DSW Downgraded to Strong Sell - Analyst Blog

Zacks Investment Research downgraded DSW Inc. DSW to a Zacks Rank #5 (Strong Sell) on May 31, 2014, following the company's dismal first-quarter fiscal 2014 performance on May 28. Since then, the shares have nosedived 23%.

Why the Downgrade?

DSW witnessed sharp downward estimate revisions after reporting lower-than-expected first-quarter fiscal 2014 results. The quarterly earnings of 42 cents a share fell short of the Zacks Consensus Estimate of 48 cents and slumped 16% from the year-ago period.

Owing to an intense promotional retail environment and an erratic weather, the top line slipped 0.4% to 598.9 million, with comparable-store sales (comps) declining 3.7% year over year. Sales also lagged the Zacks Consensus Estimate of $636.0 million.

This branded footwear retailer envisions earnings for fiscal 2014 to lie in the band of $1.45–$1.60 per share. Additionally, the company anticipates comps to decline by a low single-digit rate while expecting adjusted sales to improve at the same rate.

The Zacks Consensus Estimates has been portraying a downtrend as analysts became less constructive on the stock's future performance. Estimates for fiscal 2014 and 2015 dropped 20.1% and 13.8% to $1.51 and $1.87 per share, respectively.

Other Stocks to Consider

Some better-ranked retail stocks worth considering include Citi Trends, Inc. CTRN, American Apparel, Inc. APP and Foot Locker, Inc. FL. While Citi Trends carries a Zacks Rank #1 (Strong Buy), both American Apparel and Foot Locker hold a Zacks Rank #2 (Buy).

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