DSW Inc. reported that net income, adjusted for one-time items, rose 35.9 percent, in the fourth quarter, to $31.4 million, or 69 cents per share. After charges in both periods tied to its merger with RVI, reported earnings reached $27.1 million, or 59 cents per share, versus $19.4 million, or 37 cents a share, a year ago.
Sales increased 15.7 percent to $594.3 million, with an incremental sales benefit of $32.3 million for the 53rd week this year. Superstorm Sandy was estimated to have negatively impacted sales results by $8 million. Comps grew 3.6 percent following a 5.6 percent gain during the fourth quarter of 2011. The comp gain was driven by increase in conversion and average unit retail, said Mike MacDonald, DSWs president and CEO, on a conference call with analysts.
Among categories, the strongest growth came from Men’s Footwear and Accessories. More moderate increases were recorded in Women’s Footwear and Athletic Footwear. Within Women’s Footwear, Casual performed better than Dress. The Women’s Boot category posted a mid single-digit comp increase for the quarter.
Regarding athletic, Debbie Ferree, vice chairman and chief merchandising officer, said DSW saw very, very strong results in our big, key brands in the quarter, with running delivering very strong results and cross-training also performing well. The chain doesnt do a big business in basketball footwear.
Gross margins increased 50 basis points in the quarter to 28.9 percent as the leverage of occupancy expenses and lower distribution of fulfillment center costs offset a 40 basis point decline in merchandise margin. Its SG&A rate decreased by 90 basis points to 20.2 percent, driven by leveraging pre-opening, marketing, overhead and IT expenses.
In the full year, sales increased 11.5 percent to $2.26 billion on a 5.5 percent comparable sales increase. Adjusted for special items, earnings climbed 11.8 percent to $152.2 million, or $3.35 a share.
For 2013, DSW indicated its sales trend had softened in the first six weeks of the year with comparable sales declining by 5 percent over that period. All merchandise categories in all geographic regions have softened. While weather has certainly played a part in this result, MacDonald said DSW has reduced forward sales expectations and managed receipts downward to bring inventories in line with those reduced expectations. DSW also said it is managing variable expenses and identifying nonessential fixed expenses that can be reduced or deferred.
This approach may prove to be conservative, but weve always found that our profitability improves in situations where we are chasing the sales trend, said MacDonald. So that is exactly how we plan to operate in the near-term.
If comparable sales for the full year were to be flat, the company estimates EPS of $3.30 to $3.40 for the year, excluding any non-recurring items.
