DSW Q2 Reports Results In Line With Street, Announces Cost-Cutting Measures

DSW Q2 Reports Results In Line
A DSW store location.

Columbus, Ohio-based DSW Inc. reported second quarter earnings Tuesday morning in line with Wall Street expectations.

The company said that on the whole, sales this quarter were driven by athletic performance and noted that it was undertaking additional cost-saving measures to continue to shore up business after a tough start to business in 2016.

DSW reported net income of $25 million, or 30 cents per diluted share, in line with analyst predictions. It was a decline from the year-ago period, when profits were $37.6 million, or 42 cents a share.

Sales this quarter were up 5 percent over the year-ago period, reaching $658.9 million. In second quarter last year, DSW reported sales of $627.2 million. The sales numbers were a slight beat for the retailer: Analysts expected the firm to top $658.7 million. Comparative store sales were down 1.2 percent across the firm, but omnichannel sales grew 21 percent. DSW said many of those orders were filled from stores.

According to DSW CEO Roger Rawlins, the company had identified $25 million in savings and said that the firm had “streamlined our organization and business processes, which will reduce expense growth and align future capital spending with our strategic priorities.” The company didn’t expand on whether this included store closures or layoffs, or where exactly the savings were specifically found.

Share prices rallied about 2 percent in premarket trades but slipped as much as 7 percent at market open.

By category, women’s athletic and athleisure styles did very well, according to chief marketing officer and vice chairman Debbie Ferrée in a call with investors. She also noted sandals struggled during the second quarter. Men’s athletic styles are selling, too. The retailer is investing for fall in a tight number of booties and more transitional types of footwear.

Rawlins said that the brand had done a few tests with athletic product and saw major results, which will help drive buys for coming quarters. “What we saw was when we offer more athletic choices to the customer, we sell more athletic products,” Rawlins explained. “So the real challenge now is to figure out how do we maximize the athletic assortment in our stores without impacting the balance of the assortment. This is critical for optimizing future category distortions as well as growing our kids assortment to the rest of the chain.”

Like many retailers, DSW has been trying to balance promotions, inventory and margins during a sluggish first half of the year. The brand didn’t elaborate much on the progress of its children’s launch beyond saying it was satisfied with the introduction, which analysts were hoping for.

DSW held its guidance for diluted earnings per share to range from $1.32 to $1.42 per share and 6 percent revenue growth, and comps to decline 1 percent to 2 percent.