Important Message from CEO Roger Rawlins

July 30, 2020

Team,

Today we continue to find ourselves surrounded by change and unpredictable circumstances that challenge us in ways we never thought possible. Yet, Designer Brands has remained resilient in the face of these obstacles because we’ve been able to adapt and stay focused.

As I have shared with you in the past, our actions as a company during these unprecedented times have consistently been guided by two priorities: the health and safety of our associates, customers, and communities, and the long-term health of our business. These priorities got us through the initial crisis when the pandemic first hit, and staying true to them will be key to our ongoing recovery. It is in the spirit of the second priority that we share some difficult news today.

We are making essential changes to how we operate in light of COVID-19 and the accompanying business needs. As a result, we are reducing and reassigning a portion of our workforce. These actions come at a difficult time for the nation and world, so I want to share more about why and how we made these painful but necessary decisions.

Today’s news is in part the result of much of Retail’s physical stores’ months-long closure, impacting our North American stores. While online orders were strong during the closures, e-commerce/digital sales cannot make up for in-store sales. And while most stores have reopened, consumers’ in-store shopping habits haven’t returned to the prior normal. The impact on store traffic during the closures, as well as during this ongoing recovery, remains, and most likely some habits will have changed for good. We must assess challenges and opportunities, both temporary and more permanent in nature, and take appropriate actions. The reality is we are now living in a new normal. It’s a new day and we must operate in a new way. 

Our focus hasn’t changed – sustaining our industry-leading position while building for a sustainable future. We continue to execute on our strategic pillars of differentiated products, differentiated experiences, and growing market share.

We also are doing everything possible to keep our financial foundation strong.

• - In addition to the furloughs, pay cuts and staffing changes we implemented in the spring, we’ve deferred new store openings and are working to streamline our footprint to reduce occupancy expenses.
• - We successfully negotiated with our vendors and partners, lowered our capital and operating expenditures, and leveraged best-in-class inventory controls to responsibly manage the business during this volatile time.
• - The significant investments we have made in our digital infrastructure over the past several years have positioned us well as customer behavior has evolved and on-line demand has increased.
• - We have applied our learnings from the beginning of the pandemic and shifted our focus to prioritizing the Top 50 Brands in footwear, with particular emphasis on athletic, athleisure, and kids, and strengthening our everyday value proposition.

We are confident these are the right areas of focus in the near term. However, there are more actions we can take to further fortify our business and sustain our recovery.

Today’s Actions

To position our business for innovation and growth, we must restructure to better align with customers’ changing shopping habits.

Effective today, we are announcing that we are reducing and reorganizing the DBI workforce, a move that will eliminate over 1000 positions, approximately 380 corporate office and 700 store positions. While many of those positions were vacant, approximately 250 corporate office and approximately 100 DSW store associates will be leaving the company today and will not be offered different roles. Additionally, more than 550 store associates will be given the opportunity to remain with the company in a different role within the new organizational structure or they may choose to leave.

This means that today we must say goodbye to some of our valued associates. We are parting with associates who have supported our continued growth. It is a hard and inescapable fact: good people will be leaving Designer Brands.

Our reorganization will also require that some of our remaining associates assume different roles. As certain roles are eliminated, associates may be reassigned to new roles based on business needs or changes to store management.

Reorganization

We are making some structural changes to our business. Last week, we announced changes to DSW’s field and store teams. We are also adjusting the store management team for greater effectiveness based on the way the business is operating in a COVID-19 environment, with more back-of-house “warehouse” roles and fewer sales floor roles.

We are taking this opportunity to further integrate the Camuto Group organization into the larger Designer Brands organization and focus our attention on fewer Camuto-produced brands. In addition, last week we shared with the Sole Society team that we are closing this business. There will be a limited impact to DBI Canada.

We want to continue evolving the Designer Brands infrastructure into one where world-class product design and sourcing are fully supported by our own industry-leading retail and consumer expertise and experience.

Our Approach

These are incredibly tough and painful decisions and we wanted to make them in the most thoughtful way. Throughout the process, we held ourselves to a set of standards:

• - Align our new organizational structure to our future business strategy and associated cost model, ensuring we have the capabilities to achieve our most essential goals.
• - Be as transparent as possible about our reasoning and next steps.
• - Treat all associates with dignity, respect, and support.

When making such difficult decisions, we made sure we applied guidelines consistently. Unless an entire function or group is being eliminated, we used a variety of factors, including skills, business needs, and tenure as our guides.

We are making every possible effort to take care of the associates who are losing their jobs and to make their transition from the company as smooth as it can be. While details will vary by individual, those associates will receive the following:

• - Severance will be offered to all impacted associates, based on position and tenure.
• - Impacted associates may choose to keep their benefits through COBRA.
• - All impacted associates will be eligible for mental wellness support through our employee assistance provider and the Two Ten Foundation.

Many impacted positions will qualify for outplacement service through Lee Hecht Harrison.

Final Thoughts

I have always been proud of the Designer Brands team, but never more so than in this incredibly challenging year. You have stepped up to embrace every change we have had to make, and you have done so with a lot of heart and courage.

To those leaving, please know this was an incredibly difficult decision that we did not take lightly. It was important for me to have you see me this morning to deliver this hard news directly. I want to thank you for all you’ve done for our organization. You’ve made your mark on this company and we are better for it.

To those staying, we have work to do, and your role is critical to keeping our organization strong for the future. 

Change will be our one constant and Designer Brands is ready. We will not only continue to respond in smart ways that build a stronger organization, but we will do so with the innovation and perseverance that will keep our customers coming back for more. This is a new day and we will create a new way forward.

Roger Rawlins

CEO, Designer Brands