Designer Brands Inc.DBI
Designer Brands Inc. Income Taxes Disclosure
INCOME TAXES
Income (loss) before income taxes and loss from equity investment consisted of the following:
(in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Domestic income (loss) | $ | (7,768) | $ | (23,549) | $ | 19,499 | |||||||||||
| Foreign income | 10,002 | 12,819 | 20,698 | ||||||||||||||
| $ | 2,234 | $ | (10,730) | $ | 40,197 | ||||||||||||
Income tax provision (benefit) consisted of the following:
(in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | (2,189) | $ | 2,852 | $ | (594) | |||||||||||
| State and local | (1,091) | 1,774 | 547 | ||||||||||||||
| Foreign | 2,134 | (1,068) | 1,904 | ||||||||||||||
| (1,146) | 3,558 | 1,857 | |||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | 4,933 | (5,314) | 3,766 | ||||||||||||||
| State and local | 2,422 | (1,758) | 5,362 | ||||||||||||||
| Foreign | 749 | 2,759 | (4) | ||||||||||||||
| 8,104 | (4,313) | 9,124 | |||||||||||||||
| Income tax provision (benefit) | $ | 6,958 | $ | (755) | $ | 10,981 | |||||||||||
The following presents a reconciliation of the income tax provision (benefit) from the U.S. federal statutory tax rate to the total effective tax rate calculated based on income (loss) before income taxes and loss from equity investment:
| (dollars in thousands) | 2025 | 2024 | 2023 | ||||||||||||||||||||||||||||||||
| Amount | % | Amount | % | Amount | % | ||||||||||||||||||||||||||||||
| U.S. federal tax at statutory rate | $ | 469 | 21.0 | % | $ | (2,253) | 21.0 | % | $ | 8,441 | 21.0 | % | |||||||||||||||||||||||
| State and local income taxes, net of federal income tax effect | 1,721 | 77.0 | (353) | 3.3 | (92) | (0.2) | |||||||||||||||||||||||||||||
| Foreign tax effects: | |||||||||||||||||||||||||||||||||||
| Statutory tax rate difference between Canada and U.S. | 443 | 19.8 | 573 | (5.3) | 882 | 2.2 | |||||||||||||||||||||||||||||
| Other | 120 | 5.4 | (333) | 3.1 | 190 | 0.5 | |||||||||||||||||||||||||||||
| Nontaxable or nondeductible items: | |||||||||||||||||||||||||||||||||||
| Share-based payment awards | 3,770 | 168.8 | 2,576 | (24.0) | (2,205) | (5.5) | |||||||||||||||||||||||||||||
| Limitation on executive compensation | 937 | 41.9 | 1,432 | (13.3) | 5,783 | 14.4 | |||||||||||||||||||||||||||||
| Federal interest income | — | — | (386) | 3.5 | (2,474) | (6.2) | |||||||||||||||||||||||||||||
| Other | — | — | — | — | (258) | (0.6) | |||||||||||||||||||||||||||||
| Changes in unrecognized tax benefits | (352) | (15.8) | (3,227) | 30.0 | 1,540 | 3.8 | |||||||||||||||||||||||||||||
| Other adjustments: | |||||||||||||||||||||||||||||||||||
| Return to provision | (348) | (15.6) | 980 | (9.1) | — | — | |||||||||||||||||||||||||||||
| Other | 198 | 9.0 | 236 | (2.2) | (826) | (2.1) | |||||||||||||||||||||||||||||
| Effective tax rate | $ | 6,958 | 311.5 | % | $ | (755) | 7.0 | % | $ | 10,981 | 27.3 | % | |||||||||||||||||||||||
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities are as follows:
| (in thousands) | January 31, 2026 | February 1, 2025 | |||||||||
| Deferred tax assets: | |||||||||||
| Operating lease liabilities | $ | 201,093 | $ | 201,167 | |||||||
| Net operating losses | 16,416 | 17,000 | |||||||||
| Inventories | 8,718 | 8,502 | |||||||||
| Stock-based compensation | 5,684 | 6,696 | |||||||||
| Accrued expenses | 4,189 | 3,570 | |||||||||
| Interest | 3,143 | 9,706 | |||||||||
| Reward programs deferred revenue | 2,925 | 3,288 | |||||||||
| State bonus depreciation | 2,373 | 2,869 | |||||||||
| Gift cards | 2,219 | 2,146 | |||||||||
| Other | 3,680 | 3,229 | |||||||||
| 250,440 | 258,173 | ||||||||||
| Less: valuation allowance | (13,832) | (12,478) | |||||||||
| Total deferred tax assets, net of valuation allowance | 236,608 | 245,695 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Operating lease assets | (183,080) | (182,735) | |||||||||
| Property and equipment | (7,670) | (11,284) | |||||||||
| Intangible assets | (4,696) | (1,617) | |||||||||
| Basis in subsidiary | (4,592) | (4,123) | |||||||||
| Other | (688) | (2,612) | |||||||||
| Total deferred tax liabilities | (200,726) | (202,371) | |||||||||
| Net deferred tax assets | $ | 35,882 | $ | 43,324 | |||||||
As of January 31, 2026, the remaining valuation allowance was primarily related to state deferred tax assets. Additionally, there were $15.3 million state, $0.9 million foreign, and $0.2 million federal net operating losses and credits, which, if not utilized, a portion of the carryovers will begin to expire in 2026, 2038 and 2036, respectively.
The following table presents activity related to the valuation allowance:
| (in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Balance at beginning of period | $ | 12,478 | $ | 12,131 | $ | 14,027 | |||||||||||
| Additions charged to income tax provision (benefit) | 1,354 | 768 | — | ||||||||||||||
| Allowances taken or written off | — | — | (666) | ||||||||||||||
| Other adjustments | — | (421) | (1,230) | ||||||||||||||
| Balance at end of period | $ | 13,832 | $ | 12,478 | $ | 12,131 | |||||||||||
We intend to continue to invest all of the earnings of foreign subsidiaries, as well as our capital in these subsidiaries, outside of
the U.S. and we do not expect to incur any significant additional taxes related to such amounts.
Net cash paid (refunds received) for income taxes consisted of the following:
| (in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Federal | $ | 27 | $ | (62,059) | $ | 15,500 | |||||||||||
| Aggregated state and local jurisdictions | (330) | (190) | 1,853 | ||||||||||||||
| Disaggregated state and local jurisdictions: | |||||||||||||||||
| California | (2,286) | — | 941 | ||||||||||||||
| New York | — | — | (2,534) | ||||||||||||||
| City of Columbus, Ohio | — | — | 1,005 | ||||||||||||||
| Aggregated foreign jurisdictions | 242 | 334 | 307 | ||||||||||||||
| Disaggregated foreign jurisdiction - Canada | 1,928 | — | — | ||||||||||||||
Net cash paid (refunds received) for income taxes | $ | (419) | $ | (61,915) | $ | 17,072 | |||||||||||
The following table presents the activity related to gross unrecognized tax benefits:
| (in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Balance at beginning of period | $ | 10,184 | $ | 16,433 | $ | 15,785 | |||||||||||
| Additions for tax positions taken in the current year | 450 | 740 | 3,042 | ||||||||||||||
| Reductions for tax positions taken in prior years | — | (3,531) | — | ||||||||||||||
| Changes in estimates | — | (1,388) | — | ||||||||||||||
| Lapses of applicable statues of limitations | (684) | (1,158) | (2,323) | ||||||||||||||
| Settlements of tax positions taken in prior years | (613) | (912) | (71) | ||||||||||||||
| Balance at end of period | $ | 9,337 | $ | 10,184 | $ | 16,433 | |||||||||||
We recognize interest and penalties related to unrecognized tax benefits as a component of the income tax provision (benefit). As of January 31, 2026, February 1, 2025 and February 3, 2024, interest and penalties were $5.8 million, $5.6 million and $5.6 million, respectively.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2026 | Mar 30, 2026 | Showing above |
| 2025 | Mar 24, 2025 | |
| 2024 | Mar 25, 2024 | |
| 2023 | Mar 16, 2023 | |
| 2022 | Mar 21, 2022 | |
| 2021 | Mar 22, 2021 | |
| 2020 | May 1, 2020 | |
| 2019 | Mar 26, 2019 | |
| 2018 | Mar 23, 2018 | |
| 2017 | Mar 23, 2017 | |
| 2016 | Mar 24, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.