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DSW (DSW) Reduced To 'Hold' By Brean Capital On Too High Expectations

 January 07, 2013 01:31 PM

(By Balachander) DSW Inc. (NYSE: DSW) shares were reduced to "hold" from "buy" by Brean Capital LLC due to the combination of poor retail industry comps and aftermath from Hurricane Sandy lingering longer than expected.

The brokerage also lowered its above the Street 4QFY13 EPS estimate to $0.65 from $0.74 and adjusted FY14 EPS projection to $3.84 from $3.90.

Brean Capital wrote that the combination of poor retail industry comps suggested a weaker-than-anticipated Holiday selling season for the sector.

The aftermath from Hurricane Sandy lingering longer than expected has placed unforeseen pressure on 4Q brick and mortar sales, the brokerage said.

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"In addition, given the minimal guidance provided by management, we believe it is necessary to be more conservative in our top-line projections and by doing so, now fall at the low end of management's guided EPS range of $3.30 to $3.40," Brean Capital said.

"We view our 17X multiple as appropriate and our revised FY13 EPS estimate of $3.31 leads us to believe DSW is currently fairly valued; we note this is on a cash adjusted basis (net cash/share 3QFY13 of $9.45)," the brokerage added.

That said, Brean Capital remains upbeat on the multiple growth opportunities set in place for FY14 and anxiously look for the next entry point with a greater risk/reward to get aggressive in the name.

DSW, a branded footwear and accessories retailer, operated 364 stores in 41 states, the District of Columbia and Puerto Rico as of December 24, 2012.

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The stock, which has been trading in the 52-week range of $42.18 to $72.00, retreated 3.60 percent to trade at $65.00 on Monday.



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