DSW Inc. reported second-quarter earnings that rose 5.2 percent, ahead of Wall Street’s target, as same-store sales sales inched up 0.6 percent.

Roger Rawlins, chief executive officer, stated, “We were pleased to report our first positive comp quarter since 2015. This resulted in a healthy increase in regular priced sales and improvements across all selling metrics. With our mission to inspire self-expression, these results demonstrate how our strategic direction is resonating with the DSW customer.”

“We are deepening our customer connection with unique product and meaningful experiences that will define Designer Shoe Warehouse as the trusted authority for all things footwear. The current retail consolidation provides significant opportunity to acquire market share, and in the next 12 months, we will unveil several exciting new initiatives that will inspire emotional loyalty with the DSW brand. At the same time, we are building the infrastructure to mobilize inventory across all of our brands and enable us to better serve our customers. We are confident these initiatives will grow sales, cash flow and profitability long-term,” Rawlins concluded.

Second Quarter Operating Results

  • Sales increased 3.3 percent to $680.4 million.
  • Comparable sales increased 0.6 percent compared to last year’s 1.2 percent decrease.
  • Reported gross profit increased by 50 bps, driven by lower markdowns and favorable sourcing, partially offset by inventory reserves and distribution costs related to the ongoing integration of Ebuys.
  • Reported operating expenses as a percent of sales improved by 10 bps, with higher selling and technology expenses offset by lower overhead costs.
  • Reported net income was $28.6 million, or 35 cents per diluted share, including pre-tax charges totaling $3.2 million, or 3 cents per diluted share, related to the acquisition of Ebuys, restructuring costs and foreign exchange loss. In the year-ago period, net earnings were $25 million, or 30 cents a share.
  • Adjusted net income was $30.6 million, or 38 cents per diluted share against $29.1 million, or 35 cents, a year ago.

Wall Street’s consensus estimate had been 29 cents.

Six Months Ended July 29, 2017 Operating Results

  • Sales increased 2.3 percent to $1.4 billion.
  • Comparable sales decreased 1.3 percent compared to last year’s 1.4 percent decrease.
  • Reported gross profit decreased by 60 bps, driven by incremental clearance activity and inventory reserves and distribution costs related to the ongoing integration of Ebuys.
  • Reported operating expenses as a percent of sales improved by 30 bps due to tighter expense management.
  • Reported net income was $51.6 million, or 64 cents per diluted share, including pre-tax charges totaling $7.3 million, or 6 cents per diluted share, related to the acquisition of Ebuys, restructuring costs and foreign exchange loss.
  • Adjusted net income was $56.3 million, or 70 cents per diluted share.

Second Quarter Balance Sheet Highlights

  • Cash and investments totaled $271 million compared to $244 million in the second quarter last year.
  • The Board of Directors approved a new $500 million share repurchase authorization, in addition to the company’s remaining $33 million in its current authorization. Since 2013, the company has returned to shareholders close to $600 million in dividends and share repurchases.
  • Inventories were $527 million compared to $556 million for the same period last year. Excluding Ebuys and Gordmans, inventories decreased 10 percent on a cost per square foot basis.

Fiscal 2017 Annual Outlook 
The company reiterated its full year outlook for adjusted earnings in the range of $1.45 to $1.55 per diluted share.