While you don't have to watch out for trees in this jungle, you may want to watch your back. DSW (short for Designer Shoe Warehouse) sells discounted brand-name footwear for style-conscious men, women, and kids through nearly 400 stores in 40-plus US states and Puerto Rico, as well as online at dsw.com. DSW stores average 22,000 square feet and stock about 24,000 pair of dress, casual, and athletic shoes, as well as a complementary array of handbags, hosiery, and accessories. The company also operates about 355 leased departments inside stores operated by other retailers. DSW was founded in 1969 and merged with its majority shareholder, Retail Ventures, in 2011.
Change in Company Type
In May 2011 DSW bought out its majority shareholder, Retail Ventures, in an all-stock deal valued at about $773 million. Retail Ventures, whose only operating business was its 62% stake in DSW, became a subsidiary of DSW following the tax-free exchange of shares. The deal allowed Retail Ventures shareholders to become shareholders in DSW and eliminated the expenses associated maintaining Retail Venture's listing on the New York Stock Exchange.
Fast-growing DSW operates shoe stores in 42 US states, the District of Columbia, and Puerto Rico. Its two largest markets are California and Texas, home to about 20% of its stores.
In addition to its historically-fast-growing retail operation, DSW operates leased departments inside more than 260 stores operated by Stein Mart, 83 Gordmans stores, and one Frugal Fannie's Fashion Warehouse store. Leased departments accounted for 6% of DSW's fiscal 2013 (ended January) sales.
Sales and Marketing
DSW's marketing expenses totaled $55.9 million, $50.9 million, and $46.5 million in fiscal years 2013, 2012, and 2011, respectively.
DSW's fiscal 2013 (ended January) sales topped $2.2 billion, a 12% increase versus the prior year. While sales at its company-owned shoe stores grew by 14%, the leased departments posted a 13% decline in annual sales. (Sales at leased departments suffered as a result of the bankruptcy of Filene's Basement in 2011, resulting in the closure of 27 stores.) Sales at DSW stores open for at least one year increased 5.5%, with all merchandise categories performing well. Sales also got a boost from the addition of nearly 40 new stores, including the company's first in the District of Columbia and Puerto Rico. The company's sales have grown at a compounded annual rate of 10% since fiscal 2009.
Net income declined 16% in fiscal 2013 versus 2012, to $146.4 million because of an income tax provision of $95 million.
The historically fast-growing company has returned to a more aggressive growth strategy after a hiatus during the deep recession and its aftermath.(DSW was a relatively-strong performer throughout the recession, which left many other retailers struggling with falling sales.) In fiscal 2014 the chain plans to open 25 to 30 new stores, with an ultimate goal of 450 to 500 stores. The new locations will be in both new and existing markets. To grow its online business the shoe seller will offer styles, sizes, and widths not available in local stores. DSW is also looking for new partner retailers for its leased department business. The company targets fashion-focused men and women from wide-ranging socioeconomic and demographic backgrounds. It looks to capture these shoppers by offering a broad selection of in-season styles at prices that rival the sales deals found in department stores.
In a move that will take the company into Canada, DSW has agreed to buy a 44% stake in Canada's largest footwear retailer, Town Shoes, for about $62 million. Under the terms of the deal, which is expected to close in May 2014, DSW has the right to purchase the rest of Town Shoes after four years.
DSW chairman Jay Schottenstein owns nearly 63% of the combined voting power of all classes of DSW's common stock.