DSW Reports Promotions Dragged Down Fiscal First Quarter Sales

Reported net income was $38.6 million, or $0.42 per diluted share on 92 million weighted average shares outstanding. This compares to Reported net income in the first quarter of 2013 of $34.5 million, or $0.38 per diluted share, which included a net charge of $11.4 million, or $0.12 per share from a luxury test. This also compares to adjusted net income, excluding the impact of the luxury test, for the same period last year of $45.9 million, or $0.50 per diluted share, on 92 million weighted average shares outstanding.

 

 

“We had a challenging quarter due to unseasonal weather and an aggressively promotional retail environment,” said President and Chief Executive Officer Mike MacDonald. “We sharpened our prices for key items while proactively managing our clearance levels during the quarter. Monthly sales trends were weak but improved sequentially during the quarter. Our team is working hard to deliver an effective assortment with a compelling value message and we expect these initiatives to gain traction in the back half of the year.
 

“Our investments in omni-channel and assortment planning will strengthen our competitive advantages as we elevate our ability to meet the evolving needs our customers,” MacDonald continued. “At the same time, we are investing to grow our market share outside our core DSW, starting with our partnership with Town Shoes of Canada. I am confident that we are taking the right steps to grow sales and bottom line in the long term.”

 

 

DSW ended the quarter with cash, short term and long term investments of $548 million compared to $430 million in the first quarter last year. Inventories were at $420 million compared to $395 million during the first quarter last year. On a cost per square foot basis, DSW segment inventories increased by 1.4 percent at the end of quarter, excluding our luxury inventory.

 

 

On May 12, 2014, DSW announced the closing of its initial acquisition of Town Shoes Limited, the largest footwear and accessories retailer in Canada, for CAD$75.5 million (USD$68.7 million) in cash. DSW Inc. acquired a 49.2 percent interest in Town Shoes from the Alberta Investment Management Corporation and other minority shareholders. DSW Inc.'s initial stake provides 50 percent voting control and board representation equal to the primary remaining shareholder, Callisto Capital.

 

 

Fiscal 2014 annual outlook
For the 52-week fiscal year ending Jan. 31, 2015, the company expects adjusted earnings per share to range from $1.45 to $1.60 per share. This assumes a low, single-digit, comparable sales decline and adjusted sales growth in the low- single-digit range. This guidance includes omni-channel related expenses of $10 million or approximately $0.07 per share, a tax rate slightly above 39 percent and diluted shares outstanding of 92.5 million.

 

DSW INC.
Q1 2014 SEGMENT RESULTS
Net sales by reportable segment
	Thirteen weeks ended
	May 3, 2014				May 4, 2013				% change
	(in thousands)
DSW	$	558,866			$	562,924			(0.7)	%
Affiliated Business Group	40,081				38,438				4.3	%
Total DSW Inc.	$	598,947			$	601,362			(0.4)	%
Less: Luxury test sales	–				(5,255)
Total Adjusted DSW Inc. sales	$	598,947			$	596,107			0.5	%