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DSW Inc. (DSW) Q4 2018 Earnings Conference Call Transcript

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DSW Inc. (NYSE: DSW)
Q4 2018 Earnings Conference Call
Marc. 19, 2019, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Ryan Kirsh -- Head of Investor Relations

All right. Good morning and welcome. My name is Ryan Kirsh. I'm the Head of Investor Relations. And thank you for joining us today. Before we begin, I want to call out that today, there will be forward-looking statements in our presentation. For those of you in the room, you can see on both sides of the screen, this is our statement. Please take a quick moment to read it. You can also find our forward-looking statements in our SEC filings, and it will be available in this presentation online after today's meeting. In this presentation, we will also talk about adjusted financial statements, which is a non-GAAP item. Please note that in the appendix on today's presentation online, you will be able to find a GAAP to adjusted reconciliation.

Now, I would like to introduce our leaders that will be talking to you today. First, Roger Rawlins, our Chief Executive Officer, will be discussing our vision and strategy. Then you'll hear from Bill Jordan, President of the DSW Segment; Mary Turner, President of the Shoe Company; and Simon Nankervis, President of the Camuto Group. Finally, you'll hear from Jared Poff, our Chief Financial Officer, who will provide our financial outlook for the company through 2021. There will be a question and answer session at the end of today's presentations. And for those of you following along on the webcast, you will be able to submit questions.

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With that, it is now my great honor to present our first speaker, Chief Executive Officer Mr. Roger Rawlins.

Roger Rawlins -- Chief Executive Officer

Thanks, Ryan. Good morning, everyone. Three years ago, when I moved into this role here at DSW, what we talked about was we were going to build an elite team. And I'm so proud today to get the opportunity to introduce you to all of my teammates.

And when you look at our results that we delivered in 2018, I think they demonstrate the quality of the team that we have built; the 6% comp we delivered in 2018; the fact that when you adjust for the closure of the town enterprise, that we grew our earnings by 17% the last year; the fact that we bought back two million shares; the fact that we increased our earnings expectations twice in 2018 and delivered up on that. But I think more importantly, it's the fact, while we were doing all of that and driving the business, do what we do, we were also going after Camuto. We were also acquiring Shoe Company. So I think it really demonstrated the quality of the team that we have.

So today, I'm going to introduce you to my teammates. The first one -- frankly, I wouldn't be in this role if it weren't for her. DSW wouldn't be here if it wasn't for her. Her name is Debbie Ferree. Debbie, if you did not know this, there is a Shoe Hall of Fame, and Debbie is in the Shoe Hall of Fame. So please give it up for my partner Debbie Ferree. Next, you're gonna get the opportunity to hear from Bill Jordan.

Bill's been with the business for 13 years. Bill is now leading the DSW brand. Prior to that, Bill had served in just about every role you could possibly have within our corporate offices at DSW. But more importantly, a year ago, Bill had the opportunity to go to Canada and really help us manage this business that was transitioning to be a part of DSW Inc., so really happy to have Bill leading now the DSW brand across North America.

Next, you're gonna get to hear from Mary Turner. Mary joined our business two years ago. Great merchant, great retail expert in Canada, which is so important to us, because that's not an expertise that we have. So, so excited to have Mary on the team. And Mary's gonna talk to you a little bit about what we're doing with Shoe Company.

Next, you're gonna have the opportunity to hear from Simon. Simon joined our business three years taken, has taken over the Camuto enterprise. And what Simon brings to the table is experience in both vertical retail, which he did at American Eagle, but also on the wholesale side as well. So, perfectly positioned to lead the Camuto business.

Next, you're gonna get to hear from Jared. I've known Jared for over 20 years. Great background. Worked in vertical retail through Abercrombie. Worked in big box retail, a company called Big Lots you guys probably all follow, and a large, large company called Cardinal Health. So Jared is our CFO.

We also have three individuals that are not with us today but are back in our home office in Columbus that are sharing this message with our team in Columbus. We have Michelle Love -- 32 years with Nordstrom and joined our business about two years ago. We have Drew Domecq. Drew's our CIO. Drew has been with our business now for a year. Great experience in the invasion space with Wendy's. And we have Tom Jessop, who's been with our business for five years. And Tom leads our supply chain as well as our HR functions.

So next, I want to take you back to 1978. Do you guys remember 1978 at all? Okay. I do vividly, because in 1978, I was a 12-year-old, and I was the twelfth man on a 12-man basketball team. Do you guys know what that means? Okay. That means at the end of the game, there's 20 seconds left in the game. Your team is ahead by 20 points, or you're behind by 20 points, and the coach looks to the end of the bench, and he grabs Rawlins by the shoulder and says, "It's time for you to go in the game." I did not have a lot of self-confidence when I was 12 years old. But something changed. This. You might laugh, but this is the shoe that changed my life when I was 12. Why? Because my parents went out and invested in this shoe. Now, if you guys don't remember, back in the day, this was a crazy expensive shoe, because this is what Larry Bird, this is what Magic Johnson, Pistol Pete Maravich -- these guys were all wearing this.

Now remember, I'm the twelfth man. I never got in a game. But when I put these shoes on, when I came out, I made every single layup. I made every jump shot. Every single cheerleader was looking at Roger. Every single thing that was going on was about these shoes for me. They gave me a level of self-confidence.

That's what we're talking about today. That's the kind of energy we're gonna bring through our brands, that you're gonna hear those stories from each of my teammates. It's why today, I'm wearing Mercante. If you guys go out today, this is exclusive at DSW. Please go make a purchase this afternoon. I think we have some gifts for you. But I wanted to share that story because you're gonna hear several of those again today from my teammates.

So let's talk a little bit about our history. And when you think about what's happened, this business was actually founded 50 years ago. 50 years ago, by Jerome Schottenstein. And it started with this, doing lease businesses. So we get questions a lot about, you know, what's it like working in other retailers? We've been doing it now for almost 50 years. Then in the '80s, how this thing involved was they got into open cell concept.

They started loyalty programs. They did special makeup, all of these things that allowed DSW to be positioned differently in the marketplace, which led to the 2000s, which in 2005, we went public and really sort of set the stage for where we could go. Also at that time, we started rolling out our digital experience. Now I'm real proud of the fact that from 2008 to 2013, I got to lead our digital business and really did sort of help our business up for growth.

Then, in 2014, this changed. Our CEO then, Mike McDonald, and our board said, you know what? Things are happening to us. We don't know exactly what they are, but we've got to figure this out. So we went and created an innovation team. And we went and collected data all over the place. We looked at every part of retail. We looked at the consumer experience, how things were evolving, and we said, you know what? We have to change. And so, we went to What's Next, which you see that sort of posted all over the place. And we told this team, go put together what's next for this enterprise.

And I'm real proud of the fact that that team built the strategy -- the mission, vision, and strategy -- that we've been following since 2014. In 2015, we built out our infrastructure. And when I say infrastructure, we built what everyone calls omnichannel. And you know what? We were recently recognized as the number one omnichannel retailer in all of retail. I will tell you, we don't call it omnichannel. It's called the customer. And I think that lens is something we have always been lucky enough to have. Then in 2016, we rolled out Kids. So we added a new category to what we were doing day in and day out.

Then in 2017, we started testing services. So we went after nail services first, and you're gonna hear from Bill today, because this thing is killing it. This thing has great growth potential. This is attracting people to our brand. They create an emotional connection, no different than that shoe experience I had when I was 12 years old. Pretty soon, you'll be able to have a drink as you're having your nail service, and you'll be able to shop our brand. And it creates this emotional connection, again. And in 2018 -- you'll hear a lot about what we did this year from Bill -- we relaunched our rewards program. And it's the first time we'd really done anything with that program in 10 years. We did a six comp this year. Roughly half of that, I think you could credit to what we did within this whole concept.

So again, those were all things we did that were defined in 2014 as the direction we wanted to head. Then we said, now that we have this incredible infrastructure, what's next? What are we gonna do next? So we said, we have to grow. We have to find ways to get into new markets. We have to find ways to create new products, differentiated products. So we acquired Shoe Company and acquired the Camuto Group.

So, what does that mean? That means we are a dramatically different business in 2019 than we were at the start of 2018. We now have our three owned companies -- Camuto, DSW, Shoe Company. We also have our two lease businesses, Stein Mart and Frugal Fannie. So ultimately, this is a dramatically different company. So why did we have to evolve? Why did this all change? You guys ask us this question a lot. There were three big factors, and I think these are really, really important to understand why we've determined what's next and where we're headed.

The first one is this: technology. I see just about everyone in here has a device up in front of them. If you go back years ago, that wasn't the case, right? Technology changed consumer behavior. They have access to information at their fingertips they never had before. They have the ability to have price transparency. So our model was being challenged because our everyday value model was being offset by people discounting in the online space, right?

So we had to think differently. And the one that we kept referencing was electronics. And we talked a lot about this with our board. We are not going to stand by and let that happen to our company, to our 16,000 associates that we're so passionate about. We are not going to stand on the sideline and be HH Greg-ed, or Radio Shack-ed, or Circuit City-ed. We're going to be Best Buy of our space. That's the approach we took when we were looking at how we were going to evolve our business, which led to this.

As we looked at this next data point -- I've shared this, I think, with some of you. From 2011 to 2017, there were five companies -- I'd say five segments -- that really, really grew market share. And when I say really grew, they picked up 20 percentage points. Not 20 basis points -- 20 percentage points of market share, OK? The first one, a brand we all know and love: a company called DSW. We went from 3.1 to 3.3% market share from 2011 to 2017.

How did we do that? We did the old school way. Let's open stores. We incurred about a billion dollars -- I shouldn't say incurred. We invested about a billion dollars of our shareholders' cash opening those stores, and we grew market share, which was great. The challenge is these other elements. Number two. Who else grew? Athletics space, because guess what? You can't see everybody feet. More people are wearing sneakers than they were back in 2011. It's just the facts. So I think that segment had a sort of leg up on everyone else.

Next, Nordstrom. How? By the inline business, Nordstrom, they've done a nice job, but also the launching of Nordstrom Rack, which now we get to service through our Camuto enterprise. But this is the one everybody talks about and focuses on, and it's called Amazon, right? They're the big bad player that everyone should dislike in the industry. Why? Because from 2011 to 2017, they picked up almost six percentage points of market share. All of you guys talk about this. You're always asking us, what is it that you're gonna do to differentiate yourself from Amazon in those kind of things? The reality is, we want to partner with them, and we're figuring that out as a larger enterprise.

But this is the data point that you need to understand changed our mind on where we have to go. It's this: our vendor partners. We invested a billion dollars building our brand and their brands. Meanwhile, while we're building their brands, which we needed to do, technology has allowed the consumer to go around DSW and allowed that brand to go direct to consumer. They pick up 12 full percentage points.

Remember, these are the people that we are representing in our box. Again, an example of how we used data to say, we cannot let that happen. We are not going to sit on the sideline. We are going to think differently. We are going to find what's next, which also, as all of that was going on, you had this happening. You had brands that are being gobbled up, because guess what? If you can't do that direct to consumer thing, you'd better find someone that can help you, or else you're not gonna be relevant.

And so, that's what's happened. Caleres, Steve Madden, Marc Fisher, DSW. All of them have been buying brands, so there are fewer and fewer players, big players, that are out in that marketplace, which ultimately led us to say we've got to transform this enterprise. We have to drive value. We have to take control of our destiny. And what does that destiny look like? It looks like this, because now what we have is this world-class retailer called DSW -- the thing that's doing over $3 billion dollars in sales, that has over 500 warehouses with a kick-butt digital experience that involves their consumer, different experiences, different product. That's a core of what we do, driving a lot of cash.

We also have this new thing called Shoe Company, which gives us an edge in the last mile. And Mary's gonna talk about this. But envision how you can fill in market voids with a much smaller box that's much more targeted than something that is over 20,000 square feet providing all of the services we're providing at a DSW.

And then you marry that with this thing called Camuto Group, which is a world-class organization. Vince was a leader with Nine West of building brands, and Simon's gonna share that. So ultimately, when we do all of those things, when we bring all three of those to life, it is different than DSW. It is something dramatically different. It is something that's what next in this industry, and it is Designer Brands.

So, this is where we are going. This is what those three companies look like. This is a combination that no one else in our industry can match. We have the ability to build brands. We have the ability to bring product to life that differentiates experiences at DSW, at Shoe Company, and the ability to leverage this incredible infrastructure we have just spent 50 years investing in to do something dramatically different. So what does this mean day in and day out? It means our parent company is now Designer Brands. It means our ticker is gonna be DBI. It means how our associates connect with our brand is gonna be at a higher level than an individual brand that they work at. That is what Designer Brands looks like. But I want to share with you what Designer Brands looks like compared to what DSW Inc. used to look like.

DSW was only attached to about 20% of the total footwear market. That market was really restricted to just people that play in the space that we play in day in and day out, selling shoes and the retail concepts. With Designer Brands, we now have access to 80% of the footwear market. It's not just about us running stores. It's us playing in the wholesale space. It's playing in the direct to consumer space. I want you to think about these five things, OK? They are, first, Shoe Company gives us access to the Canadian market and gives us the ability to fill in around DSWs. That's number one.

Number two, our DSW digital expertise is going to be applied to Shoe Company and to Camuto. I mentioned on that vendor front how those vendors had gone after it in a big way to grab 12 percentage points. You're gonna hear from Simon, one of those brands that just does not know how to do that, has not had that expertise, is the Camuto organization. Digital penetrates less than 1% of their sales. Guys, think about that. 1% of their sales. We know how to do digital. That's what we can bring to the table.

Number three, we can expand this wholesale business that Camuto has been operating in a major way across our DSW, our Shoe Company platforms. Love to see more Jessica Simpson, look to see more Lucky, love to see other brands that ultimately, we can acquire as part of the Camuto Group.

Number four, we will build our private brands. We have a history of building brands. Bill will share in his presentation, as we were making those investments in stores, in our digital experience, we were growing brand sales faster than they were growing them themselves. That's an important fact I want you guys to think about as we talk about that. And then finally, what we want to do is take all of these things we've learned -- we know footwear.

We know footwear better than anyone else in our industry. We want to go share that with our other retail partners. We want to sit with Alex Dillard and share what we're doing with our rewards program to drive his footwear sales, just like we're doing with Stein Mart. And I'll go meet with Hunt on Thursday morning down in Jacksonville to share with them what it is we're doing and how that can impact their business. We want Nordstrom to sell more shoes. We just want them to sell our shoes.

So that's the direction we're headed as Designer Brands. It's dramatically different and has access to 8% of the market. And before. I talked about over a six-year period of time, we grew our market share 20 basis points, 3.1. to 3.3. In the last nine months, we've gone from 3.3% of the footwear in peoples' closets to over 5%. That's the way Designer Brands is going to be thinking.

Next, we had no brands that were produced in-house. Frankly, we've struggled to have success from this. Carol Lee from our board has always been challenging us over the last 13 years that we've been public, why can't you grow private brand? Why can't you grow private brand? Because we could never find the right partnership. And we tried a lot of players. We dated a lot of people in our industry. And we said, you know what? The only folks that really know how to do this, because they've doing it for years with Alex Dillard and Macy's, is the Camuto Group.

And so now, what we have is the capability to design, source, and market our own brands to develop differentiated product. And I want to share these data points. And I think we've talked about this in some -- I know in a couple luncheons we had. But think about this. At the beginning of 2008, the DSW brand had 800 labels that they dealt with day in and day out. That means we were putting 800 of these labels in front of the consumer.

The top 25 were really brands, right? Those 25, think of Nike, it's Skechers, it's Steve Madden -- it's those kind of folks. They accounted for 40% of our sales. Those are brands, because when someone's going online and they're looking on their device, the first thing they're looking for is that brand name. And you have to have them to present to the consumer that you know what are the appropriate brands. So you've got to have that in your mix.

Next, 75 -- I would call them item brands, meaning they have a key item that if you don't have it, the customer thinks you don't know what you're doing. Hunter Boot, as an example. Whatever that item might be, you've got to have it. That's 30% of our total sales. So 70% is really embedded in these top 100 sort of brands. The next 20% is 700 labels. Why are they even relevant to the consumer? Because we decided to put them on our selling floor, to put them on our website, to make them available to our 30 million rewards members we have across North America. That is where there's opportunity to grow our private brand from today about 10% to be closer to 25 or 30% over the next three years. That's the vision that we have.

Next, this one is probably my favorite -- limited visibility to cost. So let's talk a little bit about how we've historically cost goods. Remember, when we started, our heritage was closeout buying. In closeout buying, you don't have a lot of negotiating power, right? And the way we priced goods, we have something we want to retail for $50.00. We say we need a 60% IMU. So what do we do? We write a check for $20 bucks, and we say to that vendor, hey, we're not coming back to you for any more money.

We don't need any -- we don't come back for markdown money or any of those things. We know we're gonna take some markdowns. We'll margin out in the mid-40s. That is the way we costed goods. Guess what? That game has changed, because now, we have visibility and we understand how to manufacture footwear as Designer Brands. We have the ability to determine what costs we're going to pay.

I'm gonna give you the best example I can think of. We went to Nine West, and we looked at acquiring Nine West, and we got real close to pulling the trigger on that. We decided not to. As we did that assessment of Nine West, we were by far their best account. Why? Because we paid more for product than anyone else. We also didn't create a pain for them because we didn't come back and ask for markdown allowances and all the other things.

Then we went to Camuto. We did our due diligence at Camuto, and guess what? It was the same thing. The scorecard showed large department stores, their margins on their product is down here. Mid-tier department stores, the margin was here. The margin on DSW product is up here. Guess what? That game has to change. We will not accept that anymore. That is why Debbie is now the president of Designer Brands, because she's got those relationships over the past 22 years that we're gonna leverage so that we can have that conversation with the vendors and say, this is what we're going to pay for goods because we know this is what it costs. Major game-changer that you're gonna hear about today.

Next, we were only in the U.S. footwear market, right? Our DSW business was really isolated, focused on what we do here in the U.S. Where we're at now, as I mentioned earlier, the Shoe Company, we have the incredible opportunity to fill in market voids. We have the ability to grow DSW north of the border. Incredible opportunities to continue to expand as Designer Brands. We also were brand to brand retailer, so we were facing that challenge of the consumer going around us, the brands going direct to the consumer.

That's not where we're at now. We have a platform that will drive growth and consolidate this industry. That is the way we are thinking about it as Designer Brands. Ultimately what this gives us is the ability to control our own destiny. That has not been the case. We have been reliant upon others to deliver products on our behalf. We still will to a certain extent, but we now have the ability to go direct to consumer the same way everyone else has.

So ultimately, when you think of Designer Brands, this is what I want you to think of. We are brand builders delivering differentiated experiences powered by the scale of one of North America's largest footwear enterprises. That is who we are now. That is dramatically different than who we were as DSW. And you can see these -- we're gonna talk about these later, about how all of these come together, connecting all of these enterprises. So how do we win? It's doing this. Do what we do.

You're going to hear today, there isn't any secret thing we have to do. It's go and execute the way that we always have. It's Simon taking the Camuto Group with Alex and the team we have at Camuto and delivering the same thing they have done for Dillard's and they have done for Macy's -- just go do it for DSW. And guess what? They have the capacity to do that. If you're at DSW, keep continuing the seven consecutive quarters of positive comp you have generated, the momentum you have, and keep that ball rolling, and let's go grab share.

And if you're at Shoe Company, continue to execute the way that you have and leverage all the capabilities you now have at your fingertips by being connected to Designer Brands. When we do that, we will have differentiated products, we will have differentiated experiences, and we will grow market share. I mentioned the comps. Seven consecutive quarters, we're gonna keep that up. New categories -- Kids, Beauty, other things that we can bring to life. And ultimately, it's new markets, which will include us continuing to expand in Canada and finding ways to grow this enterprise.

So next, before -- or I'm sorry, as I finish up here, this is what all of you probably came today to hear. So what are we doing? What's the end result of all of these things? When you add it all up and you hear what each one of my teammates are gonna be delivering, it is getting to that number -- $2.75, although Jared tells me I have to give you the range -- between $2.65 and $2.75. It's about a 17% compounded annual growth rate of earnings, is what we're targeting between now and the end of 2021. When we did this acquisition and you challenged us as to what does this mean to the shareholder, this is what it means, because we will have a differentiated brand, we will have differentiated experiences -- we'll have a growing company, both bottom line as well as top line.

So next, I want to bring up my partner running the DSW brand, Bill Jordan. But before Bill comes up, we have a brief video to show you -- what the future of DSW brand looks like.

Bill Jordan -- President, DSW Designer Shoe Warehouse

Good morning. DSW is a world-class retailer with a strong track record and a loyal customer base. As part of the unique Designer Brands model that Roger just shared, we are uniquely positioned to drive growth and profitability by just continuing to do what we already know how to do. I want to start by sharing a story. I love shoes. And what you have to know about me is I've been in the footwear business since the day I was born. And the reason I say that is that my father was in the footwear business from the time he was 13 years old until the time he retired at age 65. He worked as a store manager and a district manager, and was on the front lines of product and customer.

So when I graduated from law school -- yes, I'm a lawyer. Insert your lawyer joke here. When I graduated from law school, what do you think my dad bought me as a graduation gift? A new pair of shoes. And not just any pair of shoes, but a pair of black leather wingtips. They were gorgeous. They were probably the most expensive shoes my dad had ever bought in his life, and he gave them to me because he thought that that's what a lawyer should wear. And you know what? I wasn't a very good lawyer when I started practicing law, but that first day when I walked into that firm, I felt like a lawyer. I had confidence. I knew I belonged because of what I was wearing on my feet. That's the power of self-expression, and that's what shoes can do for people.

So who is DSW? We are a destination for brand name and designer footwear and accessories. We offer value, convenience, and differentiated experiences to our customers. We have over 500 warehouses -- we call our stores warehouses -- across the U.S. and Canada. We have a world-class digital site. And we have a sticky 26 million members in an award-winning loyalty program. We have a consistent track record of growth. We are a growth company. We've grown sales each of the last 27 years. That's every year that DSW has been in existence.

Last year, we posted a +6% comp. As Roger mentioned, we've made investments over the last five or six years to make sure that we've got momentum to propel us for positive comps going forward. Those investments include investments in our omnichannel capabilities, where we've been awarded Best Omnichannel Retailer in America. Inventory management and supply chain capabilities that allow us to get the right shoes to the right place at the right time. Marketing programs that allow us to engage millions of customers and influence their buying decisions. And our loyalty program, which is one of the most successful loyalty programs across industries.

We have a very strong and engaged customer base. As we've already mentioned, we've got 26 million members in the U.S. engaged in our loyalty program. And looking at these charts, you can see that our transaction growth correlates to the growth of our loyalty program. We have grown our customer base substantially over the last decade, with over 90% of our sales coming from members in our loyalty program. What does this mean for us? It means that we've got data on our customers, and we know how to use that data to drive sales, create better experiences for our customers, and be more efficient with our marketing. This gives us a strong base for continued growth.

Within the DSW segment, we believe we can drive 13% operating income growth CAGR over the next three years. 13% CAGR. All's we need to do -- we don't need to do it on anything more than a low single-digit comp. We have three pillars that are gonna -- strategies that are gonna drive that growth: differentiated product, differentiated experience, and operational excellence. And I'm gonna walk through each of those three for you this morning.

First, I want to take you through how we think about product. As Roger touched on, we are brand builders. We've helped major brands grow their businesses through DSW, like Caleres, Skechers, and Steve Madden, to name just a few. This slide shows the combined sales of Caleres and Steve Madden over a 15-year period of time. From public data, wholesale sales of Caleres and Steve Madden have grown at an 8% CAGR over those years. Well, at DSW, they've grown at 12%. These brands grew their business 50% faster through DSW than through their other locations. Combined, we did $375 million in sales with these two brands last year. We are a key driver of growth for other brands and will continue to be so in the future.

We've also been able to create and grow our own brands, like Kelly & Katie and Mix No. 6. In that same 15-year period, we've grown our exclusive brands -- and exclusive brands are brands that are only available at DSW -- from $0 to almost $300 million. In fact, our Kelly & Katie brand is the number two brand that we sell in our entire assortment, and our customers love it.

Why are exclusive brands important? Three reasons. One, it allows us to offer differentiated product to the customer. Two, it allows us to offer great value to our customers. And three, it margins out substantially higher than the balance of our assortment. I'm really excited about the relationship we have formed with the Camuto Group because of this. They are industry leaders in creating private brands for other retailers, and they're gonna help propel us on our journey to grow our private brand substantially.

As Roger said earlier, we're taking control of our own destiny and disrupting the footwear business through this Designer Brands model. One of our key strategies is to grow the amount of product that we sell that we also produce, over $700 million by the end of 2021. This means selling more product produced and made by the Camuto Group. These sales will be a combination of our exclusive brands, like Kelly & Katie and Mix No. 6, and Camuto-produced wholesale brands like Lucky and Jessica Simpson. Together, we call this Camuto-produced brands.

And why is it important that we sell Camuto-produced brands? Well, number one, it gives us the chance to sell unique and differentiated product to our customers. Number two? Camuto-based products will have higher margin than the balance of the assortment at DSW, and Designer Brands gets to capture both the retail and wholesale margins associated with those sales. And third, as we grow the Camuto brands, we'll naturally need to reduce the choices and the balance of our assortment. That means we will use that limited shelf space that is available to go to our vendors and let our vendors compete for space on our floor, which means we can push on costing and quality to make sure we've got the best in business.

This slide shows the breadth of our offering -- our own exclusive brands and other brands that we now make through the Camuto Group. As Roger said today, our top 25 brands make up about 40% of our sales. Those are brands we must have on the floor. The next 75 brands make up 30% of our sales, and those are important, and we've got to have them as well. But the next 700 brands, which represent 20% of our sales, are really not brands. They're labels, and they're only there because we've chosen to put them on the floor. We can replace those labels that don't have brand equity with brands that we are producing through the Camuto Group that have growing brand equity and margin out better the DSW and Designer Brands enterprise.

Next, I want to turn to Kids. We recently introduced Kids to our warehouses, and the customer is responding. We are the fastest-growing retailer in Kids shoes, and we have a lot of runway in front of us. The Kids footwear market is about $6.5 billion, or roughly 10% of the total footwear market. In a short period of time, we've grown our Kids sales to almost 4% of our sales and are targeting 10% of our sales by 2021. That's an incremental $185 million in footwear sales over the next three years.

But the reason we entered Kids was not to sell kids shoes. It was to sell more adult footwear, and it's working. We are attracting a new customer. We are driving additional traffic to our warehouses. Customers that buy kids products are spending $75.00 more per year than non-kid buyers. And 31% of the time, when a kid's shoe is purchased, an adult shoe is purchased. This strategy is working, and we've got to step on the accelerator and bring it to our customers even faster. We're gonna win at Kids, and it's gonna help propel our Adult comps along the way.

Now, I want to talk about seasonal product. Seasonal product is what we call our best ad strategy, meaning we want to be known for standing for this product. This is where we differentiate ourselves from other footwear retailers. And about 30% of our sales over the course of the year are in seasonal product. That gets as high as 40% during peak sandal and boot seasons. The customer response to our seasonal product is overwhelming. Last year, we grew that product by 10%, and it represented a large percentage of our incremental +6% comp growth. We're gonna put more receipts into boots and sandals, and believe we have a real opportunity to increase our sales in these key categories by having higher in-stocks in boots and sandals all year long.

Our second strategy is to build differentiated experiences. We've got to have a connection with our customers. And we have a history of being at the forefront of retail, and Roger talked about. But our experience always starts with our loyalty program. We originally launched our loyalty program in the early 1990s, well before other retailers even though about having a loyalty program. As I said, we have over 26 million active and engaged members, and over 90% of our sales come through our loyalty program. This program allows us to have a consistent and customizable way to engage with our loyalty customers.

In 2018, we relaunched this program and changed the name to VIP, and it's really working. We're adding new customers at a faster rate. We are increasing the percentage of sales coming through the program. Members are spending more per transaction, and we're retaining members at a faster rate -- higher rate than we ever have before. That's awesome. That's why Shopify recently named our VIP program the number one innovative customer loyalty retail program. But loyalty is more than just offering a discount on a future purchase, which we do, to the tune of $5.00 per every $100.00 spent.

Our program engages customers to establish an emotional connection and gives unique benefits and experiences, like gifts with purchase, for members only; or ways to earn points without making a purchase. As part of our VIP relaunch in 2018, we asked our members what benefits they wanted. Their response? The ability to donate shoes. So we partnered with Soles4Souls, and our customers in the past year have donated almost one million pairs of shoes. And we're giving customers loyalty points for donating shoes. It's a win-win all the way around, and we're gonna continue to innovate in our loyalty program.

But we're not done yet. In May, we will launch VIP phase three, which includes personalized benefits where you have the opportunity to pick what benefits are important to you and that you want to have. We're gonna offer one free next day shipping to all members, because we know speed is important sometimes. You need that shoe. We're gonna add mobile wallet and the ability to enroll in the program via SMS.

And by yearend, we're gonna launch phase four, which will create a DSW.com customer community; offer enhanced rewards for purchasing our exclusive brands, which ties back to our strategy on growing exclusive brands; create My Brands, which will identify customers' favorite brands based on past shopping experiences; and offer rewards for social media interactions. We're gonna continue to enhance this program because We know how much it means to our customers and how much it means to our bottom line.

We are innovators at DSW, and we are a disruptor in the footwear space. We have been testing services, as Roger said, within our warehouse, including nail bars, orthotics, repair services, and even testing subscription models. The customer is responding. We are seeing strong attachment rates and increased traffic into our warehouses by shoppers that frequently make use of these services. We recently announced that we're expanding our nail bar test to five additional locations this year, and we're very excited about that opportunity.

Along with services, we've created a redesigned store layout and fixture package that allows us to offer more choices to the customer, which is now in 10 of our stores. Innovation is the core of who we are and why we will continue to win in the future.

Personalization is so important, and personalization always starts with data. We've been able to gather a tremendous amount of data about our assortment and our customers because of our loyalty program in place. This data allows us to focus our assortments on customer preferences and drive customer engagement. First, we're using customer buying patterns to inform what shoes we put in what warehouses, which means we know what she's demanding and where she's demanding it, so we are evolving our assortments to have what she wants when she walks into our warehouse.

Second, we are using data to inform how we market to customers. We are targeting promotions to customers based upon their prior shopping patterns. This will allow us to offer customers the right promotion to drive purchases and eliminate less rich offers to customers who don't need them. We're also able to drive traffic through more targeted messages by using content in our messaging that is relevant to the customer. If we know the customer like to buy athletic shoes, then we're gonna serve messages that target athletic. If we know that she likes to buy Kelly & Katie, we're gonna send messages that send Kelly & Katie.

Our third strategy is around operational excellence, and this starts with inventory management. If we can get the right shoe in the right place at the right time, we will win. Easy said, hard to do. The number one reason a customer does not buy when she is in our store? We don't have her size. Guess what? Size matters. So what are we doing about this? We're increasing our key items by 20% this year. Key items are items that we buy in depth and have flow behind. Because of this depth, we have better in-stocks by size, which drives sales and conversion. It also creates better margins for us. How? Well, when we buy larger quantities, we get better pricing on shoes upfront. And second, when we stand for an item, our market down rate is substantially less.

An increase in key items also lets us edit the balance of the assortments, which means we're gonna decrease the number of non-key items sitting on our floor. What's the result of that? Higher in-stocks by size, a better customer shopping experience, and more sales and margin for DSW.

We're also focused on fulfillment optimization. Our digital penetration continues to grow and grow, and we've got huge momentum in the digital space. Where we fulfill orders from can drive sales and margin. As I've said, we've got the ability to use our inventory no matter where in our system it is -- any warehouse, any fulfillment center, any distribution center. So we've created an order routing algorithm that allows us to pick where a shoe is shipped from for a digital order. We look at a lot of factors when we do it, but the most important factor is to target a place that's most likely to take a markdown. Because if we can avoid a markdown, it'll help our margin substantially, our bottom line substantially. We're gonna continue to optimize this order routing algorithm because we know digital will continue to be a huge part of our business.

Operational excellence also extends directly into our warehouses. We've rolled out a new service model for our associates that focuses on operational excellence and engagement with our customers. When I talk about operational excellence, I mean running a neat, clean store, making sure associates are properly scheduled for when customers are there in the store, fast checkout lanes, flawless visual execution, and fulfillment accuracy. Engagement is about greeting the customer, enrolling new members into our VIP program, and executing our new service model. Our goal is to be operationally excellent and engage with our customer to drive conversion in our warehouses.

We also have to have strong execution as it relates to our digital site. We're gonna continue to invest here, and we call this continuous digital optimization. We've structured our team so that we're adding new features on a continual basis. What used to take weeks and months, we can now do in days. We've added headcount to support a continuous digital optimization, and we've rolled out new payment, AB testing, and personalization in the last six months. All these efforts are driving stronger digital conversion online, and we're excited about those results.

Finally, real estate -- this is a competitive advantage for us. First, our portfolio is strong and balanced. We have less than five stores that are not four-wall profitable, and about approximately 20% of our leases are up for renewal every year. That means we have huge flexibility, and if we need to change our footprint, we can do it quickly. Second, our warehouses have four benefits that we like to talk about. The first? It's a traditional store. You walk in, you buy a pair of shoes, you walk out. Second, it's a billboard for our brand. When we open a store in a new geography, our digital sales in that geography increase greatly. When we close a store, those sales go away. Warehouses drive digital.

Third, it's a return center for online demand. This is a big deal. Having the ability for a customer to return a product right to a warehouse is a key differentiator from some of our competitors who don't have that and you've got to send it back through the mail. And we know that 28% of the time, if she makes a return into our warehouse, she makes a purchase. Huge advantage.

Finally, fulfillment center for our digital orders. We've said that we are within 20 minutes of 70% of the population, and as speed to consumer becomes more relevant, we are close to the customer. Finally, as it relates to real estate, we've got the ability to open up another 100+ locations across the U.S. and Canada that can further drive top line growth.

So how are we gonna win at DSW? We've made a lot of key investments over the last few years, and we've honed our operating disciplines. We are one of the best performing retailers in the U.S., and we're gonna continue to be so. Our focus is on driving three key strategies to get to that 13% operating income growth CAGR: differentiated product, differentiated experience, and operational excellence. We are excited about being a part of this new Designer Brands model and the leverage and power it bring us to further disrupt the footwear market.

And now, I'd like to introduce my partner, Mary Turner, the President of The Shoe Company.

Mary Turner -- President, The Shoe Company

Good morning. I'm here to tell you about Designer Brands' business in Canada and also to share a little bit more about my banner, The Shoe Company. The Shoe Company is the backbone of Designer Brands' Canadian business. And today, I'm going to explain how its format positions it as a powerful last-mile solution and also as the perfect complement to the DSW segment business.

But I'll tell you my shoe story first. It all started when I was eight years old with a pair of white go-go boots. It was love at first sight. But more than that, I knew in that moment that fashion was absolutely my passion, and that was the business I wanted to be in when I grew up. So fast-forward to this year, when once again, white booties are a key fashion trend. Every time I look at my Rebecca Minkoffs or put them on, I think, how lucky am I that not only was I able to follow my passion, but this is the business that I'm in now that I've grown up?

But that's enough about me, because I'd much rather talk to you about what's going on with our business in Canada. We've been selling shoes here for 65 years. As you may know, the footwear market in Canada is about $7.6 billion and grew at 2% last year. Designer Brands in Canada is the third largest player in the market, and even more importantly, had the second highest growth rate last year. I'm very proud to tell you that we're number one share in Women's and number three share in Kids. More than 3.5 million Canadians belong to our loyalty program, which is about 10% of our overall population. And we have 27 DSW warehouses and 112 Shoe Companies -- 113 Shoe Companies -- sorry, we just opened one -- across Canada.

Now let's take a look at The Shoe Company, which is my other passion. If you ask about the difference between the DSW segment and The Shoe Company model, I think the videos tell it all. The Shoe Company is a small, friendly, family based retail chain. Quite frankly, we're a small scrappy team, but we love our Shoe Company business. We love that we make it easy for our customer with a carefully edited assortment in a simple, shoppable box, and most importantly, conveniently close to her home.

As I said, we are a family footwear solution, and 21% of our business is Kids. Overall, what our customer is looking for from us is athletic, comfort, seasonal, and everything she needs for her family. But in smaller markets, we're often the only game in town, so we make sure that we have an edited assortment that meets all of her needs.

We just completed a significant research project with Maru/Matchbox, both with customers, and more importantly, with non-customers. As part of our strategy to maximize the Shoe Company opportunity, this gave us some excellent actionable insights. So who is our customer? She's likely married, she usually has kids at home, and she's almost always a working home.

But here is the really interesting thing. As busy as she is, she loves to shop for shoes. More than half of our surveyed customers describe themselves as shoefies and have bought at least five pairs of shoes for themselves in the last 12 months, in addition to the purchases they'd made for their family. And here's what she says about us. Our great Kids assortment is a key differentiator for her, and we're definitely her seasonal destination, whether for sandals or for boots. But most importantly for us, she rates us above our competitive set on almost every criteria.

The two key takeaways that we had from the Maru survey are to get a larger share of our shoefies' wallet by ensuring we have exactly what she wants every time, and the critical important of driving top funnel awareness, as we actually do a very good job of converting the customer for consideration to purchase once we get them either into our store or onto our website.

This is to help you understand the very significant difference between the two formats. When you think about the success of the DSW Warehouse, it's in a 20,000-square-foot box in markets of 400,000 people or more. But here's the beautiful thing: The Shoe Company is successful and highly profitable in 4,000 square feet in markets as small as 50,000 or even less.

It reminds me of the high school experiment that we all did, which taught us that there's always room for the grains of sand, even when the jar looks like it's already full of rocks. The Shoe Company is just like that sand. Our small boxes in smaller markets close to where our customer lives provide a very broad network of storefront marketing, of efficient fulfillment, and ease of pickup and return for our customer. That's exactly what makes us a powerful last-mile solution.

And to further leverage that last-mile network with the launch of the new digital platform that I'm going to speak more about shortly, we'll expose the much broader DSW assortment on The Shoe Company website as well to ensure that we're maximizing not only her assortment options, but our inventory productivity. And we'll build the widest possible reach for Designer Brands' digital business in Canada that way.

So, what are our strategic pillars? It's around differentiated experiences, both between the two banners in Canada, as well as against our competition; it's about leveraging the scale of designer brands for the Canadian business; and it's about our growth engines, both digital and bricks and mortar. And all of these things will help us drive a 19% operating income CAGR over the next three years.

You heard from Bill that loyalty has been a key driver in the DSW segment success story. Up until now, in Canada, both The Shoe Company and DSW have shared one common banner agnostic rewards program. More clearly defining and supporting the two separate banner propositions on all touch points is a key objective as we go forward. So in support of that, as part of our commitment to delivering an authentic DSW experience in Canada, we'll be launching the hugely successful DSW VIP program in Canada in Q2 of this year. We can then leverage the very rich information from our Maru survey to tailor a dedicated loyalty program that creates an emotional connection with our Shoe Company customer, and that will launch in fall of 2019. Oh, sorry. Phase one and phase two.

This is really big news. Moving from a 1.5% spend to a 2.1% spend gives us a 14% increase in our marketing dollars. This increase spend is critically needed to drive the engagement and frequency with our existing customer, but even more importantly, to build a new customer acquisition. As I called out earlier, this was a key action point coming out of the Shoe Company survey, which clearly identified that segments that we should target with this increased spend. And again, in keeping with our commitment to deliver on a consistent and authentic DSW experience, as of this spring, we're mirroring the DSW U.S. marketing campaigns in Canada for that banner.

Leveraging scale is a significant win for the Canadian business. Our acquisitions by Designer Brands is a game-changer for us in Canada. I liken it to suddenly having a big brother and being able to play with all of his toys. We'll have access to a free trade zone this September, which will allow the businesses on both sides of the border to best use shared inventories. This will be a particularly big win for the private brand business, and it will facilitate the significant growth that both Bill and I have planned in partnership with Simon and the Camuto Group. Going from 150 locations to being part of a thousand points of distribution clearly has a significant opportunity with vendor negotiation, not just in terms of pricing, but also in terms of access to exclusive product and special makeups. And even things like associate training programs and best practices are greatly enhanced by being part of a larger entity.

But what's the biggest leverage win? It's about digital. Our digital replatform would absolutely not have been possible without the access to the award-winning U.S. ATG platform and the access to the IT team and all of their incredible best practices that Bill just spoke to you about. The Canadian footwear business penetrates at about 19% to total for digital. And I'm here to tell you that in the past, we at Designer Brands in Canada have lagged significantly behind that number and significant behind DSW segment's penetration in the U.S.

So, this is a really big deal for us. Our move to the ATG platform in April will address not only our functionality, but much more importantly, it will enhance our consumer experience on both banners' websites and will allow us to more than double our e-commerce revenue by 2021. And although this growth sounds very high, it's actually completely consistent with the results the DSW segment has already shown and delivered in the past.

We have room to grow both DSW and The Shoe Company. And not very many retailers have the appetite or the ability to make that statement. Quebec represents 25% of the Canadian population, and we're currently not in that market at all, so definitely an opportunity. We'll also continue the expansion in smaller markets for The Shoe Company right across Canada as we continue to build the reach of our last-mile network.

So, in summary, here's how we're going to win. We'll connect with our consumers through new banner-specific loyalty programs and significantly increase marketing investment. We'll leverage the scale of Designer Brands through shared inventories, vendor negotiations, and common platforms. And we'll drive growth through increased digital penetration and organic expansion in Canada. And we will deliver a 19% operating income CAGR over the next three years.

Thank you. And I'd now like to introduce Simon Nankervis, President of the Camuto Group.

Simon Nankervis -- President, Camuto Group

Thank you, Mary. Bill and Mary have already spoken to you about the unique components of their business models and how Camuto Group and Camuto-produced products are going to play into those models. I'd like to take a little bit of time this morning and explain to you what is Camuto Group and the world-class digital design and sourcing platform that we developed.

In November of last year, Camuto Group became part of DSW, which is now Designer Brands. And as part of that, we inherited design and sourcing and branded services. We have three major brands -- our namesake brand, Vince Camuto; and our licensed brands of Lucky and Jessica Simpson. And we believe that with the addition of Camuto Group, we are positioned to drive the future of Designer Brands. We're going to accelerate our growth into the private branded business. We're grow our existing branded business through our existing retail partners. And lastly, we're gonna expand our direct-to-consumer capabilities, which to this day have been very limited.

Our mission is simple. There's a lot of words, but if you think about it, we do two things. We design great shoes and brands that customers want to buy. That's what we do. How do we that? How did we get to this place? I want to take a couple of minutes just to walk you through the history of Camuto Group so you can understand how we got to this place.

In 2001, Camuto Group was founded through a relationship with Dillard's and Vince Camuto. At that point in time, Alex Dillard granted Vince the permission to build his exclusive brands. 18 years ago, this company was founded on the development of private brands. In 2002, we landed our first license agreement with Max Azria for the development of BCBG. And over the next five years, that brand grew into a significant footwear brand in North America. In 2005, Vince, as a visionary and an entrepreneur, recognizes the value of celebrity. When you think about it, 2005.

Today, we talk about a number of brands and number of celebrities, but that was at a time when celebrity was just starting. And they signed the master license to Jessica Simpson, and we still have the footwear license today. And that brand still represents north of $150 million of retail sales for our group.

In 2006, Camuto Group partners with Tory Burch to develop probably one of the largest and strongest North American footwear brands today. And the relationship has just ended. In 2009, at the request of his retail partners and after a number of people saying, "Come on, Vince, why don't you have your own brand? You do this for everyone else. You can it for yourself," they then launched their namesake brand, Vince Camuto, and they entered the license for Lucky brand. In 2010, they begin to license the brand Vince Camuto into a number of our categories -- men's apparel, fragrance, women's apparel -- and that licensing continues today. We also launched vincecamuto.com nine years ago.

In 2013, the company continues its expansion by launching Louise et Cie. And then in 2015, two big events happened. One, the company divests itself of the master license to Jessica Simpson, to sequential brands, and the Simpson family, but retains the rights to the footwear. But more importantly, in 2015, the founder and entrepreneurial leader of the company passes away. Most companies at that point look to their executive team and say, now you have to stand up, because without that visionary and without the patriarch of the family leading the company, you can only go one of two ways.

This team stood up, and in 2016, they had their best year ever. They continued to expand their portfolio and acquired a number of other brands, including the acquisitions of Sole Society, and they produced the most numbers of pairs of shoes the company has ever produced, 33 million pairs. 19 million pairs of private branded footwear, 14 million pairs of branded footwear.

In 2017, the company [audio cuts out] moving into a new state-of-the-art distribution center which was only just completed now. And then in 2018, the company goes through a sale process with a number of significant footwear companies participating in that acquisition process. And what's important about that process is this was not a process where it was a company who won because they paid more money than another company. The company that won the right to continue with Vince's legacy was the company that they chose, and that company was Designer Brands.

Who we are. So if you think about our history and contemplate everything that we've done, we have three very clear revenue streams. We have private brand, where we design and source product for retailers and for vertical brands. We have our branded business, where we own brans or we license brands. And then lastly, we have our direct-to-consumer business through vincecamuto.com and solesociety.com.

We have a common set of key competencies that run throughout all [audio cuts out] business. Those competencies have been built over our 18-year history. It is a muscle that has been honed. It is a group of talented individuals that have been assembled, and it is a global scale. If you think about it, the vision that we had for Designer Brands, there was one piece of that puzzle missing. And Camuto Group was the missing piece.

By bringing Camuto Group into the family, what we did was we de-risked the design and sourcing operations. Roger laid that vision out for you earlier. And all we're asking for Camuto Group to do is what we've done for 18 years -- make great shoes that people want to buy. It's product that we make for vertical retailers. It's product that we sell into wholesale. It's a product that we sell to the consumer. It's what we've done for 18 years, and we're just being asked to continue to keep doing it.

What is essential to the success of Camuto Group and our history of building and designing brands? It's our fundamental ability to understand what today's customer wants. And it's not just the ultimate customer; it's what our retail partners want. We spend a lot of time in meetings with our retail partners talking about what is their consumer looking for?

What does our assortment need to look like? How does our assortment fit their needs? It is a company that is known for exceptional quality. We walk into meetings and people say to us, "Hey, I've got a little bit of an issue with this shoe. Can you talk to me about it?" And we look at the shoe and go, "We understand where you're coming from." We go, "But you're asking us to stick to a higher standard than you expect other people." And they go, "Yeah, because you're Camuto. We expect it from you."

We give great value to our retailers, and we give great value to our customers. If you buy a shoe from us, you know you can rely on it. And we have industry-leading design and sourcing services. We are a company that was founded on it. Think about our DNA. Go back to the beginning. 18 years of doing this business for other people. So all we're gonna do is what we do best: keep doing that. Designing and sourcing great product and marketing great brands that customers want to buy.

Over the past 18 years, we have built an extensive and diverse global infrastructure around design, sourcing, development, production, distribution, and wholesale. Think about it. 50+ factories in 13 countries through six global design offices. Contemplate what we have done. We have managed to de-risk what DSW would have had to have done itself. Designer Brands has inherited an ability to access a global infrastructure without taking the risks. We don't have the loss of time. We don't have the potential of missteps. So how does this all come together? What are we gonna do with this amazing machine that we've now brought into the family?

We at Camuto Group are going to do three things. We're going to accelerate private brand through our existing partnerships with a core focus on accelerating our move into DSW private brand. We're gonna grow our branded business, so continue to partner with the retail partners we've got today and figure out how to grow that business. And lastly, we're gonna innovate through speed to market.

Now let me take you through each of those. As the leader in private brand and as a business that we've been doing for 18 years, we partner with most of the major retailers, and we partner with a number of vertical brands. In providing these services, we reach a billion dollars of retail sales and produced last year 12 million pairs. If you think back to the founding of our company, Alex Dillard granted us permission to develop his private brands. He saw the value of the town in the time that it had been assembled and invested in that town. 18 years later, we continue to do that business. We've just renewed our agreement to go forward, and we will continue to make great shoes and product for his floor every single day.

At the end of the day, we are a company whose DNA is founded in developing brands for other people. How do we do this? There's a lot of retailers there. There's a lot of brands there. How do we do this and manage to maintain the uniqueness of each brand? Firstly, we separate our design services so that physically, they're in different places. But most importantly, we have a unique process that ensures that no matter what happens, each brand is pure to itself. At any point in time in the cycle, and brand could be at one or two points in this process, depending on seasonality.

So I'll take just a minute and just walk you through the cycle so you understand how we go about this. Firstly, we work on brand DNA and vision with each retail partner so that we're focused exactly on what the brand means, what that partner wants the brand to represent, and how it fits into their assortment. We then do research and development around trends, materials, constructions, because at the end of the day, the espadrille in Kelly & Katie is not the same as the espadrille in Rebecca Minkoff. We then take that and then work around a marketing and PR program to determine how that all comes together. So, we're thinking about how that product is going to come to market, how the customer is going to see that product, and how the brand comes together.

We then work with our retail partner on segmentation, which is critically important because not every customer is the same. We look at geographic data. We look at demographic data. We look at sales history. And there is a lot of to-ing and fro-ing. And this is a true collaboration where the companies are coming together. And then we look at the ultimate distribution, because product that's going to go online versus product that's going to be in store have different attributes and different things people are looking for.

And then lastly, we look at brand extensions. And I'm not talking about we're going to go and do something we don't do. We think about our core assortment. So to give you an example, in Lucky Brand, we're known for boots and booties. We have a great sandal business because we focused on how would that customer that loves a Lucky bootie also want to buy a Lucky sandal. And that all comes together and brings our design and sourcing company to one.

But as we think about growing it, central to that is DSW's private brand. So the initiative to grow DSW's private brand is something that's built into the financial models that Jared and Roger have talked you through, and it's in Bill's model. But what's important to think about here is capacity. As we ramp DSW within the Camuto Group over the next three years, our connection is only going to be on par with where we were a couple of years ago. At that point in time, the only thing that really has changed is Nam went bankrupt and Tory Burch took design and sourcing in-house. For me, yes, Tory took it in-house. Not that different to what we're doing.

We're confident in our ability to hit our production targets. And I don't think it's a huge effort because we've done it before. But at the end of the day, what does all this stuff mean? What does it mean to you as an investor? What does it mean to our shareholders? What does it mean to our associates? I think we're pretty clear, we know how to design and source and make shoes. We know how to make shoes that sell, and we know we've got the capacity. So what is the real secret sauce?

The secret sauce that Camuto Group [audio cuts out] Designer Brands is capturing margin. In the past, DSW has made shoes with a plethora of suppliers. Camuto Group is one o those. None of them have done it as a favor. They've all done it to make money. So, everyone has made money making shoes with DSW. What's changed? One thing. We no longer have to actually send that product out to get made. We make it in-house. So we reduce our product costs and we capture the margin.

At the end of the day, we're not in a place where every private label, private branded shoe that goes through Camuto Group delivers increased profitability to the Designer Brands enterprise. And that's a huge thing, because that's the magic. That's where it all comes together, because by doing this, the more shoes that we source, the more shoes that we make, the more shoes DSW and The Shoe Company sell that are produced by Camuto, the more profit is delivered to the enterprise. So at the end of the day, you can [audio cuts out] one of our big focuses is around building this capability and ensuring that we are making a lot of shoes to be sold at DSW, The Shoe Company, and produced by Camuto Group.

Our second pillar is our branded business. We are committed to growing our branded business. We can do this two ways -- through our existing retail network and through our direct-to-consumer channel. We currently have 5,400 points of distribution for our branded business through most of the major nonathletic footwear retailers. We've done this for the last 18 years. We know how to build brands. We know how to build product that customers want to buy.

Our largest brands today are Vince Camuto, Lucky, and Jessica Simpson. When you add those brands plus the risk to the brands in our portfolio together, we represent $1.5 billion of retail sales and about 10 million pairs produced in 2018. There are a number of brands on this chart that are not broadly distributed in the market. So as you're sitting there thinking, well, hang on, what's all this mean, this whole DSW, Shoe Company, Camuto group thing? There are a lot of brands here that could be produced by Camuto for DSW that will not impact our wholesale business, because we're not distributing them anywhere else today.

Our retail footprint is 5,400 doors in North America. 5,400. We are highly focused on growing this business. We value our retail partnerships. It is a diversified customer base. It gives us a very different way to analyze the market and a very different way to analyze our products, and we're really good at segmenting the way our brain shows up. We've been doing it for 18 years. It's not something that we have to figure out [audio cuts out]. It's just what we've been doing.

The commitment to growing our retail partners is a core focus of myself and our team. We spend a lot of time on those relationships, and we'll continue to spend a lot of time on those relationships because we believe in those relationships. And as Roger said earlier, at the end of the day at Camuto, we want to do one thing. We just want to sell a lot of shoes, and we want everyone to sell them. We want Nordstrom, Macy's, Dillard's -- we want them all that have their best year. We just want them to have it selling our shoes.

But what's the real opportunity here to grow our brand or business? Where is the real advantage? It's in digital. It's in direct-to-consumer. You heard Roger say earlier today that the vendor community has taken 12% market share. Unfortunately, or fortunately for all of you in this room, we're not one of those. We've been really bad at it. It's not something that we're focused on because we've been focusing on building brands, building product.

If you think about the digital capabilities that Bill explained to you that DSW has, and the infrastructure that Designer Brands has built, w have the perfect stepping stone to develop direct-to-consumer capabilities. We view it as untapped low-risk opportunity. And at the end of the day, if we just bring our desktop and mobile to the same place as DSW. We have a huge opportunity for growth.

What's even cooler is, think about this. As part of Designer Brands we have just got access to 1,000 points of distribution that are owned by our company. 1,000. What does that mean? It means that a customer shopping on vincecamuto.com or solesociety.com could, in the future, pick their shoes up at a store, a DSW store, take the return back to a DSW store. What happens if they take a return back?

We don't want them to have any returns. But if they do, Bill will then convert 28% of those customers into something else. Today we don't have that ability or capacity. That is a lost sale. Most other vendors are trying to figure out the brick and mortar play. How did they break into this place? And we've lucked into it because we're part of one of North America's largest footwear retailers.

Our view is today we're at about 1% penetration to total Vince Camuto [audio cuts out]. Over the next few years, we want to grow that to 10 to 15%. Sounds like a pretty lofty goal. Sounds like something that might -- is it realistic? We think it is, for one reason. DSW has 30 million loyalty members. 30 million who are shopping every day. They're looking for product. So think about this. Customer goes on dsw.com, buys a Steve Madden loafer. We look at that and go, hey, we can match that customer because we've got great loafers on Sole Society, in Enzo Angiolini. We redirect that customer to Sole Society. What does that mean? Think of the ability. Contemplate the upside of that business and the potential for growth.

As part of one of North America's largest retailers, we have three things going for us today. A thousand retail doors. One of the most innovative platforms and loyalty programs in North America. 3,500 third party doors. It's a unique way and a unique opportunity to think about innovating the footwear industry.

So now to our third pillar, speed to market. As you've heard Roger and Bill say earlier, we are a company that is founded in innovation. We're a company that our business model is all about innovation, and the unique business model we've assembled today is truly innovative. And at Camuto Group, we're thinking of innovation [audio cuts out] we're thinking about it through a way that how do we get product before the customer faster?

How do we get that product in front of her at a time when other people aren't before her? The community gives Steve Madden a lot of kudos for speed to market, and it's well deserved. They do an amazing job at it. But think about what we've got. Our point of [audio cuts out], our digital play, plus 30 million loyalty members who want to engage with us, who want to talk to us every day. We have everything plus more.

We have two ways we're thinking of speed to market. We have our internal and our external. Internally, we have 25 years of sales history. We have geographic and demographic data, and data is crucial. That data enables us to understand what the customer wants. We can test and react faster than ever. We have our external customer, who have a very diversified customer base. Our customers at Nordstrom, Dillard's, and Macy's is diversified from our customer at DSW. It provides us with an opportunity to test and react in their forums with different products and different brands. When you bring all of this together, we're able to actually test a much broader cross-section of the community than ever before.

We're able to do a number of things through speed to market. We're able to identify trends earlier. We're able to deliver test and react product into our own doors, which will enable us to identify what those trends are, so in November, when we're testing sandals down South, so that hopefully when it gets [audio cuts out], we already know what's gonna sell. We're able to expand our branded business by a key focus on ensuring that we have innovative product in our retail partners that their customer wants. Because some of those customers are early adopters. They're looking for that next thing today.

And then lastly, we provide an awesome experience. Because at the end of the day, this business is all about the customer. She has more information today than ever. The customer understands what they want, when they want it, and how they want it. And brands that don't innovate and show that they [audio cuts out] don't succeed. So that's our third pillar. Speed to market, so we stay relevant and so that consumers want to buy our brands.

So how do we win? As part of Designer Brands, Camuto Group will continue its strong foundation in design, sourcing, and brand marketing, and we're going to use the Designer Brands platform to unlock our opportunities as one of North America's largest footwear retailers. To reiterate, moving forward, we're gonna win by accelerating our provide brand portfolio. We're going to grow our existing branded business. We're going to increase speed to market. And through doing these three things, we're gonna grow operating income by $26 million in the next three years. And to achieve these goals, we're gonna do one simple thing. We're gonna do what we've been doing for the past 18 years. We're gonna go make great shoes at great value that customers want to buy. That's it.

Now I'll hand you back to Roger for a few additional remarks. Thank you.

Roger Rawlins -- Chief Executive Officer

Good job, Simon. First of all, thank you for staying with us for the last hour and 45 minutes. I know it's a lot of materials. But to summarize what my three partners have shared, I want to talk about these four boards that we have. The first one, we are brand builders. I want you to think about what you just heard. We have the capability now to build brands for DSW. A capability that we've been doing at DSW on behalf of others, we can now bring to life for our own selves, as well as going direct-to-consumer for the brands that sit within the Camuto portfolio.

Number two, we're delivering differentiated experiences. We didn't get a lot into the services, but we've shared this publicly. What we have done with a couple of locations that are carrying the nail bars, the attachment rate to footwear, the additional spend in footwear, we're getting from a consumer who's engaging with our nail, which is about a 60% increase in their closet, is what we're getting. It creates a differentiated experience. We also have these 30 million rewards members across North America that we're going to bring to life in different unique loyalty experiences.

And then when you think about the power of scale, our buying power now is unlike anything else in our industry. We're going to go after that. I mentioned about how Debbie's going to ensure we go and get that, because we are the largest footwear enterprise between manufacturing and what we're doing in retail. And then finally, how do we leverage all of this scale so at the end of the day, we have this common knowledge across the business? Mary knows how to run small markets. That's not a capability we had at DSW. Frankly, we've tried it, and it hasn't worked. We can leverage Mary and her team to bring that to life in a different way.

All of those are examples of what you've heard today. So, we appreciate your time. We're gonna take a quick break. And then when we come back from the break, what the financial plan looks like, as well as talk about our Q4. Thank you.

Jared Poff -- Chief Financial Officer

Something to drink. And we open this up here. So we're all here to figure out what this all shakes out to mean. First of all, I do want to kind of remind you so far of what we've heard today. You heard from Roger sort of why we evolved our business model and we became more than just a U.S. retailer, and then you heard from Roger, Simon, Bill, and Mary sort of how we evolved by buying the world-class Camuto organization and by buying the Canadian retailer Shoe Company. Now I'm going to tell you what this all shakes out to mean. And I've sat in front of you many, many times, and you know I don't easily show excitement. But I am going to talk about how big and exciting this is.

And what's even more exciting to me is that all we need this business to do is to keep doing what they've been doing for the last 20 years on an infrastructure that we already have in place. Camuto just needs to keep making stuff that people want to buy, and DSW and The Shoe Company, they just need to bringing people [audio cuts out] websites and converting them once they do. We've doing this all day every day for the last 20 years. But now the magic is we get to keep the margin that's traditionally been flowing outside of the company.

Roger revealed my punch line, and that's $2.65 to $2.75 a share in 2021. I know for a fact that is significantly better than any of your models have out there today. The cool thing is, we're not needing anything heroic to be done from any of our businesses. We are planning on reasonable, consistent comps from our retail segments, and we need Camuto to maintain their current business while bringing on DSW's private label, which they have more than the expertise and the capacity to do, as you saw Simon explain. But when we do this, the accretion to the bottom line is meaningful and the cash flow we create is substantial.

So let me talk a little bit about 2018. And I may jump off script a little bit because this continues to be something that has obviously been hard to figure out. And when you look at our stock price today and you see that we hit exactly where we said we were going to hit, on top of a year where we grew earnings by 17%, we raised guidance twice, and we're ending the year and we're back to almost where we started in the stock price at the beginning of 2018, there's obviously some story that needs to be made more clear.

We delivered one of the strongest comps in our history and one of the strongest comps in modern-day retail at over 6%. This was driven by investments in marketing, loyalty relaunch, key items, seasonal, kids, and talent. I'm gonna give you a few data points. Our women's business comped at 5%. Our men's business comped at 1%. Accessories comped at 6%, and kids grew by 74% as we completed our rollout to all of our stores prior to the back to school season. Footwear comped at 6% in total.

We saw our gross margin improve by 100 basis points, driven by lower unit costs from our vendors, key item performance, occupancy leverage, and the elimination of the Ebuys division. We did see some expense deleverage as planned through investments in marketing, and we had our bonus flex. And then we also had Camuto and the Canadian operations to consolidate within the year, which do have a higher SG&A leverage model.

We delivered $1.66 on adjusted EPS, right smack in the middle of where we said we were going to, because don't forget, you need to add back the $0.12 of the wind-down costs related to the executed businesses of Shoe Metro and the town banners, which we've been talking about all year.

Q4 was really just a math equation between the first three and ending the year at the $1.78 on the management adjusted. But I'll talk a little bit about that. We had strong positive comps, which continued into the fourth quarter. Boots were a standout category, as planned. Women's comped at a +5. Men's was down 2; accessories, +6; kids volume up 87%; and the footwear comped at 5%.

Our gross profit rate did decline, much of that as planned, as we've been talking about the entire year, our 53rd week, which not only lost a week of volume but also shifted a clearance-heavy week of February into the quarter, and we lost a regular price-heavy week of November. All of that happened, so we had some margin compression from there, as we had planned, and we had deleverage from the fact that we lost the 53rd week of sales on our occupancy. Let's remind everyone, this is a calendar shift only. It was not an acceleration in the business, and it was planned, and it had been articulated.

We did have to consolidate the Camuto Group, which was unplanned, at the beginning of the year, and they do have a slightly lower risk profit rate. Q4 was exceptionally low for the Camuto Group. As I explained during the transaction, they have been trying to get out of a situation where they were having late deliveries. Their factories were not able to bring them up to speed because of late payments.

And all of that is what we've been remedying since we bought them. But that did weigh on the fourth quarter. Much of that has already been fixed. Factories have been brought up to full capacity, and all of the back payment have been paid. But as I mentioned during the transaction, you're going to see that work its way through the cycle throughout 2019. Given the nine-month lead time in footwear, we do have a longer lead time before we'll start seeing those benefits and those fixes at Camuto start to show up.

On the operating expense side, they were slightly elevated. One, the 53rd week, the loss of that put some deleverage into the model. On the consolidation of Camuto, Camuto is a much, much higher SG&A rate business. Fourth quarter 2018, unfortunately, was exceptionally heavier, though, from a rate standpoint, because of the sales hits and the discounting that needed to happen, as was explained during the transaction. So overall, our operating profit margin came in at just around 6.2%.

On a normalized basis -- I'll give you a little bit of color -- on a full year annualized basis, we expect Camuto and Canada each to run about half the operating margin rate as DSW, but entirely incremental dollars. These get to these normalized margin rates between now and 2021. However, I want you to remember the real story about why we bought Camuto, which you've heard here, is not about the margin that it generates on its own, but about the infrastructure that it provides to the Designer Brands Inc. organization, which allows for massive accretion as an [audio cuts out].

Adjusted EPS for the quarter was $0.07 loss, but that included $0.06 related to the wind down of our exited businesses which have always been excluded from guidance. We ended 2018 with significantly strong balance sheet even after funding two acquisitions, [audio cuts out] dividends, and repurchasing 2 million shares of stock.

We upsized our revolving credit facility with the Camuto transaction and we did draw on this facility to fund the transaction and the share repurchase activity, but as I mentioned at the time of the transaction, that can be repaid within two years with generating cash flow if desired. We maintained a strong liquidity cushion of cash and investments on top of our committed cash facility due to our desire to have a conservative financial structure.

So, let's talk a little bit about the long-range plan and what all of this shakes out to mean for Designer Brands. Although we believe there are multiple opportunities to outperform, we've built the LRP to be comfortably achievable. We've planned 5.6% CAGR and revenue. I will say, and I think it's something you're going to appreciate, we have a very heavy-weighted 2019 revenue increase. That's because we're going to be consolidating the full year of Camuto and a full year of Canada.

For the rest of the businesses throughout the horizon, we have low-single-digit comps planned for the DSW business, continued to be driven by key items, kids, services and engagements that you heard from Bill, and mid-single-digit comps in Canada, driven by the website replatform, the loyalty relaunch, and the assortment, all of which will be powered by the DSW experience and infrastructure already in place.

Stabilized non-DSW wholesale sales at Camuto and growth of the direct to consumer business at vincecamuto.com will be powered by the DSW infrastructure and the expertise in place, as Simon and Roger talked about. The tag line here -- we are growing market share. By doing so, we're doing it by the way we've proven we've known how to do for the last 20 years doing what we do.

Retail needs to continue to run a retail business, draw people in and convert them. Camuto needs to create products that people want to buy. We don't need dramatic new investments or new initiatives. We just need to leverage the investments that are already in place and continue to innovate and stay engaged with our customer. That includes all of our customers.

One stat I would like to point out, however, and Bill touched on this, we are setting the stage for over $700 million of annual sales from Camuto-produced products. That's going to represent roughly 25% of our sales in 2021. That's going to be made up of 25 different national or exclusive brands.

These products aren't necessarily planned to be topline driving to DSW but our topline driving to designer brands, but the real benefit is that provide substantial accretion to our gross margin line and we keep all of that gross margin in the family. This also provides us new leverage points on the 75% of our assortment that's bought not from Camuto. As Roger talked about, we're going to have much better product-price transparency where we're going to know for a fact what it costs to make a shoe.

As we go into negotiations, we're going to have that information and be able to utilize that to our benefit. Additionally, as we continue to drive customers to our websites, to our stores, and create differentiated experiences, we are going to be at a different position of lenders with our vendors that are not Camuto. We'll be able to use that to have them compete for spots on our floor and on our website, a different position than where we've been so far in our history.

So, this is where all the magic comes in. First, Camuto's existing business will provide incremental gross profit dollars to the enterprise. But bigger, when we sell Camuto-produced products, we see a 15% to 20% lift in gross margin. The results are sustained and meaningful. As penetration grows, we're going to generate nearly 2.5% more gross margin across the entire enterprise.

Now, this certainly requires coordination and planning, but we aren't asking our businesses to do anything they haven't been doing for years. I will say it again -- we just need Camuto to keep making shoes that people want to buy and we just need DSW to keep driving people into our stores and websites and converting them once they do.

We just heard from Simon, Bill, and Mary how they plan to keep all the trains moving. Now, we're just going to make sure they're all going to the same station at the same time. Reminder -- Camuto will be producing over 25 different brands. That's just what they produce today. So, we're not talking about creating just one brand for a whole shop. It's still going to be a very diverse product offering. What this lets us do is it lets us in get in control of our own destiny.

So, when it all shakes out, we're talking meaningful accretions of the EPS, a 15% CAGR over the next three years. We just need everyone to keep doing what they do on the infrastructure that they already have in place.

So, I am very excited about that model. I'm also very excited about what isn't in the model but I think has huge potential for upside. Let's start with the first thing which I have touched on. We have not baked in any substantial improvement in gross margin as a result of our increased negotiating power with the vendors that produce 75% of our products that isn't Camuto. With the pricing transparency and the strength and leverage position, we do expect that there's the opportunity to garner real gross margin improvements.

We also haven't baked in any operating expense synergies, but as you know, at DSW, we're pretty good at finding those. Not only that, we've also recently started partnering with our sister companies who are affiliated with the Schottenstein Organization and are now banding together when we go to market for products and services that are not merchandise that we sell and we're able to go to market as a much larger enterprise to buy those products and services.

We're also always looking at ways to grow our affiliated business group. So far, we've seen that ebb and flow. What we haven't been able to do yet is bring a different model to the affiliated business or the leased business. That model is now not only can we run your footwear for you, but maybe we can also utilize our Camuto infrastructure to create private labels for you and bring you the types of benefits that we're seeing at the gross margin to the other retailers. And by the way, maybe we'll show you how you also can leverage loyalty and rewards and other engaging experiences so that they're winning and we're winning.

One of the most exciting things, though, that I think isn't baked into the model but I think has real traction and that's bringing the shoe company expertise and the ability to be that last-mile solution to the US. As Mary explained, up in Canada, The Shoe Company works to kind of fill in where the DSWs cannot reach. That's a whitespace here that we know is big.

How big is it? If you look at who's meeting that market now, you can just see the players -- Famous Footwear, Shoe Carnival, Shoe Show, and Payless all roughly had $1 billion in sales in almost 1,000 stores or more apiece. There's a there there. But something if we do figure out how to bring The Shoe Company concept to the US that those other competitors don't have is the power of the local DSW in that market.

Imagine if you're able to have the localized assortment that's inside of those stores for the customers that do walk in every day, but also when they have those other special needs, you've got the entire DSW digital assortment available to be there within a matter of hours from the local DSW store or when they get a digital order and they need to bring it back or try something on for size, they can do it at their local shoe company store in the US. We've proven we know how to innovate and create value-adding solutions. We're going to figure this one out too.

So, the fiscal 19 outlook -- the LRP is exciting and it's very much within reach, but I do want to share what our near-term looks like. As I mentioned before, we have revenue growth plan fairly strong for FY 19 where you do consolidate [audio cuts out] in Qs 1-3 of Camuto. So, we're planning a low double-digit growth in revenues.

Our comps for the retail business -- low single digits with continued momentum from 2018 as we lean on key items, some loyalty relaunch that Bill talked about, and our kids continuing to comp strongly. Canada is projected to comp in the mid-single-digits with their web platform redesign, their loyalty relaunch, and increased marketing spend. Camuto has projected to contribute a little over $400 million in revenue.

Our gross margin will see a slight uptick. DSW [audio cuts out] relatively flat-ish. Canada will de-lever somewhat because we have to absorb Q1, which is historically a lost quarter. I'm going to talk about that in the next slide. Camuto is going to see substantial improvement in the gross margin rate over last quarter. The rate will increase several hundred basis points.

Note that the improvements that you've heard us talk about are still in the works. Given the lead time in footwear, we expect to start seeing the results [audio cuts out] in 2020 and beyond, but we are making all the headwinds we had talked about at the transaction at the Camuto enterprise. Opex is expected to de-lever slightly. DSW's rate is actually going to lever slightly from marketing rationalization and lower bonus planned. Canada's moderate deleverage from the Q1 consolidation. And Camuto is expected to slightly leverage. Our tax rate is planned at 27% and we plan 81 million shares outstanding.

Now, I'm probably going to jump off script a little bit and talk about this slide because, again, it appears the story is very hard to understand. Let's look at what our EPS is shaking out to be. So, EOS for FY19 is shaking out to be a 5% to 11% growth year over year when you look at a full year to full year basis. As always, as you might expect, we do have noise because of the fact we have two consolidations and a divestiture last year. So, let's start from the top.

Our adjusted EPS was $1.66 but that included $0.12 related to the wind down of exited businesses. So, if you add those together, our management EPS is at $1.78, which was right in the middle of our guidance and that's right where we're saying is the base for 2019, except for the fact that we also have three quarters that we didn't have to consolidate last year. Q1 of Town, which is always a lost quarter, and Q's 1-3 of Camuto, which also generated a loss. A total of those two are $0.07. So, as we're looking at year over year growth, we're looking at an EPS of $1.71 for '18.

When we built our bottoms up budget in saying what can these individual businesses do over the next 12 months versus what they did the prior 12 months, we came to $1.80 to $1.90, which represented a 5% to 11% EPS increase.

Here's where I'm jumping off script a little bit. If I look at your models and I see where you have 2019, you're roughly at about a 9% growth over our $1.78. If you were to understand the quarters that we didn't have to consolidate and you were to do the same math off $1.71, you're right in that midpoint of where we are.

Said another way, if you take that $0.10 and just move it into 2020, we're talking -- and then look at where we have planned 2020 to 2021 -- we're talking more than double that $0.10 in 2020 that still needs to be added into your model. So, it's still a very impressive model. We've got a lot of explaining that we'll help you work through, especially in the one-on-one calls afterwards, but we're very excited about the year over year growth that we have here.

Camuto is expected to do substantially better this 12 months than the last 12 months, but they all still expected to generate a loss in FY19, which we will have to absorb the entire 12 months of. We expect to see a few million dollars of op income improvement versus what we had to consolidate in FY18. Again, the story is one of solid year over year 12-month growth at all of our businesses. There's just some noise due to the calendarization of the acquisitions.

As you know, we've always operated a conservative capital structure posture. While we utilize debt to help fund our 2018 acquisition and share repurchases, we also maintained a safety level of liquid cash and investments. We upsized our committed credit facility with the Camuto transaction to provide ample liquidity. During this time period, we're going to generate robust cash flow annually.

As a point of note, we have returned close to $1 billion to shareholders via dividends and share repurchases. The power of this model improves the cash flow profile and over the next three-year horizon, we're expected to generate over $800 million in cash flow.

We will utilize this cash flow to grow the business and continue to return a healthy portion back to the investors. As always, with our innovation and our technologies, we're going to be continuing to stay relevant there. But most of our heavy investments are already behind us. Now, it's about upgrading, maintaining, and enhancing.

We also see Camuto as a foundation. After we integrity, we may consider what's next for our brand portfolio that could require new M&A of brands and it also might look at our partnership with ABG and how we start to consolidate some of their brands onto our footwear platform.

Just to reiterate, I'm very excited about what we've created, this is a model that is truly unique, a model where the infrastructure is already in place, the required expertise is already functioning, and all we need to do is make sure each division works together to deliver the meaningful accretion to our bottom line.

With that, we're going to invite the speakers back up to the podium and we're going to open up for Q&A.

Questions and Answers:

Jared Poff -- Chief Financial Officer

A few rules around Q&A -- when you do have a question, please raise your brand. The mic will be brought to you so that everyone can hear the question. Please state your name and the firm you're with.

Remember, as we mentioned when we scheduled all of our callbacks, we would like the questions today to be focused primarily to the people that are here and talk about the strategy and the business model. If you have detailed modeling questions, we've scheduled one-on-ones with all of you and I'm hitting the road here in the next couple of days. So, I'm sure we'll be able to answer those for you.

With that, we'll take a couple minutes to bring people on stage and we'll open it up. There will also be questions from the web that are submitted that we'll read as well.

Paul Trussell -- Deutsche Bank -- Managing Director

Good morning. Paul Trussell from Deutsche Bank. Thanks for all the information this morning. I just wanted to maybe start on some of the 2021 plans you provided, particularly the operating income CAGR plan of 13%. If you can just maybe, Jared, touch a little bit more on the puts and takes of that operating income growth, particularly how we think about how the core DSW business contributes to that versus Camuto, Shoe Company, etc.

Jared Poff -- Chief Financial Officer

Sure. When we look at it, we're looking at it as designer brands. So, they're each going to be playing a piece. Of the growth, about 75% of that is coming from the magic that comes from selling Camuto-produced products within DSW. So, as we do that, there is going to be a portion that's attributed to Camuto and then there's going to be a portion that's retained by DSW. At the end of the day, it all shakes out to Designer Brands and about 75% of that growth is coming from that magic. The rest of that is from the businesses just continuing to do what they do.

Rick Patel -- Needham and Company -- Analyst

Thank you. Rick Patel, Needham and Company. I appreciate the detailed rundown of the business today. I had a question on the margins for The Shoe Company and Camuto. I think, Jared, you mentioned they run below the DSW legacy segment. Can you talk about the pathway to margin improvement as we think about these two segments separately. Given you're going to ramp up DTC investments and it sounds like you're going to invest a little bit more on loyalty, is it assume that margins will take a step down before they go up over the long-run?

Jared Poff -- Chief Financial Officer

Both of the Presidents I'd love to weigh in as well -- we are planning for '19 to see a little bit of a compression with Canada. That's primarily because also we're consolidating Q1, which is a loss quarter which we didn't have to consolidate before. From the Camuto side, we're actually seeing a nice margin increase. It's still a loss for 2019, but it's less of a loss than what they had last year. We really see the benefit for Camuto starting where they turned to profitability in 2020 as all of the kind of missteps that were causing pressure on their model starts to evaporate. I don't now if you guys want to weigh in.

Simon Nankervis -- President, Camuto Group

Yeah. I think as you look at Camuto, through '17 and '18 we had the launch of our new distribution center. We had an inability to deliver on time that resulted in incremental SRNA as we were giving allowances to our retail partners for product that we were delivering late. So, we're anticipating as we go through this year into 2020 and now that we're back on track with payments and back on track with shipping, that will decrease over the next 12 months.

Mary Turner -- President, The Shoe Company

And I guess I would just add that we actually are seeing the margin gap close very quickly between Shoe Company and the US businesses, even as you look later into this year and next year. Certainly, we have set ourselves up as we've built our long-range plans to be net-accretive to the overall organization.

Roger Rawlins -- Chief Executive Officer

I think it's interesting on The Shoe Company model and it gets back to that point about the shared knowledge, if you look at historically how much of the inventory carried at a [audio cuts out] DSW in Canada that was aged inventory, meaning it had a birthday, it was -- what was our percentage?

Mary Turner -- President, The Shoe Company

Over 15% -- about 15%.

Roger Rawlins -- Chief Executive Officer

About 15%. That is less than 3% in the US. So, we've entered into some disciplines of making certain you take a rotation, making certain you take your unit letters, which is our form of a markdown so that we can accelerate turns up there. That's going to continue to improve our margins at Shoe Company.

Rick Patel -- Needham and Company -- Analyst

If I can ask a follow-up -- you talked about reducing unproductive brands that you have at DSW and replacing them with better brands made by Camuto. Can you talk about what you need to do in order to make sure the new assortment doesn't end up as being part of this longtail, perhaps, any investments you need to make around marketing or something just to increase visibility of the new brands you'll put in?

Roger Rawlins -- Chief Executive Officer

I think we will take a portion of the margin that we're going to be able to extract from carrying our own private brands and invest that back into marketing to really let the market know how large these brands are. I think the best example is Kelly & Katie. It's our number two brand within the DSW enterprise. Really, the only way in which we market that is through our current loyalty base. So, there are going to be some investments in key brands.

I think as you look at the assortment, the beauty of what technology has provided -- drop ship is amazing -- you can turn a brand on digitally, see how it performs, and then make decisions about what kind of inventory investment you want to make. That's a huge advantage we now have. So, when we talk about narrowing the number of brands, it might not feel that way to use as a consumer because digitally, there still might be a lot of brands, but the ones that our teams are making actual inventory investments in are going to be ones that have to earn the right to get us to write that check. Thanks.

Sam Poser -- Susquehanna International Group -- Analyst

Hi, Sam Poser with Susquehanna. I have a question regarding Camuto Group and some of the expectations there. You talked about growing the business outside of the business you're going to create at DSW. Can you give us some color on the status of those relationships and how you see that growing and why. Then also, can you tell us the story behind Tory Burch, bringing it in-house and when that decision was made and so on.

Simon Nankervis -- President, Camuto Group

Thanks, Sam. I'll deal with the second question first. That decision was made by Tory Burch a number of years ago and we've basically been working through that relationship. We delivered our last product to them in January of this year. So, at this point in time, that's all come in-house. I think at the end of the day, if you look at the decision that designer brands has made to take on sourcing and design, there's a margin play there that you would have assumed that that is a decision that they made.

In relation to the status of our existing branded business, we have 22 brands that we either own or license today. Of those 22 brands, four of them have significant distribution into the wholesale market -- Vince Camuto, Lucky Brand, Jessica Simpson, Louise Et Cie. The balance of the brands are dropship or digital-only.

So, as you think about the way that we develop those relationships, our focus for the Camuto-produced brands within DSW is around the other brands. It's not around our core brands where we already have a substantial wholesale business.

Secondly, as we've been in this business now for six months, one of the things we've been very careful about and one of the things we are incredibly passionate about is maintaining our distribution. We value our partnerships with Nordstrom's, Dillard's, and Macy's for our Lucky Brand, our Jessica Simpson brand, and Louise Et Cie. Those relationships are critical. So, over the last six months, we've worked very closely with those partners and we've been very comforted by the response that we've had to our assortment.

Roger Rawlins -- Chief Executive Officer

Sam, in my opening comments, I talked about this -- 50 years ago, Jerome Schottenstein founded this business with the concept of a lease business and us being a partner to other retailers. That's in our heritage. It's who we are. We want them to grow their business and we're going to do everything in our power to bring to life the vision Jerome had 50 years ago to make certain that we make that happen. So, we're very, very passionate about ensuring that Dillard's, the Nordstrom, and Macy's teams get everything they need from us as a brand. We want them to grow their brands. We just want them to grow it with our product.

Sam Poser -- Susquehanna International Group -- Analyst

Thank you. Just one other -- you talked about your negotiating power now that you understand the pricing structures and so on. But how do you value the power of a brand. You've mentioned Steve Madden. You go to them. They have a shoe that's an iconic Steve Madden shoe. You can say, "Well, we can make that same shoe for less," but they want it from Madden. How do you value that in such negotiations?

Roger Rawlins -- Chief Executive Officer

I don't think you're going to see us saying, "Let's replace this item from Steve with something that we do." I don't think that's it at all. Remember, in my comments, I talked about the top 25 brands or those 75-item brands. Those are still so relevant to the consumer. We're standing by those. If anything, the conversations we've had, those can grow.

What we're talking about is sitting down with Steve and his team or sitting down with Diane and the Claire's team or sitting with David and the Aldo team and saying, "Look, there's now complete transparency in pricing. We know exactly because we did diligence at Nine West. We've owned Camuto. We see the margins people make on product they sell DSW. It is double that than what you make on any other retailer. That game has to change because that's not the way this can work going forward." That's the conversation we're going to have. There has to be equal footing in what they make for us versus what we extract from that. That's the conversation we're going to have.

Sam Poser -- Susquehanna International Group -- Analyst

Would you ever go to a situation where you ask for chargebacks and take backs? That's something you haven't done in the past, but that would probably even the field a bit.

Roger Rawlins -- Chief Executive Officer

Where we're at today, we're trying to figure that out. Those our conversations we'll end up having. To be honest, Debbie and I are starting these conversations now.

Camilo Lyon -- Canaccord Genuity -- Managing Director

Thank you, Camilo Lyon, Canaccord Genuity. So, my question centers around Camuto Group. I have a couple questions, if I may. The first one is -- so, Roger, you just said that you will continue to plan to sell the brand issues the consumer goes and searches for -- Steve Madden ballet flat or what have you. But I believe Simon, in your presentation, you said that you would optimize search for that shoe and redirect the customer to a private label-branded shoe. I just want to clarify that because that was a pretty big distinction between those two comments.

Simon Nankervis -- President, Camuto Group

Yeah. So, what I was thinking is when you think about vincecamuto.com and solesociety.com, what we have the ability to do through DSW is assuming a customer has bought a shoe from one vendor, we now have the ability to take that data and say, "Actually, we have a similar shoe in one of our other dotcom plays where we can now point that loyalty member." So, it wasn't about pushing them from one brand to a different brand.

It was really about using the customer's buying history to enable us to grow our existing dotcom businesses at Vice Camuto and sole society. It's leveraging the data and the information that we do today. So, if you shop online today -- Jared was doing it before he bought some shoes at Vince Camuto -- when he goes online, it automatically pops up the vincecamuto.com site because we're now retargeting you. What we're looking to do is to use DSW as a way of retargeting back into our other platforms.

Camilo Lyon -- Canaccord Genuity -- Managing Director

Thank you. Then my second question is on the Camuto private label business. I think it's a pretty sizable business. You've mentioned repeatedly today the strength of a relationship with Dillard's. How do we think about the fact that one of your vendors is now selling private label to Dillard's? Is that a signal of a potential risk to that pre-existing relationship starting to decay in any sort of way?

Simon Nankervis -- President, Camuto Group

Look, I think it's an interesting question and it's a great question. At the end of the day, there are people every day going after everyone else's business. We've faced it for the last six months and we heard about it even before we entered into the acquisition process. At the end of the day, if we deliver great product on time that sells, we'll keep the business. If we stop doing that, then the business is at risk, it's no different than it's ever been.

So, our commitment to Dillard's and to Macy's and everyone else that we make private brands for is to keep those businesses very separate from what we're doing. I can tell you in conversations with Bill and his team, they're just as worried about other retailers getting access to their data because think about it, we have access to 30 million people from DSW. So, we've been very careful about how we keep those teams separate and how we isolate the information. It's critical. Confidentiality is critical to what we do.

Camilo Lyon -- Canaccord Genuity -- Managing Director

Okay. Thank you. Then my last question is just on the Camuto integration. If you could update us on how that integration of a team into DSW or DBI Inc. has performed and if there have been any defections on the design team that could cause a delay in terms of the production.

Simon Nankervis -- President, Camuto Group

No. I think one of the things that we amazing to us and we even went through the acquisition process was the ability of the Camuto family to stay together. The company went through an incredible process in the last 12 months and over that period had very few people leave the organization. I can say in these six months that we've been engaged, we have had any of our talent, any of our high potential talent leave and we feel really good about the position we're in.

I think what is really cool about DSW and designer brands as a group is that we are hyper focused on talent. Roger spoke to you about it before. We see opportunities for the talent at Camuto to grow as we go out and look at bringing new brands into the portfolio and we create opportunities for people in their career path.

Then to your second question around synergies. At the moment, the only part of the business we've actually looked to work around is actually back office. That is really what our intention is is to stay focused there. We bought a part of the business we'd never done before and we bought it for a reason. The reason that the family chose us was because we kept it in tact and we had a vision to continue the legacy.

Roger Rawlins -- Chief Executive Officer

I think what's so important -- because I see some of the faces in the back -- our approach to this has been there are some things that we really believe in. We believe in setting the mission, vision, and strategies for an enterprise. It's what I talked about, what we did at DSW in 2014. We've started that process at Camuto. We've started creating transparency around the business. Remember, it was a privately held sort of family run business where we talked about how things were going.

So, I think we've elevated the transparency around how the financials, how we're performing. We bought this organization because of the people, the talent that they had because we have bought them for years. That is what attracted us to this opportunity because we want to leverage that to grow as an enterprise.

Camilo Lyon -- Canaccord Genuity -- Managing Director

Thank you.

Christopher Svezia -- Wedbush Securities -- Analyst

Good afternoon, Chris Svezia from Wedbush. Two questions -- first question, just going to private label and the fact that you want to grow those [audio cuts out] or so of the business by 2021, I guess maybe walk through your comfort level to get to that level because it's more than doubling what the business is currently. When I think about that gross margin improvement, I think it's 240 or so basis points, how much of that private label is driving that gross margin improvement to the overall company. That's my first question.

Roger Rawlins -- Chief Executive Officer

Bill, you want to take that?

Bill Jordan -- President, DSW Designer Shoe Warehouse

Yeah. I feel really comfortable about those numbers. One of the reasons is the dynamics that both Roger I talked about is after you take that top 100 brands, those next brands are really labels. Our ability to replace those labels with our labels, we feel really comfortable will and we know that we know our customer really well and we know what she wants to buy.

So, Kelly & Katie being a great example, it didn't get to be the number two choice in our assortment because it was just luck. It was because we went after it in a meaningful way. I feel really good that with a stable of 25-ish exclusive brands that we're going to have at DSW, we're going to easily be able to get there and feel really good about the choices on the floor.

Roger Rawlins -- Chief Executive Officer

I think it's also part of our learning as we've met with other retailers. Depending on which of those retailers you talk to, many of them have gone from 10% to 30% or 40% like that. We're not looking to grow at that pace. I think we feel very comfortable that we have the infrastructure in place and that these guys have already done it, that Alex and his team have already built, that quantity of goods in the past. We think it's something we can scale quickly.

Christopher Svezia -- Wedbush Securities -- Analyst

And the gross margin, thoughts about the gross margin piece to that?

Jared Poff -- Chief Financial Officer

For 2020, is that what you asked?

Christopher Svezia -- Wedbush Securities -- Analyst

For 2021, I think the overall gross margin increase was like 240 or so?

Jared Poff -- Chief Financial Officer

Let's talk about op margin. Actually, we can even talk about gross margin -- 75% of that gross margin improvement is the result of us selling products produced by Camuto. A big chunk of that is the private brands, but it's also continuing to sell the national brands that we do today as well as growing those somewhat, not heavily, but it's primarily the private brand.

Christopher Svezia -- Wedbush Securities -- Analyst

Okay. And my second question quickly is just on the unit volume between the Vince Camuto piece. You're going from roughly 32 million -- you're coming all the way down and then you're kind of going back to that 32 million. But within that, the biggest chunk of growth is the DSW component. So, it's implying very little, if any, growth in the non-DSW piece.

So, just kind of, again, walking back to how do you really grow the Vince Camuto piece of the business, whether it's with your licensing partners, whether it's with the brands, the other brands that you have? What are you baking in? What are you assuming? Does anything go away? Do you lose anything? Do you gain anything in that time period?

Simon Nankervis -- President, Camuto Group

Yeah. It's a great question. I think as we looked at the model [audio cuts out] conservative approach because if you remember the time when we announced the acquisition and how we modeled the acquisition and the value that it brought to designer brands, the way we've modeled it out is that we have moderate growth in our existing wholesale and private branded business. Think about it -- we already have four significant brands that are out at wholesale.

So, those brands we're building in moderate growth and really, what we're saying is hey, the focus is maintaining those, growing them, getting market share back that we've given up over the last 12 or 18 months as the company went through the issues that it has had. On the converse, it's then actually adding in all of the upside from taking on and developing the DSW private brand.

Roger Rawlins -- Chief Executive Officer

We have some online questions as well. Jared, do you want to take that first one?

Jared Poff -- Chief Financial Officer

Yeah. "Can you please clarify the EPS forecast? Is that for year ending early 2022?" Yes. So, our fiscal 2021 will end roughly January 31st, 2022. I don't know the exact date. That is when we are expecting the 265 to [audio cuts out].

The second question, "Will you get more aggressive with buybacks given the stock price?" What we always say and it continues to this day is we buy opportunistically. So, as I mentioned there, the cash flow we generate, we certainly plan on returning a portion to that to shareholders. We're a very strong dividend player. We've also proven that we also will opportunistically buy back stock. That's all we will say about that.

"In the future, what would the ideal percentage of the product assortment and the DSW stores be in house made private label brands and what percentage would be house-owned brands?" I'm not 100%...

Simon Nankervis -- President, Camuto Group

I don't think we have an answer to that today. It's a blend. So, the way we've looked at it as Camuto-produced brands in totality. Some of those will be brands that are owned or licensed by us. Some of them will be brands that are owned by DSW and that will be some sort of inflection. We're not really sure how that will play out today.

Bill Jordan -- President, DSW Designer Shoe Warehouse

You don't know how in the future the Camuto brand wholesale portfolio will look like. So, if they acquire new or different brands, then we've got an opportunity to change that percentage make up. We're always going to look at it. We want to put in our stores and our warehouses what the customer wants, whatever those brands are, we're going to do that. We just know a lot of those brands she's buying today really aren't brands. She's buying a look and we're going to put our exclusive brands in that place.

Roger Rawlins -- Chief Executive Officer

I want to come back to the earlier question about the wholesale side. We did not put a lot of growth into this plan on the wholesale side. As we've met with our retail partners, frankly, they're having the same conversation that we're having. I'll put my DSW hat on for a second. They see the market expansion opportunities. We're not banking and we don't need to bank on wholesale expansion. It really is providing the same solution we're providing for others in that private brand space, doing that for DSW.

I also love the fact since we already do that, as these other retailers want to grow their private brand business, frankly, we are best-suited to do that as Camuto as any other brand. So, as Amazon wants to grow private brand, which we've heard, we would love to be the partner to grow their private brand footwear.

Again, this is the difference between just DSW Inc., where you had 20% of the market you could go after to now you have 80% of the industry that we can go after. Again, it's a different mindset as Designer Brands that we're taking.

Unidentified Speaker -- Unidentified -- Analyst

Thanks. Can you just add any detail to how the loyalty program at core DSW might help you in these initiatives and how much of that is already baked into some of these expectations, specifically maybe Camuto's DTC business, how you're incentivizing members to cross over to these brands?

Bill Jordan -- President, DSW Designer Shoe Warehouse

That's a great question. We [audio cuts out] loyalty program is targeted against our entire assortment. One of the things we are going to launch is how do we create benefits through our program that drive exclusive brand or Camuto-produced brand sales. We've got a lot of margin we can play with there to steer our customer in the direction that we want the business to go. So, we'll use our loyalty program to do that.

We expect a continued increased penetration to that loyalty program. It is a key to what we do. We got 26 million -- 30 million, if you include Canada -- 30 million members that we know so much about and that we can influence their behavior. We can talk to them. That's why we've had the sustained growth for such a long period of time because we have people we can talk to and who are engaged with us and love us. So, our loyalty program is baked into the numbers that Jared has shared, but we're going to find ways to use our program to help grow our Camuto-produced brands in DSW.

Jared Poff -- Chief Financial Officer

Additionally, one thing and I know Simon commented on it but I'm not sure how clearly it came out -- something that I'm really excited about is that [audio cuts out] 30 million rewards members, you guys love what Steve Madden has done and we respect that as well. Really, he gets a lot of credit for speed to market and how quickly he can catch on to a brand, a trend, figure out what's going to hot, get it produced, and get it out in retail and wholesale.

One, our stores are definitely going to give us that same and then some retail and test and learn types of environments that Steve has. More importantly, I see our ability to now, maybe within the app say, "Hey, why don't you vote on shoes that you like?" That data that we can now harness, we can feed straight to the Camuto Group about trends and what are people liking and what do they think is happening next.

So, yes, I agree there are a lot of transactional benefits and I think a lot of that is banked in as we're maintaining low single-digit comps, but I think there's a lot of upside with something we can bring to market that no one else would have.

Simon Nankervis -- President, Camuto Group

The other thing I'd add to that is that at Camuto Group, of the major vendors to DSW, we are one of the only ones that doesn't dropship today. We are in the process of bringing that online in the next 35 days. So, automatically, you've got something that we haven't been doing and all of our competitors have been doing it for the last 12 months.

Unidentified Speaker -- Unidentified -- Analyst

What are Camuto lead times? Have you shared that or will you share that?

Simon Nankervis -- President, Camuto Group

It depends on the type of product it is. At the end of the day, our focus is really around improving speed to market. We've given an example recently where we're able to actually -- we have a sourcing and design operation in China and Brazil. Lead times from Brazil are incredibly short. We know if we have identified a trend and it's on the last that we're doing, there's no reason we can't get a test program into store within 30 days.

Unidentified Speaker -- Unidentified -- Analyst

One area where I'm confused -- apologies for this -- there are 700 brands that are doing about 20% of sales and the remaining 10% that is private label or exclusive, to get that 30% to 25% would seem -- I guess what is the brand density go forward as you look at capturing a lot of the market share from that particular group? I get that you have it online and that sort of displays a breadth of product, but in that actual store, are meaningfully going to scale down the number of brands you have in the store in favor of your own brands? Is that how this is functionally going to work?

Bill Jordan -- President, DSW Designer Shoe Warehouse

It's a great question. So, again, an average store today, we've got 2,500 choices across 800 brands. Again, the customer recognizes the top 100 brands and really concentrates their purchases on that. So, the things we're going to do, we are going to reduce that. If we reduce that to 600 in a relatively short period of time, year, 18 months, the customer is still going to feel that same breadth of assortment.

I think where we're going to also feel this is when we go to more key items because what we're going to do is we're going to reduce the number of choices on the floor from 2,500 to like 2,200, 2,100. It's a 20% decrease in your total number of choices, but it's still 2,100 choices in an average store. It's such an overwhelming number when you walk into a warehouse, it's hard to see.

I think where a lot of those brands will continue to live in the over 600 is online. Digitally, we could present as many brands as we want and let the customer vote on that and let her see it, but yes, you will see less brands in total on the floor, but they're the brands the customer really has voted for and really wants to see.

Roger Rawlins -- Chief Executive Officer

I think just to get your head around how we're envisioning this, the primary reason a consumer does not buy from us is because they can't find their size. It's not because they can't find a brand or this item, but when you're that broad, you do not have depth. So, as we scale down the number of choices, we can now add depth behind the things we're going to stand for as a private brand.

The number of items we buy as a business that's less than 5,000 units, that means it's roughly 10 per store, that's less than a case per store, is unbelievable. This [audio cuts out] and we can see that as we cut off some of the ends of that curve, we have incredible opportunity to get behind key items.

Unidentified Speaker -- Unidentified -- Analyst

Just as a follow-up to that -- I know today you didn't talk more about adding more units to the floor. Is that sort of an initiative that you're thinking about, adding more product and utilizing the square footage to greater capacity? Is that part of that?

Bill Jordan -- President, DSW Designer Shoe Warehouse

So, we have had the ability to increase the capacity we have on the floor and we've demonstrated that in the ten stores that we've had. We know that the key is more depth, not more choices right now. So, what we're going to concentrate on is driving more depth in those key items into the store because we know that having that in stock, in size it's what's going to drive conversion and drive sales.

So, we've got the ability to increase that number of choices, but we're going to concentrate on depth for the next 12 to 18 months to make sure we're getting that right and getting her engaged in the box.

Unidentified Speaker -- Unidentified -- Analyst

Good morning. I just wanted to ask about a same-store sales question -- 2018, a great year, you did your loyalty relaunch. I'm just wondering -- as you think through the drivers of that incremental sales and as you look forward over the three years, how do you think about sustaining that and if there was some level of training the customer to wait for more promotional offers on the loyalty program, etc.?

Bill Jordan -- President, DSW Designer Shoe Warehouse

I love this question. One of the first things that I heard when I came into this role was, "Oh, my gosh, we ran a 6% comp, how are we going to anniversary that?" That's the question, right? I'm going to tell you I love that we drove a 6% comp last year because you know what? It's a hell of a lot easier to drive a positive comp on top of a positive comp than to have to come in and turn around a business.

If we were sitting here at a minus 6% comp, I don't think the question would be, "Hey, you've got an easy road to get back to a great positive comp." What you'd be saying is, "Oh, my gosh, what are you going to do to fix your business." So, what I would tell you is we have got momentum behind us and we are doing the right things like key items, like more exclusive brands, more benefits on our loyalty program that we are confident that we can continue that comp trend.

Having that positive comp trend, having that tailwind, that is momentum that we can carry -- and as Roger said, seven quarters in a row -- last year's comp was on top of a comp the year before, so, I feel really confident about it and I love the challenge of having things going the right way and not having to go and fix a whole bunch of things in our basement.

Roger Rawlins -- Chief Executive Officer

I think the other thing too is what we did with loyalty was not about promotion. It is about creating an emotional connection with your consumer. The fact that we had customers donate over a million shoes to our enterprise that then we rewarded them with points to come back to our brand, you're connecting with them. You're going back to that kid when I was 12 years old -- it's an emotional connection. That's why we were recognized as being so innovative in our space. We actually reduced our markdown rate on our loyalty program and we drove experiences. We drove a reason for them to connect with our brands.

So, I want to make certain -- as you guys are thinking about what we've done with loyalty, that has not been about more giving more discounts. Actually, our margins are actually higher this year than they were the last year or the year before that. It's been about creating an emotional connection with our customer. That's what you're going to see on the roadmap for '19 so that we allow you to engage with our brand in a way that's different and unique, voting on product, all of the things that, I think, Amy and our team at DSW can bring to the table.

Unidentified Speaker -- Unidentified -- Analyst

Roger, a different question is just around -- as you talked to the board and you put together this three-year plan, I'm just wondering should we expect a change in the structure of the incentive comp for the management or even within the organization in other ways as far as how you're going to incent people over the shorter term and the longer term.

Roger Rawlins -- Chief Executive Officer

That's a great question. I think one of the things that we did this year that I think was part of our success was for the first time in the history of our company, we gave everybody the opportunity to earn a bonus that's a full-time associate. We were able to have a gathering a few weeks ago with everybody to celebrate the fact that those folks are going to receive some form of additional compensation. That's a huge homerun. I think getting buy-in from our organization is important.

I think the opportunity that we have is at Camuto. So, that's not an incentive that has frankly played out there. I think there's opportunity for us to leverage equity in a different way. Today, everything we do there is cash. So, I think there are some things -- it would be tweaking. I don't see it as anything that would be major P&L hits, but I think we will continue to find ways to motivate people in our organization because the talent, the people is what wins.

I'm a huge football fan. It is about attracting elite talent. If you're going to be the number one college football program in the country, you have to have the number recruiting class and you have to have the number one group of coaches, which is what I've got. That's what we're going to be focused on.

Another example -- up in Canada, that business had not paid a bonus in five years. This year, they're getting paid a bonus because they delivered results that exceeded our expectations. So, rallying the organization around a financial component and having transparency with your team.

I'll give you a good example as leaders, what we do -- every single day to our leadership team, they get a note, "Is it a green day?" meaning did we beat our budget for that day or is it a red day? These guys didn't like it. My one extreme was I wanted to put a stoplight up at the front of the building so that even our vendors when they walked in, what were they going to do to change it from red to green or what were they going to do to keep it green.

Like we're very, very focused on deriving results and transparency within our team and compensation, I think, is a big part of that, but no major change. That's a long-winded answer for you, but I get real passionate about it. That's how you win. It's absolutely how we win.

Unidentified Speaker -- Unidentified -- Analyst

My last question is just as you all put together this plan -- I assume there was some creative conflict -- I was wondering if you could share where there was the greatest level of conflict or where you feel most challenged, where the biggest obstacles are, as you all think through achieving your plan.

Roger Rawlins -- Chief Executive Officer

I'll let these guys talk about it.

Bill Jordan -- President, DSW Designer Shoe Warehouse

Well, I guess I would say not a lot of conflict. The reason we bought the Camuto Group was because we said we want to grow [audio cuts out] in our business. The strategy isn't, "Hey, we just bought Camuto Group, therefore let's grow exclusive brands." The strategy was we want to build our exclusive brands in a really meaningful way. How are we going to go do it? Let's go get somebody who's really good at it to help us do it. There has not been that conflict or tension between us.

We've all worked together for a period of time too. We're not marrying three companies at the executive level who have never had a working relationship. All of us have worked together for a period of time, so I feel very fortunate to be in this situation.

Simon Nankervis -- President, Camuto Group

I think from the Camuto perspective, we've done this before. We know how to partner with retailers. At the end of the day, the way we partner with Bill's team and Mary's team is no different than the way we partner with other companies that we design and develop products for. Make no mistake, at the end of the day, everyone in this industry who is a buyer, a merchant, or in design, we're all frustrated shoe designers.

So, everyone wants to be creative in that process. At the end of the day, we have a process in the way we work that we've been doing for 18 years. It works. All we've really done now is say instead of doing one brand for DSW, we're now going to do a number of other brands. It already is something that we have a skill at doing. The building of those relationships and building those bridges is something we're really good at doing.

Mary Turner -- President, The Shoe Company

I would say for the Canadian business, we have such clear wins coming our way with being able to leverage the ATG platform, with being able to migrate the DSW loyalty program, with being able to use the expertise of the loyalty team at DSW to build an equally compelling Shoe Co. program. There are just so many obvious wins. I don't think it was hard for us to align on the huge opportunities that we see ahead of ourselves.

Roger Rawlins -- Chief Executive Officer

I think I talked about this earlier, but it was four or five years ago we set out on this journey. I think the biggest conflict we've had in the last 12 to 18 months is how we prioritize things. One of the things we had a lot of conversation about is do we build this capability ourselves and we did a lot of work around that. Or do we buy someone that can deliver it?

We landed on we need to go buy someone because frankly, we thought the investment we were going to have to put in to building it on our own to build out the infrastructure that a Camuto has was also going to place at risk the private brand business that already existed because you were going to bring in an entirely new team to try to develop these brands that ultimately we could move to someone like Camuto that already had an infrastructure that we could leverage.

We didn't want to put at risk the existing $300 million of private brand business and have to learn private brands. We know how to do it through Camuto. That's probably one of the bigger conflicts because we were deciding do we buy it or do we build it. We had a lot of conversation, not just between this team, but also with our board as well.

Any more questions?

Westcott Rochette -- Evercore ISI -- Analyst

Hi, Westcott Rochette at Evercore. I have a question about online and in-store interplay, the inventory. I know you said something about letting your loyalty members get one-day shipment fulfilled from store. Do you currently have the capabilities to share inventory between the two, ship from, when someone returns -- how much has that process developed and how much of that is still on the come up?

Bill Jordan -- President, DSW Designer Shoe Warehouse

This is externally commented on -- we are the best omnichannel retailer. Our inventory, I don't care where it is in our system, at least on the DSW side today and it will be with Camuto at some point in the future -- it's seamless. If a customer wants a product that's sitting in Seattle and that customer lives in New York, no problem. So, we can move -- we can ship to store, we can ship to customer, we can ship from store to a customer, we can ship from a fulfillment center or distribution center to a customer.

It is a seamless process. We can do it fast. One of the benefits that I mentioned the VIP phase three is once a year, we're going to say to our members, "If it's important to you, we'll get it to you the next day," because we've got that capability from anywhere in our network.

Mary Turner -- President, The Shoe Company

I'd also like to clarify that in Canada, we actually doubly win on the use of our inventory. For one thing, we fulfill 100% from in-store. So, we are really close to our customer, as I commented on in our last mile strategy, but the other amazing thing that we have the ability to do is share the inventory between DSW and The Shoe Company. So, if we don't have it at The Shoe Company and we do have it at DSW, we can seamlessly fulfill to the customer to her eyes from The Shoe Company and vice versa.

That also supports, again, the incredible last mile opportunity we have and why we're going to be able to so easily expose the much broader DSW SKU offer that Bill described earlier on The Shoe Co. website, which obviously, given the size of the box, is about a third of a number of the SKUs. So, we have a super-flexible inventory situation in Canada. Once we get our free trade zone, Bill and I will be able to share all kinds of things.

Roger Rawlins -- Chief Executive Officer

I think the best example of what we're building toward -- everybody knows the weather pattern has been crazy. It always is. They always wish that you can get the right temperature all the time. Think about [audio cuts out] Toronto. Let's say it's not snowing in Toronto.

Mary Turner -- President, The Shoe Company

For a change.

Roger Rawlins -- Chief Executive Officer

For a change -- yeah, that would be nice. Instead, it's snowing in Chicago. We need boots in Chicago and we need them there now. What we're building toward is that flexible across the border, whether it be a Shoe Co., whether it be a DSW, whether it be Canada, whether it be in the US, we have that mobility to be able to serve that case study within 24 hours. That's what we're building toward as a team.

Westcott Rochette -- Evercore ISI -- Analyst

And then one more question on the services -- over the next three years, how much is expanded services and the remodels that go into that program part of your plan over the next three years?

Roger Rawlins -- Chief Executive Officer

I'll take it and have Bill chime in too. We've tested this in two stores. We're now going to pilot it in two markets, which is the process we've done with Kids and other initiatives we've tackled. When this works in the two markets we're going into, this is something that I want to turn on aggressively. I think it's an opportunity, as Bill said, 20% of our fleet renews every year. It's an incredible opportunity to reshape what our real estate portfolio looks like and include in it services. So, we're going to get very aggressive.

Again, the results we are having -- I've been in retail for almost 25 years, I have not seen the kind of topline growth that we get out this, out of anything else I've ever seen and that was in all my time at the limited brands as well. We want to get aggressive, but what I also want to caution to my folks in Columbus listening to this, we have to go make it work in markets that are not Columbus, Ohio, but when that works, we're going to go. That's what I would tell you. I think our history of back in the day when we were opening 40 doors or more a year, when that happens, we have the ability to turn this on quickly. I think that's a muscle this organization has.

Bill Jordan -- President, DSW Designer Shoe Warehouse

We are an operationally excellent retailer. What we do because of that is we test, we pilot, and we roll. I can give you lots of examples, whether it be kids, whether it be things in digital, whether it be around our loyalty program -- we've done that for years so that when we go to roll, it is seamless and it is ready to go. Rather than take those pains as we go through the process, we get it right and then we roll quickly. That can be new stores. We will find a way to operationalize this in the next 12 months and then figure out how to go fast. That will be the plan.

Roger Rawlins -- Chief Executive Officer

Do we have any more questions? We've got about one minute left? No? Okay. Thank you so much, everybody. We really, really appreciate your time today. Have an excellent day. Thank you.

Duration: 188 minutes

Call participants:

Ryan Kirsh -- Head of Investor Relations

Roger Rawlins -- Chief Executive Officer

Bill Jordan -- President, DSW Designer Shoe Warehouse

Mary Turner -- President, The Shoe Company

Simon Nankervis -- President, Camuto Group

Jared Poff -- Chief Financial Officer

Paul Trussell -- Deutsche Bank -- Managing Director

Rick Patel -- Needham and Company -- Analyst

Sam Poser -- Susquehanna International Group -- Analyst

Camilo Lyon -- Canaccord Genuity -- Managing Director

Christopher Svezia -- Wedbush Securities -- Analyst

Unidentified Speaker -- Unidentified -- Analyst

Westcott Rochette -- Evercore ISI -- Analyst

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