DSW 2009 Annual Report Download - page 10

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Distinctive and Convenient Store Layout
We provide our customers with the highest level of convenience based on our belief that customers should be
empowered to control and personalize their shopping experiences. Our merchandise is displayed on the selling floor
with self-service fixtures to enable customers to view and touch the merchandise. Our stores are laid out in a logical
manner that groups together similar styles such as dress, casual, seasonal and athletic merchandise. We believe this
self-service aspect provides our customers with maximum convenience as they are able to browse and try on
merchandise without feeling rushed or pressured to make a purchasing decision.
The Value Proposition Offered to Customers
Through our buying organization, we are able to provide customers with high quality, in-season fashion styles
at prices we believe are competitive with the typical sale price found at specialty retailers and department stores. We
generally employ a consistent pricing strategy that provides customers with the same price on our merchandise from
the day it arrives in store until it enters our planned clearance rotation. Our pricing strategy differentiates us from our
competitors who usually price and promote merchandise at discounts available only for limited time periods. We
find that customers appreciate having the power to shop for value when it is most convenient for them, rather than
waiting for a sale event.
In order to provide additional value to our customers, we maintain a loyalty program, “DSW Rewards”, which
rewards customers for shopping, both in stores and online at dsw.com. “DSW Rewards” members earn reward
certificates that offer discounts on future purchases. Reward certificates expire six months after being issued.
Members also receive promotional offers, gifts with purchase and free shipping on purchases over a certain dollar
threshold at dsw.com. We employ a variety of methods, including email, to communicate these offers to our
customers.
As of January 30, 2010, approximately 13 million members enrolled in “DSW Rewards” have made at least
one purchase over the course of the last two fiscal years as compared to approximately 10 million members as of
January 31, 2009. In fiscal 2009, shoppers in the loyalty program generated approximately 84% of DSW store and
dsw.com sales versus approximately 76% of DSW store and dsw.com sales in fiscal 2008.
Financial Strength
Our operating model is focused on assortment, convenience and value. We believe that the growth we have
achieved in the past is attributable to our operating model and management’s focus on store-level profitability and
economic payback. Over the five fiscal years ended January 30, 2010, our net sales have grown at a compound
annual growth rate of 11%. In addition, we have consistently generated positive operating cash flows and profitable
operating results. We intend to continue our focus on net sales, operating cash flows and operating profit as we
pursue our growth strategy. We believe cash generated from DSW operations, together with our current levels of
cash and investments of $289 million, should be sufficient to maintain our ongoing operations, support seasonal
working capital requirements and fund capital expenditures related to projected business growth.
Growth Strategy
Our growth strategy is to continue to strengthen our position as a leading better-branded footwear retailer by
pursuing the following three primary strategies for growth in sales and profitability: expanding our business, driving
sales through enhanced merchandising and investment in our infrastructure.
Expanding Our Business
We plan to open approximately ten DSW stores in fiscal 2010. Our plan is to open stores in both new and
existing markets, with the primary focus on power strip centers and to reposition existing stores as opportunities
arise. In considering new locations, we focus primarily on power strip centers, but, depending on the market, we
consider regional malls, lifestyle centers and urban street locations. In general, our evaluation of potential new
stores integrates information on demographics, co-tenancy, retail traffic patterns, site visibility and accessibility,
store size and configuration and lease terms. Our growth strategy includes analysis of every major metropolitan area
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