The firm maintained its "overweight" rating on the footwear retailer, but said DSW's new kids' footwear rollout at 220 of its stores could improve productivity and generate 100-200 bps in the 2016 second half.
"While kids footwear typically operates at lower margins, we think the incremental sales should drive productivity and help leverage costs," KeyBanc said in an analyst note.
DSW has recently struggled to boost expansion, but the kids initiative could help improve this, as well as recapture shoppers that exited during early years of child raising, the firm added.
Shares of DSW are declining 0.49% to $24.36 in afternoon trading today.
Separately, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:
We rate DSW INC as a Hold with a ratings score of C. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and poor profit margins.
You can view the full analysis from the report here: DSW