Why This Retailer Popped, While Others Dropped

Shares of DSW (NYSE: DSW  ) hit a 52-week high yesterday. Let's look at how the company got there and see whether it still has room to run.

How it got here
Shares of the specialty footwear retailer peaked on Thursday, even though retailers in general reported slower sales for the month. That's in part because Easter came two weeks earlier than last year -- pulling sales into March. The Reuters same-store sales index clocked a gain of just 0.8%, compared with analysts' expectations for an increase of 1.5%. Department stores such as Macy's (NYSE: M  ) and Saks disappointed. Macy's same-store sales ticked up 1.2%, while the Street had expected a 1.9% boost.

Even wholesale club Costco (Nasdaq: COST  ) fell short of expectations. The buy-in-bulk chain posted a 4% comp, excluding sales of gas, compared with the 4.9% increase that analysts forecasted. But it wasn't all bad news. Discount retailers fared far better than others in the group. TJX (NYSE: TJX  ) , the parent company of off-price department-store chains including Marshalls and T.J. Maxx, topped estimates with a 6% rise in same-store-sales, while the Street was looking for just a 4.1% increase. Similarly, Ross Stores (Nasdaq: ROST  ) grew sales 7% at stores open for more than a year, ahead of analysts' expectations for a 4% climb.

As a discount shoe retailer, DSW is benefiting from increased demand in off-price merchandise. While DSW doesn't report monthly comps, it took a ride as other discounters climbed higher. According to new research from The NPD Group, price is more important than special sales, customer service, and convenience in terms of influencing where a consumer shops. DSW sells designer and brand-name shoes at discounted prices -- a model that's working for the retailer amid a tough economy.

How it stacks up
Let's see how it measures up next to industry peers.

DSW Chart

DSW data by YCharts

With all three of these discounters around the same price point back in 2009, both DSW and Ross have shown a strong trend in stock performance. Meanwhile, DSW is up more than 37% this year.

Company

Forward P/E

Dividend Yield

DSW 15 1.05%
TJX 16 1.08%
ROST 17 0.88%

Source: Finviz.

These stocks look pretty balanced here. DSW shows impressive earnings-per-share growth north of 25% for the past five years. In addition, the footwear company is planning to open between 35 and 40 new stores in the U.S. this year, which should increase momentum going forward. All told, I think the shoe lover's stock should continue to climb, and that's why I'm giving it a three-year outperform rating on my profile in Motley Fool CAPS. You can also keep an eye on these companies by adding them to MyWatchlist -- the Fool's free tool that lets you track and monitor your favorite stocks.

Fool contributor Tamara Rutter owns no stocks mentioned in this column. Follow her on Twitter, where she uses the handle @TamaraRutter, for more Foolish insights and investing advice. The Motley Fool owns shares of Costco Wholesale. Motley Fool newsletter services have recommended buying shares of Costco Wholesale. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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