Back Half Looks Bright for DSW

NEW YORK — Analysts are bullish on DSW Inc. after the firm beat first-quarter expectations on many fronts.

“This quarter checked a lot of boxes. They beat on comps, sales, margin and earnings per share, and they raised guidance,” said Steven Marotta, analyst at CL King & Associates. “The systems [improvements] that will continue to roll out through next year will only help them.”

Christopher Svezia, analyst at Susquehanna Financial, agreed, saying it was “a solid beat [and] the fourth quarter is expected to drive the majority of growth [later this year].”

In a conference call with analysts last week, DSW President and CEO Michael MacDonald said comparable-store sales rose consistently in the high-single-digit range across all product categories in the first quarter.

Women’s footwear grew by 8 percent, led by sandals, thanks to the early arrival of warm weather.


Men’s posted a 7 percent comps increase; athletic 6 percent; accessories 8 percent; and private brands more than 30 percent.

Looking ahead, Debbie Ferrée, vice chairman and chief merchandising officer for DSW, detailed how the retailer is planning around the weather in the back half.

“Based on what happened last year around the cold weather, I still believe we will be able to deliver low- to mid-single-digit comps in boots. Once again, the market did a remarkable job on offering some freshness. So you’re going to continue to see that trend in casual … [and] a lot of ornamentation and detailing,” Ferrée said, adding that price increases will be passed through relatively easily because “the perceived value will be obvious to the customer.”

In fact, the firm also shrugged of the impact of continuing cost bumps. “Cost increases … are mitigating a little bit. We’ve been able to manage those through an increase in private brand [sales], but also some good partnership negotiations with our vendors. I don’t see [the impact] as a big event going forward,” Ferrée said.

Shares of DSW closed at a historical high of $61.23 last Tuesday after the firm raised its guidance.

For the period ended April 28, the Columbus, Ohio-based firm reported a net income of $39.9 million, versus a loss of $38.1 million a year ago. Revenue advanced 10.9 percent to $558.6 million, from $503.6 million, buoyed by a comp-sales increase of 7.6 percent.

DSW raised its full-year EPS guidance to $3.25 to $3.40, up from its prior guidance for $3.20 to $3.35. Comps are projected to increase in the range of 3 percent to 5 percent, compared with earlier guidance for an increase of 2 percent to 4 percent.

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