DSW Inc. Reports Third Quarter 2013 Financial Results

            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
 
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