The latest news from shoe retailer DSW -- including red ink where most expected to see black -- may have startled the investment community. But it also illustrates the rising costs and complexities of brick-and-mortar survival, even as companies flex their omnichannel strengths.
The biggest news is the company’s decision to ditch the DSW name in favor of Designer Brands, reflecting its commitment to private-label brands and what it hopes will be a more differentiated shopping experience.
The company showed promising gains in top-line results, wrapping up what CEO Roger Rawlins told investors is “the best year in the company’s history.”
As part of its rebranding, the company also revealed details of its new three-year plan to reshape the company. Rawlins says the goal is to bring the production of private brands in-house, “increasing the sales penetration of all of our produced brands across our retail channels,” he says in a statement. “We look forward to continuing to drive innovation and increase market share.”
For the fourth quarter, total revenues rose 16.4% to $843.4 million, from $724.7 million in the same period a year ago, fueled by acquisitions in Canada. And comparable-store sales gained 5.4%.
But that masked softness in the U.S., where sales slid almost 2% to $655.7 million, despite a substantial 5.3% improvement in same-store results.
The ugly surprise is in the profit line: While investors had expected a decline from last year’s $11.9 million, the loss of $45.7 million was unexpected.
The news sparked a sell-off on Wall Street, but Neil Saunders, managing director of GlobalData Retail, was cheered by the strength of comparable-store results. “Although down from the past two reporting periods,” he writes in his reaction, the company has “a very healthy, market-beating rate of growth.”
Praising the retailer's ability to pounce on new fashion trends quickly, he says Global Data’s customer research shows “there are now more shoppers coming into the store for fashionable buys as well as replacement purchases of basic footwear,” boosting both frequency of trips and size of transactions.
Saunders also thinks the company decision to continue adding a W Nail Bar and shoe repair services in some locations is helpful. This step attracts younger shoppers “and provides functions that cannot be easily replicated online,” he says. “In our view, DSW has much more potential in the roll-out of services… we see this as a critical differentiator from rivals and to keeping stores relevant in the digital era.”