opportunities ahead. Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Speaker 4: Good day, and welcome to the Designer Brands Inc first quarter 2026 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Matthew Crummy, Senior Vice President. Please go ahead. Good day, and welcome to the Designer Brands Inc f irst quarter 2026 earnings call. good day and welcome to the designer brands inc f irst quarter 2026 earnings call All participants will be in listen -only mode. all participants will be in listen -only mode Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. should you need assistance please signal a conference specialist by pressing the star key followed by zero After today's presentation, there will be an opportunity to ask questions. after today's presentation there will be an opportunity to ask questions To ask a question, you may press star then one on your telephone keypad. to ask a question you may press star then one on your telephone keypad To withdraw your question, please press star then two. to withdraw your question please press star then two Please note this event is being recorded. please note this event is being recorded I would now like to turn the conference over to Matthew Crummy, Senior Vice President. i would now like to turn the conference over to matthew crummy senior vice president Please go ahead. please go ahead

Speaker 2: Good morning. Earlier today, the company issued a press release comparing results of operations for the 13-week period ended May 2nd, 2026, to the 13-week period ended May 3rd, 2025. Please note that the financial results that we will be referencing during the remainder of today's call exclude certain adjustments recorded under GAAP, unless specified otherwise. Contemplated within the results are immaterial corrections to prior year periods related to inadvertent errors due to a misapplication of duty rates applied to our Topo branded products imported into the United States, as outlined in our press release. For a complete reconciliation of GAAP to adjusted earnings, please reference our press release. Additionally, please note that remarks made about the future expectations, plans, and prospects of the company constitute forward-looking statements. Results may differ materially due to various factors listed in today's press release and the company's public filings with the SEC. Good morning. good morning Earlier today, the company issued a press release comparing results of operations for the 13-week period ended May 2nd, 2026, to the 13-week period ended May 3rd, 2025. earlier today the company issued a press release comparing results of operations for the 13-week period ended may 2nd 2026 to the 13-week period ended may 3rd 2025 Please note that the financial results that we will be referencing during the remainder of today's call exclude certain adjustments recorded under GAAP, unless specified otherwise. please note that the financial results that we will be referencing during the remainder of today's call exclude certain adjustments recorded under gaap unless specified otherwise Contemplated within the results are immaterial corrections to prior year periods related to inadvertent errors due to a misapplication of duty rates applied to our Topo branded products imported into the United States, as outlined in our press release. contemplated within the results are immaterial corrections to prior year periods related to inadvertent errors due to a misapplication of duty rates applied to our topo branded products imported into the united states as outlined in our press release For a complete reconciliation of GAAP to adjusted earnings, please reference our press release. for a complete reconciliation of gaap to adjusted earnings please reference our press release Additionally, please note that remarks made about the future expectations, plans, and prospects of the company constitute forward-looking statements. additionally please note that remarks made about the future expectations plans and prospects of the company constitute forward-looking statements Results may differ materially due to various factors listed in today's press release and the company's public filings with the SEC. results may differ materially due to various factors listed in today's press release and the company's public filings with the sec Except as may be required by applicable law, the company assumes no obligation to update any forward-looking statements. Joining us today are Doug Howe, Chief Executive Officer, and Sheamus Toal, Chief Financial Officer. I'll now turn the call over to Doug. Except as may be required by applicable law, the company assumes no obligation to update any forward-looking statements. except as may be required by applicable law the company assumes no obligation to update any forward-looking statements Joining us today are Doug Howe, Chief Executive Officer, and Sheamus Toal, Chief Financial Officer. joining us today are doug howe chief executive officer and sheamus toal chief financial officer I'll now turn the call over to Doug. i'll now turn the call over to doug

Speaker 1: Good morning, and thank you everyone for joining us today. We are pleased with our start to fiscal 2026, with first quarter net sales growth in line with our plans, and earnings per share exceeding our expectations, driven by strong margin expansion. Importantly, we continue to build on the momentum we generated in the back half of fiscal 2025, highlighted by solid execution across our strategic priorities and strong growth in our Brand Portfolio segment. Before I get into some additional detail on our business performance, I'd like to thank our Designer Brands associates for their continued hard work, focus, and commitment to serving our customers and advancing our strategic priorities. I'm proud of how our team's executed throughout the first quarter, while continuing to navigate a dynamic consumer environment. For the first quarter, net sales increased 1% year-over-year, and consolidated comparable sales decreased by 1%. Good morning, and thank you everyone for joining us today. good morning and thank you everyone for joining us today We are pleased with our start to fiscal 2026, with first quarter net sales growth in line with our plans, and earnings per share exceeding our expectations, driven by strong margin expansion. we are pleased with our start to fiscal 2026 with first quarter net sales growth in line with our plans and earnings per share exceeding our expectations driven by strong margin expansion Importantly, we continue to build on the momentum we generated in the back half of fiscal 2025, highlighted by solid execution across our strategic priorities and strong growth in our Brand Portfolio segment. importantly we continue to build on the momentum we generated in the back half of fiscal 2025 highlighted by solid execution across our strategic priorities and strong growth in our brand portfolio segment Before I get into some additional detail on our business performance, I'd like to thank our Designer Brands associates for their continued hard work, focus, and commitment to serving our customers and advancing our strategic priorities. before i get into some additional detail on our business performance i'd like to thank our designer brands associates for their continued hard work focus and commitment to serving our customers and advancing our strategic priorities I'm proud of how our team's executed throughout the first quarter, while continuing to navigate a dynamic consumer environment. i'm proud of how our team's executed throughout the first quarter while continuing to navigate a dynamic consumer environment For the first quarter, net sales increased 1% year-over-year, and consolidated comparable sales decreased by 1%. for the first quarter net sales increased 1% year-over-year and consolidated comparable sales decreased by 1% Performance was led by our Brand Portfolio segment that delivered strong growth of 19% versus the prior year, and Retail segment sales were stable, approximately flat to last year. In addition to improved sales trends, we drove meaningful gross profit expansion, with gross margin increasing 240 basis points versus last year and gross profit increasing by $21 million. We also leveraged adjusted operating expenses by 50 basis points year-over-year as we continue to drive efficiency throughout the business. Importantly, the margin improvement we delivered in the first quarter reflects more than just favorable mix. It is being driven by the structural changes we've made across inventory management, pricing, discipline sourcing, and channel profitability over the last several quarters. We believe these actions are helping create a more durable earnings model for the business going forward. Performance was led by our Brand Portfolio segment that delivered strong growth of 19% versus the prior year, and Retail segment sales were stable, approximately flat to last year. performance was led by our brand portfolio segment that delivered strong growth of 19% versus the prior year and retail segment sales were stable approximately flat to last year In addition to improved sales trends, we drove meaningful gross profit expansion, with gross margin increasing 240 basis points versus last year and gross profit increasing by $21 million. in addition to improved sales trends we drove meaningful gross profit expansion with gross margin increasing 240 basis points versus last year and gross profit increasing by $21 million We also leveraged adjusted operating expenses by 50 basis points year -over -year as we continue to drive efficiency throughout the business. we also leveraged adjusted operating expenses by 50 basis points year -over -year as we continue to drive efficiency throughout the business Importantly, the margin improvement we delivered in the first quarter reflects more than just favorable mix. importantly the margin improvement we delivered in the first quarter reflects more than just favorable mix It is being driven by the structural changes we've made across inventory management, pricing, discipline sourcing, and channel profitability over the last several quarters. it is being driven by the structural changes we've made across inventory management pricing discipline sourcing and channel profitability over the last several quarters We believe these actions are helping create a more durable earnings model for the business going forward. we believe these actions are helping create a more durable earnings model for the business going forward Notably, we generated adjusted operating income of $19 million and adjusted EPS of $0.07, representing a significant improvement versus last year and ahead of our expectations. I'm encouraged by the strong start to the year and the progress we are making in implementing our strategic initiatives amidst an uncertain external environment. Let me discuss our results in a bit more detail. Starting with our Retail segment, which as a reminder, reflects the aggregation of our U.S. retail and Canada retail operating segments. Our total sales for the first quarter were approximately flat year-over-year, with comparable sales down slightly. Sales in seasonal categories were impacted by unfavorable weather in the quarter, which was more prevalent in Canada. In the U.S., revenue was up slightly, and according to Circana data, in Q1, DSW held in footwear market share versus last year. Notably, we generated adjusted operating income of $19 million and adjusted EPS of $0.07, representing a significant improvement versus last year and ahead of our expectations. notably we generated adjusted operating income of $19 million and adjusted eps of $0.07 representing a significant improvement versus last year and ahead of our expectations I'm encouraged by the strong start to the year and the progress we are making in implementing our strategic initiatives amidst an uncertain external environment. i'm encouraged by the strong start to the year and the progress we are making in implementing our strategic initiatives amidst an uncertain external environment Let me discuss our results in a bit more detail. let me discuss our results in a bit more detail Starting with our Retail segment, which as a reminder, reflects the aggregation of our U.S. retail and Canada retail operating segments. starting with our retail segment which as a reminder reflects the aggregation of our u.s retail and canada retail operating segments Our total sales for the first quarter were approximately flat year -over -year, with comparable sales down slightly. our total sales for the first quarter were approximately flat year -over -year with comparable sales down slightly Sales in seasonal categories were impacted by unfavorable weather in the quarter, which was more prevalent in Canada. sales in seasonal categories were impacted by unfavorable weather in the quarter which was more prevalent in canada In the U.S., revenue was up slightly, and according to Circana data, in Q1, DSW held in footwear market share versus last year. in the u.s revenue was up slightly and according to circana data in q1 dsw held in footwear market share versus last year Traffic trends improved. We also continued to see strong regular price sales, supported by our enhanced assortment and effective inventory management. From a product perspective, we shared on our last call that in 2026, we are focused on winning with the merchandise that matters most to our consumers, and we saw encouraging response across several categories in the first quarter. Our dress business was strong in Q1, up approximately 4%. Affordable luxury continues its significant growth trajectory with the category enhancing relevance and driving differentiation within the assortment. On our last earnings call, we also spoke about an opportunity to increase market share in categories adjacent to footwear. We were pleased to drive double-digit sales growth in these categories during the first quarter, led by strong performance across the accessories assortment. Traffic trends improved. traffic trends improved We also continued to see strong regular price sales, supported by our enhanced assortment and effective inventory management. we also continued to see strong regular price sales supported by our enhanced assortment and effective inventory management From a product perspective, we shared on our last call that in 2026, we are focused on winning with the merchandise that matters most to our consumers, and we saw encouraging response across several categories in the first quarter. from a product perspective we shared on our last call that in 2026 we are focused on winning with the merchandise that matters most to our consumers and we saw encouraging response across several categories in the first quarter Our dress business was strong in Q1, up approximately 4%. our dress business was strong in q1 up approximately 4% Affordable luxury continues its significant growth trajectory with the category enhancing relevance and driving differentiation within the assortment. affordable luxury continues its significant growth trajectory with the category enhancing relevance and driving differentiation within the assortment On our last earnings call, we also spoke about an opportunity to increase market share in categories adjacent to footwear. on our last earnings call we also spoke about an opportunity to increase market share in categories adjacent to footwear We were pleased to drive double-digit sales growth in these categories during the first quarter, led by strong performance across the accessories assortment. we were pleased to drive double-digit sales growth in these categories during the first quarter led by strong performance across the accessories assortment At the same time, weather-related headwinds impacted our 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. These trends are not unique to our business. We are confident that our assortment breadth positions us well to capitalize on these cyclical shifts in consumer preferences. Performance of our top 10 brands was generally in line with our retail trend during the quarter, with growth across several strategic partners offset by the category headwinds I mentioned earlier. These strategic brand partners continue to play an important role in driving customer engagement and in reinforcing the strength and relevance of our assortment. Our marketing team amplified our assortment strength by building on our Let Us Surprise You platform in Q1. At the same time, weather-related headwinds impacted our 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. at the same time weather-related headwinds impacted our 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 These trends are not unique to our business. these trends are not unique to our business We are confident that our assortment breadth positions us well to capitalize on these cyclical shifts in consumer preferences. we are confident that our assortment breadth positions us well to capitalize on these cyclical shifts in consumer preferences Performance of our top 10 brands was generally in line with our retail trend during the quarter, with growth across several strategic partners offset by the category headwinds I mentioned earlier. performance of our top 10 brands was generally in line with our retail trend during the quarter with growth across several strategic partners offset by the category headwinds i mentioned earlier These strategic brand partners continue to play an important role in driving customer engagement and in reinforcing the strength and relevance of our assortment. these strategic brand partners continue to play an important role in driving customer engagement and in reinforcing the strength and relevance of our assortment Our marketing team amplified our assortment strength by building on our Let Us Surprise You platform in Q1. our marketing team amplified our assortment strength by building on our let us surprise you platform in q1 We continued to curate our DSW brand positioning throughout the quarter, driving increased engagement and impressions across PR and social channels. We also rolled out an evolved influencer strategy with elevated storytelling-driven campaigns intending to strengthen DSW's authority as a destination for seasonally relevant, occasion-based dressing through trusted influencer recommendations. We intend to continue building on these marketing initiatives through Q2, driving brand relevance as we support key seasonal categories across the business. We were encouraged to see positive momentum in our stores, with improving traffic and sales trends and demand that outpaced the broader footwear market in the quarter. We believe these trends reflect the progress we are making in refining our assortment and enhancing the customer experience across our store base. We continued to curate our DSW brand positioning throughout the quarter, driving increased engagement and impressions across PR and social channels. we continued to curate our dsw brand positioning throughout the quarter driving increased engagement and impressions across pr and social channels We also rolled out an evolved influencer strategy with elevated storytelling-driven campaigns intending to strengthen DSW's authority as a destination for seasonally relevant, occasion-based dressing through trusted influencer recommendations. we also rolled out an evolved influencer strategy with elevated storytelling-driven campaigns intending to strengthen dsw's authority as a destination for seasonally relevant occasion-based dressing through trusted influencer recommendations We intend to continue building on these marketing initiatives through Q2, driving brand relevance as we support key seasonal categories across the business. we intend to continue building on these marketing initiatives through q2 driving brand relevance as we support key seasonal categories across the business We were encouraged to see positive momentum in our stores, with improving traffic and sales trends and demand that outpaced the broader footwear market in the quarter. we were encouraged to see positive momentum in our stores with improving traffic and sales trends and demand that outpaced the broader footwear market in the quarter We believe these trends reflect the progress we are making in refining our assortment and enhancing the customer experience across our store base. we believe these trends reflect the progress we are making in refining our assortment and enhancing the customer experience across our store base We've mentioned, we are planning several new store openings as well as several remodels this year, as we continue focusing on delivering a more elevated and distinctive in-store experience. Turning to our Brand Portfolio segment, on our last call, we talked about our focus on building and scaling our Brand Portfolio in 2026. We were pleased with the strong start to the year, with Q1 sales increasing 19% and operating income improving by $13 million versus last year. Within our exclusive brands business, we continued to build on our strong partnership with the DSW team. Newness across the assortment resonated well with consumers during the quarter. We remain confident in our ability to build on momentum in categories where we are seeing meaningful growth opportunities at DSW throughout the year. Topo continued its strong momentum and grew 32% during the quarter, in line with our expectations. We've mentioned, we are planning several new store openings as well as several remodels this year, as we continue focusing on delivering a more elevated and distinctive in-store experience. we've mentioned we are planning several new store openings as well as several remodels this year as we continue focusing on delivering a more elevated and distinctive in-store experience Turning to our Brand Portfolio segment, on our last call, we talked about our focus on building and scaling our Brand Portfolio in 2026. turning to our brand portfolio segment on our last call we talked about our focus on building and scaling our brand portfolio in 2026 We were pleased with the strong start to the year, with Q1 sales increasing 19% and operating income improving by $13 million versus last year. we were pleased with the strong start to the year with q1 sales increasing 19% and operating income improving by $13 million versus last year Within our exclusive brands business, we continued to build on our strong partnership with the DSW team. within our exclusive brands business we continued to build on our strong partnership with the dsw team Newness across the assortment resonated well with consumers during the quarter. newness across the assortment resonated well with consumers during the quarter We remain confident in our ability to build on momentum in categories where we are seeing meaningful growth opportunities at DSW throughout the year. we remain confident in our ability to build on momentum in categories where we are seeing meaningful growth opportunities at dsw throughout the year Topo continued its strong momentum and grew 32% during the quarter, in line with our expectations. topo continued its strong momentum and grew 32% during the quarter in line with our expectations Growth was driven by strong demand across core franchises, successful new product introductions, momentum in specialty running, and expanded distribution partnerships that further strengthened the brand's positioning within the category. Jessica Simpson also delivered another strong quarter, growing 35% versus last year, benefiting from continued strength in dress trends and positive response to the evolution of the assortment, including lower heel heights across key styles. Keds generated encouraging growth of 35%, benefiting from expanded distribution and momentum from newness across the assortment in both digital and wholesale channels as we entered the year with a sharper assortment and cleaner inventory levels. Across the portfolio, we remain focused on supporting profitable, sustainable growth while leveraging the strategic advantages of vertical integration and sourcing capabilities, as well as our strong retail partnerships. Growth was driven by strong demand across core franchises, successful new product introductions, momentum in specialty running, and expanded distribution partnerships that further strengthened the brand's positioning within the category. growth was driven by strong demand across core franchises successful new product introductions momentum in specialty running and expanded distribution partnerships that further strengthened the brand's positioning within the category Jessica Simpson also delivered another strong quarter, growing 35% versus last year, benefiting from continued strength in dress trends and positive response to the evolution of the assortment, including lower heel heights across key styles. jessica simpson also delivered another strong quarter growing 35% versus last year benefiting from continued strength in dress trends and positive response to the evolution of the assortment including lower heel heights across key styles Keds generated encouraging growth of 35%, benefiting from expanded distribution and momentum from newness across the assortment in both digital and wholesale channels as we entered the year with a sharper assortment and cleaner inventory levels. keds generated encouraging growth of 35% benefiting from expanded distribution and momentum from newness across the assortment in both digital and wholesale channels as we entered the year with a sharper assortment and cleaner inventory levels Across the portfolio, we remain focused on supporting profitable, sustainable growth while leveraging the strategic advantages of vertical integration and sourcing capabilities, as well as our strong retail partnerships. across the portfolio we remain focused on supporting profitable sustainable growth while leveraging the strategic advantages of vertical integration and sourcing capabilities as well as our strong retail partnerships We continue scaling the Brand Portfolio segment, we believe this diversified operating model enhances both profitability and flexibility across our organization. Before I conclude, I want to share a few thoughts on our 2026 guidance. Based on our strong first quarter performance, we now expect full year EPS to trend toward the high end of the guidance range we shared on our last call. We have also had a solid start to Q2, with results trending in line with our expectations. Sheamus will share more detail on the assumptions underlying guidance in a moment. Overall, we are pleased with the progress we are driving across the business. Importantly, we continue to deliver sequential improvement in both top-line trends and profitability while remaining disciplined in our execution. We continue scaling the Brand Portfolio segment, we believe this diversified operating model enhances both profitability and flexibility across our organization. we continue scaling the brand portfolio segment we believe this diversified operating model enhances both profitability and flexibility across our organization Before I conclude, I want to share a few thoughts on our 2026 guidance. before i conclude i want to share a few thoughts on our 2026 guidance Based on our strong first quarter performance, we now expect full year EPS to trend toward the high end of the guidance range we shared on our last call. based on our strong first quarter performance we now expect full year eps to trend toward the high end of the guidance range we shared on our last call We have also had a solid start to Q2, with results trending in line with our expectations. we have also had a solid start to q2 with results trending in line with our expectations Sheamus will share more detail on the assumptions underlying guidance in a moment. sheamus will share more detail on the assumptions underlying guidance in a moment Overall, we are pleased with the progress we are driving across the business. overall we are pleased with the progress we are driving across the business Importantly, we continue to deliver sequential improvement in both top-line trends and profitability while remaining disciplined in our execution. importantly we continue to deliver sequential improvement in both top-line trends and profitability while remaining disciplined in our execution I'm proud of the work our teams are doing to strengthen the foundation of Designer Brands, I remain confident that our strategic actions position us well for long-term profitable growth. With that, I'll turn it over to Sheamus. I'm proud of the work our teams are doing to strengthen the foundation of Designer Brands, I remain confident that our strategic actions position us well for long-term profitable growth. i'm proud of the work our teams are doing to strengthen the foundation of designer brands i remain confident that our strategic actions position us well for long-term profitable growth With that, I'll turn it over to Sheamus. with that i'll turn it over to sheamus

Speaker 5: Thank you, Doug. Good morning, everyone. We were pleased to deliver a strong start to fiscal 2026, with another quarter of improved operating performance trends. First quarter consolidated net sales of $696 million were up 1.4% versus last year, with comparable store sales down 1.1%. In our Retail segment, first quarter sales were approximately flat versus last year, with comparable store sales down 1.2%. We continue to see strength in average unit retail and traffic trends improved meaningfully with traffic comps improving sequentially by over 500 basis points compared to Q4. Thank you, Doug. Good morning, everyone. thank you doug. good morning everyone We were pleased to deliver a strong start to fiscal 2026, with another quarter of improved operating performance trends. we were pleased to deliver a strong start to fiscal 2026 with another quarter of improved operating performance trends First quarter consolidated net sales of $696 million were up 1.4% versus last year, with comparable store sales down 1.1%. first quarter consolidated net sales of $696 million were up 1.4% versus last year with comparable store sales down 1.1% In our Retail segment, first quarter sales were approximately flat versus last year, with comparable store sales down 1.2%. in our retail segment first quarter sales were approximately flat versus last year with comparable store sales down 1.2% We continue to see strength in average unit retail and traffic trends improved meaningfully with traffic comps improving sequentially by over 500 basis points compared to Q4. we continue to see strength in average unit retail and traffic trends improved meaningfully with traffic comps improving sequentially by over 500 basis points compared to q4 As Doug mentioned, we experienced some weather-related headwinds in Q1 that impacted sales trends, particularly in our Canada retail business. In our Brand Portfolio segment, first quarter sales increased 19.4% compared to last year, driven by strong growth in external wholesale sales and continued momentum across Topo, Jessica Simpson, and Keds, with each brand contributing meaningful growth during the quarter. In addition, intercompany sales were also up 24% for the quarter. As a reminder, these intercompany sales are eliminated through consolidation. Consolidated gross margin in the first quarter was 45.3%, representing a 240 basis point improvement versus last year, driven primarily by stronger IMU, fewer markdowns, and continued optimization of our promotional strategy. We also continued to see benefits from our focus on channel profitability and fulfillment optimization within retail. As Doug mentioned, we experienced some weather-related headwinds in Q1 that impacted sales trends, particularly in our Canada retail business. In our Brand Portfolio segment, first quarter sales increased 19.4% compared to last year, driven by strong growth in external wholesale sales and continued momentum across Topo, Jessica Simpson, and Keds, with each brand contributing meaningful growth during the quarter. as doug mentioned we experienced some weather-related headwinds in q1 that impacted sales trends particularly in our canada retail business. in our brand portfolio segment first quarter sales increased 19.4% compared to last year driven by strong growth in external wholesale sales and continued momentum across topo jessica simpson and keds with each brand contributing meaningful growth during the quarter In addition, intercompany sales were also up 24% for the quarter. in addition intercompany sales were also up 24% for the quarter As a reminder, these intercompany sales are eliminated through consolidation. as a reminder these intercompany sales are eliminated through consolidation Consolidated gross margin in the first quarter was 45.3%, representing a 240 basis point improvement versus last year, driven primarily by stronger IMU, fewer markdowns, and continued optimization of our promotional strategy. consolidated gross margin in the first quarter was 45.3% representing a 240 basis point improvement versus last year driven primarily by stronger imu fewer markdowns and continued optimization of our promotional strategy We also continued to see benefits from our focus on channel profitability and fulfillment optimization within retail. we also continued to see benefits from our focus on channel profitability and fulfillment optimization within retail As a result of these drivers of margin expansion and the strong increase in Brand Portfolio sales, consolidated gross profit increased by $20.8 million compared to last year. For the first quarter, adjusted operating expenses were 42.9% of sales, leveraging 50 basis points versus last year, driven by the cost reduction actions and organizational changes implemented during 2025 and diligent expense management during the quarter. For the first quarter, adjusted operating income was $19.4 million, compared to an adjusted operating loss of $1.1 million last year, with the improvement primarily driven by gross profit expansion, as discussed earlier. In the first quarter, we had $10.1 million of net interest expense compared to $12 million last year. Our adjusted effective tax rate for the quarter was 54.5%, compared to 0% last year. As a result of these drivers of margin expansion and the strong increase in Brand Portfolio sales, consolidated gross profit increased by $20.8 million compared to last year. as a result of these drivers of margin expansion and the strong increase in brand portfolio sales consolidated gross profit increased by $20.8 million compared to last year For the first quarter, adjusted operating expenses were 42.9% of sales, leveraging 50 basis points versus last year, driven by the cost reduction actions and organizational changes implemented during 2025 and diligent expense management during the quarter. for the first quarter adjusted operating expenses were 42.9% of sales leveraging 50 basis points versus last year driven by the cost reduction actions and organizational changes implemented during 2025 and diligent expense management during the quarter For the first quarter, adjusted operating income was $19.4 million, compared to an adjusted operating loss of $1.1 million last year, with the improvement primarily driven by gross profit expansion, as discussed earlier. for the first quarter adjusted operating income was $19.4 million compared to an adjusted operating loss of $1.1 million last year with the improvement primarily driven by gross profit expansion as discussed earlier In the first quarter, we had $10.1 million of net interest expense compared to $12 million last year. in the first quarter we had $10.1 million of net interest expense compared to $12 million last year Our adjusted effective tax rate for the quarter was 54.5%, compared to 0% last year. our adjusted effective tax rate for the quarter was 54.5% compared to 0% last year First quarter adjusted net income was $3.8 million, or $0.07 per diluted share, compared to an adjusted net loss of $13 million last year, or a loss of $0.27 per diluted share in the prior year. Turning to inventory, we ended the first quarter with total inventories down 6% compared to last year as we continued to tightly manage inventory levels and focus on improving productivity across the assortment. Importantly, inventory remains clean entering the second quarter, with healthy composition across key growth categories. We ended the quarter with $50 million of cash compared to $46 million in Q1 of last year, and total liquidity of $189 million. We continued to prioritize balance sheet strength during the quarter and further reduced debt levels, with total debt outstanding of $475 million compared to $523 million at the end of Q1 last year. First quarter adjusted net income was $3.8 million, or $0.07 per diluted share, compared to an adjusted net loss of $13 million last year, or a loss of $0.27 per diluted share in the prior year. first quarter adjusted net income was $3.8 million or $0.07 per diluted share compared to an adjusted net loss of $13 million last year or a loss of $0.27 per diluted share in the prior year Turning to inventory, we ended the first quarter with total inventories down 6% compared to last year as we continued to tightly manage inventory levels and focus on improving productivity across the assortment. turning to inventory we ended the first quarter with total inventories down 6% compared to last year as we continued to tightly manage inventory levels and focus on improving productivity across the assortment Importantly, inventory remains clean entering the second quarter, with healthy composition across key growth categories. importantly inventory remains clean entering the second quarter with healthy composition across key growth categories We ended the quarter with $50 million of cash compared to $46 million in Q1 of last year, and total liquidity of $189 million. we ended the quarter with $50 million of cash compared to $46 million in q1 of last year and total liquidity of $189 million We continued to prioritize balance sheet strength during the quarter and further reduced debt levels, with total debt outstanding of $475 million compared to $523 million at the end of Q1 last year. we continued to prioritize balance sheet strength during the quarter and further reduced debt levels with total debt outstanding of $475 million compared to $523 million at the end of q1 last year I'd like to spend a few moments on our outlook. As Doug mentioned in his remarks, while we continue to expect sales for the fiscal year in line with our original guidance, given the strong results in Q1, we now expect full-year earnings per share to trend towards the high end of our annual guidance range. In Q2, quarter-to-date performance is supportive of our approach to our annual sales guidance. The quarter began with unfavorable weather that impacted demand for seasonal products. Results improved sequentially week over week in May as weather has normalized and we anticipate total sales to be flat to slightly up for the quarter. That being said, there remains a moderate amount of uncertainty with tariffs and the macro environment. I'd like to spend a few moments on our outlook. i'd like to spend a few moments on our outlook As Doug mentioned in his remarks, while we continue to expect sales for the fiscal year in line with our original guidance, given the strong results in Q1, we now expect full-year earnings per share to trend towards the high end of our annual guidance range. as doug mentioned in his remarks while we continue to expect sales for the fiscal year in line with our original guidance given the strong results in q1 we now expect full-year earnings per share to trend towards the high end of our annual guidance range In Q2, quarter -to-date performance is supportive of our approach to our annual sales guidance. in q2 quarter -to-date performance is supportive of our approach to our annual sales guidance The quarter began with unfavorable weather that impacted demand for seasonal products. the quarter began with unfavorable weather that impacted demand for seasonal products Results improved sequentially week over week in May as weather has normalized and we anticipate total sales to be flat to slightly up for the quarter. results improved sequentially week over week in may as weather has normalized and we anticipate total sales to be flat to slightly up for the quarter That being said, there remains a moderate amount of uncertainty with tariffs and the macro environment. that being said there remains a moderate amount of uncertainty with tariffs and the macro environment We are taking a cautious approach to the potential impact of tariff dynamics on our 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. We have remained cautious in our approach, and we want to clarify that our earnings guidance excludes these potential impacts. Looking ahead to the balance of the year, as a reminder, we continue to anticipate sales and earnings growth to be stronger in the first half of the year. We are taking a cautious approach to the potential impact of tariff dynamics on our 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. we are taking a cautious approach to the potential impact of tariff dynamics on our 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. 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 We have remained cautious in our approach, and we want to clarify that our earnings guidance excludes these potential impacts. we have remained cautious in our approach and we want to clarify that our earnings guidance excludes these potential impacts Looking ahead to the balance of the year, as a reminder, we continue to anticipate sales and earnings growth to be stronger in the first half of the year. looking ahead to the balance of the year as a reminder we continue to anticipate sales and earnings growth to be stronger in the first half of the year Within the second half of the year, we expect earnings to be pressured in the third quarter as we lap strong performance and return to a normalized level of incentive-based compensation. We anticipate adjusted earnings per share in the fourth quarter will improve notably year-over-year. To conclude, we're encouraged by the continued improvement in our operating performance and the momentum we have built over the last several quarters. While the macro environment remains dynamic, we remain focused on discipline execution, inventory productivity, expense management, and driving profitable growth across both our Retail and Brand Portfolio segments. We believe that the progress that we've made over the last year continues to strengthen the foundation of the business and positions Designer Brands for sustainable, profitable growth over the long term. With that, we will open the call for questions. Operator? Within the second half of the year, we expect earnings to be pressured in the third quarter as we lap strong performance and return to a normalized level of incentive-based compensation. within the second half of the year we expect earnings to be pressured in the third quarter as we lap strong performance and return to a normalized level of incentive-based compensation We anticipate adjusted earnings per share in the fourth quarter will improve notably year-over-year. we anticipate adjusted earnings per share in the fourth quarter will improve notably year-over-year To conclude, we're encouraged by the continued improvement in our operating performance and the momentum we have built over the last several quarters. While the macro environment remains dynamic, we remain focused on discipline execution, inventory productivity, expense management, and driving profitable growth across both our Retail and Brand Portfolio segments. to conclude we're encouraged by the continued improvement in our operating performance and the momentum we have built over the last several quarters. while the macro environment remains dynamic we remain focused on discipline execution inventory productivity expense management and driving profitable growth across both our retail and brand portfolio segments We believe that the progress that we've made over the last year continues to strengthen the foundation of the business and positions Designer Brands for sustainable, profitable growth over the long term. we believe that the progress that we've made over the last year continues to strengthen the foundation of the business and positions designer brands for sustainable profitable growth over the long term With that, we will open the call for questions. with that we will open the call for questions Operator? operator

Speaker 4: We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Mauricio Serna with UBS. Please go ahead. We will now begin the question and answer session. we will now begin the question and answer session To ask a question, you may press star, then one on your telephone keypad. to ask a question you may press star then one on your telephone keypad If you are using a speakerphone, please pick up your handset before pressing the keys. if you are using a speakerphone please pick up your handset before pressing the keys If at any time your question has been addressed and you would like to withdraw your question, please press star then two. if at any time your question has been addressed and you would like to withdraw your question please press star then two At this time, we will pause momentarily to assemble our roster. at this time we will pause momentarily to assemble our roster The first question comes from Mauricio Serna with UBS. the first question comes from mauricio serna with ubs Please go ahead. please go ahead

Speaker 3: Great. Good morning. Thanks for taking my question. Just a couple of things to start on the Q2 outlook you just laid out, flat to slightly up. How does that look between the Retail segment and Brand Portfolio? How are you thinking about that, when you think about the two segments? Then, nice to see the very strong performance and the gross margin and your initiatives really coming to fruition. On that front, how much more room do you see for gross margin improvement due to all these initiatives that you've implemented over the last year? Thank you. Great. great Good morning. good morning Thanks for taking my question. thanks for taking my question Just a couple of things to start on the Q2 outlook you just laid out, flat to slightly up. just a couple of things to start on the q2 outlook you just laid out flat to slightly up How does that look between the Retail segment and Brand P ortfolio? how does that look between the retail segment and brand p ortfolio How are you thinking about that, when you think about the two segments? how are you thinking about that when you think about the two segments Then, nice to see the very strong performance and the gross margin and your initiatives really coming to fruition. then nice to see the very strong performance and the gross margin and your initiatives really coming to fruition On that front, how much more room do you see for gross margin improvement due to all these initiatives that you've implemented over the last year? on that front how much more room do you see for gross margin improvement due to all these initiatives that you've implemented over the last year Thank you. thank you

Speaker 1: Morning, Mauricio. This is Doug. Thanks for your question. I'll start, and then I'll turn it over to Sheamus to add a little bit of additional color on the financial aspect of it. As it relates to May, we have been encouraged by the trend that we've seen sequentially through the month. As we said, similar to Q1, there was a pretty large headwind, more impacted in the Canadian business, obviously more prevalent in the Canadian business than it even was in the U.S. We did see that start to rebound with pretty significant sequential improvement as we moved through May. Again, I think we're prudently cautious with regards to our outlook for Q2, which on the retail side would be flat to slightly positive. Still seeing a pretty nice increase on the brand side for Q2. Morning, Mauricio. morning mauricio This is Doug. this is doug Thanks for your question. thanks for your question I'll start, and then I'll turn it over to Sheamus to add a little bit of additional color on the financial aspect of it. i'll start and then i'll turn it over to sheamus to add a little bit of additional color on the financial aspect of it As it relates to May, we have been encouraged by the trend that we've seen sequentially through the month. as it relates to may we have been encouraged by the trend that we've seen sequentially through the month As we said, similar to Q1, there was a pretty large headwind, more impacted in the Canadian business, obviously more prevalent in the Canadian business than it even was in the U.S. as we said similar to q1 there was a pretty large headwind more impacted in the canadian business obviously more prevalent in the canadian business than it even was in the u.s We did see that start to rebound with pretty significant sequential improvement as we moved through May. we did see that start to rebound with pretty significant sequential improvement as we moved through may Again, I think we're prudently cautious with regards to our outlook for Q2, which on the retail side would be flat to slightly positive. again i think we're prudently cautious with regards to our outlook for q2 which on the retail side would be flat to slightly positive Still seeing a pretty nice increase on the brand side for Q2. still seeing a pretty nice increase on the brand side for q2 That was a pretty stellar performance that brands delivered in Q1, obviously up 19%. Again, we see a similar trend continuing into Q2. On the gross margin piece of it, a lot of it is structural with regards to the actions that the team has been working on. 240 basis point expansion on overall consolidated gross margin. On the retail side of note, about 65% of the favorability was related to lower markdowns and about 35% related to IMU. It's not just mix. It's a combination of really focusing on channel profitability, removing some of the stacking of promotions that we're doing that were just not OI accretive, taking a look at the shipping threshold on the digital platform. Then obviously the teams have done a stellar job managing inventory. We ended the quarter with 6% less inventory than last year. That was a pretty stellar performance that brands delivered in Q1, obviously up 19%. that was a pretty stellar performance that brands delivered in q1 obviously up 19% Again, we see a similar trend continuing into Q2. again we see a similar trend continuing into q2 On the gross margin piece of it, a lot of it is structural with regards to the actions that the team has been working on. 240 basis point expansion on overall consolidated gross margin. on the gross margin piece of it a lot of it is structural with regards to the actions that the team has been working on 240 basis point expansion on overall consolidated gross margin On the retail side of note, about 65% of the favorability was related to lower markdowns and about 35% related to IMU. on the retail side of note about 65% of the favorability was related to lower markdowns and about 35% related to imu It's not just mix. it's not just mix It's a combination of really focusing on channel profitability, removing some of the stacking of promotions that we're doing that were just not OI accretive, taking a look at the shipping threshold on the digital platform. it's a combination of really focusing on channel profitability removing some of the stacking of promotions that we're doing that were just not oi accretive taking a look at the shipping threshold on the digital platform Then obviously the teams have done a stellar job managing inventory. then obviously the teams have done a stellar job managing inventory We ended the quarter with 6% less inventory than last year. we ended the quarter with 6% less inventory than last year Just lower reliance on clearance markdowns and pulling back on a little bit of the promotionality of it as well. That's the high level as it relates to the GM aspect. Anything to add, Sheamus? Just lower reliance on clearance markdowns and pulling back on a little bit of the promotionality of it as well. just lower reliance on clearance markdowns and pulling back on a little bit of the promotionality of it as well That's the high level as it relates to the GM aspect. that's the high level as it relates to the gm aspect Anything to add, Sheamus? anything to add sheamus

Speaker 5: I think, as Doug mentioned, the great thing about the margin improvement is we've seen it from a number of different areas, whether it's improved IMU, improved markdowns, improved promotional cadence. What we've talked about consistently is we see that as a bigger opportunity in the first half of the year. We're seeing that in Q1. We expect to see that in Q2. As we move into the back half of the year and begin to lap some of the significant improvements that we had last year, those margin improvements relative to prior year results become a little bit more challenging. In Q2, we are expecting to see continued margin improvement. I think, as Doug mentioned, the great thing about the margin improvement is we've seen it from a number of different areas, whether it's improved IMU, improved markdowns, improved promotional cadence. i think as doug mentioned the great thing about the margin improvement is we've seen it from a number of different areas whether it's improved imu improved markdowns improved promotional cadence What we've talked about consistently is we see that as a bigger opportunity in the first half of the year. what we've talked about consistently is we see that as a bigger opportunity in the first half of the year We're seeing that in Q1. we're seeing that in q1 We expect to see that in Q2. we expect to see that in q2 As we move into the back half of the year and begin to lap some of the significant improvements that we had last year, those margin improvements relative to prior year results become a little bit more challenging. as we move into the back half of the year and begin to lap some of the significant improvements that we had last year those margin improvements relative to prior year results become a little bit more challenging In Q2, we are expecting to see continued margin improvement. in q2 we are expecting to see continued margin improvement

Speaker 3: Got it. Very helpful. A couple of other things. Just below the operating line, how should we think about interest expenses, tax rate, and share count just for housekeeping of our models? Thank you. Got it. got it Very helpful. very helpful A couple of other things. a couple of other things Just below the operating line, how should we think about interest expenses, tax rate, and share count just for housekeeping of our models? just below the operating line how should we think about interest expenses tax rate and share count just for housekeeping of our models Thank you. thank you

Speaker 5: In terms of the overall guidance, obviously we gave expectations for the full year in terms of EPS to give you some color in terms of the OpEx expenses. There are some puts and takes as you think about it relative to last year. As I commented on margin, I think we see a similar trend in terms of OpEx in the back half of the year, where last year we had some significant benefits and reductions. We are anticipating that there will be some pressure on those expenses as we move into the back half of the year. For example, in Q3, as we layer in our full incentive compensation programs and stock comp programs, there's upwards of a $10 million impact in terms of OpEx in the quarter relative to putting some of those programs back in full effect. In terms of the overall guidance, obviously we gave expectations for the full year in terms of EPS to give you some color in terms of the OpEx expenses. in terms of the overall guidance obviously we gave expectations for the full year in terms of eps to give you some color in terms of the opex expenses There are some puts and takes as you think about it relative to last year. there are some puts and takes as you think about it relative to last year As I commented on margin, I think we see a similar trend in terms of OpEx in the back half of the year, where last year we had some significant benefits and reductions. as i commented on margin i think we see a similar trend in terms of opex in the back half of the year where last year we had some significant benefits and reductions We are anticipating that there will be some pressure on those expenses as we move into the back half of the year. we are anticipating that there will be some pressure on those expenses as we move into the back half of the year For example, in Q3, as we layer in our full incentive compensation programs and stock comp programs, there's upwards of a $10 million impact in terms of OpEx in the quarter relative to putting some of those programs back in full effect. for example in q3 as we layer in our full incentive compensation programs and stock comp programs there's upwards of a $10 million impact in terms of opex in the quarter relative to putting some of those programs back in full effect They're obviously variable based upon results and profitability, but last year had no expenses in the quarter. We are anticipating the gross expense to increase as a result of that. In terms of tax rate, this quarter was a relatively unusual quarter in terms of the tax rate being 54.5%, that's due to a combination of factors, one being some fixed state and local taxes, and the second being as we again layer in various executive comp expenses that are excluded for tax deductibility purposes and become permanent differences. They're obviously variable based upon results and profitability, but last year had no expenses in the quarter. they're obviously variable based upon results and profitability but last year had no expenses in the quarter We are anticipating the gross expense to increase as a result of that. we are anticipating the gross expense to increase as a result of that In terms of tax rate, this quarter was a relatively unusual quarter in terms of the tax rate being 54. 5%, that's due to a combination of factors, one being some fixed state and local taxes, and the second being as we again layer in various executive comp expenses that are excluded for tax deductibility purposes and become permanent differences. in terms of tax rate this quarter was a relatively unusual quarter in terms of the tax rate being 54 5% that's due to a combination of factors one being some fixed state and local taxes and the second being as we again layer in various executive comp expenses that are excluded for tax deductibility purposes and become permanent differences Those permanent items, when calculated on a relatively low taxable income, can skew the rate to a higher than normal rate, and that's what we saw in Q2. For the full year, we're anticipating some impact of that, but it lessens. I would expect our full year tax rate to be in the low 40s in terms of the percentage, and that's what we have built into our guidance expectations that we laid out earlier in the year, and as you know, are continuing to reiterate those expectations for the full year in terms of EPS. Those permanent items, when calculated on a relatively low taxable income, can skew the rate to a higher than normal rate, and that's what we saw in Q2. those permanent items when calculated on a relatively low taxable income can skew the rate to a higher than normal rate and that's what we saw in q2 For the full year, we're anticipating some impact of that, but it lessens. for the full year we're anticipating some impact of that but it lessens I would expect our full year tax rate to be in the low 40s in terms of the percentage, and that's what we have built into our guidance expectations that we laid out earlier in the year, and as you know, are continuing to reiterate those expectations for the full year in terms of EPS. i would expect our full year tax rate to be in the low 40s in terms of the percentage and that's what we have built into our guidance expectations that we laid out earlier in the year and as you know are continuing to reiterate those expectations for the full year in terms of eps

Speaker 3: Got it. In terms of the share count? Got it. got it In terms of the share count? in terms of the share count

Speaker 5: Share count, we're continuing to anticipate based upon shifting back to profitability this year, that the share count will include the fully diluted calculations. We're expecting share count to be approximately 58 million shares as we move through the year. Share count, we're continuing to anticipate based upon shifting back to profitability this year, that the share count will include the fully diluted calculations. share count we're continuing to anticipate based upon shifting back to profitability this year that the share count will include the fully diluted calculations We're expecting share count to be approximately 58 million shares as we move through the year. we're expecting share count to be approximately 58 million shares as we move through the year

Speaker 3: Got it. Thank you so much. Got it. got it Thank you so much. thank you so much

Speaker 4: Again, if you have a question, please press star then one. This concludes our question and answer session. I would like to turn the conference back over to Doug Howe for any closing remarks. Again, if you have a question, please press star then one. again if you have a question please press star then one This concludes our question and answer session. this concludes our question and answer session I would like to turn the conference back over to Doug Howe for any closing remarks. i would like to turn the conference back over to doug howe for any closing remarks

Speaker 1: In closing, I just want to reiterate that we are successfully transforming our business. The strategic actions that we've taken are delivering results, and we're seeing clear momentum across those priorities. Our strategy is working, winning with the merchandise that matters most to our customers, amplifying DSW's brand positioning, elevating our in-store experience, and building a scalable, profitable Brand Portfolio. None of this progress would be possible without the dedication and the hard work of our associates. Their commitment continues to drive our success, and I want to express my sincere appreciation for everything that they do every day. I'd also like to thank everyone who joined us on today's call for your continued interest and your support. We remain focused, we are confident in our direction, and we're excited about the opportunities ahead. Thank you. In closing, I just want to reiterate that we are successfully transforming our business. in closing i just want to reiterate that we are successfully transforming our business The strategic actions that we've taken are delivering results, and we're seeing clear momentum across those priorities. the strategic actions that we've taken are delivering results and we're seeing clear momentum across those priorities Our strategy is working, winning with the merchandise that matters most to our customers, amplifying DSW's brand positioning, elevating our in-store experience, and building a scalable, profitable Brand Portfolio. our strategy is working winning with the merchandise that matters most to our customers amplifying dsw's brand positioning elevating our in-store experience and building a scalable profitable brand portfolio None of this progress would be possible without the dedication and the hard work of our associates. none of this progress would be possible without the dedication and the hard work of our associates Their commitment continues to drive our success, and I want to express my sincere appreciation for everything that they do every day. their commitment continues to drive our success and i want to express my sincere appreciation for everything that they do every day I'd also like to thank everyone who joined us on today's call for your continued interest and your support. i'd also like to thank everyone who joined us on today's call for your continued interest and your support We remain focused, we are confident in our direction, and we're excited about the opportunities ahead. we remain focused we are confident in our direction and we're excited about the opportunities ahead Thank you. thank you

Speaker 4: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. The conference has now concluded. the conference has now concluded Thank you for attending today's presentation. thank you for attending today's presentation You may now disconnect. you may now disconnect