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Thursday, Nov 30, 2023

SHOES—High-End Shoe Discounter Opens Up in Northridge

In the latest wrinkle on the ever-changing local retail scene, the discount warehouse concept is being applied to designer shoes in the San Fernando Valley. DSW Shoe Warehouse an Ohio-based chain that sells shoes from such big names as Kenneth Cole, DKNY and Joan & David at cut-rate prices in big-box warehouses is aggressively moving into the Los Angeles market. Early this month, it opened its first L.A.-area store in Northridge. At 43,000 square feet, it is the largest store in the 70-store DSW chain. The new Northridge store carries some 55,000 pairs of shoes with 900 styles and more than 150 brand names, from low-key loafers to slinky cocktail footwear. In addition, DSW is scheduled to open a 30,000-square-foot facility in West Covina next month. It’s all part of DSW’s foray into the Southern California market after the chain spent years concentrating on the Midwest and Northeast. “We have been looking at Los Angeles for quite some time,” said Mike Levison, director of advertising for DSW Shoe Warehouse. “We recently opened a store in San Francisco and Phoenix, and Los Angeles was the next logical big city.” DSW’s formula is this: It offers current-season, brand-name shoes at 20 to 50 percent off retail prices. That represents a distinctly different strategy from that of existing discount shoe retailers in the area, such as Famous Footwear and Payless Shoes, which tend to offer mass-market shoe brands. DSW is able to offer discount prices on designer-label shoes by ordering in huge quantities, buying styles that didn’t sell to the department stores, and keeping overhead low. There are few salesclerks, and the chain’s warehouses are relatively inexpensive to build, compared to a department store. Ripe new territory Retail analysts note that shoe lovers here have never had this kind of selection before and this kind of quality. And that’s one of the reasons DSW is targeting California. “There are a lot of feet in California,” said Jeffrey S. Stein, a retail analyst for McDonald Investments in Cleveland. “There are more people in California, more shoes to be sold, and there is not a great deal of competition for DSW.” DSW has a few marketing trade secrets that make it easy for shoppers to find what they want among the 50-odd aisles of footwear. First, the retailer lumps all shoes together by style instead of by designer. One pony-hair slide is next to the other pony-hair slides. Second, the shoes are displayed on waist-level counters so you can scan across the sea of shoes and figure out where you need to go. Once you’ve found an item you like, all the sizes are stacked up in boxes right below, so you can help yourself to try on a pair. “To some people, it is overwhelming, but once it is explained that everything is arranged by category, then they’re OK,” Levison said. The Northridge store has only been open a few weeks but already a steady stream of clients is pouring in. “I have been here two times, and I really like it,” said Rose O’Dell, who was scouring the aisles during her lunch break. “I thought the prices were reasonable, and I like the variation of shoes. If you can’t find it here, you can’t find it anywhere.” Diane Sexton, also on her lunch break, was overwhelmed by the selection of shoes. “See that rack right there,” she said, pointing 10 feet away. “That’s as far as I got.” The average DSW Shoe Warehouse is about 24,000 square feet with black-and-white awnings, big windows and wide aisles and rows and rows and more rows of shoes. Focus on women About 70 percent of the selection consists of women’s shoes and accessories. The rest is for men. “It’s no secret that we are aiming our product at females between the age of 25 to 54,” Levison said. “The median household income of our customers across the country is $50,000 or more. They are in professional and managerial positions with at least some college education.” DSW Shoe Warehouses have been around for nine years. It is a subsidiary of Value City Department Stores Inc., a chain of about 150 off-price department stores controlled by the Schottenstein family of Columbus, Ohio. Value City bought the shoe warehouse chain from the Shonac Corp. in 1998. While Value City has been navigating along a rough financial road recently, analysts said, DSW Shoe Warehouse has been doing well and may be the saving grace for the discount retailer. “The department store sector of Value City is struggling,” said retail analyst Lee Backus with the Buckingham Research Group in New York. “The overall earnings are down because of the things that are going on in the department store business. They have too much inventory. What happens with off-price retailers is they buy a lot of inventory at the end of the season, pack it away, thinking it was a great, great buy last year. But this year, it turns out it wasn’t such a good buy because there is a glut of inventory on the market, especially in spring and summer goods.” Backus believes that DSW alone is worth the entire $231 million market capitalization of Value City Department Stores. Value City Department Stores’ earnings were helped by the fact that in March it took control of off-price retailing veteran Filene’s Basement, which had more than 17 stores. Value City reported net income for the second quarter ended July 29 of $100,000 (less than 1 cent a share) compared with $4.0 million (12 cents a diluted share) for the like period a year ago. Revenue was $528.2 million vs. $372.8 million. Second-quarter sales included $62.8 million from Filene’s. While Value City does not break out financial figures for DSW Shoe Warehouse, analysts figure that the shoe chain generates a little more than $300 million annually in revenue, which translates to about 18 percent of Value City’s total revenues.

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