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Description of Business and Significant Accounting Policies (Policies) | 3 Months Ended
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May 03, 2025
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
Fiscal Year | Fiscal Year- Our fiscal year ends on the Saturday nearest to January 31. References to a fiscal year (e.g., "2025") refer to the calendar year in which the fiscal year begins. This reporting schedule is followed by many national retail companies and typically results in a 52-week fiscal year (including 2025 and 2024), but occasionally will contain an additional week resulting in a 53-week fiscal year.
Principles of Consolidation | Principles of Consolidation- The condensed consolidated financial statements include the accounts of Designer Brands Inc. and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. All amounts are in U.S. dollars.
Use of Estimates | Use of Estimates- The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and reported amounts of net sales and expenses during the repor ting periods. Certain estimates and assumptions use forecasted financial information based on information reasonably available to us. Significant estimates and assumptions are required as a part of accounting for customer returns and allowances, gift card breakage income, deferred revenue associated with reward programs, valuation of inventories, depreciation and amortization, impairments of long-lived assets, intangibles, goodwill and investments, lease accounting, redeemable noncontrolling interest, income taxes and valuation allowances on deferred tax assets, and self-insurance reserves. Although we believe that these estimates and assumptions are reasonable, they are based on management's knowledge of current events and actions we may undertake in the future. Changes in facts and circumstances may result in revised estimates and assumptions, and actual results could differ from these estimates.
Chief Executive Officer Transition and Restructuring Costs | Severance- During the three months ended May 3, 2025 and May 4, 2024, we incurred severance costs of $1.7 million and $2.4 million, respectively. These costs are included in operating expenses on the condensed consolidated statements of operations and no amounts were material to any individual reportable segment. As of May 3, 2025, February 1, 2025 and May 4, 2024, we had $1.8 million, $1.3 million and $5.1 million, respectively, of severance liability included in accrued expenses on the condensed consolidated balance sheets.
Income Taxes | Income Taxes- For the three months ended May 3, 2025, we used the discrete effective tax method to calculate our interim income tax benefit. The discrete method is used when the application of the estimated annual effective tax rate is impractical because it is not possible to reliably estimate the annual effective tax rate. The discrete method treats the year-to-date period as if it was the annual period and determines the income tax expense or benefit on that basis. We determined that using the discrete method is more appropriate at this time due to the high degree of uncertainty in estimating annual pretax earnings as we are unable to predict the severity of macroeconomic uncertainty, whether or when such circumstances may improve or worsen, or the full impact such circumstances could have on our business. For the three months ended May 3, 2025 and May 4, 2024, our effective tax rate was 10.4% and 138.1%, respectively. The effective tax rate for the three months ended May 3, 2025 differed from the statutory rate primarily due to state minimum tax expense on quarterly pre-tax loss and permanent non-deductible compensation. The high effective tax rate for the three months ended May 4, 2024 was due to discrete tax benefits, primarily state tax planning initiatives and release of federal tax reserves no longer deemed necessary, that approximated the amount of loss before income taxes and the impact of permanent non-deductible compensation.
Fair Value | Fair Value- Fair value is defined as the price that would be received in the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities recorded at fair value are categorized using defined hierarchical levels related to the subjectivity associated with the inputs to fair value measurements as follows: • Level 1 - Quoted prices in active markets for identical assets or liabilities. • Level 2 - Quoted prices for similar assets or liabilities in active markets or inputs that are observable. • Level 3 - Unobservable inputs in which little or no market activity exists. The carrying value of cash and cash equivalents, receivables, and accounts payables approximated their fair values due to their short-term nature. The carrying value of borrowings under our ABL Revolver and our Term Loan approximated fair value based on the terms and variable interest rates. Impairments- During the three months ended May 3, 2025, we recorded impairment charges of $1.0 million of long-lived assets due to underperforming stores in Canada. Also during the three months ended May 3, 2025, we recorded a $2.0 million impairment charge for an interest in an equity security without a readily determinable fair value held at cost, which resulted in no remaining value due to the lack of liquidity and the deterioration in the business prospects of the investee. There were no impairment charges for the three months ended May 4, 2024.
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements- In November 2024, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") 2024-03, Income Statement Expense Disaggregation Disclosures, which requires disaggregated disclosures for specific cost and expense categories such as inventory purchases, employee compensation, depreciation, and amortization, as well as other disclosures. ASU 2024-03 is effective either on a retrospective basis to all prior periods presented or on a prospective basis beginning with our 2027 Annual Report on Form 10-K and subsequent interim periods. We are currently evaluating the impact of adopting ASU 2024-03 to the notes of the consolidated financial statements.
Revenue Recognition | We record deferred revenue liabilities, included in accrued expenses on the condensed consolidated balance sheets, for remaining obligations we have to our customers.
Earnings Per Share | Basic earnings (loss) per share is based on net income (loss) attributable to Designer Brands Inc. and the weighted average of Class A and Class B common shares outstanding. Diluted earnings per share reflects the potential dilution of common shares adjusted for outstanding stock-based compensation awards calculated using the treasury stock method.
Shareholders' Equity | SHARES Our Class A common shares are listed for trading under the ticker symbol "DBI" on the New York Stock Exchange. There is currently no public market for the Company's Class B common shares, but the Class B common shares can be converted into the Company's Class A common shares at the election of the holder on a share-for-share basis. Holders of Class A common shares are entitled to one vote per share and holders of Class B common shares are entitled to eight votes per share on matters submitted to shareholders for approval.

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