Analysts: DSW’s Growth Intact

After DSW Inc. beat the Street in the fourth quarter, the retailer is poised for a strong year.

Growth in both e-commerce and brick-and-mortar should fuel sales, analysts said last week.

“While margins will be pressured in the first half from higher pre-opening costs and input cost headwinds, [there will be] opportunity in the second half moving into fiscal 2013, [when] sales and margins should benefit from the additional units opened. [This is] a fiscal 2012 and 2013 combination story,” said Susquehanna Financial analyst Christopher Svezia.

Scott Krasik, analyst at BB&T Capital Markets, noted that the firm also will “benefit from easier margin comparisons due to lower product costs, flattening distribution expenses and higher private label penetration.” 

Speaking to analysts on a call, DSW President and CEO Michael MacDonald said 35 to 40 new stores are slated to open in 2012. But, he added, “dot-com continues to be the fastest-growing part of our business. We are investing in it from an inventory perspective and from a technology perspective. We are investing in it from an infrastructure perspective. We’re undergoing a physical expansion of our fulfillment center right now to accommodate the growth.”

DSW’s fourth quarter saw the strongest growth in accessories, at 16.6 percent, and men’s footwear, at 7.5 percent. Women’s grew 5.1 percent while athletic footwear advanced 1.8 percent.

For the period ended Jan. 28, the Columbus, Ohio-based retailer’s net income surged 24.9 percent to $23.1 million, or 51 cents a share, while revenue advanced 9.7 percent to $513.7 million. After adjustments for the impact of the merger with Retail Ventures Inc. and related items, full-year profit increased 26.5 percent to $136.1 million, or $3 a share, on the back of a 11.1 percent sales increase to $2.02 billion.

For fiscal 2012, DSW forecast comparable-store sales to increase between 2 percent and 4 percent. And earnings per share is expected to come in between $3.20 and $3.35, representing a 6.7 percent to 11.7 percent increase over 2011.

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