Designer Brands Inc. (DBI): One of the Underperforming Stocks Targeted By Short Sellers

Jabran Kundi

Wed, May 14, 2025, 11:19 AM 3 min read

We recently published a list of 20 Underperforming Stocks Targeted By Short Sellers. In this article, we are going to take a look at where Designer Brands Inc. (NYSE:DBI) stands against other underperforming stocks targeted by short sellers.

Short interest refers to the percentage of publicly available shares that have been sold short. It is an indicator used by many investors to determine how strong a company’s bear thesis may be. Due to the nature of short selling, the short interest has become a popular indicator among investors.

The reason it is given so much weightage is that people betting against a stock have usually done solid research and are confident of a company’s downfall. They take unlimited risk, so when big investors or the smart money shorts a stock, people take notice. They try to unearth the red flags that may have prompted the high short interest.

We decided to dig deeper and try to find out where smart money sees trouble ahead. To come up with our list of 20 underperforming stocks targeted by short sellers, we looked at the worst-performing stocks of the last six months and then ranked them by the short interest.

A young woman walking confidently down the street wearing a stylish dress from the company.

Short interest: 17.14%

6 months’ performance: -50.27%

Designer Brands Inc. (NYSE:DBI) operates as a producer, designer, and retailer of footwear and accessories. The company generates revenue through Brand Portfolio, U.S. Retail, and Canada Retail. It provides casual, dress, and athletic footwear and accessories.

For the first time in over two years, Designer Brands Inc. (NYSE:DBI) reported positive comparable sales. Although sales grew slightly by 1%, it is important to notice that the long downtrend finally reversed. The major driver of this turnaround was the U.S. Retail segment posting a 0.7% growth after so long. Despite sales growth, margins remain a major concern as the growth is mainly coming from the branded athletic footwear segment, which generates significantly lower margins.

The company’s shift towards athletic brands like New Balance and Nike may have lowered overall gross margins, too. It remains in a challenging financial position without solid margin expansion. With debt and annual interest expense amounting to 70 to 80% of its operating income, the short continues to be heavily shorted. A recession could make matters significantly worse.

Overall, DBI ranks 7th on our list of underperforming stocks targeted by short sellers. While we acknowledge the potential of DBI as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than DBI but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.