On Wednesday, Telsey Advisory Group adjusted its price target for Designer Brands Inc (NYSE: NYSE:DBI) shares, a leading footwear and accessories retailer. The firm reduced the target to $10.00 from the previous $11.00 while maintaining a Market Perform rating on the stock.
Designer Brands reported strong sales and gross margin figures for the first quarter, surpassing expectations, particularly in the performance and leisure segment, which outperformed the wider U.S. footwear retail market.
Nonetheless, these positive results were tempered by higher than anticipated Selling, General & Administrative (SG&A) expenses, a continuation of the trend seen in the company's fourth quarter.
In response to these financial pressures, Designer Brands is actively seeking additional methods to streamline its operations and improve efficiency.
Although the company's earnings per share (EPS) for the quarter did not meet consensus estimates, management affirmed that the results were consistent with their internal forecasts.
Consequently, the company has reiterated its previous forecast for low single-digit revenue growth and low single-digit to mid-teens year-over-year growth in EPS for fiscal year 2024.
Despite these reaffirmations, the shortfall in first-quarter EPS places Designer Brands in a position where significant earnings growth in the second half of the year is necessary to meet its full-year targets.
Given the current economic environment and trends in the footwear market, particularly in dressier styles, Telsey anticipates a difficult path ahead for Designer Brands to reach the goals set during its April 2022 Investor Day within the original timeframe.
The new price target of $10 reflects a 10.0x multiple on Telsey's two-year forward EPS estimate for Designer Brands. This valuation is in comparison to the recent near-term multiple of 10.8x and the one-year average near-term multiple of 8.8x.
InvestingPro Insights
In light of Telsey Advisory Group's revised price target for Designer Brands Inc (NYSE: DBI), real-time data from InvestingPro offers additional context for investors. The company's Market Cap stands at a modest $508.31M, indicating a relatively smaller scale within the retail industry. Notably, the P/E Ratio has adjusted to 15.45 over the last twelve months as of Q4 2024, suggesting a more attractive valuation for investors seeking growth opportunities.
According to InvestingPro Tips, management's aggressive share buybacks and the valuation implying a strong free cash flow yield are important considerations. These factors, along with analysts' predictions that the company will be profitable this year, could be promising signs for potential investors. Additionally, the stock's volatility and the company's profitability over the last twelve months should be taken into account when assessing its investment profile.
For those interested in a deeper dive into Designer Brands' financials and further strategic insights, InvestingPro offers additional tips for investors. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and explore the comprehensive analysis that includes several more InvestingPro Tips beyond those mentioned here.
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