DSW Inc. (NYSE: DSW) may still have a positive analyst view, but one of the targets just was brought down to a much more conservative level. 24/7 Wall St. has warned that you almost have to expect analysts who want to keep Buy and Outperform ratings will have to lower their price targets.
Canaccord Genuity’s Camilo Lyon decided to maintain the firm’s Buy rating on DSW, but the price target was lowered sharply to $37 from $46.
What was cited was disappointing comparable sales. The firm still ultimately remains positive here. That is after DSW reported earnings per share of $0.42, versus the firm’s own $0.44 estimate. Consensus was listed as $0.42. Gross margin expanded by 122 basis points, what the firm said was due to less clearance activity driving merchandise margin expansion.
The report summary noted:
Relative to our model, the miss was driven by lower revenue (-1c) and lower gross margin (-3c), partially offset by lower expense growth (+1c) and lower tax rate (+1c). DSW segment comparable of 1.9% was considerably below our 4% estimate (consensus was 3.5%), negatively impacted by 6% decline in clearance comp due to elevated promotional activity in the second quarter of 2014.
Conversely, DSW continued to drive more full price selling as regular price comparable was up 4%. Women’s comparable was flat, as strength in sandals and athletic was offset by softness in casuals and dress.
The report summary concluded:
Overall, we are disappointed by the weak comparables and feel the company could have done a better job in communicating the potential comp impact from last year’s elevated clearance activity, as we (among others) were caught off guard.
DSW’s $28.45 share price was after 4% gain Wednesday morning. DSW has a consensus price target of $40.00, but note that the Canaccord Genuity $46 target from before was the highest target of all analysts on Wall Street. The 52-week trading range is $27.28 to $39.58, and the stock trades at about 14 times expected 2015 earnings estimates. It also has a dividend yield of about 2.5%.
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