DSW 2013 Annual Report Download - page 10

Table of Contents
pool points and on to stores. Our dsw.com fulfillment center processes orders for dsw.com and our shoephoria system, which are shipped directly to
customers using a third-party logistics provider.
Utilizing Our Financial Strength
Our operating model is focused on assortment, convenience and value. We believe that the growth we have achieved is attributable to our operating model and
management’s focus on store-level profitability and economic payback. Over the five fiscal years ended February 1, 2014, our net sales have grown at a
compounded 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 cash and investments of approximately $579 million as of February 1, 2014, should be sufficient to maintain our ongoing
operations, support seasonal working capital requirements, fund capital expenditures related to projected business growth and continue payments of dividends
to our shareholders.
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Affiliated Business Group
We operate shoe departments for three retailers. We have renewable supply agreements to provide merchandise for the shoe departments in Stein Mart, Inc.,
Gordmans Stores, Inc. and Frugal Fannie’s Fashion Warehouse stores through December 2015, January 2016 and April 2017, respectively. We own the
merchandise and the fixtures, record sales of merchandise net of returns and provide management oversight. Our affiliated business partners provide the sales
associates and retail space. We pay a percentage of net sales as rent. As of February 1, 2014, we supplied merchandise to 262 Stein Mart stores, 93 Gordmans
stores and one Frugal Fannie’s store.
Competition
We view our primary competitors to be department stores and brand-oriented discounters. However, the fragmented shoe market means we face competition
from many sources. We also compete with mall-based shoe stores, national chains, independent shoe retailers, single-brand specialty retailers, online shoe
retailers and multi-channel specialty retailers. We believe shoppers prefer our assortment, value and convenience. Many of our competitors generally offer a
more limited assortment at higher initial prices in a less convenient format than DSW and without the benefits of the DSW Rewards program. In addition, we
believe we successfully compete against retailers who have attempted to duplicate our format because they typically offer assortments with fewer recognizable
brands and more styles from prior seasons, unlike DSW’s current on-trend merchandise.
Intellectual Property
We have registered a number of trademarks, service marks and domain names in the United States and internationally, including DSW®, DSW Shoe
Warehouse® and DSW Designer Shoe Warehouse®. We believe our trademarks and service marks, especially those related to the DSW concept, have
significant value and are important to building our name recognition. To protect our brand identity, we have also protected the DSW trademark in several
foreign countries. We also hold patents related to our unique store fixtures, which gives us greater efficiency in stocking and operating those stores that
currently have the fixtures. We aggressively protect our patented fixture designs, as well as our packaging, private brand names, store design elements,
marketing slogans and graphics.
Associates
As of February 1, 2014, we employed approximately 11,000 associates. None of our associates are covered by any collective bargaining agreements. We offer
competitive wages, paid time off, comprehensive medical and dental insurance, vision care, company-paid and supplemental life insurance programs,
associate-paid long-term disability and company-paid short-term disability insurance and a 401(k) plan to our full-time associates and some of our part-time
associates. We have not experienced any work stoppages, and we consider our relations with our associates to be good.
Seasonality
Our business is subject to seasonal merchandise trends when our customers’ interest in new seasonal styles increases. New spring styles are primarily
introduced in the first quarter, and new fall styles are primarily introduced in the third quarter. Unlike
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Source: DSW Inc., 10-K, March 27, 2014 Powered by Morningstar® Document Research℠
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