DSW Offsets Q1 Comps Dip with Expense Controls…

DSW Inc. pointed to a lack of warm weather across the U.S. in the fiscal first quarter as a primary component in decline in comp sales for the period. Management said that unlike recent quarters, comps this time around varied widely by region, ranging from a negative 6% in the northeast to a plus 4% in the west. The retailer may have missed its target for comp sales for the quarter ended May 5, but they were able to deliver strong double-digit earnings growth for the period by “managing inventory, improving margin, and prioritizing expenses.”

Gross margins were up 110 basis points on an increase in initial mark-up and a reduction in the markdown rate. This gain was offset in part by a de-leveraging in occupancy expense associated with the 102 leased Stein Mart locations added in January. DSW also saw an improvement in the expense line as they reduced marketing expenses to shift dollars to the second quarter to support the end-of-season summer sale.

DSW’s chief merchant Debbie Ferree said that comps were primarily hurt by a “lack of consumer demand for all sandalized product,” as well as other seasonal accessories. Much of that demand is moving over to the flats category, which is also apparently taking some business from athletic. Ferree said that EVA and flip-flops have been a “very strong component” of the casual sandal assortment and they see the category as a key driver for back-to-school. She also pointed to canvas and fashion boots as an opportunity. She described the athletic business as “very strong” in the quarter, again due to strength in fashion athletic, which she said continues to comp in “strong positives” due to a continued infusion of fresh product from Skechers and Puma.