DSW shares rise as income tops expectations
DSW, the Columbus-based footwear and accessories retailer, reported fourthquarter earnings that beat Wall Street expectations on Tuesday. Shares closed up about 1 percent on the news.
Net income rose to $30.5 million, or 38 cents per share, from $11.8 million, or 14 cents per share, during the quarter. Sales increased to $674.6 million from $672 million in the same quarter last year.
While income beat Wall Street expectations, sales were below what analysts had predicted. Comparablestore sales, a key indicator of a retailer’s health, decreased by 7 percent.
Some analysts continued to be wary of the stock.
“We are concerned DSW did not take the appropriate markdowns, despite the fact that inventory was down ... and (comparable-store) sales decreased,” analysts at Susquehanna International Group wrote in a note to investors.
The drop in comparablestore sales didn’t faze DSW CEO Roger Rawlins, who pointed to “significantly higher” profit margins.
Even so, “after making fundamental changes to our core business last year, we are laser-focused on driving (comparable-store) growth through our merchandise and allocation initiatives and the elevation of our customers’ digital experience,” Rawlins said during a conference call with analysts on Tuesday morning.
The retailer managed its inventory better in the fourth quarter, DSW executives Revenue Net income Earnings per share Revenue Net income Earnings per share said, and offered better product assortments.
“Our conservative position in boots protected us in a choppy environment,” said Deborah Ferree, chief merchandising officer. “Strong results in our cold-weather business coupled with a focus on fashion helped us beat our boot forecast for the season.”
She added that the company was pleased with athletic-shoe sales, a trend that’s expected to continue into the next quarter.
Analysts at MKM Partners told investors, however, that the closings of stores such as Macy’s could create problems for DSW because of an expected flood of discounted merchandise from closing sales.
During the fourth quarter, DSW launched its kids storein-store shops at 227 DSW locations, which also led to growth in sales. In the past, kids’ shoes were sold only online and via its mobile site.
“The big thing we’re trying to accomplish with kids (departments) is to create new experiences that inspire emotional loyalty with our customer,” Rawlins said.
The retailer plans to add children’s shoes to 77 more DSW locations in 2017.
For the coming year, DSW predicts sales will grow moderately, between 3 percent and 5 percent, with comparable-store sales flat to a slight decline. The company expects to open 12 to 15 new locations and close two to four.