Designer Brands Inc. · NYSE:DBI
Designer Brands — Corporate Update (July 2020)
37 slides from Designer Brands's corporate update, Jul 10, 2020
Slide 1: Designer Brands Inc. Corporate Update July 2020
DESIGNER BRANDS INC. Corporate Update July 2020
Slide 2: Cautionary Statement Relating to Forward-Looking Information
CAUTIONARY STATEMENT RELATING TO FORWARD-LOOKING INFORMATION Forward-Looking Statements Any statements in this presentation that are not historical facts are forward-looking statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These
Slide 3: Business Overview
Business Overview 2
Slide 4: Designer Brands
DESIGNER o DESIGNER BRANDS
Slide 5: 4
4
Slide 6: Who We Are: DBI At a Glance
WHO WE ARE DBI At a Glance Key Highlights U.S. RETAIL BRAND PORTFOLIO ~13% +30M #1 Vertical Brands Loyalty Omnichannel Retailer(1) Penetration Members 500+ +20M $257M DSW Stores within FY 2019 Pairs Produced by 20 miles of ~70% of Normalized Adjusted the Camuto Group the U.S. Population EBITDA(2) $
Slide 7: History of Growth & Innovation
HISTORY OF GROWTH & INNOVATION 1960s 1970s 1980s 1990s 2002 2005 2008 Company Growth Through Open-Sell Concept First DSW Opens in 100 DSW DSW Inc. DSW.com Founded as Leased Business Launched Dublin, Ohio Stores Goes Public Launched Shonac Shoes Loyalty Program Launched Special Make Ups (SMUs) Introd
Slide 8: Highlights
HIGHLIGHTS One of the Largest Players with ~12% Wallet Share of the Women’s Non-Athletic 1 Footwear Market in the U.S. and Canada, Poised to Gain Share Amidst Footwear Retail Sector Rationalization Award-Winning Omnichannel Platform with Full Suite of Superior 2 Capabilities 3 Best-in-Class Loyalty
Slide 9: The U.S. Footwear Industry Is Large and Fragmented
THE U.S. FOOTWEAR INDUSTRY IS LARGE AND FRAGMENTED ~$72B U.S. Footwear Market Growing at 3% Historically(1) Fragmented with Top 10 Players Commanding ~40% of Share (% Total market share) Kids (2) 7.9% (3) DBI ACCOUNTS FOR ~5% 6.9% OF TOTAL WALLET SHARE(5) 14% Zappos 40% (4) 3.8% 3.6% 3.5% 3.5% Amazo
Slide 10: Well Positioned to Take Share as Market Consolidates
WE ARE WELL POSITIONED TO TAKE SHARE AS MARKET CONSOLIDATES POST-COVID STRUCTURAL CHANGES IN DEPARTMENT STORE CHANNEL DRIVES CONTINUED RATIONALIZATION Select Bankruptcies Shrinking Footprint Others Online / Catalogs Dept Store / National Chains Shoe Store Chains Athletic Specialty/ Select Bankruptci
Slide 11: How We Win: Our Business Strategy
HOW WE WIN OUR BUSINESS STRATEGY Desirable Customer Base Differentiated Products Differentiated Experiences Attractive Market Potential 29 10
Slide 12: Diverse and Healthy Core Customer Base
DIVERSE AND HEALTHY CORE CUSTOMER BASE 80% WOMEN 14% MEN 6% KIDS Boomers+ Gen Z & Millennials 35% 33% 32% Gen X 62% Of Customers have ~29% Household Income Loyalty Member for >$75k +10 Years 11
Slide 13: Exemplary Loyalty Program with Strong Customer Engagement
EXEMPLARY LOYALTY PROGRAM WITH STRONG CUSTOMER ENGAGEMENT One of the MOST INNOVATIVE LOYALTY PROGRAMS Exemplary $157 47% (SHOPIFY) Innovative Customer Demand per Member Loyalty Program(2) Active Member Margin %(3) +30M LOYALTY MEMBERS 54% RETENTION RATE ~90% OF TOTAL REVENUE +3% (1) Highest tier of
Slide 14: Vendor of Choice with Superior Merchandising Capabilities
VENDOR OF CHOICE WITH SUPERIOR MERCHANDISING CAPABILITIES STRATEGIC GOALS >50% PROPRIETARY, DIFFERENTIATED PRODUCT 50 Core Brands Making Up across Full-Price and Value / Discount 70% PRODUCT MIX Ability to FAST INVENTORY AINTAIN FULL CHURN Enabled by M Opportunistic Buying PRICE INTEGRITY and Pricin
Slide 15: Award-Winning Omnichannel Platform & Capabilities
AWARD-WINNING OMNICHANNEL PLATFORM & CAPABILITIES STORES RECONCEPTUALIZED TO FUEL ECOMMERCE GROWTH 500+ DSW stores within 20 miles of 70% of the U.S. population ▪ Higher online sales in regions with store presence, benefitting from brand halo ▪ Stores as online fulfillment centers providing faster s
Slide 16: Enhanced In-Store Experience to Drive Traffic and Ticket
ENHANCED IN-STORE EXPERIENCE TO DRIVE TRAFFIC AND TICKET STRONG VENDOR RELATIONSHIPS DESTINATION FOR IN-STORE SERVICES ▪ Strong relationships with key national brands to showcase premiere brand ▪ Enhance customer engagement with services located in front and back of the experience and assortments bo
Slide 17: Brand Builder with Exceptional Vertical Capabilities
BRAND BUILDER WITH EXCEPTIONAL VERTICAL CAPABILITIES ▪ Track record of creating leading brands offering high quality products at exceptional value ▪ Higher margin: DBI retains full vertical margins (~500 bps vs. 3rd party agent and ~1,500 bps vs. balance of assortment) EXCLUSIVE BRANDS SALES & PENET
Slide 18: Growing Canada Through Excellent Execution and The Shoe Company Acquisition
GROWING CANADA THROUGH EXCELLENT EXECUTION AND THE SHOE COMPANY ACQUISITION Overview of The Shoe Company #1 Dominant Kids 118 Women’s Footwear Retailer in Category Stores(1) Canada 5M 7.2% #1 Loyalty Members Comparable Sales (2) In eComm Growth(3) ~20k ~5k Store Size sq. ft. Deliver differentiated e
Slide 19: ~12% of Women's Non-Athletic Shoe Purchases Are Designed, Sourced or Sold by DBI
~12% OF WOMEN’S NON-ATHLETIC SHOE PURCHASES IN THE U.S. & CANADA ARE DESIGNED, SOURCED OR SOLD BY DBI AFFILIATED BUSINESS GROUP % Source: Company management and NPD. 18
Slide 20: Market Share Opportunities
MARKET SHARE OPPORTUNITIES GROW CAMUTO PRODUCED BRANDS EXPAND KIDS PIVOT TOWARDS GROWTH CATEGORIES ▪ Drives traffic and incremental sales: customers with RECENT OPPORTUNITY IN ATHLETICS kids make more trips and spend $75 more per year ▪ Drives attachment and shop rate lift: +50% of rewards customer
Slide 21: Recent Developments
RECENT DEVELOPMENTS 20
Slide 22: COVID-19 Pandemic Response
COVID-19 PANDEMIC RESPONSE ▪ Continue to evaluate additional inventory ▪ As of March 18, 2020, all North American retail discipline, liquidity management, and Stores stores were temporarily closed Operating Expenses reductions to expense and capital expenditure plans ▪ The Company has removed all gu
Slide 23: COVID-19 Operational Impact
COVID-19 OPERATIONAL IMPACT PRE-COVID COVID IMPACT / OUTLOOK ($M) +2.2% (62.3)% ▪ Over the last three years, March- $1,016 April has accounted for nearly 20% of annual sales and over 30% of annual operating profit ▪ The Company's leading $383 omnichannel capabilities Total Demand Total $313 $320 pos
Slide 24: Update on Store Reopenings
UPDATE ON STORE REOPENINGS ▪ Management decision to reopen stores is based on: – Guidance from local authorities – Overall assessment of environmental safety at each location – Actions of peers in neighboring vicinity, as well as proximity of other DSW retail stores (likely to reopen in clusters / m
Slide 25: Sequential Improvement in Demand
SEQUENTIAL IMPROVEMENT IN DEMAND ▪ Beginning with April Week 4, reopened stores are realizing an average weekly improvement of +8% in demand; the chart below shows demand through June Week 1 – Demand improved +8% during 4th week of May vs. the prior week ▪ Demand comp has improved +30% since the end
Slide 26: Resilient Business Model
RESILIENT BUSINESS MODEL Business Model Better Positioned to Weather a Downturn… Sales 2x $3.5B 2x 2016(1) 2019 $1.5B ~13% EMAND D CALE ~25% S IGITAL ~87% ~75% 2008 2019 D Stores 298 666 % Camuto Produced Exclusive Brands Members ~3x >60% +30M RANDS B USTOMERS C ~10M ERTICAL 0% V OYALTY L 2008 Today
Slide 27: Resilient Business Model: Secular Tailwind
RESILIENT BUSINESS MODEL … With Secular Tailwind Permitting Further Share Gain RETAIL BANKRUPTCIES STORE CLOSURES SHIFT HOLESALE W SHARE Hunt for Value Took Off During a Recession… …With Appeal Cutting Across Income Groups % who shop at discount retailers 90% ISCOUNT 89% 88% / D 89% U.S. adults shop
Slide 28: Illustrative "COVID 2.0" Scenario
ILLUSTRATIVE “COVID 2.0” SCENARIO ▪ Illustrative “COVID 2.0” analysis assumes a stress case scenario with: – Cash & equivalents of $251M and $393M outstanding under the revolver and $5M in letters of credit issued, resulting in $2M available for borrowings and $253M of liquidity (as of quarter ended
Slide 29: Financial Overview
FINANCIAL OVERVIEW 28
Slide 30: Annual Financial Performance
ANNUAL FINANCIAL PERFORMANCE Sales Adjusted EBITDA (% Margin) (2) ($M) $3,493 $3,178 $301 $2,806 $284 $288 $278 $2,620 $2,713 $257 6.1% 11.5% 10.5% 10.3% 0.8% (0.4%) 0.8% 8.8% 7.3% (3.0%) FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 (1) Sales % Comparable Sales Adj
Slide 31: Strong Free Cash Flow Generation and Healthy Balance Sheet
STRONG FREE CASH FLOW GENERATION AND HEALTHY BALANCE SHEET Last 10 Years of FCF Cumulative: ~$1,900M ($M) Average Yearly: ~$190M $229 $232 $223 $213 $201 $197 $196 $179 Strong $125 $138 Free Cash Flow (1) FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 0.8x 0.6x Low G
Slide 32: Key Drivers for Adjusted EBITDA Margin Decline
KEY DRIVERS FOR ADJUSTED EBITDA MARGIN DECLINE Over the last several years, management have strategically re-invested Adjusted EBITDA Margins to drive long-term growth Investment in Digital & Omnichannel ▪ Always negotiating shipping costs Capabilities ▪ Partner with other digital platforms for excl
Slide 33: Q1 2020 Performance
Q1 2020 PERFORMANCE Q1 2020 Revenue ₋ For the three month period ended May 2, 2020, net sales decreased 44.7% to $483M (1) (vs. $873M during the same period last year) ₋ U.S. Retail segment comparable sales decreased 42.4% (vs. +3.0% in Q1 2019); Digital demand net sales in U.S. Retail was better re
Slide 34: Zs - c o a. 2. ef
Zs - c o a. 2. ef
Slide 35: Camuto Group Acquisition Transforms Our Business
CAMUTO GROUP ACQUISITION TRANSFORMS OUR BUSINESS OVERVIEW AND STRATEGIC RATIONALE BENEFITS ◼ In Nov. 2018, DBI acquired 100% of Camuto Group’s operations for � Immediate scale and market share gain $166M and 40% of Camuto’s brands for $57M via a joint venture with � Fully captured vertical margin th
Slide 36: Appraisals of Certain Assets
APPRAISALS OF CERTAIN ASSETS REAL ESTATE ASSETS APPRAISED COLLATERAL VALUE Home Office Distribution Center Appraised Asset ($ in M) Value DSW Home Office $42 DSW Distribution Center 46 Total Real Estate Appraised Value $88 INTELLECTUAL PROPERTY / BRANDS DSW / The Shoe Company Retail Banner Names (In
Slide 37: Non-GAAP Reconciliation
NON-GAAP RECONCILIATION ($M) Fiscal Year Q1 2015 2016 2017 2018 2019 2019 2020 Reported Operating Income / (Loss) $213.6 $200.0 $125.1 $59.0 $127.3 $44.0 ($324.0) Depreciation & Amortization 73.6 82.8 80.9 79.0 86.6 21.4 23.1 EBITDA $287.1 $282.8 $205.9 $138.1 $213.9 $65.4 ($300.8) Stock Based Compe