DSW Just Got Stomped

rollandthomas (74)in #investing • 6 years ago

DSW Inc., together with its subsidiaries, operates as a branded footwear and accessories retailer in the United States. The company offers dresses, casual and athletic footwear, and accessories under various brands for women, men, and kids. It also provides handbags, hosiery, jewelry, and other accessories.

Today DSW announced their fourth quarter earnings today. The company lost $0.07 / share, but Wall Street was looking for a $0.03 gain. In addition, gross margins dropped to the lowest level in three years. For the current year, DSW expects earnings / share in the range of $1.80 to $1.90 vs analysts’ expectations of $1.94.

CEO Roger Rawlins tried to put the quarter's results in a longer-term perspective. "Fiscal 2018 was one of the best years in our Company's history," Rawlins said, "from a comparable sales and earnings growth standpoint." The CEO pointed to the expansion of its DSW Kids concept as well as the relaunch of its loyalty program as key contributors to longer-term success.

DSW also believes that its future is bright. As Rawlins put it, DSW has "strategically positioned our company to grow share and enhance profitability through transformative acquisitions, creating an infrastructure that positions us to be a significant force in the footwear industry for years to come."

Source

The motivational speech by the CEO gave investors now confidence because the stock fell by the most in four years. The drop was pretty bad because the stock price has been flat the past 12 months.

DSW plans to rebrand itself as Designer Brands and change its ticker to DBI on April 2. The rebrand is better reflected their growing show lineup. Last year, DSW bought the Camuto Group, a design and brand development business that owns the Vince Camuto line and holds footwear licenses for Jessica Simpson and Lucky Brand. It’s also starting to induce nail salons into its stores and offer shoe repair services. DSW acquired Canada-based The Shoe Company last year.

CEO Rawlins said DSW sells around 800 brand with the top 100 brands account for 70% of sales, while DSW’s private label accounts for 10%. By purchasing other shoe labels, their goal is to increase their private label sales to represent 25-30% of total sales, which should result in higher gross margins.

I hate to say it, but a rebrand isn’t going to fix this issue. I also think they should of kept the name DSW, because it’s a brand that many people are familiar with. The chart suggests there is further downside to the monthly demand at $12.