Marketing, retail shifts pay off for DSW

By Meredith Wilson

Profits for shoe and accessory retailer DSW Inc. rose 9.5 percent from the previous year’s quarter, and the stock price jumped 4 percent, due to successful reorganization of leadership, marketing and pricing, beating analysts’ expectations for the quarter.

DSW reported net income for the quarter ended Jan. 31 of $30.8 million, or 34 cents diluted earnings per share, compared with a net income of $28.1 million, or 30 cents per share, in the prior-year quarter. Analysts had estimated that the company would report 28 cents per share.

Sales for the quarter rose to $640.2 million from $572.3 million in the previous year’s quarter, a growth of 11.8 percent.

[field name=”DSW historic revenue”]

DSW suffered an unexpected disruption to its supply chain during a dispute between West Coast dockworkers’ unions and shipping lines that continues to snarl cargo movements despite a mid-February resolution.

“We are missing 6 percent of our inventory that we expected to have at this time,” DSW president and CEO Mike MacDonald said during a conference call. However, he noted that the company has been able to offset lower inventory levels and plans to take advantage of opportunistic buying now that the port dispute has been resolved.

“Our decisive actions earlier in the year in the areas of leadership, value and marketing produced strong results,” MacDonald said in a press release. “We are excited to embark on the 2015 fiscal year with considerable momentum.”

Christina Cheng, a spokeswoman for DSW, said the company increased the number of fashion brands and better-performing brands in its inventory selection.

The company also invested in a ship-from-store program that “enabled us to grow our ability to fulfill orders across all channels and enabled us to almost double our omni-channel sales in 2014,” according to Cheng. Omni-channel retailing focuses on creating a seamless customer experience across all shopping channels.

“DSW is operating better and benefitting from more favorable footwear trends,” said Edward Yruma, an analyst at KeyBanc Capital Markets in a research note.

Yruma is slightly concerned about what the extra spending for omni-channel retailing will do to profit margins, but believes that revenue will remain strong.

“We think top-line trends will remain solid in 2015 against easier compares, sharper entry price points, improved category mix, benefits from omni-channel investments and better fashion trends,” Yruma said.

The company expects revenue growth of 7 to 8 percent in 2015. Analysts predict that the company will return earnings per share of $1.63 in 2015, lower than the company’s forecast of $1.80 to $1.90. Earnings per share for the year ended Jan. 31 were $1.69, an increase from the year prior, which reported EPS of $1.65.

Profit for the year totaled $153.3 million, an increase of 1.3 percent from $151.3 million reported profit for the year prior, which ended Feb. 1, 2014. Revenue for the year was $2.5 billion, an increase of 5.4 percent from the year prior, which reported revenue of $2.4 billion.

DSW stock closed at $38.33 Tuesday, up $1.48.


Photo at top: (Mike Mozart/Creative Commons)