Athleisure Plays Bigger Role in Assortment Mix at Designer Brands

Designer Brands Inc. has its eyes on product, product and more product.

The company is leaning more into athleisure as part of some anticipated changes to its assortment mix. And its eyeing private label as a margin driver for the 2025, as well as a rebuild of the foundation for its Vince Camuto and Lucky Brand lines.

“We have a number of initiatives in place, which include a new marketplace strategy, growing new channels of distribution, diversifying product assortment, and leaning into growing categories like casual for Lucky and dress for Vince Camuto,” DBI CEO Doug Howe told analysts in a conference call Thursday after the company posted fourth quarter earnings. “Jessica Simpson is another brand that is well positioned to continue to capitalize on the resurgence of dress in the marketplace, which we aim to leverage by offering a strong assortment and delivering great value to consumers in this growing category.”

Howe added that the company will continue to invest in fueling the growth across the portfolio.

“We’ve made considerable progress in revitalizing our assortment. We ended 2024 with a more relevant and balanced assortment that includes more athleisure than ever before, increasing our penetration by five percentage points and grabbing market share,” he said. “We also rekindled and expanded our relationship with our top brand partners, deepening the number of styles offered with key brands to build an eye catching in-store and online collection.”

He told analysts and investors that the top eight brands remain a primary driver of positive performance for the company, adding that there was also continued growth in the Topo Athletics and Jessica Simpson brands.

“Both brands have been significantly outperforming expectations throughout the year. For the year, Topo was up nearly 80 percent and Jessica was up over 20 percent in wholesale sales,” he said.

Topo represented over 10 percent of DBI’s total brand portfolio sales, and grew over 70 percent in 2024, Howe said. “We anticipate another year of growth in 2025,” the CEO added, noting that growth has been driven in part by a strategic approach to distribution within the specialty running area couple with strong product launches and increasing investment in marketing to establish key franchise items.

The plan for 2025 is a continuation of a “revitalization” of its assortment mix.

The company is using a data-driven approach that it expects to drive improved inventory availability. “We are rationalizing unproductive product, which will allow us to amplify our investments in key items and top selling products. We are also optimizing our inventory allocation and digital order management to improve product availability across our network,” Howe said. He explained that the changes are expected to directly drive increases to in-stock rates, improve conversion on store traffic, and lower fulfillment costs for digital orders.

Another area for growth centers on reestablishing its private label brands as margin drivers, as well as building a more profitable wholesale business. The investment in Keds and Topo is expected to drive top-line revenue. So far, private label brands are sold only at the company’s DSW stores, but given DBI’s control over design and production, it is able to deliver over 1,500 basis points of incremental margin rate above its national brands, which helps to drive overall margin.

Private label brand penetration is less than 20 percent of DSW sales, Howe said, adding, “We believe this has the opportunity to expand in the future.

The company also is repositioning itself in the comfort/casual category to target a broader customer base, including Gen X. And as it looks to its most valuable customers, DBI will also be fine-tuning its VIP Rewards Program, which Howe said represents 90 percent of transactions.

According to Howe, the program will be transformed with new rewards and perks. The target date for its relaunch is early 2026. “Additionally, we intend to continue evolving our approach to promotions and discounts to help serve customers searching for value. To this end, our semi-annual sale will continue to evolve as it becomes a more important promotional event to DSW.”

The company is also evolving its omni channel customer experience to drive both value for consumers and improve financial results, which will include an enhancements to its in-store selection and displays. The CEO said these enhancements represent a key differentiator in the in-person shopping experience, which drives over 70 percent of sales.

Looking ahead, DBI is expanding its store fleet for its DSW banner, both to expand customer access to product and align with population migration. “We are rolling out simple, tech-enabled shoe fitting services and post-purchase protective shoe cleaning, which we believe will provide points of differentiation for our brand and incremental margin in 2025,” Howe said.

For the fourth quarter ended Feb. 1, DBI post a wider net loss of $38.2 million, or 80 cents a diluted share, versus a net loss of $29.7 million, or 52 cents, in the year-ago period. On an adjusted basis, the net loss was $21.3 million, or 44 cents a diluted share. Net sales were down 5.4 percent to $713.6 million from $754.3 million, with total comparable sales up 0.5 percent.

For the year, the company reported a net loss of $10.5 million, or 20 cents a diluted share, against net income of $29.1 million, or 46 cents, in 2023. Net sales slipped 2.1 percent to $3.01 billion from $3.07 billion, while total comparable sales were down 1.7 percent..

For full year 2025, DBI is forecasting net sales growth in the low-single digits, with diluted earnings per share in the range of 30 cents to 50 cents.

Howe said DBI isn’t expecting any material impact on the business from “currently anticipated tariff policies.” Consumers have become more cautious starting in the back half of January due to ongoing inflation. “This was a marked change from the trends we were seeing exiting December, and we recognize that uncertainty remains as they continue to be selective with their discretionary income. As such, we are leaning into initiatives to drive demand and value,” he told investors.