DESIGNER BRANDS INC 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 For those unable to listen to the live broadcast, an archived version will be available at the same location until May 30, 2017.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.
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SOURCE DSW Inc.
