Sales fell short of estimates
On March 14, 2018, DSW (DSW) reported fiscal 4Q17 sales of ~$720 million. The number fell short of the $728.2 million that analysts had projected. However, on a year-over-year basis, sales were up 6.7% driven primarily by an additional week in the quarter, which contributed $35.6 million to the top line.
Segment-wise, DSW segment’s sales were up 8.5% to $664.2 million, while the Other segment (including sales contribution from Ebuys) was down 11.1% to $55.8 million. The company is now exiting the Ebuys business, which it purchased two years back to expand in the online space, as losses are ballooning. The company said it will be liquidating assets and inventories and will record one-time exit charges in 2018 related to Ebuys.
The company also added that it will likely complete the integration of the remaining share in Canada-based Town shoes in the coming days but declined to elaborate. In fiscal 2017, the company recorded $1 million in income from equity investments in Town Shoes.
Focus on kids’ footwear category
Despite the setback, the company remains focused on its digital merchandising efforts and Kids’ category business to augment the top line. To find new revenue streams, the company has now forayed into the kids’ footwear space. DSW believes that if it wants customers to keep coming back to the stores throughout their life, stocking kids’ footwear is the way forward. DSW plans to cover its entire store base before this year’s back-to-school season kicks off.
Comps up 1.3%
DSW reported comps (comparable-store sales) growth of 1.3% compared with a 7% decrease in fiscal 4Q16. Segment-wise, DSW segment comps were up 1%, while the ABG segment reported comps growth of 9.8%. Category-wise, footwear comped in low single digits, but accessories were down in the high single digits on account of SKU (stock keeping unit) realignment.
For 2018, management has guided for comps growth in the low single digits. Sales are expected to fall in the range of 1% to 3% given the Ebuys exit and the absence of the additional week in the year. Excluding these items, sales are projected to increase 2% to 4%.