Designer Brands Inc. - Proxy Solicitation & Information Statement 2011

PAGEBREAK

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934

Filed by the Registrant þ Filed by a Party other than the Registrant o

Check the appropriate box:

o	Preliminary Proxy Statement
o	Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
þ	Definitive Proxy Statement
o	Definitive Additional Materials
o	Soliciting Material Pursuant to §240.14a-12

DSW Inc.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

þ	No fee required.
o	Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1)	Title of each class of securities to which transaction applies:
(2)	Aggregate number of securities to which transaction applies:
(3)	Per unit price or other underlying value of transaction computed pursuant to Exchange Act
Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was
determined):
(4)	Proposed maximum aggregate value of transaction:
(5)	Total fee paid:

o	Fee paid previously with preliminary materials.
o	Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form or Schedule and the date of its
filing.

(1)	Amount Previously Paid:
(2)	Form, Schedule or Registration Statement No.:
(3)	Filing Party:
(4)	Date Filed:

Folio /Folio

PAGEBREAK

DSW INC.

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD

May 19, 2011

AND

PROXY STATEMENT

IMPORTANT

If you received a copy of the proxy card by mail, please complete, sign and date your proxy and promptly return it in the enclosed envelope. No postage is necessary if mailed in the United States.

Folio /Folio

PAGEBREAK

DSW INC. 810 DSW Drive Columbus, Ohio 43219 (614) 237-7100

April 4, 2011

To Our Shareholders:

The 2011 Annual Meeting of Shareholders of DSW Inc. will be held at 810 DSW Drive, Columbus, Ohio on May 19, 2011, at 10:00 a.m., Eastern Daylight Savings Time, for the following purposes:

| 1. | To elect three Class I directors, each to serve until the
2014 Annual Meeting of Shareholders and until their successors are duly
elected and qualified; |
| --- | --- |
| 2. | To hold an advisory vote on the frequency of voting on the
compensation of our named executive officers; |
| 3. | To hold an advisory vote relating to the compensation of
our named executive officers; and |
| 4. | To transact such other business as may properly come before
the meeting or any adjournment or postponement thereof. |

Only the holders of record of Class A and Class B Common Shares at the close of business on March 22, 2011, our record date for the Annual Meeting, are entitled to notice of and to vote at the meeting. Each shareholder is entitled to one vote for each share of Class A common stock held as of the record date, and eight votes for each share of Class B common stock held as of the record date.

By Order of the Board of Directors, William L. Jordan Secretary

YOUR VOTE IS IMPORTANT

If you received a copy of the proxy card by mail, you are urged to date, sign and promptly return the enclosed form of proxy in the enclosed envelope to which no postage need be affixed if mailed in the United States. Voting your shares by the proxy does not affect your right to vote in person in the event you attend the meeting. You are cordially invited to attend the meeting. If you attend, you may revoke your proxy and vote in person if you wish, even if you have previously returned your proxy.

Folio /Folio

PAGEBREAK

Contents


NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
PROXY STATEMENT	1
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT	3
PROPOSAL 1 ELECTION OF DIRECTORS	7
EXECUTIVE OFFICERS	11
OTHER DIRECTOR INFORMATION, COMMITTEES OF DIRECTORS AND CORPORATE GOVERNANCE INFORMATION	13
AUDIT AND OTHER SERVICE FEES	18
AUDIT COMMITTEE REPORT	19
COMPENSATION DISCUSSION AND ANALYSIS	21
REPORT OF THE COMPENSATION COMMITTEE	29
COMPENSATION OF MANAGEMENT	30
PROPOSAL 2 ADVISORY VOTE ON THE FREQUENCY OF VOTING ON THE COMPENSATION OF NAMED EXECUTIVE
OFFICERS	41
PROPOSAL 3 ADVISORY VOTE ON THE COMPENSATION PAID TO NAMED EXECUTIVE OFFICERS	42
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	43
INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS	51
OTHER MATTERS	51

Folio i /Folio

PAGEBREAK

DSW INC. 810 DSW Drive Columbus, Ohio 43219 (614) 237-7100

PROXY STATEMENT

| This proxy is being solicited on behalf of our Board of Directors for use at our
2011 Annual Meeting of Shareholders to be held at 10:00 a.m., Eastern Daylight Savings
Time, on Thursday, May 19, 2011, and any postponements or adjournments thereof (the
Annual Meeting). The Annual Meeting will be held at our corporate office, 810 DSW
Drive, Columbus, Ohio. This proxy statement, including the Notice of Meeting and our
Annual Report on Form 10-K for the fiscal year ended January 29, 2011 (fiscal
2010), is being made available electronically on or about April 4, 2011. |
| --- |
| Pursuant to rules adopted by the Securities and Exchange Commission, we have elected
to provide access to our proxy materials over the Internet. Accordingly, we are
sending a Notice of Internet Availability of Proxy Materials (the Notice of Internet
Availability) to our shareholders of record and beneficial owners. All shareholders
will have the ability to access the proxy materials on a website referred to in the
Notice of Internet Availability or request to receive a printed set of the proxy
materials, at no charge. Instructions on how to access the proxy materials over the
Internet or to request a printed copy may be found on the Notice of Internet
Availability. In addition, shareholders may request to receive proxy materials in
printed form by mail or electronically by email on an ongoing basis by following the
instructions on the website referred to in the Notice of Internet Availability. |
| We have two classes of securities outstanding and entitled to vote at the Annual
Meeting, our Class A Common Shares, no par value, and our Class B Common Shares, no
par value. Only shareholders of record at the close of business on March 22, 2011,
our record date for the Annual Meeting, are entitled to notice of and to vote at the
meeting or any adjournments thereof. The total number of outstanding Class A Common
Shares entitled to vote at the meeting is 16,741,975 and the total number of Class B
Common Shares entitled to vote at the meeting is 27,382,667. Each outstanding Class A
Common Share is entitled to one vote with respect to each matter to be voted on at the
meeting and each outstanding Class B Common Share is entitled to eight votes with
respect to each matter to be voted on at the meeting. Class A Common Shares and Class
B Common Shares vote together as a single class with respect to all matters submitted
to a vote of shareholders. |
| Prior to the completion of our initial public offering in July 2005, we were operated
as a direct wholly-owned subsidiary of Retail Ventures, Inc. (Retail Ventures). As of
March 22, 2011, Retail Ventures owned 27,382,667 of our Class B Common Shares,
constituting all of our issued and outstanding Class B Common Shares, or approximately
62.1% of our total outstanding shares and approximately 92.9% of the combined voting
power of our outstanding Common Shares. At our Annual Meeting, Retail Ventures has
the power acting alone to approve any action requiring a vote of the majority of our
voting shares, to elect all our directors, and to approve the advisory votes on
executive compensation and the frequency of the advisory vote on executive
compensation. |
| Without affecting any vote previously taken, a proxy may be revoked by a shareholder
by giving a written notice of revocation to us in writing (attention: William L.
Jordan, Secretary). A shareholder may also change his or her vote by executing and
returning to us a later-dated proxy or by giving notice of revocation in person at the
meeting. |
| All properly executed proxies received by the Board of Directors will be voted as
directed by the shareholder. All properly executed proxies received by the Board of
Directors which do not specify how shares should be voted will be voted FOR the
election as directors of the nominees listed below under Proposal 1 Election of
Directors, FOR 1 Year under Proposal 2 Advisory Vote on the Frequency of
Voting on the Compensation of Executive Officers, FOR the compensation paid to our
executive officers under Proposal 3 Advisory Vote on the Compensation Paid to
Executive Officers, and in the discretion of the proxies, on any other business
properly brought before the meeting or any adjournments thereof. |

Folio 1 /Folio

PAGEBREAK

| The presence, in person or by proxy, of a majority of the outstanding Common Shares is
necessary to constitute a quorum for the transaction of business at the Annual
Meeting. Abstentions and broker non-votes are counted
for purposes of determining the presence or absence of a quorum. Broker non-votes
occur when brokers holding shares on behalf of beneficial owners do not receive voting
instructions from the beneficial holders at least ten days before the meeting. If
that happens, the broker may vote those shares only on matters deemed routine by the
New York Stock Exchange, such as the advisory vote on executive compensation and the
advisory vote on the frequency of the advisory vote on executive compensation. On
non-routine matters, such as the election of directors, brokers cannot vote unless
they receive voting instructions from beneficial holders, resulting in so-called
broker non-votes. |
| --- |
| Solicitation of proxies may be made by mail, personal interview and telephone by our
officers, directors and regular employees, and by the employees of our transfer agent,
Computershare. We will bear the cost of the solicitation of proxies, including the
charges and expenses of brokerage firms and others for forwarding solicitation
material to beneficial owners of shares. |

Folio 2 /Folio

PAGEBREAK

Security Ownership of Certain Beneficial Owners and Management

Security Ownership of Certain Beneficial Owners

The following table sets forth information with respect to the only persons known to us to own beneficially more than five percent of our outstanding Class A or Class B Common Shares as of March 22, 2011, unless as otherwise specified:


						Combined Voting
	Number of Shares			Percentage of Shares		Power of All
	Beneficially Owned			Beneficially Owned		Classes of Common
Name and beneficial owner	Class A	Class B		Class A	Class B	Stock
Retail Ventures, Inc.
4150 East Fifth Ave.
Columbus, Ohio 43219			27,382,667	(1)		100 %	92.9 %
Jay L. Schottenstein
4300 East Fifth Avenue
Columbus, Ohio 43219	2,115,975	(2)			12.3 %		0.9 %
SEI, Inc.
4300 East Fifth Avenue
Columbus, Ohio 43219	1,292,900	(2)			7.7 %		0.5 %
FMR LLC
82 Devonshire Street
Boston, Massachusetts 02109	2,339,152	(3)			14 %		1.0 %
Valinor Management, LLC
90 Park Avenue, 40 th Floor
New York, New York 10016	1,634,361	(4)			9.8 %		0.7 %
Century Capital Management LLC
100 Federal Street 29 th Floor
Boston, Massachusetts 02110	1,249,518	(5)			7.5 %		0.5 %
Invesco Ltd.
1555 Peachtree St. NE
Atlanta, Georgia 30309	874,091	(6)			5.2 %		0.4 %

| (1) | Class B Common Shares of DSW held by Retail Ventures, Inc. are exchangeable into a
like number of Class A Common Shares of DSW. |
| --- | --- |
| (2) | As of March 22, 2011, Mr. Schottenstein beneficially owned 2,115,975 Class A Common
Shares of DSW in the aggregate. This includes (i) 350,100 shares held by various family
trusts of which Mr. Schottenstein serves as trustee and is therefore deemed to beneficially
own such shares; (ii) 328,915 Class A Common Shares beneficially owned by Schottenstein RVI,
LLC (SRVI), which are issuable upon the exercise of warrants (Mr. Schottenstein is the manager
of SRVI); (iii) 1,292,900 Class A Common Shares beneficially owned by SEI, Inc. (SEI) (Mr.
Schottenstein is a director and Chairman of SEI, 58.95% of whose common stock is owned by
trusts of which Mr. Schottenstein is a trustee or trust advisor); and (iv) 144,060 Class A
Common Shares that Mr. Schottenstein has the right to acquire upon the exercise of stock
options within 60 days of March 22, 2011. |

Folio 3 /Folio

PAGEBREAK

| (3) | Fidelity Management & Research Company (Fidelity), a wholly owned subsidiary of FMR
LLC and an investment adviser registered under Section 203 of the Investment Advisers Act of
1940, is the beneficial owner of 1,937,432 Class A Common Shares as a result of acting as
investment adviser to various investment companies registered under Section 8 of the
Investment Company Act of 1940. The ownership of one investment company, Pyramis Global
Advisors, LLC, amounted to 11,130 Class A Common Shares. The ownership of another investment
company, Pyramis Global Advisors Trust Company, amounted to 384,760 Class A Common Shares.
The ownership of another investment company, FIL Limited, amounted to 5,830 Class A Common
Shares. Edward C. Johnson 3d and FMR LLC, through its control of Fidelity and the funds, each
has sole power to dispose of 2,339,152 Class A Common Shares. Based upon information
contained in a Schedule 13G filed with the Securities and Exchange Commission on February 14,
2011. |
| --- | --- |
| (4) | Valinor Management, LLC is the beneficial owner of 1,634,361 Class A Common Shares
on behalf of its clients. Valinor Management, LLC reported that its clients (i) Valinor
Capital Partners Offshore Masters Fund, L.P. beneficially owned 1,040,118 Class A Common
Shares, over which it had shared voting and shared dispositive power; and (ii) David Gallo
beneficially owned 1,634,361 Class A Common Shares over which he had shared voting and shared
dispositive power. Based on information contained in a Schedule 13G/A filed with the
Securities and Exchange Commission on January 24, 2011. |
| (5) | Century Capital Management LLC may be deemed to beneficially own 1,249,518 Class A
Common Shares on behalf of its clients. Century Capital Management LLC reported it had sole
voting power over 612,118 Class A Common Shares and sole dispositive power over 1,249,518
Class A Common Shares. Based on information contained in a Schedule 13G filed with the
Securities and Exchange Commission on February 9, 2011. |
| (6) | Invesco Ltd. may be deemed to beneficially own 874,091 Class A Common Shares.
Shares are held by subsidiaries of Invesco Ltd. that hold the following number of shares:
Invesco Advisers, Inc. has sole voting power over 787,579 Class A Common Shares and sole
dispositive power over 837,279 Class A Common Shares; Invesco Powershares Capital Management
has sole power to vote and dispose over 28,603 Class A Common Shares; Van Kampen Asset
Management has sole power to vote and dispose over 7,709 Class A Common Shares; and Invesco
National Trust Company has sole power to vote and dispose over 500 Class A Common Shares.
Based on information contained in a Schedule 13G filed with the Securities and Exchange
Commission on February 11, 2011. |

The information with respect to beneficial ownership is based upon information furnished by the shareholder or information contained in filings made with the Securities and Exchange Commission.

Folio 4 /Folio

PAGEBREAK

Security Ownership of Management

The following table sets forth, as of March 22, 2011, information with respect to our Class A Common Shares owned beneficially by each director and director nominee individually, by the executive officers named in the Summary Compensation Table of this proxy statement and by all directors and executive officers as a group:

	Number of Shares		Percentage of Shares		Percentage of — Combined Voting
	Beneficially		Beneficially		Power of All
	Owned (1)		Owned (2)		Classes of
Name	Class A	Class B	Class A	Class B	Common Shares
Elaine J. Eisenman	14,407		*		*
Deborah L. Ferrée	357,126		2.1%		*
Carolee Friedlander	23,749		*		*
Joanna T. Lau	13,310		*		*
Michael R. MacDonald	106,600		*		*
Roger S. Markfield	22,661		*		*
Philip B. Miller	29,232		*		*
Harris Mustafa	71,486		*		*
Douglas J. Probst	170,708		*		*
James D. Robbins (3)	26,680		*		*
Jay L. Schottenstein (4)	2,115,975		12.3%		*
Harvey L. Sonnenberg	20,796		*		*
Allan J. Tanenbaum	31,432		*		*
Heywood Wilansky	25,000		*		*
All
directors and executive officers as a group (17 persons)	3,201,357		17.6%		1.3%

*	Represents less than 1% of outstanding Common Shares.
(1)	Except as otherwise noted, the persons named in this table have sole power to vote
and dispose of the shares listed.
	Includes the following number of DSW class A common shares as to which the named person has the
right to acquire beneficial ownership upon (i) the exercise of stock options exercisable within
60 days of March 22, 2011, (ii) payment of vested deferred share units on a one-for-one basis
upon retirement from the DSW board of directors, and (iii) payment upon the vesting of
restricted share units on a one-for-one basis to officers within 60 days of March 22, 2011.

	Stock Options — Exercisable within 60	Share Units Vesting
	days of	within 60 days of
Beneficial Owner	March 22, 2011	March 22, 2011
Elaine J. Eisenman		14,407
Deborah L. Ferrée	309,120	7,500
Carolee Friedlander		20,749
Joanna T. Lau		13,310
Michael R. MacDonald	91,600
Roger S. Markfield		22,661
Philip B. Miller		21,232
Harris Mustafa	60,960	3,000
Douglas J. Probst	150,960	4,000
James D. Robbins		19,680
Jay L. Schottenstein	144,060
Harvey L. Sonnenberg		18,796
Allan J. Tanenbaum		30,432
Heywood Wilansky
All directors and
executive officers as a
group (17 persons)	910,550	181,767

Folio 5 /Folio

PAGEBREAK

| (2) | The percent is based upon 16,741,975 DSW class A common shares and 27,382,667 DSW
class B common shares outstanding, plus the number of shares a person has the right to acquire
within 60 days of March 22, 2011. |
| --- | --- |
| (3) | Includes 1,000 shares owned by Mr. Robbins spouse. |
| (4) | Includes 350,100 DSW class A common shares held by family trusts, 1,292,900 DSW
class A common shares held by SEI, Inc., and 328,915 class A common shares that Schottenstein
RVI, LLC has the right to acquire from Retail Ventures pursuant to certain warrant agreements.
As of March 22, 2011, Mr. Schottenstein was the beneficial owner of approximately 65.6% of
the outstanding common shares of Schottenstein Stores Corporation (SSC). |

The information with respect to beneficial ownership is based upon information furnished by each director, director nominee or executive officer, or information contained in filings made with the Securities and Exchange Commission.

Folio 6 /Folio

PAGEBREAK

PROPOSAL 1 ELECTION OF DIRECTORS

| Our Board of Directors currently consists of eleven members and is divided into
three classes, designated Class I, Class II and Class III. The members of the three
classes are elected to serve for staggered terms of three years. Pursuant to Section
2.02 of our Code of Regulations, the number of directors constituting each class will,
as nearly as practicable, be equal. |
| --- |
| At the Annual Meeting, three directors are nominated for election as Class I directors
with a term to expire in 2014. Each of the nominees for director currently serves as
a director of the Company. |
| Heywood Wilansky, a current Class I Board member whose term ends on the date of the
Annual Meeting, is not standing for re-election. Additionally, in connection with the
Agreement and Plan of Merger entered into with Retail Ventures, our Board has
determined, effective as of the effective time of the proposed merger with Retail
Ventures with and into DSW MS LLC, a wholly owned subsidiary of DSW, to elect Henry L.
Aaron to the board or directors of the Company. If the merger is completed, Mr. Aaron
will serve as a Class III director, whose term will expire on the date of the 2013
annual meeting of shareholders. |
| The names and ages of the Nominees and the Continuing Directors, their principal
occupations during the past five years, and certain other information are listed
below. |

Nominees for Class I Directors for Term to Expire in 2014:

| Name — Carolee Friedlander* | 69 | Our Directors and Their Positions with Us/ Principal Occupations / Business Experience — Ms. Friedlander
serves as a founder
and CEO of
AccessCircles, a
by-invitation
global community of
women providing
connectivity,
knowledge and
information in the
areas of health and
wellness, financial
expertise and life
balance. Ms.
Friedlander has
held that position
since August 2004.
From July 2001 to
August 2004, Ms.
Friedlander served
as Senior Vice
President of Retail
Brand Alliance,
Inc., and as
President and Chief
Executive Officer
of Carolee Designs,
Inc., a subsidiary
of Retail Brand
Alliance. Prior to
that, Ms.
Friedlander served
as President and
Chief Executive
Officer of Carolee
Designs, a fashion
accessory company
she founded in 1973
and sold to Retail
Brand Alliance in
July 2001. Ms.
Friedlanders long
term service as a
CEO of a retail
company brings
strong leadership
experience and
in-depth knowledge
of marketing and
merchandising to
our Board. | 2005 |
| --- | --- | --- | --- |
| Harvey L. Sonnenberg | 69 | Mr. Sonnenberg was
a partner in the
certified public
accounting firm,
Weiser, LLP from
1994 to 2009, and
currently serves as
a Senior Director
to that firm. Mr.
Sonnenberg has been
active in a number
of professional
organizations,
including the
American Institute
of Certified Public
Accountants and the
New York State
Society of
Certified Public
Accountants, and
has long been
involved in
rendering audit and
advisory services
to the retail,
apparel, and
consumer products
industries. Mr.
Sonnenberg is a
certified public
accountant and was
the
partner-in-charge
of his firms
Sarbanes-Oxley and
Corporate
Governance
practice. Mr.
Sonnenberg has been
a director of
Retail Ventures
(NYSE: RVI) since
2001. Mr.
Sonnenbergs strong
accounting
background,
particularly in the
retail industry,
brings accounting
and related
financial
management
experience to the
Board. | 2005 |

Folio 7 /Folio

PAGEBREAK

| Name — Allan J. Tanenbaum* | 64 | Our Directors and Their Positions with Us/ Principal Occupations / Business Experience — Mr. Tanenbaum has been General
Counsel and Managing Partner of
Equicorp Partners, LLC, an
Atlanta-based private investment
and advisory firm, since January
2006. From February 2001 to
December 31, 2005, Mr. Tanenbaum
served as Senior Vice President,
General Counsel and Corporate
Secretary for AFC Enterprises,
Inc., a franchisor and operator of
quick-service restaurants. From
June 1996 to February 2001, Mr.
Tanenbaum was a shareholder in
Cohen Pollock Merlin Axelrod &
Tanenbaum, P.C., an Atlanta,
Georgia law firm, where he
represented corporate clients in
connection with mergers and
acquisitions and other commercial
transactions. With Mr. Tanenbaums
legal background and services as a
general counsel of a public
company, Mr. Tanenbaum brings
valuable board governance
experience to our Board. | 2005 |
| --- | --- | --- | --- |

Continuing Class II Directors for Term to Expire in 2012:

| Name — Jay L. Schottenstein | 56 | Our Directors and Their Positions with Us/ Principal Occupations / Business Experience — Mr. Schottenstein has
served as our Chairman
of the Board of
Directors since March
2005. Mr.
Schottenstein
previously served as
our Chief Executive
Officer from March
2005 to April 2009. He
has been Chairman of
the Board of Directors
of Retail Ventures,
Inc., American Eagle
Outfitters, Inc. and
SSC since March 1992
and was Chief
Executive Officer of
Retail Ventures from
April 1991 to July
1997 and from July
1999 to December 2000.
Mr. Schottenstein
served as Vice
Chairman of SSC from
1986 until March 1992
and as a director of
SSC since 1982. He
served in various
executive capacities
at SSC since 1976. Mr.
Schottenstein has been
a director of American
Eagle Outfitters, Inc.
(NYSE: AEO) since
1992, and Retail
Ventures, Inc. (NYSE: RVI) since 1992. Mr.
Schottenstein also
serves as the manager
of Schottenstein RVI,
LLC. Mr.
Schottensteins
extensive experience
as a chairman and CEO
of numerous companies
brings strong
leadership skills to
our Board.
Additionally, Mr.
Schottensteins tenure
with DSW provides the
Board with a strong
background in the shoe
industry. | 2005 |
| --- | --- | --- | --- |
| Michael R. MacDonald | 59 | Mr. MacDonald has
served as our
President and Chief
Executive Officer
since April 2009.
Prior to joining DSW,
Mr. MacDonald served
as Chairman and Chief
Executive Officer of
Shopko Stores from May
2006 to March 2009.
Prior to that time,
Mr. MacDonald held
executive positions at
Saks Incorporated from
1998 to 2006, most
recently as Chairman
and Chief Executive
Officer of the
Northern Department
Stores Group for six
years. Prior to
serving in that
capacity, Mr.
MacDonald held
executive positions at
Carson Pirie Scott,
including the position
of Chairman and Chief
Executive Officer.
With over 30 years of
business experience in
all phases of retail,
including managing
merchandising,
marketing, stores,
operations and finance
functions, Mr.
MacDonald brings
strong leadership
abilities and in-depth
retail knowledge to
our Board. | 2009 |
| Philip B. Miller* | 72 | Mr. Miller is the
President of Philip B.
Miller Associates, a
consulting firm, and
an Operating Director
of Tri-Artisan Capital
Partners, a privately
held merchant bank,
and has held those
positions since July
2001. Mr. Miller also
serves on the Board of
Directors of St. John
Knits, a position he
has held since
December 2002. Mr.
Miller served on the
Board of Directors of
Kellwood until January
2008. Mr. Miller
served as Chairman and
Chief Executive
Officer of Saks Fifth
Avenue, Inc. from 1993
until January 2000 and
continued as | 2005 |

Folio 8 /Folio

PAGEBREAK

Name		Our Directors and Their Positions with Us/ Principal Occupations / Business Experience
		Chairman
of that company until
July 2001. From 1983
to 1990, Mr. Miller
served as Chairman and
Chief Executive
Officer of Marshall
Fields, Inc. Mr.
Miller brings to the
Board extensive
experience in
executive leadership
and retail
merchandising.
James D. Robbins*	64	Mr. Robbins currently
holds a directorship
in Huntington
Preferred Capital,
Inc. (NASDAQ:HPCCP),
that he has held since
November 2001. Mr.
Robbins also serves as
chairman of the audit
committee of
Huntington Preferred
Capital, Inc. From
1993 until his
retirement in June
2001, Mr. Robbins
served as Managing
Partner of the
Columbus, Ohio office
of
PricewaterhouseCoopers
LLP. Mr. Robbins was
on the Board of
Directors of Dollar
General from April
2002 until July 2007,
during which time he
chaired the audit
committee. Mr.
Robbins is a certified
public accountant
(inactive). With a
33-year background in
public accounting, Mr.
Robbins has developed
strong accounting
skills and significant
retail industry
experience, which are
valuable assets to our
Board, particularly in
relation to the Audit
Committee.	2005

Continuing Class III Directors for Term to Expire in 2013:

| Name — Elaine J. Eisenman | 61 | Our Directors and Their Positions with Us/ Principal Occupations / Business Experience — Dr. Eisenman has served as Dean of
Babson Executive
Education since
October 2005, the
division of Babson
College focused on
providing education,
consulting and
applied research in
innovation and
leadership to
corporations,
executives, and
educational and
institutional
non-profit
enterprises. Dr.
Eisenman also is
responsible for the
management of the
Babson Executive
Conference Center.
Prior to that, Dr.
Eisenman served as
Senior Vice
President Human
Resources and
Administration of
The Childrens Place
Retail Stores, Inc.
since September
2003. Dr. Eisenman
has also held senior
executive positions
at American Express,
Enhance Financial
Services Co. and
private companies
such as PDI
International, a
global consulting
firm. With a
background in human
resources, Dr.
Eisenman brings
experience in
executive
compensation and
succession planning
to our Board and
Compensation
Committee. | 2008 |
| --- | --- | --- | --- |
| Joanna T. Lau | 51 | Ms. Lau currently
serves as CEO of Lau
Technologies, an
executive consulting
and investment
company focused on
providing debt and
equity financing and
consulting to
mid-range companies.
Ms. Lau founded Lau
Technologies in 1990
and has been
responsible for
managing all aspects
of the company from
financing growth to
the quality of the
performance of the
products previously
sold by the company.
Ms. Lau held
leadership positions
with Digital
Equipment
Corporation and
General Electric
before founding Lau
Technologies. Ms.
Lau is a member of
the Board of
Directors of ITT
Education Services
(NYSE:ESI) since
2003 and currently
serves on the Audit
Committee of ESI.
Ms. Lau served as a
director of TD
Banknorth, Inc.
until July 2007.
Ms. Lau brings a
strong background in
technology and
executive leadership
to our Board. | 2008 |
| Roger S. Markfield | 69 | Mr. Markfield is
Vice-Chairman and
Executive Creative
Director of American
Eagle Outfitters
(NYSE: AEO), a
clothing retailer,
and has served in
this capacity since
February 2009, and
has served as a
Director of AEO
since March 1999.
From February 2007
to December 2008,
Mr. Markfield served
AEO as a
non-executive
officer employee.
He served AEO as
Vice-Chairman from
November 2003 to
February 2007, as
President from
February 1995 to
February 2006, and
as Co-Chief
Executive Officer
from December 2002
to November | 2008 |

Folio 9 /Folio

PAGEBREAK

Name		Our Directors and Their Positions with Us/ Principal Occupations / Business Experience
		2003.
Mr. Markfield also
served AEO and its
predecessors as
Chief Merchandising
Officer from
February 1995 to
December 2002 and as
Executive Vice
President of
Merchandising from
May 1993 to February
1995. Prior to
joining AEO, he
served as Executive
Vice
President-General
Merchandising
Manager for the
Limited Stores
Division of Limited
Brands from May 1992
to April 1993. As a
chief merchant of a
high profile brand,
Mr. Markfield brings
a strong
merchandising and
brand development
background to the
Board.
* Independent Directors under New York Stock Exchange Rules.
Heywood Wilansky, a current Class I Board member whose term ends on the date of the
Annual Meeting, is not standing for re-election.
Heywood Wilansky	63	Mr. Wilansky is the former President
and Chief Executive Officer of Retail
Ventures. Mr. Wilansky served as a
member of the Retail Ventures Board
of Directors until July 2009 and as a
member of the Board of Directors of
Bertuccis until June 2009. Mr.
Wilansky served as President and Chief
Executive Officer of Retail Ventures
from November 2004 through January
2009. Before joining Retail Ventures
in November of 2004, he served as
President and Chief Executive Officer
of Filenes Basement, a subsidiary of
Retail Ventures, from February 2003 to
November 2004. Mr. Wilansky was a
professor of marketing at the
University of Maryland business school
from August 2002 to February 2003.
From August 2000 to January 2003, he
was President and Chief Executive
Officer of Strategic Management
Resources, LLC. From August 1995 to
July 2000, he was President and Chief
Executive Officer of Bon Ton Stores.
Mr. Wilansky brings more than 30 years
of retail experience to the Board,
including in-depth knowledge of the
challenges of managing an expanding
store base, store operations,
marketing and merchandising.	2005

| Unless otherwise directed, the persons named in the proxy will vote the proxies FOR the election of the above-named nominees as directors. While it is contemplated that
all nominees will stand for election, in the event any person nominated fails to stand
for election, the proxies will be voted for such other person or persons as may be
designated by the directors. Management has no reason to believe that any of the
above-mentioned persons will not stand for election or serve as a director. |
| --- |
| Under Ohio law and our Code of Regulations, the nominees receiving the greatest number
of votes will be elected as directors. Shares as to which the authority to vote is
withheld are not counted toward the election of directors or toward the election of
the individual nominees specified on the proxy. A broker non-vote will have the same
effect as a withhold and, therefore, will not affect the outcome of the vote. |
| Your Board of Directors unanimously recommends a vote FOR each of the
director nominees named above. |

Folio 10 /Folio

PAGEBREAK

EXECUTIVE OFFICERS

The following persons are our executive officers. Our officers are elected annually by our Board and serve at the pleasure of the Board.

Jay L. Schottenstein , age 56, serves as our Executive Chairman of the Board of Directors. Mr. Schottenstein was appointed as our Chief Executive Officer in March 2005 and served in that role until April 2009. He became a director of DSW in March 2005. He has been Chairman of the Board of Directors of Retail Ventures, American Eagle Outfitters, Inc. and SSC since March 1992 and was Chief Executive Officer of Retail Ventures from April 1991 to July 1997 and from July 1999 to December 2000. Mr. Schottenstein served as Vice Chairman of SSC from 1986 until March 1992 and as a director of SSC since 1982. He served in various executive capacities at SSC since 1976. Mr. Schottenstein also serves as the manager of Schottenstein RVI, LLC.

Michael R. MacDonald , age 59, has served as our President and Chief Executive Officer since April 2009. Prior to joining DSW, Mr. MacDonald served as Chairman and Chief Executive Officer of Shopko Stores from May 2006 to March 2009. Prior to that time, Mr. MacDonald held executive positions at Saks Incorporated from 1998 to 2006, most recently as Chairman and Chief Executive Officer of the Northern Department Stores Group for six years. Prior to serving in that capacity, Mr. MacDonald held executive positions at Carson Pirie Scott, including the position of Chairman and Chief Executive Officer. Mr. MacDonald has over 30 years of business experience in all phases of retail, including managing merchandising, marketing, stores, operations and finance functions.

Deborah L. Ferrée , age 57, has served as our Vice Chairman and Chief Merchandising Officer since January 2006. Ms. Ferrée joined us in November 1997. She served as our President and Chief Merchandising Officer from November 2004 until January 2006. From March 2002 until November 2004, she served as Executive Vice President and Chief Merchandising Officer. Prior to that, she served as Senior Vice President of Merchandising beginning in September 2000, and Vice President of Merchandising beginning in October 1997. Prior to joining us, Ms. Ferrée worked in the retail industry for more than 30 years in various positions, including serving as Divisional Merchandising Manager of Shoes, Accessories and Intimate Apparel for Harris Department Store, womens buyer for Ross Stores and Divisional Merchandise Manager of the May Company.

William L. Jordan , age 39, serves as our Executive Vice President, General Counsel and Secretary, a position he has held since March 2009. From May 2008 to March 2009 he was our Senior Vice President, General Counsel and Secretary. In January 2006, Mr. Jordan joined us as our Vice President, General Counsel and Secretary. Prior to joining us he had served as Corporate Counsel for Lancaster Colony Corporation since 2005, and was with the firm of Porter, Wright, Morris & Arthur LLP in Columbus, Ohio, from 1997 to 2005 where he specialized in Corporate Securities and Mergers & Acquisitions law.

Carrie McDermott , age 45, has served as our Executive Vice President, Stores and Operations since March 2011. Previously, Carrie served as our Senior Vice President, Stores and Operations since she joined DSW in February 2007. From October 2002 to November 2005, she served as the President and Chief Executive Officer of Coopers, Inc. Ms. McDermott also held various positions within Gap, Inc. including Vice President, Central Zone from April 2000 to October 2002, Zone Operations Manager from August 1998 to April 2000, and Regional Manager from March 1997 to August 1998. Ms. McDermott has over twenty-five years of experience working in the retail industry.

Harris Mustafa, age 57, serves as our Executive Vice President, Supply Chain and Merchandise Planning and Allocation. Prior to joining us in July 2006, Mr. Mustafa served as Executive Vice President, Private Brand and Product Development from August 2004 to June 2006 at Saks Department Store Group. Prior to serving in that capacity, he served as their Senior Vice President, Planning and Operations, Private Brand Group from October 2003 to August 2004. From May 2002 to March 2003, Mr. Mustafa served as Senior Vice President Business Planning for Williams-Sonoma, Inc. Prior to serving in that capacity, Mr. Mustafa served in various executive positions at Payless ShoeSource, Inc. from 1987 to 2001.

Folio 11 /Folio

PAGEBREAK

Douglas J. Probst , age 46, serves as our Executive Vice President and Chief Financial Officer. Mr. Probst joined DSW in March 2005. From April 1990 to February 2005, he held various positions with Too Inc., (now Tween Inc., a division of Dress Barn), including Vice President of Finance and Controller from May 2004 to February 2005, Vice President Finance from October 2003 to May 2004 and Vice President Financial Analysis and Store Control from December 1999 to October 2003. From August 1986 to March 1990, he was in the practice of public accounting with KPMG. Mr. Probst is a certified public accountant.

Derek Ungless , age 62, serves as our Executive Vice President and Chief Marketing Officer, a position he has held since June 2005. From April 2002 to May 2005, he was Executive Vice President of Marketing for Express, part of Limited Brands. Mr. Ungless was Senior Vice President and Head of Global Brand Design of the Estee Lauder brand, part of Estee Lauder Companies Inc. from September 2000 until November 2001 and was Executive Vice President and Creative Director of Brooks Brothers from October 1997 until September 2000.

Folio 12 /Folio

PAGEBREAK

OTHER DIRECTOR INFORMATION, COMMITTEES OF DIRECTORS AND CORPORATE GOVERNANCE INFORMATION

General

A total of six meetings of the Board of Directors were held during fiscal 2010. Other than Mr. Markfield who attended less than 75% of Technology Committee meetings, no director attended less than 75% of the aggregate of (i) the total number of meetings of the Board of Directors held during the time in which such director was a member of the Board of Directors and (ii) the total number of meetings held by all committees of the Board of Directors on which that director served during the period each director served as a member of such committee.

There are no family relationships among our directors and executive officers.

Our Corporate Governance Principles provide that all incumbent directors and director nominees are encouraged to attend our Annual Meeting of Shareholders. All of our directors then in office attended our 2010 Annual Meeting of Shareholders.

Board Leadership Structure

Until the election of Mr. MacDonald as our President and CEO in April 2009, our Chairman, Mr. Schottenstein, held the positions of both Chairman and CEO. Mr. Schottenstein continues to serve as our Chairman. Mr. Schottenstein is not an independent member of the Board.

The Chairman is responsible for developing our agenda for Board meetings and presides at regular sessions of the Board. The Board does not have a lead or presiding director.

The Board of Directors meets in regularly scheduled executive sessions (without management present). The independent members of the Board also meet alone in regularly scheduled executive sessions. The Board of Directors does not have a designated director who leads executive sessions held by the independent directors. The non-management directors alternate as the chair of such executive sessions in alphabetical order by last name.

The Board believes that the current leadership structure, with a separated Chairman and CEO structure, provides the Company with the appropriate leadership structure. The current Board leadership allows the Chairman to focus on Board of Director responsibilities and the CEO to focus on the Companys administrative and operating functions.

Corporate Governance Principles

In June 2005, the Board of Directors adopted Corporate Governance Principles that address Board structure, membership (including nominee qualifications), performance, operations and management oversight. The Corporate Governance Principles were last amended in November 2010. A current copy of our Corporate Governance Principles can be found at our corporate and investor website at www.dswinc.com and is available in print (without charge) to any shareholder upon request.

Director Independence

Our director independence standards are set forth in our Corporate Governance Principles, a copy of which can be found at our corporate and investor website at www.dswinc.com . The Corporate Governance Principles provide that the Board of Directors goal is that a majority of the directors should be independent directors. A director will be designated as independent if he or she:

	has no material relationship with us or our subsidiaries;
	satisfies the other criteria specified by New York Stock Exchange listing
standards;
	has no business conflict with us or our subsidiaries; and
	otherwise meets applicable independence criteria specified by law,
regulation, exchange requirement or the Board of Directors.

Folio 13 /Folio

PAGEBREAK

During its review of director independence, the Board considered whether there were any transactions or relationships between the Company and any director or any member of his or her immediate family (or any entity of which a director or an immediate family member is an executive officer, general partner or significant equity holder). As a result of this review, the Board of Directors has affirmatively determined that the following persons are independent under our independence standards:

Elaine J. Eisenman Carolee Friedlander Joanna T. Lau Philip B. Miller James D. Robbins Allan J. Tanenbaum

Our Board of Directors has a Nominating and Corporate Governance Committee, a Compensation Committee and an Audit Committee, all of which are comprised solely of independent directors as defined under applicable Securities and Exchange Commission rules and the listing standards of the New York Stock Exchange. Our Board of Directors also has a Technology Committee comprised of a mixture of independent and non-independent directors.

Boards Role in the Risk Management Process

Our Board and its committees play an important role in overseeing the identification, assessment and mitigation of risks that are material to us. In fulfilling this responsibility, the Board and its committees regularly consult with management to evaluate and, when appropriate, modify our risk management strategies. While each committee is responsible for evaluating certain risks and overseeing the management of such risks, the entire Board is regularly informed about such risks through committee reports.

We have adopted the concept of enterprise risk management (ERM). The Board charged management with the responsibility of creating an ERM program, which was implemented in fiscal 2010. Our CEO, who reports to our Board of Directors, is the sponsor of the ERM Program. As part of the ERM Program, management provides an annual report to the Board regarding our significant risks and what management is doing to mitigate risk. Management also updates the Board on significant new risks that are identified on a quarterly basis.

Additionally, our Audit Committee assists the Board in fulfilling its oversight responsibility relating to the performance of our system of internal controls, legal and regulatory compliance, our audit, accounting and financial reporting processes, and the evaluation of enterprise risk issues, particularly those risk issues not overseen by other committees. The Audit Committee also reviews periodically with our General Counsel legal matters that may have a material adverse impact on our financial statements, compliance with laws and any material reports received from regulatory agencies. Our Compensation Committee is responsible for overseeing the management of risks relating to our compensation programs. Our Nominating and Corporate Governance Committee manages risks associated with corporate governance and business conduct and ethics.

Nominating and Corporate Governance Committee

The members of our Nominating and Corporate Governance Committee are Mr. Tanenbaum (Chair) and Messes. Eisenman and Friedlander, each of whom is independent as discussed above. A current copy of our Nominating and Corporate Governance Committee charter can be found on our corporate and investor website at www.dswinc.com and is available in print (without charge) to any shareholder upon request.

The Nominating and Corporate Governance Committee met five times during fiscal 2010. Its functions include assisting the Board in determining the desired qualifications of directors, identifying potential individuals meeting those qualification criteria, proposing to the Board a slate of nominees for election by the shareholders and reviewing candidates nominated by shareholders. In addition, the Committee also reviews the Corporate Governance Principles, makes recommendations to the Board with respect to other corporate governance principles applicable to us, and oversees the annual evaluation of the Board and management.

The Nominating and Corporate Governance Committee meets to discuss, among other things, identification and evaluation of potential candidates for nomination as a director. Although there are no specific minimum qualifications that a director candidate must possess and the Committee has not adopted a specific policy with

Folio 14 /Folio

PAGEBREAK

regard to the consideration of diversity, potential candidates are identified and evaluated according to the qualification criteria set forth in the Boards Corporate Governance Principles, including:

	independence;
	judgment;
	skill;
	diversity;
	strength of character;
	age;
	experience as an executive of, or advisor to, a publicly traded or private
organization;
	experience and skill relative to other Board members;
	specialized knowledge or experience;
	service on other boards; and
	desirability of the candidates membership on the Board or any committees
of the Board.

In considering diversity, the Nominating and Corporate Governance Committee may take into account various attributes, including background, skill set or viewpoint.

The Nominating and Corporate Governance Committee will consider nominees recommended by shareholders for the 2012 Annual Meeting of Shareholders, provided that the names of such nominees are submitted in writing, not later than January 1, 2012, to DSW, 810 DSW Drive, Columbus, Ohio 43219, Attn: Corporate Secretary. Each such submission must include:

As to the nominee:

	name, age, business address and residence address;
	principal occupation or employment;
	the class and number of DSW shares beneficially owned; and
	any other information relating to the nominee that is required to be
disclosed in solicitations for proxies for election of directors pursuant to
Regulation 14A under the Exchange Act; and

As to the shareholder giving the notice:

	name and record address; and
	the class and number of our shares beneficially owned.

Such notice shall be accompanied by a consent signed by the nominee evidencing a willingness to serve as a director, if nominated and elected, and a commitment by the nominee to meet personally with the Nominating and Corporate Governance Committee members.

Other than the submission requirements set forth above, there are no differences in the manner in which the Nominating and Corporate Governance Committee evaluates a nominee for director recommended by a shareholder.

Compensation Committee

The members of our Compensation Committee are Messrs. Miller (Chair) and Robbins and Messes. Eisenman and Friedlander. Each member of the Compensation Committee is independent as discussed above. None of the members of the Compensation Committee are present or former officers of our Company, nor are they or any of their affiliates, if any, parties to agreements with us.

A current copy of our Compensation Committee charter can be found on our corporate and investor website at www.dswinc.com and is available in print (without charge) to any shareholder upon request.

Our Compensation Committee met nine times during fiscal 2010. The Compensation Committees functions include evaluating the Chief Executive Officers performance and, based upon these evaluations, setting the Chief Executive Officers annual compensation; reviewing and approving the compensation packages of our other executive officers; making recommendations to the Board with respect to our incentive compensation,

Folio 15 /Folio

PAGEBREAK

retirement and other benefit plans; making administrative and compensation decisions under such plans; and recommending to the Board the compensation for non-employee Board members. See the Compensation Discussion and Analysis below for a more complete description of the Compensation Committees deliberations and decisions relating to executive compensation, including the Committees retention of a compensation consultant and the role of our executive officers in determining executive compensation.

Pursuant to its Charter, the Compensation Committee has the sole authority to retain and terminate the services of any outside compensation consultants to the Committee. During fiscal 2010, the Compensation Committee retained Hay Group to provide advice to the Committee on general program design and best practices as well as to assist the Committee in ensuring officers and directors were competitive with a Peer Group of companies, as identified in the Compensation Discussion and Analysis below. Hay Group reported directly to the Committee. Hay Group also provided compensation services to DSW management. The amount of services was not material and DSW paid approximately $14,350 for these services in fiscal 2010. While Hay Group performed the general competitive review, as requested by the Committee, Hay Group did not determine or recommend any amount or form of compensation to the Committee with respect to DSWs executive officers, except as requested by the Committee.

Audit Committee

A current copy of our Audit Committee charter can be found on our corporate and investor website at www.dswinc.com and is available in print (without charge) to any shareholder upon request.

Our Audit Committee met five times during fiscal 2010. The purpose of our Audit Committee is to assist the Board of Directors in fulfilling its oversight responsibilities of:

	the integrity of our financial statements;
	compliance with legal and regulatory requirements;
	the independent auditors qualifications and independence; and
	performance of our internal audit function and independent auditor.

The Audit Committee is directly responsible for the appointment, compensation, retention, termination and oversight of the work of our independent auditor, including resolution of disagreements between management and the independent auditor regarding financial reporting.

No member of the Audit Committee is currently serving on the audit committees of more than three public companies.

Technology Committee

The members of our Technology Committee are Ms. Lau (Chair) and Messrs. Markfield, Robbins, and Sonnenberg. A current copy of our Technology Committee charter can be found on our corporate and investor website at www.dswinc.com and is available in print (without charge) to any shareholder upon request.

Our Technology Committee met four times during fiscal 2010. The purpose of the Technology Committee is to ensure that technology endeavors are effectively managed and that technology performance meets the following objectives:

	aligns with our business strategy;
	enables the business to maximize benefits technology can provide;
	resources are used responsibly; and
	risks are managed appropriately.

Folio 16 /Folio

PAGEBREAK

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our directors and executive officers and persons who are beneficial owners of more than ten percent of our Common Shares (reporting persons) to file reports of ownership and changes of ownership with the Securities and Exchange Commission and the New York Stock Exchange. We assist our directors and executive officers in completing and filing those reports. Based upon a review of those reports furnished to us and representations of our directors and executive officers, we believe that, except for one late filing for Mr. Mustafa covering one transaction, all filing requirements applicable to our directors, executive officers and greater than ten percent beneficial owners were complied with during the last completed fiscal year.

Code of Ethics and Corporate Governance Information

We have adopted a code of ethics that applies to all our officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, and an additional code of ethics that applies to senior financial officers. Additionally, the Board of Directors has adopted a Director Code of Conduct applicable to our Board members. These codes of ethics, designated as the Code of Conduct, the Code of Ethics for Senior Financial Officers, and the Director Code of Conduct, respectively, by us can be found on our investor website at www.dswinc.com and are available in print (without charge) to any shareholder upon request. We intend to disclose any amendment to, or waiver from, any applicable provision of the Code of Conduct, Code of Ethics for Senior Financial Officers, or Director Code of Conduct by posting such information on our corporate and investor website at www.dswinc.com .

Folio 17 /Folio

PAGEBREAK

AUDIT AND OTHER SERVICE FEES

Our Audit Committee has adopted a policy under which audit and non-audit services to be rendered by our independent registered public accounting firm are pre-approved. The pre-approval policy is designed to assure that the provision of such services does not impair the independence of our independent registered public accounting firm and is summarized below.

| | Delegation The Audit Committee may delegate pre-approval authority to
one or more of its independent members provided that the member(s) to whom
such authority is delegated promptly reports any pre-approval decisions to
the other Audit Committee members. The Audit Committee has not delegated to
management its responsibilities to pre-approve services performed by the
independent registered public accounting firm. |
| --- | --- |
| | Audit Services Annual audit, review and attestation engagement terms and
fees are subject to the specific pre-approval of the Audit Committee. Any
changes in the terms, conditions or fees resulting from changes in the audit
scope requires the Audit Committees approval. |
| | Other Services Unless a type of service to be provided by the
independent registered public accounting firm has received general
pre-approval, it will require specific pre-approval by the Audit Committee. |
| | Tax Services The Audit Committee believes that our independent
registered public accounting firm can provide tax services to us such as tax
compliance and certain tax advice without impairing its independence. In no
event, however, will the independent registered public accounting firm be
retained in connection with a transaction initially recommended by the
independent registered public accounting firm, the purpose of which may be
tax avoidance and the tax treatment of which may not be supported in the
Internal Revenue Code and related regulations or similar regulations of other
applicable jurisdictions. |

No services were provided by the independent public accountants during fiscal 2010 or fiscal 2009 that were approved by the Audit Committee under Securities and Exchange Commission Regulation S-X Rule 2-01(c)(7)(i)(C) (which addresses certain services considered de minimis and may be approved by the Committee after such services have been performed).

The following table sets forth the aggregate fees for professional services rendered by Deloitte & Touche LLP, our independent registered accountants, for each of the last two fiscal years.

	2010	2009
Audit fees	$ 835,300	$ 985,300
Audit-related fees (1)	$ 100,000
Tax fees (1)	$ 100,000
All other fees
Total	$ 1,035,300	$ 985,300

(1) Audit-related fees and tax fees for fiscal 2010 relate to services provided in connection with the proposed transaction with Retail Ventures.

Folio 18 /Folio

PAGEBREAK

AUDIT COMMITTEE REPORT

The members of our Audit Committee are Messrs. Robbins (Chair), Miller and Tanenbaum and Ms. Lau. The Board of Directors has determined that each of them is independent and is financially literate in accordance with the applicable Securities and Exchange Commission rules and listing standards of the New York Stock Exchange. The Board of Directors has also determined that our Audit Committees Chairman, James D. Robbins, qualifies as an audit committee financial expert as such term is defined by the Securities and Exchange Commission under Item 407(d)(5) of Regulation S-K. Although our Board of Directors has determined that Mr. Robbins is a financial expert as defined under Securities and Exchange Commission rules, his responsibilities are the same as those of other Audit Committee members. The Securities and Exchange Commission has determined that an audit committee financial expert will not be deemed an expert for any purpose as a result of being identified as an audit committee financial expert.

The Audit Committee operates under a written charter, which is available on our corporate and investor website at www.dswinc.com and is available in print (without charge) to any shareholder upon request. Under the charter, the Audit Committees responsibilities include:

| | Review of our annual financial statements to be included in our Annual
Report on Form 10-K and recommendation to the Board of Directors whether the
audited financial statements should be included in our Annual Report on Form
10-K; |
| --- | --- |
| | Review of our quarterly financial statements to be included in our
Quarterly Reports on Form 10-Q; |
| | Oversight of our relationship with our independent auditors, including: |

	Appointment, termination and oversight of our independent auditors; and
	Pre-approval of all auditing services and
permitted non-audit services by our independent auditors;

	Oversight of our internal controls;
	Oversight of the review and response to complaints made to us regarding
accounting, internal accounting controls and auditing matters or other
compliance matters;
	Oversight of our internal audit function; and
	Review and approval of related party transactions.

Our management is responsible for our internal controls and preparing our consolidated financial statements. Our independent registered public accounting firm, Deloitte & Touche LLP, is responsible for performing an independent audit of the consolidated financial statements and issuing a report thereon. Their audit is performed in accordance with the standards of the Public Company Accounting Oversight Board. The Audit Committee is responsible for overseeing the conduct of these activities. In performing its oversight function, the Audit Committee relies, without independent verification, on the information provided to it and on representations made by our management and our independent registered public accounting firm.

In conducting its oversight function, the Audit Committee discusses with our internal auditors and our independent registered public accounting firm, with and without management present, the overall scope and plans for their respective audits. The Audit Committee also reviews our programs and key initiatives to design, implement and maintain effective internal controls over financial reporting and disclosure controls. The Audit Committee has sole discretion, in its areas of responsibility and at our expense, to engage independent advisors as it deems appropriate and to approve the fees and retention terms of such advisors.

The Audit Committee meets with the internal auditors and independent registered public accounting firm, with and without management present, to discuss the results of their audits, the evaluations of our internal controls and the overall quality of our financial reporting. The Audit Committee has reviewed and discussed with management and Deloitte & Touche LLP the audited financial statements for the fiscal year ended January 29, 2011. The Audit Committee also reviewed and discussed with Deloitte & Touche LLP its report on our annual financial statements.

Folio 19 /Folio

PAGEBREAK

The Audit Committee discussed with Deloitte & Touche LLP the matters required to be discussed by Statement on Auditing Standards No. 114 (Communications with Audit Committees), as adopted by the Public Company Accounting Oversight Board in Rule 3200T. In addition, the Audit Committee has received from Deloitte & Touche LLP the written disclosures and the letter from the independent accountant required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountants communications with the audit committee concerning independence, and has discussed with the independent accountant the independent accountants independence.

Based on its review of the audited consolidated financial statements and discussions with management and Deloitte & Touche LLP referred to above, the Audit Committee recommended to the Board the inclusion of the audited financial statements for the fiscal year ended January 29, 2011 in our Annual Report on Form 10-K for filing with the Securities and Exchange Commission.

Respectfully submitted, Audit Committee James D. Robbins, Chair Joanna T. Lau Philip B. Miller Allan J. Tanenbaum

Folio 20 /Folio

PAGEBREAK

COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis describes the material compensation decisions and elements for DSWs executive team. As more fully described below, the Compensation Committee of DSWs Board of Directors (the Committee) makes all compensation decisions for DSWs executive officers, including the executive officers named in the Summary Compensation Table below (the Named Executive Officers) as follows:

	Jay L. Schottenstein Executive Chairman of the Board;
	Michael R. MacDonald President and Chief Executive Officer;
	Deborah L. Ferrée Vice Chairman and Chief Merchandising Officer;
	Douglas J. Probst Executive Vice President, Chief Financial Officer;
and
	Harris Mustafa Executive Vice President, Supply Chain and Merchandise
Planning & Allocation.

Executive Compensation Philosophy & Objectives

The Committee believes that executive compensation packages should incorporate an appropriate balance of fixed versus variable compensationas well as cash-based versus stock-based compensationand reward performance that is measured against established goals that correspond to our short-term and long-term business plan and objectives.

DSWs executive compensation program is designed to:

(1) Attract and retain highly talented, experienced retail executives who can make significant contributions to our long-term business success . Specifically, we structure our compensation program to attract and keep executives we believe are critical to the implementation of our business strategy to:

| | Anticipate the desires of our brand-, quality- and style-conscious
customers who have a passion for footwear and accessories and provide them
with a vast, exciting assortment of in-season styles combined with the
convenience and value they desire; |
| --- | --- |
| | Create a distinctive store experience that satisfies both the rational and
emotional shopping needs of our customers; and |
| | Execute on a growth strategy to increase total net sales through DSW store
expansion, positive comparable store sales for DSW stores, increase in sales
through leased business partners, and the expansion of dsw.com. |
| | At DSW, we believe we have assembled an experienced and talented executive team
with a proven track record of delivering notable results. |

Mr. Schottenstein, a seasoned retail industry executive, is our Executive Chairman of the Board, provides strategic guidance and insight to the DSW business, and helps our CEO oversee the operation of the business. Mr. MacDonald, our CEO, is an accomplished retail executive who provides leadership to DSWs senior executive team. Ms. Ferrée, our Vice Chairman and Chief Merchandising Officer, leads our merchandising strategy and oversees a merchant team that is focused on continually delivering a broad assortment of fresh and current merchandise into our stores at price points that appeal to consumers from a broad range of socioeconomic and demographic backgrounds. Mr. Probst, our Chief Financial Officer, provides daily leadership to a Finance function that plays a critical role in ensuring the availability of the investment capital necessary to deliver on our growth strategy. Mr. Probst also leads our Leased Business Division. Mr. Mustafa leads our supply chain and merchandise planning and allocation functions. We believe that our current senior executive team possesses a proven ability to develop and execute merchandising, customer, real estate and infrastructure strategies. As a result, we believe our compensation program must incentivize and reward their efforts and also serve to keep their services with DSW, thus allowing us to compete in attracting and developing talent to support the continued development of DSW.

Folio 21 /Folio

PAGEBREAK

(2) Reward executives for delivering superior performance . The Committee regularly reviews executive compensation packages to ensure a proper balance between fixed and variable compensation with more of the focus on, and potential reward to the executive for, achievement of short- and long-term performance goals. This was true for fiscal 2010 in aggregate, the Named Executive Officer compensation opportunity consisted of approximately one-third fixed compensation (base salary) and approximately two-thirds variable compensation (annual cash incentive compensation and long-term equity compensation). The Committee believed this was an appropriate balance given the current focus and goals of the Company.

(3) Create a strong link among the interests of shareholders, DSWs financial performance and the total compensation of executives, and align executive incentives with shareholder value creation . The Committee believes targeting above-median long-term equity award levels (as discussed below) is appropriate for DSW during a critical growth phase. As a result, the Committee annually awards equity, generally in the form of stock options and restricted stock units, to the Named Executive Officers based, in part, on DSWs financial performance. Such grants strongly align these officers interests with the interests of our shareholders as each are focused on the same result value creation.

Setting Executive Compensation

Based on the objectives described above, the Committee has structured DSWs executive compensation programs primarily to motivate executives to achieve the business goals established by DSW and reward executives for meeting those business goals, and perhaps more importantly, delivering superior performance as measured against those business goals. For 2010, the Committee engaged Hay Group, a global human resources consulting firm, to conduct a review of its total compensation program for the Named Executive Officers as well as for other company executives. As requested by the Committee, Hay Group provided the Committee with market data from proprietary databases and publicly available information to consider when making compensation decisions for our Named Executive Officers. While Hay Group was engaged directly by the Committee, Hay Group also provided similar input to company management to support compensation recommendations and decisions made for company executives who are not Named Executive Officers.

In making compensation decisions for executive officers in fiscal 2010, including the Named Executive Officers, the Committee compared each officers compensation against market compensation benchmarks drawn from a peer group of publicly-traded and privately-held retail industry companies (collectively, the Survey Peer Group). With input from Hay Group, the Committee ensured the Survey Peer Group generally consisted of retail companies with a focus on specialty retail and fashion similar to DSW. In addition, the Committee ensured the Survey Peer Group included companies against which the Committee believes DSW competes for talent and shareholder investment. The companies included in the Survey Peer Group for 2010 were:

Abercrombie & Fitch	Aeropostale	American Eagle Outfitters
Ann Taylor Stores	Big Lots	Bon-Ton Stores
Brown Shoe Company	Chicos FAS	Childrens Place
Coach	Collective Brands	Express
Foot Locker	J.C. Penney	J. Crew Group
Kohls	Limited Brands	Limited Stores
Macys	Michaels Stores	New York & Company
Nordstrom	Stage Stores	Target
Timberland	TJX Companies	Tween Brands

DSWs revenue is slightly below the median revenue of the Survey Peer Group companies. However, Hay Group uses proprietary methodologies that allow for pay comparisons for the same job between companies of different sizes. As a result, pay comparisons may be made directly without adjusting for the difference in the size of the companies.

The pay elements used for comparison purposes are target total cash compensation (consisting of base salary and annual cash incentive compensation) and long-term equity incentive compensation. Generally, the Committee targets Named Executive Officer pay to fall between the 50th and 75th percentiles of Survey Peer Group data for total direct compensation (including both total cash compensation and long-term incentive compensation). This pay objective reflects the fact that DSW is a growth company and executives with the skills and experience necessary to deliver contributions that will significantly impact DSWs long-term business

Folio 22 /Folio

PAGEBREAK

success and intended growth pattern command a premium in the marketplace. These objectives also recognize the Committees expectation that, over the long term, the Company will generate shareholder returns in excess of the average of its Survey Peer Group. Variations to this pay objective may occur as dictated by the experience level of the individual and market factors.

In addition, for Named Executive Officers where comparison data was available in 2010, the Committee also evaluates the actual pay of the Named Executive Officer with pay data drawn from proxy-disclosed pay information for the following publicly-traded companies (collectively, the Proxy Peer Group):

Abercrombie & Fitch	Aeropostale	American Eagle Outfitters
Ann Taylor Stores	Big Lots	Bon-Ton Stores
Brown Shoe Company	Charming Shoppes	Coach
Collective Brands	Dicks Sporting Goods	Finish Line
J. Crew Group	Limited Brands	New York & Company
Pacific Sunwear	Skechers USA	Stein Mart
Timberland	Tween Brands

For fiscal 2010, the compensation paid to Messrs. Schottenstein, MacDonald, Probst and Mustafa and Ms. Ferrée was reviewed pursuant to the Proxy Peer Group (in addition to the Survey Peer Group above). By looking at this proxy-disclosed information, as reviewed and summarized for the Committee by Hay Group, the Committee was able to analyze the relation between performance and the resulting pay delivered.

Finally, the Committee takes into consideration a review of each Named Executive Officers compensation relative to the other Named Executive Officers, taking into account each officers performance and impact on DSWs business results.

Role of Executive Officers in Compensation Decisions

The Board of Directors determines Mr. Schottensteins compensation package. The Committee makes all compensation decisions for DSWs Named Executive Officers based upon input provided by the Executive Chairman of the Board and certain members of company management, as discussed under DSWs 2010 Executive Compensation Elements below, and the objective market data provided by Hay Group. The Committee can exercise its discretion and modify any recommendations that may be provided by company management and the independent compensation consultant. Company management does not provide input in determining the compensation of the Chief Executive Officer, which is determined solely by the Compensation Committee with input from the Executive Chairman of the Board and the independent compensation consultant.

DSWs 2010 Executive Compensation Elements

For the fiscal year ended January 29, 2011, the total compensation opportunity for DSWs executives (including the Named Executive Officers) was generally comprised of the following principal components:

	base salary;
	performance-based annual cash incentive compensation;
	long-term equity incentive compensation in the form of service-based stock
options and restricted stock units; and
	retirement savings contributions through the 401(k) plan.

Base Salary

While the Committees focus is on variable compensation based on performance, a clear objective of our executive compensation program is to pay a base salary that is competitive with the stated Survey Peer Group and Proxy Peer Group (where applicable) in order to retain our Named Executive Officers. The base salaries of all DSW executives (including the Named Executive Officers) are determined based on job responsibilities and individual contribution, and with reference to the considerations set forth below. Salary bands are designed so that the salary opportunity for a given position generally falls between 80% and 140% of the base salary midpoint established for that position. In the case of DSWs executive team, the salary opportunity for a given position is targeted to be between the 50 th percentile and the 75 th percentile of Survey Peer Group market data for that position.

Folio 23 /Folio

PAGEBREAK

In March each year, the Committee determines the base salary of each Named Executive Officer for the next year. During its review, the Committee primarily considers:

	overall DSW financial performance during the prior year;
	the individual performance of the Named Executive Officer during the prior
year;
	the target total cash compensation level of the appropriate benchmark
position(s) as reflected in Survey Peer Group and Proxy Peer Group (where
applicable) data;
	base salary data drawn from the Survey Peer Group and Proxy Peer Group
(where applicable) information where available; and
	if relevant, compensation paid by a previous employer.

The Executive Chairman of the Board met with the Committee and reviewed the accomplishments and contributions made by Mr. MacDonald and Ms. Ferrée. In addition, the Chief Executive Officer reviewed with the Committee the accomplishments and contributions made by each of the Named Executive Officers under his supervision and provided his proposed base salary changes. After (i) discussing the performance of each named executive officer and (ii) reviewing the recommendations made by the Executive Chairman and the Chief Executive Officer, and based upon the Committees individual review and analysis of compensation paid by Survey Peer Group companies for the comparable position, the Committee approved the following salary changes for 2010:

Mr. MacDonald	2009 Salary — $ 950,000	2010 Salary — $ 1,000,000	5.3 %
Ms. Ferrée	$ 850,000	$ 900,000	5.9 %
Mr. Probst	$ 470,000	$ 490,000	4.3 %
Mr. Mustafa	$ 540,000	$ 565,000	4.6 %

Performance-Based Annual Cash Incentive Compensation

In May 2009, the DSW Inc. 2005 Cash Incentive Compensation Plan (the ICP) was re-approved by DSWs shareholders. The ICP gives the Committee the ability to foster and promote the financial success of the Company and increase shareholder value by providing cash incentives to the Named Executive Officers based on the achievement of specified annual business objectives. The ICP is designed to promote the achievement of annual performance goals and focuses the Named Executive Officers on short-term objectives which ultimately will contribute to the likelihood of achieving long-term business objectives and increase shareholder value. Under the ICP, Named Executive Officers earn annual cash incentives only when pre-established business objectives and targets are achieved. The Company currently has approximately 450 associates who are eligible to receive awards under the ICP. The Named Executive Officers are generally treated the same as all other eligible DSW associates under the ICP.

Generally, in the first quarter of each year, the Committee establishes the performance criteria that will be used to determine incentive compensation awards for that year. Company associates who participate in the plan have incentive levels that vary based on the individuals position and contribution to business performance. Target award opportunities are established as a percentage of base salary and range from 50% to 100% of base salary for the Named Executive Officers. The target award opportunities for Ms. Ferrée and Messrs. MacDonald, Probst and Mustafa were 100%, 100%, 80% and 50%, respectively, and were established based on market data provided by the independent compensation consultant and the scope of the leadership positions the executives occupy in the DSW business. Mr. Schottenstein was not a participant in the ICP during fiscal 2010.

For fiscal 2010, the Committee determined that 100% of each Named Executive Officers (excluding Mr. Schottenstein) annual cash incentive compensation award would be based upon DSWs net income performance as reported in DSWs financial statements. The Committee believed net income was the most relevant metric to DSWs existing growth plan and best aligned with the growth objective shared with investors. Additionally, net income is publicly disclosed in the Companys financial statements and provides transparency to all ICP participants.

In March 2010, the Committee established a target threshold performance level for fiscal 2010. Unless otherwise determined by the Committee, all associates who participated in the plan (including the Named Executive Officers) were to receive:

Folio 24 /Folio

PAGEBREAK

| | no payment unless the Company achieved net income of $55.2 million
(approximately 88% of the target net income level established); |
| --- | --- |
| | a payment of at least 50% but less than 100% of the target award
opportunity if the Company achieved or exceeded $55.2 million of net income
but did not achieve $62.8 million of net income (the target net income level
established); |
| | a payment of at least 100% but less than 200% of the target award
opportunity if the Company achieved or exceeded $62.8 million of net income
but did not achieve $78.0 million of net income (approximately 124% of the
target net income level established); and |
| | a payment of 200% of the target award opportunity if the Company achieved
or exceeded $78.0 million of net income. |

In making the annual determination of the minimum, target and maximum net income levels, the Committee may consider specific circumstances facing the company during the prior and subsequent years. In fiscal 2010, the Committee set the threshold net income level equal to prior year actual performance and set the target net income level equal to approximately 14% growth over the prior year. Generally, the Committee sets the minimum, target and maximum levels such that the relative difficulty of achieving the target level is reasonably consistent from year to year.

DSWs fiscal 2010 performance led to a 200% payout for ICP participants, including each of the Named Executive Officers (other than Mr. Schottenstein). The bonuses paid to the Named Executive Officers (other than Mr. Schottenstein) for the fiscal year ending January 29, 2011 are reflected in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table below. For fiscal 2010, Mr. Schottenstein was not a participant in the ICP.

In March 2011, as a result of our financial results and Mr. Schottensteins contributions to the Company, the Committee determined to award a $500,000 cash bonus to Mr. Schottenstein. The bonus paid to Mr. Schottenstein is reflected in the Bonus column of the Summary Compensation Table below.

Long-Term Equity Incentive Compensation

Prior to our IPO in 2005, the DSW Inc. 2005 Equity Incentive Plan (the Equity Plan) was approved by our shareholders. The Equity Plan generally furthers the Committees objectives to retain its executives as well as build a link between executive compensation and shareholder interests and objectives. All equity awards are granted in respect to DSWs Class A Common Stock.

DSWs executive compensation philosophy generally calls for grants of both service-based stock options and restricted stock units to executives (Vice President and above) including the Named Executive Officers. As discussed above, in determining the value of annual long-term equity incentive grants for DSW executives, the Committees overall objectiveconsistent with its executive compensation philosophyis to target the combined grant value of stock options and restricted stock units to fall between the 50th and 75th percentile of Survey Peer Group long-term incentive data. The Committee believes targeting above-median long-term incentive levels is appropriate for DSW as it seeks to create a compelling value proposition during a critical growth phase. Furthermore, the Committee believes that an above-median long-term equity incentive target is necessary to attract and retain executives with the skills and experience necessary to deliver contributions that will significantly impact DSWs long-term business success and intended growth pattern.

In addition, long-term equity incentive grants to the Named Executive Officers are based on each individuals (i) scope of job responsibilities, (ii) assessment of past performance and (iii) assessment of potential future contribution.

Historically, the value of long-term equity incentive awards has been delivered to executives 70% in stock options and 30% in restricted stock units. The Committee believes that delivery in this form provides an appropriate incentive to the leadership team to focus on long-term shareholder value creation and, at the same time, provides the Company with the retention value necessary in a competitive labor market. Prior to fiscal 2009, the targeted long-term incentive value delivered in stock options was converted to a number of shares

Folio 25 /Folio

PAGEBREAK

using the same fair value methodology the Company uses in determining accounting expense under Accounting Standard Codification 718 Compensation Stock Compensation (ASC 718). The targeted long-term incentive value delivered in restricted stock units was determined by the grant date share price and adjusted based on an assumed forfeiture rate to calculate the total number of Common Shares to be delivered once all vesting requirements were satisfied.

In 2009, due to unprecedented stock market volatility as well as DSWs severely depressed stock price that was trading at one-half of its historical average, the Company modified its approach to converting the targeted long-term incentive value into stock options and restricted stock units. Instead of using the fair value methodology noted above, the Company instead used a profit growth model that evaluated how the Companys earnings were likely to grow over the applicable vesting period. The Company used the same methodology to determine grants made in 2010. Based on a $25.00 grant date stock price assumption, the Company converted the targeted long term incentive value to be delivered to each executive into a number of stock options valued at $13.00 per share and a number of restricted stock units valued at $35.00 per share.

Stock Options

Stock options provide executives with financial gain derived from the potential appreciation in the DSW share price between the awards grant date and the date the executive elects to exercise the option. As a result, DSWs long-term financial performance, as reflected in share price appreciation, ultimately determines the value of stock options. Because financial gain from stock options is only possible after the price of DSW common stock has increased, the Company believes grants encourage executives to focus on reasonable behaviors and actions that lead to an increase in the DSW share price, thus benefiting both company associates and shareholders. Generally, stock options vest annually in equal installments over the five years following the grant date.

Restricted Stock Units

Restricted stock units provide the Company with retention value vis-à-vis executives because, generally, they cliff vest 100% at the end of four years. In this way, executives are unable to realize the value of restricted stock units until a significant period of time has passed since the grant date. Additionally, since the restricted stock unit value is tied directly to the market value of DSW common stock, and not exclusively to the increase in the market value of DSW common stock, restricted stock units provide retention value even when the stock price is stable or declining. Thus, the Committee believes that restricted stock units are a key component of the long-term incentive portfolio in that they help retain executives and keep them focused on long-term value creation for shareholders. Dividend equivalents are not paid on restricted stock units granted to company executives, including those granted to the Named Executive Officers.

2010 Long-Term Equity Incentive Awards for the Named Executive Officers

In March 2010, the Committee granted long-term equity incentive awards to Named Executive Officers as part of the annual performance review process. The Committee considered various alternatives based on input from management and the independent compensation consultant which included different multiples of market competitive long-term incentive values based on Survey Peer Group data. The Committee considered alternative scenarios to effectively balance the delivery of cash and equity to the Named Executive Officers. Based upon the information provided, the Committee determined to deliver to each Named Executive Officer a long-term incentive award with a value reasonably consistent with market data for the Survey Peer Group companies at the 65 th percentile. In addition, the Committee determined to deliver the award 70% in stock options and 30% in restricted stock units to each Named Executive Officer consistent with the Committees typical practice for executives. The table below reflects the grants and applicable vesting schedule for each of the grants to the Named Executive Officers in 2010.

Folio 26 /Folio

PAGEBREAK

	# — Of	Options Vesting	# of Restricted	Restricted Stock — Units Vesting
Name	Options	Schedule	Stock Units	Schedule
Mr. Schottenstein	57,700	20% per year	N/A	N/A
Mr. MacDonald	108,000	20% per year	17,100	100% on 4 th anniversary of grant date
Ms. Ferree	65,000	20% per year	10,300	100% on 4 th anniversary of grant date
Mr. Probst	24,000	20% per year	3,900	100% on 4 th anniversary of grant date
Mr. Mustafa	16,000	20% per year	2,600	100% on 4 th anniversary of grant date

Equity Grant Practices

Under the Equity Plan, the Committee approves all equity awards and has not delegated to management the authority to approve equity awards. The Committee may not grant stock options at a discount to the closing price of DSW common stock on the grant date, nor may the Committee reduce the exercise price of outstanding stock options except in the case of a stock split or other similar event. All stock options granted under the Equity Plan have an exercise price that is equal to the closing market price of DSW common stock on the grant date. The grant date is the date of Compensation Committee approval, except in the case of prospective hires who meet the criteria outlined below.

The Committee also reviews and considers approval of off-cycle equity awards recommended by management at regularly scheduled Committee meetings (generally quarterly). These off-cycle equity awards reflect commitments made by DSW, subject to Committee approval, and are for current associates (generally in the case of promotion or retention), new hires who have already become employees of DSW or prospective hires who have agreed to a start date with DSW that will occur within the three weeks following the Committee meeting. The grant date for current associates and for new hires who have already become employees of DSW is the date the Committee approves the grant. The grant date for prospective hires is their future start date.

In March 2007, the Committee established a methodology to determine the grant date on which annual equity awards would be granted to eligible associates. The Committee determined that the annual equity grant date would be the seventh calendar day following DSWs fiscal year-end earnings release. Prior to the establishment of this methodology, the Committee made annual equity grants on pre-established dates. The Committee does not backdate stock options or grant stock options retroactively. Additionally, the Committee does not coordinate equity grants so that they are made before announcement of favorable information or after announcement of unfavorable information.

401(k) Retirement Savings Contributions

DSW sponsors a tax-qualified 401(k) plan (the Plan) in which all DSW associates, including the Named Executive Officers (other than Mr. Schottenstein), are eligible to participate. Under the Plan, participants are able to contribute up to 50% of their total eligible cash compensation (including base salary and annual cash incentives) on a pre-tax or after-tax basis up to the limits imposed by the Internal Revenue Code. The maximum allowable per participant deferral in 2010 under the Internal Revenue Code was $16,500. DSW provides a 100% match on the first 3% contributed by a participant and an additional 50% match on the next 2% contributed by a participant. These matching contributions are not available to participants until they have completed at least one year of service with DSW. In light of the matching contribution for participants, and the Internal Revenue Code section 401(a)(17) annual compensation limit, the maximum allowable per participant company matching contribution in 2010 was $9,800. Participants choose to invest their account balances from an array of investment alternatives as selected by plan fiduciaries from time to time. A DSW stock fund is not among the investment alternatives available to plan participants. The Plan allows for distributions in a lump sum after termination of service. However, loansand in-service distributions under certain circumstances such as a hardship, attainment of age 59-1/2 or a disabilityare permitted.

Tax Considerations

Section 162(m) of the Internal Revenue Code limits deductibility of certain compensation paid to the chief executive officer and three other executive officers (exclusive of the Chief Financial Officer) who are the highest paid and employed at fiscal year-end to $1 million per year. The Committee annually considers the

Folio 27 /Folio

PAGEBREAK

impact of section 162(m) of the Internal Revenue Code in structuring DSWs executive compensation program. In light of the competitive nature of the market for our executive talent, and our philosophy to pay and reward individual contributions to overall Company performance, the Committee reserves the discretion to reward significant contributions by the Named Executive Officers to building shareholder value, regardless of the tax deductibility limits of section 162(m).

Termination and Change in Control Arrangements

The Named Executive Officers (other than Mr. Schottenstein) have employment agreements that entitle them to receive certain benefits and payments if their employment terminates in specified separation scenarios. All of the Named Executive Officers are entitled to certain payments or benefits upon a change in control, including acceleration of the vesting of outstanding equity awards pursuant to the Equity Plan, which benefit is available to all Company associates. These arrangements are described under Potential Payments upon Termination and Change in Control below.

Folio 28 /Folio

PAGEBREAK

REPORT OF THE COMPENSATION COMMITTEE

The Compensation Committee has reviewed and discussed the foregoing Compensation Discussion and Analysis with management and its independent compensation consultant. Based on the Compensation Committees review and discussion with management and its independent compensation consultant, the Compensation Committee has recommended to the Board of Directors, and the Board of Directors has approved, that the Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference into our Annual Report on Form 10-K for the year ended January 29, 2011.

Respectfully submitted,
Compensation Committee
Philip B. Miller, Chair
Elaine J. Eisenman
Carolee Friedlander
James D. Robbins

Folio 29 /Folio

PAGEBREAK

COMPENSATION OF MANAGEMENT

The following table summarizes compensation awarded or paid to, or earned by, each of the named executive officers during fiscal 2010, fiscal 2009, and fiscal 2008. We follow a 52/53 week fiscal year that ends on the Saturday nearest to January 31 in each year. Fiscal 2010, 2009 and 2008 consisted of 52 weeks.

SUMMARY COMPENSATION TABLE

							Changes in Pension
							Value and
							Non-Qualified
				Stock		Non-Equity	Deferred	All Other
Name and	Fiscal	Salary	Bonus	Award(s)	Option Award(s)	Incentive Plan	Compensation	Compensation ($)
Principal Position	Year	($)	($)	($)(1)	($) (2)	Compensation (3)	Earnings	(4)	Total
Jay L. Schottenstein	2010	$ 500,000	$ 500,000		$ 776,342				$ 1,776,342
Executive Chairman of the	2009	$ 500,000	$ 250,000						$ 750,000
Board of Directors	2008	$ 500,000			$ 537,321				$ 1,037,321
Michael R. MacDonald	2010	$ 992,308	$ 250,000	$ 455,031	$ 1,453,118	$ 2,000,000		$ 10,760	$ 5,161,217
President and Chief	2009	$ 730,769	$ 250,000	$ 489,150	$ 576,723	$ 1,900,000		$ 19,730	$ 3,966,372
Executive Officer (5)	2008
Deborah L. Ferrée	2010	$ 892,308		$ 274,083	$ 874,562	$ 1,800,000		$ 10,760	$ 3,851,713
Vice Chairman and Chief	2009	$ 846,764		$ 300,000	$ 700,840	$ 1,700,000		$ 10,760	$ 3,558,364
Merchandising Officer	2008	$ 825,859	$ 414,485	$ 189,000	$ 481,979			$ 11,353	$ 1,922,676
Douglas J. Probst	2010	$ 486,923		$ 103,428	$ 320,448	$ 784,000		$ 10,735	$ 1,705,534
Executive Vice President and	2009	$ 465,385		$ 160,000	$ 390,468	$ 752,000		$ 10,694	$ 1,778,547
Chief Financial Officer	2008	$ 437,077	$ 176,000	$ 103,360	$ 253,128			$ 10,000	$ 979,565
Harris Mustafa	2010	$ 561,154		$ 68,952	$ 213,632	$ 565,000		$ 10,760	$ 1,419,498
Executive Vice	2009	$ 536,154		$ 120,000	$ 280,336	$ 540,000		$ 10,760	$ 1,487,250
President, Supply Chain	2008	$ 510,538	$ 128,750	$ 64,600	$ 172,587			$ 10,244	$ 886,719
& Merchandise Planning & Allocation

| (1) | This column represents the grant date fair value of RSUs granted in fiscal
2010 as well as prior fiscal years in accordance with ASC 718. For RSUs, fair
value is calculated using the closing price of DSW Class A Common Stock on the
date of grant. For additional information on the valuation assumptions, refer to
note 3 of DSWs financial statements in the Form 10-K for the year ended January
29, 2011, as filed with the SEC. See the Grants of Plan-Based Awards Table for
information on awards made in fiscal 2010. The amounts reflected are for the fair
value of RSUs granted and do not necessarily correspond to the actual value that
will be realized by the Named Executive Officers. |
| --- | --- |
| (2) | This column represents the grant date fair value of stock options
granted in fiscal 2010 as well as prior fiscal years in accordance with ASC 718.
For additional information on the valuation assumptions, refer to note 3 of DSWs
financial statements in the Form 10-K for the year ended January 29, 2011, as
filed with the SEC. See the Grants of Plan-Based Awards Table for information on
options granted in fiscal 2010. The amounts reflected are for the fair value of
the stock options granted and do not necessarily correspond to the actual value
that will be realized by the Named Executive Officers. |
| (3) | This column represents the dollar amount earned by each applicable
Named Executive Officer pursuant to our ICP for fiscal 2010, 2009 and 2008. See
the Compensation Discussion and Analysis above and the Grants of Plan-Based
Awards Table below for information on the grant of these awards. |

Folio 30 /Folio

PAGEBREAK

(4) The following table describes each component of the All Other Compensation column in the Summary Compensation Table for fiscal 2010.

Name	401(k) Matching — Contributions	Life Insurance — Premium	Total
Michael R. MacDonald	$ 9,800	$ 960	$ 10,760
Deborah L. Ferrée	$ 9,800	$ 960	$ 10,760
Douglas J. Probst	$ 9,800	$ 935	$ 10,735
Harris Mustafa	$ 9,800	$ 960	$ 10,760

(5) Mr. MacDonalds employment with us began on April 27, 2009. As part of his employment negotiations, we agreed to pay Mr. MacDonald a bonus of $250,000 upon his start of employment and an additional $250,000 upon his first anniversary of employment. The $250,000 payable in each of fiscal 2009 and fiscal 2010 is reflected in the Bonus column.

Folio 31 /Folio

PAGEBREAK

FISCAL YEAR 2010 GRANTS OF PLAN-BASED AWARDS

		Estimated Possible Payouts Under			All Other Stock — Awards: Number of	All Other Option — Awards: Number of	Exercise or Base	Grant Date Fair
		Non-Equity Incentive Plan Awards (1)			Shares of Stock or	Securities	Price	Value of Stock and
	Grant	Threshold	Target	Maximum	Units	Underlying Options	of Option Awards	Option Awards
Name	Date	($)	($)	($)	(#) (2)	(#) (2)	($/Sh)	($)
Jay L. Schottenstein	N/A	N/A	N/A	N/A		57,700	$ 26.61	$ 776,342
Michael R.
MacDonald	3/24/2010	$ 500,000	$ 1,000,000	$ 2,000,000	17,100	108,000	$ 26.61	$ 1,908,149
Deborah L. Ferrée	3/24/2010	$ 450,000	$ 900,000	$ 1,800,000	10,300	65,000	$ 26.61	$ 1,148,645
Douglas J. Probst	3/23/2010	$ 196,000	$ 392,000	$ 784,000	3,900	24,000	$ 26.52	$ 423,876
Harris Mustafa	3/23/2010	$ 141,250	$ 282,500	$ 565,000	2,600	16,000	$ 26.52	$ 282,584

| (1) | These columns represent potential payouts for fiscal 2010 under our ICP. See
the Compensation Discussion and Analysis for a discussion of the
performance-based criteria applicable to these awards. |
| --- | --- |
| (2) | Generally, options vest ratably over five years on each of the first five
anniversaries of the grant date and restricted stock units cliff vest on the
fourth anniversary of the date of grant. Dividend equivalents are not paid or
accrued. |

Folio 32 /Folio

PAGEBREAK

LANDSCAPE

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 2010

	Option Awards					Stock Awards
											Equity Incentive
			Equity Incentive							Equity Incentive	Plan Awards: Market
	Number of	Number of	Plan Awards: Number							Plan Awards: Number	or Payout Value of
	Securities	Securities	of Securities						Market Value of	of Unearned Shares,	Unearned Shares,
	Underlying	Underlying	Underlying				Number of Shares or		Shares or Units of	Units, or Other	Units, or Other
	Unexercised Options	Unexercised Options	Unexercised		Option Exercise		Units of Stock That		Stock That Have Not	Rights That Have	Rights That Have
	Exercisable	Unexercisable	Unearned Options		Price	Option Expiration	Have Not Vested		Vested	Not Vested	Not Vested
Name	(#)	(#)	(#)		($)	Date	(#)		($) (1)	(#)	($)
Jay L. Schottenstein	33,360	8,340	(2)	N/A	$ 27.80	9/7/2016
	32,340	21,560	(3)	N/A	$ 42.88	4/5/2017
	37,360	56,040	(4)	N/A	$ 12.92	4/3/2018				N/A	N/A
	0	57,700	(5)		$ 26.61	3/24/2020
Michael R. MacDonald	35,000	70,000	(6)	N/A	$ 10.87	4/30/2019
	0	108,000	(5)	N/A	$ 26.61	3/24/2020	62,100	(7)	$ 2,066,688	N/A	N/A
Deborah L. Ferrée	150,000	0		N/A	$ 19.00	6/28/2015
	32,040	21,360	(3)	N/A	$ 42.88	4/5/2017
	31,600	47,400	(8)	N/A	$ 13.50	4/23/2018	46,800	(10)	$ 1,557,504	N/A	N/A
	28,000	112,000	(9)	N/A	$ 10.00	4/1/2019
	0	65,000	(5)	N/A	$ 26.61	3/24/2020
Douglas J. Probst	70,000	0		N/A	$ 19.00	6/28/2015
	13,920	9,280	(3)	N/A	$ 42.88	4/5/2017
	17,600	26,400	(4)	N/A	$ 12.92	4/3/2018	23,900	(11)	$ 795,392	N/A	N/A
	15,600	62,400	(9)	N/A	$ 10.00	4/1/2019
	0	24,000	(5)	N/A	$ 26.52	3/23/2020
Harris Mustafa	24,000	6,000	(12)	N/A	$ 35.79	7/10/2016
	12,420	8,280	(3)	N/A	$ 42.88	4/5/2017
	0	18,000	(4)	N/A	$ 12.92	4/3/2018	16,600	(13)	$ 552,448	N/A	N/A
	0	44,800	(9)	N/A	$ 10.00	4/1/2019
	0	16,000	(5)	N/A	$ 26.52	3/23/2020

| (1) | Represents the closing market price of DSW Class A common stock on last day
of the fiscal year times number of shares not yet vested. |
| --- | --- |
| (2) | Remaining options vest on September 7, 2011. |
| (3) | Remaining options vest over two years on April 5 of each year. |
| (4) | Remaining options vest over three years on April 3 of each year. |
| (5) | Options vest over five years on March 24 of each year. |
| (6) | Remaining options vest over two years on April 30 of each year. |
| (7) | Restricted stock units vest on April 30, 2012 (45,000) and March
24, 2014 (17,100). |
| (8) | Remaining options vest over three years on April 23 of each year. |
| (9) | Remaining options vest over four years on April 1 of each year. |
| (10) | Restricted stock units vest on April 1, 2011 (7,500), April 23,
2012 (14,000), April 1, 2013 (15,000) and March 24, 2014 (10,300). |
| (11) | Restricted stock units vest on April 1, 2011 (4,000), April 3, 2012
(8,000), April 1, 2013 (8,000) and March 23, 2014 (3,900). |
| (12) | Remaining options vest on July 10, 2011. |
| (13) | Restricted stock units vest on April 1, 2011 (3,000), April 3, 2012
(5,000), April 1, 2013 (6,000) and March 23, 2014 (2,600). |

Folio 33 /Folio

PAGEBREAK

FISCAL YEAR 2010 OPTION EXERCISES AND STOCK VESTED

	Option Awards — Number of Shares	Value Realized	Stock Awards — Number of Shares	Value Realized
Name	Acquired on Exercise (#)	On Exercise ($)	Acquired on Vesting	on Vesting
Jay L. Schottenstein	N/A	N/A	N/A	N/A
Michael R. MacDonald	N/A	N/A	N/A	N/A
Deborah L. Ferrée	N/A	N/A	7,500	$ 191,475
Douglas J. Probst	N/A	N/A	4,000	$ 102,120
Harris Mustafa	23,200	385,808	8,500	$ 202,595

Potential Payments Upon Termination and Change in Control

Ms. Ferrée and Messrs. MacDonald, Probst and Mustafa have employment agreements with DSW that provide for limited payments and benefits following termination of their employment without cause or if the executive terminates employment for good reason. Additionally, our Equity Plan provides for acceleration of the vesting of outstanding equity awards upon a change in control for all Company associates, including the Named Executive Officers.

Employment Agreements with Ms. Ferrée and Messrs. MacDonald, Probst and Mustafa

Generally, pursuant to each Named Executive Officers employment agreement, if DSW involuntarily terminates the officers employment without cause or if the officer voluntarily terminates employment for good reason, each of Ms. Ferrée and Messrs. MacDonald, Probst and Mustafa are entitled to receive:

| (i) | salary continuation for at least a 12-month period based on
the executives salary as of the date of termination; |
| --- | --- |
| (ii) | a pro-rata share of any annual cash incentive bonus paid
for performance in the fiscal year when termination occurs; |
| (iii) | one year of accelerated vesting with respect to
outstanding stock options and restricted stock units; and |
| (iv) | continuing health coverage for at least 12 months. |

| Also, pursuant to each officers employment agreement, if employment terminates as a
result of death or disability, each of Ms. Ferrée and Messrs. MacDonald, Probst and
Mustafa are entitled to receive a pro-rata share of any annual cash incentive bonus
paid for performance in the fiscal year when termination occurs. |
| --- |
| Each executives employment agreement also contains confidentiality and
non-disparagement provisions effective through the term of the agreement, a
non-competition provision effective through the longer of one year following
termination of employment or the period of any salary continuation, and a
non-solicitation provision effective through the longer of two years following
termination of employment or the period of any salary continuation. |
| For additional information about these employment agreements, see Employment
Agreements with Key Executives (below). |

Folio 34 /Folio

PAGEBREAK

Equity Plan

| Pursuant to our Equity Plan and any applicable award agreement, termination by reason
of death, disability or retirement (defined as termination after reaching age 65 and
completing at least five years of employment) entitles each Named Executive Officer to
receive accelerated vesting with respect to all equity awards that are not vested as
of the date of termination. |
| --- |
| Pursuant to the Equity Plan and any applicable award agreement, a change in control
entitles all associates, including each Named Executive Officer, to receive
accelerated vesting with respect to all equity awards that are not vested as of the
date of the termination. |

Potential Termination and Change in Control Payments

The estimated value of the benefits described above are presented in the table below and are calculated as if the respective termination or change in control event occurred on January 29, 2011 and our stock price was $33.28, the closing price of our Class A Common Shares on January 28, 2011, the last trading day of fiscal 2010, in the case of termination, and $39.93 in the case of change in control based on the calculation methodology specified in our Equity Plan. The amounts below assume each Named Executive Officers salary and annual incentive award is as set forth above in the Summary Compensation Table for fiscal 2010. The actual amounts to be paid will only be determinable at the time of actual payment.

Folio 35 /Folio

PAGEBREAK

	Involuntary — Termination Without	Involuntary	Voluntary
	Cause or Voluntary	Termination	Termination
	Termination for Good	Because of Death	Because of	Change in
Named Executive Officer	Reason (1)	or Disability (2)	Retirement (2)	Control(2)
Jay L. Schottenstein Salary Continuation	$ 0	$ 0	$ 0	$ 0
Benefits Continuation	$ 0	$ 0	$ 0	$ 0
Accelerated Vesting of Equity	$ 0	$ 1,571,537	$ 1,571,537	$ 2,383,369
Total	$ 0	$ 1,571,537	$ 1,571,537	$ 2,383,369
Michael R. MacDonald Salary Continuation (3)	$ 1,000,000	$ 0	$ 0	$ 0
Benefits Continuation (4)	$ 6,093	$ 0	$ 0	$ 0
Accelerated Vesting of Equity	$ 928,422	$ 4,355,748	$ 4,355,748	$ 5,539,448
Total	$ 1,934,515	$ 4,355,748	$ 4,355,748	$ 5,539,448
Deborah L. Ferrée Salary Continuation (3)	$ 900,000	$ 0	$ 0	$ 0
Benefits Continuation (4)	$ 2,715	$ 0	$ 0	$ 0
Accelerated Vesting of Equity	$ 1,300,674	$ 5,535,986	$ 5,535,986	$ 7,028,246
Total	$ 2,203,389	$ 5,535,986	$ 5,535,986	$ 7,028,246
Douglas J. Probst Salary Continuation (3)	$ 490,000	$ 0	$ 0	$ 0
Benefits Continuation (4)	$ 8,748	$ 0	$ 0	$ 0
Accelerated Vesting of Equity	$ 707,904	$ 2,947,808	$ 2,947,808	$ 3,697,928
Total	$ 1,206,652	$ 2,947,808	$ 2,947,808	$ 3,697,928
Harris Mustafa Salary Continuation (3)	$ 565,000	$ 0	$ 0	$ 0
Benefits Continuation (4)	$ 8,748	$ 0	$ 0	$ 0
Accelerated Vesting of Equity	$ 504,368	$ 2,070,032	$ 2,070,032	$ 2,618,892
Total	$ 1,078,116	$ 2,070,032	$ 2,070,032	$ 2,618,892

| (1) | The amount reported for Accelerated Vesting of Equity reflects
the intrinsic value of unvested stock options and restricted stock units that
would vest during the one year following the Named Executive Officers deemed
date of termination. |
| --- | --- |
| (2) | The amount reported for Accelerated Vesting of Equity reflects
the intrinsic value of unvested stock options and restricted stock units that
would vest upon the Executives deemed date of termination or upon a change in
control, as the case may be. |
| (3) | The amount reported reflects the continued payment of base salary
for a period of 12 months at the rate in effect on the Executives deemed date of
termination. |
| (4) | The amount reported reflects the cost of maintaining health care
coverage for a period of 12 months at the coverage level in effect as of the
Executives date of termination. The cost of maintaining health care coverage is
calculated as the difference between (i) the companys cost of providing the
benefits and (ii) the amount the Executive paid for such benefits as of the
Executives deemed date of termination. |

Folio 36 /Folio

PAGEBREAK

Employment Agreements with Key Executives

Mr. Schottenstein

We have not entered into an employment agreement with Mr. Schottenstein, our Chairman. Mr. Schottenstein was appointed to this position on March 14, 2005.

Mr. MacDonald

We entered into an employment agreement with Mr. MacDonald, our President and Chief Executive Officer, in March 2009. The agreement provides for an indefinite term, subject to earlier termination pursuant to certain events (and potential payment amounts) summarized under Potential Payments upon Termination and Change in Control above. As of January 29, 2011, Mr. MacDonalds base salary was $1,000,000. Mr. MacDonald also participates in our ICP with a target bonus opportunity of 100% of his base salary and a maximum annual bonus of 200% of base salary. In addition, Mr. MacDonald received a signing bonus of $500,000, $250,000 of which was paid on his date of hire, and $250,000 of which was paid on his first anniversary of employment. The agreement also provides for Mr. MacDonalds participation in our 401(k) plan and welfare benefit plans.

Ms. Ferrée

We entered into an employment agreement with Ms. Ferrée, our Vice Chairman and Chief Merchandising Officer, in November 2004. The agreement provides for an indefinite term, subject to earlier termination pursuant to certain events (and potential payment amounts) summarized under Potential Payments upon Termination and Change in Control above. As of January 29, 2011, Ms. Ferrées base salary was $900,000, which is to be increased annually by a minimum of 2.5% over the previous years base salary. Ms. Ferrée also participates in our ICP with a target bonus opportunity of 100% of base salary and a maximum annual bonus of 200% of base salary. The agreement also provides for Ms. Ferrées participation in our 401(k) plan and welfare benefit plans.

Mr. Probst

We entered into an employment agreement with Mr. Probst, our Executive Vice President and Chief Financial Officer, in March 2005. The agreement provides for an indefinite term, subject to earlier termination pursuant to certain events (and potential payment amounts) summarized under Potential Payments upon Termination and Change in Control above. As of January 29, 2011, Mr. Probsts base salary was $490,000. Mr. Probst also participates in our ICP with a target bonus opportunity of 80% of his base salary and a maximum annual bonus of 160% of base salary. The agreement also provides for Mr. Probsts participation in our 401(k) plan and welfare benefit plans.

Mr. Mustafa

We entered into an employment agreement with Mr. Mustafa, our Executive Vice President, Supply Chain and Merchandise Planning and Allocation, in July 2006. The agreement provides for an indefinite term, subject to earlier termination pursuant to certain events (and potential payment amounts) summarized under Potential Payments upon Termination and Change in Control above. As of January 29, 2011, Mr. Mustafas base salary was $565,000. Mr. Mustafa also participates in our ICP with a target bonus opportunity of 50% of base salary and a maximum annual bonus of 100% of base salary. The agreement also provides for Mr. Mustafas participation in our 401(k) plan and welfare benefit plans.

Compensation Committee Review of the Relation of Compensation Design to Risk

The Compensation Committee has reviewed the design and operation of our compensation policies and practices, including incentive compensation arrangements for our Named Executive Officers and for all employees. The Compensation Committee has determined that the Companys compensation policies and practices do not encourage our employees to take unnecessary or inappropriate risks that could reasonably be expected to materially threaten our value. Several factors contributed to this assessment, including the following:

Folio 37 /Folio

PAGEBREAK

| | The Compensation Committee reviews the quality of our
earnings prior to approving incentive payments; |
| --- | --- |
| | We provide a significant percentage of compensation
based on performance, which is in turn based on annual and long-term
incentives that require sustained value creation over several years to
earn target incentives; |
| | For cash incentive payments made under our ICP, the
Compensation Committee provides a maximum payout of 200% of target; |
| | We use the same financial metrichistorically net
incometo determine annual incentive payouts for all home office bonus
eligible associates; |
| | Certain payments to our Named Executive Officers are
subject to recovery if we restate a financial statement due to material
noncompliance with any financial reporting requirement under the
securities laws and such noncompliance is a result of misconduct; and |
| | The Compensation Committee has the discretion to
adjust incentive payments based on key performance indicators that have a
long-term financial impact, and an assessment of whether results are
consistent with our values. |

Compensation of Directors

Our Compensation Committee reviews director compensation and makes recommendations to our Board of Directors regarding director compensation.

Our current director compensation policies provide that each director who does not otherwise receive compensation (including severance) from DSW or Retail Ventures will receive:

	An annual cash retainer of $50,000;
	An annual equity retainer of $100,000; and
	An additional annual retainer for committee service for each committee on
which such director serves (provided that the committee chairs do not receive
such additional retainer) as follows:

	Audit Committee $15,000
	Compensation Committee $11,500
	Nominating and Corporate Governance Committee $7,500
	Technology Committee $7,500

The annual retainers are paid as follows:

| | The annual cash retainer and the additional annual retainer for committee
service are payable in quarterly installments on the last day of each fiscal
quarter; and |
| --- | --- |
| | The annual equity retainer is payable on the date of each annual meeting
of the shareholders for the purpose of electing directors, determined by
dividing the amount of the retainer by the per-share market value of our
Class A Common Shares on the grant date. |

Directors do not receive any additional compensation for attending board meetings or board committee meetings. However, the chairmen of the Audit Committee, Nominating and Corporate Governance Committee, Compensation Committee, and Technology Committee each receive an additional $35,000, $20,000, $30,000, and $20,000 in cash or stock units (as they may elect) per year, respectively. We pay this compensation on a quarterly basis. All members of our Board of Directors are reimbursed for reasonable costs and expenses incurred in attending meetings of our Board of Directors and its committees.

During fiscal 2009, the Board of Directors established a special committee to review the proposed transaction with Retail Ventures. The members of the special committee are Messrs. Robbins (Chair), Miller and Tanenbaum, and Ms. Lau. The Board determined, upon a recommendation from the Compensation Committee, to pay Mr. Robbins a one-time retainer of $25,000 to chair the special committee. Additionally, each of the members of the special committee, and any independent board members who participate in a meeting, receive a meeting fee of $3,000 per meeting.

Folio 38 /Folio

PAGEBREAK

Non-management directors may elect to have any of the cash portion of their compensation paid in the form of stock units in lieu of cash.

Stock units issued to a director are fully vested on the date of grant, but will not be distributable to the director until the director leaves the board (for any reason). When the director leaves the board, the stock units owed to the director will be settled in DSW Class A Common Shares (with cash for any fractional shares), unless the directors award agreement provides for a cash settlement. The stock units will be settled in a lump sum transfer, and the compensated director may not defer settlement or spread the settlement over a longer period of time.

Directors have no voting rights in respect to the stock units, but they will have the power to vote the DSW Class A Common Shares received upon settlement of the award. In general, directors have equivalent rights to receive dividends paid on DSW Class A Common Shares. Each director will be credited with the same dividend that would be issued if the stock unit was a DSW Class A Common Share. The amounts associated with the dividend equivalent rights will not be distributed until the directors stock unit award is settled at the time that the director leaves the board. We will be entitled to a tax deduction when the award is settled, and the director will be taxed on the then fair market value of the award.

FISCAL YEAR 2010 DIRECTOR COMPENSATION

					Change In Pension
					Value and
				Non-Equity	Nonqualified
	Fees Earned or Paid			Incentive Plan	Deferred	All Other
	in Cash	Stock Awards	Option Awards	Compensation	Compensation	Compensation
Name	($)(1)	($) (2)(3)	($)	($)	Earnings	($)	Total
Elaine J. Eisenman	$97,875	$100,000	None	None	None	None	$197,875
Carolee Friedlander	$94,875	$100,000	None	None	None	None	$194,875
Joanna T. Lau	$117,375	$100,000	None	None	None	None	$217,375
Roger S. Markfield (4)	None	$157,812	None	None	None	None	$157,812
Philip B. Miller	$124,375	$100,000	None	None	None	None	$224,375
James D. Robbins	$160,875	$100,000	None	None	None	None	$260,875
Harvey L. Sonnenberg	$57,812	$100,000	None	None	None	None	$157,812
Allan J. Tanenbaum	$117,375	$100,000	None	None	None	None	$217,375
Heywood Wilansky (5)	$25,000	None	None	None	None	None	$25,000

(1) The reported amount includes the following payments made to certain Directors for participation on the special committee during the year:

Name	Amount
Elaine J. Eisenman	$ 30,000
Carolee Friedlander	$ 27,000
Joanna T. Lau	$ 33,000
Philip B. Miller	$ 30,000
James D. Robbins	$ 58,000
Allan J. Tanenbaum	$ 33,000

| (2) |
| --- |
| These stock units are fully vested but will not be distributable to the director
until the director leaves the Board. Because these units are fully-vested upon
grant, we recognize the full grant date fair value for financial statement
reporting purposes, as provided by ASC 718. For additional information on the |

Folio 39 /Folio

PAGEBREAK

| | valuation assumptions, refer to note 3 of DSWs financial statements in the Form
10-K for the year ended January 29, 2011, as filed with the SEC. |
| --- | --- |
| (3) | As of January 29, 2011, each director listed had the following
number of stock units outstanding: |

	Number of Stock Units Outstanding
Name	as of January 29, 2011
Elaine J. Eisenman	14,407
Carolee Friedlander	20,749
Joanna T. Lau	13,310
Roger S. Markfield	22,661
Philip B. Miller	21,232
James D. Robbins	19,680
Harvey L. Sonnenberg	18,796
Allan J. Tanenbaum	30,432

| (4) | Beginning in the first quarter of fiscal 2008, Mr. Markfield
elected to receive payment of all fees in the form of stock awards. |
| --- | --- |
| (5) | Effective August 1, 2010, Mr. Wilansky was eligible to receive
compensation for service on the Board. |

Folio 40 /Folio

PAGEBREAK

PROPOSAL 2 ADVISORY VOTE ON THE FREQUENCY OF VOTING ON THE COMPENSATION OF NAMED EXECUTIVE OFFICERS

Section 14A of the Exchange Act requires the Company to include in its proxy statement an advisory vote on named executive officer compensation this year and, going forward, at least once every three years. Section 14A also requires the Company to include in its proxy statement this year and, going forward, at least every six years, a vote regarding the frequency with which the vote on named executive officer compensation should be held. While the Company will continue to monitor developments in this area, the Board of Directors currently plans to seek an advisory vote on executive compensation every year. The Board of Directors believes this approach would align more closely with the interests of shareholders by giving shareholders the opportunity to vote on the compensation decisions made by the Committee each year. The Board of Directors believes that an annual vote provides the most direct communication and clarity and avoids delays. The Company asks that you indicate your support for holding the advisory vote on executive compensation every year. Because your vote is advisory, it will not be binding on the Board of Directors. However, the Board of Directors will review the voting results and take them into consideration when making future decisions regarding the frequency with which the advisory vote on executive compensation will be held.

The Board of Directors recommends that the shareholders vote FOR holding an advisory vote on executive compensation every year.

Folio 41 /Folio

PAGEBREAK

PROPOSAL 3 ADVISORY VOTE ON THE COMPENSATION PAID TO NAMED EXECUTIVE OFFICERS

As noted above, Section 14A of the Exchange Act requires the Company to include in its proxy statement this year an advisory vote regarding named executive officer compensation. The Company asks that you indicate your approval of the compensation paid to our named executive officers as described in this Proxy Statement under the heading Executive Compensation, which includes the Compensation Discussion and Analysis, compensation tables and narratives included elsewhere in this Proxy Statement.

Because your vote is advisory, it will not be binding on the Board of Directors. However, the Board of Directors and the Committee will review the voting results and take them into consideration when making future decisions regarding executive compensation.

As described in the Compensation Discussion and Analysis, the Companys objectives for its executive compensation program as are follows:

| | Attract and retain highly talented, experienced retail executives who can
make significant contributions to our long-term success; |
| --- | --- |
| | Reward executives for delivering superior performance; and |
| | Create a strong link among the interests of shareholders, DSWs financial
performance and the total compensation of executives, and align executive
incentives with shareholder value creation. |

For the reasons discussed above and in this Proxy Statement under the heading Executive Compensation, the Board of Directors recommends that shareholders vote to approve the following resolution:

RESOLVED, that the compensation of the named executive officers of the Company, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion in this Proxy Statement is approved.

Vote Required

Under our Code of Regulations, approval of this proposal requires the affirmative vote of the holders of the greater of (i) a majority of the shares required to constitute a quorum for such meeting, in which case broker non-votes have the effect of votes Against the proposal, and (ii) a majority of the shares voted on such proposal, in which case broker non-votes are disregarded and have no effect on the outcome of the vote. Abstentions will be counted as represented and entitled to vote and will therefore have the effect of a vote Against the proposal.

The Board of Directors recommends that the shareholders vote FOR the approval of the resolution relating to the compensation of our executive officers.

Folio 42 /Folio

PAGEBREAK

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

General

Prior to the completion of our initial public offering in July 2005, we were operated as a wholly-owned subsidiary of Retail Ventures. As of March 22, 2011, Retail Ventures owned 27,382,667 of our Class B Common Shares, constituting all of our issued and outstanding Class B Common Shares, or approximately 62.1% of our total outstanding shares and approximately 92.9% of the combined voting power of our outstanding Common Shares. Retail Ventures has the power acting alone to approve any action requiring a vote of the majority of our voting shares, including the election of all our directors.

On February 8, 2011, DSW, DSW MS LLC, an Ohio limited liability company and a wholly owned subsidiary of DSW (DSW Merger LLC), and Retail Ventures, entered into an Agreement and Plan of Merger (the Merger Agreement), pursuant to which Retail Ventures will merge with and into DSW Merger LLC, with DSW Merger LLC continuing after the merger as the surviving entity and a wholly owned subsidiary of DSW (the Merger). Retail Ventures board of directors and the independent members of DSWs board of directors have approved the Merger Agreement based on the recommendation of a special committee of each board of directors and have recommended that the shareholders of Retail Ventures and DSW, respectively, adopt the Merger Agreement and the Merger.

Upon the closing of the Merger, each outstanding Retail Ventures common share will be converted into the right to receive 0.435 DSW class A common shares, unless the holder properly and timely elects to receive a like amount of DSW class B common shares in lieu of DSW class A common shares. All compensatory awards based on or comprised of Retail Ventures common shares, such as stock options, stock appreciation rights, and restricted stock, will be converted into and become, respectively, awards based on or comprised of DSW class A common shares, in each case on terms substantially identical to those in effect immediately prior to the effective time of the Merger, in accordance with the 0.435 exchange ratio.

It is expected that the Merger will qualify as a tax-free reorganization for U.S. federal income tax purposes, so that, in general, none of DSW, Retail Ventures, DSW Merger LLC or any of the Retail Ventures shareholders will recognize any gain or loss in the transaction, except that Retail Ventures shareholders will generally recognize gain or loss with respect to cash received in lieu of fractional shares of DSW class A or class B common shares.

As of March 22, 2011, Jay L. Schottenstein, the Chairman of Retail Ventures, beneficially owned approximately 65.6% of the common shares of SSC. As of March 22, 2011, SSC and its affiliates owned approximately 50.6% of the outstanding shares and beneficially owned approximately 52.3% of the outstanding shares of Retail Ventures (assumes issuance of 1,731,460 Retail Ventures common shares issuable upon the exercise of term loan warrants). For fiscal 2010, we paid approximately $17.1 million in total fees, rents and expenses to SSC and its affiliates.

In the ordinary course of business, we have entered into a number of agreements with Retail Ventures and SSC and their affiliates relating to our business and our relationship with these companies, the material terms of which are described below. We believe that each of the agreements entered into with these entities is on terms at least as favorable to us as could be obtained in an arms length transaction with an unaffiliated third party. In the event that we desire to enter into any agreements with Retail Ventures or any of our directors, officers or other affiliates in the future, in accordance with Ohio law, any contract, action or other transaction between or affecting us and one of our directors or officers or between or affecting us and any entity in which one or more of our directors or officers is a director, trustee or officer or has a financial or personal interest, will either be approved by the shareholders, a majority of the disinterested members of our Board of Directors or a committee of our Board of Directors that authorizes such contracts, action or other transactions or must be fair to us as of the time our directors, a committee of our directors or our shareholders approve the contract, action or transaction. In addition, any transactions with directors, officers or other affiliates will be subject to requirements of the Sarbanes-Oxley Act and other Securities and Exchange Commission rules and regulations, as well as to our written related party transaction policy described below.

Folio 43 /Folio

PAGEBREAK

Procedures for Review of Related Party Transactions

In June 2006, our board of directors approved a written related party transaction policy which gives our Audit Committee the power to approve or disapprove potential related party transactions, arrangements or relationships between us and a related person, as described below. The related party transaction policy was amended in March 2007 and a copy of the policy can be found at our corporate and investor website at www.dswinc.com and is available in print (without charge) to any shareholder upon request. The related party transaction policy provides for the review, approval or ratification of any related person transaction that we are required to report under this section of the proxy statement.

For purposes of this policy, a Related Person Transaction is any transaction which is currently proposed or has been in effect at any time since the beginning of the last fiscal year, in which the Company or any of its subsidiaries, was, or is proposed to be, a participant, and in which any of the following persons (each, a Related Person) has or will have a direct or indirect material interest:

| (1) | any person who is, or at any time since the beginning of the
Companys last fiscal year was, a director, director nominee or executive officer
of the Company; |
| --- | --- |
| (2) | a shareholder of the Company who owns more than five percent (5%)
of any class of the Companys voting securities; |
| (3) | a member of the immediate family of any person described in (1) or
(2) above; and |
| (4) | an entity in which any person described in (1), (2) or (3) above
has a greater than ten percent (10%) equity interest. |

In determining whether to approve a related person transaction, the Audit Committee considers the following factors, to the extent relevant:

	Is the transaction in the normal course of the Companys business?
	Are the terms of the transaction fair to the Company?
	Are the terms of the transaction commercially reasonable? Are the terms
of the transaction substantially the same as the terms that the Company would
be able to obtain in an arms-length transaction with an unrelated third
party?
	Has the Company obtained an independent appraisal or completed a financial
analysis of the transaction? If so, what are the results of such appraisal
or analysis?
	Is the transaction in the best interests of the Company? The Companys
shareholders?
	Would the transaction impair a directors independence in the event that
the Related Person is an independent director?

Based on an analysis of these factors (and other additional factors that the Audit Committee may deem relevant based on the circumstances), the Audit Committee takes formal action to either approve or reject the related person transaction.

Relationships between DSW and Retail Ventures

Historical Relationship With Retail Ventures

Prior to the completion of our initial public offering in July 2005, we were a wholly-owned subsidiary of Value City or Retail Ventures since 1998. As a result, in the ordinary course of our business, we have received various services provided by Value City and Retail Ventures, including import administration, risk management, information technology, tax, financial services, benefits administration and payroll, as well as other corporate

Folio 44 /Folio

PAGEBREAK

services. Retail Ventures also maintained insurance for us and for our directors, officers and employees. Retail Ventures also provided us with the services of a number of its executives and employees. Our historical financial statements include allocations to us by Retail Ventures of its costs related to these services. These cost allocations have been determined on a basis that we and Retail Ventures consider to be reasonable reflections of the use of services provided or the benefit received by us.

Retail Ventures as our Controlling Shareholder

As of March 22, 2011, Retail Ventures owns approximately 62.1% of the outstanding shares of our Common Shares, and approximately 92.9% of the combined voting power of our outstanding Common Shares. For as long as Retail Ventures continues to control more than 50% of the combined voting power of our Common Shares, Retail Ventures will be able to direct the election of all the members of our board and exercise a controlling influence over our business and affairs, including any determinations with respect to mergers or other business combinations involving our company, the acquisition or disposition of assets by our company, the incurrence of indebtedness by our company, the issuance of any additional common shares or other equity securities, and the payment of dividends with respect to our Common Shares. Except with respect to the approval of the Merger Agreement and the Merger and subject to the Merger Agreement, Retail Ventures has the power to determine matters submitted to a vote of our shareholders without the consent of our other shareholders, has the power to prevent a change in control of our company and has the power to take other actions that might be favorable to Retail Ventures.

On January 15, 2010, we entered into a share purchase agreement with Retail Ventures pursuant to which we purchased from Retail Ventures 320,000 Class B Common Shares for an aggregate amount of $8.0 million.

Retail Ventures has not advised us that it currently intends to dispose of the Common Shares owned by it, excluding the sale to us of 320,000 Class B Common Shares and except to the extent necessary to satisfy its obligations, including obligations under the Retail Ventures Premium Income Exchangeable Securities (PIES) and obligations under warrants it has granted to SSC and its affiliates, and Millennium Partners, L.P. (Millennium). In addition, Retail Ventures is subject to contractual obligations with its warrantholders to retain enough DSW Common Shares to be able to satisfy its obligations to deliver such shares to its warrantholders if the warrantholders elect to exercise their warrants in full for DSW Class A Common Shares. Retail Ventures is also subject to contractual obligations with the holders of the PIES to retain enough DSW Common Shares to be able to satisfy its obligations to deliver shares to the holders of the PIES. In addition, in the event that the PIES were to be accelerated, a payment which is required to be paid to the PIES holders by RVI can be satisfied by, in lieu of paying cash, using additional Class A Common Shares upon compliance with the terms of the instruments governing the PIES. The settlement of the PIES (if done prior to closing of the Merger Agreement) will not change the number of DSW Common Shares outstanding, although shares delivered upon the settlement of the PIES will generally be freely tradable by the former PIES holders as a result of having been registered in connection with the initial issuance of the PIES.

Under the Merger Agreement, Merger Sub will assume, as of the effective time of the Merger, by supplemental indenture and supplemental agreement, all of Retail Ventures obligations with respect to the PIES.

If Retail Ventures were to require funds to service or refinance its indebtedness or to fund its operations in the future and could not obtain capital from alternative sources, it could seek to sell some or all of the Common Shares of DSW that it holds in order to obtain such funds.

Agreements Between Us And Retail Ventures

This section describes the material provisions of agreements between us and Retail Ventures. The description of the agreements is not complete and, with respect to each material agreement, is qualified by reference to the terms of the agreement, each of which is filed as an exhibit to our registration statement filed in connection with our initial public offering or subsequent filings we have made with the Securities and Exchange Commission. We entered into these agreements with Retail Ventures in the context of our relationship with Retail Ventures. The prices and other terms of these agreements may be less favorable to us than those we could have obtained in arms length negotiations with unaffiliated third parties for similar services or under similar agreements.

Folio 45 /Folio

PAGEBREAK

Agreements Relating to our Separation from Retail Ventures

In connection with our initial public offering, we and Retail Ventures entered into agreements governing various interim and ongoing relationships between us. These agreements include:

	a master separation agreement;
	a shared services agreement and other intercompany arrangements;
	a tax separation agreement;
	an exchange agreement; and
	a footwear fixture agreement.

Effective March 17, 2008, we amended the shared services agreement and tax separation agreement.

Master Separation Agreement. The Master Separation Agreement contains key provisions relating to the separation of our business from Retail Ventures. The Master Separation Agreement requires us to exchange information with Retail Ventures, follow certain accounting practices and resolve disputes with Retail Ventures in a particular manner. We also have agreed to maintain the confidentiality of certain information and preserve available legal privileges. The separation agreement also contains provisions relating to the allocation of the costs of our initial public offering, indemnification, non-solicitation of employees and employee benefit matters.

Under the master separation agreement, we agreed to effect up to one demand registration per calendar year of our Common Shares, whether Class A or Class B, held by Retail Ventures, if requested by Retail Ventures. We have also granted Retail Ventures the right to include its Common Shares of DSW in an unlimited number of other registrations of such shares initiated by us or on behalf of our other shareholders.

The Master Separation Agreement will be terminated as of the effective time of the Merger, except for certain provisions that provide for registration rights to Schottenstein affiliates.

Amended and Restated Shared Services Agreement. Effective March 17, 2008, we entered into an Amended and Restated Shared Services Agreement with Retail Ventures and its subsidiaries. Pursuant to the terms of the Amended and Restated Shared Services Agreement, we provide Retail Ventures and its subsidiaries with key services relating to risk management, tax, financial services, benefits administration, payroll and information technology. The current term of the Amended and Restated Shared Services Agreement expired at the end of fiscal 2010, was extended automatically for fiscal 2011 and will be extended automatically for additional one-year terms unless terminated by one of the parties. With respect to each shared service, we cannot reasonably anticipate whether the services will be shared for a period shorter or longer than the initial term.

In fiscal 2010, we paid Retail Ventures approximately $0.5 million for our portion of expenses relating to the Northland office facility. In addition, in fiscal 2010, Retail Ventures paid us approximately $1.1 million for services we rendered on behalf of Retail Ventures and its affiliates.

The Amended and Restated Shared Services Agreement will be terminated as of the effective time of the Merger.

Tax Separation Agreement. The tax separation agreement provides that DSW is exclusively responsible for preparing any tax return with respect to Retail Ventures consolidated group or any combined group. For fiscal years after fiscal 2007, DSW and Retail Ventures ceased reimbursing each other for the benefits or detriments derived from combined and unitary state and local filing positions. In fiscal 2010, we had an adjustment to our non-cash capital contribution from Retail Ventures of a reduction of $0.9 million.

Exchange Agreement. In connection with our initial public offering, we entered into an exchange agreement with Retail Ventures. In the event that Retail Ventures desires to exchange all or a portion of the Class B Common Shares held by it for Class A Common Shares, we will issue to Retail Ventures an equal number of duly authorized, validly issued, fully paid and nonassessable Class A Common Shares in exchange for the Class B Common Shares of DSW held by Retail Ventures. Retail Ventures may make one or more requests for such exchange, covering all or a part of the Class B Common Shares that it holds.

The Exchange Agreement will be terminated as of the effective time of the Merger.

Folio 46 /Folio

PAGEBREAK

Footwear Fixture Agreement. In connection with the completion of our initial public offering in July 2005, we entered into an agreement with Retail Ventures related to our patented footwear display fixtures. We agreed to sell Retail Ventures, upon its request, the fixtures covered by the patents at the cost associated with obtaining and delivering them. In addition, we have agreed to pay Retail Ventures a percentage of any net profit we may receive should we ever market and sell the fixtures to third parties.

The Footwear Fixture Agreement will be terminated as of the effective time of the Merger.

Leases and Subleases

Warehouse and Distribution facility . We lease our approximately 700,000 square foot warehouse and distribution facility in Columbus, Ohio from an affiliate of SSC. In fiscal 2006, in connection with the execution of the lease for a new corporate office described below, we exercised the first renewal option extending the term of this lease until December 2021. Additionally, we were granted an additional five-year renewal option for this facility. The monthly rent is $179,533, $194,228 and $208,922, and $220,416 during the first, second, third and fourth five-year periods of the initial term and first renewal period, respectively. The lease has three remaining renewal options with terms of five years each. The rent increases to $235,111, $249,805, and $265,160 in second, third and fourth renewal terms, respectively. Under this agreement, we incurred approximately $2.5 million of expense for fiscal 2010 (includes rent, real estate taxes, and CAM).

Corporate Office. In fiscal 2006, we entered into a lease for a new corporate headquarters immediately adjacent to our existing home office in Columbus, Ohio. The landlord is an affiliate of SSC. The lease expires in December 2021 and has three renewal options with terms of five years each. The monthly rent is $123,143 with a minimum annual rent of $1,477,710. Under this agreement, we incurred approximately $1.3 million of expense for fiscal 2010 (includes rent, real estate taxes, and CAM).

Fulfillment Center. In fiscal 2007, we entered into a lease for a new fulfillment center for dsw.com adjacent to our existing home office in Columbus, Ohio. The landlord is an affiliate of SSC. The lease expires in September 2017 and has two renewal options with terms of five years each. For fiscal 2009, the monthly rent was $46,375, with a minimum annual rent of $556,500. Under this agreement, we incurred approximately $0.8 million of expense for fiscal 2010 (includes rent, real estate taxes, and CAM).

Utilities. In connection with our leases for the warehouse and distribution center, corporate office, and fulfillment center (described above), we incurred approximately $1.1 million of expense related to the payment of utilities to the landlords. The landlords of these facilities are affiliates of SSC.

DSW stores. As of January 29, 2011, we leased or subleased 21 DSW stores from affiliates of SSC. We incurred approximately $8.0 million of rent and approximately $1.8 million of other expense (real estate taxes, maintenance and insurance) related to these leases for fiscal 2010. In addition to base rent, for each lease, we also (a) pay percentage rent equal to approximately 2% annually of gross sales that exceed specified breakpoints that increase as the minimum rent increases and (b) pay a portion of expenses related to maintenance, real estate taxes and insurance. These leases have terms expiring between July 2011 and January 2023 and generally have at least three renewal options of 5 years each.

Reimbursement Agreement . In fiscal 2010, accounts payable to Retail Ventures were reduced by $0.5 million related to Retail Ventures reimbursement of certain DSW leasehold improvement expenditures.

Merchandise Transactions with SSC and Affiliates

We purchase merchandise from affiliates of SSC from time to time. During fiscal 2010, we purchased merchandise in the amount of $0.4 million from affiliates of SSC. Any merchandise purchases from such sources are on terms at least as favorable to us as could be obtained in an arms length transaction with an unaffiliated third party.

Corporate Services Agreement with SSC

We receive services from SSC pursuant to a Corporate Services Agreement between Retail Ventures and SSC. The agreement sets forth the costs of shared services, including specified legal, advertising, travel expense, and administrative services. For fiscal 2010, our allocated portion of the amount we paid to SSC was in an amount immaterial to the financial statements.

Folio 47 /Folio

PAGEBREAK

Registration Rights Agreements

Under the master separation agreement, we have agreed to effect up to one demand registration per calendar year of our Common Shares, whether Class A or Class B, held by Retail Ventures, if requested by Retail Ventures. We have also granted Retail Ventures the right to include its Common Shares of DSW in an unlimited number of other registrations of such shares initiated by us or on behalf of our other shareholders.

We have also entered into a registration rights agreement with SSC, under which we have agreed to register in specified circumstances the Class A Common Shares issued to them upon exercise of their warrants. Millennium Partners, L.P., or Millennium, will be entitled to participate in the registrations initiated by SSC. Under this agreement, SSC (together with transferees of at least 15% of its interest in registrable DSW Common Shares) may request up to three demand registrations. The agreement will also grant SSC and Millennium the right to include these Class A Common Shares in an unlimited number of other registrations of any of our securities initiated by us or on behalf of our other shareholders (other than a demand registration made under the agreement).

Notes, Credit Agreements and Guarantees

The Value City Term Loan Facility. Prior to completion of our initial public offering in July 2005, we were party to a Financing Agreement, as amended, among Cerberus, as agent and lender, and SSC as lender, and the other parties named as co-borrowers therein, originally entered into in June 2002. Upon the completion of our initial public offering, this term loan agreement was amended and restated and we were released from our obligations as a party thereto.

In connection with these loans, Retail Ventures issued to each of Cerberus and SSC warrants to purchase 1,388,752 common shares of Retail Ventures at a purchase price of $4.50 per share, subject to adjustment. In September 2002, Back Bay Capital Funding LLC (Back Bay) bought from each of Cerberus and SSC a $1.5 million interest in each of the tranches of their term loans for an aggregate $6.0 million interest, and Back Bay received from each of Cerberus and SSC a corresponding portion of the warrants to purchase Retail Ventures common shares originally issued in connection with the second tranche of their term loans. Effective November 23, 2005, Millennium purchased from Back Bay term loan warrants to purchase an aggregate of 177,288 of Retail Ventures common shares, subject to adjustment. Effective May 30, 2008, SRVI acquired from SSC term loan warrants to purchase an aggregate 1,388,752 of Retail Ventures common shares, subject to adjustment. On November 16, 2010, Retail Ventures issued 1,214,572 of its common shares to Cerberus in connection with Cerberus exercise of its outstanding warrant. The warrant was exercised on a cashless exercise basis as permitted by the warrant, resulting in the issuance of 1,214,572 of the 1,731,460 shares for which the warrant could have been exercised (at an exercise price of $4.50 per share). In connection with this issuance, no payment was made to Retail Ventures, no underwriters were utilized and no commissions were paid.

In connection with the 2005 amendment of this term loan agreement, Retail Ventures amended the outstanding warrants to provide SSC, SRVI, Cerberus and Millennium the right, from time to time, in whole or in part, to (i) acquire Retail Ventures common shares at the then current conversion price (subject to the existing anti-dilution) provisions, (ii) acquire from Retail Ventures Class A Common Shares of DSW at an exercise price of $19.00 per share (subject to anti-dilution provisions similar to those in the existing warrants) or (iii) acquire a combination thereof.

Assuming an exercise price per share of $19.00, SRVI would receive 328,915 Class A Common Shares, and Millennium would receive 41,989 Class A Common Shares, if they exercised these warrants in full exclusively for DSW Common Shares. The warrants expire in June 2012.

In the Merger, Merger Sub will assume by operation of law, as of the effective time of the Merger, the warrants to the extent such warrants remain outstanding immediately prior to the effective time of the Merger. Following the effective time of the Merger, the right to exercise such warrants for DSW class A common shares will continue in accordance with the terms of the warrants. Following the effective time of the Merger, each warrant to purchase either Retail Ventures common shares or DSW class A common shares will, in accordance with the terms of the warrants, represent the right to purchase a number of DSW class A common shares equal to the number of Retail Ventures common shares that could have been purchased pursuant to such warrant immediately prior to the effective time of the Merger, multiplied by the exchange ratio, rounded down to the

Folio 48 /Folio

PAGEBREAK

nearest whole share. The per share exercise price of each warrant will be the exercise price applicable under such warrant for Retail Ventures common shares immediately prior to the effective time of the Merger, divided by the exchange ratio, rounded up to the nearest whole cent.

We have entered into an exchange agreement with Retail Ventures whereby, upon the request of Retail Ventures, we will be required to exchange some or all of the Class B Common Shares of DSW held by Retail Ventures for Class A Common Shares.

Union Square Store Guaranty by Retail Ventures. In January 2004, we entered into a lease agreement with 40 East 14 Realty Associates, L.L.C., an unrelated third party, for our Union Square store in Manhattan, New York. In connection with the lease, Retail Ventures agreed to guarantee payment of our rent and other expenses and charges and the performance of our other obligations.

Taryn Rose . In January 2010, we invested approximately $1.2 million into an entity that purchased certain assets of Taryn Rose, a luxury comfortable shoe brand. In exchange for our $1.2 million investment, we received a 19.9% interest in the entity. The 80.1% owner of the entity is an affiliate of SSC. We received a return of capital in the amount of $0.2 million in fiscal 2010.

Folio 49 /Folio

PAGEBREAK

Provisions of Our Amended Articles of Incorporation Governing Corporate Opportunities and Related Party Transactions

Retail Ventures remains a substantial shareholder of DSW and SSC and its affiliates remain a substantial shareholder of Retail Ventures. Retail Ventures and SSC are engaged in the same or similar activities or lines of business as we are and have interests in the same areas of corporate opportunities. Summarized below are provisions in our amended articles of incorporation that govern conflicts, corporate opportunities and related party transactions.

Conflicts / Competition. Retail Ventures and SSC and its affiliates have the right to engage in the same businesses as we do, to do business with our suppliers and customers and to employ any of our officers or employees.

Corporate Opportunities. In the event that Retail Ventures, SSC or any director or officer of either of them who is also one of our directors or officers learns about a potential transaction or business opportunity which we are financially able to undertake, which is in our line of business, which is of practical advantage to us and in which we have an interest or a reasonable expectancy, but which may also be appropriate for Retail Ventures or SSC, our amended articles of incorporation provide:

| | If Retail Ventures or SSC learns about a corporate opportunity, it does
not have to tell us about it and it is not a breach of any fiduciary duty for
it to pursue such corporate opportunity for itself or to direct it elsewhere. |
| --- | --- |
| | If one of our directors or officers who is also a director or officer of
Retail Ventures or SSC learns about a corporate opportunity, he or she shall
not be liable to us or to our shareholders if Retail Ventures or SSC pursues
the corporate opportunity for itself, directs it elsewhere or does not
communicate information about the opportunity to us, if such director or
officer acts in a manner consistent with the following policy: |

| | If the corporate opportunity is offered to
one of our officers who is also a director but not an officer of
Retail Ventures or SSC, the corporate opportunity belongs to us unless
it was expressly offered to the officer in writing solely in his or
her capacity as a director of Retail Ventures or SSC, in which case it
belongs to Retail Ventures or SSC, as the case may be. |
| --- | --- |
| | If the corporate opportunity is offered to
one of our directors who is not an officer of DSW, and who is also a
director or officer of Retail Ventures or SSC, the corporate
opportunity belongs to us only if it was expressly offered to the
director in writing solely in his or her capacity as our director. |
| | If the corporate opportunity is offered to
one of our officers, whether or not such person is also a director,
who is also an officer of Retail Ventures or SSC, it belongs to us
only if it is expressly offered to the officer in writing solely in
his or her capacity as our officer or director. |

Related Party Transactions. We may, from time to time, enter into contracts or otherwise transact business with Retail Ventures, SSC, our directors, directors of Retail Ventures or SSC or organizations in which any of such directors has a financial interest. Such contracts and transactions are permitted if:

| | the relationship or interest is disclosed or is known to the board of
directors or the committee approving the contract or transaction, and the
board of directors or committee, in good faith reasonably justified by the
facts, authorizes the contract or transaction by the affirmative vote of a
majority of the directors who are not interested in the contract or
transaction; |
| --- | --- |
| | the relationship or interest is disclosed or is known to the shareholders,
and the shareholders approve the contract or transaction by the affirmative
vote of the holders of a majority of the voting power of the corporation held
by persons not interested in the contract or transaction; or |
| | the contract or transaction is fair at the time it is authorized or
approved by the board of directors, a committee of the board of directors, or
the shareholders. |

Folio 50 /Folio

PAGEBREAK

INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS

We engaged Deloitte & Touche LLP as our independent registered public accountants to audit our consolidated financial statements for fiscal 2010. Services provided by Deloitte & Touche LLP for each of fiscal 2010 and fiscal 2009 and the related fees are described under the caption Audit and Other Service Fees of this proxy statement. Our Audit Committee is directly responsible for the appointment, compensation, retention, termination and oversight of the work of the independent auditors, and has the sole responsibility to retain and replace our independent auditor.

We expect that representatives of Deloitte & Touche LLP will be present at the Annual Meeting with the opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions.

OTHER MATTERS

Shareholder Proposals Pursuant to Rule 14a-8

In order to be considered for inclusion in the proxy statement distributed to shareholders prior to the Annual Meeting of Shareholders in 2012, a shareholder proposal in compliance with Rule 14a-8 of the Exchange Act must be received by DSW no later than December 6, 2011. Written requests for inclusion should be addressed to: Corporate Secretary, 810 DSW Drive, Columbus, Ohio 43219. It is suggested that you mail your proposal by certified mail, return receipt requested.

Shareholder Proposals Other Than Pursuant to Rule 14a-8

In order for proposals of shareholders made outside of Rule 14a-8 under the Exchange Act to be considered timely within the meaning of Rule 14a-4(c) under the Exchange Act, such proposals must be received by our Corporate Secretary at the above address by February 19, 2012. Our Code of Regulations also provides that nominations for director may only be made by the Board of Directors (or an authorized Board committee) or by a shareholder of record entitled to vote who sends notice to our Corporate Secretary not fewer than 60 nor more than 90 days before the anniversary date of the previous years annual meeting of shareholders. Any nomination by a shareholder must comply with the procedures specified in our Code of Regulations. To be eligible for consideration at the 2012 Annual Meeting, any nominations for director must be received by our Corporate Secretary between February 19, 2012 and March 20, 2012. This advance notice period is intended to allow all shareholders an opportunity to consider any nominees expected to be considered at the meeting.

Shareholder Communications to the Board of Directors

Shareholders and interested parties may communicate with the Board of Directors (including the non-management directors as a group) or individual directors directly by writing to the directors in care of our Corporate Secretary, 810 DSW Drive, Columbus, Ohio 43219, in an envelope clearly marked shareholder communication. Such communications will be provided promptly and, if requested, confidentially to the respective directors.

General Information

A COPY OF THE FORM 10-K FOR THE FISCAL YEAR ENDED JANUARY 29, 2011 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION WILL BE SENT TO ANY SHAREHOLDER WITHOUT CHARGE UPON WRITTEN REQUEST ADDRESSED TO INVESTOR RELATIONS DEPARTMENT, 810 DSW DRIVE, COLUMBUS, OHIO 43219.

Management knows of no other business which may be properly brought before the 2011 Annual Meeting of Shareholders. However, if any other matters shall properly come before such meeting, it is the intention of the persons named in the form of proxy to vote such proxy in accordance with their best judgment on such matters.

Folio 51 /Folio

PAGEBREAK

IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO COMPLETE AND SUBMIT YOUR PROXY.

By Order of the Board of Directors,
William L. Jordan
Secretary

Folio 52 /Folio

PAGEBREAK

DSW INC. 810 DSW Drive, Columbus, Ohio 43219 ____

PROXY FOR ANNUAL MEETING OF SHAREHOLDERS MAY 19, 2011

THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned shareholder of DSW Inc. (the Company) hereby appoints Douglas J. Probst and William L. Jordan, or any one of them, as attorneys and proxies with full power of substitution to each, to vote all shares of common stock of the Company which the undersigned is entitled to vote at the Annual Meeting of Shareholders of the Company to be held at the Companys corporate offices, 810 DSW Drive, Columbus, Ohio 43219, on Thursday, May 19, 2011 at 10:00 a.m. Eastern Daylight Savings Time, and at any postponement or adjournments thereof, with all of the powers such undersigned shareholder would have if personally present, for the following purposes:

The Board of Directors recommends a vote FOR the election of directors below:

Election of the following Class III Directors:

Carolee Friedlander

Harvey L. Sonnenberg

Allan J. Tanenbaum

o FOR ALL NOMINEES o WITHHOLD AUTHORITY FOR ALL NOMINEES

o FOR ALL NOMINEES EXCEPT (See instructions below)

(Instruction: To withhold authority for one or more specific nominees, write such nominee(s)

name here: _________.)

The Board of Directors recommends a vote FOR 1 Year

To recommend, by non-binding vote, the frequency of executive compensation votes.

o 1Year o 2 Years o 3 Years o ABSTAIN

The Board of Directors recommends a vote FOR the following proposal:

To approve, by non-binding vote, executive compensation.

o FOR o AGAINST o ABSTAIN

The proxies are hereby authorized to vote in their discretion upon such other matters as may properly come before the meeting and any adjournments or postponements thereof.

THIS PROXY, WHEN EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES TO THE BOARD OF DIRECTORS (ITEM 1), FOR ITEM 3, AND FOR EVERY 1 YEAR REGARDING THE FREQUENCY OF THE VOTE ON EXECUTIVE COMPENSATION (ITEM 2).

The undersigned hereby acknowledges receipt of the Notice of Annual Meeting of Shareholders, dated April 4, 2011, and the proxy statement of the Company. Any proxy heretofore given to vote said shares is hereby revoked.

PLEASE SIGN AND DATE THIS PROXY BELOW AND RETURN PROMPTLY.

Dated: ___, 2011 _______

Folio 53 /Folio

PAGEBREAK

| Signature |
| --- |
| Signature |
| Signature(s) shall agree with the name(s) printed on
this Proxy. If shares are registered in two names,
both shareholders should sign this Proxy. If signing
as attorney, executor, administrator, trustee or
guardian, please give your full title as such. If
the shareholder is a corporation, please sign in
full corporate name by an authorized officer. If
the shareholder is a partnership or other entity,
please sign that entitys name by authorized person.
(Please note any change of address on this Proxy.) |

Folio 54 /Folio

AI assistant

Designer Brands Inc. Proxy Solicitation & Information Statement 2011

33779_psi_2011-04-06_40a1fab2-1f87-43af-ada9-29c0c215f367.zip

AI assistant

Designer Brands Inc. — Proxy Solicitation & Information Statement 2011

33779_psi_2011-04-06_40a1fab2-1f87-43af-ada9-29c0c215f367.zip

More from Designer Brands Inc.

Designer Brands Inc. Proxy Solicitation & Information Statement 2011