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DSW Inc. Reports Fourth Quarter and Year-End 2011 Financial Results; Provides 2012 Annual Outlook

COLUMBUS, Ohio, March 20, 2012 /PRNewswire/ --

    --  Full year sales increase 11.1% to $2.02 billion; comparable sales
        increase 8.3%
    --  Full year Reported diluted EPS totals $4.54 per share which includes a
        positive $1.54 per share impact due to the merger with Retail Ventures,
        Inc. ("RVI") and related items
    --  Adjusted diluted EPS rises to $3.00 per share for the full year, up from
        $2.40 in 2010
    --  Fourth quarter sales increase 9.7% to $513.7 million; comparable sales
        increase 5.6%
    --  After a net charge of $0.14 per share due to the merger with Retail
        Ventures, Inc. ("RVI") and related items, fourth quarter Reported
        diluted EPS totals $0.37 per share
    --  Adjusted diluted EPS rises to $0.51 per share, up from $0.41 in the
        fourth quarter of 2010
    --  Company initiates 2012 annual diluted EPS guidance in the range of $3.20
        to $3.35, excluding one-time items from RVI

DSW Inc. (NYSE: DSW), a leading branded footwear and accessories retailer, announced financial results for the three-month and twelve-month periods ended January 28, 2012, which compares to the three-month and twelve-month periods ended January 29, 2011.

(Logo: http://photos.prnewswire.com/prnh/20100325/DSWLOGO-a)

"We again posted solid results in the fourth quarter, with our performance driven by continued product excitement, compelling pricing and an efficient shopping experience. Total sales growth was broad-based across all of our key categories and geographic regions," stated Mike MacDonald, President and Chief Executive Officer, DSW Inc.

Mr. MacDonald continued, "This concludes a very strong year for our Company in which we grew our total sales by 11%, generated a two-year comparable sales gain of 21.5% and improved our profitability. We achieved a number of milestones including the completion of our merger with RVI and the successful launch of our mobile website and kids' shoes online. Our business generated strong cash flow and we returned cash to our shareholders in the form of special and regular quarterly dividends. Our new stores continue to perform well and, with our strong balance sheet, we are well-positioned to continue to pursue our growth strategies including opening 35 to 40 new stores in 2012. We look forward to another year of profitable growth."

Fourth Quarter Operating Results

    --  Fourth quarter 2011 sales increased 9.7% to $513.7 million compared to
        last year's fourth quarter sales of $468.5 million.
    --  Comparable sales for the fourth quarter 2011 increased 5.6%. This
        follows a 14.9% increase in comparable sales in the fourth quarter of
        2010.
    --  Fourth quarter 2011 Reported net income was $19.4 million, or $0.37 per
        diluted share on 44.8 million weighted average shares outstanding, which
        included a $3.7 million net charge due to the merger with RVI and
        related items.  This compares to Reported net income in the fourth
        quarter of 2010 of $0.2 million, or $0.01 per diluted share on 21.8
        million weighted average shares outstanding.
    --  Fourth quarter 2011 net income, adjusted for the impact of the merger
        with RVI and related items, was $23.1 million, or $0.51 per diluted
        share on 45.3 million weighted average shares outstanding. This compares
        to Adjusted net income for the same period last year of $18.5 million,
        or $0.41 per diluted share on 45.1 million weighted average shares
        outstanding.
    --  At the conclusion of this press release is a reconciliation of Reported
        to Adjusted results.

Full Year Operating Results

    --  Fiscal 2011 sales increased 11.1% to $2.02 billion compared to full year
        2010 sales of $1.82 billion.
    --  Comparable sales for the full year 2011 increased 8.3%. This follows a
        13.2% increase in comparable sales for the full year 2010.
    --  Fiscal 2011 Reported net income was $174.8 million, or $4.54 per diluted
        share on 37.1 million weighted average shares outstanding, which
        included a $38.6 million net benefit due to the merger with RVI and
        related items. This compares to Reported net income for the full year
        2010 of $17.8 million, or $0.82 per diluted share on 21.6 million
        weighted average shares outstanding.
    --  Fiscal 2011 net income, adjusted for the impact of the merger with RVI
        and related items, was $136.1 million, or $3.00 per diluted share on
        45.3 million weighted average shares outstanding. This compares to
        Adjusted net income for the full year 2010 of $107.6 million, or $2.40
        per diluted share on 44.9 million weighted average shares outstanding.
    --  At the conclusion of this press release is a reconciliation of Reported
        to Adjusted results.

Fourth Quarter Balance Sheet Highlights

    --  Cash and investments totaled $430 million compared to $391 million at
        the end of the fourth quarter 2010.
    --  Inventories were $334 million compared to $309 million at the end of the
        fourth quarter of 2010. Inventory cost per square foot in DSW stores
        increased 2% compared to the fourth quarter of 2010.

Regular Dividend

On February 29, 2012, DSW's Board of Directors approved the Company's third consecutive quarterly cash dividend payment of $0.15 per share. The dividend will be paid on March 30, 2012 to shareholders of record at the close of business on March 20, 2012.

Fiscal 2012 Annual Outlook

The Company is initiating its annual 2012 guidance. DSW estimates annual comparable sales to increase between 2% to 4% and expects annual diluted earnings per share in the range of $3.20 to $3.35 for fiscal 2012. The Company's fiscal year 2012 retail calendar includes a fifty-third week compared to a fifty-two week year in fiscal year 2011. This guidance includes only the minimal ongoing operating expenses related to RVI; the impact of the mark-to-market adjustment on the warrants and one-time items will continue to be excluded from Adjusted earnings for Fiscal 2012.

Webcast and Conference Call

To hear the Company's live earnings conference call, log on to http://www.dswinc.com/ today at 8:30 AM Eastern, or call (800) 860-2442. To hear a replay of the earnings call, which will be available approximately two hours after the conference call ends, dial (877) 344-7529, followed by conference number 10011482. An audio replay of the conference call, as well as additional financial information, will also be available at http://www.dswinc.com/.

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 March 20, 2012, DSW operated 328 stores in 40 states and operated an e-commerce site, http://www.dsw.com, and a mobile website, http://m.dsw.com. DSW also supplied footwear to 341 leased locations in the United States. For store locations and additional information about DSW, visit http://www.dswinc.com. Follow DSW on Twitter at http://twitter.com/DSWShoeLovers and "like" DSW on Facebook at http://www.facebook.com/DSW.



                                                                   DSW INC.
                                                   Q4 AND YEAR-TO-DATE 2011 SEGMENT RESULTS

    Net sales by reportable segment:

                                      Three Months Ended                                             Year Ended
                                      ------------------                                             ----------
                                January 28,          January 29,           %             January 28,          January 29,      %
                                       2012                 2011       increase                 2012                 2011  increase
                               ------------         ------------      ---------         ------------         ------------ ---------
                                         (in millions)                                              (in millions)

    DSW                              $475.5               $434.3            9.5%            $1,871.9             $1,680.9      11.4%
    Leased
     Business
     Division                          38.2                 34.2           11.8%               152.4                141.5       7.7%
    ---------                          ----                 ----                               -----                -----
    Total
     DSW
     Inc.                            $513.7               $468.5            9.7%            $2,024.3             $1,822.4      11.1%
    =====                            ======               ======                            ========             ========



    Comparable
     sales change
     by
     reportable
     segment:

                         Three Months Ended                           Year Ended
                         ------------------                           ----------
                                            January 29,   January 28,        January 29,
                    January 28, 2012               2011          2012               2011
                    ----------------       ------------  ------------       ------------

    DSW                          5.9%              15.6%          8.6%              14.0%
    Leased Business
     Division                    1.4%               7.0%          5.1%               4.6%
    Total DSW Inc.               5.6%              14.9%          8.3%              13.2%

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 2012 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 opening and operating new stores on a timely and profitable basis; continuation of supply agreements and the financial condition of our leased business partners; disruption of our distribution and fulfillment operations; failure to retain our key executives or attract qualified new personnel; our competitiveness with respect to style, price, brand availability and customer service; our reliance on our "DSW Rewards" program to drive traffic, sales and customer loyalty; maintaining good relationships with our vendors; our ability to anticipate and respond to fashion trends; fluctuation of our comparable sales and quarterly financial performance; uncertain general economic conditions; our reliance on foreign sources for merchandise and risks inherent to international trade; risks related to our cash and investments; the anticipated benefits of the merger with RVI taking longer to realize or not being achieved in their entirety; and the realization of risks related to the merger with RVI, including risks related to pre-merger RVI guarantees of certain Filene's Basement leases. 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 SEC. 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.
                              CONDENSED CONSOLIDATED BALANCE SHEETS
                                          (In thousands)
                                           (Unaudited)

                                                               As of         As of
                                                          January 28,      January 29,
                                                                     2012             2011
                                                         ------------     ------------

    Assets
    Cash and equivalents                                    $79,003          $99,126
    Short-term investments                                  296,697          241,557
    Accounts receivable, net                                 16,996           13,186
    Inventories                                             334,390          309,013
    Prepaid expenses and other
     current assets                                          24,448           30,900
    Deferred income taxes                                   116,473           49,354
    ---------------------                                   -------           ------
    Total current assets                                    868,007          743,136
    --------------------                                    -------          -------

    Property and equipment, net                             235,726          212,342
    Long-term investments                                    53,858           49,987
    Goodwill                                                 25,899           25,899
    Deferred income taxes                                    15,653
    Other assets                                              8,757           10,113
    ------------                                              -----           ------
    Total assets                                         $1,207,900       $1,041,477
    ------------                                         ----------       ----------

    Liabilities and shareholders'
     equity
    Accounts payable                                       $151,248         $150,276
    Accrued expenses                                        126,998          113,100
    Conversion feature of short-
     term debt                                                                 6,375
    Warrant liability                                        29,303           20,624
    Current maturities of long-
     term debt                                                               132,132
    ---------------------------                                              -------
    Total current liabilities                               307,549          422,507
    -------------------------                               -------          -------

    Deferred income taxes and
     other non-current
     liabilities                                            113,764          130,101
    Total shareholders' equity                              786,587          488,869
    --------------------------                              -------          -------
    Total liabilities and
     shareholders' equity                                $1,207,900       $1,041,477
    ---------------------                                ----------       ----------



                                               DSW INC.
                           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                                 and
                                  RECONCILIATION OF ADJUSTED RESULTS
                               (In thousands, except per share amounts)
                                             (Unaudited)

                                                       Three                           Three
                                                      months                          months
                                                       ended          Adjustments      ended
                                                                      -----------
                                                    January 28,                     January 28,
                                                        2012                            2012
                                                     Reported                        Adjusted
                                                     --------                        --------
    Net sales                                          $513,684                        $513,684
    Cost of sales                                      (367,721)                       (367,721)
    Operating expenses                                 (109,026) (1)          $700     (108,326)
    Change in fair value
     of derivative
     instruments                                          2,981  (2)        (2,981)
    --------------------                                  -----             ------
      Operating profit                                   39,918             (2,281)      37,637
    Interest (expense)
     income, net                                             33  (3)            40           73
    ------------------                                      ---                ---          ---
      Income from
       continuing
       operations before
       income taxes                                      39,951             (2,241)      37,710
    Income tax provision                                (15,556) (4)           913      (14,643)
    --------------------                                -------                ---      -------
      Income from
       continuing
       operations                                        24,395             (1,328)      23,067
    Total net loss from
     discontinued
     operations, net of
     tax                                                 (5,028) (5)         5,028
    -------------------                                  ------              -----
      Net income                                        $19,367             $3,700      $23,067


    Adjustments to net
     income for diluted
     earnings per share
     calculation:
    Less: Gain in fair
     value of warrants                                   (2,981) (6)         2,981
    ------------------                                   ------              -----
    Net income for
     diluted earnings per
     share calculation                                  $16,386  (6)        $6,681      $23,067


    Diluted shares used
     in per share
     calculations:                                       44,782  (7)                     45,313

    Diluted (loss)
     earnings per share:
      Diluted earnings per
       share from
       continuing
       operations                                         $0.48                           $0.51
      Diluted earnings per
       share from
       discontinued
       operations                                        $(0.12)
      Diluted earnings per
       share                                              $0.37                           $0.51

Notes:

    1. In addition to RVI-related expenses, also reflects pension, cure payment
       for RVI-owned property, recovery from Filene's Basement's 2009 bankruptcy
       and current legal fees related to RVI lease guarantees.
    2. Change in fair value of derivative instruments, which relate to RVI's
       warrants.
    3. Interest expense related to RVI-related tax penalty.
    4. Reflects impact of RVI-related tax expense.
    5. Reflects the removal of discontinued operations, which relate to the
       guarantees of two Filene's Basement leases.
    6. Net income for the diluted earnings per share calculation is adjusted for
       the change in fair value of warrants.
    7. The Reported weighted average shares outstanding represent DSW Class A
       Common Shares and Class B Common Shares as well as the warrants and other
       dilutive instruments. Adjusted shares used in the per share calculations
       reflect DSW's weighted average shares outstanding as of the first
       quarter, prior to the merger with RVI.




                                   Three                          Three
                                  months                         months
                                   ended         Adjustments      ended
                                                 -----------
                                January 29,                    January 29,
                                    2011                           2011
                                 Reported                       Adjusted
                                 --------                       --------
    Net sales                      $468,450                       $468,450
    Cost of sales                  (335,072)                      (335,072)
    Operating expenses             (100,157) (1)      $(1,950)    (102,107)
    Change in fair value of
     derivative instruments          (3,171) (2)        3,171
    -----------------------          ------             -----
      Operating profit               30,050             1,221       31,271
    Interest (expense)
     income, net                     (2,906) (3)        3,135          229
      Income from continuing
       operations before income
       taxes                         27,144             4,356       31,500
    Income tax provision            (21,441) (4)        8,414      (13,027)
    --------------------            -------             -----      -------
      Income from continuing
       operations                     5,703            12,770       18,473
    Total income from
     discontinued operations,
     net of tax                       1,467  (5)       (1,467)
    -------------------------         -----            ------
      Net income                      7,170            11,303       18,473
    Less: net income
     attributable to the
     noncontrolling interests        (7,012) (6)        7,012
    -------------------------        ------             -----
      Net income, net of
       noncontrolling interests        $158           $18,315      $18,473

    Diluted shares used in
     per share calculations:         21,774  (7)                    45,137

    Diluted (loss) earnings
     per share:
      Diluted (loss) earnings
       per share from
       continuing operations,
       net of noncontrolling
       interests                   $(0.06)         $0.41
      Diluted earnings per
       share from discontinued
       operations                     $0.07
      Diluted earnings per
       share, net of
       noncontrolling interests       $0.01                          $0.41

Notes:

    1. Reflects RVI-related operating income, net of expenses.
    2. Change in fair value of derivative instruments, which relate to RVI's
       PIES and warrants.
    3. Interest expense related to the PIES.
    4. Reflects impact of RVI-related tax expense.
    5. Reflects the removal of discontinued operations, which relate to RVI's
       dispositions of Value City and Filene's Basement.
    6. Reflects the removal of the noncontrolling interest in DSW that RVI
       recorded prior to the merger date.
    7. Reported weighted average shares outstanding reflect the RVI weighted
       average shares outstanding adjusted for the 0.435 exchange ratio, as
       previously reported by RVI. Adjusted weighted average shares outstanding
       reflect what DSW previously reported during this period.




                                Fiscal year                    Fiscal year
                                   ended         Adjustments      ended
                                                 -----------
                                January 28,                    January 28,
                                    2012                           2012
                                 Reported                       Adjusted
                                 --------                       --------
    Net sales                    $2,024,329                     $2,024,329
    Cost of sales                (1,370,382)                    (1,370,382)
    Operating expenses             (448,583) (1)      $17,263     (431,320)
    Change in fair value of
     derivative instruments         (53,914) (2)       53,914
    -----------------------         -------            ------
    Operating profit                151,450            71,177      222,627
    Interest (expense) income,
     net                             (9,181) (3)       10,524        1,343
    --------------------------       ------            ------        -----
    Income from continuing
     operations before income
     taxes                          142,269            81,701      223,970
    Income tax benefit
     (provision)                     58,069  (4)     (145,895)     (87,826)
    ------------------               ------          --------      -------
    Income from continuing
     operations                     200,338           (64,194)     136,144
    Net loss from discontinued
     operations, net of tax          (4,855) (5)        4,855
    --------------------------       ------             -----
    Net income                     $195,483          $(59,339)    $136,144
    Less: net income
     attributable to the
     noncontrolling interests       (20,695) (6)       20,695
    -------------------------       -------            ------
    Net (loss) income, net of
     noncontrolling interests      $174,788          $(38,644)    $136,144

    Adjustments to net income
     for diluted earnings per
     share calculation:
    Less: Gain in fair value of
     PIES and tax effected
     other PIES  expenses            (6,019) (7)        6,019
    Net income for diluted
     earnings per share
     calculation                   $168,769  (7)     $(32,625)    $136,144

    Diluted shares used in per
     share calculations:             37,138  (8)                    45,313

    Diluted earnings per share:
    Diluted earnings per share
     from continuing operations       $4.68                          $3.00
    Diluted (loss) earnings per
     share from discontinued
     operations                      $(0.14)
    Diluted earnings per share        $4.54                          $3.00

Notes:

    1. In addition to RVI-related and merger-related expenses, also reflects
       lease and asset impairment of $5.0M related to an RVI office lease.
    2. Change in fair value of derivative instruments, which relate to RVI's
       PIES and warrants.
    3. Interest expense related to the PIES and RVI's deferred financing costs.
    4. Reflects impact of RVI-related reversal of valuation allowance on NOLs
       and other merger-related items.
    5. Reflects the removal of discontinued operations, which relate to RVI's
       disposition of Filene's Basement and guarantees of two Filene's Basement
       leases.
    6. Reflects the removal of the noncontrolling interest in DSW that RVI
       recorded prior to the merger date.
    7. Net income for the diluted earnings per share calculation is adjusted for
       the change in fair value of PIES and related tax-effected interest
       expense.
    8. The Reported weighted average shares outstanding represent DSW Class A
       Common Shares and Class B Common Shares as well as the PIES and other
       dilutive instruments. Adjusted shares used in the per share calculations
       reflect DSW's weighted average shares outstanding as of the first
       quarter, prior to the merger with RVI.




                             Fiscal year                    Fiscal year
                                ended         Adjustments      ended
                                              -----------
                             January 29,                    January 29,
                                 2011                           2011
                              Reported                       Adjusted
                              --------                       --------
    Net sales                 $1,822,376                     $1,822,376
    Cost of sales             (1,256,695)                    (1,256,695)
    Operating expenses          (396,107) (1)       $4,009     (392,098)
    Change in fair value of
     derivative instruments      (49,014) (2)       49,014
    -----------------------      -------            ------
      Operating profit           120,560            53,023      173,583
    Interest (expense)
     income, net                 (10,267) (3)       12,463        2,196
    Non-operating income           1,500                          1,500
    --------------------             ---                          -----
      Income from continuing
       operations before
       income taxes              111,793            65,486      177,279
    Income tax provision         (59,973) (4)       (9,682)     (69,655)
    --------------------         -------            ------      -------
      Income from continuing
       operations                 51,820            55,804      107,624
    Total income from
     discontinued
     operations, net of tax        6,628  (5)       (6,628)
    -----------------------        -----            ------
      Net income                  58,448            49,176      107,624
    Less: net income
     attributable to the
     noncontrolling
     interests                   (40,654) (6)       40,654
    --------------------         -------            ------
      Net income, net of
       noncontrolling
       interests                 $17,794           $89,830     $107,624

    Diluted shares used in
     per share
     calculations:                21,576  (7)                    44,918

    Diluted earnings per
     share:
      Diluted earnings per
       share from continuing
       operations, net of
       noncontrolling
       interests                 $0.52          $2.40
      Diluted earnings per
       share from
       discontinued
       operations                  $0.31
      Diluted earnings per
       share, net of
       noncontrolling
       interests                   $0.82                          $2.40

Notes:

    1. Reflects RVI-related operating expenses, net of income.
    2. Change in fair value of derivative instruments, which relate to RVI's
       PIES and warrants.
    3. Interest expense related to the PIES.
    4. Reflects impact of RVI-related tax benefit.
    5. Reflects the removal of discontinued operations, which relate to RVI's
       dispositions of Value City and Filene's Basement.
    6. Reflects the removal of the noncontrolling interest in DSW that RVI
       recorded prior to the merger date.
    7. Reported weighted average shares outstanding reflect the RVI weighted
       average shares outstanding adjusted for the 0.435 exchange ratio, as
       previously reported by RVI. Adjusted weighted average shares outstanding
       reflect what DSW previously reported during this period.

This release contains certain Adjusted financial measures. These measures are included as a complement to Reported results because management believes these Adjusted financial measures help explain underlying performance trends in DSW's business and provide useful information to both management and investors. The unaudited Condensed Consolidated Statements of Operations and Reconciliation of Adjusted Results should not be construed as an alternative to the Reported results determined in accordance with generally accepted accounting principles. Further, DSW's definition of Adjusted income information may differ from similarly titled measures used by other companies. While it is not possible to predict future results, management believes the Adjusted information is useful to investors for the assessment of the ongoing operations of DSW. The unaudited Condensed Consolidated Statements of Operations and Reconciliation of Adjusted Results should be read in conjunction with DSW's and RVI's historical financial statements and notes thereto contained in DSW's and RVI's quarterly reports on Form 10-Q and annual report on Form 10-K.

SOURCE DSW Inc.

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