DSW parent signals store closures ahead DSW is reopening and resuming business,

DSW parent signals store closures ahead
DSW is reopening and resuming business, but lessons learned during the closure mean it will be reexamining its real estate footprint
By Tristan Navera  – Staff reporter, Columbus Business First
Jun 18, 2020
Shoppers might be headed back into stores, but DSW’s parent company is looking into some permanent changes as it adjusts to the new normal.
At the outset of the Covid-19 pandemic, the company closed its stores and furloughed 88% of its workforce. Now it is reopening and resuming business, but lessons learned during the closure mean it will be reexamining its real estate footprint, CEO Roger Rawlins told analysts on a call Thursday morning.
Net sales were slashed 44.7% to $482.8 million for the first quarter, including a dramatic 42.4% decrease in comparable sales, Designer Brands Inc. reported, leading to an operating loss of $26.5 million on the quarter compared to a profit of $259.3 million in the same time last year. The company’s net loss topped $131.8 million.
DSW has been negotiating with its major vendors and landlords to preserve liquidity and cut advertising, as well as borrowing $203 million to increase its cash position. Rawlins said its stores were in good shape before the pandemic with maybe five or so not profitable – a number that “is significantly higher” now.
“What we’re trying to do is to try to get some level of, I should call it, a normalized sense of how did the consumer come back to the physical store versus shop online,” Rawlins said. “And then we got to sit down and have the tough conversations with our landlords.”
Rawlins didn’t indicate how many of its stores could be closed, only that DSW would decide in the third quarter once things settle a bit more. DSW has 550 stores in the U.S. and Canada averaging about 10,000 square feet, plus another 120 The Shoe Company and Shoe Warehouse locations in Canada closer to 700 square feet. About 20% of its store leases expire at the end of each year.
DSW has benefitted from nail salons in its stores including W Nail Bar in Columbus, which boost foot traffic. But it has also been growing its online customer base and loyalty program which bolsters digital businesses like buy online, pick up in-store options. The pandemic seems to be accelerating that trend.
“To be perfectly honest right now, as much as we don’t know what the permanent impact of traffic is, the landlord doesn’t either,” Rawlins said. “But we all know that right now it’s impacted pretty substantially and it’s causing significant de-leverage on our occupancy line and that’s not sustainable in the long-term.”
CFO Jared Poff said the company also has the benefit of Camuto Group, which it acquired to bring some shoe design in-house. It’s reemphasizing athleisure and informal shoppers during the pandemic, which pushes away from its traditional market base of dress shoes.
This might mean consolidating some of Camuto Group’s brands, and also might change how DSW sources from the big 50 shoe brands it sells, Poff said.
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