Earnings fall at DSW, surprising investors
Shares of DSW plummeted by more than 12 percent on Tuesday — to $22.09 — after the Columbus-based footwear and accessories retailer reported earnings that fell short of Wall Street expectations.
During the fourth quarter, DSW reported a loss of 7 cents per share, missing analyst expectations of a profit of 5 cents per share. Sales for the quarter were $843.4 million, in line with predictions.
Profit margins, however, fell 3 percent. Wall Street had expected the profit margin to increase 0.7 percent.
Still, CEO Roger Rawlins saw much to cheer in the full-year results.
“Fiscal 2018 was one of the best years in our company’s history from a comparable sales and earnings growth standpoint,” Rawlins said during a presentation to investors.
For the first time, he said, DSW reported sales of more than $3 billion, and had a 6 percent growth in comparable store sales, a key indicator of a retailer’s health.
“We built a compelling product assortment, including the expansion of DSW Kids, a differentiated services offering with our W Nail Bar partnership and the relaunch of our awardwinning loyalty program,” Rawlins said.
“At the same time, we strategically positioned our company to grow share and enhance profitability through transformative acquisitions, creating an infrastructure that positions us to be a significant force in the footwear industry for years to come.”
With all the “transformative” changes, the company saw a need to alter its name.
Rawlins announced that DSW’S parent company will be renamed Designer Brands, while the stores will continue to be called DSW.
“DSW was attached to about 20 percent of the footwear market,” he said. “Designer Brands now has access to 80 percent of the footwear market.”
A new stock ticker abbreviation, DBI, will launch on April 2 along with the new name, he said.
The transformation of the past year is cause for optimism on several fronts, he said. One reason: DSW acquired The Shoe Company, giving it access to Canada. Another: DSW is now applying its digital expertise to both The Shoe Company and another recent acquisition, the Camuto Group, both of which have significantly lagged behind DSW and other retailers in digital sales. DSW also plans to expand the wholesale business at Camuto, an area DSW has long been interested in.
DSW referred repeatedly during its investor presentation to the advantages that the fall Camuto Group acquisition has given the company, especially with profit margins.
While DSW has in the past simply sold shoes, the purchase of the Camuto Group, which designs and produces the Vince Camuto line as well as Jessica Simpson and Lucky Brand shoes, is “a major game changer.”
“Now we have the ability to determine what costs we’re going to pay,” Rawlins said.
DSW is also expected to gain some market share after Payless Shoesource closes its stores soon, but Wall Street was left unimpressed. Tuesday’s stock plunge was DSW’S biggest since May 2016.