DSW 1Q14 Earnings Call Notes

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A digest of some of the top insights that I’ve gathered from this week’s earnings calls.  Full notes can be found here.

Comps decline

“Comparable sales declined by 3.7%. In the DSW segment, which includes DSW stores and DSW.com, comparable sales declined 4%.”

Things got slightly better throughout the quarter, but negative comps throughout

“Within the quarter, there were sequential improvements in our comparable sales performance, but we’ve posted negative comp performance in each of the three months in the quarter.’

It was cold last year, it was colder this year

“We were disappointed with our sales results this quarter. We had expected to post a sales increase given the cold start to spring that we experienced in the prior year.

Unfortunately, weather was even less favorable this year. These conditions created a very competitive pricing environment in the quarter, which is reflected in our margin results.”

Things didn’t recover as rapidly as anticipated

” think what our guidance and our margin performance reflects is the fact that the business didn’t recover as rapidly as we had anticipated.”

Pretty intense pricing pressure

“I think the other thing that we have seen is pretty intense pricing competition, which we’ve obviously reacted to in order to give the same great relative value to the customer, but also to control our inventory.”

Sandals season starting 3-4 months later

“right now is it looks like the sandal business is actually starting three months later than what you would normally position the sandal inventory. So for example you typically think that sandal starts in February as they did last year and as they are doing this year, they are taking a later start like three to four months.”

Super promotional environment

“So I think the promotional activity I would describe it as disruptive, chaotic and really is across the entire industry and I think what you are seeing is business has been tough and I think that most retailers do to address that are just price reducing in a degree that I’ve never ever seen before.”

Can’t chase price down and grow a business

“So we all know that we can’t chase price down and drive a growth business and so what we talked about in the earnings call is that we are going to be very proactive as we are right now.”

Going to have to sit down with vendor partners to make sure we are competitive

“We always have been, but will be even more so sitting with our vendor partners to make sure that we are competitive with everything going on in the industry so that we continue to drive value to the customer, but it’s happening across the industry in every segment.”

We thought we had purchased well, weather working against us, but we lost some bets too

“We believed that this past quarter because it had a very slow start because of the weather, we actually believed that we had bought the right things. We bought core items. We bought trend items. The trend items, the early trend items that we placed our bet on that seem to be the big deals in the industry didn’t play out for us. Example that would be Gladiator, they just didn’t play out.

So we took some bets and we lost those bets. The place that we took bets on our four items fashionable, not fashion directional, those are actually doing very well. So I think this is typical of any quarter where some of the fashion you place your money on, it does work, the weather worked against us, but we do have some bright spots in sandals, but we still haven’t started to see it comp positive yet.”

Appear to be hitting promotional environment head on

“I think what we said is we are going to be increasing to be able to pass additional value to the consumer”

“we are aggressively out in the marketplace to procure additional opportunity buys. We will be pricing those very sharply and I want to stress very sharply.”

We are in chase mode

“So the one thing that we do know is when we are in a chase mode and we operate lean and mean. We deliver results and we don’t take excess markdowns. We will be running our inventory level very wisely and tightly in the back half, so we make sure that we demonstrate that.”

Maybe the weather never turns

“We are in a good chase mode. We have opened to buy liquidity and we don’t wait for maybe the weather never turns.”

Reduced outlook for second half too

“we reduced our expected results both from the second quarter and the second half.”

Omni-channel makes it very difficult for small retailers to compete

“over the last couple of years the top 10 retailers and footwear have grown their market share by several hundred basis points…all the other retailers have had market share losses and I think that what that reflects is the difficulty that smaller less well capitalized, less technologically proficient, regional footwear players that they are going to have very difficult time being competitive in the new way of doing retail and that way is that the customer wants to shop seamlessly from store to the dot com site to the mobile site and she wants to access all the product with — regardless to where it is and she wants help making that decision on what she should buy and once she decides what she is going to buy, she wants it delivered to her wherever she wants it and whenever.”