DSW Delivers in Q1, Analysts Bullish

LOS ANGELES — After a strong first quarter, the future is looking bright for DSW Inc.

“There are a lot of good things going on with this company,” said Christopher Svezia, an analyst at Susquehanna Financial.

“As we move forward, they’ll continue to show the ability to gain market share. There are a lot of things — such as its price/value equation — that bode well for the company in the current [economic] environment.”

Steve Marotta, an analyst at C.L. King & Associates, agreed that the retail chain is on solid footing and has ample room to grow.

“It was a bang-up quarter,” he said. “[Cold] weather played against them in their sandal business, but they were still able to generate a near-11 percent comp. They have growth opportunities going forward [to open more stores].”

For the quarter ended May 1, the Columbus, Ohio-based retailer chalked up earnings of $38.4 million, or 85 cents a share, a 27 percent increase over the $30.2 million, or 67 cents, the company reported in the year-ago period. Analysts polled by Yahoo Finance had predicted earnings per share of 75 cents on revenue of $486.6 million.

Net sales rose 12 percent to $503.6 million, from $449.5 million, as comparable-store sales advanced 10.8 percent, following a 16.2 percent increase in the corresponding quarter last year.

Sales during the period were led by growth in accessories, men’s footwear and the company’s private-label offering.

And while weather hindered the performance of women’s sandals, DSW President and CEO Michael MacDonald said the women’s category still finished strong.

“Our women’s footwear business recorded a solid comp-sales increase for the quarter,” he said during a conference call with investors and analysts. “We believe it could have been even stronger had it not been for the cold and wet weather in the Northeast and Midwest.”

Still, MacDonald noted that the firm met its expected sandal sales by redirecting inventory to regions of the country with stronger demand.

The retailer bowed seven new stores during the period. An additional 10 doors are slated to open during the third quarter of this year. In all, the company plans to add 18 stores this year and remodel 42 existing locations.

The company’s merger with Retail Ventures Inc., which closed on Thursday, is also expected to strengthen the business by simplifying the corporate structure and improving cash flow.

“The completion of our merger with RVI represents a milestone for our company and brings a number of expected benefits to DSW,” MacDonald said.

The firm ended the quarter with cash and cash equivalents of $49.9 million and no debt.

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