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DSW Riding High On Earnings Beat, Comp Growth, Stock Gains

DSW Inc. recently posted the strongest comparable-store sales in nearly three years and Q4 earnings that beat Wall Street’s forecasts. The Columbus, Ohio-based footwear retailer’s share price also jumped after the bell this morning.

Net Income: Net income for the quarter ended Jan. 31, 2015, was $30.8 million, which included an expense of $100,000 related to RVI. Earnings were up compared with last year’s same quarter, which had $21.8 million in earnings, including $600,000 of net charges related to RVI and the company’s luxury test.

EPS: Earnings per diluted share were 34 cents, including the expense of $100,000 related to RVI, compared with the year-ago quarter’s EPS of 30 cents, which included $600,000 of net charges related to RVI and the company’s luxury test.

Adjusted Income: Adjusted net income was $30.9 million, or 35 cents per diluted share — an increase of 13 percent over last year’s $28.7 million, or 31 cents per diluted share.

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Net Revenue: Sales increased 11.9 percent, to $640 million, compared with last year’s $572 million.

Adjusted Revenue: Adjusted sales rose 12.1 percent, to $640 million, compared with last year’s $571 million, excluding sales from the company’s luxury test.

Hit, Miss or Beat: DSW’s performance was a beat on Wall Street’s estimates for revenues and EPS. Analysts polled by Yahoo Finance had forecasted EPS of 28 cents and net revenue of $614 million.

Executive Insights: “At the outset of the year, we made a number of leadership changes in our buying organization. These changes led to a resurgence of our women’s footwear business, which contributes over 60 percent of total revenues. After four consecutive quarters of comparable sales declines, the women’s footwear category turned positive in Q3 and recorded a strong 6 percent increase in Q4,” said CEO Michael MacDonald during a March 17 earnings conference call.

On the West Coast Backlog: “The processing slowdowns that we have seen through the last several months have resulted in product delays. We’ve been able to offset some of these delays with the early release of our pre-buy inventory,” MacDonald added.

Looking Ahead: For FY 2015, DSW said it expects revenue growth of 7 percent to 8 percent, with comparable-sales growth in the low- to mid-single-digit range. It expects to open 35 new stores, including 8 to 10 small-format stores. Full-year earnings per share are expected to range from $1.80 to $1.90 per share, representing 10 percent earnings growth at the midpoint of the range. This guidance assumes a tax rate of 39 percent and 90 million shares outstanding.

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