COLUMBUS, Ohio, Aug. 28,
2018 /PRNewswire/ -- DSW Inc. (NYSE: DSW), a leading branded
footwear and accessories retailer, announced financial results for
the three months ended August 4,
2018, compared to the three months ended July 29, 2017.
Chief Executive Officer, Roger
Rawlins stated, "We are thrilled to report record sales and
earnings results this quarter as our merchandise strategy and
marketing investment fueled strong customer engagement, traffic and
transaction activity, resulting in a 10% comp. The strong results
we've had this spring demonstrate we're successfully activating
customers and increasing lifetime value. I'm proud of the progress
we're making and with our updated earnings outlook, we look forward
to sales reaching $3 billion for the
first time in DSW's history."
"After completing our strategic assessment of the Canadian
marketplace, we have decided to close its smallest retail banner
and focus on the three largest family footwear banners which we
believe have the most potential for future growth and
profitability," Mr. Rawlins added.
Second Quarter Operating Results
- Total revenue increased by 16.4% to $795
million, including $72.5
million from the consolidation of its Canadian retail
business.
- Comparable sales increased 9.7% for the same 13-week periods
ended August 4, 2018 and August 5, 2017. Comparable sales exclude results
from its Canada Retail segment.
- Reported gross profit, as a percent of sales, increased by 280
bps, due to favorable merchandise margin and occupancy
leverage.
- Reported operating expenses, as a percent of sales, increased
by 220 bps, driven by marketing investments, acquisition-related
costs and restructuring expenses.
Six Months Operating Results
- Total revenue increased 9.6% to $1.5
billion, including $72.5
million from the consolidation of its Canadian retail
business.
- Comparable sales increased 5.8% compared to last year's 1.3%
decrease.
- Reported gross profit, as a percent of sales, increased by 170
bps, driven by favorable merchandise margin and business mix.
- Reported operating expenses, as a percent of sales, increased
by 160 bps, due to marketing investments, lease exit costs,
acquisition-related costs and restructuring expenses.
- Reported net loss was $14.1
million, or $0.18 loss per
diluted share, including pre-tax charges totaling $98.4 million, or $1.20 per diluted share, primarily related to the
acquisition of the Canadian retail business and the exit of
Ebuys.
- Adjusted net income was $82.4
million, or $1.02 per diluted
share, a 47% increase to last year. This includes a loss of
$0.01 per diluted share from the
operations of the Town Shoes banner, which will be mostly exited by
the end of the fiscal year.
Integration of New Canada Retail Segment
- As part of the two step acquisition, the Company completed the
remeasurement of previously held assets, including the equity
investment and note receivable from its initial investment in 2014,
resulting in a non-cash charge of $34.0
million.
- As a result of the current enterprise value exceeding the fair
value of the acquired net assets, the Company recorded a goodwill
impairment of $36.2 million.
- Upon the completion of its comprehensive review, the Company
will focus on its largest retail banners, Shoe Company, Shoe
Warehouse and DSW Designer Shoe Warehouse. The Company will exit
its full price, mall-based Town Shoes banner, which operates 38
locations, mostly by the end of the fiscal year.
- The acquisition is expected to generate approximately
$215 million in revenues and will be
slightly accretive to Adjusted Earnings in 2018.
Second Quarter Balance Sheet Highlights
- Cash and investments totaled $289
million compared to $271
million in the second quarter last year.
- The Company ended the quarter with inventories of $597 million compared to $527 million last year. Excluding inventories
from its Canadian acquisition, inventories per square foot
increased by 12.0% and increased by 2.0% on a two-year basis.
Regular Dividend
DSW Inc.'s Board of Directors
declared a quarterly cash dividend of $0.25 per share.
The dividend will be paid on October 5, 2018 to shareholders
of record at the close of business on September 24, 2018.
Fiscal 2018 Annual Outlook
The Company updated its
full year outlook for adjusted earnings in the range of
$1.60 to $1.75 per diluted share, compared to its previous
range of $1.52 to $1.67 per diluted share. Guidance does not
include charges related to exit costs, restructuring or
acquisition-related expenses or operating losses from the Town
Shoes banner, which will mostly close by the end of the fiscal
year.
|
Current
outlook
|
|
Previous
outlook
|
Revenue
outlook
|
Increase 6% to
9%
|
|
Decrease 1% to
3%
|
Revenues from
Canadian acquisition
|
Approx. $215
million
|
|
|
Comparable sales
growth
|
Low- to mid-single
digit range
|
|
Low-single digit
range
|
Tax rate
|
Approx.
27%
|
|
Approx.
29%
|
Shares
outstanding
|
82 million
|
|
81 million
|
Adjusted
EPS
|
$1.60 to $1.75/
share
|
|
$1.52 to $1.67/
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 September 12, 2018. The teleconference will be
available on replay and can be accessed by dialing 1-877-344-7529
and entering passcode 10123353.
About DSW Inc.
DSW Inc. is a leading footwear and
accessories retailer that operates a portfolio of several value
retail concepts under the DSW Designer Shoe Warehouse, Shoe
Company, Shoe Warehouse and Town Shoes brands. DSW also supplies
footwear at leased locations in the U.S. through its Affiliated
Business Group and franchised international
locations. Products are available across North
America at close to 1,000 retail outlets and via e-commerce
sites and a mobile app. More information can be found
at www.dswinc.com.
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
2018 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; risks related to our acquisition of Town Shoes Limited
("TSL"), including the possibility that the anticipated benefits of
the acquisition are not realized when expected or at all; 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 Stein Mart; our ability to execute our
strategies; risks related to international franchisees failing to
perform under their obligations and/or not operating the franchised
stores according to our standards; 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 or mitigate 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 reliance
on our loyalty program and marketing to drive traffic, sales and
customer loyalty; risks related to leases of our properties; our
competitiveness with respect to style, price, brand availability
and customer service; our reliance on foreign sources for
merchandise and risks inherent to international trade; uncertainty
related to future legislation, regulatory reform, policy changes,
or interpretive guidance on existing legislation, including the
impact of the Tax Cuts and Jobs Act; uncertain general economic
conditions; risks related to holdings of cash and investments and
access to liquidity; and fluctuations in foreign currency exchange
rates. 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.
|
SEGMENT
RESULTS
|
(unaudited)
|
|
Net sales by
segment and total revenue
|
|
Three months
ended
|
|
Six months
ended
|
(dollars in
thousands)
|
August 4,
2018
|
|
July 29,
2017
|
|
%
change
|
|
August 4,
2018
|
|
July 29,
2017
|
|
%
change
|
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Retail
segment1
|
$
|
691,757
|
|
|
$
|
629,691
|
|
|
9.9
|
%
|
|
$
|
1,361,541
|
|
|
$
|
1,254,195
|
|
|
8.6
|
%
|
Canada Retail
segment
|
72,532
|
|
|
—
|
|
|
—
|
%
|
|
72,532
|
|
|
—
|
|
|
—
|
%
|
Other
|
29,446
|
|
|
52,030
|
|
|
(43.4)
|
%
|
|
70,099
|
|
|
118,345
|
|
|
(40.8)
|
%
|
Total net
sales
|
793,735
|
|
|
681,721
|
|
|
16.4
|
%
|
|
1,504,172
|
|
|
1,372,540
|
|
|
9.6
|
%
|
Franchise and other
revenue
|
1,533
|
|
|
1,291
|
|
|
18.7
|
%
|
|
3,198
|
|
|
2,510
|
|
|
27.4
|
%
|
Total
revenue
|
$
|
795,268
|
|
|
$
|
683,012
|
|
|
16.4
|
%
|
|
$
|
1,507,370
|
|
|
$
|
1,375,050
|
|
|
9.6
|
%
|
Comparable sales
change
|
|
Three months
ended
|
|
Six months
ended
|
|
August 4,
2018
|
|
July 29,
2017
|
|
August 4,
2018
|
|
July 29,
2017
|
U.S. Retail
segment1
|
9.6%
|
|
0.6%
|
|
5.7%
|
|
(1.3)%
|
Other -
ABG
|
12.2%
|
|
(0.1)%
|
|
8.2%
|
|
(1.0)%
|
Total
Company
|
9.7%
|
|
0.6%
|
|
5.8%
|
|
(1.3)%
|
|
|
|
|
|
|
|
|
1 U.S.
Retail segment was previously presented as the DSW
segment.
|
Stores
data
|
|
August 4,
2018
|
|
July 29,
2017
|
Number of stores in
the U.S.:
|
|
|
|
DSW
|
517
|
|
510
|
ABG
|
289
|
|
349
|
|
806
|
|
859
|
Number of stores in
Canada:
|
|
|
|
The Shoe Company /
Shoe Warehouse
|
113
|
|
—
|
DSW Designer Shoe
Warehouse
|
27
|
|
—
|
Town Shoes
|
38
|
|
—
|
|
178
|
|
—
|
Total number of
stores
|
984
|
|
859
|
Reported gross
profit by segment1
|
|
Three months
ended
|
|
Six months
ended
|
|
August 4,
2018
|
|
July 29,
2017
|
|
August 4,
2018
|
|
July 29,
2017
|
U.S. Retail
segment:
|
|
|
|
|
|
|
|
Merchandise
margin
|
45.9 %
|
|
44.4 %
|
|
44.3 %
|
|
43.8 %
|
Store occupancy
expenses
|
(10.6)
|
|
(11.4)
|
|
(10.6)
|
|
(11.2)
|
Distribution and
fulfillment expenses
|
(2.1)
|
|
(2.1)
|
|
(2.3)
|
|
(2.2)
|
Gross
profit
|
33.2
|
|
30.9 %
|
|
31.4
|
|
30.4
|
Canada Retail
segment:
|
|
|
|
|
|
|
|
Merchandise
margin
|
41.2
|
|
—
|
|
41.2
|
|
—
|
Store occupancy
expenses
|
(14.9)
|
|
—
|
|
(14.9)
|
|
—
|
Distribution and
fulfillment expenses
|
(1.2)
|
|
—
|
|
(1.2)
|
|
—
|
Gross
profit
|
25.1
|
|
—
|
|
25.1
|
|
—
|
Other - gross
profit
|
22.7
|
|
8.5
|
|
19.3
|
|
12.7
|
Total Company gross
profit
|
32.1 %
|
|
29.2 %
|
|
30.6 %
|
|
28.9 %
|
|
|
|
|
|
|
|
|
1 Numbers
are displayed as a percentage of net sales.
|
DSW
INC.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(unaudited and in
thousands)
|
|
|
|
|
|
|
|
August 4,
2018
|
|
February 3,
2018
|
|
July 29,
2017
|
Assets
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
215,996
|
|
|
$
|
175,932
|
|
|
$
|
89,305
|
|
Investments
|
73,119
|
|
|
124,605
|
|
|
182,062
|
|
Accounts
receivable
|
17,259
|
|
|
19,236
|
|
|
17,742
|
|
Inventories
|
596,956
|
|
|
501,903
|
|
|
527,305
|
|
Prepaid expenses and
other current assets
|
73,763
|
|
|
49,197
|
|
|
45,529
|
|
Total current
assets
|
977,093
|
|
|
870,873
|
|
|
861,943
|
|
Property and
equipment, net
|
387,621
|
|
|
355,199
|
|
|
364,552
|
|
Goodwill
|
25,899
|
|
|
25,899
|
|
|
79,689
|
|
Deferred income
taxes
|
14,235
|
|
|
27,711
|
|
|
18,792
|
|
Equity investment in
TSL
|
—
|
|
|
6,096
|
|
|
10,350
|
|
Notes receivable from
TSL
|
—
|
|
|
115,895
|
|
|
60,094
|
|
Intangible
assets
|
20,285
|
|
|
135
|
|
|
33,065
|
|
Other
assets
|
19,883
|
|
|
19,709
|
|
|
18,144
|
|
Total
assets
|
$
|
1,445,016
|
|
|
$
|
1,421,517
|
|
|
$
|
1,446,629
|
|
Liabilities and
shareholders' equity
|
|
|
|
|
|
Accounts
payable
|
$
|
229,440
|
|
|
$
|
179,308
|
|
|
$
|
165,377
|
|
Accrued
expenses
|
145,776
|
|
|
148,226
|
|
|
124,343
|
|
Total current
liabilities
|
375,216
|
|
|
327,534
|
|
|
289,720
|
|
Non-current
liabilities
|
150,316
|
|
|
138,732
|
|
|
178,955
|
|
Total shareholders'
equity
|
919,484
|
|
|
955,251
|
|
|
977,954
|
|
Total liabilities and
shareholders' equity
|
$
|
1,445,016
|
|
|
$
|
1,421,517
|
|
|
$
|
1,446,629
|
|
DSW
INC.
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(unaudited and in
thousands, except per share amounts)
|
|
|
|
|
|
Three months
ended
|
|
Six months
ended
|
|
August 4,
2018
|
|
July 29,
2017
|
|
August 4,
2018
|
|
July 29,
2017
|
Revenue:
|
|
|
|
|
|
|
|
Net sales
|
$
|
793,735
|
|
|
$
|
681,721
|
|
|
$
|
1,504,172
|
|
|
$
|
1,372,540
|
|
Franchise and other
revenue
|
1,533
|
|
|
1,291
|
|
|
3,198
|
|
|
2,510
|
|
Total
revenue
|
795,268
|
|
|
683,012
|
|
|
1,507,370
|
|
|
1,375,050
|
|
Cost of
sales
|
(539,240)
|
|
|
(482,424)
|
|
|
(1,044,452)
|
|
|
(976,158)
|
|
Franchise
costs
|
(293)
|
|
|
—
|
|
|
(573)
|
|
|
—
|
|
Operating
expenses
|
(195,026)
|
|
|
(152,554)
|
|
|
(363,166)
|
|
|
(309,122)
|
|
Impairment
charges
|
(36,240)
|
|
|
—
|
|
|
(36,240)
|
|
|
—
|
|
Change in fair value of
contingent consideration
liability
|
—
|
|
|
(1,168)
|
|
|
—
|
|
|
(2,252)
|
|
Operating
profit
|
24,469
|
|
|
46,866
|
|
|
62,939
|
|
|
87,518
|
|
Interest income,
net
|
805
|
|
|
661
|
|
|
1,469
|
|
|
1,222
|
|
Non-operating expenses,
net
|
(47,349)
|
|
|
(679)
|
|
|
(49,486)
|
|
|
(2,183)
|
|
Income (loss) before
income taxes and income
(loss) from equity
investment
|
(22,075)
|
|
|
46,848
|
|
|
14,922
|
|
|
86,557
|
|
Income tax
provision
|
(16,281)
|
|
|
(18,390)
|
|
|
(27,671)
|
|
|
(33,975)
|
|
Income (loss) from
equity investment
|
—
|
|
|
219
|
|
|
(1,310)
|
|
|
(1,087)
|
|
Net income
(loss)
|
$
|
(38,356)
|
|
|
$
|
28,677
|
|
|
$
|
(14,059)
|
|
|
$
|
51,495
|
|
Diluted earnings
(loss) per share
|
$
|
(0.48)
|
|
|
$
|
0.36
|
|
|
$
|
(0.18)
|
|
|
$
|
0.64
|
|
Weighted average
diluted shares
|
80,265
|
|
|
80,714
|
|
|
80,187
|
|
|
80,729
|
|
DSW
INC.
|
NON-GAAP
RECONCILIATION
|
(unaudited and in
thousands, except per share amounts)
|
|
|
|
|
|
Three months
ended
|
|
Six months
ended
|
|
August 4,
2018
|
|
July 29,
2017
|
|
August 4,
2018
|
|
July 29,
2017
|
Reported net income
(loss)
|
$
|
(38,356)
|
|
|
$
|
28,677
|
|
|
$
|
(14,059)
|
|
|
$
|
51,495
|
|
Pre-tax
adjustments:
|
|
|
|
|
|
|
|
Included in operating
expenses:
|
|
|
|
|
|
|
|
Lease
exit and other termination costs
|
409
|
|
|
—
|
|
|
4,403
|
|
|
—
|
|
Acquisition-related costs and target
acquisition costs
|
5,104
|
|
|
—
|
|
|
5,612
|
|
|
—
|
|
Restructuring expenses
|
2,708
|
|
|
292
|
|
|
2,708
|
|
|
829
|
|
Amortization of intangible assets
|
114
|
|
|
1,018
|
|
|
114
|
|
|
2,036
|
|
Impairment
charges
|
36,240
|
|
|
—
|
|
|
36,240
|
|
|
—
|
|
Change in fair value
of contingent
consideration liability
|
—
|
|
|
1,168
|
|
|
—
|
|
|
2,252
|
|
Included in
non-operating expenses, net:
|
|
|
|
|
|
|
|
Fair
value adjustments of Town Shoes'
previously held assets
|
33,988
|
|
|
—
|
|
|
33,988
|
|
|
—
|
|
Foreign
currency transaction losses
|
13,318
|
|
|
699
|
|
|
15,296
|
|
|
2,161
|
|
Total pre-tax
adjustments
|
91,881
|
|
|
3,177
|
|
|
98,361
|
|
|
7,278
|
|
Tax effect of
adjustments
|
(2,623)
|
|
|
(1,138)
|
|
|
(4,173)
|
|
|
(2,542)
|
|
Tax expense impact as
a result of Ebuys
exit
|
—
|
|
|
—
|
|
|
2,265
|
|
|
—
|
|
Total adjustments,
after tax
|
89,258
|
|
|
2,039
|
|
|
96,453
|
|
|
4,736
|
|
Adjusted net
income
|
$
|
50,902
|
|
|
$
|
30,716
|
|
|
$
|
82,394
|
|
|
$
|
56,231
|
|
Reported diluted
earnings (loss) per share
|
$
|
(0.48)
|
|
|
$
|
0.36
|
|
|
$
|
(0.18)
|
|
|
$
|
0.64
|
|
Adjusted diluted
earnings per share
|
$
|
0.63
|
|
|
$
|
0.38
|
|
|
$
|
1.02
|
|
|
$
|
0.70
|
|
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 the lease exit and other
termination costs; costs and charges associated with
acquisition-related activity, including target acquisition efforts;
restructuring expenses; amortization expense of intangible assets;
the change in fair value of contingent consideration liability
related to Ebuys; and foreign currency losses, including the
reclassification from accumulated other comprehensive loss as a
result of the Town Shoes acquisition. 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.
View original
content:http://www.prnewswire.com/news-releases/dsw-inc-reports-second-quarter-2018-financial-results-300702927.html
SOURCE DSW Inc.