DSW Inc.: Step Into This Growth Retailer

| About: DSW Inc. (DSW)

DSW Inc (NYSE:DSW) is a retailer that sells brand name dress and athletic shoes for men and women. It operates 215 stores in 32 states with 30 new stores opening every year.

It is announcing its Q4 and year-end results this Thursday and I think you should buy this stock ahead of the earnings. Here is why:

DSW specializes in designer footwear and buys from over 300 brands including Kenneth Cole, Via Spiga, Calvin Klein, Gucci and Addidas. Their business model allows them to sell such footwear at 20% to 50% less than department stores.

The company's inventory system allows it to sell 80% of its inventory without markdowns and keep the merchandise turn-over at over 4 times a year, double the turn-over at department stores. A typical store carries over 30,000 pairs of shoes and runs a successful loyalty program with over 6 million members.

In addition to its own stores, DSW runs 240 leased departments for other retailers, including Stein Mart. In fact, starting January, DSW became the exclusive shoe provider in all Stein Mart stores, which gives it over 100 additional retail outlets, and with 300 brands, they have a much larger variety than Shoe Pavilion.

The stock has been on a tear these last 6 months, rising 65% since September and currently sits less than 4% below its all time high. At 25 times earnings, the stock is by no means a bargain, however, it is growing at over 40% YOY and carries no debt.

Management has committed to increasing sales per square foot by 35% over the next 3-5 years and this coupled with the 30 new stores annually projected to open should keep EPS on the rise.

Full Disclosure: I am long DSW but my position can change anytime without notice.

DSW 1-yr chart: