Bears Accumulating At DSW: Credit Suisse Follows Goldman Sachs With Sell

Credit Suisse's Christian Buss downgraded the rating for DSW Inc. (NYSE: DSW) from Outperform to Neutral, with a price target of $26. The downgrade comes two days after Goldman Sachs cuts its rating on DSW from Neutral to Sell.

Analyst Christian Buss mentioned that the recent comp challenges facing DSW are actually structural and not transitory. This is indicated by a change in the company's brand proposition and the absence of premium brands.

DSW originally sourced nearly 80 percent of its products from national brands available primarily in premium distribution. The company's current portfolio offers only a few designer and premium styles. About 92 percent of the shelf space is now allocated to mid-tier and private label brands, Buss pointed out.

This implies that DSW's concept has lost one of its major differentiating features and, thus, the attraction point for repeat visits. Buss believes that DSW will find it difficult to drive comp momentum, needed to deliver low-to-mid single digit revenue growth and mid-single digit earnings growth in the future.

The recent acquisition of ecommerce retailer EBuys is unlikely to improve DSW's designer branding. This is because out of the 700 newly acquired brands, only 3.5 percent can be categorized as designer label brands, Buss commented.