DSW (DSW) Gets Hammered on Q1 Earnings

Jianyu Zhao  |

The branded discount shoe retailer DSW Inc. (DSW) released its disappointing financial reports of first quarter in 2014 on Wednesday, which led shares to lose 27.49 percent of the company’s value. The current share price of $23.58 it its the lowest in more than two years, and  the company’s earnings outlook for the year also appeared to disappoint.

Besides footwear, DSW offers brand name dresses, and accessories, including handbags, hosiery, and jewelry for women and men through its stores and website. Columbus, Ohio-based DSW operates 410 stores around the country.

DSW reported that its sales fell 0.4 percent to $599 million from last year’s first quarter sales of $601 million. Mike MacDonald, President and CEO attributed the “challenging quarter” to “unseasonal weather and an aggressively promotional retail environment.”

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In addition, the growing threat of online shopping rivals such as Amazon (AMZN) is also shaking consumer confidence. To return on track, DSW is investing in “omni-channel,” an increasingly popular approach for retailer to combat e-commerce. In May, the company bought a 49.2 percent stake in Canadian shoe seller Town Shoes for $68.7 million to expand into the country.

MacDonald believed that the partnership with Town Shoes could boost the company.

“Monthly sales trends were weak but improved sequentially during the quarter. Our team is working hard to deliver an effective assortment with a compelling value message and we expect these initiatives to gain traction in the back half of the year,” he said in a statement. “I am confident that we are taking the right steps to grow sales and bottom line in the long term.”

Due to cost controls, DSW’s first-quarter net income did rise 12 percent from a year ago. For the first quarter, DSW reported a net profit of $38.6 million or $0.42 per share, versus the net profit of $34.5 million or $0.38 per share from the same period a year ago. Analysts were expecting a net profit of $0.48 per share on revenues of $623.2 million.

For the fiscal year ending in January of 2015, DSW expected to see adjusted full-year earnings between $1.45 and $1.60 per share, down from what most analysts were expecting at $1.55 to $1.70 per share. The estimated revenues are based on the assumption of low single digit comparable sales decline and adjusted sales growth "in the low single digit range." In March, the company said it expected full-year revenue to grow between 6 percent and 7 percent from 2013. Analysts expected 2014 revenue to rise 5.7 percent from the year before to $2.5 billion.

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