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

Good morning, and welcome to the 2021 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. As we move through the first half of 2021, our business is stabilizing thanks to our team's successful execution on our near-term priorities. We are energized by our first quarter performance and the green shoots that we are seeing in areas of the business that have been previously depressed during the COVID-19 pandemic. Our strong Marpril selling season was driven by continued consumer preference for athletic product, a pickup in demand for seasonal product and increased penetration in our top 50 brands. Our return to profitability last quarter demonstrates the strength of our strategy. We are staying focused on what we can control to set the business up for success going forward. This includes leveraging the flexibility of our business model, pivoting our assortment to athletic to better match the purchasing habits of our customers and strategically managing costs. Looking forward, we are optimistic that the positive trends will continue as the market recovers. Over the past year, we've made progress on our ongoing environmental, social and corporate governance efforts as we continue to focus on sustainability, philanthropy and associate engagement. Our most recent ESG initiatives are highlighted in our 2021 proxy statement. We are proud to report that over the last 3 years, together with our associates and customers, we have donated over 4 million pairs of shoes through our partnership with Soles4Souls. In addition, for the second year in a row, we have been recognized with a perfect score on the Human Rights Campaign's Corporate Equality Index. We strive to continuously invest in our associates and make Designer Brands an inclusive environment, which is why I am proud signatory of the CEO Action for Diversity & Inclusion Pledge. While we are proud of our current ESG practices, we are actively looking for ways to improve, and we are looking forward to sharing future initiatives with our shareholders. 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 virtual meeting rules of conduct and copies of our proxy statement and our 2020 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, and we'll address any unanswered questions on our corporate website shortly after the meeting. It is now shortly after 11:00 a.m. Eastern Standard Time on May 27, and this meeting is officially called to order. I'd 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 LLC and as Chief Executive Officer and 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 as 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 of Lau Technologies. Ms. Lau brings a strong background in technology, strategic operations and executive leadership to our Board. 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 the 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 and is regarded as an expert in the global management, financial, technology and cybersecurity fields. Harvey Sonnenberg has served as our Director since 2005. He is a former partner and current adviser to Weiser, LLP. Mr. Sonnenberg's strong accounting background and his deep knowledge of the changing retail environment provides significant accounting and related financial management expertise to the Board. Allan Tanenbaum has served as our Director since 2005. He currently serves as of counsel to Taylor English Duma LLC and General Counsel and as Managing Partner of EquiCorp Partners. Joanne Zaiac has served as our director since 2016. Until January of 2021, she served as Chief Client Officer for Dentsu Aegis Network U.S. Ms. Zaiac brings depth of brand building, marketing, digital media and consumer insights expertise to the Board. 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 & Touche, our independent auditor. He will have an opportunity to make a statement after the formal portion of the meeting if he wishes to do so 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 Q&A box on the bottom-right 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. Out of consideration for others, please limit yourself to one question. As stated in the rules of conduct, we ask that you restrict your remarks to the items of the agenda that is before us and items that are germane to the business of the company or to the business of the annual meeting. We will follow the parameters outlined in the rules of conduct in answering questions during the annual meeting. If you are a shareholder entitled to vote and have not yet 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 or video 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 the meeting and the affidavit of mailing will be filed with the minutes of the meeting. All shareholders of record as of the close of business on April 1, 2021, the record date for this meeting, are entitled to vote at the annual meeting. A list of the shareholders of record as of April 1, 2021, 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 64,780,833 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 shareholder 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 of 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 4 Class II directors to serve until the Annual Meeting of Shareholders in 2024 and until their successors are duly elected and qualified. The Board has nominated Peter S. Cobb, Jay L. Schottenstein, Roger L. Rawlins, and Joanne Zaiac. 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 that shareholders vote in favor of the election of each nominee to the Board. Proposal 2 is the ratification of our appointment of Deloitte as our independent registered public accounting firm for the fiscal year ending January 29, 2022. 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.

Roger, each item has been properly brought before this meeting. Any shareholder who has yet to vote or who wishes to change their vote may do so by clicking on the Voting button on the virtual meeting website and following the instructions there. However, we urge all shareholders to allow their proxies to stand. Shareholders who have mailed in proxies or have voted previously by telephone or internet do not need to take any further action at this time. I will now pause here to allow shareholders to vote. [Voting]

Now that all shareholders have had the opportunity to vote, I declare the polls for this meeting closed. Roger, I now turn the meeting back to you.

Thank you, Michelle. While the votes are being tabulated, I'd like to take a moment to thank our entire Designer Brands leadership team who has been steering the company through these unprecedented times. I also want to applaud the thousands of Designer Brands' associates for their resilience, hard work and adaptability. And finally, on behalf of the Board and management, I'd like to thank our shareholders for your continued confidence and your investment in Designer Brands. Now I'd like to turn the floor back to Michelle to announce the preliminary voting results.

Thank you, Roger. The preliminary vote results are as follows: each of the 4 nominees for election to the Board have been duly elected, the appointment of Deloitte as our independent registered public accounting firm for fiscal 2021 has been ratified, and the compensation of the named executive officers has been approved on an advisory basis. The final report of the inspector of elections will be filed with the minutes of the meeting, and the final voting results will be filed with the SEC on a Form 8-K. Now I'd like to turn the meeting back to you, Roger.

Thank you, Michelle. The report of the inspector of election, as presented, is accepted. There being no further business to come before the meeting. The 2021 Annual Meeting of Shareholders of Designer Brands Inc. is now adjourned. We will now open the floor to questions from shareholders. As a reminder, you are able to ask questions using the Q&A box on the bottom right side of your screen. Please note that the rules of conduct apply to this question-and-answer session, and we reserve the right to not answer any questions that do not comply with our rules of conduct.

We do not have any questions submitted at this time.

So on behalf of management and the Board of Directors, I'm going to thank everyone for attending today. And this meeting is now concluded.