TGT Target Corp

Disappointing shoes sales at DSW Inc. dragged earnings down by more than a third in its first quarter, prompting the retailer to slash its outlook for the year.

Shares slid 6.2% in premarket trading. Over the past 12 months, through Monday's close, the stock has tumbled 38%.

Chief Executive Roger Rawlins said the company's reduced earnings and sales guidance reflects "the current trend of our business in a challenging retail environment."

Mr. Rawlins said that heavy investments over the past three years in technology, stores, marketing and support services have aided sales, "but we haven't grown our bottom line." As such, he said DSW has launched a review of its cost structure to support earnings "in a rapidly changing environment."

DSW's woes echo those of retailers across the spectrum. From department stores such as Nordstrom Inc. and Macy's Inc. to specialty shops to Target Corp., stores have seen traffic drop off as shoppers increasingly move online and to fast-fashion chains. The troubles have driven teen retailer Aé ropostale Inc. and Sports Authority Inc. to bankruptcy this year, and struggling apparel chain Gap Inc. had its credit rating cut to junk status this month.

For its part, DSW in February stuck a deal to buy online shoe retailer Ebuys Inc. for $62.5 million in an effort to grab more online shoppers.

For the year, the Columbus, Ohio, based retailer said it expects to report $1.32 to $1.42 in adjusted earnings per share, well short of the $1.58 analysts have anticipated and down from an earlier forecast of $1.54 to $1.64.

The company now sees a decline in sales at existing stores, predicting a 1% to 2% fall after having projected growth in the same range. It is also forecasting 7% to 8% in operating expense growth this year, after having previously guided for such expenses to be up in the low teens.

In its most-recent quarter, DSW posted a profit of $30 million, or 36 cents a share, down from $47.4 million, or 53 cents a share, a year earlier. Excluding acquisition-related charges, earnings per share were 40 cents.

Revenue rose 3.9% to $681.3 million. Analysts predicted 45 cents in adjusted earnings per share on $698.8 million in sales, according to Thomson Reuters.

Comparable-store sales declined 1.6% after having risen 5.1% a year earlier. Analysts were looking for a 0.2% increase in the metric.

Write to Lisa Beilfuss at lisa.beilfuss@wsj.com

(END) Dow Jones Newswires

May 24, 2016 09:05 ET (13:05 GMT)

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