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UBS lowered its price target on Designer Brands (NYSE: NYSE:DBI) stock to $3.00 from $3.50 on Wednesday, while maintaining its Neutral rating on the footwear retailer. According to InvestingPro data, the stock has fallen over 56% in the past year, though analysis suggests it may be slightly undervalued at current levels.
The price target reduction follows Designer Brands’ suspension of its fiscal year 2025 guidance, which UBS attributed to tariffs having a "larger than previously anticipated impact" on the company’s business. InvestingPro forecasts suggest challenging times ahead, with analysts expecting negative earnings per share of -$0.89 for fiscal year 2026.
UBS cited concerns about Designer Brands’ long-term growth potential despite its position as one of the largest fashion footwear retailers in the United States, forecasting a flat six-year earnings per share compound annual growth rate.
The investment firm identified two key challenges facing the company: DSW, Designer Brands’ main retail banner, appears to be relatively mature and likely losing market share to other retail channels, according to UBS.
Designer Brands’ high concentration in seasonal footwear is expected to continue weighing on total sales growth, a factor UBS believes will prevent the company’s price-to-earnings ratio from expanding.
In other recent news, Designer Brands Inc. reported disappointing financial results for the first quarter of fiscal year 2025. The company posted an adjusted net loss with earnings per share (EPS) of -$0.26, significantly missing the forecasted -$0.08. Revenue for the quarter was $686.9 million, falling short of the expected $736.02 million, marking an 8% year-over-year decline in net sales. In response to these results and ongoing market volatility, Designer Brands has withdrawn its forward guidance. The company is focusing on expense management, aiming to save between $20 million to $30 million over the course of 2025. Despite these challenges, the Topo brand within Designer Brands showed impressive growth, with sales up 84% year-over-year. In light of current economic pressures, Designer Brands is adapting its strategies, including diversifying its sourcing and controlling costs, to navigate the uncertain environment.
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