DESIGNER BRANDS INC 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 46,729 40,330 86,667 89,731
Shoes
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 1,168 2,167 2,252 3,611
liability(4)
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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SOURCE DSW Inc.
