DSW Sees Sales and Net Gains in Q4; Year

DSW Inc. reported net income of $16.6 million on net sales of $329.1 million for the fourteen-week fourth quarter ended February 3, 2007, compared with net income of $10.0 million on net sales of $283.8 million for the thirteen-week fourth quarter ended January 28, 2006. Same store sales increased 1.0% for the quarter, on top of an 11.3% for the same period last year.

Diluted earnings per share were 37 cents for the fourteen-week fourth quarter this year compared with 23 cents for last year's thirteen-week fourth quarter.

Fiscal Year Results

For the fiscal year, net income was $65.5 million on net sales of $1.28 billion, compared with net income of $37.2 million on net sales of $1.14 billion last year. On a comparable fifty-two week basis, same store sales increased 2.5% versus an increase of 5.4% for last year.

Diluted earnings per share for the fifty-three week fiscal year ended February 3, 2007 were $1.48 compared with $1.00 for the fifty-two week fiscal year ended January 28, 2006.

The fiscal 2005 results include $6.6 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 in March 2005. After adjusting for the dividend interest, the data theft accrual and the significant increase in shares as a result of the company's initial public offering in June 2005, pro forma net income for the fiscal 2005 full-year period was $45.0 million, or diluted earnings per share of $1.02. The exhibit at the end of this release reconciles the non-GAAP pro forma net income and diluted earnings per share to the reported net income and diluted earnings per share for fiscal 2005.

2007 Outlook

The company currently estimates fiscal 2007 annual diluted earnings per share to be in the range of $1.63 to $1.68. Annual comparable store sales are projected to increase approximately 3-5% and the company plans to open at least 30 DSW stores during the year. The company plans to make significant investments in future growth initiatives during the year that are expected to be accretive to earnings in 2008 and beyond.

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

                           Fourteen     Thirteen      Fiscal Year Ended
                         weeks ended  weeks ended
                          February 3, January 28,  February 3,  January 28,
                             2007         2006        2007         2006

    Net sales             $329,052     $283,804   $1,279,060   $1,144,061
    Cost of sales         (239,765)    (210,265)    (912,709)    (828,342)
    Gross profit            89,287       73,539      366,351      315,719
    Operating expenses     (64,783)     (56,895)    (265,637)    (245,607)
    Operating profit        24,504       16,644      100,714       70,112
    Interest income
     (expense), net          2,051          879        6,913       (7,505)
    Earnings before income
     taxes                  26,555       17,523      107,627       62,607
    Income tax provision    (9,952)      (7,484)     (42,163)     (25,426)
    Net income             $16,603      $10,039      $65,464      $37,181

    Basic and diluted earnings per share:
       Basic                 $0.38        $0.23        $1.49        $1.00
       Diluted               $0.37        $0.23        $1.48        $1.00

    Shares used in per share calculations:
       Basic                43,929       43,892       43,914       37,219
       Diluted              44,309       44,147       44,222       37,347