COLUMBUS, Ohio, Aug. 22, 2017 /PRNewswire/ -- DSW Inc.
(NYSE: DSW), a leading branded footwear and accessories retailer,
announced financial results for the three months ended July 29, 2017, compared to the three months ended
July 30, 2016.
Roger Rawlins, Chief Executive
Officer stated, "We were pleased to report our first positive comp
quarter since 2015. This resulted in a healthy increase in regular
priced sales and improvements across all selling metrics. With our
mission to inspire self-expression, these results demonstrate how
our strategic direction is resonating with the DSW customer."
"We are deepening our customer connection with unique product
and meaningful experiences that will define Designer Shoe Warehouse
as the trusted authority for all things footwear. The current
retail consolidation provides significant opportunity to acquire
market share, and in the next 12 months, we will unveil several
exciting new initiatives that will inspire emotional loyalty with
the DSW brand. At the same time, we are building the infrastructure
to mobilize inventory across all of our brands and enable us to
better serve our customers. We are confident these initiatives will
grow sales, cash flow and profitability long-term," Mr. Rawlins
concluded.
Second Quarter Operating Results
- Sales increased 3.3% to $680.4
million.
- Comparable sales increased 0.6% compared to last year's 1.2%
decrease.
- Reported gross profit increased by 50 bps, driven by lower
markdowns and favorable sourcing, partially offset by inventory
reserves and distribution costs related to the ongoing integration
of Ebuys.
- Reported operating expenses as a percent of sales improved by
10 bps, with higher selling and technology expenses offset by lower
overhead costs.
- Reported net income was $28.6
million, or $0.35 per diluted
share, including pre-tax charges totaling $3.2 million, or $0.03 per diluted share, related to the
acquisition of Ebuys, restructuring costs and foreign exchange
loss.
- Adjusted net income was $30.6
million, or $0.38 per diluted
share.
Six Months Ended July 29, 2017
Operating Results
- Sales increased 2.3% to $1.4
billion.
- Comparable sales decreased 1.3% compared to last year's 1.4%
decrease.
- Reported gross profit decreased by 60 bps, driven by
incremental clearance activity and inventory reserves and
distribution costs related to the ongoing integration of
Ebuys.
- Reported operating expenses as a percent of sales improved by
30 bps due to tighter expense management.
- Reported net income was $51.6
million, or $0.64 per diluted
share, including pre-tax charges totaling $7.3 million, or $0.06 per diluted share, related to the
acquisition of Ebuys, restructuring costs and foreign exchange
loss.
- Adjusted net income was $56.3
million, or $0.70 per diluted
share.
Second Quarter Balance Sheet Highlights
- Cash and investments totaled $271
million compared to $244
million in the second quarter last year.
- The Board of Directors approved a new $500 million share repurchase authorization, in
addition to the Company's remaining $33
million in its current authorization. Since 2013, the
Company has returned to shareholders close to $600 million in dividends and share
repurchases.
- Inventories were $527 million
compared to $556 million for the same
period last year. Excluding Ebuys and Gordmans, inventories
decreased 10% on a cost per square foot basis.
Regular Dividend
DSW Inc.'s Board of Directors declared a quarterly cash dividend
of $0.20 per share. The dividend will be paid on
September 29, 2017 to shareholders of record at the close of
business on September 19, 2017.
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 August 29, 2017. The
teleconference will be available on replay and can be accessed by
dialing 1-877-344-7529 and entering passcode 10111383.
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 August 22, 2017, DSW operates 511 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 350
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.
|
SEGMENT
RESULTS
|
(unaudited)
|
|
Net sales by
segment
|
|
Three months
ended
|
|
Six months
ended
|
|
July 29,
2017
|
|
July 30,
2016
|
|
%
change
|
|
July 29,
2017
|
|
July 30,
2016
|
|
%
change
|
|
(dollars in
thousands)
|
DSW
segment
|
$
|
628,379
|
|
|
$
|
603,927
|
|
|
4.0%
|
|
|
$
|
1,253,166
|
|
|
$
|
1,226,959
|
|
|
2.1%
|
|
ABG
segment
|
31,330
|
|
|
35,446
|
|
|
(11.6)%
|
|
|
75,318
|
|
|
78,585
|
|
|
(4.2)%
|
|
Other
|
20,700
|
|
|
19,571
|
|
|
5.8%
|
|
|
43,027
|
|
|
34,667
|
|
|
24.1%
|
|
DSW Inc.
|
$
|
680,409
|
|
|
$
|
658,944
|
|
|
3.3%
|
|
|
$
|
1,371,511
|
|
|
$
|
1,340,211
|
|
|
2.3%
|
|
Comparable sales
change by reportable segment
|
|
Three months
ended
|
|
Six months
ended
|
|
July 29,
2017
|
|
July 30,
2016
|
|
July 29,
2017
|
|
July 30,
2016
|
DSW
segment
|
0.6%
|
|
(1.2)%
|
|
(1.3)%
|
|
(1.3)%
|
ABG
segment
|
(0.1)%
|
|
(1.0)%
|
|
(1.0)%
|
|
(2.3)%
|
DSW Inc.
|
0.6%
|
|
(1.2)%
|
|
(1.3)%
|
|
(1.4)%
|
Stores and square
footage data
|
|
July 29,
2017
|
|
July 30,
2016
|
DSW stores open, end
of period
|
510
|
|
|
480
|
|
ABG stores open, end
of period
|
349
|
|
|
385
|
|
DSW stores total
square footage (in thousands)
|
10,483
|
|
|
9,978
|
|
Reported gross
profit by segment
|
|
Three months
ended
|
|
Six months
ended
|
|
July 29,
2017
|
|
July 30,
2016
|
|
July 29,
2017
|
|
July 30,
2016
|
DSW segment
merchandise margin
|
44.1
|
%
|
|
43.1
|
%
|
|
43.5
|
%
|
|
43.5
|
%
|
Store occupancy
expense
|
(11.4)
|
|
|
(11.5)
|
|
|
(11.2)
|
|
|
(11.2)
|
|
Distribution and
fulfillment expenses
|
(2.1)
|
|
|
(2.1)
|
|
|
(2.2)
|
|
|
(2.2)
|
|
DSW segment gross
profit
|
30.6
|
%
|
|
29.5
|
%
|
|
30.1
|
%
|
|
30.1
|
%
|
ABG segment
merchandise margin
|
42.3
|
%
|
|
41.7
|
%
|
|
44.3
|
%
|
|
44.3
|
%
|
Store occupancy
expense
|
(20.6)
|
|
|
(20.2)
|
|
|
(20.7)
|
|
|
(20.3)
|
|
Distribution and
fulfillment expenses
|
(1.1)
|
|
|
(1.1)
|
|
|
(1.1)
|
|
|
(1.1)
|
|
ABG segment gross
profit
|
20.6
|
%
|
|
20.4
|
%
|
|
22.5
|
%
|
|
22.9
|
%
|
Other segment
merchandise margin
|
19.8
|
%
|
|
34.0
|
%
|
|
25.1
|
%
|
|
34.2
|
%
|
Marketplace
fees
|
(11.2)
|
|
|
(12.0)
|
|
|
(11.8)
|
|
|
(11.5)
|
|
Fulfillment
expenses
|
(18.3)
|
|
|
(13.0)
|
|
|
(17.8)
|
|
|
(11.5)
|
|
Other segment gross
profit(1)
|
(9.7)
|
%
|
|
9.0
|
%
|
|
(4.5)
|
%
|
|
11.2
|
%
|
Total Company gross
profit
|
28.9
|
%
|
|
28.4
|
%
|
|
28.6
|
%
|
|
29.2
|
%
|
|
(1) Other
segment gross profit for the three and six months ended
July 30, 2016 includes $0.5 million and $0.7 million,
respectively, 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, consumer preferences and changing customer expectations;
risks related to the loss or 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 the loss or disruption of
our information systems and data; our ability to prevent breaches
of our information security and the compromise of sensitive and
confidential 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 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 and access to liquidity. 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)
|
|
|
July 29,
2017
|
|
January 28,
2017
|
|
July 30,
2016
|
Assets
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
89,305
|
|
|
$
|
110,657
|
|
|
$
|
62,324
|
|
Short-term
investments
|
182,062
|
|
|
98,530
|
|
|
103,467
|
|
Accounts receivable,
net
|
17,742
|
|
|
19,006
|
|
|
18,929
|
|
Inventories
|
527,305
|
|
|
499,995
|
|
|
556,183
|
|
Prepaid expenses and
other current assets
|
38,472
|
|
|
31,078
|
|
|
30,052
|
|
Total current
assets
|
854,886
|
|
|
759,266
|
|
|
770,955
|
|
Property and
equipment, net
|
364,552
|
|
|
375,251
|
|
|
379,643
|
|
Long-term
investments
|
—
|
|
|
77,904
|
|
|
77,901
|
|
Goodwill
|
79,689
|
|
|
79,689
|
|
|
81,043
|
|
Deferred income
taxes
|
18,765
|
|
|
14,934
|
|
|
20,690
|
|
Equity investment in
Town Shoes
|
10,350
|
|
|
15,830
|
|
|
17,261
|
|
Note receivable from
Town Shoes
|
60,094
|
|
|
53,121
|
|
|
50,200
|
|
Intangible
assets
|
33,065
|
|
|
35,108
|
|
|
39,316
|
|
Other
assets
|
18,144
|
|
|
17,373
|
|
|
21,966
|
|
Total
assets
|
$
|
1,439,545
|
|
|
$
|
1,428,476
|
|
|
$
|
1,458,975
|
|
Liabilities and
shareholders' equity
|
|
|
|
|
|
Accounts
payable
|
$
|
165,377
|
|
|
$
|
186,271
|
|
|
$
|
199,240
|
|
Accrued
expenses
|
121,934
|
|
|
130,334
|
|
|
115,192
|
|
Total current
liabilities
|
287,311
|
|
|
316,605
|
|
|
314,432
|
|
Non-current
liabilities
|
178,955
|
|
|
174,383
|
|
|
203,173
|
|
Total shareholders'
equity
|
973,279
|
|
|
937,488
|
|
|
941,370
|
|
Total liabilities and
shareholders' equity
|
$
|
1,439,545
|
|
|
$
|
1,428,476
|
|
|
$
|
1,458,975
|
|
DSW
INC.
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(unaudited and in
thousands, except per share amounts)
|
|
|
Three months
ended
|
|
Six months
ended
|
|
July 29,
2017
|
|
July 30,
2016
|
|
July 29,
2017
|
|
July 30,
2016
|
Net sales
|
$
|
680,409
|
|
|
$
|
658,944
|
|
|
$
|
1,371,511
|
|
|
$
|
1,340,211
|
|
Cost of
sales
|
(483,437)
|
|
|
(472,083)
|
|
|
(979,310)
|
|
|
(948,993)
|
|
Operating
expenses
|
(149,057)
|
|
|
(145,088)
|
|
|
(302,321)
|
|
|
(299,284)
|
|
Change in fair value of
contingent consideration liability
|
(1,168)
|
|
|
(2,166)
|
|
|
(2,252)
|
|
|
(3,611)
|
|
Operating
profit
|
46,747
|
|
|
39,607
|
|
|
87,628
|
|
|
88,323
|
|
Interest income,
net
|
661
|
|
|
623
|
|
|
1,222
|
|
|
1,144
|
|
Non-operating income
(expense)
|
(679)
|
|
|
100
|
|
|
(2,183)
|
|
|
264
|
|
Income before income
taxes and income (loss) from Town
Shoes
|
46,729
|
|
|
40,330
|
|
|
86,667
|
|
|
89,731
|
|
Income tax
provision
|
(18,349)
|
|
|
(15,716)
|
|
|
(34,014)
|
|
|
(34,794)
|
|
Income (loss) from
Town Shoes
|
219
|
|
|
418
|
|
|
(1,087)
|
|
|
109
|
|
Net income
|
$
|
28,599
|
|
|
$
|
25,032
|
|
|
$
|
51,566
|
|
|
$
|
55,046
|
|
Diluted earnings per
share
|
$
|
0.35
|
|
|
$
|
0.30
|
|
|
$
|
0.64
|
|
|
$
|
0.67
|
|
Weighted average
diluted shares
|
80,714
|
|
|
82,655
|
|
|
80,729
|
|
|
82,691
|
|
DSW
INC.
|
NON-GAAP
RECONCILIATION
|
(unaudited and in
thousands, except per share amounts)
|
|
|
Three months
ended
|
|
Six months
ended
|
|
July 29,
2017
|
|
July 30,
2016
|
|
July 29,
2017
|
|
July 30,
2016
|
Reported net
income
|
$
|
28,599
|
|
|
$
|
25,032
|
|
|
$
|
51,566
|
|
|
$
|
55,046
|
|
Adjustments:
|
|
|
|
|
|
|
|
Inventory step-up
costs(1)
|
—
|
|
|
532
|
|
|
—
|
|
|
692
|
|
Transaction
costs(2)
|
—
|
|
|
127
|
|
|
—
|
|
|
2,284
|
|
Amortization of
intangible assets(2)
|
1,018
|
|
|
1,098
|
|
|
2,036
|
|
|
1,831
|
|
Restructuring
expenses(3)
|
292
|
|
|
2,727
|
|
|
829
|
|
|
2,727
|
|
Change in fair value
of contingent consideration
liability(4)
|
1,168
|
|
|
2,167
|
|
|
2,252
|
|
|
3,611
|
|
Foreign currency
loss(5)
|
699
|
|
|
—
|
|
|
2,161
|
|
|
—
|
|
Total adjustments,
pre-tax
|
3,177
|
|
|
6,651
|
|
|
7,278
|
|
|
11,145
|
|
Tax effect of
adjustments
|
(1,138)
|
|
|
(2,589)
|
|
|
(2,542)
|
|
|
(4,339)
|
|
Total adjustments,
after tax
|
2,039
|
|
|
4,062
|
|
|
4,736
|
|
|
6,806
|
|
Adjusted net
income
|
$
|
30,638
|
|
|
$
|
29,094
|
|
|
$
|
56,302
|
|
|
$
|
61,852
|
|
Reported diluted
earnings per share
|
$
|
0.35
|
|
|
$
|
0.30
|
|
|
$
|
0.64
|
|
|
$
|
0.67
|
|
Adjusted diluted
earnings per share
|
$
|
0.38
|
|
|
$
|
0.35
|
|
|
$
|
0.70
|
|
|
$
|
0.75
|
|
|
(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) Related to
the Company's expense management initiative as recorded within
operating expenses.
|
|
(4) 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 recognized as an adjustment to income from
operations.
|
|
(5)
Related 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.
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content:http://www.prnewswire.com/news-releases/dsw-inc-reports-second-quarter-2017-financial-results-300507465.html
SOURCE DSW Inc.