Dozens of DSW stores could be heading for the chopping block.
At a conference call with analysts on Wednesday, parent Designer Brands Inc.’s top leaders said DSW could close 10% to 15% of its brick-and-mortar fleet as the coronavirus pandemic continues to drive shoppers online. It plans to retain “a physical presence in most geographic markets” as it focuses on its digital business.
“With continued pressure we are seeing on store traffic and the material acceleration we have experienced in the transition of customers from store to digital, we continue to closely evaluate our existing store infrastructure,” said EVP and CFO Jared Poff.
During the third quarter, Designer Brands opened four outposts and shuttered two in the United States. It currently has 524 units in the country. In Canada, it opened one store to end the period with 145 locations. Poff said that the company “will likely open very few to no new stores” in the foreseeable future.
“While we are making some progress on lease concessions, the fact remains that our fixed cost store infrastructure is not nearly as productive as it once was,” he added. “We will begin aggressively negotiating exits of our worst-performing store locations as lease terms and market conditions warrant.”
For the three months ended Oct. 31, the Columbus, Ohio-based chain posted an adjusted net loss of $19 million, or a loss of 26 cents per share, compared with the prior year’s profits of $48.5 million, or earnings of 67 cents per share. Revenues fell 30.1% to $652.9 million. Still, it beat analysts’ expectations for a loss of 48 cents per share and revenues of $650.63 million.
According to CEO Roger Rawlins, one of the company’s “biggest competitive advantages” is that its entire portfolio of stores, which are currently acting as fulfillment centers of sorts, are within 20 minutes of 70% of the U.S. population.
“I love the fact that we have the ability to deliver product to our consumers faster than anyone,” he told analysts. “As far as digital margins, there really isn’t such a thing as [a] digital margin versus a store margin anymore because roughly 50% to 60% of all of our digital demand is fulfilled out of that local fulfillment center.”
Amid a surge in new COVID-19 infections that could result in renewed lockdowns and stay-at-home orders, Rawlins remained cautious on Designer Brands’ future. The retailer did not provide an outlook for the fiscal year.