NEW YORK (TheStreet) -- DSW's (DSW) shares aren't discounted enough given sales declines, say investors. A majority of users on StockTwits.com see dire signs in the discount shoe retailer's disappointing earnings, declining sales and poor guidance. And many argued that DSW's stock would continue to fall more than the 27% it had dropped by 12:30 p.m. Wednesday.
Short $DSW. It's pure math, figure out their forward looking P/E. With no growth this could go below 20 near term.? Beat Bartlome (@3xkona) May. 28 at 09:33 AM
$DSW Where is the bottoms is anyones guess today? Megaas2000 (@Megaas2000) May. 28 at 10:26 AM
DSW badly missed consensus sales and earnings estimates. Sales fell 0.4% in the first quarter to $599 million. Analysts had expected $622.4 million in sales. Comparable-store sales fell an even worse 3.7% for the 13 weeks ended May 3. That sales drop was greater than the 2.4% drop for the same quarter last year.
Earnings grew 10.5% to 42 cents per share. However, that fell short of the 48 cents in EPS that Wall Street expected, according to the Analyst Ratings Network.
Guidance disappointed. Management projected EPS of between $1.45 and $1.60 for the fiscal year ending January 31, 2015. The outlook assumes low single-digit sales declines for comparable stores.
Some investors bought DSW's argument that cold weather kept shoe shoppers from buying new sandals, sneakers and stilettos. In a statement, CEO Mike MacDonald said that the quarter was "challenging" due to "unseasonal weather and an aggressive promotional retail environment."
Bulls said that DSW would recover as the shoe store's sales picked up with warmer weather.
$DSW I like the price action around 24. I am in for a bounce.? OptionsMonster (@OptionsMonster) May. 28 at 10:29 AM
But many others said DSW has lost its bargain-hunter niche. Instead of buying in stores, savvy shoppers will try on shoes elsewhere and then find them online for the lowest price. As a result, DSW will continue to see sales declines incapable of justifying its 11 times price-to-2016-earnings ratio, many argued.
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At the time of publication the author held no positions in any of the stocks mentioned.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.