DSW Tops Expectations in Q2

DSW Inc. crushed analysts’ estimates in the second quarter, as the completed merger with Retail Ventures Inc. delivered better returns per share.

The firm also announced a special dividend of $2 per share and will start paying out a quarterly dividend of 15 cents per share, pushing its stock price up 2 percent at the market’s opening bell.

After adjustment for items related to the merger, the Columbus, Ohio-based retailer earned a net income of $33.7 million, or 74 cents a share, for the period ended July 30 — compared with a net income of $23.5 million, or 52 cents, in the same period a year ago.

Net sales advanced 15 percent to $476.3 million, from $415.1 million, on the back of strong comparable-store sales, which increased 12.3 percent on top of last year’s 12 percent increase.

Analysts were expecting earnings per share of 63 cents on revenue of $459.4 million, as polled by Yahoo Finance. The firm also delivered better-than-expected gross margin of 32.7 percent, or a 240-basis-point improvement over a year ago.

“We continued our strong performance in the second quarter, delivering double-digit increases in sales and comparable sales, expansion in gross margin and solid earnings growth, driven by the success of our format and our strategies,” Mike MacDonald, president and CEO of DSW, said in a statement.

“Despite economic uncertainty and equity market volatility, we expect fiscal 2011 to represent another strong year of growth and increased value for all DSW stakeholders,” he added.

DSW’s cash and cash equivalents totaled $49.6 million at the end of the second quarter, while inventory per square foot was flat compared with the same period a year ago.

DSW also raised its guidance. Assuming moderate comp growth, flat gross margin and modest reduction of expenses in the back half, the firm now expects EPS to range from $2.70 to $2.85 for fiscal 2011.

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