DSW Sees Q3 Comps Climb 5.3 Percent

DSW Inc. reported sales increased 8.5 percent in the third quarter to
$530.7 million from $489.3 million for the third quarter of 2010.
Comparable sales for the third quarter increased 5.2 percent. This
follows a 10.1 percent increase in comparable sales for the third
quarter of 2010.

Reported net income was $53.7 million, or $0.75 per diluted share on
44.7 million weighted average shares outstanding, which included a
$13.9 million impact due to the merger with RVI and related items.  This
compares to Reported net loss of $3.3 million, or $0.16 per diluted
share on 21.3 million weighted average shares outstanding, for the third
quarter of 2010.

Net income, adjusted for the impact of the
merger with RVI and related items, was $39.8 million, or $0.88 per
diluted share on 45.3 million weighted average shares outstanding. This
compares to Adjusted net income of $35.5 million, or $0.79 per diluted
share on 44.9 million weighted average shares outstanding, for the third
quarter of 2010.

Following the announcement on November 2, 2011 that SYMS
Corp. filed for bankruptcy protection, DSW reserved $1.7 million in
markdowns at cost related to inventory in Filene's Basement and SYMS
stores. This equates to a $0.02 per share impact to both Reported and
Adjusted EPS in the third quarter.

“Our strong performance continued into the fall season, further demonstrating our increasing relevance as a destination for great brands, fashion and value in the footwear industry,” stated Mike MacDonald, President and Chief Executive Officer, DSW Inc.  “During the quarter, we generated an 8.5 percent increase in total sales and a 5.2 percent increase in comparable sales, for a two-year comparable sales gain of 15 percent and a three year comparable sales increase of 24 percent.  DSW remained a top choice for women's footwear, led by a strong performance in boots.  We continued to capitalize on sales opportunities in men's and accessories – both of which remained our fastest growth categories.  Our new store performance exceeded our expectations and e-commerce sales remained robust.  We were also pleased with our leased business division, which recorded solid sales growth.   Our balance sheet remained strong at quarter end even as we invested in our long-term growth and returned value to our shareholders in the form of both a regular quarterly cash and special cash dividend.  We are confident in our strategies and continue to expect fiscal 2011 to represent a strong year of growth, and as a result we have increased our annual guidance.”

Nine-Month Operating Results

Net sales increased 11.6 percent to $1.51 billion from $1.35 billion for the first nine months of 2010.

Comparable sales for the first nine months increased 9.2 percent. This follows a 12.6 percent increase in comparable sales for the first nine months of 2010.

Reported net income was $155.4 million, or $4.30 per diluted share on 34.8 million weighted average shares outstanding, which included a $42.3 million impact due to the merger with RVI and related items. This compares to Reported net income of $17.6 million, or $0.82 per diluted share on 21.5 million weighted average shares outstanding, for the first nine months of 2010.

Net income, adjusted for the impact of the merger with RVI and related items, was $113.1 million, or $2.50 per diluted share on 45.3 million weighted average shares outstanding. This compares to Adjusted net income of $89.2 million, or $1.99 per diluted share on 44.8 million weighted average shares outstanding, for the first nine months of 2010.

At the conclusion of this press release is a reconciliation of Reported to Adjusted results.

Third Quarter Balance Sheet Highlights

Cash and investments totaled $369 million.

Inventories were $378 million compared to $332 million at the end of the third quarter of 2010. Inventory cost per square foot in DSW stores increased 5 percent compared to the third quarter of 2010.  

Special and Regular Dividend

On August 10, 2011, the company announced that its Board of Directors declared a special cash dividend of $2.00 per share, totaling approximately $86 million. In conjunction with this approval, the Board of Directors also initiated a regular quarterly cash dividend of $0.15 per share. Both the special dividend and the regular dividend were paid on September 30, 2011 to shareholders of record at the close of business on September 20, 2011.

On November 17, 2011, DSW's Board of Directors approved the company's second quarterly cash dividend payment of $0.15 per share. The dividend will be paid on December 30, 2011 to shareholders of record at the close of business on December 19, 2011.

Settlement of the Premium Income Exchangeable Securities

Separately, on August 10, 2011, the company announced plans to settle the Premium Income Exchangeable Securities (“PIES”) assumed pursuant to the merger with RVI in exchange for approximately 3.8 million shares of DSW Class A common stock on the maturity date of September 15, 2011. Following the delivery of the shares to the holders of the PIES, DSW's public float increased by the 3.8 million shares. However, these shares did not increase the company's diluted shares reported in previous quarters because they have always been included in the diluted share count since the PIES were issued in 2006.

Fiscal 2011 Annual Outlook

The company is raising its annual guidance. DSW now estimates annual comparable sales to increase between 7 percent and 8 percent and now expects annual diluted earnings per share in the range of $2.90 to $2.95 for fiscal 2011, excluding any impact from the merger with RVI and related items.