DSW to pilot The Edit, an affordable-luxury shop-in-shop, at four stores this fall
The pilot follows a quarter in which Designer Brands' owned brand portfolio grew nearly 18% while retail traffic softened.
DSW will open The Edit, a shop-in-shop concept built around affordable luxury, at four existing store locations this fall. Its parent, Designer Brands, is testing the format after retail traffic came in below expectations for the quarter while its owned brand portfolio kept growing sharply.
Recently appointed chief financial officer Sheamus Toal told investors that top-line retail performance was slightly below expectations, citing what he called a sequential traffic headwind during the quarter. Designer Brands operates a retail and brand portfolio spanning three store banners with a combined 668 stores as of 1 August.
Against that softness in retail traffic, the company's brand division has been the standout. Its owned brand portfolio, which includes Topo Athletic, Keds, Vince Camuto, Jessica Simpson and Lucky Brand among others, grew nearly 18% year over year for the quarter, executives told analysts.
What is driving the brand growth
The affordable luxury assortment within that portfolio nearly doubled last year's volume, according to the company. Topo Athletic and Jessica Simpson each posted revenue growth of about 24% for the quarter, the two fastest-growing names across the entire brand division.
Topo is expected to generate more than $100 million in sales in 2027, with what the company describes as significant opportunity anticipated in both existing and new channels of distribution. Notably, Topo is not currently sold inside DSW stores, which is part of what The Edit is meant to test.
The pilot will be used to evaluate customer response and inform how the concept evolves going forward, according to the company. Designer Brands frames the strategy as an interplay between its two divisions: stores lending brands reach and visibility, and brands giving stores differentiated, more tightly controlled product.
The company put it directly: the strength of its store base gives its brands reach, visibility and support by leveraging scale, sourcing and logistics capabilities. Stores remain its largest channel for acquiring new customers, providing a scaled platform to introduce and build brands DSW itself owns and produces.
What else the company is changing
Designer Brands is relaunching its rewards program this month. Nearly 90% of its transactions come from roughly 30 million VIP members, and the company says it has modernised the program to improve the value it offers members while making its CRM efforts more effective and efficient.
The retailer raised its full-year sales guidance for fiscal 2026 to a range of flat to up 1% year over year, an improvement on its previous guidance of down 1% to up 1%. Retail sales are expected to stay flat to slightly down while the brand segment forecasts double-digit growth.
Toal attributed part of the revised outlook to anticipated improvement in top-line sales and to a reduced expense structure tied to lower debt levels. Designer Brands cut its debt to $423.1 million in the second quarter of 2026, down $93 million compared with the same quarter of 2025.
The moves come months after Designer Brands announced an unspecified number of layoffs in February. A company spokesperson said at the time the cuts were intended to strengthen its ability to execute, manage costs and create long-term value for its customers, teams and business.
The wider pressure on physical retail
Retailers in DSW's category are contending with a poor housing market, elevated interest rates, low consumer confidence and shifting tariff policy, all of which have weighed on discretionary footwear spending. Legacy and emerging brands alike, from Mango to smaller upstarts, are leaning harder on physical stores to win customers back from online competition.
Sephora has taken a different route to the same problem, opening a US TikTok Shop built around a monthly pilot product drop rather than a new in-store format. Both retailers are experimenting with smaller, curated formats to test what draws shoppers back through the door.
For DSW, The Edit is a bet that pairing its store network with brands it already owns can offset softer traffic without discounting further. If the pilot succeeds, the format could expand well beyond the four locations chosen for this fall's test.
The debt reduction gives the company more room to fund that expansion if the pilot works, since a lighter interest burden frees up cash that would otherwise service loans. Designer Brands has not disclosed how long the pilot will run before it decides on a wider rollout.
The brand division's growth rate, nearly 18%, is roughly double the low single-digit range Designer Brands now expects across its retail business for the full year. That gap is the clearest evidence yet that owned brands, not store traffic, are carrying the company's performance.
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