DSW: Strength Notable on M&A Day

While the focus on DSW is inevitably the company’s merger with holding company RVI, the 4Q same store sales increase of 14.9% should not be ignored.  The overall strength was broad based, but below the surface there are some interesting trends to note:

  • Strength was pretty consistent across the board.  Every single category had comp increases reflecting a continuation of the momentum seen in 3Q.
  • No major fluctuations month to month, with consistency throughout the quarter.
  • Cost increases remain consistent with prior views coming out of the NY Shoe Show.  Expect impact at end of 3Q, early 4Q.  7-12% increase in general with fluctuations between categories.  Getting “nice” results from early spring.
  • Boots were very strong once again, up 16% in 4Q and 57% on a two year basis.  Positive comp increases in December and January for cold-weather product but fashion boots drove the strength.  Strength continues into 1Q.  Expect that 2011 could actually be another strong boot year based on what was shown at Shoe Show. 
  • Not expecting much of an uptick in in-season opportunistic closeouts.  Company did do some pre-buying of inventory to hold for next year.  Management expects this strategy to enable a greater value proposition next year in the rising cost environment.
  • Flat clearance levels year over year in 4Q.
  • Men’s business up 14% in 4Q.
  • DSW will look to hold price on more commodity-like items responsible for bigger volumes overall.  Fashion items will see increases where the value is warranted.

Eric Levine

Director