8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)   August 30, 2006 (August 30, 2006)  

DSW Inc.

(Exact name of registrant as specified in its charter)

Ohio	001-32545	31-0746639
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

4150 E. Fifth Avenue, Columbus, Ohio	43219
(Address of principal executive offices)	(Zip Code)

(614) 237-7100

(Registrant’s telephone number, including area code)

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

     On August 30, 2006, the Company issued a press release regarding its consolidated financial results for the quarter ended July 29, 2006. A copy of the press release announcing these financial results for the quarter is attached as Exhibit 99.1 hereto and incorporated by reference herein.

     Pursuant to General Instruction B.2 of Current Report on Form 8-K, the information in this Item 2.02 is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Furthermore, the information in this Item 2.02 shall not be deemed to be incorporated by reference into the filings of the Company under the Securities Act of 1933, as amended.

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.

     (d) Exhibits.

Exhibit Number	Description
99.1	Press Release dated August 30, 2006

Signature

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

DSW Inc.
By:	/s/Douglas J. Probst
	Douglas J. Probst Executive Vice President, Chief Financial Officer and Treasurer

Date: August 30, 2006

EX-99.1

Exhibit 99.1

DSW INC. REPORTS 2006 SECOND QUARTER
FINANCIAL RESULTS

COLUMBUS, Ohio, August 30, 2006/PRNewswire/ — DSW Inc. (NYSE: DSW), a leading branded footwear specialty retailer, announced net income of $15.3 million on net sales of $301.3 million for the second quarter ended July 29, 2006, compared with net income of $9.3 million on net sales of $276.2 million for the comparable period last year.

Diluted earnings per share were $0.35 for the second quarter of 2006 compared with $0.28 for last year’s second quarter.

The second quarter 2005 results include $3.9 million of interest expense on a dividend note to the Company’s controlling shareholder, Retail Ventures, Inc. (NYSE: RVI). After adjusting for the dividend interest and the significant increase in shares as a result of the Company’s initial public offering in June 2005, pro forma net income for the second quarter of 2005 was $11.6 million, or $0.26 per share. The exhibit at the end of this release reconciles the non-GAAP pro forma net income and diluted earnings per share to the reported net income and diluted earnings per share for second quarter 2005.

Comparable store sales for the second quarter of 2006 increased 2.2% compared with the same period last year.

Six Month Results

For the six months ended July 29, 2006, net income was $32.9 million on net sales of $617.8 million, compared with net income of $16.2 million on net sales of $558.0 million for the comparable period last year.

Diluted earnings per share for the six months ended July 29, 2006, were $0.74 compared with $0.53 for the same period last year.

The fiscal 2005 six-month results include $6.6 million of interest expense on a dividend note to the Company’s controlling shareholder, Retail Ventures, Inc., and $6.5 million for the accrual for losses associated with the data theft announced March 2005. After adjusting for the dividend interest, the data theft accrual and the significant increase in shares as a result of the Company’s initial public offering in June 2005, pro forma net income for the fiscal 2005 six-month period was $24.1 million, or $0.55 per share. The exhibit at the end of this release reconciles the non-GAAP pro forma net income and diluted earnings per share to the reported net income and diluted earnings per share for the fiscal 2005 six-month period.

Comparable store sales for the six months ended July 29, 2006 increased 3.2% compared with the same period last year.

2006 Outlook

The Company reiterated its previous estimate for fiscal 2006 annual diluted earnings per share of $1.24 to $1.27. Comparable store sales are projected to increase 3-5% and the Company plans to open 30 DSW stores during the year.

Webcast and Conference Call

To hear the Company’s live second quarter earnings conference call, log on to www.DSWshoes.com at 8:00 a.m. ET today, Wednesday, August 30, 2006 or call 1-866-277-1184 and reference passcode 23706620. To hear a replay of the earnings call, which will be available approximately two hours after the conference call ends, dial 1-888-286-8010, followed by passcode 79238948. An audio replay of the conference call, as well as additional financial information, will also be available at www.DSWshoes.com.

About DSW Inc.

DSW Inc., headquartered in Columbus, Ohio, is a leading U.S. branded footwear specialty retailer that offers a wide selection of brand name and designer dress, casual and athletic footwear for women and men. As of August 29, 2006, DSW operated 209 stores in 33 states and supplied footwear to 242 leased locations (26 for related retailers and 216 for non-related retailers) in the United States. For store locations and additional information about DSW, visit www.DSWshoes.com.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

Any statements in this release that are not historical or current facts are forward-looking statements. All forward-looking statements in this release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements 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, performances or achievements expressed or implied by the forward-looking statements. Certain of these risks and uncertainties are described in the Company’s latest annual or quarterly report, as filed with the SEC. These risk factors include, but are not limited to: the Company’s success in opening and operating new stores on a timely and profitable basis; maintaining good relationships with vendors; ability to anticipate and respond to fashion trends; fluctuation of comparable store sales and quarterly financial performance; disruption of distribution operations; dependence on Retail Ventures, Inc. for key services; failure to retain key executives or attract qualified new personnel; remaining competitive with respect to style, price, brand availability and customer service; declining general economic conditions; risks inherent to international trade; and security risks related to our electronic processing and transmission of confidential customer information. Management undertakes no obligation to revise these forward-looking statements included in this press release to reflect any future events or circumstances.

Contact: DSW Investor Relations, 614-872-1474

Source: DSW Inc.

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DSW INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)

	July 29,		January 28,
	2006		2006
ASSETS
Cash and equivalents	$	104,326	$	124,759
Short-term investments		46,925		—
Accounts receivable, net		6,757		4,088
Inventories		222,029		216,698
Prepaid expenses and other assets		14,303		13,981
Deferred income taxes		19,372		18,591
Total current assets		413,712		378,117
Property and equipment, net		97,859		95,921
Goodwill		25,899		25,899
Tradenames and other intangibles, net		5,784		6,216
Deferred income taxes and other assets		2,017		1,562
Total assets	$	545,271	$	507,715
LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable	$	86,725	$	85,520
Accrued expenses		53,536		54,069
Total current liabilities		140,261		139,589
Other noncurrent liabilities		65,146		63,410
Total shareholders’ equity		339,864		304,716
Total liabilities and shareholders’ equity	$	545,271	$	507,715

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DSW INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
(Unaudited)

	Three Months Ended						Six Months Ended
	July 29,			July 30,			July 29,			July 30,
	2006			2005			2006			2005
Net sales	$	301,302		$	276,211		$	617,789		$	558,017
Cost of sales		(216,200	)		(199,848	)		(439,400	)		(398,856	)
Gross profit		85,102			76,363			178,389			159,161
Operating expenses		(62,005	)		(55,675	)		(127,403	)		(123,420	)
Operating profit		23,097			20,688			50,986			35,741
Interest income (expense), net		1,975			(5,012	)		3,299			(8,533	)
Earnings before income taxes		25,072			15,676			54,285			27,208
Income tax provision		(9,731	)		(6,425	)		(21,425	)		(10,977	)
Net income	$	15,341		$	9,251		$	32,860		$	16,231
Basic and diluted earnings per share:
Basic	$	0.35		$	0.28		$	0.75		$	0.53
Diluted	$	0.35		$	0.28		$	0.74		$	0.53
Shares used in per share calculations:
Basic		43,909			33,390			43,902			30,546
Diluted		44,210			33,472			44,177			30,588

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Exhibit
(in thousands, except per share amounts)

				Three Months Ended
				July 30,
	Proforma			2005			As reported
	Non-GAAP			Adjustments (1)			GAAP
Net Sales	$	276,211					$	276,211
Cost of sales		(199,848	)					(199,848	)
Gross profit		76,363						76,363
Operating expenses		(55,675	)					(55,675	)
Operating profit		20,688						20,688
Interest expense, net		(1,092	)		(3,920	)		(5,012
Earnings before income taxes		19,596			(3,920	)		15,676
Income tax provision (3)		(7,993	)		1,568			(6,425	)
Net income		11,603			(2,352	)		9,251
Weighted average outstanding shares, diluted (2)		44,127			(10,655)			33,472
Diluted earnings per share		0.26						0.28

				Six Months Ended
				July 30,
	Proforma			2005			As reported
	Non-GAAP			Adjustments (1)			GAAP
Net Sales	$	558,017					$	558,017
Cost of sales		(398,856	)					(398,856	)
Gross profit		159,161						159,161
Operating expenses		(116,920	)		(6,500	)		(123,420	)
Operating profit		42,241			(6,500	)		35,741
Interest expense, net		(1,941	)		(6,592	)		(8,533	)
Earnings before income taxes		40,300			(13,092	)		27,208
Income tax provision (3)		(16,214	)		5,237			(10,977	)
Net income		24,086			(7,855	)		16,231
Weighted average outstanding shares, diluted (2)		44,127			(13,539)			30,588
Diluted earnings per share		0.55						0.53

(1)	The Company believes the use of pro forma results provide meaningful information for the three and six months ended July 30, 2005 due to: i) the significant increase in share count as a result of the Company’s initial public offering on June 29, 2005, ii) the interest expense in the first three and six-month periods of fiscal 2005 attributable to a $190 million dividend note which was repaid with the proceeds of the initial public offering, and iii) the $6.5 million accrual for the data theft which was recorded in the first quarter of fiscal 2005. The pro forma data is presented as if the initial public offering occurred on the first day of fiscal 2005 and the dividend note interest and data theft accrual are non-recurring or unusual charges.
(2)	Amount is based on the number of shares outstanding, plus the assumed exercise of dilutive stock options and restricted stock units, as of the quarter ended July 30, 2005, the first quarter end following the Company’s initial public offering on June 29, 2005, and eliminates the weighting effect to equal total shares at period end.
(3)	The tax effect on the pro forma adjustments is calculated using an approximate annual tax rate of 40%.

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