DSW 2014 Annual Report Download - page 9

Table of Contents
Driving Sales through Enhanced Merchandising
Our merchandising group continuously monitors current fashion trends as well as historical sales trends to identify popular styles and styles that may become
popular in the upcoming season. We track performance and sales trends on a weekly basis and have a flexible buying process that allows us to reorder
successful styles and cancel underperforming styles throughout each season. To keep our product mix fresh and on target, we test new fashions and actively
monitor sell-through rates. We also aim to improve the quality and breadth of existing vendor offerings and identify new vendor and category opportunities.
In fiscal 2014, we began offering jewelry in all DSW stores and increased the availability of accessories online.
Investment in Our Infrastructure
We are investing in systems that will enhance our operating efficiency in areas such as supply chain, merchandise planning and allocation, inventory
management, distribution and labor management.
Over the past few years, we completed investments in our supply chain to support size replenishment and size optimization. Size replenishment focuses on
replenishing core styles at a size level; size optimization allows us to effectively allocate sizes by store. All categories will be planned using an enterprise-
wide assortment planning system that will allow us to build assortments based on local customer profiles rather than just based on store volume. We continue
to enhance our ship from store criteria to select stores with lower inventory turns.
Our primary distribution center is located in an approximately 700,000 square foot facility in Columbus, Ohio. The distribution center operates to facilitate
the prompt delivery of priority purchases and fast-selling footwear so we can take full advantage of each selling season. During fiscal 2014, we invested in
the installation of a new shipping sorter in our distribution center. This new shipping sorter improved productivity and increased shipping capacity. Our
fulfillment center processes orders which are shipped directly to customers using a logistics provider. Our ship from store program enables us to fulfill unmet
demand originating from either dsw.com or DSW stores from inventory that is located in other stores rather than only from our inventory in the fulfillment
center or the customer's home store. To further ensure prompt delivery, we engage a logistics service provider to receive orders originating from suppliers on
the West Coast and some imports entering at a West Coast port of entry through our West Coast facility. Merchandise is transported either from our West
Coast facility or our primary distribution center to our pool points and then on to stores.
Utilizing Our Financial Strength
Our operating model is focused on assortment, value and convenience. We believe that the growth we have achieved is attributable to our operating model
and management’s focus on profitability and economic payback. Over the five fiscal years ended January 31, 2015, our net sales have grown at a
compounded annual growth rate of 9%. In addition, we have consistently generated positive operating cash flows and profitable operating results. We intend
to explore ways to manage our net sales, operating cash flows and operating profit. We believe cash generated from operations, together with our cash and
investments of approximately $447 million as of January 31, 2015, is sufficient to maintain our ongoing operations, support seasonal working capital
requirements, fund capital expenditures, make quarterly dividend payments to our shareholders and make opportunistic share repurchases.
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Affiliated Business Group
As a division of DSW Inc., ABG partners with multi-category retailers and wholesalers to develop strategies and business models for targeted shoe
assortments. ABG provides service to over 370 store locations and e-commerce channels through leased partnerships with Stein Mart, Gordmans and Frugal
Fannie's. Additionally, ABG operates mall-based branded specialty retail stores under the banner of Yellow Box footwear. We have renewable supply
agreements to provide merchandise for the shoe departments in Stein Mart, Gordmans, and Frugal Fannie’s stores through December 2017, January 2016 and
April 2017, respectively. As of January 31, 2015, we supplied merchandise to 269 Stein Mart stores and the Stein Mart e-commerce website, 97 Gordmans
stores, one Frugal Fannie’s store and four Yellow Box stores.
Competition
We view our primary competitors to be department stores, online shoe retailers and brand-oriented discounters. We also compete with mall-based shoe stores,
national chains, independent shoe retailers, single-brand specialty retailers and multi-
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Source: DSW Inc., 10-K, March 26, 2015 Powered by Morningstar® Document Research℠
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