DSW 2010 Annual Report Download - page 12

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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 29, 2011, our net sales have grown at a compound
annual growth rate of 10%. 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 $385.2 million as of January 29, 2011, should be sufficient to maintain our ongoing
operations, support seasonal working capital requirements and fund capital expenditures related to projected
business growth for the foreseeable future.
Growth Strategy
Our growth strategy is to continue to strengthen our position as a leading better-branded footwear retailer by
pursuing the following 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 15 to 20 DSW stores in fiscal 2011 and plan to open 10 to 15 DSW stores in
each of the following three to five years. 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. Depending on the
market, we also 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 in the country with the objective of understanding demand for our products in each market over
time and our ability to capture that demand. The analysis also looks at current penetration levels in markets we serve
and our expected deepening of those penetration levels as we continue to grow and become the shoe retailer of
choice in each market.
We plan to increase dsw.com sales through serving customers in areas where we do not currently operate stores
and offering current customers additional styles and sizes not available in their local store. We continue to focus on
the growth of dsw.com by increasing site efficiency with a faster check-out process and improved product pages,
offering online exclusive merchandise and reaching our customers through social media. In our leased business, we
continue to refine our merchandise assortment to best meet the needs of our different leased business customers, and
we are actively pursuing opportunities with new leased business partners.
Driving Sales through Enhanced Merchandising
Our merchandising group constantly 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 store 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. Our merchandising initiative will continue invest-
ments in planning, allocation and distribution systems to improve inventory and markdown management.
Investment in Infrastructure
As we grow our business and fill in markets to their full potential, we believe we will improve our profitability
by leveraging our cost structure in areas of regional management, supply chain and overhead functions. Addi-
tionally, we intend to continue investing in our infrastructure to improve our operating and financial performance.
Most significantly, we believe continued investment in information systems will enhance our efficiency in areas
such as merchandise planning and allocation, inventory management, distribution, labor management and point of
sale functions.
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