DSW 4Q15 Earnings Call Notes

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DSW’s (DSW) CEO Roger Rawlins on Q4 2015 Results

New CEO

“I’m excited to be here today, conducting my first call as CEO.”

Mary Meixelspeger

Got promotional to protect market share, sacrificed earnings

“As expected, the fourth quarter was a challenging retail environment. Rather than waiting to take clearance markdowns at the end of the season, we took aggressive action to drive the top line over the holidays, with a focus on growing market share. These actions resulted in a 0.7% comparable sales increase for the fourth quarter, on top of last year’s plus 7.6% comp growth. Our promotional activity allowed us to exit the quarter with clean inventories and acquire new customers, but came at a cost of substantially lower margin and earnings for the quarter. ‘

Disappointed by margin erosion but gained marketing insights

“Gross profit declined by 300 basis points, driven by higher markdowns we took to activate customers and drive traffic. We were disappointed with the margin erosion we experienced this holiday, but we gained new marketing insights that we will apply to drive profitable sales going forward.”

We’re disruptors

“we became one of the largest footwears in the United States because we have a special gene in our DNA. We’re disruptors. We were one of the first to offer a convenient, open selling model for footwear and every day value to our customers and to launch a rewards program, 24 million members strong today.”

rapid evolution demands that we operate at a different pace

“During the fourth quarter, stores fulfilled almost 30% of total digital orders. In order to take full advantage of this, we’re motivating our field and building tools to maximize these omni-channel capabilities when they engage with the customer. Now let’s talk about tempo. The rapid evolution in consumer behavior demands that we operate at a different pace.”

Kids business leads to adult

“And David, I would like to add a little bit more color regarding kids. Obviously, we’re doing it because we want to grab market share within the kids category, but it is also about adult footwear. I mean, we see that when a customer is a part of DSW and engaging with DSW before they have a child, we have a certain market share. Once they find their significant other, we sort of maintain that market share. When that child is born, our market share cuts significantly on the adult side and then when that child leaves the house, we get right back to where we were before they had a child”

Debbie Ferree

We took our eye off the ball

“In hindsight, we were disproportionately focused on organizational and system changes that took our eye off the ball, in terms of providing customers with the products they wanted. This year, we’re putting product back into singular focus.”

Athletic offers the most exciting products

“We will focus on three key initiatives, athletic, women, fashion and kids. First, the athletic and athletic [ph] leisure brands continue to offer some of the most exciting and innovative products in the footwear space. We believe the strength of athletic is part of a lifestyle shift that incorporates the customer’s desire for casual comfort, with sport inspired fashion.”