DSW Inc. reported a loss on an adjusted basis of $5.4 million, or 7 cents a share, against adjusted earnings of $30.8 million, or 38 cents, a year ago.
On a reported basis, the loss in the latest period came to $45.7 million, or 58 cents a share, against earnings of $12 million, or 15 cents, a year ago.
Sales for the quarter were $838.6 million vs. $723.4 million a year earlier. Analysts had predicted sales of $840 million for the quarter.
Full-year highlights include:
- Full-year reported a net loss for fiscal 2018 was $0.26 loss per diluted share, including net after-tax charges of $1.92 per diluted share from adjusted items
- Full-year Adjusted EPS for fiscal 2018 was $1.66 per diluted share, which included $0.12 per diluted share from the wind-down of operations of exited businesses; Adjusted EPS at mid-point of guidance, which excluded the wind down of operations of exited businesses
- Repurchased two million of company shares during the fourth quarter; including dividends, returned over $127 million to shareholders in fiscal 2018
- Board of Directors declared a quarterly dividend of $0.25 per share
Chief executive officer, Roger Rawlins, stated, “Fiscal 2018 was one of the best years in our company’s history from a comparable sales and earnings growth standpoint. We crossed the $3 billion revenue threshold for the first time and drove a +6 percent increase in comparable sales as we strengthened connections with our customers. We built a compelling product assortment, including the expansion of DSW Kids, a differentiated services offering with our W Nail Bar partnership, and the relaunch of our award-winning loyalty program. At the same time, we strategically positioned our company to grow share and enhance profitability through transformative acquisitions, creating an infrastructure that positions us to be a significant force in the footwear industry for years to come.”
The company achieved several important milestones in fiscal 2018:
- Total company revenues hit a new high of $3.2 billion;
- Strongest Adjusted EPS growth since 2013 and best year-over-year comparable sales performance since 2011;
- Continued momentum in the core business with five consecutive quarters of positive comparable sales and seven consecutive quarters of positive footwear comparable sales;
- DSW Kids expanded to every store and is a significant growth driver;
- Digital demand grew over 30 percent;
- Relaunched the VIP Program, which was named a Top Ten 2018 Most Innovative Loyalty Program by Shopify, in the company of well regarded programs such as Sephora, Amazon Prime and Starbucks. Our new program drove significant enrollment increases and contributed to higher brand engagement and retention rates and transactions per member;
- Completed two major acquisitions that added two new segments, Canada Retail and Brand Portfolio, to the business; and
- Further differentiated our in-store customer experience with the introduction of the W Nail Bar concept store, which generated significant revenues in its first year.
Full Year Operating Results
- Total revenue increased 13.3 percent to $3.2 billion, including $310.0 million from the acquisitions of the Canadian business (Canada Retail Segment) and Camuto Group (Brand Portfolio Segment).
- For the fifty-two week period, comparable sales increased by 6.1 percent compared to last year’s 0.4 percent decrease.
- Reported gross profit, as a percent of sales, increased 100 bps due to lower product costs and occupancy leverage.
- Reported operating expenses, as a percent of sales, increased 380 bps driven by increased marketing investments, higher incentive compensation, and the impact of acquisition-related costs, lease exit and restructuring charges.
- Reported net loss was $20.5 million, or $0.26 loss per diluted share.
- Adjusted net income was $134.9 million, or $1.66 per diluted share, which included a loss of $0.12 per diluted share from the wind down of operations for the exited businesses, which were not reflected in the company’s guidance.
- Excluding the additional 53rd week in fiscal 2017, fiscal 2018 Adjusted net income grew 14.3 percent and Adjusted EPS grew 13.7 percent compared to the prior year.
On December 11, DSW raised its full year outlook for Adjusted EPS in the range of $1.70 to $1.85 per diluted share, compared to its previous range of $1.60 to $1.75 per diluted share. Guidance does not include charges related to exit costs, restructuring or acquisition-related expenses or the impact of exited businesses.
Balance Sheet Highlights
- Cash and investments totaled $169 million at year-end 2018 compared to $301 million the prior year, and debt totaled $160 million at the end of fiscal 2018 compared to no debt outstanding at the end of the prior year reflecting the funding of two acquisitions and share repurchase activity in fiscal 2018.
- The company ended the year with inventories of $645 million compared to $502 million at the end of fiscal 2017. Excluding inventories from the acquisitions, inventories per square foot increased by 5.9 percent year-over-year.
- For the full year, the company repurchased a total of two million shares for a total of $47.5 million and has $476.6 million remaining under its share repurchase program. Since 2013, the company has returned $753 million to shareholders through dividends and share repurchases.
- Regular Dividend DSW Inc.’s Board of Directors declared a quarterly cash dividend of $0.25 per share. The dividend will be paid on April 12, 2019 to shareholders of record at the close of business on April 1, 2019.
The company also announced a 3-year Long-Range Plan, which the company will discuss in detail at its Investor Day today. The company will also provide its outlook for Fiscal 2019 at the Investor Day.