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.
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 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.
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.
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