DSW Inc. Reports Third Quarter 2013 Financial Results PR Newswire COLUMBUS, Ohio, Nov. 26, 2013 COLUMBUS, Ohio, Nov. 26, 2013 /PRNewswire/ -- oThird quarter Reported sales increase 6.8% to $633 million; comparable sales decrease 0.7% oFirst nine months Reported sales increase 8.0% to $1.80 billion; comparable sales increase 0.2% oThird quarter Reported EPS rises to $0.60 per share on a post-split basis, including net income of $0.01 per share from our luxury test oThird quarter Adjusted EPS rises to $0.58 per share on a post-split split basis ($1.17 on a pre-stock split basis), an increase of 14% over last year oRaises full year Adjusted EPS guidance of $1.80 to $1.90 per share on a post-split basis, assuming flat same store sales growth oBoard of Directors approve a quarterly dividend of $0.125 per share DSW Inc. (NYSE: DSW), a leading branded footwear and accessories retailer, announced financial results for the thirteen week period ended November 2, 2013, which compare to the thirteen week period ended October27, 2012. Mike MacDonald, President and Chief Executive Officer states, "A solid increase in total sales combined with disciplined execution and inventory management allowed us to increase our Adjusted earnings per share by 14%. We achieved our highest level of profitability in the third quarter while navigating through a promotional environment. We were encouraged by the improvement in traffic and sales at the end of the quarter, as the fall selling season got off to a delayed start." Mr. MacDonald added, "During the quarter we opened 16 new stores, including two small format stores, advanced our omni-channel work and implemented a number of systems initiatives. For the full year, we expect Adjusted EPS to range from $1.80 to $1.90 per share based on flat same store sales and 4% to 5% increase in Adjusted sales." Third Quarter Operating Results oReported sales increased 6.8% to $633 million compared to last year's third quarter sales of $593 million. oFor the thirteen week period ended November2, 2013, comparable sales decreased by 0.7%. This follows an increase of 6.3% during the thirteen week period ended October27, 2012. oReported net income was $55.0 million, or $0.60 per diluted share on 92.1 million weighted average shares outstanding, which included net after-tax income of $1.4 million, or $0.01 per share, from our luxury test. This compares to Reported net income in the third quarter of 2012 of $50.1 million, or $0.55 per diluted share, which included a $3.6 million award, or $0.04 per share, resulting from the 2005 credit card litigation, as well as $0.2 million in legacy charges from RVI. oNet income, adjusted for the results of our luxury test and legacy charges from RVI, was $53.6 million, or $0.58 per diluted share on 92.1 million weighted average shares outstanding. This compares to Adjusted net income for the same period last year of $46.6 million, or $0.51 per diluted share, on 91.0 million weighted average shares outstanding. Nine Months Ended November 2, 2013 Operating Results oReported sales increased 8.0% to $1.8 billion compared to last year's sales of $1.7 billion. oFor the thirty-nine week period ended November2, 2013, comparable sales increased by 0.2%. This follows an increase of 6.1% during the thirty-nine week period ended October27, 2012. oReported net income was $123 million, or $1.34 per diluted share, on 91.8 million weighted average shares outstanding, which included a net after-tax loss of $11.5 million, or $0.13 per share, from our luxury test, and a net after-tax charge of $9.4 million, or $0.10 per share, from the termination of the pension plan assumed in conjunction with the RVI merger. This compares to Reported net income in the same period last year of $119.3 million, which included $5.2 million in after-tax non-cash charges related to RVI and a $3.6 million after-tax award from credit card litigation. Reported EPS for the thirty-nine week period ended October27, 2012 was $1.32 per share. oNet income, adjusted for the net loss from our luxury test and legacy charges from RVI, was $144.1 million, or $1.57 per diluted share, on 91.8 million weighted average shares outstanding. This compares to Adjusted net income for the same period last year of $120.8 million, or $1.33 per diluted share, on 90.8 million weighted average shares outstanding. Third Quarter Balance Sheet Highlights oCash, short term and long term investments totaled $522 million compared to $430 million in the third quarter last year. oInventories were flat at $424 million compared to $422 million during the third quarter last year, in line with expectations. On a cost per square foot basis, DSW segment inventories decreased by 2.2% at the end of quarter. Regular Dividend On November 26, 2013, DSW's Board of Directors declared a quarterly cash dividend payment of $0.125 per share. The dividend will be paid on December 31, 2013 to shareholders of record at the close of business on December 19, 2013. Fiscal 2013 Annual Outlook For the fifty-two week fiscal year ended February 1, 2014, the Company expects Adjusted earnings per share to range from $1.80 to $1.90 per share. This assumes flat same store sales and Adjusted sales growth of 4% to 5% for the current fifty-two week period compared to the fifty-three week period ended February 2, 2013. Excluding the sales of $32 million from the fifty-third week in fiscal 2012, full year Adjusted sales growth for fiscal 2013 is expected to increase in the range of 6% to 7%. 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 1-888-317-6003 in the U.S. or 1-412-317-6061 outside the U.S using passcode 5551497 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 December 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 10036641. 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 November 26, 2013, DSW operates 393 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 356 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. Q3 2013 SEGMENT RESULTS Net sales by reportable segment Thirteen weeks ended Thirty-nine weeks ended November2, October27, % November2, October27, % change change 2013 2012 2013 2012 (in thousands) (in thousands) DSW $ 597,274 $ 559,312 6.8 % $ 1,691,119 $ 1,562,707 8.2 % Affiliated Business 35,702 33,422 6.8 % 105,282 100,817 4.4 % Group Total DSW $ 632,976 $ 592,734 6.8 % $ 1,796,401 $ 1,663,524 8.0 % Inc. Less: Luxury 8,341 — 17,418 — sales Total Adjusted $ 624,635 $ 592,734 $ 1,778,983 $ 1,663,524 DSW Inc. sales Comparable sales change by reportable segment (excludes luxury) Thirteen weeks ended Thirty-nine weeks ended November2, October27, November2, October27, 2013 2012 2013 2012 DSW (1.0)% 6.6% 0.2% 6.3% Affiliated Business Group 3.6% 1.8% 1.8% 2.5% Total DSW Inc. (0.7)% 6.3% 0.2% 6.1% 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 November2, 2013 February 2, 2013 Assets Cash and equivalents $ 84,429 $ 81,097 Short-term investments 195,248 232,081 Restricted cash 7,700 — Accounts receivable, net 23,853 26,784 Inventories 424,066 393,794 Prepaid expenses and other current assets 35,866 20,637 Deferred income taxes 24,343 67,397 Total current assets 795,505 821,790 Property and equipment, net 316,542 300,313 Long-term investments 234,748 96,712 Goodwill 25,899 25,899 Deferred income taxes 10,562 9,443 Other assets 8,518 7,946 Total assets $ 1,391,774 $ 1,262,103 Liabilities and shareholders' equity Accounts payable $ 147,100 $ 152,112 Accrued expenses 130,612 123,199 Total current liabilities 277,712 275,311 Non-current liabilities 132,844 128,213 Total shareholders' equity 981,218 858,579 Total liabilities and shareholders' equity $ 1,391,774 $ 1,262,103 DSW INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (Unaudited) Thirteen weeks ended Thirty-nine weeks ended November2, October27, November2, October27, 2013 2012 2013 2012 Net sales $ 632,976 $ 592,734 $ 1,796,401 $ 1,663,524 Cost of sales (420,106) (392,563) (1,217,092) (1,110,518) Gross profit 212,870 200,171 579,309 553,006 Operating expenses (124,614) (121,734) (382,786) (355,775) Change in fair value of — — — (6,121) derivative instruments Operating profit 88,256 78,437 196,523 191,110 Interest income, net 1,036 2,575 1,857 3,538 Income from continuing operations before income 89,292 81,012 198,380 194,648 taxes Income tax provision (34,331) (30,897) (75,184) (76,608) Income from continuing 54,961 50,115 123,196 118,040 operations Total income from discontinued operations, — — — 1,253 net of tax Net income $ 54,961 $ 50,115 $ 123,196 $ 119,293 Diluted shares used in 92,090 91,046 91,813 90,346 per share calculations: Diluted earnings per share: Diluted earnings per share from continuing $ 0.60 $ 0.55 $ 1.34 $ 1.31 operations Diluted earnings per share from discontinued $ — $ — $ — $ 0.01 operations Diluted earnings per $ 0.60 $ 0.55 $ 1.34 $ 1.32 share DSW INC. RECONCILIATION OF ADJUSTED RESULTS (In thousands, except per share amounts) (Unaudited) Thirteen weeks ended November 2, 2013 Diluted Net sales Cost of Gross Operating Net earnings Sales profit expenses income per share Reported $ 632,976 $ (420,106) $ 212,870 $ (124,614) $ 54,961 $ 0.60 Measure Less: luxury performance Net sales 8,341 Cost of (5,589) sales Gross profit (loss), including valuation reserves 2,752 (535) 1,366 0.01 on remaining inventory & operating expenses Less: Other RVI related 46 (48) — income (expenses) Adjusted $ 624,635 $ (414,517) $ 210,118 $ (124,125) $ 53,643 $ 0.58 Measure Thirteen weeks ended October 27, 2012 Diluted Net income earnings per share Reported Measure $ 50,115 $ 0.55 RVI related expenses: RVI operating expenses, net of tax 174 (1) 0.00 (1) Adjustments related to award of damages: Operating expenses, net of tax (2,486) (2) (0.03) (2) Interest income, net of tax (1,156) (2) (0.01) (2) Adjusted Measure $ 46,647 $ 0.51 (1) Reflects legal fees related to the settlement of RVI litigation and other RVI legal expenses and related tax effects (2) Reflects the receipt of an award of damages related to the 2005 data theft of $5.3 million, net of expense of $1.3 million, and interest accrued on the settlement of $1.9 million. Also reflects the related tax effects. Thirty-nine weeks ended November 2, 2013 Diluted Net sales Cost of Sales Gross Operating Net income earnings profit expenses per share Reported $ 1,796,401 $ (1,217,092) $ 579,309 $ (382,786) $ 123,196 $ 1.34 Measure Less: luxury performance Net sales 17,418 — — — — Cost of — (33,084) — — — Sales Gross profit (loss), including valuation reserves — — (15,666) (2,977) (11,521) (0.13) on remaining inventory and operating expenses Less: RVI pension and other RVI — — — (14,695) (9,355) (0.10) related income (expenses) Adjusted $ 1,778,983 $ (1,184,008) $ 594,975 $ (365,114) $ 144,072 $ 1.57 Measure Thirty-nine weeks ended October 27, 2012 Diluted shares Diluted earnings Net income per share used in per share calculations Reported Measure $ 119,293 $ 1.32 90,346 RVI related expenses: Change in fair value of derivative 6,121 (1) 0.07 (1) instruments RVI operating 307 (2) — (2) expenses, net of tax Total income from discontinued (1,253) (3) (0.01) (3) operations, net of tax Adjustments related to award of damages: Operating expenses, (2,486) (4) (0.03) (4) net of tax Interest income, net (1,156) (4) (0.01) (4) of tax Share adjustment (0.01) (5) 444 (5) Adjusted Measure $ 120,826 $ 1.33 90,790 1) Change in fair value of derivative instruments, which relate to RVI's warrants 2) Reflects legal fees related to the settlement of RVI litigation and other RVI legal expenses, and related tax effects. 3) Reflects the removal of discontinued operations 4) Reflects DSW's receipt of an award of damages related to the 2005 credit card litigation of $5.3 million, net of expense of $1.3 million, and interest accrued on the settlement of $1.9 million. Also reflects the related tax effects. 5) 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.dsw.com Contact: Christina Cheng, 855-893-5691
DSW Inc. Reports Third Quarter 2013 Financial Results
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