May 19, 2005
Julia A. Davis
General Counsel
DSW Inc.
3241 Westerville Road
Columbus, Ohio 43224
Re: DSW Inc.
Amendment to Form S-1 filed May 9, 2005
File No. 333-123289
Dear Ms. Davis:
We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
General
1. Your request for confidential treatment of the entire letter
dated
May 9, 2005 is overly broad. Your request should be limited to
market sensitive and competitive information, the confidentiality
of
which the company is prepared to substantiate in accordance with
Rule
83 of the Freedom of Information Act. Please re-file as
correspondence your response letter redacting only the
confidential
information. Additionally, please acknowledge that any future
correspondence for which confidentiality is requested will be
filed
on EDGAR in redacted form.
2. We note your response to comment 1. We do not agree with your
analysis. Please provide us with additional information
supporting
your belief that this press release is consistent with section 5
of
the Securities Act of 1933 and advise us how you intend to address
the announcement of this information.
Summary, page 1
3. We note your response to comment 6 and reissue the comment.
Risk Factors
We face security risks related . . ., page 14
4. With respect to the March 8, 2005 security breach that resulted
in
the theft of certain customer transaction information please tell
us,
and revise your filing to indicate, the extent to which your
business
has been adversely affected by your disclosure of the security
breach. We understand that reasonably estimating your potential
liability at this time may not be possible. However, with regard
to
your assertion that you do not know what effect this incident may
have on your customers` perceptions of you we assume that weekly
or
monthly comparable store sales data subsequent to the March 8,
2005
announcement would provide meaningful information to the reader as
to
the short-term effect of the security breach on your business.
Please revise your risk factor accordingly.
Unaudited Pro Forma Condensed Consolidated Statement of Income,
page
27
5. We have considered your response to prior comment 15. Please
describe for us, in detail, the nature and amount of costs
included
in the estimate of "incremental costs associated with the
operation
of DSW as a separate entity" included in pro forma adjustment #2.
Help us understand how each of these estimated costs is factually
supported.
Management`s Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Fiscal Year Ended January 29, 2005 (Fiscal 2004) Compared to
Fiscal
Year Ended January 31, 2004 (Fiscal 2003), page 36
6. Your discussion of income taxes indicates that the significant
decline in the effective rate during fiscal 2004 was primarily due
to
the change in tax deferred items for tax purposes. Based on
review
of your quarterly disclosure on page 39, the effective tax rate
for
each of the first three quarters of fiscal 2004 was 40.2%, while
the
effective rate for the fourth quarter was 8.4%. It appears that
the
change in the effective rate during the fourth quarter is the
result
of "non-deductible expenses and other" items as disclosed in your
tax
reconciliation on page F-15. Please revise your Management`s
Discussion and Analysis to clarify the specific nature of the
items
impacting your effective tax rate and indicate whether you expect
such items to recur. If you do not expect the benefit of these
tax
items to recur, please clarify for the reader your expectation as
to
your effective tax rate going forward. Please also revise your
footnote to clarify the nature of the non-deductible expenses and
other items. Finally, help us understand how non-deductible
expenses
decrease your tax liability.
Separation Agreements, page 32
7. We note your response to comment 19. Please confirm that
before
you request effectiveness of the registration statement, you will
file the agreements related to the secured revolving credit
facility.
Business, page 47
8. We note your response to comment 22. Please provide the
research
that supports your statement that you believe your typical store
offers the largest selection of brand name and designer
merchandise.
Industry Overview and Competition, page 56
9. We note your response to comment 23 and reissue the comment.
Provide support for the industry statistics cited in this section
and
file appropriate consents.
Principal Shareholders, page 86
10. We reissue comment 31. Please provide the requested
information
for Back Bay Capital Funding LLC.
Material U.S. Federal Income and Estate Tax Considerations, page
97
11. We note your response to comment 32. Please revise the
heading
and the first paragraph on page 97 to indicate that you have
described the material U.S. federal income tax consequences.
Consolidated Statements of Operations, page F-4
12. We have considered your response to prior comment 42 and the
additional disclosures you made to the Cost of Sales and
Merchandise
Inventories footnote on page F-10. It is unclear to us whether
depreciation expense associated with distribution and store
occupancy
is included in cost of sales. If cost of sales does not include
depreciation charges associated with distribution and store
occupancy
please revise your disclosure to clarify that fact and
supplementally
tell us the amounts of depreciation expense excluded from cost of
sales for all periods presented. Since exclusion of depreciation
expense associated with distribution and store occupancy from cost
of
sales may impact comparability of your gross margin to others in
your
industry, please consider the need for cautionary disclosure in
the
Management`s Discussion and Analysis section. Also, please ensure
you revise your filing to provide the disclosure required by SAB
Topic 11:B to the extent that depreciation expense is excluded
from
cost of sales.
****
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
letter with your amendment that keys your responses to our
comments
and provides any requested supplemental information. Detailed
letters greatly facilitate our review. Please understand that we
may
have additional comments after reviewing your amendment and
responses
to our comments.
You may contact Ta Tanisha Henderson at (202) 551-3322 or
George Ohsiek, Accounting Branch Chief, at (202) 551-3843 if you
have
questions regarding comments on the financial statements and
related
matters. Please direct any other questions to Howard M. Baik at
(202) 551-3317 or to Ellie Quarles, Special Counsel, at (202) 551-
3238.
Sincerely,
H. Christopher Owings
Assistant Director
cc (via fax): Robert M. Chilstrom, Esq.
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Julia A. Davis
DSW Inc.
May 19, 2005
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