Canaccord Sees DSW (DSW) Valuation as Fair Following Q2 Results; Affirms at 'Hold'
- Wall St. rises amid robust earnings, GDP data
- FBI to review more emails related to Clinton's private email use: letter
- Unusual 11 Mid-Day Movers 10/28: (GRVY) (VRTS) (ITGR) Higher; (OPXA) (SNMX) (STON) Lower
- ExxonMobil (XOM) Tops Q3 EPS by 5c; CapEx Light of Views
- Baker Hughes (BHI), General Electric (GE) in Partnership Talks, Not Merger Talks
Get access to the best calls on Wall Street with StreetInsider.com's Ratings Insider Elite. Get your Free Trial here.
Canaccord Genuity affirms DSW (NYSE: DSW) with a Hold rating and $23 price target, seeing shares fully valued at current levels amid Q2 results and maintained outlook.
The firm commented today,
DSW’s Q2 adj. EPS of 35c beat our 33c estimate and consensus of 30c. That said, the 1.2% comp decline (a 300bp sequential two year deceleration) coupled with product margin contraction of -140bps underscores our concerns around the challenges DSW faces.
Specifically, we fear the mounting competitive pressure (from department stores, online retailers and off-pricers) coupled with DSW’s own strategic initiatives (increasing mix of kids, private label, athletic and closeouts) will continue to pressure AUR over the long run. The company also announced $25M in annualized expense reductions that we estimate will benefit 2017 EPS by ~13c; however, it does not solve the fundamental problem of driving both positive comp growth and merchandise margin expansion.
Despite the Q2 beat and reiteration of full year EPS guidance of $1.32-$1.42, the stock's weakness (-10%) can be linked to the implied expectation for significant traffic declines in the 2H as DSW laps the heavy markdowns (and consequently high traffic) from last holiday. While this is the correct course of action to take to retrain the consumer to buy at full price, these efforts will likely leave little room for EPS upside (barring significant intra-season chase/reorders) we believe.
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- Leerink Partners Downgrades McKesson (MCK) to Market Perform
- Pacific Crest Downgrades World Wrestling Entertainment (WWE) to Sector Weight
- Jefferies Raises Price Target on Bristol-Myers Squibb (BMY) Following 3Q
Create E-mail Alert Related CategoriesAnalyst Comments, Analyst EPS View
Related EntitiesCanaccord Genuity
Sign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!