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Why Most Analysts Rate DSW a ‘Hold’

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Rating synopsis

Most analysts covering DSW (DSW) have maintained a “hold” rating ahead of the company’s upcoming fiscal 4Q17 results. Of the 14 analysts covering the stock, 71% recommended a “hold,” and 29% recommended a “buy.” No analyst has recommended a “sell” rating for the stock.

DSW is a leading name in the retail footwear space. However, a radically altered retail landscape and the arrival of online retailers and subsequent price wars have resulted in subdued profitability for most of the traditional retailers. The company is also investing in its online channel as well as revamping stores to better meet customer demand. The company has forayed into the kids’ footwear space to develop new revenue streams.

In September 2017, DSW introduced a new membership program called “DSW Rewards VIP.” Under this membership program, over 25 million customers can take advantage of services like repairs to handbags and shoes and rentals. These initiatives could boost the company’s long-term performance.

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Analysts expect the company to report 7.9% growth in sales compared with fiscal 4Q16, but adjusted EPS (earnings per share) is expected to be up 35% to $0.27. Currently, the analysts’ 12-month average target price for DSW stock is $21.77, which reflects a 15.1% upside to the stock price as of March 8, 2018.

Peer ratings

Out of 21 analysts covering Foot Locker (FL), 33% have provided a “hold” rating for Finish Line (FINL), while ~67.0% of the 15 analysts covering the stock have provided a “hold” rating. 60% of the analysts have provided a “hold” rating for Shoe Carnival (SCVL).

Currently, the analysts’ target price for Foot Locker is $51.68, reflecting a 26.5% upside to share price as of March 8, 2018. For Finish Line, the mean target price is $12.67, which indicates a 25.3% upside to the share price as of March 8, 2018. For Shoe Carnival, the target price is $28.60, implying a 30.8% upside to the share price as of March 8, 2018.

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