DESIGNER BRANDS INC COLUMBUS, Ohio, Aug. 26, 2014 /PRNewswire/ -- DSW Inc. (NYSE: DSW), a leading branded footwear and accessories retailer, announced financial results for the thirteen week period ended August 2, 2014, which compare to the thirteen week period ended August 3, 2013.
Mike MacDonald, President and Chief Executive Officer stated, "In the quarter we accomplished our goal of achieving improvement in the underlying sales trends and eliminating any inventory imbalances. All major categories recorded improved sales performance in the second quarter compared to the first quarter. In addition, we were encouraged by the sequential improvement in sales trends as the quarter progressed. The actions we took to balance inventories created margin pressure but inventories at the end of the quarter were current and below the prior year on a cost per square foot basis.
"We continued to make progress in our omni-channel initiative. The changes we are making are fundamental to the way we serve our customers. They will enable DSW to respond to the rapidly changing customer shopping patterns and maintain our position of strength in the footwear industry," Mr. MacDonald added.
Second Quarter Operating Results
-- Reported sales increased 4.5% to $587 million compared to last year's
second quarter sales of $562 million.
-- Adjusted sales increased 5.2% to $587 million compared to last year's
second quarter sales of $558 million, which excluded sales from the
Company's luxury test. For the thirteen week period ended August 2,
2014, comparable sales increased by 0.8%. This follows an increase of
4.4% during the thirteen week period ended August 3, 2013.
-- Reported net income was $34.3 million, or $0.38 per diluted share on 91
million weighted average shares outstanding, which includes an after-tax
gain related to income for RVI. This compares to Reported net income in
the second quarter of 2013 of $33.7 million, or $0.37 per diluted share,
which included a net after-tax loss of $1.5 million, or $0.02 per share,
from our luxury test, and a net charge of $9.3 million, or $0.10 per
share, from the termination of the pension plan assumed in conjunction
with the RVI merger.
-- Adjusted net income was $33.6 million, or $0.37 per diluted share on 91
million weighted average shares outstanding. This compares to net
income, adjusted for the results of our luxury test and legacy charges
from RVI, for the same period last year of $44.6 million, or $0.49 per
diluted share, on 92 million weighted average shares outstanding.
Six Months Ended August 2, 2014 Operating Results
-- Reported sales increased 1.9% to $1.19 billion compared to last year's
sales of $1.16 billion.
-- Adjusted sales increased 2.7% to $1.19 billion compared to last year's
sales of $1.15 billion, which excluded sales from the Company's luxury
test.
-- For the twenty-six week period ended August 2, 2014, comparable sales
decreased by 1.5%. This follows an increase of 0.8% during the
twenty-six week period ended August 3, 2013.
-- Reported net income was $73.0 million, or $0.80 per diluted share, on 92
million weighted average shares outstanding. This compares to Reported
net income in the same period last year of $68.2 million, or $0.74 per
diluted share, which included a net after-tax loss of $12.9 million, or
$0.14 per share, from our luxury test, and a net after-tax charge of
$9.3 million, or $0.10 per share, from the termination of the pension
plan assumed in conjunction with the RVI merger.
-- Adjusted net income was $72.2 million, or $0.79 per diluted share, on 92
million weighted average shares outstanding. This also compares to net
income, adjusted for the net loss from our luxury test and legacy
charges from RVI, for the same period last year of $90.4 million, or
$0.99 per diluted share, on 92 million weighted shares outstanding.
Second Quarter Balance Sheet Highlights
-- Cash, short term and long term investments totaled $465 million at
quarter end compared to $500 million at the end of the second quarter
last year.
-- Inventories were at $415 million compared to $405 million during the
second quarter last year. On a cost per square foot basis, DSW segment
inventories decreased by 3.3% at the end of quarter, excluding inventory
for our luxury test last year.
-- The Company repurchased approximately 2 million shares for $55 million
under its $100 million authorized share buyback plan, with $43 million
of its current authorization remaining.
Regular Dividend
On August 19, 2014, DSW's Board of Directors approved a quarterly cash dividend payment of $0.1875 per share. The dividend will be paid on September 30, 2014 to shareholders of record at the close of business on September 19, 2014.
Fiscal 2014 Annual Outlook
For the fifty-two week fiscal year ending January 31, 2015, the Company expects Adjusted earnings per share to range from $1.50 to $1.65 per share. This assumes flattish comps and total revenue growth in the mid single digit range. This guidance includes omni-channel related expenses of $10 million, or approximately $0.07 per share, a tax rate of 39% and diluted shares outstanding of 91 million.
Webcast and Conference Call
To hear the Company's live earnings conference call, log on to http://dswinc.investorroom.com today at 8:30 AM Eastern, or call 1-888-317-6003 in the U.S. or 412-317-6061 outside the U.S (conference number 4655137) approximately ten minutes prior to the start of the call. A telephone replay of this call will be available until 9:00 a.m. Eastern Time on September 5, 2014 and can be accessed by dialing 1-877-344-7529 in the U.S. or 1-412-317-0088 outside the U.S. (conference number 10051255). An audio replay of the conference call, as well as additional financial information, will also be available at http://dswinc.investorroom.com.
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 26, 2014, DSW operates 410 stores in 42 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 362 leased locations in the United States and operates two Yellow Box stores under the Affiliated Business Group. For store locations and additional information about DSW, visit http://www.dswinc.com. Follow DSW on Twitter at http://twitter.com/DSWShoeLovers and "like" DSW on Facebook at http://www.facebook.com/DSW.
DSW INC.
Q2 2014 SEGMENT RESULTS
Net sales by reportable segment
Thirteen weeks ended Twenty-six weeks ended
-------------------- ----------------------
August 2, August 3, % change August 2, August 3, % change
2014 2013 2014 2013
---- ---- ---- ----
(in thousands) (in thousands)
DSW $553,814 $530,921 4.3% $1,112,680 $1,093,845 1.7%
Affiliated Business Group 33,282 31,142 6.9% 73,363 69,580 5.4%
------ ------ ------ ------
Total DSW Inc. $587,096 $562,063 4.5% $1,186,043 $1,163,425 1.9%
Less: Luxury test sales - 3,822 - 9,077
--- --- -----
Total Adjusted DSW Inc. sales $587,096 $558,241 5.2% $1,186,043 $1,154,348 2.7%
======== ======== ========== ==========
Comparable sales change by reportable segment (excludes luxury)
Thirteen weeks ended Twenty-six weeks ended
-------------------- ----------------------
August 3, 2013 August 2, 2014 August 3, 2013
August 2, 2014
--------------
DSW 0.8% 4.4% (1.7)% 0.8%
Affiliated Business Group 2.5% 4.3% 1.6% 0.9%
Total DSW Inc. 0.8% 4.4% (1.5)% 0.8%
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 2014 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 opening and operating new stores on a timely and profitable basis; our success in executing our omni-channel initiative; maintaining strong relationships with our vendors; our ability to anticipate and respond to fashion trends; disruption of our distribution and fulfillment operations; continuation of supply agreements and the financial condition of our affiliated business partners; 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 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 electronic processing of sensitive and confidential customer and associate data; risks related to leases of our properties; risks related to the realization of benefits related to our acquisition of an equity interest in Town Shoes, a leading branded shoe retailer in Canada; foreign currency exchange risk; risks related to our cash and investments; and the realization of risks related to the merger with Retail Ventures, Inc., including risks related to pre-merger RVI guarantees of certain Filene's Basement leases. 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 SEC. 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
(In thousands)
(Unaudited)
August 2, 2014 February 1, 2014 August 3, 2013
-------------- ---------------- --------------
Assets
Cash and equivalents $87,406 $112,021 $68,929
Short-term investments 151,647 224,098 200,238
Accounts receivable, net 27,868 26,646 21,742
Inventories 414,988 397,768 404,512
Prepaid expenses and
other current assets 52,515 34,101 39,116
Deferred income taxes 22,331 18,130 42,368
------ ------ ------
Total current assets 756,755 812,764 776,905
------- ------- -------
Property and equipment,
net 331,269 318,620 310,374
Long-term investments 225,972 243,188 230,599
Goodwill 25,899 25,899 25,899
Deferred income taxes 12,466 11,587 14,366
Investment in Town Shoes 24,788 - -
Note receivable from
Town Shoes 47,755 - -
Other assets 8,863 9,186 8,030
----- ----- -----
Total assets $1,433,767 $1,421,244 $1,366,173
========== ========== ==========
Liabilities and shareholders' equity
Accounts payable $192,999 $168,705 $176,625
Accrued expenses 107,123 115,697 127,151
------- ------- -------
Total current
liabilities 300,122 284,402 303,776
------- ------- -------
Non-current liabilities 142,479 138,298 131,657
Total shareholders'
equity 991,166 998,544 930,740
------- ------- -------
Total liabilities and
shareholders' equity $1,433,767 $1,421,244 $1,366,173
========== ========== ==========
DSW INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Thirteen weeks ended Twenty-six weeks ended
-------------------- ----------------------
August 2, 2014 August 3, 2013 August 2, 2014 August 3, 2013
-------------- -------------- -------------- --------------
Net sales $587,096 $562,063 $1,186,043 $1,163,425
Cost of sales (415,192) (378,621) (826,134) (796,986)
-------- -------- -------- --------
Gross profit 171,904 183,442 359,909 366,439
Operating expenses (118,594) (129,461) (245,348) (258,172)
--------
Operating profit 53,310 53,981 114,561 108,267
Interest income, net 635 481 1,593 821
--- --- ----- ---
Income before income taxes and income from Town Shoes 53,945 54,462 116,154 109,088
Income tax provision (20,824) (20,742) (44,394) (40,853)
Income from Town Shoes 849 - 849 -
--- --- --- ---
Income from continuing operations 33,970 33,720 72,609 68,235
Total income from discontinued operations, net of tax 358 - 358 -
--- --- --- ---
Net income $34,328 $33,720 $72,967 $68,235
======= ======= ======= =======
Diluted shares used in per share calculations: 91,126 91,796 91,618 91,678
Diluted earnings per share:
Diluted earnings per share from continuing operations $0.37 $0.37 $0.79 $0.74
Diluted earnings per share from discontinued operations 0.00 - 0.00 -
Diluted earnings per share $0.38 $0.37 $0.80 $0.74
DSW INC.
RECONCILIATION OF ADJUSTED RESULTS
(In thousands, except per share amounts)
(Unaudited)
For thirteen weeks and twenty six weeks ended August 2, 2014, the table below presents the adjustments to reported results:
Thirteen weeks ended Twenty-six weeks ended
August 2, 2014 August 2, 2014
-------------- --------------
Net income Diluted Net income Diluted
earnings per earnings per
share share
---------- ------------ ---------- ------------
Reported Measure $34,328 $0.38 $72,967 $0.80
Less: RVI operating expenses
RVI operating expenses, net of tax 377 (1) 0.00 377 (1) 0.00
Total income from discontinued operations, net of tax 358 (1) 0.00 358 (1) 0.00
Adjusted Measure $33,593 $0.37 $72,232 $0.79
======= ===== ======= =====
(1) The adjustments for the current period relate to RVI's recovery from the Filene's Basement debtors' estates.
The table below presents the adjustments for the prior period:
Thirteen weeks ended August 3, 2013
-----------------------------------
Net sales Cost of Sales Gross profit Operating expenses Net income Diluted
earnings per
share
--------- ------------- ------------ ------------------ ---------- ------------
Reported Measure $562,063 $(378,621) $183,442 $(129,461) $33,720 $0.37
Less: luxury test
Net sales 3,822
Cost of sales (5,733)
Gross profit (loss), including (1,911) (554) (1,532) (0.02)
valuation reserves on remaining
inventory & operating expenses
Less: RVI pension and other RVI related expenses (14,741) (9,309) (0.10)
Adjusted Measure $558,241 $(372,888) $185,353 $(114,166) $44,561 $0.49
======== ========= ======== ========= ======= =====
Twenty-six weeks ended August 3, 2013
-------------------------------------
Net sales Cost of Sales Gross profit Operating expenses Net income Diluted
earnings per
share
--------- ------------- ------------ ------------------ ---------- ------------
Reported Measure $1,163,425 $(796,986) $366,439 $(258,172) $68,235 $0.74
Less: luxury test
Net sales 9,077
Cost of sales (27,495)
Gross profit (loss), including (18,418) (2,442) (12,887) (0.14)
valuation reserves on remaining
inventory & operating expenses
Less: RVI pension and other RVI related expenses (14,741) (9,309) (0.10)
Adjusted Measure $1,154,348 $(769,491) $384,857 $(240,989) $90,431 $0.99
========== ========= ======== ========= ======= =====
Non-GAAP Measures
The unaudited reconciliation of adjusted results should not be construed as an alternative to the reported results determined in accordance with generally accepted accounting principles ("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.
