DSW More Than Doubles Net Income; Raises Guidance

DSW Inc. saw first quarter net income increase 150% to $17.5 million from $7.0 million for the same period last year. Net sales for the quarter increased 12.3% to $316.5 million from $281.8 million for the comparable period last year. Diluted earnings per share were 40 cents for the fiscal first quarter of 2006 compared with 25 cents for last year’s first quarter.

The first quarter 2005 results include $2.7 million of interest expense on a dividend note to the company’s controlling shareholder, Retail Ventures, Inc. and $6.5 million for the accrual for losses associated with the data theft announced March 2005. After adjusting for the dividend interest, the data theft accrual and the significant increase in shares as a result of the initial public offering in June 2005, pro forma net income for the first quarter of 2005 was $12.5 million, or 28 cents per share.

Comparable store sales for the first quarter of 2006 increased 4.2% compared with the same period last year.

2006 Outlook

Based on the first quarter performance reported today, the company raised its current estimate for fiscal 2006 annual diluted earnings per share to a range of $1.24 to $1.27, up from its previous estimate of $1.22 to $1.25. Comparable store sales are projected to increase 3-5%. The company also plans to open 30 DSW stores during the year.

                            DSW INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
               (Dollars in thousands, except per share amounts)
                                 (Unaudited)

                                         Three Months Ended

                                         April 29,  April 30,
                                             2006       2005

    Net sales                            $316,487   $281,806
    Cost of sales                        (223,200)  (199,008)
    Gross Profit                           93,287     82,798
    Operating expenses                    (65,398)   (67,745)
    Operating profit                       27,889     15,053
    Interest income (expense), net          1,324     (3,521)
    Earnings before income taxes           29,213     11,532
    Income tax provision                  (11,694)    (4,552)
    Net income                            $17,519     $6,980

    Basic and diluted earnings per share:
      Basic                                 $0.40      $0.25
      Diluted                               $0.40      $0.25

    Shares used in per share calculations:
      Basic                                43,896     27,703
      Diluted                              44,144     27,703