Discount footwear retailer DSW Designer Shoe Warehouse (DSW) has completed its share purchase of Canadian footwear retailer, Town Shoes, for $75.5 million (US$68.7 million) in cash. DSW acquired a 49.2% interest in Town Shoes, paving the way for DSW to open Canadian stores. DSW's initial stake provides 50% voting control and board representation, equal to Town Shoes' primary remaining shareholder, Callisto Capital.

DSW is hugely popular in the United States, currently operating 410 retail locations with more on the way. Its name indicates its business model: it sells designer shoes at discounted prices. Stores average at around 22,000 square feet and each store carries about 24,000 pairs of shoes. The company has hundreds of millions in cash and no debt, hence its ability to complete its all-cash purchase of Town Shoes.

DSW's share purchase comes with the option to buy the rest of Town Shoes' shares after four years. Town Shoes is already familiar with the Canadian retail market, and it may be able to help DSW set up its retail locations as well as other operations, including logistics. Town Shoes is Canada's largest footwear retailer, with 182 stores and $291 million in sales for 2013. Namesake 'The Shoe Company' also operates under Town Shoes' control.

In the winter of 2013, sources informed us that Town Shoes/The Shoe Company intended to open DSW-like stores in Canada. Plans have since changed, now that DSW itself will operate in Canada via Town Shoes.

When DSW opens in Canada, it will rapidly face competition from other new retailers selling discounted footwear. Nordstrom Rack, Off 5th by Saks Fifth Avenue, and hr2 by Holt Renfrew will open stores nation-wide within the next three years. Nordstrom Rack will open up to 20 Canadian locations, Off 5th by Saks will open up to 25 locations, and hr2 is looking to open between 15 and 20 locations.

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