Investors Rejoice, DSW Is Back in the Saddle

Shares for DSW Inc. are jumping in early-morning trading after the retailer posted third-quarter results that trumped expectations and also lifted its guidance for the fiscal year. As of 10 a.m.  ET, DSW’s stock was up more than 7 percent to $24.73. (The shares had surged more than 16 percent in premarket trading.)

The off-price footwear seller — and recent Camuto Group acquirer — said today that its sales during the period increased 17 percent to $833 million, blowing past market watchers’ forecast of $794 million. The firm, which has experienced its share of unevenness in recent years, has moved quickly to implement digital marketing and in-store technology, as well as leverage its stores for online order fulfillment to upend competition. Due in no small part to these efforts, DSW said its Q3 comparable store sales improved 7.3 percent, also handily above forecasts.

The company’s profits also skyrocketed year over year to $39.3 million, or 48 cents per diluted share, from $4 million, or 5 cents per diluted share, in last year’s same period. On an adjusted basis, DSW’s profits were 70 cents per diluted share, well above the 51 cents analysts had expected.

“Our investments in merchandising, marketing and talent drove continued top line momentum, with comp growth across all businesses,” said CEO Roger Rawlins. “Additionally, the nationwide rollout of DSW kids drove the most successful back-to-school season in our history, and our recently acquired Canadian business delivered the best results in the last five years.”

On the heels of the better-than-expected results, management boosted the firm’s outlook for fiscal 2018 and now expects adjusted EPS for ongoing business to range from $1.70 to $1.85 per diluted share, including $0.05 to $0.10 per share loss from the Camuto Group acquisition.

DSW announced in October an unorthodox merger that would see the retailer partner with brand management firm Authentic Brands Group to snap up Camuto Group for $375 million. Under the terms of the agreement, the pair jointly acquired the intellectual property of Camuto Group’s brands, including Vince Camuto, Louise et Cie, Sole Society and Enzo Angiolini. ABG took the majority stake of 60 percent, while DSW acquired the remainder. DSW also acquired all of Camuto Group’s global production, sourcing and design infrastructure in addition to existing working capital of around $100 million. It took on the licensing rights for the Jessica Simpson footwear business, as well as the footwear and handbag licenses for Lucky Brand and Max Studio. Finally, the off-price retailer procured joint-venture participation in the ED Ellen DeGeneres and Mercedes Castillo brands.

“Our acquisition of Camuto Group brings powerful design and sourcing capabilities in-house and new streams of revenue from one of the leading lifestyle brands in fashion footwear,” Rawlins said of the deal today. “Integration efforts are on track, with supply chain and working capital improvements paving the way for a return to profitability. We have transformed our company to one of North America’s largest footwear operators, with vertical product development expertise combined with a vast distribution network. This will accelerate market share growth by creating value for more customers and increasing our competitive differentiation.”

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