Why Shares of DSW Inc. Slumped Today

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What happened

Shares of DSW Inc. (NYSE:DSW) fell on Wednesday after the footwear retailer announced a deal to acquire Camuto Group. The broad stock market sell-off is also probably playing a role. DSW stock was down about 12.8% at market close.

So what

Under the agreement, DSW will acquire the operations of product design and brand development company Camuto Group. DSW will also acquire intellectual-property rights from Camuto Group in a joint deal with Authentic Brands Group. In total, Camuto Group will be paid about $375 million.

The outside of a DSW store.

Image source: DSW.

DSW laid out some expected benefits from the deal, including a brand portfolio with attractive growth prospects, a larger addressable market, and access to a larger talent base.

DSW will pay $200 million to acquire Camuto’s global production, sourcing, and design infrastructure, as well as $56 million to acquire a 40% stake in the intellectual property. The deal will be funded with cash on hand and an existing credit facility.

Now what

It’s unclear how much of the steep decline in DSW stock is due to the market’s reaction to the deal. The S&P 500 closed down more than 3% on Wednesday, and shares of DSW have soared this year. Wednesday’s move lower may just be a market-driven correction.

DSW will report its third-quarter results in December. The deal is expected to close by the end of the fiscal fourth quarter.

Timothy Green has no position in any of the stocks mentioned. The Motley Fool recommends DSW. The Motley Fool has a disclosure policy.