DSW Shrinking Stores

COLUMBUS, OH-”Smaller-faster-better” is DSW’s new mantra, as it downsizes its new units, introduces a new store design, and upgrades its customer loyalty program this fall in pursuit of chainwide sales of $300 per sf.

New units will average 19,000 sf, compared with an average of 25,000 sf for existing units, said the chain’s executives at its first-quarter conference call. The company plans to open 30 DSW stores during the year. Five units, averaging 21,000 sf, have already opened, with the bulk of the remainder to open toward in the second half of the year, said Peter Horvath, president.

“For the past five years, first-year productivity for new stores have averaged $175 per sf,” Horvath said. Overall chain sales are $217 per sf. “The $230 per sf we’ll do this year [in the new stores] should be the lowest you’ll see.”

The new store design will be unveiled at Easton Market here, “with a new aesthetic,” Horvath said.

Also in the fall, DSW will relaunch its customer loyalty program, making it easier and quicker for shoppers to receive rewards. About six million shoppers already are part of the program.

In addition, DSW is setting up 102 additional leased departments in Steinmart stores for a January 2007 launch, becoming the department store’s exclusive shoe lessee. DSW already operates leased departments in 150 Steinmart units.

DSW posted sales of $316.5 million for the fiscal first quarter ended April 29, 2006, sales of $281.8 million for the comparable period last year. The net income for the first quarter was $17.5 million compared with earnings of $7 million last year. However, the first quarter of 2005 boasting one-time charges related to its July 2005 initial public offering. The adjusted pro forma net income for the first quarter of 2005 was $12.5 million.

Comparable store sales for the first quarter of 2006 increased 4.2% compared with the same period last year. The company expects comparable store sales increases of 3% to 5% for fiscal 2006.