What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-03-30 compared with 2025-03-24 · 119 added, 251 removed, 178 unchanged (68% of the section changed)

6 unchanged sentences

Risk Factors of this Form 10-K and included elsewhere in this Form 10-K.

Our two reportable segments are the Retail segment and the Brand Portfolio segment.

Beginning with this 2025 Annual Report on Form 10-K, we aggregated our previously reported U.S.

Retail operating segment and Canada Retail operating segment into a single reportable segment, the Retail segment, due to the similar nature of their operations and economic characteristics.

This aggregation had no impact on our historical consolidated financial position, results of operations or cash flows.

All prior period segment information has been recast to conform to the current reporting segment presentation.

The following discussion includes a comparison of our results of operations and liquidity and capital resources for 2025 and 2024.

Beginning in the fourth quarter of 2024, we changed our financial statement presentation related to expenses associated with distribution and fulfillment and store occupancy for the U.S.

Retail and Canada Retail segments.

These expenses were previously included within cost of sales and are now included within operating expenses in order to present all of our operating segments on a consistent basis.

Also beginning in the fourth quarter of 2024, we changed the presentation of segment performance by including an operating profit measurement for our reportable segments.

Prior period reclassifications were made to conform to the current period presentation in the consolidated statements of operations.

For 2023 and 2022, the reclassifications resulted in a decrease to cost of sales and an increase to operating expenses.

These reclassifications did not change operating profit, net income, or earnings per share attributable to Designer Brands Inc.

As a result of the prior period reclassifications, we have included a discussion of the results of operations of 2023 compared with 2022.

A discussion of 2022 liquidity and capital resources may be found in Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended February 3, 2024, filed with the SEC on March 25, 2024.

Except where it may be useful in understanding 2025 results, we have omitted discussion of results for 2023, which may

be found in Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations of our Annual

Report on Form 10-K for the year ended February 1, 2025, filed with the SEC on March 24, 2025.

EXECUTIVE OVERVIEW AND TRENDS IN OUR BUSINESS

For 2024, net sales decreased 2.1% with total comparable sales down 1.7% over last year.

Gross profit as a percentage of net sales for 2024 was 40 basis points lower when compared to last year primarily due to a change in mix of products sold as we expanded our athletic and casual offerings, which have lower margins than the seasonal and dress categories.

During April 2024, we completed the acquisition of Rubino, which allowed our Canada Retail segment to expand into the province of Quebec.

Beginning in 2024, we changed how the Brand Portfolio segment sources certain Owned Brands for the U.S.

Retail segment by transacting using a wholesale model, where intersegment sales and cost of sales are recorded, whereas in 2023 and prior we transacted on a commission model, where intersegment sales were based on a percentage of product cost.

This change resulted in an increase in Brand Portfolio intersegment net sales, cost of sales, gross profit, and gross profit as a percentage of net sales and a corresponding increase in the amount of eliminated intersegment net sales, cost of sales, and gross profit with no impact to consolidated net sales, cost of sales, and gross profit.

EFFECTS OF INFLATION AND GLOBAL ECONOMIC CONDITIONS

During 2024, our comparable sales declined as we experienced lower traffic, primarily in the U.S.

Retail segment.

For 2025, net sales decreased 3.9% with a decrease in total comparable sales of 4.3% over last year.

Gross profit as a percentage of net sales for 2025 was 43.6%, an increase of 90 basis points when compared to last year.

EFFECTS OF MACROECONOMIC CONDITIONS AND TARIFFS

Macroeconomic conditions influenced by uncertain tariff policies, stock market indices, interest rates, inflation and employment levels, along with geopolitical unrest, continue to persist and create a challenging retail environment.

Consumer spending on discretionary items, including our products, generally declines during periods of economic uncertainty, when disposable income is reduced, or when there is a reduction in consumer confidence.

We believe the decrease in comparable sales is a result of ongoing consumer concern of negative and/or uncertain economic conditions, most notably the concern of economic volatility, including an economic downturn, fluctuations in interest rates, inflationary pressures, and changes in employment levels.

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.

These factors ultimately could require us to enact further mitigating operating efficiency measures that may not have the intended effect and could have a material adverse effect on our business, operations, and results of operations.

Adverse global economic conditions and disruptions to our business, along with a sustained decline in our stock price, may lead to triggering events that may indicate that the carrying value of certain assets, including inventories, accounts receivables, equity investments, long-lived assets, intangibles, and goodwill, may not be recoverable.

In February and March 2025, the U.S.

administration announced new tariffs on all imports from China.

All of the products manufactured through the Brand Portfolio segment come from third-party facilities outside of the U.S., with 77 % of units sourced from China during 2024.

In addition to the merchandise sourced through our Brand Portfolio segment, our U.S.

Retail and Canada Retail segments also source merchandise from domestic third-party suppliers with many of these suppliers importing a large portion of their merchandise from China.

We are closely monitoring this situation and evaluating the actions we plan to take, which may include cost-mitigation measures, sourcing strategies, and price adjustments.

However, there can be no assurance that we will be able to fully mitigate the impact of such tariffs or new tariffs in China or elsewhere.

Future impacts are unknown at this time and could have a material adverse effect on our business, operations, and results of operations.

We believe these ongoing uncertainties have had a negative impact on our operating results and liquidity during 2025 and we may continue to experience the impact of decreased consumer demand for our products and lower direct-to-consumer traffic.

We have enacted certain mitigating actions, including alignment of inventory with current demand levels, expense and capital expenditure reductions, and accelerating sourcing diversification efforts.

Although we have made progress in mitigating the impacts of certain macroeconomic conditions, our actions are not necessarily complete, and they should be viewed as part of the process in which we will continue our efforts to better align our cost structure with our operating results.

We are unable to predict the severity of macroeconomic uncertainty, whether or when such circumstances may improve or worsen, including from one of our quarterly reporting periods to the next, or the full impact such circumstances could have on our business.

These factors ultimately could require us to enact further mitigating operating efficiency measures that could have a material adverse effect on our business, results of operations, and liquidity.

Following its January 2025 inauguration, the U.S.

administration has taken action to increase tariffs assessed on most products imported into the U.S.

Various modifications to the U.S.

tariffs have been announced, and further changes are expected to be made in the future, including in response to litigation, which has introduced heightened uncertainty regarding the future of global trade and the impact to our cost structure.

On February 20, 2026, the U.S.

Supreme Court rendered a decision invalidating tariffs imposed under the International Emergency Economic Powers Act (the "IEEPA").

Supreme Court did not address refunds or remedies but instead remanded the matter to the U.S.

Court of International Trade to address remedies.

In response, the U.S.

President issued an executive order rescinding the IEEPA tariffs and directing agencies to take measures to cease collection of the tariffs.

Further, following the decision, the U.S.

President imposed a new tariff surcharge of not less than 10% under Section 122 of the Trade Act of 1974 on all imports, subject to certain exceptions.

The tariffs under this statute took effect on February 24, 2026, and will remain in effect for 150 days (the maximum under the statute).

Tariffs have not been previously imposed under this statutory provision, and such tariffs may be increased.

On March 4, 2026, the U.S.

Court of International Trade ruled that companies that paid tariffs imposed under the IEEPA are due refunds.

There remains substantial uncertainty regarding any refund processes and further uncertainty regarding future trade policy actions, and any

future tariffs or other trade policy actions could affect our cost structure and supply chain.

All of the products manufactured through the Brand Portfolio segment come from third-party facilities outside of the U.S., with the majority of our units sourced from Asia.

In addition to the merchandise sourced through our Brand Portfolio segment, our Retail segment also sources merchandise from third-party suppliers, with many of these suppliers importing a large portion of their merchandise from Asia.

We are closely monitoring this situation and evaluating the actions we have taken and additional actions we may take in the future, including cost mitigation measures and price adjustments.

For our Brand Portfolio segment, we have adjusted our sourcing diversification by optimizing where we source our products from in an effort to mitigate the risk, maximize flexibility, and decrease costs.

However, sourcing diversification could result in product quality issues, higher product costs, and/or not being able to source the quantity desired on a timely basis and there can be no assurance that we will be able to fully mitigate the impact of such tariffs or new tariffs in Asia or elsewhere.

The ultimate impact of tariffs and other trade policies on our business will depend on several factors, including future measures implemented by the U.S.

government and the governments of other countries, the overall magnitude and duration of these measures, and our ability to mitigate effects, which could include higher import costs and our ability to obtain any refund.

Accordingly, our financial position or results of operations may be adversely influenced by political, economic, legal, compliance, social, and business conditions in the U.S.

and in other countries.

Future impacts from macroeconomic conditions and tariffs are unknown at this time and could have a material adverse effect on our business, results of operations, and liquidity.

Unfavorable developments may result in future write-downs or adjustments to inventories, receivables, the valuation allowance on deferred tax assets, and may also negatively impact the fair value of our reporting units, indefinite-lived tradenames, and long-lived assets, which could result in us recording impairment charges for amounts below their carrying value.

FINANCIAL SUMMARY AND OTHER KEY METRICS

• Net sales decreased to $2.9 billion from $3.0 billion last year.

• Gross profit as a percentage of net sales was 42.7% compared to 43.1% in 2023 and 43.9% in 2022.

• Gross profit as a percentage of net sales was 43.6% compared to 42.7% in 2024.

• Net loss attributable to Designer Brands Inc.

was $10.5 million, or $0.20 loss per diluted share, compared to net income attributable to Designer Brands Inc.

of $29.1 million, or $0.46 earnings per diluted share, last year.

was $8.4 million, or $0.17 loss per diluted share, compared to net loss attributable to Designer Brands Inc.

of $10.5 million, or $0.20 loss per diluted share, last year.

Comparable Sales Performance Metric- The following table presents the percent change in comparable sales for each segment and in total:

1 unchanged sentence

Retail segment (3.9) % (1.5) %

Canada Retail segment (2.2) % (5.9) %

Brand Portfolio segment - direct-to-consumer channel (21.9) % (9.5) %

3 unchanged sentences

Stores are added to the comparable base at the beginning of the year and are dropped for comparative purposes in the quarter in which they are closed.

Comparable sales include the e-commerce sales of the U.S.

Retail and Canada Retail segments.

For calculating comparable sales in 2024, periods in 2023 are shifted by one week to compare similar calendar weeks.

Comparable sales for the Canada Retail segment exclude the impact of foreign currency translation and are calculated by translating current period results at the foreign currency exchange rate used in the comparable period of the prior year.

Stores added as a result of the Rubino acquisition that will have been in operation for at least 14 months at the beginning of 2025, along with its e-commerce sales, will be added to the comparable base for the Canada Retail segment beginning with the second quarter of 2025.

Comparable sales include the e-commerce sales of the Retail segment.

Comparable sales in Canada exclude the impact of foreign currency translation and are calculated by translating current period results at the foreign currency exchange rate used in the comparable period of the prior year.

Comparable sales include the e-commerce net sales of the Brand Portfolio segment from the direct-to-consumer e-commerce sites.

The calculation of comparable sales varies across the retail industry and, as a result, the calculations of other retail companies may not be consistent with our calculation.

Number of Stores- At the end of the last two fiscal years, we had the following number of stores:

February 1, 2025 February 3, 2024

Retail segment - DSW stores 494 499

Canada Retail segment:

stores 121 118

Rubino stores 28 —

DSW stores 26 25

Number of Stores- The following table presents the number of stores by banner in our Retail segment:

January 31, 2026 February 1, 2025

Total number of stores 665 669

13 unchanged sentences

Non-operating expenses, net (192) — (372) — 180 (48.4) %

Income (loss) before income taxes (10,730) (0.4) 40,197 1.4 (50,927) NM

Income (loss) before income taxes and loss from equity investment 2,234 0.1 (10,730) (0.4) 12,964 NM

Income tax benefit (provision) (6,958) (0.3) 755 — (7,713) NM

Net income (loss) (9,975) (0.4) 29,216 1.0 (39,191) NM

Loss from equity investment (847) — — — (847) NM

Net loss (5,571) (0.2) (9,975) (0.4) 4,404 (44.2) %

Net income attributable to redeemable noncontrolling interest (2,803) (0.1) (574) — (2,229) 388.3 %

Net income (loss) attributable to Designer Brands Inc.

$ (10,549) (0.4) % $ 29,062 1.0 % $ (39,611) NM

Earnings (loss) per share attributable to Designer Brands Inc.:

Basic earnings (loss) per share $ (0.20) $ 0.47 $ (0.67) NM

Diluted earnings (loss) per share $ (0.20) $ 0.46 $ (0.66) NM

Weighted average shares used in per share calculations:

Basic shares 53,657 61,296 (7,639) (12.5) %

Diluted shares 53,657 63,375 (9,718) (15.3) %

Net loss attributable to Designer Brands Inc.

$ (8,374) (0.3) % $ (10,549) (0.4) % $ 2,175 (20.6) %

Basic and diluted loss per share attributable to Designer Brands Inc.

$ (0.17) $ (0.20) $ 0.03 (15.0) %

Basic and diluted weighted average shares used in per share calculations 49,136 53,657 (4,521) (8.4) %

NM - Not meaningful

4 unchanged sentences

Retail $ 2,656,809 88.0 % $ 2,749,124 87.3 % $ (92,315) (3.4) % (3.9)%

Canada Retail 283,023 9.0 % 264,229 8.4 % 18,794 7.1 % (2.2)%

Brand Portfolio 362,861 12.0 398,881 12.7 (36,020) (9.0) % (21.9)%

2 unchanged sentences

Consolidated net sales $ 2,892,671 $ 3,009,262 $ (116,591) (3.9) %

During 2024, net sales decreased in the U.S.

Retail segment, primarily due to the decrease in comparable sales of $35.0 million and the additional week of sales during 2023.

The decrease in comparable sales for the U.S.

Retail segment was largely driven by a decrease in comparable transactions with lower traffic and a lower conversion rate.

Net sales increased in the Canada Retail segment due to the addition of Rubino, with $24.6 million of net sales during the period, as well as $7.9 million from the net new stores opened since the end of 2023, partially offset by the decrease in comparable sales of $5.7 million due to lower average sales amounts per transaction, the unfavorable impact from foreign currency translation of $5.0 million, and the additional week of sales in 2023.

The increase in net sales for the Brand Portfolio segment was primarily due to the change in how we source certain Owned Brands for the U.S.

Retail segment from a commission model, where sales are based on a percentage of product cost, to a wholesale model, where sales and cost of sales are recorded, which added approximately $70.0 million in net sales and also resulted in the increase in intersegment net sales that are eliminated.

This increase in the Brand Portfolio segment was partially offset by lower sales to external customers as retail customers pulled back on orders during 2024.

During 2025, net sales decreased in the Retail segment primarily driven by a decline in comparable sales of approximately $106.0 million, which was partially offset by an increase in non-product sales activity including service revenue, retail media income, and shipping revenue.

The decrease in comparable sales for the Retail segment was largely driven by lower comparable transactions of approximately 8% due to reduced traffic, partially offset by an increase in comparable average sales amounts per transaction.

The decrease in net sales for the Brand Portfolio segment was primarily due to lower revenue from wholesale activity of $39.9 million (excluding Topo wholesale) as retail customers and the Retail segment pulled back on orders, partially offset by a $17.3 million increase in net sales from strong Topo wholesale activity, with the remaining decrease from direct-to-consumer sales, primarily from the Vince Camuto e-commerce site.

The following table summarizes gross profit by segment:

4 unchanged sentences

Retail $ 1,152,705 43.4 % $ 1,186,228 43.1 % $ (33,523) (2.8) % 30

Canada Retail 126,030 44.5 % 119,167 45.1 % 6,863 5.8 % (60)

Brand Portfolio 102,791 28.3 % 109,814 27.5 % (7,023) (6.4) % 80

2 unchanged sentences

Consolidated gross profit $ 1,260,390 43.6 % $ 1,285,958 42.7 % $ (25,568) (2.0) % 90

The decrease in gross profit for the U.S.

Retail segment was primarily driv en by the decrease in net sales during 2024 over last year and at lower margin rates.

Gross profit as a percentage of net sales decreased for the U.S.

Retail seg ment when compared to last year primarily due to a change in mix of products sold as we expanded our athletic and casual offerings, which have lower margins than the seasonal and dress categories.

The increase in gross profit for the Canada Retail segment was primarily driven by the increase in net sales during 2024 over last year.

Gross profit as a percentage of net sales decreased for the Canada Retail segment also due to a change in mix of products sold and a lower margin rate for Rubino as we worked through elevated inventory from the acquisition.

The increase in gross profit for the Brand Portfolio segment was primarily driven by the transition of certain Owned Brands sourced for the U.S.

Retail segment under a wholesale model, as discussed above, which also resulted in the net eliminatio n of intersegment gross profit during 2024 as compared to the net recognition of intersegment gross profit last year (refer to the table below).

Gross profit as a percentage of net sales increased for the Brand Portfolio segment primarily due to the transition of certain Owned Brands sourced for the U.S.

Retail segment under a wholesale model, partially offset by higher freight costs as we rerouted supply chain lanes in order to avoid potential disruptions.

The decrease in gross profit for the Retail segment was primarily driven by the decrease in net sales at a slightly higher margin rate.

The improved margin rate was primarily due to greater efficiency in our digital order fulfillment operations.

The decrease in gross profit for the Brand Portfolio segment was primarily due to lower sales as retail customers pulled back on orders.

Gross profit as a percentage of net sales increased for the Brand Portfolio segment primarily due to favorable customer mix and improved inventory management with less seasonal aged product, partially offset by the deleverage of fixed royalty expenses on lower net sales.

The net recognition (elimination) of intersegment gross profit consisted of the following:

13 unchanged sentences

Retail $ 941,153 35.4 % $ 936,786 34.1 % $ 4,367 0.5 % 130

Canada Retail 102,099 36.1 % 94,535 35.8 % 7,564 8.0 % 30

Brand Portfolio 102,909 28.4 % 119,734 30.0 % (16,825) (14.1) % (160)

2 unchanged sentences

Consolidated operating expenses $ 1,219,233 42.1 % $ 1,245,834 41.4 % $ (26,601) (2.1) % 70

During 2024, operating expenses decreased in the U.S.

Retail segment primarily due to a $7.1 million decrease in personnel overhead costs with a lower headcount and lower store selling expenses of $4.9 million and distribution costs of $2.6 million in line with lower net sales.

Operating expenses increased in the Canada Retail segment primarily driven by the addition of Rubino.

Operating expenses decreased in the Brand Portfolio segment primarily due to a $4.7 million decrease in marketing expenses and lower distribution costs of $1.9 million with the decline in external customer wholesale activity.

Operating expenses increased for corporate shared services primarily due to higher professional fees and costs for cloud computing arrangements, partially offset by approximately $5.0 million lower stock compensation expense as a result of the CEO transition costs incurred last year.

The increase in consolidated operating expenses as a percentage of consolidated net sales over last year was due to the deleverage of our costs on lower net sales.

IMPAIRMENT CHARGES

Impairment charges are not attributed to any of our segments for segment presentation purposes.

During 2024, we recorded impairment charges of $9.4 million due to a vacated leased corporate office and other corporate assets, $7.0 million of our equity investment in Le Tigre due to the inability of Le Tigre to generate earnings with expected future losses, $1.3 million due to two underperforming Canada Retail segment stores, and $0.6 million due to an underperforming U.S.

Retail segment store.

During 2023, we recorded impairment charges of $4.8 million, primarily related to a vacated leased space.

OPERATING PROFIT

The following table summarizes operating profit (loss) by segment:

(dollars in thousands)

2024 2023 Change

Amount % of Segment Net Sales Amount % of Segment Net Sales Amount % Basis Points

Segment operating profit (loss):

Retail $ 225,511 9.1 % $ 261,675 10.3 % $ (36,164) (13.8) % (120)

Canada Retail 23,931 8.5 % 24,632 9.3 % (701) (2.8) % (80)

Brand Portfolio 3,225 0.8 % (26,723) (7.7) % 29,948 NM NM

Total segment operating profit 252,667 8.0 % 259,584 8.2 % (6,917) (2.7) % (20)

Corporate/eliminations (217,734) (187,183) (30,551) 16.3 %

Consolidated operating profit $ 34,933 1.2 % $ 72,401 2.4 % $ (37,468) (51.8) % (120)

NM - Not meaningful

During 2024, operating profit for the U.S.

Retail segment decreased due to lower gross profit partially offset by lower operating expenses.

For the Brand Portfolio segment, the improvement in operating results was the result of the increase in gross profit and lower operating expenses.

Corporate/eliminations increased, which lowers consolidated operating profit, due to an increase in impairments in 2024 and higher eliminations of Brand Portfolio intercompany activity.

These changes led to lower consolidated operating profit as a percent of consolidated net sales.

INTEREST EXPENSE, NET

For 2024, interest expense, net, increased by $13.1 million over last year, primarily driven by a higher debt balance.

The effective tax rate was 7.0% for 2024, as compared to 27.3% for 2023.

The effective tax rate for 2024 differed from the statutory rate primarily due to non-deductible compensation and other adjustments partially offset by discrete tax benefits recognized, primarily related to the release of tax reserves no longer deemed necessary and state tax planning initiatives.

The effective tax rate for 2023 differed from the statutory rate primarily due to non-deductible compensation offset by other permanent adjustments.

2023 COMPARED WITH 2022

The following table presents our consolidated results of operations with associated percentages of net sales:

(amounts in thousands, except per share amounts) 2023 2022 Change

Amount % of Net Sales Amount % of Net Sales Amount %

Net sales $ 3,074,976 100.0 % $ 3,315,428 100.0 % $ (240,452) (7.3) %

Cost of sales (1,750,981) (56.9) (1,860,731) (56.1) 109,750 (5.9) %

Gross profit 1,323,995 43.1 1,454,697 43.9 (130,702) (9.0) %

Operating expenses (1,256,150) (40.8) (1,271,854) (38.4) 15,704 (1.2) %

Income from equity investments 9,390 0.3 8,864 0.3 526 5.9 %

Impairment charges (4,834) (0.2) (4,317) (0.1) (517) 12.0 %

Operating profit 72,401 2.4 187,390 5.7 (114,989) (61.4) %

Interest expense, net (32,171) (1.0) (14,874) (0.5) (17,297) 116.3 %

Loss on extinguishment of debt and write-off of debt issuance costs — — (12,862) (0.4) 12,862 NM

Non-operating expenses, net (33) — (130) — 97 (74.6) %

Income before income taxes 40,197 1.4 159,524 4.8 (119,327) (74.8) %

Income tax benefit (provision) (10,981) (0.4) 3,142 0.1 (14,123) NM

Net income 29,216 1.0 162,666 4.9 (133,450) (82.0) %

Net loss (income) attributable to redeemable noncontrolling interest (154) — 10 — (164) NM

Net income attributable to Designer Brands Inc.

$ 29,062 1.0 % $ 162,676 4.9 % $ (133,614) (82.1) %

Earnings per share attributable to Designer Brands Inc.:

Basic earnings per share $ 0.47 $ 2.41 $ (1.94) (80.5) %

Diluted earnings per share $ 0.46 $ 2.26 $ (1.80) (79.6) %

Weighted average shares used in per share calculations:

Basic shares 61,296 67,603 (6,307) (9.3) %

Diluted shares 63,375 72,101 (8,726) (12.1) %

NM - Not meaningful

The following table summarizes net sales by segment:

(dollars in thousands) 2023 2022 Change

Amount % of Segment Net Sales Amount % of Segment Net Sales Amount % Comparable Sales %

Segment net sales:

Retail $ 2,533,849 80.5 % $ 2,791,513 82.0 % $ (257,664) (9.2) % (9.5)%

Canada Retail 264,229 8.4 % 283,241 8.3 % (19,012) (6.7) % (5.9)%

Brand Portfolio 348,976 11.1 % 327,715 9.7 % 21,261 6.5 % 6.0%

Total segment net sales 3,147,054 100.0 % 3,402,469 100.0 % (255,415) (7.5) % (9.0)%

Elimination of intersegment net sales (72,078) (87,041) 14,963 (17.2) %

Consolidated net sales $ 3,074,976 $ 3,315,428 $ (240,452) (7.3) %

During 2023, net sales decreased in the U.S.

Retail segment, primarily due to the decrease in comparable sales of $260.3 million, with the additional week of sales during 2023 offset by the impact of net store closures since the end of 2022.

The decrease in comparable sales for the U.S.

Retail segment was largely driven by a decrease in comparable transactions of approximately 5%, driven by lower traffic, and a decrease in the comparable average sales amounts per transaction of approximately 5% as we were more promotional than we were during 2022.

Net sales decreased in the Canada Retail segment due to the decrease in comparable sales of $16.6 million, with the majority of the remaining decrease due to the unfavorable impact from foreign currency translation, partially offset by the additional week of sales in 2023.

The decrease in comparable sales for the Canada Retail segment was impacted primarily by lower comparable average sales amount per transaction.

Net sales for the Brand Portfolio segment increased due to the net sales added from the acquired Topo and Keds businesses partially offset by lower wholesale sales as retail customers pulled back on orders.

The following table summarizes gross profit by segment:

(dollars in thousands)

2023 2022 Change

Amount % of Segment Net Sales Amount % of Segment Net Sales Amount % Basis Points

Segment gross profit:

Retail $ 1,109,002 43.8 % $ 1,246,884 44.7 % $ (137,882) (11.1) % (90)

Canada Retail 119,167 45.1 % 132,292 46.7 % (13,125) (9.9) % (160)

Brand Portfolio 92,545 26.5 % 72,006 22.0 % 20,539 28.5 % 450

Total segment gross profit 1,320,714 42.0 % 1,451,182 42.7 % (130,468) (9.0) % (70)

Net recognition of intersegment gross profit 3,281 3,515 (234)

Consolidated gross profit $ 1,323,995 43.1 % $ 1,454,697 43.9 % $ (130,702) (9.0) % (80)

The decrease in consolidated gross profit was primarily driven by the decrease in consolidated net sales during 2023 over 2022, partially offset by lower freight and shipping costs.

Gross profit as a percentage of net sales decreased 90 basis points for the U.S.

Retail segment when compared to 2022, primarily due to being more promotional, partially offset by lower logistics costs including freight and shipping.

Gross profit as a percentage of net sales decreased 160 basis points for the Canada Retail segment in 2023 when compared to 2022, primarily due to a mix shift in sales towards lower margin products.

Gross profit as a percentage of net sales increased 450 basis points for the Brand Portfolio segment in 2023 when compared to 2022, primarily due to the change in mix of products sold, improved inventory positions, lower freight costs, and the leverage of higher sales on royalty expense since the acquired businesses do not have any royalty obligations.

The net recognition of intersegment gross profit consisted of the following:

(in thousands) 2023 2022

Intersegment recognition and elimination activity:

Net sales recognized by Brand Portfolio segment $ (72,078) $ (87,041)

Cost of sales:

Cost of sales recognized by Brand Portfolio segment 51,213 58,234

Recognition of intersegment gross profit for inventory previously purchased that was subsequently sold to external customers during the current period 24,146 32,322

$ 3,281 $ 3,515

OPERATING EXPENSES

The following table summarizes operating expenses by segment:

(dollars in thousands)

2023 2022 Change

Amount % of Segment Net Sales Amount % of Segment Net Sales Amount % Basis Points

Segment operating expenses:

Retail $ 847,327 33.4 % $ 896,374 32.1 % $ (49,047) (5.5) % 130

Canada Retail 94,535 35.8 % 96,583 34.1 % (2,048) (2.1) % 170

Brand Portfolio 128,658 36.9 % 103,766 31.7 % 24,892 24.0 % 520

Total segment operating expenses 1,070,520 34.0 % 1,096,723 32.2 % (26,203) (2.4) % 180

Corporate 185,630 175,131 10,499 6.0 %

Consolidated operating expenses $ 1,256,150 40.8 % $ 1,271,854 38.4 % $ (15,704) (1.2) % 240

During 2023, operating expenses decreased in the U.S.

Retail segment primarily due to a decrease of $17.9 million in depreciation and amortization expense and $8.4 million distribution costs as we realized the benefit of moving our digital fulfillment activities from our Ohio location to our New Jersey location and a decrease of $12.8 million in store selling expenses and the remaining decrease primarily in lower incentive compensation in line with lower net sales.

Operating expenses increased in the Brand Portfolio segment primarily due to an increase of $8.2 million in marketing expenses as we invested more in brand awareness and the remaining increase primarily due to the additional expenses from the acquired Keds and Topo businesses.

Operating expenses also increased for corporate shared services due to higher professional fees and costs for cloud computing arrangements.

The increases in consolidated operating expenses as a percentage of consolidated net sales over 2022 was due to the deleverage of our costs on lower net sales.

During 2025, operating expenses increased in the Retail segment primarily due to an increase in distribution and fulfillment costs of $7.7 million with the addition of our new distribution center, partially offset by lower store selling expenses in line with lower net sales.

Operating expenses as a percentage of net sales increased in the Retail segment due to the deleverage impact of lower net sales.

Operating expenses decreased in the Brand Portfolio segment primarily due to an $8.6 million decrease in marketing expenses with the remaining decrease primarily due to lower personnel overhead and other costs, in line with lower net sales.

Operating expenses as a percentage of net sales decreased in the Brand Portfolio segment as the decline in operating expenses leveraged even with lower net sales.

Operating expenses decreased for corporate shared services primarily due to lower professional fees.

IMPAIRMENT CHARGES

Impairment charges are not attributed to any of our segments for segment presentation purposes.

During 2023, we recorded impairment charges of $4.8 million, primarily due to a vacated leased space.

During 2022, we recorded impairment charges of $4.3 million, primarily due to subleases of vacated leased spaces.

During 2025, we recorded impairment charges to long-lived assets of $2.4 million due to underperforming stores and $2.0 million of 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.

OPERATING PROFIT

The following table summarizes operating profit (loss) by segment:

The following table summarizes operatin g profit by segment:

(dollars in thousands)

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Amount % of Segment Net Sales Amount % of Segment Net Sales Amount % Basis Points

Segment operating profit (loss):

Segment operating profit:

Retail $ 211,552 8.0 % $ 249,442 9.1 % $ (37,890) (15.2) % (110)

Canada Retail 24,632 9.3 % 35,709 12.6 % (11,077) (31.0) % (330)

Brand Portfolio 10,908 3.0 % 3,225 0.8 % 7,683 238.2 % 220

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Consolidated operating profit $ 47,764 1.7 % $ 34,933 1.2 % $ 12,831 36.7 % 50

During 2023, operating profit for the U.S.

Retail and Canada Retail segments decreased due to lower gross profit partially offset by lower operating expenses.

For the Brand Portfolio segment, the increase in operating loss was due to the increase in gross profit being more than offset by higher operating expenses.

These factors led to lower operating profit (higher operating loss) as a percentage of net sales for all segments and in total.

INTEREST EXPENSE, NET

For 2023, interest expense, net, increased by $17.3 million over 2022, primarily driven by overall higher interest rates on our debt, with higher rates on the ABL Revolver over 2022 and the addition of the Term Loan, and a higher average debt balance during 2023.

LOSS ON EXTINGUISHMENT OF DEBT AND WRITE-OFF OF DEBT ISSUANCE COSTS

In connection with the settlement of our previous senior secured term loan agreement on February 8, 2022, we incurred a $12.7 million loss on extinguishment of debt, composed of a $6.9 million prepayment premium and a $5.7 million write-off of unamortized debt issuance costs.

As a result of the replacement of the ABL Revolver during 2022, we also wrote off $0.2 million of debt issuance costs.

The effective tax rate was a positive 27.3% for 2023, as compared to a negative 2.0% for 2022.

The effective tax rate for 2023 differed from the statutory rate primarily due to non-deductible compensation offset by other permanent adjustments.

The effective tax rate for 2022 differed from the statutory rate as a result of releasing $55.7 million of the valuation allowance partially offset by the permanent tax adjustments, primarily non-deductible compensation.

During 2025, operating profit for the Retail segment decreased primarily due to lower gross profit.

Operating profit for the Brand Portfolio segment increased due to lower operating expenses, partially offset by lower gross profit.

Corporate/eliminations were favorable to consolidated operating profit due to lower corporate operating expenses, lower impairments, and favorable intersegment activity.

These factors led to an increase in consolidated operating profit.

The effective tax rate, which is calculated based on income (loss) before income tax and loss from equity investment, for 2025 and 2024 was 311.5% and 7.0%, respectively.

The effective tax rate for 2025 differed from the statutory rate primarily due to the impact of non-deductible compensation and higher state income taxes resulting from state valuation allowances and tax return adjustments as well as the income tax amounts on a relatively low pretax income base.

The effective tax rate for 2024 differed from the statutory rate, primarily due to non-deductible compensation and other adjustments partially offset by discrete tax benefits recognized, primarily related to the release of tax reserves no longer deemed necessary and state tax planning initiatives.

LIQUIDITY AND CAPITAL RESOURCES

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Our working capital and inventory levels fluctuate seasonally.

On April 8, 2024, we acquired Rubino for $16.1 million in cash, funded with available cash and borrowings on the ABL Revolver.

During 2024, we repurchased 10.3 million Class A common shares at an aggregate cost of $68.6 million.

As of February 1, 2025, $19.7 million of Class A common shares remained available for repurchase under the share repurchase program.

The following table summarizes our material undiscounted cash requirements for 2026 and future fiscal years thereafter, and provides reference for each item to the relevant note of the consolidated financial statements of this Form 10-K:

(in thousands) Note Reference 2026 Future Fiscal Years Thereafter Total

Debt maturities Note 12 $ 6,750 $ 489,715 $ 496,465

Fixed minimum lease payments

Note 13 $ 198,646 $ 755,304 $ 953,950

$ 219,242 $ 757,263 $ 976,505

Debt maturities Note 12 $ 6,750 $ 431,938 $ 438,688

Noncancelable purchase obligations

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Note 13 $ 33,834 $ 67,668 $ 101,502

In addition to the above, we have an exclusive call option and the noncontrolling interest holders have a put option with respect to our purchase of the remaining 20.6% ownership interest in Topo upon the occurrence of certain events or after a period of three years following the close of the transaction, which was December 13, 2022.

The redemption price is defined in the operating agreement and is based primarily on a fixed multiple of Topo's trailing 12 months of adjusted earnings before interest, taxes, depreciation, amortization, and other agreed upon adjustments.

We are committed to a cash management strategy that maintains liquidity to adequately support the operation of the business, pursue our growth strategy, and withstand unanticipated business volatility, including the impacts of the global economic conditions on our results of operations.

We believe that cash generated from our operations, together with our current levels of cash, as well as the availability under our ABL Revolver, are sufficient to maintain our ongoing operations, support seasonal working capital requirements, fund acquisitions and capital expenditures, repurchase common shares under our share repurchase program, and meet our debt service obligations over the next 12 months and beyond.

We believe that cash generated from our operations together with our current levels of cash and the availability under our ABL Revolver are sufficient to maintain our ongoing operations, support seasonal working capital requirements, fund acquisitions and capital expenditures, repurchase common shares under our share repurchase program, and meet our debt service obligations over the next 12 months and beyond.

The following table presents the key categories of our consolidated statements of cash flows:

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Net cash used in investing activities (33,521) (62,673) 29,152

Net cash provided by (used in) financing activities (22,094) 10,479 (32,573)

Net cash used in financing activities (72,532) (22,094) (50,438)

Effect of exchange rate changes on cash balances 2,312 (1,890) 4,202

Net decrease in cash and cash equivalents $ (4,421) $ (9,593) $ 5,172

Net increase (decrease) in cash and cash equivalents $ 6,119 $ (4,421) $ 10,540

OPERATING CASH FLOWS

The decrease in net cash provided by operations was largely driven by the decrease in net income recognized after adjusting for non-cash activity, including depreciation and amortization, stock-based compensation expense, changes in deferred income taxes and impairment charges, and higher spend on working capital.

The increased spend on working capital was the result of an increased investment in inventories and the timing of payments on current liabilities, partially offset by the receipt of income tax refunds of $61.9 million compared to cash paid for income taxes of $17.1 million last year, timing of payments on lease obligations, and no incentive compensation for 2023 being paid in the first quarter of 2024 whereas we did pay incentive compensation for 2022 in the first quarter of 2023.

The increase in net cash provided by operations was primarily due to improved working capital management as we adjusted inventories in line with sales volume and the timing of payments, partially offset by the receipt of income tax refunds of over $40.0 million in 2024.

INVESTING CASH FLOWS

For 2024, net cash used in investing activities was primarily due to capital expenditures of $50.9 million relating to infrastructure and IT projects and new stores, including relocations, and the acquisition of Rubino for $16.1 million.

For 2023, net cash used in investing activities was primarily due to the acquisition of Keds for $127.3 million and capital expenditures of $55.0 million relating to infrastructure and IT projects, new stores, and store improvements.

The decrease in cash used in investing activities during 2025 as compared to 2024 was primarily due to the reduction in capital expenditures of $19.3 million as we pulled back in response to the lower net sales experienced especially early in the year, along with impact of the 2024 acquisition of Rubino for $16.1 million.

FINANCING CASH FLOWS

For 2024, net cash used in financing activities was due to the repurchase of 10.3 million Class A common shares at an aggregate cost of $68.6 million, payments of dividends of $10.5 million, and payments on the Term Loan of $6.8 million, partially offset by the net receipts of $69.0 million from our ABL Revolver.

For 2023, net cash provided by financing activities was due to proceeds from the issuance of the Term Loan of $135.0 million and the net receipts of $20.0 million from our ABL Revolver, partially offset by the repurchase of 9.7 million Class A common shares at an aggregate cost of $102.2 million, payments of $17.5 million for taxes for stock-based compensation shares withheld, payments of dividends of $12.2 million, and payments of debt issuance costs of $10.7 million.

For 2025, we had net cash used in financing activities primarily due to net payments on debt of $57.8 million on our ABL Revolver and Term Loan and dividend payments of $9.7 million.

For 2024, we had net cash used in financing activities primarily due to the repurchase of 10.3 million Class A common shares at an aggregate cost of $68.6 million, dividend payments of $10.5 million, and payments on our Term Loan of $6.8 million, partially offset by the net receipts of $69.0 million from our ABL Revolver.

ABL Revolver- The ABL Revolver provides a revolving line of credit of up to $600.0 million, including a Canadian sub-limit of up to $60.0 million, a $75.0 million sub-limit for the issuance of letters of credit, a $60.0 million sub-limit for swing-loan advances for U.S.

borrowings, and a $6.0 million sub-limit for swing-loan advances for Canadian borrowings.

In addition, the ABL Revolver includes a first-in last-out term loan ("FILO Term Loan") of up to $30.0 million.

In addition, the ABL Revolver includes a first-in last-out term loan ("FILO Term Loan") with approximately $30.0 million borrowed.

The FILO Term Loan may be repaid in full, but not in part, so long as certain payment conditions are satisfied.

Once repaid, no portion of the FILO Term Loan may be reborrowed.

The ABL Revolver, which matures in 2027, may be used to provide funds for working capital, capital expenditures, share repurchases, other expenditures, and permitted acquisitions as defined by the credit facility agreement.

The ABL Revolver may be used to provide funds for working capital, capital expenditures, share repurchases, other expenditures, and permitted acquisitions as defined by the credit facility agreement.

The amount of credit available is limited to a borrowing base formulated on, among other things, a percentage of the book value of eligible inventory and credit card receivables, as reduced by certain reserves.

As of February 1, 2025, the revolving line of credit (excluding the FILO Term Loan) had a borrowing base of $471.4 million, with $340.1 million in outstanding borrowings and $4.0 million in letters of credit issued, resulting in $127.3 million available for borrowings.

The ABL Revolver matures on the earlier of the maturity date of the Term Loan (currently June 2028) or February 2031.

As of January 31, 2026, the revolving line of credit (excluding the FILO Term Loan) had a borrowing base of $394.2 million, with $289.1 million in outstanding borrowings and $4.0 million in letters of credit issued, resulting in $101.1 million available for borrowings.

Term Loan - On June 23, 2023, we entered into the Term Loan and have since borrowed the maximum aggregate amount of $135.0 million.

The Term Loan matures at the earliest of the date the ABL Revolver matures (currently March 2027) or five years from closing of the Term Loan (June 2028).

The Term Loan matures at the earliest of the date the ABL Revolver matures or June 2028.

Debt Covenants- The ABL Revolver requires us to maintain a fixed charge coverage ratio covenant of not less than 1:1 when availability is less than the greater of $47.3 million or 10.0% of the maximum borrowing amount.

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There are specific exceptions to these covenants including, in some cases, upon satisfying specified payment conditions based on availability.

As of February 1, 2025, we were in compliance with all financial covenants contained in the ABL Revolver and the Term Loan.

As of January 31, 2026, we were in compliance with all financial covenants contained in the ABL Revolver and the Term Loan.

Refer to Note 12, Debt , of the consolidated financial statements of this Form 10-K for further information about our debt arrangements.

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Differ from Assumptions

Inventories- The U.S.

Retail segment inventory is accounted for using the retail inventory method, which is stated at the lower of cost or market.

Inventories- The Retail segment inventory held in the U.S.

is accounted for using the retail inventory method, which is stated at the lower of cost or market.

Under the retail inventory method, the valuation of inventories at cost and the resulting gross profits are determined by applying a calculated cost-to-retail ratio to the retail value of inventories.

The cost basis of inventories reflected on the balance sheet is decreased by charges to cost of sales at the time that the retail value of the inventory is lowered by markdowns.

The Canada Retail and Brand Portfolio segments account for inventory using the moving average cost method and is stated at the lower of cost or net realizable value.

All other inventory is accounted for using the moving average cost method and is stated at the lower of cost or net realizable value.

For all inventories, we also monitor excess and obsolete inventories that may need to be liquidated at amounts below cost.

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If the reduction to inventories for markdowns, shrink, and aged inventories were to increase by 10%, cost of sales would increase by approximately $4.0 million.

Asset Impairment of Long-Lived Assets- We periodically evaluate the carrying amount of our long-lived assets, primarily property and equipment and operating lease assets, when events and circumstances warrant such a review to ascertain if any assets have been impaired.

The carrying amount of a long-lived asset or asset group is considered impaired when the carrying value of the asset or asset group exceeds the expected future cash flows from the asset or asset group.

The impairment loss recognized is the excess of the carrying value of the asset or asset group over its fair value.

Our reviews are conducted at the lowest identifiable level, which typically is at the store level for the majority of our long-lived assets.

Fair value at the store level is typically based on projected discounted cash flows over the remaining lease term.

We also review construction-in-progress projects, including internal-use software under development, for recoverability when we have a strategic shift in our plans.

A 10% change in our projected cash flows for our store fleet would not result in a material amount of additional impairment charges.

To the extent that these future projections or our strategies change, the conclusion regarding impairment may differ from our current estimates.

Policy Judgments and Estimates Effect if Actual Results

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These estimates are highly subjective, and our ability to realize the future cash flows used in our fair value calculations is affected by factors such as the success of strategic initiatives, changes in economic conditions, changes in our operating performance and changes in our business strategies.

As of February 1, 2025, we had goodwill of $93.7 million, $25.8 million, $6.6 million, and $4.3 million for the U.S.

As of January 31, 2026, we had goodwill of $93.7 million, $25.8 million, $7.0 million, and $4.3 million for the U.S.

Retail, Keds, Rubino, and Topo reporting units, respectively.

As of the fourth quarter measurement date, we determined for each of the reporting units that the fair value was in excess of their carrying value and a 10% decrease in fair value would not result in an impairment charge.

As of February 1, 2025, we had indefinite-lived tradenames of $46.9 million and $18.5 million within the Brand Portfolio segment and Canada Retail segment, respectively.

The Brand Portfolio segment includes the indefinite-lived tradename of Keds and the Canada Retail segment includes the indefinite-lived tradenames of The Shoe Co.

As of the fourth quarter measurement date, we performed a qualitative impairment assessment for the goodwill in the U.S.

Retail and Topo reporting units and determined it is not more likely than not that there is an impairment for either reporting unit.

Also, we determined for the Keds and Rubino reporting units that the fair values were in excess of their carrying values and a 10% decrease in fair value would not result in an impairment charge.

As of January 31, 2026, we had indefinite-lived tradenames of $19.8 million and $44.2 million within the Retail segment and Brand Portfolio segment, respectively.

The Retail segment includes the indefinite-lived tradenames of The Shoe Co.

and Rubino and the Brand Portfolio segment includes the indefinite-lived tradename of Keds.

We have determined that the fair value of each of the indefinite-lived tradenames was in excess of the carrying value and a 10% decrease in fair value would not result in an impairment charge.

As we periodically reassess estimated future cash flows and asset fair values, changes in our estimates and assumptions may cause us to realize material impairment charges in the future.

The impairment loss recognized is the excess of the carrying value of the asset or asset group over its fair value.

Our reviews are conducted at the lowest identifiable level, which typically is at the store level for the majority of our long-lived assets.

Fair value at the store level is typically based on projected discounted cash flows over the remaining lease term.

We also review construction-in-progress projects, including internal-use software under development, for recoverability when we have a strategic shift in our plans.

A 10% change in our projected cash flows for our store fleet would not result in a material amount of additional impairment charges.

To the extent that these future projections or our strategies change, the conclusion regarding impairment may differ from our current estimates.

Policy Judgments and Estimates Effect if Actual Results

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In addition, state, local or foreign jurisdictions may enact tax laws that could result in further changes to taxation and materially affect our financial position and results of operations.

As of February 1, 2025, our deferred tax assets were reserved with a valuation allowance of $12.5 million.

As of January 31, 2026, we had a valuation allowance of $13.8 million primarily related to state deferred tax assets.

We also had gross unrecognized tax benefits of $9.3 million.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis