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DSW Inc. Reports First Quarter 2017 Financial Results
- First quarter sales increased 1.4% to $691.1 million; comparable sales decreased 3.0%
- Including $0.04 per share related to Ebuys acquisition related costs, restructuring costs and foreign exchange loss, first quarter Reported EPS of $0.28 per diluted share
- First quarter Adjusted EPS of $0.32 per diluted share
- Reiterates Fiscal 2017 EPS guidance of $1.45 to $1.55 per share

COLUMBUS, Ohio, May 23, 2017 /PRNewswire/ -- DSW Inc. (NYSE: DSW), a leading branded footwear and accessories retailer, announced financial results for the thirteen week period ended April 29, 2017, compared to the thirteen week period ended April 30, 2016.

Roger Rawlins, Chief Executive Officer stated, "First quarter sales were challenging, but trends improved during the quarter with comps turning positive in April. As expected, planned clearance activity and the addition of Ebuys drove lower gross margin and operating income. The investments we have made in our digital capabilities, such as our redesigned website and mobile app, drove robust growth in digital demand. We are intently focused on driving sequential top line improvements through key product and customer initiatives while balancing strategic investments with disciplined expense management."

First Quarter Operating Results

  • Sales increased 1.4% to $691.1 million, including $22.3 million of revenues from Ebuys.
  • Comparable sales decreased 3.0% compared to last year's 1.6% decrease.
  • Reported gross profit decreased by 180 bps, driven by planned clearance activity and the addition of Ebuys, offset by disciplined markdown management and favorable sourcing costs.
  • Reported operating expenses improved by 40 bps, due to tighter expense management.
  • Reported net income was $23.0 million, or $0.28 per diluted share, including pre-tax charges totaling $4.1 million, or $0.04 per share, related to the acquisition of Ebuys, restructuring costs and foreign exchange loss assumed in the process of pre-funding the upcoming Town Shoes acquisition.
  • Adjusted net income was $25.7 million, or $0.32 per diluted share.

First Quarter Balance Sheet Highlights

  • Cash, short-term and long-term investments totaled $254 million compared to $238 million in the first quarter last year.
  • Inventories were $575 million compared to $563 million for the same period last year. On a cost per square foot basis, inventories declined by 2.6%.

Fiscal 2017 Annual Outlook

The Company reiterated its full year outlook for adjusted earnings in the range of $1.45 to $1.55 per diluted share.

Webcast and Conference Call

The Company is hosting a conference call today at 8:30 am Eastern Time. The conference will be broadcast live over the internet and can be accessed at http://dswinc.investorroom.com. For those unable to listen to the live broadcast, an archived version will be available at the same location until May 30, 2017. The teleconference will be available on replay and can be accessed by dialing 1-877-344-7529 and entering passcode 10107186.

About DSW Inc.

DSW Inc. is a leading branded footwear and accessories retailer that offers a wide selection of brand name and designer dress, casual and athletic footwear and accessories for women, men and kids. As of May 23, 2017, DSW operates 510 stores in 43 states, the District of Columbia and Puerto Rico, and operates an e-commerce site, http://www.dsw.com, and a mobile website, http://m.dsw.com. DSW also supplies footwear to 377 leased locations in the United States under the Affiliated Business Group. DSW also owns Ebuys, Inc., a leading off price footwear and accessories retailer operating in digital marketplaces in North America, Europe, Australia and Asia. For store locations and additional information about DSW, visit http://www.dswinc.com. Follow DSW on Twitter at http://twitter.com/DSWShoeLovers and Facebook at http://www.facebook.com/DSW.

 

 

DSW INC.

FIRST QUARTER 2017 SEGMENT RESULTS

(unaudited)



Net sales by segment




Thirteen weeks ended



April 29, 2017


April 30, 2016


% change



(in thousands)

DSW segment


$

624,787


$

623,032


0.3%

ABG segment


43,988


43,139


2.0%

Other


22,327


15,096


47.9%

DSW Inc.


$

691,102


$

681,267


1.4%











Comparable sales change by reportable segment










Thirteen weeks ended





April 29, 2017


April 30, 2016



DSW segment


(3.1)%


(1.4)%



ABG segment


(1.7)%


(3.4)%



DSW Inc.


(3.0)%


(1.6)%




Stores and square footage data








April 29, 2017


April 30, 2016



DSW stores open, end of period


508


478



ABG stores open, end of period


379


385



DSW stores total square footage (in thousands)


10,449


9,955




Reported gross profit by segment






Thirteen weeks ended





April 29, 2017


April 30, 2016



DSW segment merchandise margin


42.8%


43.9%



Store occupancy expense


(10.9)


(10.9)



Distribution and fulfillment expenses


(2.3)


(2.3)



DSW segment gross profit


29.6%


30.7%



ABG segment merchandise margin


45.7%


46.6%



Store occupancy expense


(20.7)


(20.4)



Distribution and fulfillment expenses


(1.1)


(1.1)



ABG segment gross profit


23.9%


25.1%



Other segment merchandise margin


30.2%


34.6%



Marketplace fees


(12.4)


(11.0)



Fulfillment expenses


(17.4)


(9.5)



Other segment gross profit(1)


0.4%


14.1%



Total company gross profit


28.2%


30.0%




(1)  Other segment gross profit for the three months ended April 30, 2016 includes $0.2 million related to the step-up of the value of Ebuys' inventory.



 

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

Any statements in this release that are not historical facts, including the statements made in our "Fiscal 2017 Annual Outlook," are forward-looking statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on the Company's current expectations and involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. These factors include, but are not limited to: our success in growing our store base and digital demand; our ability to protect our reputation; maintaining strong relationships with our vendors; our ability to anticipate and respond to fashion trends; our success in meeting customer expectations; disruption of our distribution and/or fulfillment operations; continuation of agreements with and our reliance on the financial condition of our affiliated business and international partners; our ability to successfully integrate Ebuys, Inc.; fluctuation of our comparable sales and quarterly financial performance; risks related to our information systems and data; failure to retain our key executives or attract qualified new personnel; our competitiveness with respect to style, price, brand availability and customer service; our reliance on our DSW Rewards program and marketing to drive traffic, sales and customer loyalty; uncertain general economic conditions; our reliance on foreign sources for merchandise and risks inherent to international trade; risks related to our handling of sensitive and confidential data; risks related to leases of our properties; risks related to prior and current acquisitions; risks related to future legislation, regulatory reform or policy changes; foreign currency exchange risk; and risks related to holdings of cash and investments. Additional factors that could cause our actual results to differ materially from our expectations are described in the Company's latest annual or quarterly report, as filed with the Securities and Exchange Commission. All forward-looking statements speak only as of the time when made. The Company undertakes no obligation to revise the forward-looking statements included in this press release to reflect any future events or circumstances.

 

 

DSW INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited and in thousands)



April 29, 2017


January 28, 2017


April 30, 2016

Assets






Cash and cash equivalents

$

79,673



$

110,657



$

59,462


Short-term investments

174,193



98,530



97,612


Accounts receivable, net

16,865



19,006



15,297


Inventories

575,171



499,995



563,317


Prepaid expenses and other current assets

36,230



31,078



32,166


Total current assets

882,132



759,266



767,854


Property and equipment, net

374,320



375,251



373,979


Long-term investments



77,904



80,456


Goodwill

79,689



79,689



80,684


Deferred income taxes

16,287



14,934



21,217


Equity investment in Town Shoes

13,705



15,830



18,389


Note receivable from Town Shoes

52,928



53,121



50,618


Intangible assets

34,044



35,108



40,614


Other assets

18,359



17,373



23,179


Total assets

$

1,471,464



$

1,428,476



$

1,456,990


Liabilities and shareholders' equity






Accounts payable

$

213,611



$

186,271



$

197,519


Accrued expenses

135,758



130,334



125,766


Total current liabilities

349,369



316,605



323,285


Non-current liabilities

176,807



174,383



200,138


Total shareholders' equity

945,288



937,488



933,567


Total liabilities and shareholders' equity

$

1,471,464



$

1,428,476



$

1,456,990


 

 

DSW INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited and in thousands, except per share amounts)



Thirteen weeks ended


April 29, 2017


April 30, 2016

Net sales

$

691,102



$

681,267


Cost of sales

(495,873)



(476,910)


   Gross profit

195,229



204,357


Operating expenses

(153,264)



(154,196)


Change in fair value of contingent consideration liability

(1,084)



(1,445)


   Operating profit

40,881



48,716


Interest income, net

561



521


Non-operating income (expense)

(1,504)



164


  Pre-tax income from continuing operations

39,938



49,401


Income tax provision

(15,665)



(19,078)


Loss from Town Shoes

(1,306)



(309)


   Net income

$

22,967



$

30,014


Diluted earnings per share

$

0.28



$

0.36


Weighted average diluted shares

80,732



82,705


 

 

DSW INC.

NON-GAAP RECONCILIATION

(unaudited and in thousands, except per share amounts)



Thirteen weeks ended


April 29, 2017


April 30, 2016

Reported net income

$

22,967



$

30,014


Adjustments:




Inventory step-up costs(1)



160


Transaction costs(2)



2,157


Amortization of intangible assets(2)

1,018



732


Restructuring expenses(4)

537




Change in fair value of contingent consideration liability(3)

1,084



1,445


Foreign currency loss(5)

1,462




Total adjustments, pre-tax

4,101



4,494


Tax effect of adjustments

(1,404)



(1,749)


Total adjustments, after tax

2,697



2,745


Adjusted net income

$

25,664



$

32,759


Reported diluted earnings per share

$

0.28



$

0.36


Adjusted diluted earnings per share

$

0.32



$

0.40




(1)

Related to the step-up of the value of Ebuys' inventory, which is recorded in gross profit.



(2)

Related to costs associated with the acquisition of Ebuys and the amortization expense associated with $38.7 million of acquired intangibles, which are recorded within operating expenses.



(3)

The Company agreed to pay additional amounts to Ebuys contingent upon achievement of certain negotiated goals. The Company has recognized a liability for this contingent consideration based on the estimated fair value at the date of acquisition with any differences between the acquisition-date fair value and the ultimate settlement of the obligations being recognized as an adjustment to income from operations.



(4)

Relates to the Company's expense management initiative as recorded within operating expenses.



(5)

Relates to foreign exchange loss on Canadian dollar investments related to the funding of our upcoming Town Shoes acquisition.

 

Non-GAAP Measures

In addition to earnings per share and net income determined in accordance with accounting principles generally accepted in the United States ("GAAP"), for purposes of evaluating operating performance, the Company uses adjusted earnings per share and net income, which adjust for the effects of acquisition costs and the amortization expense of acquired intangible assets related to the Ebuys acquisition, restructuring costs related to the Company's expense management initiative, as well as foreign currency loss on Canadian dollar investments. The unaudited reconciliation of adjusted results should not be construed as an alternative to the reported results determined in accordance with GAAP. These financial measures are not based on any standardized methodology and are not necessarily comparable to similar measures presented by other companies. The Company believes that this non-GAAP information is useful as an additional means for investors to evaluate the Company's operating performance, when reviewed in conjunction with the Company's GAAP statements. These amounts are not determined in accordance with GAAP and therefore should not be used exclusively in evaluating the Company's business and operations.

 

SOURCE DSW Inc.

For further information: Christina Cheng, 1-855-893-5691, investorrelations@dswinc.com

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