What DSW’s New Name Change Means for Its Business
DSW Inc. is following in the footsteps of Tapestry Inc. and Capri Holdings Ltd. to create a new corporate identity to house its rapidly growing enterprise.
The Columbus, Ohio-based company announced today at an investor meeting in New York that it has changed its name to Designer Brands Inc., an umbrella organization that will trade under the ticker symbol DBI and comprise the DSW retail chain, Camuto Group, The Shoe Company and other affiliated businesses.
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CEO Roger Rawlins noted that the new entity has a broader operational sphere than in the past. “DSW was only attached to about 20 percent of the footwear market,” he said. “With Designer Brands, we now have access to 80 percent of the footwear market. And it’s not just about us running stores; it’s us playing in the wholesale space, it’s playing in the direct-to-consumer space.” He added that in the last nine months, the firm has gone from owning 3.3 percent of the footwear in people’s closets to over 5 percent.
To grow the business further, Rawlins and his team plan to leverage and share the expertise of the various divisions, starting with Camuto Group.
In October of last year, DSW partnered with brand management firm Authentic Brands Group to purchase Camuto for $375 million. Under the terms of the deal, the pair acquired the intellectual property of Camuto Group’s brands, including Vince Camuto, Louise et Cie, Sole Society and Enzo Angiolini. While ABG acquired the majority stake of 60 percent, DSW took the remainder.
As part of the Designer Brands organization, Camuto Group will now take over the design, sourcing and development of DSW’s private-label brands, giving the retailer the ability to lower product costs and capture higher margins. Rawlins also noted that the group’s deep manufacturing knowledge gives DSW a stronger hand in negotiations with outside vendor partners. “Now we have the visibility and ability to control costs and will no longer accept higher rates on products,” he said.
Additionally, the company plans to expand Camuto’s wholesale business across the DSW and Shoe Company platforms to drive growth, and will apply its digital expertise to improve Camuto’s direct-to-consumer operations, which have not kept pace with the market.
Simon Nankervis, president of Camuto Group, noted that the Vince Camuto website has only 1 percent brand penetration. “This group hasn’t been very good at digital in the past because we’ve been building brands and product. So we see [direct-to-consumer] as an untapped, low-risk opportunity,” he said, adding that the goal is to reach 10 to 15 percent online penetration in the next 10 years.
Meanwhile, Designer Brands aims to continue its expansion efforts north of the border with The Shoe Company, a smaller-format family footwear chain that has 112 locations in Canada and is the country’s No. 3 retailer. In addition to relaunching Shoe Company’s loyalty program, the company will invest more in marketing and expand into new regions such as Quebec.
And as for the DSW flagship chain, product and experiences are at the top of its three-year priorities. The retailer will incorporate more private-label and Camuto brands in the coming years and expand its kids’ offering. “We expect to have $300 million in sales from children’s by 2021,” said Bill Jordan, president of DSW.
It also is focused on offering enhanced shopping experiences such as the successful W Nail Bar (which recently expanded to five new stores) and its VIP Loyalty program (which in May will add new features including personalized benefits and limited next-day shipping).
The company’s stock dropped in early trading today after it issued its fourth-quarter results and reported a surprising earnings loss of $5.4 million, or 7 cents a share, in the period ended Feb. 2. Analysts had expected EPS of 4 cents. Executives blamed some of the losses on lingering issues surrounding the closure of the Town Shoes banner. Revenues during the period, however, advanced 16 percent to $843.4 million, besting the $841.5 million market watchers had predicted. DSW’s comparable sales also climbed 5.4 percent in Q4.
At the investor event, the firm shared its fiscal 2019 outlook, which predicted low-double-digit revenue growth. It also forecast 5 to 11 percent earnings growth, with adjusted EPS of $1.80 to $1.90.
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