QUOTE AND NEWS
Benzinga  Mar 17  Comment 
Morgan Stanley’s Jay Sole maintained an Underweight rating on DSW Inc. (NYSE: DSW), with a price target of $19. FY16 Guidance Sole mentioned that the company’s FY16 guidance implies that the EPS CAGR for the last five years has been -3...
Benzinga  Mar 16  Comment 
Johnson Rice’s David Mann downgraded the rating on DSW Inc. (NYSE: DSW) from Buy to Accumulate. Key 2016 Initiatives Mann mentioned that among the key initiatives undertaken by DSW for 2016 are the expansion of the company’s...
MarketWatch  Mar 15  Comment 
The footwear and accessories retailer said it will expand its lineup of children’s shoes in a bid to retain shoppers who take their business elsewhere when they become parents.
Benzinga  Mar 15  Comment 
Operator: Good morning and welcome to the DSW's fourth quarter 2015 earnings conference call. All participants will be in a listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now to turn the conference...
Benzinga  Mar 15  Comment 
DSW Inc. (NYSE: DSW) shares are trading higher by $0.27 at $27.76 in Tuesday's session. Before the open, the company announced a Q4 beat of $0.07 with a revenue beat of over $30 million. The solid beat instigated a sharply higher open, but it...
Motley Fool  Mar 15  Comment 
The shoe retailer's earnings dropped, but not as much as expected.
SeekingAlpha  Mar 15  Comment 
Benzinga  Mar 15  Comment 
Some of the stocks that may grab investor focus today are: Wall Street expects Oracle Corporation (NYSE: ORCL) to post its quarterly earnings at $0.62 per share on revenue of $9.12 billion. Oracle shares gained 0.21 percent to $38.78 in...
MarketWatch  Mar 4  Comment 
DSW Inc. was downgraded to neutral from outperform at Credit Suisse after analysts said the off-price shoe and accessory retailer lacks high-end merchandise. Shares of DSW wre down 1% on Friday, trading at about $26. DSW "originally sourced...
Benzinga  Mar 4  Comment 
Credit Suisse's Christian Buss downgraded the rating for DSW Inc. (NYSE: DSW) from Outperform to Neutral, with a price target of $26. The downgrade comes two days after Goldman Sachs cuts its rating on DSW from Neutral to Sell. Analyst Christian...




 

DSW (Designer Shoe Warehouse) is a U.S. discount shoe retailer. Unlike conventional shoe stores and department stores that pay sales associates to go to the back of the store to retrieve shoes for the customer, DSW displays its merchandise directly on the sales floor and cuts costs by eliminating the need for sales people. The company operated about 305 DSW stores in 29 states across the United States as of December 31, 2009.[1] In addition to selling shoes through its own retail stores and its website, DSW also runs the shoe departments in several discount department store chains.

Retail Ventures (RVI), owns 60% of DSW's common shares, and controls 90% of the voting rights. Until it disposed of most of its ownership stake in 2007, RVI also owned Value City Department Stores. Under this arrangement, DSW was able to share its fixed expenses with Value City. With RVI's sale of most of its stake in Value City, DSW's fixed expenses increased significantly. Moreover, since DSW lacks an international presence; as such its fortunes are closely tied to general U.S. economic conditions, as all of its stores are located in the U.S. Falling discretionary spending in the U.S. as a result of the 2007 Credit Crunch and 2008 Financial Crisis forced the company to sell its already discounted merchandise at lower than usual prices.

DSW has a single primary distribution center, which is a 700,000 square foot facility in Columbus, Ohio. The design of the distribution center facilitates the prompt delivery of priority purchases and fast-selling footwear so we can take full advantage of each selling season.

Company Overview

DSW sells branded footware in large retail stores, through leased departments in other retailers, and online at dsw.com. The stores themselves are typically very large (25,000 sq ft on average), located in shopping strips, and use most of their space (about 85%) for selling.

DSW leases shoe departments in 4 other retailers: 266Stein Mart (SMRT) stores, 66 Gordman's stores, 23 Filene's Basement (BSMTQ) stores (Filene's Basement is entirely owned by DSW's parent company, Retail Ventures (RVI), and one Frugal Fannie's store. Typically, DSW owns the merchandise and fixtures, and pays a percentage of sales to the lessor as rent.

Total net sales in fiscal 2009 increased 9.5% as a result of positive comparable store sales of 3.2%, new DSW stores and increased sales from its restaurant. The increase in comparable store sales were mostly due to increases in women's shoes and accessories. [2] This metric is significant considering the tough economic climate in the United States during 2009. In 2009, total sales were $1.46 billion, allowing it to post a net income of $26.9 million.

Trends and Forces

Drop in U.S. consumer spending forces discount

All of DSW's 305 stores are located in the United States. As a result, the company's sales are highly sensitive to general economic conditions. The subprime lending crisis and the attendant housing slump and credit crunch led to a slow down in consumer spending. Since shoes are in many cases discretionary purchases, DSW was forced to discount its prices even more in order to move its merchandise. However, in 2009 DSW had an increase in comparable store sales, perhaps signaling that consumer spending confidence has recovered.

DSW loyalty program drives incremental sales

Customers in the loyalty program tend to spend more than other customers, and each year more and more customers become members of the loyalty program. Furthermore, DSW has traditionally had over 60% of its customers who were in the loyal program. DSW has over 8 million enrolled customers in the loyalty program, giving it a large base of potential repeat customers.

Competition

According to NPD Fashionworld, the adult footwear market is over $36.6 billion industry. DSW competes mainly against departments stores. DSW also competes with single-brand company stores and specialty retailers, as well as with independent shoe retailers and national chains.

DSW's main non-department store competitors are:

  • Collective Brands, Inc. (PSS) (formerly Payless ShoeSource) is a brand-name shoe discounter with 3,954 domestic stores[3] (DSW only has 305), but these tend to be in shopping malls and are much smaller (3,200 sq ft versus DSW’s 25,000 sq ft). Still, Payless stores, in aggregate, occupy roughly twice as much total area as DSW stores. Payless has expanded internationally - they currently have 598 stores outside of the United States - while DSW continues to grow only domestically. Collective Brands, Inc. (PSS) has also purchased Stride Rite (SRR) and thus expanded into the children's footwear market, whereas DSW only sells adult shoes.[4]
  • Shoe Carnival (SCVL) operates 291 stores in the Midwest and South. Stores are generally smaller than DSW’s (11,300 sq ft) but contain a similar number of shoes (29,000 compared to DSW’s 30,000).[5]
  • Shoe Pavilion (SHOE) operates 115 stores in the West and Southwest. Stores are smaller than DSW’s – 13,800 sq ft on average.[6]

References

  1. DSW 10-K 2009 Item 1 Pg. 2
  2. DSW 10-K 2009 Item 7 Pg. 23
  3. Collective Brands 10-K, 4/1/08
  4. Reuter's Collective Brands Company Profile
  5. Reuter's Shoe Carnival Company Profile
  6. Reuter's Shoe Pavillion Company Profile
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