DSW Inc. reported first-quarter earnings on an adjusted basis rose 23.4 percent as comparable-store sales rose 2.0 percent. Earnings were two cents higher than Wall Street’s consensus estimate.

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 percent revenue increase and a 16 percent 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,” Rawlins added.

First Quarter Operating Results

Total revenue increased by 2.9 percent 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 percent 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 exits costs and transaction expenses with the acquisition of Town Shoes.

Reported net income was $24.3 million, or 30 cents per diluted share, including net after-tax charges totaling $7.2 million, or 9 cents 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 39 cents 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. That represents a gain of 23.4 percent compared to earnings of $25.5 million, or 32 cents, a year ago.  Wall Street’s consensus estimate was 37 cents.

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 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.

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.