Designer Brands Inc. (DBI) Faces Critical Payment Processing Threat

Designer Brands Inc. (DBI), the company behind DSW and The Shoe Company, is embroiled in a critical legal dispute with its primary payment processor, Worldpay. This situation presents significant operational and financial challenges for the company and its investors.

The Core Issue: An Abrupt Payment Processing Threat

On January 22, 2026, Worldpay, which handles nearly all credit and debit card payments for DBI's approximately 500 DSW stores in the U.S. and over half of its U.S. online sales, issued a notice. This notice stated Worldpay would terminate its services effective February 2, 2026. Such an abrupt termination would have severely hindered DBI's ability to conduct business.

In response, DBI swiftly filed a lawsuit on January 27, 2026. The court then granted DBI a temporary restraining order (TRO) on January 28, 2026. This TRO compels Worldpay to continue providing payment processing services until at least May 31, 2026, which is the original expiration date of their current contract.

The Nature of the Dispute

Worldpay claims DBI failed to meet a specific financial metric outlined in their contract. However, DBI vehemently disputes this, asserting full compliance with the contract terms and denying any default. Adding to its defense, DBI noted that Worldpay had previously expressed intentions to extend the contract and offer additional services.

Before the lawsuit, Worldpay offered a short three-month extension but demanded "substantially more" for these services. DBI deemed this demand "commercially unreasonable," highlighting a fundamental disagreement over contract terms and financial obligations.

Why This Matters: Significant Operational and Financial Risk

Worldpay plays an integral role in DBI's sales infrastructure, meaning this dispute directly threatens the company's operations. DBI explicitly stated in its filing that an inability to process card transactions "could have a material adverse effect on our business operations and financial performance."

DSW U.S. stores and U.S. online sales represent a substantial portion of DBI's overall revenue. Therefore, any disruption to payment processing beyond May 31, 2026, could lead to:

• Significant Revenue Loss: An inability to complete transactions directly translates to lost sales.
• Customer Dissatisfaction: Frustration for customers unable to pay, potentially driving them to competitors.
• Increased Operating Costs: DBI faces rising legal fees from the ongoing lawsuit and potentially higher fees from new payment processors if it is forced to switch.

What Happens Next: Legal Proceedings and Mitigation Efforts

The immediate next step is a court hearing for DBI's request for a preliminary injunction. If granted, this injunction would compel Worldpay to continue services until the full lawsuit is resolved, a process that could take considerable time.

Concurrently, DBI is actively pursuing short-, medium-, and long-term payment processing solutions. This includes exploring alternative payment processors and potentially renegotiating terms with Worldpay. The company must secure a viable, permanent solution before the May 31, 2026, contract expiration to avoid operational disruption.

Investor Implications and Key Considerations

This event introduces significant uncertainty and risk for Designer Brands Inc. investors:

• Operational Continuity Risk: The primary concern is the potential for sales disruption if DBI cannot seamlessly transition to a new payment processor or secure a favorable long-term agreement by May 31, 2026.
• Financial Impact: Beyond potential revenue loss, the company faces increased legal expenses and could incur higher processing fees from new vendors, impacting profitability.
• Legal Outcome: The results of the preliminary injunction hearing and the broader lawsuit will be critical. Any ruling against DBI could escalate the operational and financial challenges.
• Management Focus: This dispute diverts management's attention and resources from core strategic initiatives, potentially affecting long-term growth plans.
• Market Perception: The uncertainty surrounding this fundamental operational issue could negatively impact DBI's stock price and investor confidence until a clear resolution is in sight.

Investors should closely monitor court updates, DBI's progress in securing alternative payment solutions, and any disclosures about the dispute's financial implications.