With warm
weather spurring early seasonal sales of sandals, DSW Inc. reported
first-quarter earnings that handily topped Wall Street targets, prompting the
shoe chain to raise its full-year profit guidance.

Earnings reached
$39.9 million, or 89 cents share, rebounding from a loss of $38.1 million, or
$1.74, a year ago. The latest quarter included a $4.3 million after-tax net
charge related to the merger with RVI (Retail Ventures), versus a $77.7 million
after-tax charge on the same merger a year ago. Excluding special items, the
footwear chain earned 98 cents per share, compared with the 87 cents in the
2011 first quarter and ahead of Wall Street's consensus estimate of 90 cents.

increased 10.9 percent to $558.6 million. Comps ran ahead 7.6 percent versus a
10.8 percent comp gain a year ago. Gross margins increased 30 basis points to
34.5 percent due mainly to a 70 basis point decrease in occupancy rates.
Merchandise margins remained relatively flat at 46.9 percent versus a record
47.0 percent rate last year, due in part to a higher mix of regular priced

On a
conference call with analysts, Mike MacDonald, president and CEO, said the
earnings gain came despite incremental costs related to the acceleration in its
store expansion, which include opening 35 to 40 stores in 2012. Comps were
better-than-expected comps due in part to the unseasonable warm weather in
March and early April. All product categories delivered comp gains in the high
single-digit range. Women's footwear increased 8 percent, led by double digit
growth in sandals. Men's rose 7 percent on top of an 18 percent increase last
year. Athletic comped up 6 percent due to the addition of stronger technical
brands and the infusion of color across the assortment. Accessory advanced 8
percent, led by casual hosiery and small leather goods.

The ten
stores opened in the quarter are exceeding plan “by a wide margin,”
including its second Manhattan location, at 34th street. High-profile locations
also opened near Union Square in San Francisco and on State Street in Chicago
with plans set for a third Manhattan store to open in July. DSW.com also had
strong sales results in the quarter.

forward, the website is expected to benefit from enhancements that enable
browsers to learn more about features and SKU availability, as well as improved
product recommendations around customer data. Stores will be supported by a new
size optimization system that more-efficiently allocates sizes by local store data
as well as a new in-store wedding gift planner.

For the
full year, DSW raised its per-share earnings guidance to $3.25 to $3.40, up
from its prior outlook of $3.20 to $3.35. Comps are expected to increase
between 3 to 5 percent, up from 2 to 4 percent previously.