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What Analysts Expect for DSW’s Q2 2018 Top Line

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Top line to disappoint

Footwear retailer DSW (DSW) is expected to announce its second-quarter earnings results on August 20.

Analysts expect the company to report revenue of $678.3 million, reflecting a 0.3% fall on a YoY (year-over-year) basis. This performance stands in contrast to the 3.3% YoY rise it registered in the same quarter last year.

Weakness in the footwear category, as well as stiff competition from online players, remains a concern for DSW. The company’s buyout of Ebuys was troublesome. It purchased the e-commerce footwear retailer in 2016 to expand in the online space. However, the buyout didn’t pan out as expected, and it had to exit the business as losses swelled.

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The way forward

DSW has taken several measures to boost its top line. The company is revamping its merchandise and its store layout, and it’s also investing in technology, especially in its mobile platform.

Mobile is quickly becoming consumers’ favorite shopping platform around the globe. A majority of the company’s digital sales traffic comes through mobile channels. According to a March eMarketer report, e-commerce sales in the United States are projected to have risen 15.6% to $526.1 billion, representing one-tenth of overall US retail sales.

DSW expects its kids footwear category’s sales to benefit from the back-to-school season, which starts in mid-July and ends in mid-September. According to a survey from the National Retail Federation, back-to-school spending in 2018 for elementary through high school students is expected to top $27.5 billion. Apart from clothes, spending will be on electronics, footwear, and school supplies.

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Recap of past performance

For the first quarter, DSW’s net sales rose 2.8% to $710.4 million. Its DSW segment reported a 7.3% rise in sales to $669.8 million. Its Other segment’s revenue fell 38.7% to $40.7 million.

The company’s total revenue (total net sales plus franchise and other revenue) rose 2.9% to $712.1 million in the quarter. Its overall comps (for the 13-week period) were up 2.2%. DSW’s segment comps grew 2%.

Peers’ expectations

For the second quarter, Foot Locker’s (FL) sales are expected to be $1.76 billion, representing a 3.4% rise on a YoY basis.

Skechers (SKX) reported its second-quarter earnings on July 19. The company’s revenue came in at $1.14 billion, which marginally beat analysts’ estimate but rose 10.6% on YoY basis.

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