Good morning, and welcome to the Designer Brands Inc. First Quarter 2023 Earnings Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Justin Fischer, Director of Investor Relations. Please go ahead.

Good morning. Earlier today, the company issued a press release comparing results of operation for the 13 week period ending April 29, 2023 to the 13 week period ended April 30, 2022. Please note that the financial results that we will reference during the remainder of today's call exclude certain adjustments recorded under GAAP unless specified otherwise. For a complete reconciliation of GAAP to adjusted earnings, please reference our press release. Additionally, please note that remarks made about the future expectations, plans, and prospects of the company constitute forward-looking statements. Results may differ materially due to various factors listed in today's press release and the company's public filings with the SEC. The company assumes no obligation to update any forward-looking statements. Joining us today are Doug Howe, Chief Executive Officer; and Jared Poff, Chief Financial Officer. Now let me turn over the call to Doug.

I want to begin by thanking our team for their continued hard work throughout the quester. Given the strength of our first quarter last year which was propelled by the strong return of fashion, coupled with this year's broad based pressure on the consumer, we anticipated our first quarter would face headwinds. That being said, the environment was slightly more difficult than we expected. I was pleased with how our team stepped up to read and react to an increasingly promotional environment, and at the same time, manage our inventory level appropriately across both our retail and brand segment. In the first quarter, Designer Brands net sales declined 10.7% compared to the first quarter last year. As I just mentioned, the first quarter of 2022 was a robust period where we saw a net sales growth of 18.1% year-over-year. Additionally, our US retail store traffic was up 22% last year, significantly outpacing the market. Despite the negative trend that the retail industry has been experiencing since the fourth quarter as well as the sequential down trend in February, March and April of this year, we are continuing to see increased customer demand in the casual segment of our offerings. However, the increase in casual sales were not significant enough to offset the decreases in our dress and seasonal businesses within our most important [indiscernible] selling season. Specifically, we saw a sharp pullback in seasonal products, particularly sandals, which were down 14% in women's and down 8% in men's in the quarter in our retail segment. Conversely, we saw strength in our overall casual category within DBI with women's up 7% and men’s up 4% in the quarter compared to the prior year, and we are leaning our ability to flex and pivot our assortment to offer even more of the…

Thank you, Doug, and good morning, everyone. I want to reiterate Doug's comments and echo how proud we are of this organization's ability to manage through the current challenging macroeconomic environment. We remain on the path to evolve our business model as we demonstrate the power of our brand building capabilities, and I am pleased with the progress we have made on our journey to date. As you heard from Doug, it was a challenging first quarter, particularly on the top line, and our adjusted EPS came in slightly below our expectations at $0.21. With the strong first quarter performance last year in both our retail and wholesale segments, coupled with the challenges of the current environment, we had communicated that the first quarter would most likely be our most difficult by far from a year-over-year comparison on both the top and bottom line. We continue to feel that this is the case. However, Q1 was slightly more challenging than anticipated and the trajectory change into Q2 is not materializing as originally projected. From a retail perspective, we continue to react to the constrained discretionary consumer and saw an increasingly promotional environment across most of our retail peers. Additionally, we had an especially pressured March as weather did not support our all-important [indiscernible] expectations. This is a peak holiday for seasonal product, a category in which we dominate and over penetrate. From a wholesale perspective, we met expectations, which were down to last year due to many of our retail partners assuming a conservative stance with near term inventory adjustments. Now let me provide a bit more detail on our financial results. For the first quarter sales decreased 10.7% to $742.1 million compared to 2022, primarily as a result of the aforementioned pressures on consumers, inventory tightening across the industry,…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Jay Sole from UBS. Please go ahead.

Great. Thank you so much. Maybe just to start off, I'm interested if you can elaborate a little bit on this elevation of partnership with Nike. Just maybe tell us a little bit about how it came together. And I think, before Nike was 6% of sales, maybe 7% of sales. I mean, are we are going to have a full reversal and go back to that level of sales with Nike and see if you can sort of give us some detail around that, that would be helpful. Thank you.

Yes. Hey, Jay. Thanks for the questions. This is Doug. Obviously, we're very excited about the changes that the teams are making in the overall product portfolio. Elevating our relationship with Nike is obviously among them. It just really came -- they've been great partners. We've had ongoing dialogue for the past several months. And we're super excited to be able to bring that back across men's, women's, and kids. That'll happen in Q4. So kind of November available to customer. Again, they've been great partners. We're excited to be able to offer that across stores and digital. We'll thoughtfully with their partnership, build that business back. We're going to be focusing obviously on, like I said, men's, women's and kids. Big opportunity, I think, for both of us, just given our number three market share penetration in women's. On the customer, we'll woe that we'll continue to evolve our portfolio with them and other partners as well, but obviously, very excited about that.

Got it. And then maybe just kind of follow-up on that. You talked about just -- you want to touch on the guidance a little bit. You mentioned that the trajectory change in the business that perhaps you've been anticipating for Q2 hasn't yet materialized. Can you just talk about you're seeing and sort of, like, what hasn't happened? And then maybe also talk about when you said there's an increasingly promotional environment, like, what categories are you seeing that in and sort of where are you noticing the most kind of increase in promotions?

Yes. This is Doug again. Thanks, Jay. It's pretty equally spread across the categories to be honest with you. I mean, we're definitely seeing strength in buoyancy in the casual area. That casualization trend just continues. And men's, women's, kids all very, very similar, which to us really just points to she's being much more discretionary with their income. Right? And it's fairly broad based. I think the good news on that is we feel like there's parts of that that are in our control obviously when that rebounds. We're being very thoughtful about our promotions obviously to be able to manage through that. We've always been known for value, so we certainly want to lean into that as a core competency. But I think we're just seeing a little bit of tampered demand. We had a lot of reasons to believe as we move through the back half of the year. Teams have done an amazing job of rebalancing the inventory, both on the retail side and on the brand side, meaning, into that casualization. So feel really good about the work the teams are doing there. We're going to be launching an exciting fall marketing campaign, obviously, excited for the first time to be able to launch an owned brand in the athletic space with [indiscernible]. And then as we said, really excited about elevating our relationship with Nike as we move into the back half of the year.

Got it. Okay. Thank you so much.

[Operator Instructions] There are no more questions in the queue. This concludes our question and answer session. I would like to turn the conference back over to Doug Howe for any closing remarks.

Thank you. Well, hopefully, you heard through our remarks. Consistently, we are obviously focused on products. We're excited to continue to elevate our national brand portfolio through the relationship with Nike. As I said, we're looking forward to launching Le Tigre. First time we've launched a known brand in that athletic space in August of this year. And I'll just close where I began by thanking our team for their continued hard work and dedication. Also want to thank our amazing brand partners. And thanks to all of you for joining us today. And we look forward to updating you our progress next quarter.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.