How DSW Is Rethinking — and Shrinking — Its Store Fleet

Designer Brands Inc. — parent to DSW, Camuto Group and a Canadian retail division — plans to make some of its locations smaller.

At the same time, the company is rolling out a plan to optimize its stores as fulfillment centers and platforms of discovery for its company-owned and partner brands.

In a call with investors discussing the company’s Q4 and full-year results, executives called out DSW’s strong retail store business. U.S. retail store traffic was up 47% over Q4 of last year, with February traffic up 46% compared to February 2021. At the same time, digital demand in the U.S. in Q4 was up 39.4% over 2019 and up 10.8% over 2020.

Still, DSW closed seven stores in the U.S. and four in Canada in Q4, with no new store openings. The company currently operates 508 U.S. stores and 140 Canadian stores.

CFO Jared Poff addressed these closures and his year-ago projection of closing 65 stores within four years, which he said was “before we really saw the recovery take hold.” As such, DSW has adjusted its projected number of store closures — which has yet to be announced — but there will still be an overall reduction in square footage.

“We need to get smaller in certain locations,” said CEO Roger Rawlins. “It’s really about efficiency of inventory.

The goal is to create a “store of the future,” Rawlins added, which will consolidate the 20,000 to 25,000 square foot-stores into more efficient 15,000 square-foot locations and “tell different stories with these brands.”

Rawlins suggested that certain stores could potentially be partly used as fulfillment centers for online orders. As discussed in the company’s financial results, U.S. retail stores fulfilled nearly 60% of the company’s digital demand across all of its retail segments in 2021.

“We’re able to flow key items into a group of stores, have depth behind them, and take days out of the fulfillment cycle as well as cost out of the fulfillment cycle,” Rawlins said.

When it comes to optimizing physical stores, Poff said the goal is to keep stores in certain neighborhoods to be able to leverage benefits for the company’s DTC business as well as its branded partners. For example, some DSW stores allow customers to come in and return items from Vince Camuto, which is partly owned by Authentic Brands Group and DSW Inc. These are the types of experiences DSW hopes to curate in its stores.

“We’re getting ready to launch with a couple of other external brands, the ability to be their kind of omnichannel infrastructure in those local markets,” Poff said.

He added that the company will provide more guidance on its store fleet on April 8 during its Investor Day.

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