DSW Inc. Q2 net income was $6.5 million on net sales of $348.7 million for the second quarter ended August 4, 2007, compared with net income of $15.3 million on net sales of $301.3 million for the second quarter ended July 29, 2006. Same store sales increased 5.9% for the comparable thirteen-week period versus an increase of 2.2% last year.
The Company said second quarter sales were driven by significant promotional activity aimed at clearing seasonal merchandise, which negatively impacted gross margin for the quarter.

Diluted earnings per share were 15 cents for the second quarter of 2007 compared with 35 cents for last year's second quarter.

Net income was $30.3 million on net sales of $705.7 million for the six months ended August 4, 2007, compared with net income of $32.9 million on net sales of $617.8 million for the six months ended July 29, 2006. Same store sales increased 0.9% for the comparable twenty-six week period versus an increase of 3.2% last year.

Diluted earnings per share were $0.68 for the six months ended August 4, 2007, compared with $0.74 for the same period last year.

2007 Outlook

Based on the performance through the second quarter reported today, the Company is maintaining its annual estimate for fiscal 2007 diluted earnings per share in the range of $1.63 to $1.68 and is maintaining its annual estimate for comparable store sales in the range of 0% to 3%. In addition, the Company plans to open at least 35 new DSW stores during the year, an increase from its original estimate of at least 30 new stores.


                                   DSW INC.


                 CONDENSED CONSOLIDATED STATEMENTS OF INCOME


                   (In thousands, except per share amounts)


                                 (Unaudited)



                               Three Months Ended         Six Months Ended


                             August 4,     July 29,    August 4,     July 29,


                               2007          2006        2007         2006



    Net sales                $348,718     $301,302     $705,715     $617,789


    Cost of sales            (267,368)    (216,200)    (515,109)    (439,400)


    Gross profit               81,350       85,102      190,606      178,389


    Operating expenses        (73,024)     (62,005)    (145,062)    (127,403)


    Operating profit            8,326       23,097       45,544       50,986


    Interest income, net        1,948        1,975        3,667        3,299


    Earnings before income


     taxes                     10,274       25,072       49,211       54,285


    Income tax provision       (3,753)      (9,731)     (18,946)     (21,425)


    Net income                 $6,521      $15,341      $30,265      $32,860



    Basic and diluted earnings


     per share:


      Basic                     $0.15        $0.35        $0.69        $0.75


      Diluted                   $0.15        $0.35        $0.68        $0.74



    Shares used in per share


     calculations:


      Basic                    43,953       43,909       43,947       43,902


      Diluted                  44,338       44,210       44,349       44,177