DSW Earnings Call Insights: Productivity Details and New Stores

DSW Inc (NYSE:DSW) recently reported its second quarter earnings and discussed the following topics in its earnings conference call.

Productivity Details

Mark Montagna – Avondale Partners, LLC: Just a question in terms of your – with the productivity gains that I’m assuming you’re getting at the DC, I think in January you’ve really kicked off all the reorganized DC. I am hoping you can give us some metrics in terms of productivity per hour, how much cost per unit may have declined, because I’ve got to think that you’re getting a lot of EPS benefit out of that DC.

Douglas J. Probst – EVP and CFO: Well, from a rate perspective, the DC has improved its expense rate to last year as it relates to the DSW store sales. Obviously, the mix change going to the fulfillment center because of a growing dotcom business, you’re not going to see an overall leverage on that DC/FC expense based on that shift in sales. So, we’re certainly seeing productivity gains, but from a benefit to the bottom line and the operating profit rate, you’re not seeing a material impact there. Mike?

Michael R. MacDonald – President and CEO: Yeah. I would say the big change in the DC is the implementation of the high-speed sortation system. And what this really did is dramatically increased our capacity to allocate by size, by store, and to replenish at size level by store. Previously, I think we put up our unit replenishment system – I don’t know, two years plus ago, and as we ramped that up, it was largely a manual process in the DC, and as a consequence, there was limited number of items that we could put on our unit replenishment system. And so, what the sortation system has effectively done is taken the lid off of that capacity constraint, and as a consequence, we are putting a lot more product through that that sortation system. So, I defer to Doug on the numbers, but I think what we’re doing is we are processing a lot more precisely because of our automation…

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