Investors Alert on Earnings News – DSW Inc. (NYSE: DSW)

DSW Inc. (NYSE: DSW) closed with change of 2.73% to $19.6 with the total traded volume of 5147861 shares versus to an average volume of 1.57M. The stock was up in the 5 days activity 0.93%. The one month performance of stock was high 4.31%. DSW shares are -9.01% for the quarter and driving a -5.36% over the course of the past year and is now -8.45% since this point in 2018.  Right now ABC beta is 0.78. The average volatility for the week and month was at 2.90% and 3.35% respectively.

DSW Inc. (NYSE: DSW), a leading branded footwear and accessories retailer, announced financial results for the fourteen week and fifty-three week periods ended February 3, 2018,  compared to the thirteen week and fifty-two week periods ended January 28, 2017.

Roger Rawlins, Chief Executive Officer stated, “Our fourth quarter performance capped our first year of adjusted earnings growth since 2013. Our initiatives drove comparable sales growth and strong margin improvement at the DSW Segment this quarter. The sales inflection at our Power 35 locations, including our Lab store where we have introduced an elevated warehouse experience, prove our initiatives are gaining traction and provide us a blueprint to drive sales. We are drawing on our strong cash flow and the benefit from U.S. Tax Reform to enhance shareholder returns by boosting our quarterly dividend and reinvesting in strategic initiatives that will advance DSW’s dominant position in the marketplace in the years to come,” stated Mr. Rawlins.

The Company achieved several important milestones in fiscal 2017:

Total Company revenues hit a new high of $2.8 billion;

Renewed momentum in the core business, with footwear posting positive comparable sales for three quarters in a row;

The revitalization of DSW’s Power 35 locations;

The successful expansion of DSW Kids, with plans to complete the chain-wide roll-out in 2018;

The Company’s strongest growth in digital demand in the last 9 years;

The first increase in operating profitability and EPS since 2013;

The development of a new store design and the innovation of new services and technology that will define DSW’s future customer experience.

Fourth Quarter Operating Results

Sales increased 6.7% to $720.0 million, including $35.6 million from the extra week.

For the thirteen-week period, comparable sales increased 1.3% compared to last year’s 7.0% decrease.

Reported gross profit increased by 150 bps, driven by favorable sourcing, lower markdowns and occupancy leverage.

Reported operating expenses improved by 20 bps, driven by tighter expense management, partly offset by higher incentive compensation.

Reported net income was $11.7 million, or $0.15 per diluted share, which included net after-tax charges of $18.8 million, or $0.23 per diluted share, excluding costs related to Ebuys, restructuring, acquisition expenses related to Town Shoes and the impact of U.S. Tax Reform.

Adjusted net income was $30.5 million, or $0.38 per diluted share, an increase of 90%, excluding costs related to Ebuys, restructuring, acquisition expenses related to Town Shoes and the impact of U.S. Tax Reform. Excluding the impact of the 53rd week of $0.06 per diluted share, adjusted earnings per share increased by 60%.

Impact of the Tax Cuts and Jobs Act (the “U.S. Tax Reform’):

As a result of the recent passage of the U.S. Tax Reform, the Company recorded an additional $10.1 million net tax expense resulting from the remeasurement of its net federal deferred tax assets, partially offset by the benefit of applying the new rate on the last month of the fiscal year. This additional amount is excluded from the Company’s adjusted results.

Based on its initial analysis of the U.S. Tax Reform, the Company estimates an effective tax rate of approximately  29% for fiscal year 2018 compared to its historical rate of 39%, with the benefit from the reduction in federal tax rate partly offset by other provisions in the new law. The Company’s effective tax rate will be subject to changes in its interpretation and application of the new tax legislation, future guidance and regulatory updates from governing bodies go forward.

Exit of Ebuys

Following a comprehensive evaluation of strategic alternatives for Ebuys, the Company made the decision  to exit the business. Consequently, the Company revalued its remaining assets including inventory, fixed and intangible assets at liquidation value and reduced its contingent consideration liability. The Company expects to complete the liquidation process in early 2018 and may incur additional one-time exit charges, which will be excluded from adjusted results.

Full Year Operating Results

Sales increased 3.3% to $2.8 billion, including $87.0 million from Ebuys.

For the fifty-two week period, comparable sales decreased by 0.4% compared to last year’s 3.0% decrease.

Reported net income was $67.3 million, or $0.83 per diluted share, which included net after-tax charges of $55.5 million, or $0.69 per diluted share, excluding costs related to Ebuys, restructuring costs, acquisition expenses related to Town Shoes and the impact of U.S. Tax Reform.

Adjusted net income was $122.8 million, or $1.52 per diluted share, a 4.1% increase to last year.

Balance Sheet Highlights

Cash, short-term and long-term investments totaled $300.5 million compared to $287.1 million the previous year.

Inventories were $501.9 million compared to $500.0 million last year. On a cost per square foot basis, DSW inventories increased by 6%, primarily due to higher in-transit goods as the Company funds growth initiatives. On a two-year basis, inventories per square foot declined 2%.

For the full year, the Company repurchased a total of 0.5 million shares for a total of $9.4 million and has $524.1 million remaining under its share repurchase program. The Company has returned $625 million in dividends and share repurchases since 2013.

Regular Dividend

DSW Inc.’s Board of Directors approved to increase its quarterly cash dividend by 25% to $0.25 per share. The dividend will be paid on April 6, 2018 to shareholders of record at the close of business on March 23, 2018.

Fiscal 2018 Annual Outlook

For the fifty-two week period ending February 2, 2019, the Company expects full year revenue growth to decrease by 1% to 3%, with the exit of non-core businesses and the impact of the 53rd week. Excluding the exit of non-core businesses and the 53rd week, total revenues are expected to increase in the 2% to 4% range. This assumes comparable sales increase in the low single digit range and the opening of 3 to 6 net new locations for the DSW Segment.

Full year adjusted earnings per share is expected to range between $1.52 to $1.67 per diluted share, representing earnings growth of 4% to 14% excluding the income from the 53rd week. The Company’s outlook assumes a tax rate of 29% and 81.0 million shares outstanding. Guidance excludes charges related to the exit of Ebuys and does not assume the consolidation of Town Shoes.

Shares of DSW Inc. have been recently spotted trading -13.73% off of the 52-week high price. On the other end, company shares have been noted 29.46% away from the low price over the last 52-weeks. 52 week range of the stock remained $ 15.14 – 22.72. Switching over to some distances from popular moving averages, we see that the stock has been recorded -3.33% away from the 50 day moving average and 1.41% away from the 200 day moving average. Moving closer, we can see that shares have been trading 0.34% off of the 20-day moving average.

Dorian Mcburney

Dorian Mcburney

Dorian Mcburney is an author, journalist and CEO of the website. He has more than 5 years of experience in institutional investment markets, including fixed income, equities, derivatives and real estate. He has a Bachelor in Business Administration with a major in Finance. He bought his first stocks in a private business at age 15 and made his first public stock trade at 23. He has always been interested in the stock market and how it behaves. As the dad of two children, he’s made saving money and investing for them a high priority. Over many years of investing, he has made some wise choices and he’s made many mistakes. But he’s learned from both. Mr. Dorian observations and experience give him the insight to stock market patterns and the investor behaviors that create them. He reports about Earnings news category. Address: 4946 Melody Lane, FARMINGTON, Minnesota Email: Dorianmcburney@stocksgeeks.com Contact number: 804-446-7372

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