DSW Inc. Reports Fourth Quarter and Fiscal Year 2012 Financial Results

    DSW Inc. Reports Fourth Quarter and Fiscal Year 2012 Financial Results

PR Newswire

COLUMBUS, Ohio, March 19, 2013

COLUMBUS, Ohio, March 19, 2013 /PRNewswire/ --

  oFourth quarter sales increase 15.7% to $594.3 million; comparable sales
    increase 3.6%
  oIncluding a net loss of $0.10 per share of legacy charges from RVI,
    Reported EPS totals $0.59
  oFourth quarter Adjusted EPS rises to $0.69 per share, an increase of 35.3%
    per share
  oFull year sales increase 11.5% to $2,257.8 million; comparable sales
    increase 5.5%
  oFull year Reported EPS totals $3.23 including $0.12 per share in one time
    net charges
  oAdjusted EPS rises to $3.35 per share for the full year, up from $3.00 per
    share in 2011

DSW Inc. (NYSE: DSW), a leading branded footwear and accessories retailer,
announced financial results for the fourteen week and fifty-three week periods
ending February2, 2013, which compare to the thirteen week and fifty-two week
periods ending January28, 2012.

(Logo: http://photos.prnewswire.com/prnh/20100325/DSWLOGO-a )

"I am proud of what we have accomplished as a team. We delivered solid sales
and earnings growth this quarter, which represented our 14th consecutive
quarter of positive comparable sales growth," stated Mike MacDonald, President
and Chief Executive Officer, DSW Inc.

Mr. MacDonald continued, "This quarter concluded a very strong year for the
Company in which we grew total sales by 12%, generated a two year comparable
store gain of 13.8% and increased earnings per share by 12%. We continue to
make excellent progress on our strategic initiatives, all of which are
designed to enhance our shopping experience, regardless of how and where the
customer chooses to shop. We also rewarded our shareholders with dividends
totaling $128 million in 2012."

Fourth Quarter Operating Results

  oSales increased 15.7% to $594.3 million compared to last year's fourth
    quarter sales of $513.7 million. The increase includes an incremental
    sales benefit of $32.3 million for the 53rd week.
  oFor the thirteen week period, comparable sales increased by 3.6%. This
    follows an increase of 5.6% during the fourth quarter of 2011.
  oReported net income was $27.1 million, or $0.59 per diluted share on 45.7
    million weighted average shares outstanding, which included $4.2 million
    in legacy charges from RVI. This compares to Reported net income in the
    fourth quarter of 2011 of $19.4 million, which included a non-cash charge
    of $3.7 million related to the merger with RVI. Reported EPS for the
    fourth quarter last year was $0.37 per share.
  oNet income, adjusted for one-time items was $31.4 million, or $0.69 per
    diluted share on 45.7 million weighted average shares outstanding. This
    compares to Adjusted net income for the same period last year of $23.1
    million, or $0.51 per diluted share on 45.3 million weighted average
    shares outstanding.

Full Year Operating Results

  oFiscal 2012 sales increased 11.5% to $2,257.8 million from $2,024.3
    million for fiscal 2011.
  oOn a fifty-two week basis, comparable sales for fiscal 2012 increased 5.5%
    which came on top of an increase of 8.3% for fiscal 2011.
  oReported net income in 2012 was $146.4 million, or $3.23 per diluted share
    on 45.3 million weighted average shares outstanding, which included $9.4
    million in after-tax non-cash charges related to RVI and a $3.6 million
    after-tax award from credit card litigation. This compares to Reported net
    income in 2011 of $174.8 million, which included a non-cash benefit of
    $38.6 million related to the merger with RVI. Reported EPS last year was
    $4.54.
  oFiscal 2012 net income, adjusted for one-time items, was $152.2 million or
    $3.35 per diluted share on 45.5 million weighted average shares
    outstanding. This compares to Adjusted net income for last year of $136.1
    million, or $3.00 per diluted share on 45.3 million weighted average
    shares outstanding.

Fourth Quarter Balance Sheet Highlights

  oCash, short term and long term investments totaled $410 million compared
    to $430 million last year.
  oInventories were $394 million compared to $334 million last year, an
    increase of 17.8%, in line with expectations. On a cost per square foot
    basis, inventories supporting DSW stores increased by 1.0% at the end of
    quarter.
  oThe company did not repurchase any shares under its $100 million share
    buyback program this quarter.
  oThe company closed on the acquisition of its corporate headquarters and
    distribution center in Columbus, OH during the fourth quarter for $72
    million.

Fiscal 2013 Annual Outlook

The company's sales trend has softened in the first six weeks of the 2013
fiscal year with comparable sales declining by 5% over that period. Given
this weak start, which is markedly different from DSW's consistent record of
solid comparable sales growth over the last fourteen quarters, it is
difficult to project full year sales and profit performance with confidence.
Internally, the company is now managing merchandise receipts and inventories
assuming flat comparable sales performance in the first half of the year. If
comparable sales for the full year were to be flat, the company estimates
diluted earnings per share of $3.30 to $3.40, excluding any impact from the
merger with RVI and the company's luxury initiative. The company intends to
discuss the luxury initiative on its earnings conference call.

Webcast and Conference Call

To hear the Company's live earnings conference call, log on to
http://www.dswinc.com today at 8:30 AM Eastern, or call (866) 524-3160 in the
U.S. or (412) 317-6760 outside the U.S. To hear a replay of the earnings call,
which will be available approximately two hours after the conference call
ends, dial (877) 344-7529 in the U.S. or (412) 317-0088 outside the U.S.
followed by conference number 10025993. An audio replay of the conference
call, as well as additional financial information, will also be available at
http://www.dswinc.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 March 19, 2013, DSW operates
364 stores in 41 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 346 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 "like" DSW on Facebook at
http://www.facebook.com/DSW.



DSW INC.
Q4 SEGMENT RESULTS
Net sales by reportable segment:
           Fourteen     Thirteen               Fiscal year ended
           weeks ended  weeks ended
           February2,  January28,  %         February2,  January28,  %
           2013         2012         change    2013         2012         change
           (in millions)                       (in millions)
DSW        $  562.6     $  475.5     18.3   %  $  2,125.3   $  1,871.9   13.5   %
Affiliated
Business   31.7         38.2         (17.0) %  132.5        152.4        (13.1) %
Group
Total DSW  $  594.3     $  513.7     15.7   %  $  2,257.8   $  2,024.3   11.5   %
Inc.

Comparable sales change by reportable segment:
                       Thirteen weeks ended           Fifty-two weeks ended
                       February2, 2013  January28,  February2,  January28,
                                         2012         2013         2012
DSW                    3.9        %      5.9    %     5.7    %     8.6    %
Affiliated Business    (2.2)      %      1.4    %     1.4    %     5.1    %
Group
Total DSW Inc.         3.6        %      5.6    %     5.5    %     8.3    %



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 2013 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; 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; our success in launching a luxury business; 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 our cash and investments; and the realization of
risks related to the Merger, including risks related to pre-merger RVI
guarantees of certain Filene's Basement leases and RVI's assumption of a
pension plan. 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)
                                           As of             As of
                                           February2, 2013  January 28, 2012
Assets
Cash and equivalents                       $   81,097        $   79,003
Short-term investments                     232,081           296,697
Accounts receivable, net                   26,784            16,996
Inventories                                393,794           334,390
Prepaid expenses and other current assets  20,637            24,448
Deferred income taxes                      67,397            116,473
Total current assets                       821,790           868,007
Property and equipment, net                300,313           235,726
Long-term investments                      96,712            53,858
Goodwill                                   25,899            25,899
Deferred income taxes                      9,443             15,653
Other assets                               7,946             8,757
Total assets                               $   1,262,103     $   1,207,900
Liabilities and shareholders' equity
Accounts payable                           $   152,112       $   151,248
Accrued expenses                           123,199           126,998
Warrant liability                          —                 29,303
Total current liabilities                  275,311           307,549
Non-current liabilities                    128,213           113,764
Total shareholders' equity                 858,579           786,587
Total liabilities and shareholders' equity $   1,262,103     $   1,207,900

DSW INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
and
RECONCILIATION OF ADJUSTED RESULTS
(In thousands, except per share amounts)
(Unaudited)
                             Fourteen weeks    Adjustments      Fourteen weeks
                             ended             related to       ended
                             February2, 2013                   February2,
                                               RVI legacy       2013
                             Reported          charges          Adjusted
Net sales                    594,254                            $   594,254
Cost of sales                (422,540)                          (422,540)
Operating expenses           (126,022)         $  5,986    (1)  (120,036)
Operating profit        45,692            5,986            51,678
Interest income, net         273                                273
Income from continuing
operations before income     45,965            5,986            51,951
taxes
Income tax (provision)       (18,819)          (1,771)     (1)  (20,590)
benefit
Net income              $     27,146      $  4,215         $   31,361
Diluted shares used in per   45,687                             45,687
share calculations:
Diluted earnings per share:
Diluted earnings per
share from continuing        $     0.59                         $   0.69
operations
Diluted earnings per    $     0.59                         $   0.69
share

Notes:
1) Reflects lease impairment of $6.0M related to an RVI office lease and the
   impact of RVI-related tax expense.

                         Thirteen weeks        Adjustments      Thirteen weeks
                         ended                 related to       ended
                         January28, 2012                       January28,
                                               RVI legacy       2012
                         Reported              charges          Adjusted
Net sales                $    513,684                           $   513,684
Cost of sales            (367,721)                              (367,721)
Operating expenses       (109,026)             $  700      (1)  (108,326)
Change in fair value of  2,981                 (2,981)     (2)  —
derivative instruments
Operating profit    39,918                (2,281)          37,637
Interest income, net     33                    40          (3)  73
Income from
continuing operations    39,951                (2,241)          37,710
before income taxes
Income tax (provision)   (15,556)              913         (4)  (14,643)
benefit
Income from         24,395                (1,328)          23,067
continuing operations
Total income from
discontinued             (5,028)               5,028       (5)  —
operations, net of tax
Net income          $    19,367           $  3,700         $   23,067
Adjustments to net
income from diluted
earnings per share
calculation:
Less: (Loss) in fair     (2,981)          (6)  2,981
value of warrants
Net income for diluted
earnings per share       $    16,386      (6)  $  6,681         $   23,067
calculation
Diluted shares used in   44,782           (7)                   45,313
per share calculations:
Diluted earnings (loss)
per share:
Diluted earnings
per share from           $    0.48        (6)                   $   0.51
continuing operations
Diluted loss per
share from discontinued  $    (0.12)
operations
Diluted earnings    $    0.37        (6)                   $   0.51
per share

Notes:
   In addition to RVI-related expenses, also reflects pension expense, cure
   payment for RVI-owned property, recovery from Filene's Basement 2009
1) bankruptcy and

   current legal fees related to RVI lease guarantees.

2) Change in fair value of derivative instruments, which relate to RVI's
   warrants to purchase DSW common shares.

3) Interest expense related to RVI-related tax penalty.

4) Reflects impact of RVI-related tax expense.

5) Reflects the removal of discontinued operations, which relate to guarantees
   of two Filene's Basement leases.

6) Net income for the diluted earnings per share calculation is adjusted for
   the change in fair value of warrants.

   The Reported weighted average shares outstanding represent DSW Class A
   Common Shares and Class B Common Shares as well as the warrants and other

7) dilutive instruments. Adjusted shares used in the per share calculations
   reflect DSW's weighted average shares outstanding as of the first quarter
   of fiscal 2011,

   prior to the merger with RVI.

                Fiscal year       Adjustments      Adjustments      Fiscal year
                ended             related to       related to       ended
                February2,                                         February2,
                2013              RVI legacy       award of         2013
                Reported          charges          damages          Adjusted
Net sales       $ 2,257,778                                         $ 2,257,778
Cost of sales   (1,533,058)                                         (1,533,058)
Operating       (481,797)         $  6,546    (1)  $  (4,018)  (4)  (479,269)
expenses
Change in fair
value of        (6,121)           6,121       (2)
derivative
instruments
Operating  236,802           12,667           (4,018)          245,451
profit
Interest        3,811                              (1,869)     (4)  1,942
income, net
Income
from
continuing      240,613           12,667           (5,887)          247,393
operations
before income
taxes
Income tax
(provision)     (95,427)          (2,024)     (1)  2,245       (4)  (95,206)
benefit
Income
from            145,186           10,643           (3,642)          152,187
continuing
operations
Total income
from
discontinued    1,253             (1,253)
operations,
net of tax
Net        $ 146,439         $  9,390         $  (3,642)  (4)  $ 152,187
income
Diluted shares
used in per     45,303       (3)                                    45,466
share
calculations:
Diluted
earnings per
share:
Diluted
earnings per
share from      $ 3.20                                              $ 3.35
continuing
operations
Diluted
earnings per
share from      $ 0.03
discontinued
operations
Diluted
earnings per    $ 3.23                                              $ 3.35
share

Notes:
   Reflects lease impairment of $6.0M related to an RVI office lease, legal
1) fees related to the settlement of RVI litigation and other RVI legal
   expenses and related tax effects.

2) Change in fair value of derivative instruments, which relate to RVI's
   warrants.

   The Reported weighted average shares outstanding represent DSW Class A
   Common Shares and Class B Common Shares as well as dilutive instruments.
3) Adjusted shares used in the

   per share calculations reflect DSW's weighted average shares outstanding
   and assume full exercise of warrants at the beginning of the period.

   Reflects DSW's receipt of an award of damages related to the 2005 data
   theft of $5.3 million, net of related expense of $1.3 million and interest
4) accrued on the settlement of $1.9 million.

   Also reflects the related tax effects.

                          Fiscal year ended      Adjustments      Fiscal year
                                                 related to       ended
                          January28, 2012                        January28,
                                                 RVI legacy       2012
                          Reported               charges          Adjusted
Net sales                 $   2,024,329                           $ 2,024,329
Cost of sales             (1,370,382)                             (1,370,382)
Operating expenses        (448,583)              $ 17,263    (1)  (431,320)
Change in fair value of   (53,914)               53,914      (2)
derivative instruments
Operating profit     151,450                71,177           222,627
Interest (expense)        (9,181)                10,524      (3)  1,343
income, net
Income from
continuing operations     142,269                81,701           223,970
before income taxes
Income tax benefit        58,069                 (145,895)   (4)  (87,826)
(provision)
Income from          200,338                (64,194)         136,144
continuing operations
Total income from
discontinued operations,  (4,855)                4,855       (5)
net of tax
Net income           195,483                (59,339)         136,144
Less: net income
attributable to the       (20,695)               20,695      (6)
noncontrolling interests
Net income, net of   $   174,788            $ (38,644)       $ 136,144
noncontrolling interests
Adjustments to net
income from diluted
earnings per share
calculation:
Less: Gain in fair
value of PIES and tax     (6,019)           (7)  6,019
effected other PIES
related expenses
Net income for diluted
earnings per share        $   168,769       (7)  $ (32,625)       $ 136,144
calculation
Diluted shares used in    37,138            (8)                   45,313
per share calculations:
Diluted earnings (loss)
per share:
Diluted earnings
per share from            $   4.68          (7)                   $ 3.00
continuing operations
Diluted loss per
share from discontinued   $   (0.14)        (7)
operations
Diluted earnings
per share, net of         $   4.54          (7)                   $ 3.00
noncontrolling interests

Notes:
   In addition to DSW and RVI transaction costs and RVI-related expenses, also
1) reflects lease and asset impairment of $5.0M related to an RVI office
   lease.

2) Change in fair value of derivative instruments, which relate to RVI's PIES
   and warrants.

3) Interest expense related to the PIES and RVI's debt.

4) Reflects impact of reversal of valuation allowances and other
   merger-related tax items.

5) Reflects the removal of discontinued operations, which relate to RVI's
   dispositions of Value City and Filene's Basement.

6) Reflects the removal of the noncontrolling interest in DSW that RVI
   recorded through the merger date.

7) Net income for the diluted earnings per share calculation is adjusted by
   the change in fair value of PIES and related tax-effected interest expense.

   Reported weighted average shares outstanding are prorated for pre-merger
   RVI shares through the merger date and post-merger DSW shares after the
   merger date and

   through period end. Through the merger date, RVI weighted average shares
   outstanding are adjusted for the 0.435 exchange ratio. After the merger
   date, the weighted
8)
   average shares outstanding reflect DSW shares converted from RVI shares as
   well as DSW Class A Common Shares outstanding prior to the merger. Adjusted
   shares used

   in the per share calculations reflect DSW's weighted average shares
   outstanding as of the first quarter of fiscal 2011, prior to the merger
   with RVI.

This release contains certain Adjusted financial measures. These measures are
included as a complement to Reported results because management believes these
Adjusted financial measures help explain underlying performance trends in
DSW's business and provide useful information to both management and
investors. The unaudited Condensed Consolidated Statements of Operations and
Reconciliation of Adjusted Results should not be construed as an alternative
to the Reported results determined in accordance with generally accepted
accounting principles. Further, DSW's definition of Adjusted income
information may differ from similarly titled measures used by other companies.
While it is not possible to predict future results, management believes the
Adjusted information is useful to investors for the assessment of the ongoing
operations of DSW. The unaudited Condensed Consolidated Statements of
Operations and Reconciliation of Adjusted Results should be read in
conjunction with DSW's and RVI's historical financial statements and notes
thereto contained in DSW's and RVI's quarterly reports on Form 10-Q and annual
report on Form 10-K.

SOURCE DSW Inc.

Website: http://www.dswinc.com
Contact: DSW Inc., Christina Cheng, Director of Investor Relations,
+1-855-893-5691