What Happened?
Shares of footwear and accessories discount retailer Designer Brands (NYSE: DBI) fell 5.1% in the afternoon session after UBS reiterated a Neutral rating on the stock, flagging concerns about the company's long-term growth prospects.
The move overshadowed the company's announcement of a quarterly cash dividend of $0.05 per share. Investors seemed to fixate on the cautious commentary from UBS, which maintained its $4.00 price target. The bank pointed to the maturity of the DSW banner and the company's focus on seasonal footwear as factors that limited growth potential. This analyst view suggested that even with a dividend payout, significant concerns loomed over the company's ability to expand its business in the future, prompting a negative reaction in the market.
The shares closed the day at $4.15, down 4.4% from previous close.
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What Is The Market Telling Us
Designer Brands’s shares are extremely volatile and have had 70 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 4.5% on the news that the stock extended its positive momentum as the company reported second-quarter results that beat Wall Street's profit expectations.
Although revenue of $739.8 million was largely in line with analyst estimates, it still marked a 4.2% decline compared to the previous year. The main driver of the positive sentiment was the company's bottom line. Designer Brands posted an adjusted earnings per share of $0.34, which soundly surpassed the forecast of $0.22. Management attributed the strong profit performance to disciplined cost management and specific operational efforts, which helped offset the dip in sales.
Designer Brands is down 21.9% since the beginning of the year, and at $4.14 per share, it is trading 43.9% 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 $722.51.
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