DSW Expansion Plans & Strong Q2 Push it to Strong Buy – Analyst Blog

DSW Expansion Plans & Strong Q2 Push it to Strong Buy – Analyst Blog

Zacks Investment Research upgraded DSW Inc. (DSW), the specialty branded footwear retailer, to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

DSW has been witnessing rising earnings estimates since it released its second quarter fiscal 2014 earnings results where both top and bottom line beat the Zacks Consensus Estimate, buoyed by an improvement across all key categories.

While adjusted earnings from continuing operations of 37 cents per share beat the Zacks Consensus Estimate of 30 cents, top line for the quarter advanced 4.5% year over year to $587.1 million, cruising ahead of the Zacks Consensus Estimate of $552 million. However, adjusted earnings remained flat year over year.

Moreover, the impressive results encouraged management to raise its adjusted earnings guidance for fiscal 2014. It now expects adjusted earnings in the range of $1.50–$1.65 per share, as against $1.45–$1.60 predicted earlier. The Zacks Consensus Estimate for the fiscal is currently pegged at $1.57 a share, falling within the company’s range.

Apart from delivering spectacular second quarter results, the company’s store opening plans have been in full swing. Recently, DSW announced three new stores in Livingston, NJ; Augusta, GA and Brooklyn, NY.

The new stores will offer a wide variety of fashionable footwear for both men and women. DSW’s store openings signify the company’s commitment toward strengthening its network with the aim to drive top-line growth.

Apart from the above-mentioned outlets, the company’s other locations include Watertown, NY; Louisville, KY; Glendale, CA; Asheville, NC; Hagerstown, MD; Rogers, AR; Ingram, TX; Crofton, MD; Evansville, IN; Fort Worth, TX; Eden Prairie, MN and Plattsburgh, NY.

Meanwhile, the company is also making significant investments to strengthen its international ‘footprint’, which is evident from its deal with Town Shoes of Canada. DSW closed this acquisition on May 12 and spent $68.7 million for a 49.2% stake in Town Shoes.

The Town Shoes buyout has proven to be a strategic one owing to its considerable access to the Canadian markets. With this takeover, DSW will gain an operating base in Canada which will help in popularizing its brand across the country. Interestingly, DSW has already started reaping gains from the Town Shoes acquisition. The latter opened two DSW outlets in Toronto in the beginning of August and has received positive response from customers so far.

All the aforementioned factors speak positively about the company and highlight its growth prospects.

Other Stocks to Consider

Other top-ranked stocks worth considering in the retail space include Citi Trends, Inc. (CTRN), Christopher & Banks Corporation (CBK) and Barnes & Noble, Inc. (BKS), each carrying the same Zacks rank as DSW.


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