- Telsey Advisory Group Analyst Dana Telsey reiterated a Market Perform rating on the shares of Designer Brands Inc DBI with a Price target of $12.
- The company reported solid Q4 results after repeating the forecast in early January with the announcement of the CEO change.
- While sales for the period were slightly below expectations, healthier gross margin and unexpected cost leverage led to an improvement in operating margin and bottom line profit for the period, the analyst noted.
- However, the FY23 outlook fell short of expectations for both sales and earnings as the macroeconomic environment in the footwear sector remains volatile and uncertain.
- While near-term pressures continue to impact DBI’s business, the long-term plan, which was detailed at Investor Day in April 2022, remains intact, giving visibility to management’s strategic and financial framework beyond this year, the analyst said.
- The analyst added that the plan results almost entirely in Camuto Group’s reasonably steady and rapid growth, especially given long-term headwinds for the national branding business.
- With both revenue and earnings projected to decline in FY23, management expects the pressure to continue through 1H23 before rebounding in H2, the analyst noted.
- Most of the decline is expected to occur in the first quarter, while the rest of the year is expected to be flat to slightly up year-on-year.
- The Owned Brands category continues to grow, and management expects DBI to reach a third of total sales by 2026.
- The analyst also reduced FY23 and FY24 EPS estimates, incorporating fourth-quarter results and ongoing macroeconomic headwinds.
- Price promotion: DBI shares trade 0.80% lower at $9.24 on the last check Friday.
- Photo via company
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