UPDATE: Sterne Agee Downgrades DSW Inc. (DSW) to Underperform
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Sterne Agee downgraded DSW Inc. (NYSE: DSW) from Neutral to Underperform with a price target of $23.00. FY14 SSS estimates were reduced to -3.4% (from -2.3%) and 2014/15 ESP estimates were lowered to to $1.43/$1.65 (from $1.55/$1.88). Analyst Sam Poser noted weak trends and poor planning.
"DSW will face challenges for the foreseeable future. After excellent results from 2009 through 2012, DSW is facing its first major hurdles and will likely further lower guidance. Lack of fashion trends have and a cool start to spring certainly hurt business, but DSW's internal execution made it worse and prevent optimizing its business in the future," said Poser.
"Over the past five years DSW has posted positive annual same-store sales of 4.3%, 14%, 8.6%, 5.7%, and 0.1%. The flat SSS in 4Q13 appears to have been driven by promotional activity, given the 75bp deterioration of the gross margin. The negative 3.7% comps in 1Q14 and the 211bp deterioration of gross margin were the result of few trends, poor weather, and in our mind failure to attack problem inventory in a timely manner. We are confident that had DSW's merchants and planners been more proactive, 1Q14 sales would have been better, inventory gross margin would have been worse, inventory levels would have been in line with sales, and the company would have been positioned to move on. We believe that DSW's fashion footwear concept is a strong one, but poor execution issues run deep and if not remedied will do further damage," he added.
Shares of DSW Inc. closed at $27.16 yesterday.
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Related EntitiesSterne Agee, Sam Poser
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