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DSW Inc. Reports Second Quarter 2013 Financial Results



            DSW Inc. Reports Second Quarter 2013 Financial Results

PR Newswire

COLUMBUS, Ohio, Aug. 27, 2013

COLUMBUS, Ohio, Aug. 27, 2013 /PRNewswire/ --

  o Second quarter Reported sales increase 9.7% to $562 million; comparable
    sales increase 4.4%
  o First six months Reported sales increase 8.7% to $1.16 billion; comparable
    sales increase 0.8%
  o Including a net loss of $0.03 per share from our luxury test and $0.20 per
    share charge from the termination of RVI's pension plan, Reported EPS
    totals $0.73
  o Second quarter Adjusted EPS rises to $0.97 per share, an increase of 47%
    over last year
  o As previously announced, full year Adjusted EPS guidance of $3.60 to $3.80
    per share on low single digit comparable sales growth

DSW Inc. (NYSE: DSW), a leading branded footwear and accessories retailer,
announced financial results for the thirteen week period ended August 3, 2013,
which compare to the thirteen week period ended July 28, 2012.

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

"Second quarter sales rebounded nicely after a difficult start to the year.
This sales bounce, coupled with excellent inventory management and prudent
expense discipline, resulted in solid quarterly profit results. Moreover, in a
volatile sales environment, DSW was able to post a solid 20% earnings growth
for the first half of the fiscal year," stated Mike MacDonald, President and
Chief Executive Officer, DSW Inc.

Mr. MacDonald added, "These results underscore the compelling nature of the
DSW formula that is based on the brand cornerstones of assortment, value and
convenience. DSW's continued progress on its strategic initiatives supports
our long term growth trajectory. With that in mind, we raised our full year
guidance earlier this month to $3.60 to $3.80 per share."

Second Quarter Operating Results

  o Reported sales increased 9.7% to $562 million compared to last year's
    second quarter sales of $512 million.
  o For the thirteen week period ended August 3, 2013, comparable sales
    increased by 4.4%. This follows an increase of 4.2% during the thirteen
    week period ended July 28, 2012.
  o Reported net income was $33.7 million, or $0.73 per diluted share on 45.9
    million weighted average shares outstanding, which included a net
    after-tax loss of $1.5 million, or $0.03 per share, from our luxury test,
    and a net after-tax charge of $9.3 million, or $0.20 per share, from the
    termination of the pension plan assumed in conjunction with the RVI
    merger. This compares to Reported net income in the second quarter of 2012
    of $29.3 million, or $0.65 per diluted share, which included a non-cash
    charge of $0.7 million or $0.01 per share, related to legacy charges from
    RVI.
  o Net income, adjusted for the results of our luxury test and legacy charges
    from RVI, was $44.6 million, or $0.97 per diluted share on 45.9 million
    weighted average shares outstanding. This compares to Adjusted net income
    for the same period last year of $30.1 million, or $0.66 per diluted
    share, on 45.4 million weighted average shares outstanding.

Six Months Ended August 3, 2013 Operating Results

  o Reported sales increased 8.7% to $1.16 billion compared to last year's
    sales of $1.07 billion.
  o For the twenty-six week period ended August 3, 2013, comparable sales
    increased by 0.8%. This follows an increase of 6.0% during the twenty-six
    week period ended July 28, 2012.
  o Reported net income was $68.2 million, or $1.49 per diluted share, on 45.8
    million weighted average shares outstanding, which included a net
    after-tax loss of $12.9 million, or $0.28 per share, from our luxury test,
    and a net after-tax charge of $9.3 million, or $0.20 per share, from the
    termination of the pension plan assumed assumed in conjunction with the
    RVI merger. This compares to Reported net income in the same period last
    year of $69.2 million, which included a non-cash charge of $5.0 million
    related to legacy charges from RVI. Reported EPS for the second quarter
    last year was $1.54 per share.
  o Net income, adjusted for the net loss from our luxury test and legacy
    charges from RVI, was $90.4 million, or $1.97 per diluted share, on 45.8
    million weighted average shares outstanding. This compares to Adjusted net
    income for the same period last year of $74.2 million, or $1.64 per
    diluted share, on 45.3 million weighted average shares outstanding.

Second Quarter Balance Sheet Highlights

  o Cash, short term and long term investments totaled $500 million compared
    to $485 million in the second quarter last year.
  o Inventories were $405 million compared to $367 million during the second
    quarter last year, an increase of 10%, in line with expectations. On a
    cost per square foot basis, inventories supporting DSW stores increased by
    2.7% at the end of quarter.

Regular Dividend

On August 22, 2013, DSW's Board of Directors declared a quarterly cash
dividend payment of $0.25 per share. The dividend will be paid on September
30, 2013 to shareholders of record at the close of business on September 20,
2013.

Special Meeting Date for Stock Split

The Company has called a special shareholder's meeting to approve the proposed
2-for-1 stock split on October 14, 2013. Shareholders of record as of the
close of the Friday, August 16, 2013 will be entitled to vote.

Fiscal 2013 Annual Outlook

As previously announced, for the fifty-two week period ending February 1,
2014, the Company expects earnings to range from $3.60 to $3.80 per share
compared to the previous range of $3.40 to $3.60 per share. The midpoint of
the revised range represents a 10% increase in earnings per share. This
assumes comparable sales growth in the low single digit range and revenue
growth of 5% to 7% for the fifty-two week period compared to the fifty-three
week period ending February 2, 2013. Excluding the sales of $32 million from
fifty-third week in fiscal 2012, full year revenue growth for fiscal 2013 is
expected in the range of 6% to 8%.

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 1-866-524-3160 in the
U.S. or 1-412-317-6760 outside the U.S. approximately ten minutes prior to the
start of the call. A telephone replay of this call will be available until
9:00 a.m. Eastern Time on Sept. 4, 2013 and can be accessed by dialing
1-877-344-7529 in the U.S. or 1-412-317-0088 outside the U.S. and using
conference number 10031358. 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 August 27, 2013, DSW operates
377 stores in 42 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 351 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.

Q2 2013 SEGMENT RESULTS
Net sales by reportable segment
            Thirteen weeks ended            Twenty-six weeks ended
            August 3,   July 28,    %       August 3,     July 28,      %
            2013        2012        change                2012          change
                                            2013
            (in thousands)                  (in thousands)
DSW         $ 530,921   $ 482,244   10.1 %  $ 1,093,845   $ 1,003,395   9.0  %
Affiliated
Business    31,142      29,974      3.9  %  69,580        67,395        3.2  %
Group
Total DSW   $ 562,063   $ 512,218   9.7  %  $ 1,163,425   $ 1,070,790   8.7  %
Inc.
Less:
Luxury      3,822       —                   9,077         —
sales
Total
Adjusted    $ 558,241   $ 512,218           $ 1,154,348   $ 1,070,790
DSW Inc.
sales

Comparable sales change by reportable segment (excludes luxury)
                          Thirteen weeks ended  Twenty-six weeks ended
                          August 3,   July 28,  August 3,     July 28,
                          2013        2012                    2012
                                                2013
DSW                       4.4%        4.3%      0.8%          6.2%
Affiliated Business Group 4.3%        3.5%      0.9%          2.9%
Total DSW Inc.            4.4%        4.2%      0.8%          6.0%

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; 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. 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
                                           August 3, 2013  February 2, 2013
Assets
Cash and equivalents                       $   68,929      $     81,097
Short-term investments                     200,238         232,081
Accounts receivable, net                   21,742          26,784
Inventories                                404,512         393,794
Prepaid expenses and other current assets  39,116          20,637
Deferred income taxes                      42,368          67,397
Total current assets                       776,905         821,790
Property and equipment, net                310,374         300,313
Long-term investments                      230,599         96,712
Goodwill                                   25,899          25,899
Deferred income taxes                      14,366          9,443
Other assets                               8,030           7,946
Total assets                               $   1,366,173   $     1,262,103
Liabilities and shareholders' equity
Accounts payable                           $   176,625     $     152,112
Accrued expenses                           127,151         123,199
Total current liabilities                  303,776         275,311
Non-current liabilities                    131,657         128,213
Total shareholders' equity                 930,740         858,579
Total liabilities and shareholders' equity $   1,366,173   $     1,262,103

 

DSW INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)
                 Thirteen weeks ended         Twenty-six weeks ended
                        August       July             August 3,      July 28,
                        3,           28,              2013           2012
                        2013         2012
Net sales        $      562,063   $  512,218   $      1,163,425   $  1,070,790
Cost of sales    (378,621)        (351,973)    (796,986)          (717,955)
Gross profit     183,442          160,245      366,439            352,835
Operating        (129,461)        (112,118)    (258,172)          (234,041)
expenses
Change in fair
value of         —                (779)        —                  (6,121)
derivative
instruments
Operating        53,981           47,348       108,267            112,673
profit
Interest         481              496          821                963
income, net
Income from
continuing
operations       54,462           47,844       109,088            113,636
before income
taxes
Income tax       (20,742)         (18,526)     (40,853)           (45,711)
provision
Income from
continuing       33,720           29,318       68,235             67,925
operations
Total income
from
discontinued     —                —            —                  1,253
operations, net
of tax
Net income       $      33,720    $  29,318    $      68,235      $  69,178
Diluted shares
used in per      45,898           45,256       45,839             44,957
share
calculations:
Diluted
earnings per
share:
Diluted
earnings per
share from       $      0.73      $  0.65      $      1.49        $  1.51
continuing
operations
Diluted
earnings per
share from       $      —         $  —         $      —           $  0.03
discontinued
operations
Diluted
earnings per     $      0.73      $  0.65      $      1.49        $  1.54
share

 

DSW INC.

RECONCILIATION OF ADJUSTED RESULTS

(In thousands, except per share amounts)

(Unaudited)
                        Thirteen weeks ended August 3, 2013
                                                                 Operating                  Diluted
                        Net sales    Cost of Sales  Gross                       Net income  earnings
                                                    profit       expenses                   per
                                                                                            share
Reported Measure        $  562,063   $  (378,621)   $  183,442   $  (129,461)   $  33,720   $  0.73
Less: luxury
performance
Net sales               3,822
Cost of sales                        (5,733)
Gross profit (loss),
including valuation
reserves on remaining                               (1,911)      (554)          (1,532)     (0.03)
inventory & operating
expenses
Less: RVI pension and
other RVI related                                                (14,741)       (9,309)     (0.20)
expenses
Adjusted Measure        $  558,241   $  (372,888)   $  185,353   $  (114,166)   $  44,561   $  0.97

 

               Thirteen weeks ended July 28, 2012
                                              Diluted        Diluted
                                                             shares
                                              earnings
               Net income                     per            used in per
                                                             share
                                              share
                                                             calculations
Reported       $                 29,318       $   0.65       45,256
Measure
Change in fair
value of       779                       (1)  0.02      (1)
derivative
instruments
RVI operating
income, net of (39)                      (2)  —
tax
Share                                         (0.01)         120           (3)
adjustment
Adjusted       $                 30,058       $   0.66       45,376
Measure
(1) Change in fair value of derivative instruments, which relate to RVI's
warrants

(2) Reflects favorable resolution of other miscellaneous RVI matters, net of
tax

(3) The Reported weighted average shares outstanding represent DSW Class A
Common Shares and Class B Common Shares as well as dilutive instruments.
Adjusted shares used in the per share calculations reflect DSW's weighted
average shares outstanding and assumed full exercise of the warrants at the
beginning of the period.

 

                        Twenty-six weeks ended August 3, 2013
                                                                                              Diluted
                        Net sales      Cost of Sales  Gross        Operating      Net income  earnings
                                                      profit       expenses                   per
                                                                                              share
Reported Measure        $  1,163,425   $  (796,986)   $  366,439   $  (258,172)   $  68,235   $  1.49
Less: luxury
performance
Net sales               9,077
Cost of Sales                          (27,495)
Gross profit (loss),
including valuation
reserves on remaining                                 (18,418)     (2,442)        (12,887)    (0.28)
inventory and operating
expenses
Less: RVI pension and
other RVI related                                                  (14,741)       (9,309)     (0.20)
expenses
Adjusted Measure        $  1,154,348   $  (769,491)   $  384,857   $  (240,989)   $  90,431   $  1.97

 

                Twenty-six weeks ended July 28, 2012
                                                             Diluted
                                             Diluted         shares
                                             earnings
                Net income                                   used in per
                                             per             share
                                             share
                                                             calculations
Reported        $              69,178        $   1.54        44,957
Measure
Change in fair
value of        6,121                  (1)   0.14      (1)
derivative
instruments
RVI operating
income, net of  133                    (2)   —         (2)
tax
Total income
from
discontinued    (1,253)                (3)   (0.03)    (3)
operations, net
of tax
Share                                        (0.01)    (4)   333           (4)
adjustment
Adjusted        $              74,179        $   1.64        45,290
Measure
1) Change in fair value of derivative instruments, which relate to RVI's
warrants

2) Reflects favorable resolution of other miscellaneous RVI matters

3) Reflects the removal of discontinued operations

4) The Reported weighted average shares outstanding represent DSW Class A
Common Shares and Class B Common Shares as well as dilutive instruments.
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.

 

Non-GAAP Measures

The unaudited reconciliation of adjusted results should not be construed as an
alternative to the reported results determined in accordance with generally
accepted accounting principles ("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.

 

SOURCE DSW Inc.

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