DSW 2013 Annual Report Download - page 15

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Table of Contents
Our failure to retain our existing senior management team and to continue to attract qualified new personnel could adversely affect our business.
Our business requires disciplined execution at all levels of our organization to ensure that we continually have sufficient inventories of assorted brand name
merchandise at attractive retail prices. This execution requires an experienced and talented management team. If we were to lose the benefit of the experience,
efforts and abilities of any of our key executive and buying personnel, our business could be adversely affected. We have entered into employment agreements
with several key executives and also offer stock compensation packages designed to attract and retain key employees. Furthermore, our ability to manage our
expansion will require us to continue to train, motivate, compensate and manage our employees and to attract, motivate and retain additional qualified
managerial and merchandising personnel. Competition for these types of personnel is intense, and we may not be successful in attracting and retaining the
personnel required to grow and operate our business.
We are dependent on our DSW Rewards program to drive traffic, sales and loyalty, and any decrease in membership or purchases from members
could have a material adverse effect on our business.
DSW Rewards is a customer loyalty program that we rely on to drive customer traffic, sales and loyalty. DSW Rewards members earn reward certificates that
offer discounts on future purchases. In fiscal 2013, shoppers in the loyalty program generated approximately 90% of DSW store and dsw.com sales versus
approximately 89% of DSW store and dsw.com sales in fiscal 2012. As of February 1, 2014, approximately 22 million members were enrolled in DSW
Rewards and have made at least one purchase over the course of the last two fiscal years, compared to approximately 20 million members as of February 2,
2013. In the event that our DSW Rewards members do not continue to shop at DSW or the number of members decreases, this could have a material adverse
effect on our business.
We are constantly exploring new business opportunities. The failure to successfully execute our plans may have a material adverse effect on our
business, results of operations or financial condition.
In fiscal 2013, we conducted an unsuccessful test of an expanded luxury assortment online, and our future approach to luxury will depend on our ability to
buy products that will allow us to at least break even. The continued development of new business opportunities could distract management from our core
business. In the event that we lose focus on our core business or are unsuccessful in the execution of our concept, it may have a material adverse effect on our
business, results of operations or financial condition.
DSW is exposed to risk through leases of certain portions of its properties.
In fiscal 2012, we purchased our corporate office headquarters, our distribution center and a trailer parking lot. Certain portions of the properties are leased to
both unrelated and related parties, which provides rental income. The largest tenant's lease, which is not with a related party, renewed for another two-year term
in June 2013, but either party can terminate after each two-year renewal option and the tenant can terminate at any time with 60 days' notice. In the event that
one or more tenants do not renew their leases, the foregoing circumstances or events could have a material adverse effect on our financial condition.

We may be unable to compete favorably in our highly competitive market, which could have a material adverse effect on our business.
The retail footwear market is highly competitive with few barriers to entry. We compete against a diverse group of retailers, both small and large, including
department stores, mall-based shoe stores, national chains, independent shoe retailers, single-brand specialty retailers, online shoe retailers, multi-channel
specialty retailers and brand-oriented discounters. Our success depends on our ability to remain competitive with respect to style, price, brand availability and
customer service. The performance of our competitors, as well as a change in their pricing policies as a result of the current economic environment, marketing
activities and other business strategies, could have a material adverse effect on our business.
Our failure to identify and respond to rapidly changing customer behavior and the impact that social media and comparison shopping has on our customer
could have a material adverse effect on our business.
11
Source: DSW Inc., 10-K, March 27, 2014 Powered by Morningstar® Document Research℠
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