DSW Inc. Reports First Quarter 2018 Financial Results

COLUMBUS, Ohio, May 30, 2018 /PRNewswire/ -- DSW Inc. (NYSE: DSW), a leading branded footwear and accessories retailer, announced financial results for the three months ended May 5, 2018, compared to the three months ended April 29, 2017.

Roger Rawlins, Chief Executive Officer stated, "We are pleased this quarter to report our second consecutive positive comp for DSW Inc. and the fourth positive footwear comp in the DSW brand. With our solid first quarter results, we have delivered a 4% revenue increase and a 16% earnings increase over the last twelve months, marking an exciting return to growth for the DSW brand."

"Furthermore, we launched a new integrated and cross-channel loyalty program a few weeks ago, reaching an important milestone in DSW's history. We are pleased with the customer response to DSW VIP, which delivers a simpler points system and new benefits like shoe donations, free shipping and points gifting. We remain committed to innovating our customer experience with initiatives that will elevate Designer Shoe Warehouse and drive customer acquisition and loyalty for years to come," Mr. Rawlins added.

First Quarter Operating Results

• Total revenue increased by 2.9% to $712 million, including $5.6 million from residual Ebuys operations.
• Comparable sales for operations for the 13-week period ended May 5, 2018 increased 2.2% over the same 13-week period ended May 6, 2017.
• Reported gross profit, as a percentage of sales, increased by 40 bps due to the wind down of Ebuys.
• Reported operating expenses, as a percent of sales, increased by 100 bps, driven by marketing investments, Ebuys exit costs and transaction expenses with the acquisition of Town Shoes. 
• Reported net income was $24.3 million, or $0.30 per diluted share, including net after-tax charges totaling $7.2 million, or $0.09 per diluted share, related to the exit of Ebuys, foreign exchange losses and transaction costs related to the acquisition of Town Shoes.
• Adjusted net income was $31.5 million, or $0.39 per diluted share, including a loss of $0.04 per share from residual Ebuys operations, which the Company exited at the end of the first quarter.

Completed the Acquisition of Town Shoes

• On May 10, 2018, the Company completed the purchase of its remaining stake in Town Shoes of Canada for CAD 44.7 million (USD $35 million). The Company appointed William Jordan, Chief Administrative Officer of DSW Inc., as President of Town Shoes.
• The Company is in the process of conducting a comprehensive review of the Town Shoes business and will provide future expectations for this business on its Second Quarter Earnings Conference.

First Quarter Balance Sheet Highlights

• Cash and investments totaled $269 million compared to $254 million in the first quarter last year.
• Inventories were $540 million compared to $575 million last year and decreased slightly on a cost per square foot basis.

Implementation of New Revenue Recognition Standard
Starting with the first quarter of 2018, the Company implemented the new revenue recognition standard, which primarily affects the timing of the recording of gift card breakage and deferred revenue from the Company's loyalty program, as well as changes within the reclassification of these items on the Company's financial statements. Prior year's results have been retroactively restated in this press release to ensure the comparability of results, with additional details to be provided in the Company's quarterly 10-Q filing. The adoption of this new standard had an immaterial impact on the Company's results for the first quarter of 2017 and the fiscal year 2017.

Regular Dividend
DSW Inc.'s Board of Directors declared a quarterly cash dividend of $0.25 per share. The dividend will be paid on July 5, 2018 to shareholders of record at the close of business on June 21, 2018.

Fiscal 2018 Annual Outlook
The Company maintained its full year outlook for adjusted earnings in the range of $1.52 to $1.67 per diluted share.

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 June 13, 2018. The teleconference will be available on replay and can be accessed by dialing 1-877-344-7529 and entering passcode 10120095.

About DSW Inc.
DSW Inc. is a leading branded footwear and accessories retailer that offers a wide selection of brand name and designer dress, casual and athletic footwear and accessories for women, men and kids. As of May 5, 2018, DSW operates 517 DSW Designer Shoe Warehouse locations in 44 states, the District of Columbia and Puerto Rico, and operates an e-commerce site, http://www.dsw.com, and a mobile website, http://m.dsw.com. DSW also supplies footwear to 289 leased locations in the United States under the Affiliated Business Group. For store locations and additional information about DSW, visit http://www.dswinc.com. Follow DSW on Twitter at http://twitter.com/DSWShoeLovers and Facebook at http://www.facebook.com/DSW.

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 the acquisition of Town Shoes, including the possibility that the anticipated benefits of the acquisition are not realized when expected or at all; our ability to protect our reputation; maintaining strong relationships with our vendors; 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 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; 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.

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 exit of Ebuys, costs associated with the acquisition of Town Shoes, foreign currency exchange losses, the amortization expense of acquired intangible assets and the change in fair value of contingent consideration liability related to Ebuys, and restructuring costs. 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.

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SOURCE DSW Inc.