DSW says small format stores are on the way

DSW (NYSE: DSW) is known for its massive, warehouse-style shoe outlets, but the company says that small-format stores are on the horizon.

The Columbus-based discount shoe and accessory retailer said Tuesday it sees the potential for as many as 550 stores, including 35 new stores it expects to build in fiscal 2014. These figures do not include small-format growth, said Doug Probst, CFO and exec-VP, during an earnings call with investors.

DSW opened two small-format stores in the fourth quarter, and said that as many as six more could be opened this year. The small-format test was launched in the fall of 2013. On average, a DSW store occupies 22,000 sq. ft., but its smaller locations will take up about 10,000 sq. ft. The smaller DSW stores carry the same core products as a larger DSW, but have a fewer number of choices.

In addition to the store news, DSW reported a net income increase in the fourth quarter of fiscal 2013 compared to the same period a year earlier. Fourth-quarter profit rose 4 percent to $28.1 million from $27.1 million, while revenue declined 4 percent to $572 million from $594 million. Same-store sales remained flat.

Small format stores are a big trend in retailing. This week, Walmart (NYSE: WMT) opened the latest version of its small-format model, Walmart To Go. The convenience store offers the ease of a 7-Eleven but with fresh grocery and hot food offerings. The store comes on the heels of Walmart's Feb. 20 announcement it would be revving up expansion of small-format stores.

Kroger (NYSE: KR) is also focusing on urban-format stores through its newly-acquired Harris Teeter unit. Kroger purchased Harris Teeter for roughly $2.5 billion in July. The Harris Teeter stores are typically much smaller than Kroger locations and are located in more densely populated areas than a typical Kroger. J. Michael Schlotman, Kroger's CFO, remarked that operating the Harris Teeter unit has helped the company "learn a lot" about urban-format stores.

For more:
-See this DSW earnings call transcript

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