QUOTE AND NEWS
Benzinga  Oct 30  Comment 
Jay Sole of Morgan Stanley initiated coverage of DSW Inc. (NYSE: DSW) with an Underweight rating and $27 price target. "In the 2000s, DSW's value proposition of great prices, selection and convenience was differentiated," Sole wrote. "Today the...
Forbes  Oct 28  Comment 
Shareholders of DSW Inc (NYSE: DSW) looking to boost their income beyond the stock's 0.6% annualized dividend yield can sell the April 2015 covered call at the $35 strike and collect the premium based on the $1.00 bid, which annualizes to an...
Benzinga  Oct 16  Comment 
DSW Inc. (NYSE: DSW), a leading branded footwear and accessories retailer, is pleased to announce the opening of a new store across in the Wildewood Shopping Center in California, MD on October 23. The address of the new store is: Wildewood...
Motley Fool  Oct 8  Comment 
This retailer's shares have taken a hit, but is a recovery in the cards?
TheStreet.com  Oct 8  Comment 
NEW YORK (TheStreet) -- Shares of DSW Inc. are rising, up 2.14% to $30.10 in mid-morning trading, after checks of the footwear and accessories retailer by analysts at Cleveland Research showed improving comp trends for the third quarter. The...
SeekingAlpha  Oct 6  Comment 
By Josh Arnold: Last summer I took a look at DSW (NYSE:DSW) and concluded it was overpriced. The shoe retailer runs a successful business but at the time, I felt shares were too expensive given the company's prospects. Shares were around $35 when...
TheStreet.com  Sep 26  Comment 
NEW YORK (TheStreet) -- RATINGS CHANGES Ally Financial was initiated with an outperform rating at Wells Fargo. Company has competitive advantages and can generate solid returns, Wells Fargo said. Actuant was downgraded at FBR Capital Markets...
TheStreet.com  Sep 26  Comment 
Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link. aTheStreet Ratings quantitative algorithm...
SeekingAlpha  Sep 11  Comment 
By George Hanley: Shareholders in footwear retailer DSW (NYSE: DSW) have been a happy lot over the past five years with the company's stock price up more than 300%, a consequence of a sharp rise in operating income over that time period. DSW has...
TheStreet.com  Sep 8  Comment 
NEW YORK (TheStreet) -- Credit Suissea aincreased its price target onaDSWa to $34, increased its estimates and maintained an "outperform" rating on Monday. The firm said sales visibility is improving. Shares of DSW were unchanged in pre-market...




 

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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