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Analysts Up Their DSW Forecasts for 4Q

In anticipation of the release of DSW Inc.’s 4Q and full-year earnings on March 17, analysts have raised their price targets and ratings for the footwear and accessories retailer. While the Columbus, Ohio-based company’s profits were down in 3Q, analysts say better product offerings, solid technology investments, and favorable weather will result in stronger 4Q results.

In late November 2014, DSW posted 3Q profits of $49.6 million, or 55 cents per diluted share, down from the previous year’s profits of $55 million or 60 cents per diluted share.

Wunderlich Securities analyst Danielle McCoy said today in a note that she expects management to be more bullish this quarter given “what we view as improving business trends driven by better product assortment, more favorable weather vs. last year, and the port strike potentially acting as a one-time benefit …”

Camilo Lyon, an analyst at Canaccord Genuity Inc., upgraded DSW to “buy” from “hold” in late February, saying in a note: “We believe a multitude of factors are coming together to support a comp re-acceleration in DSW’s largest and margin-accretive category, women’s footwear.”

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Lyon also suspected that while the massive inventory backlog at the West Coast ports hurts retailers that sell in-season product, DSW’s business model of offering post-season product at a discount means the port delays  could hand DSW a buying opportunity.

DSW’s recent executive moves could also play a role in upping the ante this quarter, Lyon added.

“[An] improved assortment, driven by DSW’s new buying team [with increased stocking of key brands like Sorel, Timberland and Bearpaw] have visibly helped,” Lyon said in the note.

While DSW’s outlook has improved, Wunderlich’s McCoy reiterated her “hold” rating, noting that it reflects “our long-term outlook and struggle for sustainable growth drivers.”

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