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DSW Drops as Retailers Struggle to Recover From Winter Slump

Customers exit a DSW Inc. store in San Francisco on May 26, 2014. Photographer: David Paul Morris/Bloomberg
Customers exit a DSW Inc. store in San Francisco on May 26, 2014. Photographer: David Paul Morris/Bloomberg

May 28 (Bloomberg) -- The weather is still chilling U.S. retailers.

Discount-shoe chain DSW Inc. and women’s-clothing retailer Chico’s FAS Inc. both blamed an unusually cold winter and steep discounts for weak results last quarter. DSW posted a 3.7 percent decline in same-store sales today, missing the 0.1 percent gain analysts had predicted, and cut its forecast. That sent its shares on their biggest plunge since the company went public almost nine years ago.

Blaming the frigid weather has become a common theme for retailers, though the industry also is grappling with shaky consumer confidence and the growing threat of e-commerce rivals such as Amazon.com Inc. Still, both DSW and Chico’s said that sales are showing signs of rebounding.

“Monthly sales trends were weak, but improved sequentially during the quarter,” DSW Chief Executive Officer Mike MacDonald said in a statement. “Our team is working hard to deliver an effective assortment with a compelling value message and we expect these initiatives to gain traction in the back half of the year.”

At Chico’s, the comparable-store sales drop was 2.6 percent last quarter, worse than the 2.2 percent decrease predicted. In the latest period, the sales are up 1 percent so far. Shares of the Fort Myers, Florida-based retailer fell 3 percent to $15.14 at the close of trading in New York.

Lower Forecast

DSW, based in Columbus, Ohio, raised bigger concerns for investors by cutting its annual forecast to $1.45 to $1.60 a share, down from as much as $1.95 earlier. The stock fell 27 percent to $23.62, the biggest drop since its initial public offering in June 2005.

To get back on track, DSW is adjusting its lineup and investing in “omnichannel” -- an increasingly popular approach to retail that integrates online and brick-and-mortar outlets. DSW also acquired almost half of Town Shoes Ltd., a retailer in Canada, for about $69 million this month.

“I am confident that we are taking the right steps to grow sales and bottom line in the long term,” MacDonald said.

To contact the reporter on this story: Lindsey Rupp in New York at lrupp2@bloomberg.net

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net

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