Designer Brands Inc. (DBI) Earnings Call Transcript & Summary

Good day and welcome to the Designer Brands Inc. 2020 Annual Meeting of Shareholders. I would now like to turn the conference over to Roger Rawlins, CEO and Director of Designer Brands Inc. Please go ahead.

Good morning and welcome to the 2020 Annual Shareholders' Meeting of Designer Brands Inc. I am Roger Rawlins, Chief Executive Officer and Director of Designer Brands Inc. It is my pleasure, on behalf of the Board of Directors and officers of Designer Brands, to welcome you today. This year, we are hosting a virtual meeting in light of the public health impact of the coronavirus pandemic and thank all those joining us via webcast. During this difficult time, our team has continued to prove their unwavering commitment to excellence. There is no doubt the retail industry has been heavily impacted, and there are challenges that lie ahead. But I have confidence that Designer Brands will remain resilient in the face of these obstacles. In the early stages of COVID-19, we took swift and effective actions to preserve liquidity and financial flexibility. We successfully negotiated with our vendors and partners, substantially lowered our capital and operating expenditures and leveraged best-in-class inventory controls to responsibly manage the business during this volatile time. The significant investments we have made in our digital infrastructure over the past several years have positioned us well as customer behavior has evolved. We have analyzed our learnings from the beginning of the pandemic and shifted our focus to prioritizing the top 50 brands in footwear and emphasizing our everyday value proposition. We are confident these are the right areas of focus in the near term. One final point. We would be remiss not to address the recent civil unrest in our country. As previously stated, as a company, we stand firmly against discrimination, bigotry and injustice in all forms. These are deep-rooted issues that we, as a society, are required to confront and address. Change is desperately needed, and at Designer Brands, our management team and Board are committed to doing our part. Our company has always stood for self-expression and believe a diverse team is absolutely key to our success. Recently, we have taken time to listen and reflect on what we are doing internally to be the best company possible for our employees and our customers. We have a diverse customer base, and it is important that our own team mirror that diversity. We recognize we have opportunities to expand diversity in our leadership team. We will be intentional in our actions over the coming weeks and months. We stated Black lives do matter because they do, and we needed our employees and our customers to hear us. Any change requires a growth mindset, embracing the challenge, recognizing sustained effort is required in holding ourselves accountable. On behalf of the Board of Directors, I would like to thank our shareholders for their ongoing commitment and continued investment in Designer Brands. We are confident in the long-term sustainability of the business and our ability to grow market share to create value for shareholders. An agenda for the meeting, our meeting rules of conduct and copies of our proxy statement and our 2019 annual report on Form 10-K can be found at the bottom of the meeting website. As is our custom, we will conduct the business portion of our meeting first and answer questions at the end of the meeting. Though we may not be able to answer every question, we will do our best to provide a response to as many as possible. It is now shortly after 11:00 a.m. Eastern Standard time on July 14, and this meeting is officially called to order. I would like to begin the meeting by introducing the other members of the Board who are also joining us virtually today. Jay Schottenstein has served as our Executive Chairman of the Board since 2005 and previously served as our CEO. He currently serves as Chairman of the Board of Directors of Schottenstein Realty and as Chief Executive Officer and Executive Chairman of the Board of American Eagle Outfitters, Inc. Peter Cobb has served as our Director since 2017. Peter cofounded eBags, an online retailer of luggage, handbags and travel products, and currently serves on the Advisory Boards of numerous companies, including PayPal. Elaine Eisenman has served as our Director since 2008. She currently serves as Managing Director of Saeje Advisors, an advisory firm for high-growth companies. Joanna Lau has served as our Director since 2008. She currently serves as the Chief Executive Officer of Lau Technologies and as a Director and Audit Committee Chair for RPT Realty. Joseph Schottenstein has served as our Director since 2012. He currently serves as the Chief Operating Officer and Executive Vice President of Acquisitions and Leasing at Schottenstein Property Group and Schottenstein Realty LLC. Ekta Singh-Bushell has served as our Director since 2018. Until 2017, she served as the Chief Operating Officer, Executive Office, at the Federal Reserve Bank of New York. Harvey Sonnenberg has served as our Director since 2005. He is a former partner of and current adviser to Weiser, LLP. Allan Tanenbaum has served as our Director since 2005. He currently serves as Of Counsel to Taylor English Duma, LLC (sic) [ Taylor English Duma LLP ] and General Counsel and as Managing Partner of Equicorp Partners. Joanne Zaiac has served as our Director since 2016. She currently serves as Chief Client Officer for the Dentsu Aegis Network. On behalf of the Board of Directors, I would like to congratulate Carolee Lee on her retirement from our Board effective as of today's meeting. She has elected not to stand for reelection. I would like to thank Carolee for her 15 years of dedicated service to Designer Brands, her commitment to our shareholders, and also for her contributions throughout her career to philanthropy and is a champion for diversity and inclusion. Carolee has served as an instrumental thought leader, and the Board will miss her expertise and insights. Also joining me today is Michelle Krall, our Senior Vice President, General Counsel, Chief Compliance Officer and Corporate Secretary. She will act as Secretary of the meeting. The company has also appointed Michelle to act as Inspector of Election, and she took the oath of Inspector of Election earlier today. We are also joined here today by Dave Eshman, a partner with Deloitte, our independent auditors. He will have an opportunity to address you after the formal portion of the meeting and will be available during the question-and-answer session after the meeting to respond to appropriate questions. After the formal meeting has been adjourned, we will provide time for general questions. While we have time set aside at the end of the meeting for questions and answers, you're able to ask questions at any time using the Ask a Question box on the bottom left side of the screen. Please note that only validated shareholders or their representatives will have the ability to ask questions in the designated field on the web portal. [Operator Instructions] If you are a shareholder entitled to vote and have not voted or if you want to change your previously cast vote, you can vote at any time by clicking the Voting button on the web portal and following the instructions. Shareholders who have sent in proxies or voted by telephone or Internet and do not want to change their vote do not need to take any further action. Also, please note that this meeting is being recorded and will be available on designerbrands.com. However, no one attending via the webcast or telephone is permitted to use any audio recording device. Michelle, has the notice of this meeting been sent to all shareholders entitled to vote at this meeting?

Yes. Broadridge Financial Solutions has delivered an affidavit of mailing establishing that notice of this meeting was duly given. A copy of the notice of meeting and the affidavit of mailing will be filed with the minutes of the meeting. All shareholders of record at the close of business on May 18, 2020, the record date for this meeting, are entitled to vote at the annual meeting. A list of the shareholders of record as of May 18, 2020, who are entitled to vote, showing their respective addresses and the number of shares held, is available for inspection during this meeting at the bottom of the meeting website and will be filed with the minutes of this meeting. The shareholder list shows that as of the record date, there were 63,905,190 outstanding Class A common shares and 7,732,786 outstanding Class B common shares entitled to vote at this meeting. More than a majority of the voting power of all issued and outstanding stock entitled to vote on the record date is represented in person or by proxy, and therefore, a quorum is present for purposes of transacting business.

Thank you, Michelle. On the basis of the report of the Secretary and the Inspector of Election, I find that proper notice has been given and that a quorum is present. Accordingly, this meeting has been properly convened. The next order of business is a description of the matters to be voted on at today's meeting. Michelle, were there any shareholders' nominations or proposals for business for this meeting properly filed with you as Secretary?

No. None were filed with me.

Thank you. Because no shareholder nominations or proposals were properly filed in advance to this meeting, the business of this meeting is limited to the matters on the agenda. Now I will present the matters to be voted upon. Proposal 1 is the election of 2 Class 1 Directors to serve until the Annual Meeting of Shareholders in 2023 and until their successors are duly elected and qualified. The Board has nominated Harvey Sonnenberg and Allan Tanenbaum. Information concerning their principal occupations, their service with Designer Brands and other matters which may be of interest are contained in the proxy statement. The Board unanimously recommends the shareholders vote in favor of the election of each nominee to the Board. Proposal 2 is the ratification of the appointment of Deloitte as our independent registered public accounting firm for the fiscal year ending January 30, 2021. The Board of Directors unanimously recommends that shareholders ratify the foregoing appointment. Proposal 3 is the advisory vote to approve the compensation of our named executive officers as described in the proxy statement. It is a nonbinding vote, although the Compensation Committee and the Board will certainly take the results of the vote into account when making future compensation decisions. The Board unanimously recommends that shareholders vote for approval of the advisory resolution approving the compensation of our named executive officers, as detailed in the proxy. Proposal 4 is the approval of an amendment and restatement of the Designer Brands Inc's. 2014 long-term incentive plan, as detailed in the proxy. The Board of Directors unanimously recommends that shareholders vote for approval of the amended plan.