DSW Inc. announced a 4.5% increase in net income of $9.3 million for the second quarter, compared with $8.9 million last year. Net sales for the quarter were $276.2 million, a 17.8% rise from $234.4 million during last year's second quarter. The second quarter of 2005 results include $3.9 million of interest expense on dividend notes to the company's controlling shareholder, Retail Ventures, Inc. that were repaid in full from the net proceeds of DSW's initial public offering.
Diluted earnings per share were 28 cents for the second quarter of 2005 compared with 32 cents for the comparable quarter last year. After adjusting for the dividend interest paid to RVI and the increase in shares as a result of the initial public offering, pro forma net income for the second quarter of 2005 was $11.6 million, or 26 cents per share, compared with $8.9 million, or 20 cents per share, for the second quarter of 2004. The exhibit at the end of this release reconciles net income for the 2005 and 2004 second quarters to non-GAAP pro forma net income.
Comparable store sales for the second quarter of 2005 increased 3.3% compared with 3.0% for the same period last year.
On June 29, 2005, DSW's initial public offering of 16.2 million shares of Class A common stock, which included the underwriters' over-allotment option of 2.1 million shares, was sold at $19.00 per share. The company received net proceeds of $278 million. The company used $196.6 million of the net proceeds to repay in full $190.0 million in dividend notes and accrued interest to RVI.
Six-Month Results
For the six months ended July 30, 2005, DSW had net income of $16.2 million on net sales of $558.0 million, compared with net income for the comparable period last year of $16.7 million on net sales of $467.0 million. The fiscal 2005 six-month results include $6.6 million of interest expense on the dividend notes to RVI that were repaid in full from the net proceeds of the initial public offering, and $6.5 million for the accrual for losses associated with the data theft announced in March 2005.
Diluted earnings per share for the six months ended July 30, 2005 were 53 cents compared with 60 cents for the comparable six-month period last year. After adjusting for the dividend interest, the data theft accrual and the increase in shares as a result of the initial public offering, pro forma net income for the six months was $24.1 million, or 55 cents per share, compared with $16.7 million, or 38 cents per share, for the six-month period last year. The exhibit at the end of this release reconciles net income for the 2005 and 2004 six-month periods to non-GAAP pro forma net income.
Store Growth
DSW opened seven stores and added one leased department during the second quarter of 2005. As of July 30, 2005, the company operated 184 DSW stores and 232 leased shoe departments. Since that date, the company has opened three more stores and added two more leased shoe departments.
DSW INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
July 30, July 31, July 30, July 31,
2005 2004 2005 2004
Net sales $276,211 $234,403 $558,017 $466,962
Cost of sales (199,848) (167,464) (398,856) (332,436)
Gross profit 76,363 66,939 159,161 134,526
Operating expenses (55,675) (51,305) (123,420) (105,087)
Operating profit 20,688 15,634 35,741 29,439
Interest expense, net (5,012) (745) (8,533) (1,471)
Earnings before income
taxes 15,676 14,889 27,208 27,968
Income tax provision (6,425) (5,992) (10,977) (11,255)
Net income $9,251 $8,897 $16,231 $16,713
Basic and diluted
earnings per share:
Basic $0.28 $0.32 $0.53 $0.60
Diluted $0.28 $0.32 $0.53 $0.60
