PSS Collective Brands, Inc.

With the intention to accomplish its plan of opening 39 stores in fiscal 2012, footwear retailer DSW Inc. (DSW) recently announced four new store openings. The new stores are destined at different locations – Sangertown Square Mall in New Hartford, New York, Best Buy Shopping Center in Bridgewater, New Jersey, Plaza at Cedar Hill in Cedar Hill, Texas and at East Town Plaza in Madison, Wisconsin.

DSW, as a policy, prefers to open new stores in the higher volume periods of the first and third quarter. However, against this long-standing strategy, the company opened two larger-than-average downtown stores during the second quarter of fiscal 2012. Additionally, DSW relocated two stores in the second quarter. This brings the company’s total new store activity to 12 and four relocations for the first six months of fiscal 2012.

With an objective of attracting customers, DSW runs a free, award-winning loyalty program ‘DSW Rewards,’ which issues certificates to the customers for future purchases at DSW. Moreover, customers receive member-only offers through this loyalty program.

Of the planned new store openings through the rest of the year, the company aims to open 7 stores in new markets, while 20 stores are lined up to open in the existing markets. DSW’s store plans for fiscal 2012 cover all the major geographic regions in the U.S. with little focus on the northeast.

The company’s store expansion strategy is expected to be accretive to its top-line growth, since it offers a wide range of designer shoes at discounted prices for both men and women. DSW’s wedding shop collection provides exclusive assortments for bridal parties and occasions.

Columbus, Ohio-based DSW Inc. currently operates 348 stores in 41 states and also supplies footwear to 342 leased locations in the U.S. It also runs an e-commerce site www.dsw.com and a mobile website m.dsw.com. The company competes with Collective Brands Inc. (PSS) and J. C. Penney Company Inc. (JCP).

DSW has exceeded the Zacks Consensus Estimate over the last four quarters, and we expect the company to sustain its momentum in the coming quarters as well. Based on the better-than-expected second quarter results and rising earnings momentum, DSW currently has a Zacks #2 Rank, implying a short-term Buy rating for the next 1-3 months.

 
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