DSW Down to Strong Sell - Analyst Blog


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On March 20, 2014, Zacks Investment Research downgraded DSW Inc. ( DSW ), the branded footwear retailer, to a Zacks Rank #5 (Strong Sell).

Why the Downgrade?

Shares of DSW slipped 2.9% after the company released its fourth-quarter fiscal 2013 earnings on March 18, 2014.

During the quarter, the top line disappointed as it slipped 3.7% to $572.3 million. Sales also fell short of the Zacks Consensus Estimate of $586 million as weak sales from a huge decline in women's footwear sales were more than offset by the increase in men's footwear sales.

Comparable store sales (comps) remained flat year over year, compared to a 3.6% rise last year. The impact of increased store conversion was completely offset by a fall in store traffic leading to flat comps.

The company's women footwear business posted a 3% comps decline during the quarter and the company believes that the changing lifestyles will continue to be a big concern for DSW. During the year, the company's focus on implementing omni-channel strategies also led to higher costs for the company.

DSW's quarterly adjusted earnings of 31 cents a share tanked 8.8% year over year. Moreover, gross profit declined 6.8% with the gross margin contracting 90 basis points (bps). On the other hand, operating profit inched down 1.8% to $44.8 million.

The company's dismal results triggered a downtrend in the Zacks Consensus Estimates, as analysts become less constructive on the stock's future performance. The Zacks Consensus Estimate for fiscal 2014 and 2015 fell 9% to $1.91 and 1.7% to $2.33, respectively in the past 7 days.  

Other Stocks that Warrant a Look

Other better-ranked retail stocks that look promising and are expected to continue with their upbeat performance include Foot Locker Inc. ( FL ), American Apparel, Inc. ( APP ) and Columbia Sportswear Company ( COLM ), all sporting a Zacks Rank #2 (Buy).

AMER APPAREL (APP): Free Stock Analysis Report

COLUMBIA SPORTS (COLM): Free Stock Analysis Report

DSW INC CL-A (DSW): Free Stock Analysis Report

FOOT LOCKER INC (FL): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
More Headlines for: APP , COLM , DSW , FL

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