DSW’s Investments in Kids, Sandals and Athleisure Are Paying Off

DSW has mastered the mix.

The off-price shoe chain posted blockbuster earnings on Tuesday, lifting its stock more than 20 percent in morning trading. On a call with investors, CEO Roger Rawlins credited the growth to DSW’s improved inventory strategies, including its new kids offerings and increased investments in seasonal styles.

While the Columbus, Ohio-based retailer’s comparable sales grew 9.7 percent overall in the second quarter — far above Wall Street’s estimated 2.5 percent — the sandals category saw growth in the mid-teens.

“[That] is fantastic,” said Rawlins, “but what I’ll tell you is if you look at that on a two- or three- or four-year basis, we’re still nowhere near where we used to be as far as penetration, so I think there’s continued upside with sandals. And for fall, we’re looking to do the same thing with boots.”

The full rollout of DSW Kids, which kicked off in 2016 and wrapped in July of this year, drew “off-the-charts” results, he said. As intended, it hasn’t just been about bringing in the grade-school shopper but also drumming up loyalty among their parents (something the company has also targeted with its revamped rewards program).

Finally, athleisure, which has been the footwear industry’s biggest success story in recent years, also boosted DSW’s bottom line, and it forecasts even more growth in the category as its merchants stay “very focused” on what’s working in stores and online, and work to decrease the amount of time between when they place an order and when the shoes hit the sales floor.

Revenue for the second quarter increased 16.4 percent to $795 million, easily topping the consensus estimate of 1 percent growth, while earnings came in at $0.63 per diluted share, versus the $0.46 estimate. Digital growth also bested competitors, ballooning 52 percent over the same quarter last year

Finally, the company announced that it will shutter its Town Shoes business in Canada, closing all 38 locations by the end of the fiscal year in order to focus on its three biggest businesses: Shoe Company, Shoe Warehouse and DSW Designer Shoe Warehouse.

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