DSW Plans Stock Split, Boosts Outlook

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Footwear and accessories retailer, DSW Inc. (DSW) stated that it seeks to split its common stock two-for-one. Simply put, the move involves altering the number of shares outstanding and proportionally adjusting the share price. 

This makes the shares look more reasonably priced, though the underlying value of the company remains constant. In a 2-for-1 stock split, every shareholder with one stock is given an additional share. 

However, it seems that DSW designed the stock split to trim down the voting power of Class B shareholders. The Class A shares carries one vote per share, while Class B carries eight.

Thus, if approved by the shareholders, the company would issue one Class A share for each Class A or Class B share, which would create about 90.2 million shares comprising 81.6 million Class A shares and 8.6 million Class B shares and would curb the voting power of the Class B shareholders to 46% from the current 65% voting control.

Alongside, the company stated that net sales for the second quarter ended Aug 3, 2013 increased 9% year over year to $558 million. Same store sales increased 4.3% during the quarter compared with a 4.2% rise witnessed in the year-ago quarter.

DSW also raised its fiscal 2013 earnings guidance. The company now expects earnings to be in the range of $3.60 to $3.80 per share, up from its earlier guidance range of $3.40 to $3.60 per share. The company expects same store sales growth in the low single digits for fiscal 2013.

DSW has been extensively using its cash flow to spread its reach throughout the United States. We believe that the company’s aggressive store expansion plans signify its popularity among the customers.

Moreover, its wedding shop collection provides exclusive assortments for bridal parties and occasions and sets it apart from its peers Foot Locker, Inc. (FL), J. C. Penney Company Inc. (JCP) and Macy’s Inc. (M).

Besides offering a wide range of designer shoes at discounted prices for both men and women, DSW runs a free, award-winning loyalty program ‘DSW Rewards,’ which issues certificates to customers for future purchases at DSW. This initiative not only helps retain customers but also attracts new buyers.

Currently, DSW holds a Zacks Rank #2 (Buy).

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