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DSW Misses Investor Forecasts; Reports Cloudy Outlook for 2016

It’s hard out here for a footwear retailer. DSW shares fell more than 9 percent Tuesday morning on news that the Columbus, Ohio-based retailer had slashed its outlook for 2016.

In its first-quarter earnings report, DSW said it now expects adjusted earnings per share (EPS) of $1.32 to $1.42, below the prior range of $1.54 to $1.64, and below investor’s predictions of $1.58. The retailer also lowered its revenue expectations, saying it now only expects to see growth of 6 percent, rather than the 8 to 10 percent that had been forecasted.

“We were disappointed in our first quarter results,” said CEO Roger Rawlins in a conference call with analysts. “Over the past three years, we have invested heavily in technology, stores, marketing and support services. These investments have driven sales, but we haven’t grown our bottom line. We have begun an assessment of our cost structure to improve earnings and reinforce our competitive position in a rapidly changing environment.”

As is the case with a number of brick-and-mortar retailers, DSW has struggled as consumers are becoming increasingly comfortable with the idea of buying shoes online. Earlier this year, DSW purchased off-price e-commerce retailer Ebuys in an effort to expand its online business, though that may take more time to play out.

“We have reduced our sales and earnings guidance to reflect the current trend of our business in a challenging retail environment,” Rawlins said. “This is the prudent action to take so that inventory, expenses and capital investments are aligned to maximize profitability and positioned to expand earnings as our trend improves.”

In its most recent quarter, DSW reported that sales and revenue both fell below expectations. Adjusted EPS was 40 cents, below the 46 cents investors expected, while net sales were $681.3 million, short of the $698.8 million predicted. Same-store sales, meanwhile, not only missed growth forecasts, but actually fell, down 1.6 percent. Investors had expected a modest 0.6 percent growth.

As of Monday’s close, DSW shares have fallen 37 percent from a year ago.