COLUMBUS, Ohio, Dec. 11,
2018 /PRNewswire/ -- DSW Inc. (NYSE: DSW), one of North America's largest designers, producers
and retailers of footwear and accessories, announced financial
results for the three months ended November
3, 2018, compared to the three months ended October 28, 2017.
Chief Executive Officer, Roger
Rawlins stated, "Our investments in merchandising, marketing
and talent drove continued top line momentum, with comp growth
across all businesses. Additionally, the nationwide roll-out 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."
"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. 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," Mr. Rawlins added.
Third Quarter Operating Results
- Total revenue increased by 17.2% to $833
million, including $80.1
million from the consolidation of the Canadian retail
business.
- Comparable sales increased 7.3% for the same 13-week periods
ended November 3, 2018 and
November 4, 2017. Comparable sales
exclude results from the Canada Retail segment
- Reported gross profit, as a percent of sales, increased by 320
bps, due to favorable merchandise margin.
- Reported operating expenses, as a percent of sales, increased
by 540 bps, driven by planned marketing and labor investments,
lease exit costs and acquisition-related costs.
- Reported net income was $39.3
million, or $0.48 per diluted
share, including pre-tax charges totaling $22.9 million, or $0.22 per diluted share, from transaction costs
related to acquisition activity, and lease exit costs partially
offset by a favorable adjustment in goodwill impairment resulting
from a change in purchase accounting.
- Adjusted net income was $57.9
million, or $0.70 per diluted
share, a 56% increase to last year. Adjusted EPS includes a loss of
$0.02 per share from the wind down of
operations for the Town Shoes banner.
Nine Months Operating Results
- Total revenue increased 12.2% to $2.3
billion, including $152.6
million from the consolidation of the Canadian retail
business.
- Comparable sales increased 6.3% compared to last year's 1.0%
decrease.
- Reported gross profit, as a percent of sales, increased by 220
bps, driven by favorable merchandise margin and business mix.
- Reported operating expenses, as a percent of sales, increased
by 290 bps, due to planned marketing and labor investments, lease
exit costs, acquisition-related costs and restructuring
expenses.
- Reported net income was $25.3
million, or $0.31 per diluted
share, including pre-tax charges totaling $121.3 million, or $1.41 per diluted share, related to acquisition
activity, impairment charges, lease exit costs, restructuring
expenses and foreign exchange loss.
- Adjusted net income was $140.3
million, or $1.72 per diluted
share, a 51% increase to last year. Year-to-date Adjusted EPS
includes a loss of $0.07 per share
from the wind down of operations for the Town Shoes banner and
Ebuys.
Third Quarter Balance Sheet Highlights
- Cash and investments totaled $294
million compared to $330
million last year.
- The Company ended the quarter with inventories of $624 million compared to $547 million last year. Excluding inventories
from the Canadian acquisition, inventories per square foot
increased by 10.4% and increased by 7.9% on a two-year basis, in
line with the Company's two-year comparable sales growth of
6.9%.
Regular Dividend
DSW Inc.'s Board of Directors
declared a quarterly cash dividend of $0.25 per share.
The dividend will be paid on January 4, 2019 to shareholders
of record at the close of business on December 21, 2018.
Fiscal 2018 Annual Outlook
The Company raised its full
year outlook for Adjusted EPS in the range of $1.70 to $1.85 per
diluted share, compared to its previous range of $1.60 to $1.75 per
diluted share. Guidance does not include charges related to
exit costs, restructuring or acquisition-related expenses or the
impact of exited businesses. The Company noted the impact of the
Camuto Group acquisition reflects the seasonality of the business
and the timing of the integration process, which is expected to
yield benefits starting in 2019.
Comparison of
Current to Previous Outlook
|
|
|
Current
outlook
|
|
Previous
outlook
|
Revenue
outlook
|
Increase 12% to
14%
|
|
Increase 6% to
9%
|
Revenue from Canadian
acquisition
|
Approx. $215
million
|
|
Approx. $215
million
|
Revenue from Camuto
Group acquisition
|
Approx. $100
million
|
|
|
Comparable sales
growth
|
Mid- to high-single
digit range
|
|
Low- to mid-single
digit range
|
Tax rate
|
Approx.
26%
|
|
Approx.
27%
|
Shares
outstanding
|
82
million
|
|
82 million
|
|
Adjusted EPS
Guidance (exc. business exits)
|
|
Fiscal
2018
|
|
Q4 of Fiscal
2018
|
Prior guidance (exc.
Camuto Group)
|
$
|
1.60
|
|
to
|
$
|
1.75
|
|
|
|
|
|
Current guidance
(exc. Camuto Group)
|
$
|
1.80
|
|
to
|
$
|
1.90
|
|
|
$
|
0.01
|
|
to
|
$
|
0.11
|
|
Impact from Camuto
Group
|
$
|
(0.10)
|
|
to
|
$
|
(0.05)
|
|
|
$
|
(0.10)
|
|
to
|
$
|
(0.05)
|
|
Current
guidance(1)
|
$
|
1.70
|
|
to
|
$
|
1.85
|
|
|
$
|
(0.09)
|
|
to
|
$
|
0.06
|
|
Impact from
business exits
|
$
|
(0.07)
|
|
to
|
$
|
(0.07)
|
+
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Revised guidance for
fiscal 2018 is based on Adjusted earnings of $1.72 per diluted
share for the nine months ended November 3, 2018, plus losses
of $0.07 per share from business exits incurred to-date.
|
|
Webcast and Conference Call
The Company is hosting a
conference call today at 8:30 am Eastern
Time. The conference will be broadcast live over the
internet and can be accessed at http://dswinc.investorroom.com. For
those unable to listen to the live broadcast, an archived version
will be available at the same location until January 4, 2019. The teleconference will be
available on replay and can be accessed by dialing 1-877-344-7529
and entering passcode 10126509.
About DSW Inc.
DSW Inc. is one of North America's largest designers, producers
and retailers of footwear and accessories. The company operates a
portfolio of retail concepts in nearly 1,000 locations under the
DSW Designer Shoe Warehouse®, Shoe Company®, Shoe Warehouse® and
Town Shoes® brands and operates leased locations in the U.S.
through its Affiliated Business Group. DSW Inc. designs and
produces footwear and accessories through Camuto Group, a leading
manufacturer selling in more than 5,400 doors worldwide. The Camuto
Group owns licensing rights for the Jessica Simpson® footwear
business, and footwear and handbag licenses for Lucky Brand® and
Max Studio®. In partnership with a joint venture with Authentic
Brands Group, DSW Inc. also owns a stake in Vince Camuto®, Louise
et Cie®, Sole Society®, CC Corso Como®, Enzo Angiolini® and others.
More information can be found at www.dswinc.com.
Safe Harbor Statement under the Private Securities Litigation
Reform Act of 1995
Any statements in this release that are
not historical facts, including the statements made in our "Fiscal
2018 Annual Outlook," are forward-looking statements and are made
pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. These statements are based on the
Company's current expectations and involve known and unknown risks,
uncertainties and other factors that may cause actual results,
performance or achievements to be materially different from any
future results, performance or achievements expressed or implied by
the forward-looking statements. These factors include, but are not
limited to: our success in growing our store base and digital
demand; risks related to our acquisitions of Camuto Group and Town
Shoes Limited ("TSL"), including the possibility that the
anticipated benefits of the acquisitions are not realized when
expected or at all; our ability to protect our reputation and to
maintain the brands we license; maintaining strong relationships
with our vendors, manufacturers and wholesale customers; our
ability to anticipate and respond to fashion trends, consumer
preferences and changing customer expectations; risks related to
the loss or disruption of our distribution and/or fulfillment
operations; continuation of agreements with and our reliance on the
financial condition of Stein Mart;
our ability to execute our strategies; risks related to
international franchisees failing to perform under their
obligations and/or not operating the franchised stores according to
our standards; fluctuation of our comparable sales and quarterly
financial performance; risks related to the loss or disruption of
our information systems and data; our ability to prevent or
mitigate breaches of our information security and the compromise of
sensitive and confidential data; failure to retain our key
executives or attract qualified new personnel; our reliance on our
loyalty program and marketing to drive traffic, sales and customer
loyalty; risks related to leases of our properties; our
competitiveness with respect to style, price, brand availability
and customer service; our reliance on foreign sources for
merchandise and risks inherent to international trade, including
escalating trade tensions between the U.S. and other countries;
uncertainty related to future legislation, regulatory reform,
policy changes, or interpretive guidance on existing legislation,
including the impact of the Tax Cuts and Jobs Act; uncertain
general economic conditions; risks related to holdings of cash and
investments and access to liquidity; and fluctuations in foreign
currency exchange rates. Additional factors that could cause our
actual results to differ materially from our expectations are
described in the Company's latest annual or quarterly report, as
filed with the Securities and Exchange Commission. All
forward-looking statements speak only as of the time when made. The
Company undertakes no obligation to revise the forward-looking
statements included in this press release to reflect any future
events or circumstances.
DSW
INC.
|
SEGMENT
RESULTS
|
(unaudited)
|
|
Net sales by
segment and total revenue
|
|
|
|
Three months
ended
|
|
|
|
|
|
Nine Months
Ended
|
|
(dollars in
thousands)
|
November 3,
2018
|
|
October 28,
2017
|
|
%
change
|
|
November 3,
2018
|
|
|
October 28,
2017
|
|
%
change
|
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Retail
segment(1)
|
$
|
721,746
|
|
$
|
655,930
|
|
10.0%
|
|
$
|
2,083,287
|
|
$
|
1,910,125
|
|
9.1%
|
Canada Retail
segment
|
80,072
|
|
—
|
|
— %
|
|
152,604
|
|
—
|
|
— %
|
Other
|
29,851
|
|
53,721
|
|
(44.4)%
|
|
99,950
|
|
172,066
|
|
(41.9)%
|
Total net
sales
|
831,669
|
|
709,651
|
|
17.2%
|
|
2,335,841
|
|
2,082,191
|
|
12.2%
|
Franchise and
other
revenue
|
1,334
|
|
1,341
|
|
(0.5)%
|
|
4,532
|
|
3,851
|
|
17.7%
|
Total
revenue
|
$
|
833,003
|
|
$
|
710,992
|
|
17.2%
|
|
$
|
2,340,373
|
|
$
|
2,086,042
|
|
12.2%
|
Comparable sales
change
|
|
|
Three months
ended
|
|
Nine months
ended
|
|
November 3,
2018
|
|
October 28,
2017
|
|
November 3,
2018
|
|
October 28,
2017
|
U.S. Retail
segment(1)
|
7.3%
|
|
(0.4)%
|
|
6.2%
|
|
(1.0)%
|
Other -
ABG
|
6.5%
|
|
0.5%
|
|
7.6%
|
|
(0.5)%
|
Total
Company
|
7.3%
|
|
(0.4)%
|
|
6.3%
|
|
(1.0)%
|
Stores
data
|
|
November 3,
2018
|
|
October 28,
2017
|
Number of stores in
the U.S.:
|
|
|
|
DSW
|
519
|
|
514
|
ABG
|
287
|
|
351
|
|
806
|
|
865
|
Number of stores in
Canada:
|
|
|
|
The Shoe Company /
Shoe Warehouse
|
111
|
|
—
|
DSW Designer Shoe
Warehouse
|
27
|
|
—
|
Town Shoes
|
34
|
|
—
|
|
172
|
|
—
|
Total number of
stores
|
978
|
|
865
|
Square footage
data
|
|
|
November 3,
2018
|
|
October 28,
2017
|
U.S. Retail
segment(1)
|
10,582
|
|
10,534
|
Canada Retail
segment(2)
|
1,148
|
|
—
|
Total square
footage
|
11,730
|
|
10,534
|
Reported gross
profit by segment(3)
|
|
|
Three months
ended
|
Nine months
ended
|
|
November 3,
2018
|
|
October 28,
2017
|
|
November 3,
2018
|
|
October 28,
2017
|
U.S. Retail
segment(1):
|
|
|
|
|
|
|
|
Merchandise
margin
|
45.6%
|
|
44.1%
|
|
44.7%
|
|
44.0%
|
Store occupancy
expenses
|
(10.2)
|
|
(10.8)
|
|
(10.5)
|
|
(11.1)
|
Distribution and
fulfillment expenses
|
(2.2)
|
|
(2.2)
|
|
(2.2)
|
|
(2.2)
|
Gross
profit
|
33.2
|
|
31.1
|
|
32.0
|
|
30.7
|
Canada Retail
segment:
|
|
|
|
|
|
|
Merchandise
margin
|
46.3
|
|
—
|
|
43.9
|
|
—
|
Store occupancy
expenses
|
(13.4)
|
|
—
|
|
(14.1)
|
|
—
|
Distribution
expenses
|
(1.2)
|
|
—
|
|
(1.2)
|
|
—
|
Gross
profit
|
31.7
|
|
—
|
|
28.6
|
|
—
|
Other - gross
profit
|
20.3
|
|
8.3
|
|
19.6
|
|
11.3
|
Total Company gross
profit
|
32.6%
|
|
29.4%
|
|
31.3%
|
|
29.1%
|
|
|
|
|
|
|
|
|
(1)
|
U.S. Retail segment
was previously presented as the DSW segment.
|
|
|
(2)
|
The Town Shoes banner
has been excluded from the reported Canada Retail segment square
footage data due to the
decision to exit the banner by the end of fiscal 2018.
|
|
|
(3)
|
Numbers are displayed
as a percentage of net sales.
|
DSW
INC.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(unaudited and in
thousands)
|
|
|
November 3,
2018
|
|
February 3,
2018
|
|
October 28,
2017
|
Assets
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
222,419
|
|
$
|
175,932
|
|
$
|
149,485
|
Investments
|
71,848
|
|
124,605
|
|
180,066
|
Accounts
receivable
|
14,902
|
|
19,236
|
|
20,417
|
Inventories
|
624,167
|
|
501,903
|
|
546,553
|
Prepaid expenses and
other current assets
|
49,924
|
|
49,197
|
|
34,220
|
Total current
assets
|
983,260
|
|
870,873
|
|
930,741
|
Property and
equipment, net
|
383,110
|
|
355,199
|
|
358,154
|
Goodwill
|
25,899
|
|
25,899
|
|
25,899
|
Deferred income
taxes
|
42,966
|
|
27,711
|
|
35,316
|
Equity investment in
TSL
|
—
|
|
6,096
|
|
7,180
|
Notes receivable from
TSL
|
—
|
|
115,895
|
|
60,249
|
Intangible
assets
|
20,000
|
|
135
|
|
3,135
|
Other
assets
|
19,394
|
|
19,709
|
|
19,711
|
Total
assets
|
$
|
1,474,629
|
|
$
|
1,421,517
|
|
$
|
1,440,385
|
Liabilities and
shareholders' equity
|
|
|
|
|
|
Accounts
payable
|
$
|
198,499
|
|
$
|
179,308
|
|
$
|
194,313
|
Accrued
expenses
|
182,964
|
|
148,226
|
|
146,155
|
Total current
liabilities
|
381,463
|
|
327,534
|
|
340,468
|
Non-current
liabilities
|
150,730
|
|
138,732
|
|
146,714
|
Total shareholders'
equity
|
942,436
|
|
955,251
|
|
953,203
|
Total liabilities and
shareholders' equity
|
$
|
1,474,629
|
|
$
|
1,421,517
|
|
$
|
1,440,385
|
|
|
DSW
INC.
|
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
(unaudited and in
thousands, except per share amounts)
|
|
|
|
|
Three months
ended
|
|
|
Nine months ended
|
|
|
|
|
|
|
|
|
|
November 3,
2018
|
|
October 28,
2017
|
|
|
November 3,
2018
|
|
October 28,
2017
|
Revenue:
|
|
|
|
|
|
|
|
|
|
Net sales
|
$
|
831,669
|
|
$
|
709,651
|
|
|
$
|
2,335,841
|
|
$
|
2,082,191
|
Franchise and other
revenue
|
1,334
|
|
1,341
|
|
|
4,532
|
|
3,851
|
Total
revenue
|
833,003
|
|
710,992
|
|
|
2,340,373
|
|
2,086,042
|
Cost of
sales
|
(560,586)
|
|
(500,924)
|
|
|
(1,605,038)
|
|
(1,477,082)
|
Franchise
costs
|
(98)
|
|
—
|
|
|
(671)
|
|
—
|
Operating
expenses
|
(226,393)
|
|
(155,175)
|
|
|
(589,559)
|
|
(464,297)
|
Impairment adjustments
(charges)
|
7,163
|
|
(82,701)
|
|
|
(29,077)
|
|
(82,701)
|
Change in fair value of
contingent consideration liability
|
—
|
|
31,178
|
|
|
—
|
|
28,926
|
Operating
profit
|
53,089
|
|
3,370
|
|
|
116,028
|
|
90,888
|
Interest income,
net
|
870
|
|
602
|
|
|
2,339
|
|
1,824
|
Non-operating expenses,
net
|
(108)
|
|
(121)
|
|
|
(49,594)
|
|
(2,304)
|
Income before income
taxes and
income (loss) from equity investment
in TSL
|
53,851
|
|
3,851
|
|
|
68,773
|
|
90,408
|
Income tax
provision
|
(14,532)
|
|
(1,476)
|
|
|
(42,203)
|
|
(35,451)
|
Income (loss) from
equity investment in TSL
|
—
|
|
1,630
|
|
|
(1,310)
|
|
543
|
Net income
|
$
|
39,319
|
|
$
|
4,005
|
|
|
$
|
25,260
|
|
$
|
55,500
|
Diluted earnings per
share
|
$
|
0.48
|
|
$
|
0.05
|
|
|
$
|
0.31
|
|
$
|
0.69
|
Weighted average
diluted shares
|
82,287
|
|
80,647
|
|
|
81,686
|
|
80,699
|
DSW
INC.
|
NON-GAAP
RECONCILIATION
|
(unaudited and in
thousands, except per share amounts)
|
|
|
Three months
ended
|
|
Nine months
ended
|
|
November 3,
2018
|
|
October 28,
2017
|
|
November 3,
2018
|
|
October 28,
2017
|
Reported net
income
|
$
|
39,319
|
|
|
$
|
4,005
|
|
|
$
|
25,260
|
|
|
$
|
55,500
|
|
Pre-tax
adjustments:
|
|
|
|
|
|
|
|
Included in operating
expenses:
|
|
|
|
|
|
|
|
Lease exit and other
termination
costs
|
16,301
|
|
|
—
|
|
|
20,704
|
|
|
—
|
|
Acquisition-related
costs and target
acquisition costs
|
12,982
|
|
|
77
|
|
|
18,594
|
|
|
77
|
|
Restructuring
expenses
|
563
|
|
|
—
|
|
|
3,271
|
|
|
829
|
|
Amortization of
intangible assets
|
115
|
|
|
1,019
|
|
|
229
|
|
|
3,055
|
|
Impairment charges
(adjustments)
|
(7,163)
|
|
|
82,701
|
|
|
29,077
|
|
|
82,701
|
|
Change in fair value
of contingent
consideration liability
|
—
|
|
|
(31,178)
|
|
|
—
|
|
|
(28,926)
|
|
Included in
non-operating
expenses, net:
|
|
|
|
|
|
|
|
Fair value
adjustments of TSL's
previously held assets
|
—
|
|
|
—
|
|
|
33,988
|
|
|
—
|
|
Foreign currency
transaction losses
|
94
|
|
|
48
|
|
|
15,390
|
|
|
2,209
|
|
Total pre-tax
adjustments
|
22,892
|
|
|
52,667
|
|
|
121,253
|
|
|
59,945
|
|
Tax effect of
adjustments
|
(4,302)
|
|
|
(20,768)
|
|
|
(8,475)
|
|
|
(23,310)
|
|
Tax expense impact as
a result of
Ebuys exit
|
—
|
|
|
—
|
|
|
2,265
|
|
|
—
|
|
Total adjustments,
after tax
|
18,590
|
|
|
31,899
|
|
|
115,043
|
|
|
36,635
|
|
Adjusted net
income
|
$
|
57,909
|
|
|
$
|
35,904
|
|
|
$
|
140,303
|
|
|
$
|
92,135
|
|
Reported diluted
earnings per share
|
$
|
0.48
|
|
|
$
|
0.05
|
|
|
$
|
0.31
|
|
|
$
|
0.69
|
|
Adjusted diluted
earnings per share
|
$
|
0.70
|
|
|
$
|
0.45
|
|
|
$
|
1.72
|
|
|
$
|
1.14
|
|
Non-GAAP Measures
In addition to earnings per share
and net income determined in accordance with accounting principles
generally accepted in the United
States ("GAAP"), for purposes of evaluating operating
performance, the Company uses adjusted earnings per share and net
income, which adjust for the effects of the lease exit and other
termination costs; costs and charges associated with
acquisition-related activity, including target acquisition efforts;
restructuring expenses; amortization expense of intangible assets;
the change in fair value of contingent consideration liability
related to Ebuys; and foreign currency losses, including the
reclassification from accumulated other comprehensive loss as a
result of the TSL acquisition. The unaudited reconciliation of
adjusted results should not be construed as an alternative to the
reported results determined in accordance with GAAP. These
financial measures are not based on any standardized methodology
and are not necessarily comparable to similar measures presented by
other companies. The Company believes that this non-GAAP
information is useful as an additional means for investors to
evaluate the Company's operating performance, when reviewed in
conjunction with the Company's GAAP statements. These amounts are
not determined in accordance with GAAP and therefore should not be
used exclusively in evaluating the Company's business and
operations.
View original
content:http://www.prnewswire.com/news-releases/dsw-inc-reports-third-quarter-2018-financial-results-300763013.html
SOURCE DSW Inc.