The Buzz

All markets and investing news all the time

Look out below! DSW stock falls 27%

May 28, 2014: 3:32 PM ET
Image

Bad weather earlier this spring and slower women's shoe sales contributed to DSW's poor earnings and gloomy outlook.

Cue the jokes about a shoe dropping or not fitting.

DSW, the popular discount shoe retailer that allows customers to browse through thousands of shoes warehouse style, is having anything but a Cinderella moment.

The footwear and accessories retailer dropped a bomb on investors on Wednesday, revealing shrinking sales and a diminished outlook for the rest of the year. DSW (DSW) blamed the bad news on severe weather, tumbling women's shoe sales and slower store traffic.

Wall Street punished DSW by sending its shares down over 27%, wiping out more than $800 million of value for the company.

Related: Are you a Target or Wal-Mart shopper?

DSW CEO Mike MacDonald told analysts during a conference call that extreme winter weather forced "disruptive" and "chaotic" promotional activity throughout the industry. Retailers have been forced to slash prices to a "degree that I've never ever seen before," he said.

It's an excuse many retailers have had for poor performance in early 2014, but it's telling that some retailers are down more than others.

DSW's ugly news stands in stark contrast with the upbeat tone set by rival Brown Shoe Co. (BWS). The parent of Famous Footwear boosted its full-year earnings outlook on Wednesday, triggering an 8% pop in its shares.

Today's wave of selling left DSW shares at levels unseen since January 2012.

DSW blamed its poor results and gloomy outlook on slumping women's shoe sales and severe weather.

DSW is facing a terrible trifecta: worse-than-expected sales and earnings as well as downgraded financial projections.

Sales dipped 0.4% during the first quarter, while same-store sales dropped 3.7%. That means regular DSW shoppers weren't coming back as often.

The company said women's footwear comparable sales dropped 7%. Women's sandals, which account for a big chunk of total sales, tumbled 12%.

Website traffic increased, but it wasn't enough to make up for fewer people coming to the stores.

Sales trends got better during the latter part of the first quarter, but DSW warned the improvement was only modest.

Related: It's not looking good for Target

The bigger issue is that DSW doesn't predict that sales will rebound a lot for the rest of the year. Now even the optimistic end of its profit outlook would widely miss Wall Street's estimates.

DSW tried to reassure investors by highlighting plans to increase direct marketing messages, engage a new ad agency and revamp the website to improve search and customer personalization.

But it's clear shareholders, understandably, remain alarmed. The wave of selling left DSW shares at levels unseen since January 2012.

Wall Street appears to think it will take a fairy godmother to turn this shoe story around.

  • Drugstore cowboys: CVS, Walgreen red hot

    The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, Abbott Laboratories and AbbVie, La Monica does not own positions in any individual stocks.

    With each passing day, it's getting harder to say with a straight face that stocks are fairly valued.

    But even though some parts of the market are looking as frothy as the top of a Starbucks MORE

    - Nov 5, 2013 2:12 PM ET
  • Do consumers care about the debt ceiling?

    The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, Abbott Laboratories and AbbVie, La Monica does not own positions in any individual stocks.

    The government's in shutdown mode? The U.S. may default on its debt? Yawn. Get me another almond milk pumpkin spice latte and spelt blueberry muffin please! And I think I'll go grab some carnitas tacos MORE

    - Oct 15, 2013 12:43 PM ET
  • Beware the China stock rally

    The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, Abbott Laboratories and AbbVie, La Monica does not own positions in any individual stocks.

    So much for that China hard landing.

    It was fashionable late last year to predict that China's economy was headed for an epic collapse, akin to the Great Recession in the United States a few years MORE

    - Jan 15, 2013 1:16 PM ET
  • Plastic power! Visa, MasterCard at all-time highs

    It's hard to find a stock that isn't higher on the first trading day of 2013 as investors around the world cheered the fiscal cliff deal.

    But two stocks that were up sharply Wednesday are worth nothing because they are at all-time highs: Visa (V) and MasterCard (MA).

    What does it say about consumers that the two credit and debit card processing giants are doing so well?

    Are individuals, much like the federal MORE

    - Jan 2, 2013 12:01 PM ET
  • J.C. Penney's reality check

    Maybe Ron Johnson should have stayed at Apple (AAPL). The J.C. Penney (JCP) CEO continues to struggle to get the retailer on the right track.

    Johnson, who helped launch hundreds of retail stores for Apple, succeeded Mike Ullman as CEO of J.C. Penney last year. And investors had high hopes that he'd be able to swiftly turn things around for the retailer, which has been flailing with weak sales and MORE

    - Sep 20, 2012 12:38 PM ET
  • Investors' appetite for McDonald's weakens

    Even the dollar value menu couldn't coax consumers to McDonald's in July.

    Same-store sales were flat in the United States and Europe, and sales were down 1.5% throughout Asia, the Middle East and Africa.

    The house that Ronald McDonald built did try but "promotional activity" couldn't offset the sluggish global economy, the company said in a statement. One bright spot was the most important meal of the day: Breakfast.

    McDonald's (MCD) said consumers MORE

    - Aug 8, 2012 3:49 PM ET
Fear & Greed
Sponsored by

To view my watchlist

Not a member yet?

Sign up now for a free account
Stupid Stock Move of the Day
#StupidStock Move of the Day! Meg Whitman doing good job with lousy hand. But $HPQ up 4%? Sales must improve to justify more upside, right?
Powered by WordPress.com VIP.
Follow

Get every new post delivered to your Inbox.

Join 242 other followers