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Ahead of the Bell: DSW

NEW YORK (AP) — An analyst said Thursday that Wall Street's expectations for DSW are currently too high, given disruptions the shoe company faced following Superstorm Sandy and a weak holiday season.

Danielle McCoy of Brean Capital said in a client note that she still believes in the retailer's long-term growth opportunities, but that it has faced some difficulties of late.

Aside from Sandy and the soft holiday season, she noted that DSW Inc. had to contend with difficult weather conditions on the East Coast and a reduction in consumers' disposable income given that people are receiving tax returns later this year.

The East Coast makes up about 50 percent of DSW's business, according to McCoy.

The analyst said that the company is also up against difficult first-quarter comparisons, as warmer weather arrived early last year and helped drive sales of sandals. Other pressures on DSW include the higher payroll tax and the loss of February break from many schools in locations hurt by Sandy.

"With lack of urgency to stock up on new seasonal arrivals for vacations, harsh weather conditions and the reduced amount of recreational cash, we believe first-quarter traffic and sales patterns have been materially hindered thus far," McCoy wrote.

The analyst also feels that DSW's spring product assortment lacks a bit of color and doesn't account for the must-have trends of the season.

McCoy said that she is reaffirming a "Hold" rating, preferring to wait until economic and weather-related pressures ease up and Wall Street expectations normalize. She lowered her 2014 earnings estimate to $3.63 per share from $3.84 per share.

DSW is expected to report its fourth-quarter financial results on Tuesday.

Its shares finished at $68.34 on Wednesday. They have traded in a 52-week range of $51.16 to $72.

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