What Happened?
Shares of footwear and accessories discount retailer Designer Brands (NYSE: DBI) fell 7.8% in the morning session after investors appeared to take profits following a significant recent rally.
The stock had surged an impressive 64% over the previous month, a move attributed to investors rewarding the company for its "recent signs of discipline." However, this short-term gain was set against a backdrop of longer-term challenges.
Over the previous year, the stock was down more than 20%, highlighting what one source describes as a "huge long-term challenge" in winning back investor trust. Despite optimism around cost-cutting measures, there had been an expectation that revenue could drop slightly in the next quarter, fueling ongoing skepticism about the company's long-term growth prospects.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Designer Brands? Access our full analysis report here, it’s free.
What Is The Market Telling Us
Designer Brands’s shares are extremely volatile and have had 72 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 2 days ago when the stock gained 10.2% on the news that the stock extended its positive momentum as the company reported second-quarter financial results that surpassed analyst expectations for profit, even as sales declined.
The footwear retailer posted an adjusted earnings per share (EPS) of $0.34, which was significantly above the consensus estimate of around $0.22 and an improvement from $0.29 in the same period last year. However, net sales for the quarter fell 4.2% year-over-year to $739.8 million, with comparable sales declining by 5%. Despite the drop in revenue, the company's management highlighted a sequential improvement in comparable sales from the first quarter and a strong start to the back-to-school season. Investors appear to be focused on the strong profitability and earnings beat, signaling confidence in the company's operational initiatives and cost management.
Designer Brands is down 20.8% since the beginning of the year, and at $4.20 per share, it is trading 43.2% below its 52-week high of $7.38 from September 2024. Investors who bought $1,000 worth of Designer Brands’s shares 5 years ago would now be looking at an investment worth $644.39.
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