Designer Brands Inc (NYSE:DBI) shares tumbled more than 21% on Tuesday after the footwear retailer delivered a first-quarter earnings beat but kept its full-year outlook unchanged, a move investors interpreted as a warning of rougher conditions ahead.
The company posted adjusted earnings per share of $0.07 for the quarter, topping expectations, even as revenue of $696.4 million came in slightly below consensus. Net sales rose 1.4% year over year.
Profitability was a clear bright spot. Gross margin expanded 240 basis points to 45.3%, helping swing results from a $7.9 million operating loss in the same period last year to an $18.9 million operating profit this quarter.
The Brand Portfolio segment led the charge, posting a 19.4% jump in sales while operating profit surged more than 600%.
Despite the strong operational showing, management chose to hold its full-year sales guidance steady at a range of down 1% to up 1%. That signal of deceleration overshadowed the headline beat and pointed to management caution around the consumer outlook and macroeconomic conditions in the second half of the year.