COLUMBUS, Ohio, May 30,
2018 /PRNewswire/ -- DSW Inc. (NYSE: DSW), a leading branded
footwear and accessories retailer, announced financial results for
the three months ended May 5, 2018,
compared to the three months ended April 29,
2017.
Roger Rawlins, Chief Executive
Officer stated, "We are pleased this quarter to report our second
consecutive positive comp for DSW Inc. and the fourth positive
footwear comp in the DSW brand. With our solid first quarter
results, we have delivered a 4% revenue increase and a 16% earnings
increase over the last twelve months, marking an exciting return to
growth for the DSW brand."
"Furthermore, we launched a new integrated and cross-channel
loyalty program a few weeks ago, reaching an important milestone in
DSW's history. We are pleased with the customer response to DSW
VIP, which delivers a simpler points system and new benefits like
shoe donations, free shipping and points gifting. We remain
committed to innovating our customer experience with initiatives
that will elevate Designer Shoe Warehouse and drive customer
acquisition and loyalty for years to come," Mr. Rawlins added.
First Quarter Operating Results
- Total revenue increased by 2.9% to $712
million, including $5.6
million from residual Ebuys operations.
- Comparable sales for operations for the 13-week period ended
May 5, 2018 increased 2.2% over the
same 13-week period ended May 6,
2017.
- Reported gross profit, as a percentage of sales, increased by
40 bps due to the wind down of Ebuys.
- Reported operating expenses, as a percent of sales, increased
by 100 bps, driven by marketing investments, Ebuys exit costs and
transaction expenses with the acquisition of Town Shoes.
- Reported net income was $24.3
million, or $0.30 per diluted
share, including net after-tax charges totaling $7.2 million, or $0.09 per diluted share, related to the exit of
Ebuys, foreign exchange losses and transaction costs related to the
acquisition of Town Shoes.
- Adjusted net income was $31.5
million, or $0.39 per diluted
share, including a loss of $0.04 per
share from residual Ebuys operations, which the Company exited at
the end of the first quarter.
Completed the Acquisition of Town Shoes
- On May 10, 2018, the Company
completed the purchase of its remaining stake in Town Shoes of
Canada for CAD 44.7 million (USD $35
million). The Company appointed William Jordan, Chief Administrative Officer of
DSW Inc., as President of Town Shoes.
- The Company is in the process of conducting a comprehensive
review of the Town Shoes business and will provide future
expectations for this business on its Second Quarter Earnings
Conference.
First Quarter Balance Sheet Highlights
- Cash and investments totaled $269
million compared to $254
million in the first quarter last year.
- Inventories were $540 million
compared to $575 million last year
and decreased slightly on a cost per square foot basis.
Implementation of New Revenue Recognition
Standard
Starting with the first quarter of 2018, the
Company implemented the new revenue recognition standard, which
primarily affects the timing of the recording of gift card breakage
and deferred revenue from the Company's loyalty program, as well as
changes within the reclassification of these items on the Company's
financial statements. Prior year's results have been retroactively
restated in this press release to ensure the comparability of
results, with additional details to be provided in the Company's
quarterly 10-Q filing. The adoption of this new standard had an
immaterial impact on the Company's results for the first quarter of
2017 and the fiscal year 2017.
Regular Dividend
DSW Inc.'s Board of Directors
declared a quarterly cash dividend of $0.25 per share.
The dividend will be paid on July 5, 2018 to shareholders of
record at the close of business on June 21, 2018.
Fiscal 2018 Annual Outlook
The Company maintained its
full year outlook for adjusted earnings in the range of
$1.52 to $1.67 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 June 13, 2018. The teleconference will be
available on replay and can be accessed by dialing 1-877-344-7529
and entering passcode 10120095.
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 5, 2018, DSW operates
517 DSW Designer Shoe Warehouse locations in 44 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 289 leased
locations in the United States
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
Facebook at http://www.facebook.com/DSW.
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 the acquisition of Town Shoes, 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 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
|
(dollars in
thousands)
|
May 5,
2018
|
|
April 29,
2017
|
|
%
change
|
Net Sales:
|
|
|
|
|
|
DSW
segment
|
$
|
669,784
|
|
|
$
|
624,504
|
|
|
7.3
|
%
|
Other
|
40,653
|
|
|
66,315
|
|
|
(38.7)
|
%
|
Total net
sales
|
710,437
|
|
|
690,819
|
|
|
2.8
|
%
|
Franchise and other
revenue
|
1,665
|
|
|
1,219
|
|
|
36.6
|
%
|
Total
revenue
|
$
|
712,102
|
|
|
$
|
692,038
|
|
|
2.9
|
%
|
Comparable sales
change by reportable segment
|
|
Three months
ended
|
|
May 5,
2018
|
|
April 29,
2017
|
DSW
segment
|
2.0%
|
|
(3.1)%
|
ABG
|
5.1%
|
|
(1.7)%
|
Total
Company
|
2.2%
|
|
(3.0)%
|
Stores and square
footage data
|
|
Three months
ended
|
|
May 5,
2018
|
|
April 29,
2017
|
DSW stores open, end
of period
|
517
|
|
508
|
ABG stores open, end
of period
|
289
|
|
379
|
DSW stores total
square footage (in thousands)
|
10,566
|
|
10,449
|
Reported gross
profit by segment
|
|
Three months
ended
|
|
May 5,
2018
|
|
April 29,
2017
|
DSW
segment:
|
|
|
|
Merchandise
margin
|
42.6
|
%
|
|
43.2
|
%
|
Store occupancy
expenses
|
(10.7)
|
|
|
(11.0)
|
|
Distribution and
fulfillment expenses
|
(2.3)
|
|
|
(2.3)
|
|
Gross
profit
|
29.6
|
%
|
|
29.9
|
%
|
Other - gross
profit
|
16.9
|
%
|
|
16.0
|
%
|
Total Company gross
profit
|
28.9
|
%
|
|
28.5
|
%
|
DSW
INC.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(unaudited and in
thousands)
|
|
|
May 5,
2018
|
|
February
3, 2018
|
|
April 29,
2017
|
Assets
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
197,162
|
|
$
|
175,932
|
|
$
|
79,673
|
Investments
|
71,708
|
|
124,605
|
|
174,193
|
Accounts
receivable
|
13,571
|
|
19,236
|
|
16,865
|
Inventories
|
539,700
|
|
501,903
|
|
575,171
|
Prepaid expenses and
other current assets
|
56,815
|
|
49,197
|
|
44,464
|
Total current
assets
|
878,956
|
|
870,873
|
|
890,366
|
Property and
equipment, net
|
352,550
|
|
355,199
|
|
374,320
|
Goodwill
|
25,899
|
|
25,899
|
|
79,689
|
Deferred income
taxes
|
28,174
|
|
27,711
|
|
16,311
|
Equity investment in
Town Shoes
|
2,401
|
|
6,096
|
|
13,705
|
Notes receivable from
Town Shoes
|
123,710
|
|
115,895
|
|
52,928
|
Intangible
assets
|
135
|
|
135
|
|
34,044
|
Other
assets
|
19,793
|
|
19,709
|
|
18,359
|
Total
assets
|
$
|
1,431,618
|
|
$
|
1,421,517
|
|
$
|
1,479,722
|
Liabilities and
shareholders' equity
|
|
|
|
|
|
|
Accounts
payable
|
$
|
186,038
|
|
$
|
179,308
|
|
$
|
213,611
|
Accrued
expenses
|
139,346
|
|
148,226
|
|
139,419
|
Total current
liabilities
|
325,384
|
|
327,534
|
|
353,030
|
Non-current
liabilities
|
145,366
|
|
138,732
|
|
176,807
|
Total shareholders'
equity
|
960,868
|
|
955,251
|
|
949,885
|
Total liabilities and
shareholders' equity
|
$
|
1,431,618
|
|
$
|
1,421,517
|
|
$
|
1,479,722
|
DSW
INC
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(unaudited and in
thousands, except per share amounts)
|
|
|
Three months
ended
|
|
May 5,
2018
|
|
April 29,
2017
|
Revenue:
|
|
|
|
|
Net sales
|
$
|
710,437
|
|
$
|
690,819
|
Franchise and other
revenue
|
1,665
|
|
1,219
|
Total
revenue
|
712,102
|
|
692,038
|
Cost of
sales
|
(505,212)
|
|
(493,734)
|
Franchise
costs
|
(280)
|
|
—
|
Operating
expenses
|
(168,140)
|
|
(156,568)
|
Change in fair value of
contingent consideration liability
|
—
|
|
(1,084)
|
Operating
profit
|
38,470
|
|
40,652
|
Interest income,
net
|
664
|
|
561
|
Non-operating
expense
|
(2,137)
|
|
(1,504)
|
Income before income
taxes and loss from Town Shoes
|
36,997
|
|
39,709
|
Income tax
provision
|
(11,390)
|
|
(15,585)
|
Loss from Town
Shoes
|
(1,310)
|
|
(1,306)
|
Net income
|
$
|
24,297
|
|
$
|
22,818
|
Diluted earnings per
share
|
$
|
0.30
|
|
$
|
0.28
|
Weighted average
diluted shares
|
80,758
|
|
80,732
|
DSW
INC.
|
NON-GAAP
RECONCILIATION
|
(unaudited and in
thousands, except per share amounts)
|
|
|
Three months
ended
|
|
May 5,
2018
|
|
April 29,
2017
|
Reported net
income
|
$
|
24,297
|
|
$
|
22,818
|
Pre-tax
Adjustments:
|
|
|
|
|
Ebuys lease exit and
other termination costs
|
3,994
|
|
—
|
Town acquisition
costs
|
508
|
|
—
|
Foreign currency
losses
|
1,978
|
|
1,462
|
Amortization of
intangible assets
|
—
|
|
1,018
|
Change in fair value
of contingent consideration liability
|
—
|
|
1,084
|
Restructuring
expenses
|
—
|
|
537
|
Total pre-tax
adjustments
|
6,480
|
|
4,101
|
Tax effect of
adjustments
|
(1,550)
|
|
(1,404)
|
Tax expense impact as
a result of Ebuys exit
|
2,265
|
|
—
|
Total adjustments,
after tax
|
7,195
|
|
2,697
|
Adjusted net
income
|
$
|
31,492
|
|
$
|
25,515
|
Reported diluted
earnings per share
|
$
|
0.30
|
|
$
|
0.28
|
Adjusted diluted
earnings per share
|
$
|
0.39
|
|
$
|
0.32
|
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 exit of Ebuys, costs
associated with the acquisition of Town Shoes, foreign currency
exchange losses, the amortization expense of acquired intangible
assets and the change in fair value of contingent consideration
liability related to Ebuys, and restructuring costs. 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.