DSW 2014 Annual Report Download - page 11

Table of Contents
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In addition to the other information in this Annual Report on Form 10-K, shareholders or prospective investors should carefully consider the following risk
factors when evaluating DSW Inc. If any of the events described below occurs, our business, financial condition, results of operations and future growth
prospects could be negatively affected.
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We are positioning DSW as an omni-channel retailer and expect to make significant capital investments and have significant expenses related to our
omni-channel strategy. Failure to execute our omni-channel strategy could have a material adverse effect on our business, results of operations and how
we meet consumer expectations.
The omni-channel strategy is a business necessity to meet changing customer experience expectations and an opportunity to create a competitive advantage.
It is a business necessity because the DSW customer expects to be able to shop across all sales channels. The omni-channel strategy can also create distance
between DSW and single channel competitors as well as multi-channel competitors who either do not operate in an omni-channel way or do not define omni-
channel as broadly as DSW intends to define it. We have developed an omni-channel strategy and expect to have continued innovation in our business. We
no longer consider our omni-channel strategy as a business initiative, as we see it as a fundamental change of how we plan and operate the business.
This strategy will require significant cost investment of cross-functional operations and management focus, along with investment in supporting
technologies. The risk is that the execution of our omni-channel strategy could cost more than expected, have fewer benefits than anticipated, distract
management from our day-to-day operations, or be unsuccessful. In the event that our omni-channel strategy is unsuccessful, it may have a material adverse
effect on our business, results of operations or financial results.
We opened 37 DSW stores in fiscal 2014, plan to open approximately 35 DSW stores in fiscal 2015 and plan to open 15 to 20 DSW stores in each of the
following two to five years, which could strain our resources and have a material adverse effect on our business and financial performance.
Our continued and future growth largely depends on our ability to successfully open and operate new DSW stores on a profitable basis as part of our real
estate strategy. During fiscal 2014, 2013 and 2012, we opened 37, 30 and 39 new DSW stores, respectively. Included in the 37 new DSW stores in fiscal 2014
were five small format stores. Our small format stores average approximately 12,000 square feet and, if successful, they could pave the way for more small
format stores. We plan to open approximately 35 stores in fiscal 2015 and plan to open 15 to 20 stores each year for the following two to five years. As of
January 31, 2015, we have signed leases for an additional 34 stores opening in fiscal 2015 and 2016. During fiscal 2014, the average investment in property
and equipment, inventory and new store expenses required to open a typical new DSW store was approximately $1.5 million, excluding construction and
tenant allowances received from landlords.
This continued expansion could place increased demands on our financial, managerial, operational and administrative resources. We may not achieve our
planned expansion on a timely and profitable basis or achieve results in new locations similar to those achieved in existing locations in prior periods. Our
ability to open and operate new DSW stores on a timely and profitable basis depends on many factors, including our ability to:identify suitable markets and
sites for new store locations with financially stable co-tenants and landlords; negotiate favorable lease terms; build-out or refurbish sites on a timely and
effective basis; obtain sufficient levels of inventory to meet the needs of new stores; obtain sufficient financing and capital resources or generate sufficient
operating cash flows from operations to fund growth;open new stores at costs not significantly greater than those anticipated;successfully open new DSW
stores in markets in which we currently have few or no stores;control the costs of other capital investments associated with store openings; hire, train and
retain qualified managers and store personnel; and successfully integrate new stores into our existing infrastructure, operations, management and distribution
systems or adapt such infrastructure, operations and systems to accommodate our growth.
As a result, we may be unable to open new stores at the rates expected or at all. If we fail to successfully implement our growth strategy, the opening of new
DSW stores could be delayed or prevented, could cost more than anticipated and could divert resources from other areas of our business, any of which could
have a material adverse effect on our business.
To the extent that we open new DSW stores in our existing markets, we may experience reduced net sales in existing stores in those markets. As our store base
increases, our stores will become more concentrated in the markets we serve. As a result, the number of customers and financial performance of individual
stores may decline and the average sales per square foot at our stores may be reduced, which could have a material adverse effect on our business.
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Source: DSW Inc., 10-K, March 26, 2015 Powered by Morningstar® Document Research℠
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