DSW 2015 Annual Report Download - page 9

Table of Contents
In our Affiliated Business Group, we leverage our sourcing network to produce a merchandise assortment that meets the needs of our affiliated business
customers. We pursue opportunities for new affiliated business partners.
Through our investment in Town Shoes, we serve Canadian customers with great values on branded footwear and accessories within a variety of concepts,
including DSW Designer Shoe Warehouse stores. As of January 30, 2016, there are 13 DSW Designer Shoe Warehouse stores in Canada, and Town Shoes
plans to open approximately 10 DSW Designer Shoe Warehouse stores in fiscal 2016.
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We have invested 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 assortment planning, size replenishment and size optimization. All
categories are planned using an enterprise-wide assortment planning system that allows us to build assortments based on local customer profiles rather than
just based on store volume. Size replenishment focuses on replenishing core styles at a size level; size optimization allows us to effectively allocate sizes by
store.
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 purchases and fast-selling footwear so we can take full advantage of each selling season. 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 a
West Coast facility we utilize. Merchandise is transported either from the West Coast facility or our primary distribution center to our pool points and then on
to stores.
Order routing optimization determines the best location to ship certain digitally demanded products from, to optimize our operating profit. Orders originating
online can be fulfilled from a store or our fulfillment center, which is also located in Columbus, Ohio. The fulfillment center processes orders which are
shipped to a customer's home or to a store when an order is placed through buy online, ship to store. Orders originating from a store that cannot be fulfilled in
that store can either be fulfilled from our ship from store capability, from the fulfillment center, or drop shipped from a vendors' warehouse.
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Our operating model is focused on assortment, convenience and value. Over the past five years, our net sales have grown at a compounded annual growth rate
of 8%. In addition, we have consistently generated positive operating cash flows and profitable operating results. Our liquidity, strong vendor relationships
and talented associates enable DSW to differentiate our assortment and run a profitable business compared to our peers.
We are committed to a disciplined process in capital allocation. We believe cash generated from operations, together with our cash and investments of
approximately $330 million as of January 30, 2016, is sufficient to maintain our ongoing operations, support seasonal working capital requirements, fund
capital expenditures, and make quarterly dividend payments and opportunistic share repurchases. In addition, our strong balance sheet allows us to pursue
investments like Town Shoes and Ebuys, Inc.
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As a division of DSW Inc., ABG partners with multi-category retailers to develop strategies and business models for targeted shoe assortments. We have
renewable supply agreements to provide merchandise for the shoe departments in Stein Mart, Gordmans, and Frugal Fannie’s stores through December 2016,
January 2019 and April 2017, respectively. As of January 30, 2016, we supplied merchandise to 276 Stein Mart stores and Steinmart.com, 102 Gordmans
stores and Gordmans.com, and one Frugal Fannie’s store.
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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 24, 2016 Powered by Morningstar® Document Research℠
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