DSW Inc. reported third quarter sales increased 11.7 percent to $592.7 million, aided by a 6.3 percent comparable sales increase. Earnings improved 17.1 percent adjusted for special items.
“We are pleased with our third quarter results. Comparable sales grew for the 13th consecutive quarter and earnings increased at a double digit rate,” stated Mike MacDonald, President and Chief Executive Officer. “During the quarter, we opened a record 26 new stores. We also paid a special dividend of $2.00 per share to DSW shareholders this quarter, the second such dividend in the last 13 months. Finally, we continued to make strategic investments that will enable DSW to maintain its growth trajectory.”
Third Quarter Operating Results
- Sales increased 11.7 percent to $592.7 million compared to last year's third quarter sales of $530.7 million.
- Comparable sales increased by 6.3 percent. This follows an increase of 5.2 percent for the third quarter of 2011.
- Reported net income was $50.1 million, or $1.10 per diluted share on 45.5 million weighted average shares outstanding, which included a $3.6 million award resulting from the 2005 credit card litigation, as well as $0.2 million in legacy charges from RVI. This compares to Reported net income in the third quarter of 2011 of $53.7 million, which included a non-cash benefit of $13.9 million related to the merger with RVI. Reported EPS for the third quarter last year was $0.75 per share.
- Net income, adjusted for one-time items was $46.6 million, or $1.02 per diluted share on 45.5 million weighted average shares outstanding. This compares to Adjusted net income for the same period last year of $39.8 million, or $0.88 per diluted share on 45.3 million weighted average shares outstanding.
- Sales increased 10.1 percent to $1,663.5 million from $1,510.6 million for the first nine months of 2011.
- Comparable sales for the first nine months increased 6.1 percent over an increase of 9.2 percent for the first nine months of 2011.
- Reported net income was $119.3 million, or $2.64 per diluted share on 45.2 million weighted average shares outstanding, which included $5.2 million after-tax non-cash charges related to RVI and a $3.6 million after-tax award from credit card litigation. This compares to Reported net income in the first nine months of 2011 of $155.4 million, which included a non-cash benefit of $42.3 million related to the merger with RVI. Reported EPS last year was $4.30 per share.
- Net income, adjusted for one-time items was $120.8 million or $2.66 per diluted share on 45.4 million weighted average shares outstanding. This compares to Adjusted net income for the same period last year of $113.1 million, or $2.50 per diluted share on 45.3 million weighted average shares outstanding.
- Cash, short term and long term investments totaled $430 million compared to $369 million last year, an increase of 16.5 percent.
- Inventories were $422 million compared to $378 million last year, an increase of 11.8 percent, in line with expectations. On a cost per square foot basis, inventories in DSW stores decreased by 1 percent at the end of quarter.
- The company did not repurchase any shares under its $100 million share buyback program this quarter.
- At the beginning of the fourth quarter, the company closed on the acquisition of 810 AC LLC, which owned its corporate headquarters and distribution center on Air Center Drive in Columbus, OH in the fourth quarter.
DSW INC.
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Net sales by reportable segment: | |||||||||||||||||||||
Three months ended | Nine months ended | ||||||||||||||||||||
October 27, 2012 | October 29, 2011 | % change | October 27, 2012 | October 29, 2011 | % change | ||||||||||||||||
(in millions) | (in millions) | ||||||||||||||||||||
DSW | $ | 559.3 | $ | 491.9 | 13.7 | % | $ | 1,562.7 | $ | 1,396.4 | 11.9 | % | |||||||||
Affiliated Business Group | 33.4 | 38.8 | (13.9) | % | 100.8 | 114.2 | (11.7) | % | |||||||||||||
Total DSW Inc. | $ | 592.7 | $ | 530.7 | 11.7 | % | $ | 1,663.5 | $ | 1,510.6 | 10.1 | % | |||||||||
Comparable sales change by reportable segment:
DSW INC. | ||||||||||||||||||
Three months ended | Adjustments related to the Merger with RVI | Adjustments related to award of damages | Three months ended | |||||||||||||||
October 27, 2012 | October 27, 2012 | |||||||||||||||||
Reported | Adjusted | |||||||||||||||||
Net sales | $ | 592,734 | $ | 592,734 | ||||||||||||||
Cost of sales | (392,563) | (392,563) | ||||||||||||||||
Operating expenses | (121,734) | 302 | (1) | (4,018) | (2) | (125,450) | ||||||||||||
Operating profit | 78,437 | 302 | (4,018) | 74,721 | ||||||||||||||
Interest income, net | 2,575 | (1,869) | (2) | 706 | ||||||||||||||
Income from continuing operations before income taxes | 81,012 | 302 | (5,887) | 75,427 | ||||||||||||||
Income tax (provision) benefit | (30,897) | (128) | (1) | 2,245 | (2) | (28,780) | ||||||||||||
Net income | $ | 50,115 | $ | 174 | $ | (3,642) | $ | 46,647 | ||||||||||
Diluted shares used in per share calculations: | 45,523 | 45,523 | ||||||||||||||||
Diluted earnings per share: | ||||||||||||||||||
Diluted earnings per share from continuing operations | $ | 1.10 | $ | 1.02 | ||||||||||||||
Diluted earnings per share | $ | 1.10 | $ | 1.02 | ||||||||||||||
Notes: | |
1) | Reflects legal fees related to the settlement of RVI litigation and other RVI legal expenses, and related tax effects. |
2) | Reflects DSW's receipt of an award of damages related to the 2005 data theft of $5.3 million, net of expense of $1.3 million and interest accrued on the settlement of $1.9 million. Also reflects the related tax effects. |
Three months ended | Adjustments related to the Merger with RVI | Three months ended | ||||||||||||
October 29, 2011 | October 29, 2011 | |||||||||||||
Reported | Adjusted | |||||||||||||
Net sales | $ | 530,747 | $ | 530,747 | ||||||||||
Cost of sales | (350,465) | (350,465) | ||||||||||||
Operating exp | ||||||||||||||
