DSW misses in fourth quarter

Posted Mar 26th 2009 8:00AM by Steven Mallas
Filed under: Earnings Reports, Wal-Mart (WMT), Penney (J.C.) (JCP)

DSW (NYSE: DSW) issued a pretty short press release detailing its Q4 earnings on Wednesday. Can't blame management about that. There really wasn't much to say, other than the data did not look appealing.

The footwear business reported a loss of 17 cents per share. In the previous year's Q4, there was a profit of 2 cents per share (I'm sure DSW is looking on that time period with bitter nostalgia). Unfortunately, the market was looking for a loss of only 12 cents per share according to this.

Sales revenue may have seen an increase in an overall sense, but I like to focus on same-store sales when it comes to retailers. They went down by more than 7%. For the year, same-store sales declined by almost 6%. This isn't a complicated situation: DSW is performing horribly, and it probably won't get better anytime soon. The consumer is looking for deals, and when you think about it, many shoppers can head to their local Wal-Mart (NYSE: WMT) to acquire the footwear they need.

In addition, there's competition from the shoe departments at Macy's (NYSE: M) and J.C. Penney (NYSE: JCP), as well as pressure from Collective Brands (NYSE: PSS), which operates Payless ShoeSource. In other words, this earnings miss gives me no confidence in DSW's ability to keep up with the competition.

As far as I'm concerned, I wouldn't take a chance on DSW. With bad retail conditions still around us, I'd imagine that it could miss estimates again in the near future. Even though the stock isn't near the 52-week low, it closed down over 7% on Wednesday to $9.22. Not an encouraging sign, especially on an up day for the general markets. Oh, by the way, know what the 52-week low is? You know, I just can't get myself to write the three-digit number out, but you'll know it as the mark of the beast. Maybe that says it all. . . .

Disclosure: I don't own any company mentioned; positions can change without notice.

Tags: collective brands, CollectiveBrands, DSW, footwear, j.c. penney, J.c.Penney, JCP, M, Macys, Payless Shoesource, PaylessShoesource, PSS, retail, wal-mart, WMT