DSW's new loyalty program stoking sales
DSW on Tuesday reported that third quarter total revenue rose 17.2% to $833 million, including $80.1 million from the consolidation of the company's Canadian retail business.
Store comps, excluding results from the Canada Retail segment, rose 7.3% year over year. Inventories at the end of the quarter were up to $624 million from $547 million last year. Excluding inventories from its Canadian acquisition, inventories per square foot rose 10.4% year over year and 7.9% on a two-year basis, in line with DSW's two-year comparable sales growth of 6.9%, the company said.
Reported net income in the quarter reached $39.3 million, and adjusted net income was $57.9 million, according to a company press release. Reported gross profit, as a percent of sales, expanded by 320 basis points thanks to favorable merchandise margin.
DSW executives are pleased with early results from its revamped loyalty program, and they told analysts on Tuesday that the information the company gleans from it will inform not only its assortments, but also personalization of its marketing and merchandising.
The company beat in several measures in the quarter, in part because it's being underestimated, according to William Blair analyst Dylan Carden. "Combined with a 25 million strong active loyalty base, DSW's advantages in a consolidating footwear market continue to be overly discounted, in our view," Carden said in comments emailed to Retail Dive.
Its recent acquisition of Camuto brands, which include Vince Camuto, Jessica Simpson, Lucky Brand, Louise et Cie, Enzo Angiolini and ED Ellen DeGeneres, in partnership with Authentic Brands, also helped drive sales. The Camuto unit will continue to provide the company with opportunities to develop private labels at much lower cost, according to analysts at Jane Hali & Associates. "DSW has improved their footwear assortment across men's and women's," Jane Hali said in comments emailed to Retail Dive. "Their expansion into kids will continue to be a benefit [because back-to-school] still affects Q3."
The company also got lucky in the quarter, with the weather cooperating to move what could have been bloated inventory of boots, Jane Hali also said.
DSW has made several bold moves of late, like the Camuto acquisition, dropping Town Shoes and Ebuy, and the revamps of its stores and loyalty program, but its improvements also come down to merchandising efforts that have been ongoing.
"The third quarter is another proof point in management's strategy to more fully leverage its competitive advantages and take share," Carden said. "The quarter again likely benefited from new kids product and a refreshed loyalty program. However, we believe there is as much to say about overall better merchandising that has been gaining traction now for two years. This includes new functionality to allow for micro-assortment and store fulfillment capabilities to better leverage a solid real estate positioning and warehouse layout."
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