DSW Stock Tumbles on Unexpected Net Loss, Announces New Umbrella Company

Shares for DSW Inc. are tumbling in morning trading after the off-price footwear seller posted a surprising fourth-quarter loss.

The company’s stock was down nearly 15 percent to $21.70 as of 9:45 a.m. ET after it said it reported a loss of $5.4 million, or 7 cents a share, in the period ended Feb. 2. Analysts had expected earnings per share of 4 cents. On a reported basis, the firm’s losses were even steeper at $45.7 million, or 58 cents per share.

Revenues during the period, however, advanced 16 percent to $843.4 million, besting the $841.5 million market watchers had predicted. DSW’s comparable sales also climbed 5.4 percent in Q4 — on top of the previous year’s same-period gains of 1.3 percent.

“We built a compelling product assortment, including the expansion of DSW Kids, a differentiated services offering with our W Nail Bar partnership and the relaunch of our award-winning loyalty program,” said CEO Roger Rawlins. “At the same time, we strategically positioned our company to grow share and enhance profitability through transformative acquisitions, creating an infrastructure that positions us to be a significant force in the footwear industry for years to come.”

Among last year’s troubles, the retailer noted inventories per square foot (excluding goods from acquisitions) that climbed 5.9 percent from the previous year. However, a high demand for its DSW Kids partially offset the losses brought about by increased expenses and inventories.

In October, DSW partnered with brand management firm Authentic Brands Group to snap up Camuto Group for $375 million. Under the terms of the deal, the pair acquired the intellectual property of Camuto Group’s brands, including Vince Camuto, Louise et Cie, Sole Society and Enzo Angiolini. While ABG acquired the majority stake of 60 percent, DSW took the remainder.

“Fiscal 2018 was one of the best years in our company’s history from a comparable sales and earnings growth standpoint,” Rawlins added. “We crossed the $3 billion revenue threshold for the first time and drove a [more than] 6 percent increase in comparable sales as we strengthened connections with our customers.”

For the full year, net sales gained 13 percent to $3.2 billion; however, the firm posted a reported net loss of $20.5 million, or 26 cents per share. On an adjusted basis, profits were $134.9 million, or $1.66 per share — an improvement over the prior year’s profits of $122.9 million, or $1.52 per share.

During its investor day, the company announced that it was creating a new umbrella company called Designer Brands, which will be listed as DBI.

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