What analysts say:
- Buy, sell, or waffle? Five analysts follow DSW. Three of them call the stock a buy and the other two a hold.
- Revenues. According to Yahoo! Finance, none of the analysts has publicly predicted revenue levels for either DSW's fourth quarter or for full-year 2005.
- Earnings. They have, however, predicted that profits will come in at $0.24 per share.
Like a new pair of shoes, it takes time to start feeling comfortable with a new public company. We make another attempt to break in shoe retailer and Retail Ventures (NYSE:RVI) subsidiary DSW (NYSE:DSW), whose IPO was in June of last year. DSW reports its Q4 and full-year 2005 earnings numbers tomorrow after the market closes.
What management says:
DSW management is pretty tight-lipped in its earnings releases, limiting itself to "just the facts, ma'am" and offering only a bare minimum of detail on how the facts came to be, and making no promises about the future. One inter-earnings report filing with the Securities and Exchange Commission does shed light on the company's thoughts, however. There, the firm describes its business as occupying a "unique niche," which has helped it to post strong growth in sales and profits over the last five years, and which provides the firm with "strong growth potential through new store rollout, comp store sales and margin expansion." So let's look at how that's been working out for DSW recently.
What management does:
"Unique niche" or not, the "margin expansion," at least, seems to have gone missing. Gross margins have slipped over the last year or so, and operating and net margins remain essentially where they were a year ago.
|
Margins |
10/04 |
1/05 |
4/05 |
7/05 |
10/05 |
|---|---|---|---|---|---|
|
Gross |
28.5% |
28.1% |
28.3% |
28.0% |
27.5% |
|
Op. |
5.8% |
5.9% |
5.8% |
6.0% |
5.9% |
|
Net |
3.3% |
3.6% |
3.4% |
3.3% |
3.3% |
One Fool says:
In the presentation mentioned above, DSW refers to compounded annual growth in sales of 22% over the past four years, and operating profits that have compounded at 123% per annum since 2001. The charts depicting this growth, however, bring a phrase to mind: "past performance is no indication of future ." You know the drill.
Year to date, DSW has grown its revenues 18% in comparison with the first three quarters of 2004. Operating profits are up only 16%. That's probably not what investors in the company's IPO were hoping would happen. Looking forward to tomorrow's news, they'll likely be hoping that Santa left a lot of shoes under a lot of trees this Christmas past.
Competitors:
- FederatedDepartment Stores (NYSE:FD)
- Payless ShoeSource (NYSE:PSS)
Fool contributor Rich Smith does not own shares of any company named above.
