DSW Inc. today provided another source of hope that conditions could be improving for retail.
For the first time since 2015, the off-price shoe seller’s same-store sales (comps) turned positive — advancing a modest 0.6 percent in the second quarter. At the same time, DSW’s sales and profit significantly topped market watchers’ forecast. That combination of upbeat news today has sent the firm’s shares skyrocketing.
As of 10:30 a.m. ET, DSW’s stock was up nearly 21 percent to $18.94.
The retailer’s Q2 sales increased 3.3 percent to $680.4 million, besting estimates for sales of $666.1 million. Its reported net income was $28.6 million, or 35 cents per diluted share, a 14 percent gain over the same period last year. Adjusted net income was $30.6 million, or 38 cents per diluted share — which handily topped analysts’ bets for earnings per diluted share of 29 cents.
During a conference call this morning, CEO Roger Rawlins told investors that DSW’s same-store-sales gain wasn’t its only milestone during the quarter.
“Our largest category, women’s, turned positive this quarter and marked the first time that women business achieved its original plan since 2014,” Rawlins said, noting that DSW’s strategy around product differentiation and “customer centricity” resonated during the period. “With our focus on execution, we drove a mid-single-digit comp increase [on] regular-price product during the typically clearance-dominated quarter. We reduced clearance markdowns, and we ended the season with 10 percent less inventory.”
Rawlins said the retailer’s expansion into kids as well as its larger athletic selection also helped improve the company gain more market share and new customers. DSW launched its kids’ business in more than 200 stores during the 2016 back-to-school season.
“We saw a sequential improvement across all selling metrics,” he added.
DSW maintained its full-year outlook and continues to expected adjusted diluted EPS at $1.45 to $1.55.