DSW 2008 Annual Report Download - page 16

E
ff
ect
i
ve Marc
h
17, 2008, we entere
di
nto an Amen
d
e
d
an
d
Restate
d
S
h
are
d
Serv
i
ces Agreement w
i
t
h
RVI an
d
F
ilene’s Basement. Pursuant to the terms of the Amended and Restated Shared Services A
g
reement, DSW provides
RVI and Filene’s Basement with key services relating to risk management, tax, financial services, benefit
s
a
d
m
i
n
i
strat
i
on, payro
ll
,an
di
n
f
ormat
i
on tec
h
no
l
ogy
b
ase
d
upon a usage
b
ase
d
c
h
arge. T
h
e current term o
f
t
h
e
A
mended and Restated Shared Services A
g
reement will expire at the end of fiscal 2009 and extends automaticall
y
f
or a
ddi
t
i
ona
l
one-year terms un
l
ess term
i
nate
db
y one o
f
t
h
e part
i
es. In t
h
e event t
h
at RVI or F
il
ene’s Basemen
t
si
gn
ifi
cant
l
yre
d
uces or ceases operat
i
ons, DSW wou
ld
not
b
ea
bl
etoa
ll
ocate as muc
h
or any expense to RVI o
r
Fil
ene’s Basement. T
hi
s
i
ncrease
d
a
ll
ocat
i
on percenta
g
ean
d
re
d
uct
i
on
i
n expense a
ll
ocat
i
on cou
ld b
e mater
i
a
l
an
d
have a negative effect on DSW’s results of operations and financial condition
.
I
n fiscal 2008, we allocated $5.7 million to Filene’s Basement and ex
p
ect to allocate u
p
to $5.7 million in fiscal
2
009. As of January 31, 2009, Filene’s Basement owed DSW
$
1.8 million. In fiscal 2008, we allocated
$
0.7 millio
n
t
o RVI and expect to allocate up to
$
0.7 million in fiscal 2009. As of Januar
y
31, 2009, DSWowed RVI
$
3.4 million.
We
l
aunc
h
e
dd
sw.com in t
h
e
f
irst
h
a
lf
o
ff
isca
l
2008, w
h
ic
h
ma
y
not
b
e success
f
u
l
an
d
cou
ld
a
d
verse
ly
a
ffect our results of operations or distract management from our core business.
We
l
aunc
h
e
dd
sw.com to se
ll
s
h
oes an
d
re
l
ate
d
accessor
i
es t
h
rou
gh
our we
b
s
i
te
i
n
fi
sca
l
2008. In a
ddi
t
i
on, w
e
have entered into a ten-
y
ear lease a
g
reement for space to serve as a fulfillment center for dsw.com distribution. Th
e
c
ontinued development of such a business channel could distract mana
g
ement from our core business, take busines
s
f
rom our ex
i
st
i
ng store
b
ase resu
l
t
i
ng
i
n
l
ower sa
l
es
i
n our stores or
b
e unsuccess
f
u
l
.Ina
ddi
t
i
on, as t
hi
s
i
s a new
b
usiness channel, we have purchased inventor
y
based upon anticipated sales. In the event that our actual sales ar
e
lower than planned, we will likel
y
take markdowns on inventor
y
which will adversel
y
affect
g
ross mar
g
in. In th
e
e
vent t
h
at we
l
ose
f
ocus on our core
b
us
i
ness,
i
mpact sa
l
es
i
n our ex
i
st
i
ng store
b
ase or are unsuccess
f
u
li
nt
he
e
xecution of dsw.com, it ma
y
have a material adverse effect on our business, results of operations, financial
c
ondition or result in asset impairment char
g
es related to assets used specificall
y
b
y
dsw.com
.
We re
ly
on our goo
d
re
l
ations
h
i
p
s wit
h
ven
d
ors to
p
urc
h
ase
b
etter-
b
ran
d
e
d
merc
h
an
d
ise at
f
avora
ble
p
rices. If these relationships were to be impaired, we may not be able to obtain a sufficient selection o
f
m
erc
h
an
d
ise at attractive
p
rices, an
d
we ma
y
not
b
ea
bl
e to res
p
on
dp
rom
p
t
ly
to c
h
anging
f
as
h
ion tren
d
s,
e
it
h
er o
f
w
h
ic
h
cou
ld h
ave a materia
l
a
d
verse e
ff
ect on our com
p
etitive
p
osition, our
b
usiness an
d
financial performance.
We
d
o not
h
ave
l
on
g
-term supp
ly
a
g
reements or exc
l
us
i
ve arran
g
ements w
i
t
h
an
y
ven
d
ors an
d
,t
h
ere
f
ore, our
s
uccess depends on maintaining good relations with our vendors. Our growth strategy depends to a significan
t
e
xtent on the willingness and ability of our vendors to supply us with sufficient inventory to stock our stores. If we
f
a
il
to stren
g
t
h
en our re
l
at
i
ons w
i
t
h
our ex
i
st
i
n
g
ven
d
ors or to en
h
ance t
h
e qua
li
t
y
o
f
merc
h
an
di
se t
h
e
y
supp
ly
us,
and if we cannot maintain or acquire new vendors of in-season better-branded merchandise, our abilit
y
to obtain
a
s
ufficient amount and variety of merchandise at favorable prices may be limited, which could have a negativ
e
i
mpact on our compet
i
t
i
ve pos
i
t
i
on. In a
ddi
t
i
on, our
i
na
bili
t
y
to stoc
k
our DSW stores w
i
t
hi
n-season merc
h
an
di
se at
attractive prices could result in lower net sales and decreased customer interest in our stores, which could adversel
y
a
ff
ect our
fi
nanc
i
a
l
per
f
ormance
.
D
ur
i
ng
fi
sca
l
2008, merc
h
an
di
se supp
li
e
d
to DSW
b
yt
h
ree
k
ey ven
d
ors accounte
df
or approx
i
mate
l
y 20% o
f
our net
f
ootwear sa
l
es. T
h
e
l
oss o
f
or a re
d
uct
i
on
i
nt
h
e amount o
f
merc
h
an
di
se ma
d
eava
il
a
bl
etous
b
y any one o
f
t
hese vendors could have an adverse effect on our business
.
We ma
yb
e una
bl
e to antici
p
ate an
d
res
p
on
d
to
f
as
h
ion tren
d
san
d
consumer
p
re
f
erences in t
h
e mar
k
ets
in which we operate, which could have a material adverse effect on our business, financial condition and
r
esults of operations.
O
ur merchandisin
g
strate
gy
is based on identif
y
in
g
each re
g
ion’s customer base and havin
g
the proper mix o
f
p
ro
d
ucts
i
n eac
h
store to attract our target customers
i
nt
h
at reg
i
on. T
hi
s requ
i
res us to ant
i
c
i
pate an
d
respon
d
t
o
12