10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 27, 2012

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ______________

Commission File Number     1-32545

DSW INC.

(Exact name of registrant as specified in its charter)

Ohio	31-0746639
(State or other jurisdiction of Incorporation or organization)	(I.R.S. Employer Identification No.)
810 DSW Drive, Columbus, Ohio	43219
(Address of principal executive offices)	(Zip Code)
(614) 237-7100
Registrant’s telephone number, including area code
N/A
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
	þ	Yes	o	No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
	þ	Yes	o	No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
	Large Accelerated Filer			þ
	Accelerated Filer			o
	Non-accelerated Filer			o
	(Do not check if smaller reporting company)
	Smaller reporting company			o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
	o	Yes	þ	No

The number of outstanding Class A Common Shares, without par value, as of November 27, 2012 was 35,083,912 and Class B Common Shares, without par value, as of November 27, 2012 was 9,653,102.

DSW INC.

TABLE OF CONTENTS

Item No.	Page
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of October 27, 2012 and January 28, 2012	2
Condensed Consolidated Statements of Operations and Comprehensive Income for the three and nine months ended October 27, 2012 and October 29, 2011	3
Condensed Consolidated Statements of Shareholders’ Equity for the nine months ended October 27, 2012 and October 29, 2011	4
Condensed Consolidated Statements of Cash Flows for the nine months ended October 27, 2012 and October 29, 2011	6
Notes to the Condensed Consolidated Financial Statements	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3. Quantitative and Qualitative Disclosures About Market Risk	33
Item 4. Controls and Procedures	33
Part II. Other Information
Item 1. Legal Proceedings	34
Item 1A. Risk Factors	34
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 3. Defaults Upon Senior Securities	35
Item 4. Mine Safety Disclosure	35
Item 5. Other Information	35
Item 6. Exhibits	35
Signature	36
Index to Exhibits	37

1

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

DSW INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

(unaudited)

	October 27, 2012			January 28, 2012
ASSETS
Cash and equivalents	$	134,322		$	79,003
Short-term investments	203,320			296,697
Accounts receivable, net	26,245			16,900
Accounts receivable from related parties	—			96
Inventories	422,467			334,390
Prepaid expenses and other current assets	22,891			24,448
Deferred income taxes	90,100			116,473
Total current assets	899,345			868,007
Property and equipment, net	276,496			235,726
Long-term investments	92,674			53,858
Goodwill	25,899			25,899
Deferred income taxes	—			15,653
Other assets	8,144			8,757
Total assets	$	1,302,558		$	1,207,900
LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable	$	167,858		$	148,944
Accounts payable to related parties	1,098			2,304
Accrued expenses	130,256			126,998
Warrant liability	—			29,303
Total current liabilities	299,212			307,549
Other non-current liabilities	123,159			113,764
Deferred income taxes	21,708			—
Commitments and contingencies	—			—
Shareholders’ equity:
Class A Common Shares, no par value; 170,000,000 authorized; 35,043,163 and 32,121,760 issued and outstanding, respectively	680,266			624,948
Class B Common Shares, no par value; 100,000,000 authorized; 9,653,102 and 11,169,972 issued and outstanding, respectively	180,144			171,864
Preferred Shares, no par value; 100,000,000 authorized; no shares issued or outstanding	—			—
Retained earnings (Accumulated deficit)	5,980			(1,739		)
Accumulated other comprehensive loss	(7,911		)	(8,486		)
Total shareholders’ equity	858,479			786,587
Total liabilities and shareholders’ equity	$	1,302,558		$	1,207,900

The accompanying Notes are an integral part of the Condensed Consolidated Financial Statements.

2

DSW INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(in thousands, except per share amounts)

(unaudited)

	Three months ended						Nine months ended
	October 27, 2012			October 29, 2011			October 27, 2012			October 29, 2011
Net sales	$	592,734		$	530,747		$	1,663,524		$	1,510,645
Cost of sales	(392,563		)	(350,465		)	(1,110,518		)	(1,002,661		)
Operating expenses	(121,734		)	(120,310		)	(355,775		)	(339,557		)
Change in fair value of derivative instruments	—			20,924			(6,121		)	(56,895		)
Operating profit	78,437			80,896			191,110			111,532
Interest expense	(205		)	(1,743		)	(651		)	(11,171		)
Interest income	2,780			592			4,189			1,957
Interest income (expense), net	2,575			(1,151		)	3,538			(9,214		)
Income from continuing operations before income taxes	81,012			79,745			194,648			102,318
Income tax (provision) benefit	(30,897		)	(26,076		)	(76,608		)	73,625
Income from continuing operations	50,115			53,669			118,040			175,943
Income from discontinued operations, net of tax - Value City	—			5			—			173
Income from discontinued operations, net of tax - Filene’s Basement	—			—			1,253			—
Income from discontinued operations, net of tax	—			5			1,253			173
Net income	50,115			53,674			119,293			176,116
Less: net income attributable to the noncontrolling interests	—			—			—			(20,695		)
Net income, net of noncontrolling interests	$	50,115		$	53,674		$	119,293		$	155,421
Basic and diluted earnings per share:
Basic earnings per share from continuing operations, net of noncontrolling interests	$	1.12		$	1.30		$	2.67		$	4.77
Diluted earnings per share from continuing operations, net of noncontrolling interests	$	1.10		$	0.75		$	2.61		$	4.29
Basic earnings per share from discontinued operations	$	0.00		$	0.00		$	0.03		$	0.01
Diluted earnings per share from discontinued operations	$	0.00		$	0.00		$	0.03		$	0.00
Basic earnings per share, net of noncontrolling interests	$	1.12		$	1.30		$	2.69		$	4.78
Diluted earnings per share, net of noncontrolling interests	$	1.10		$	0.75		$	2.64		$	4.30
Shares used in per share calculations:
Basic	44,664			41,214			44,266			32,545
Diluted	45,523			44,739			45,173			34,781
Other Comprehensive Income:
Change in minimum pension liability, net of tax benefit of $284 and $210, respectively	$	451		$	—		$	575		$	—
Comprehensive income	$	50,566		$	53,674		$	119,868		$	155,421

The accompanying Notes are an integral part of the Condensed Consolidated Financial Statements.

3

DSW INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands)

(unaudited)

	Number of Shares												Treasury Shares			Retained Earnings (Accum-ulated Deficit)			Accum-ulated Other Compre-hensive Loss			Noncon-trolling Interests			Total
	Class A Common Shares		Class B Common Shares		Treasury Shares		Class A Common Shares			Class B Common Shares
Balance, January 29, 2011	21,873				3		$	330,022					$	(59	)	$	(78,940	)	$	(5,842	)	$	243,688		$	488,869
Income from continuing operations, net of tax																155,248						20,695			175,943
Income from discontinued operations, net of tax																173									173
Pre-merger share and shareholders’ equity activity:
Capital transactions of subsidiary																2,778						6,467			9,245
Net settlement of restricted shares	(10	)					(345		)																(345		)
RVI stock-based compensation expense, before related tax effects							157																		157
Exercise of stock options, net of settlement of taxes	108						1,051																		1,051
Exercise of warrant	96						4,579																		4,579
Merger-related share and shareholders’ equity activity:
Purchase of noncontrolling interest	17,121						270,850															(270,850		)	—
Exchange of Class A Common Shares for Class B Common Shares	(11,507	)	11,507				(177,059		)	177,059															—
Retirement of treasury shares					(3	)	(59		)				59												—
Fractional shares settled in cash	(1	)					(28		)																(28		)
Cash settlement of RVI options and SARs							(7,000		)																(7,000		)
Stock-based compensation expense related to cash settled RVI options and SARs							255																		255
RVI stock-based compensation expense, before related tax effects							339																		339
Post-merger share and shareholders’ equity activity:
DSW stock-based compensation expense, before related tax effects							2,595																		2,595
Exercise of DSW stock options, net of settlement of taxes	168						2,974																		2,974
Stock units granted	8						29																		29
Vesting of restricted stock units, net of settlement of taxes	1						(30		)																(30		)
Excess tax benefits related to stock exercises							4,469																		4,469
Exchange of Class B Common Shares for Class A Common Shares	337		(337	)			5,195			(5,195		)													—
Settlement of PIES with Class A Common Shares	3,827						181,776																		181,776
Dividends paid and accrued ($2.15 per share)																(93,906		)							(93,906		)
Balance, October 29, 2011	32,021		11,170		—		$	619,770		$	171,864		$	—		$	(14,647	)	$	(5,842	)	$	—		$	771,145

The accompanying Notes are an integral part of the Condensed Consolidated Financial Statements.

4

DSW INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands)

(unaudited)

	Number of Shares									Retained Earnings (Accum-ulated Deficit)			Accum-ulated Other Compre-hensive Loss			Total
	Class A Common Shares	Class B Common Shares		Class A Common Shares			Class B Common Shares
Balance, January 28, 2012	32,122	11,170		$	624,948		$	171,864		$	(1,739	)	$	(8,486	)	$	786,587
Income from continuing operations, net of tax										118,040						118,040
Income from discontinued operations, net of tax										1,253						1,253
Stock-based compensation expense, before related tax effects				5,360												5,360
Stock units granted	26			1,076												1,076
Exercise of stock options, net of settlement of taxes	559			7,354												7,354
Vesting of restricted stock units, net of settlement of taxes	66			(1,858		)										(1,858		)
Excess tax benefits related to stock exercises				8,450												8,450
Exchange of Class B Common Shares for Class A Common Shares	2,270	(2,270	)	34,936			(34,936		)							—
Exercise of warrants		753					43,216									43,216
Payment of dividends ($2.51 per share)										(111,574		)				(111,574		)
Change in minimum pension liability, net of tax benefit of $210													575			575
Balance, October 27, 2012	35,043	9,653		$	680,266		$	180,144		$	5,980		$	(7,911	)	$	858,479

The accompanying Notes are an integral part of the Condensed Consolidated Financial Statements.

5

DSW INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Nine months ended
	October 27, 2012			October 29, 2011
Cash flows from operating activities:
Net income	$	119,293		$	176,116
Less: income from discontinued operations, net of tax	(1,253		)	(173		)
Income from continuing operations, net of tax	$	118,040		$	175,943
Adjustments to reconcile net income to net cash provided by operating activities from continuing operations:
Amortization of debt issuance costs and discount on debt	151			6,031
Depreciation and amortization	42,076			38,218
Capital transactions of subsidiary	—			2,778
DSW and RVI stock-based compensation expense	5,360			3,346
Deferred income taxes	70,213			(118,142		)
Change in fair value of derivative instruments	6,121			56,895
Loss on disposal of long-lived assets	1,400			936
Impairment of long-lived assets	—			1,626
Impairment of lease	—			3,394
Excess tax benefits related to stock option exercises	(8,450		)	(4,469		)
Other	20,589			10,671
Change in working capital, assets and liabilities:
Accounts receivable, net	(9,249		)	(760		)
Inventories	(88,077		)	(68,932		)
Prepaid expenses and other current assets	1,557			9,830
Accounts payable	19,058			4,625
Accrued expenses	(1,575		)	8,952
Net cash provided by operating activities from continuing operations	$	177,214		$	130,942
Cash flows from investing activities:
Cash paid for property and equipment	(80,203		)	(55,356		)
Purchases of available-for-sale investments	(38,130		)	(114,900		)
Purchases of held-to-maturity investments	(195,468		)	(149,314		)
Maturities and sales of available-for-sale investments	157,527			144,174
Maturities of held-to-maturity investments	125,721			139,663
Activity related to long-term investment - related party	—			(95		)
Net cash used in investing activities from continuing operations	$	(30,553	)	$	(35,828	)
Cash flows from financing activities:
Loan proceeds from related party loan	—			11,000
Payment of related party loan	—			(11,000		)
Proceeds from exercise of stock options	11,244			4,025
Shares withheld to satisfy income tax withholdings for restricted stock unit vesting and option exercises	(5,748		)	—
Cash settlement of RVI options and SARs	—			(7,000		)
Debt issuance costs	—			(2,625		)
Cash paid for fractional shares	—			(28		)
Dividends paid	(113,080		)	(92,401		)

6

	Nine months ended
	October 27, 2012			October 29, 2011
Proceeds from the exercise of warrants	7,792			995
Excess tax benefits related to stock exercises	8,450			4,469
Net cash used in financing activities from continuing operations	$	(91,342	)	$	(92,565	)
Net increase in cash and equivalents from continuing operations	55,319			2,549
Cash and equivalents, beginning of period	79,003			99,126
Cash and equivalents, end of period	$	134,322		$	101,675
Supplemental disclosures of cash flow information:
Cash paid during the period for interest	$	—		$	7,291
Cash paid during the period for income taxes	$	4,871		$	24,552
Proceeds from construction and tenant allowances	$	10,115		$	7,079
Non-cash investing and financing activities:
Balance of accounts payable and accrued expenses due to property and equipment purchases	$	13,047		$	7,408
Amortization of investment discounts and premiums	$	4,913		$	4,249
Additional paid in capital transferred from warrant liability due to warrant exercises	$	35,424		$	3,584
Settlement of PIES with Class A Common Shares	$	—		$	181,776

The accompanying Notes are an integral part of the Condensed Consolidated Financial Statements.

7

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

1. BUSINESS OPERATIONS AND BASIS OF PRESENTATION

Business Operations- DSW and its wholly owned subsidiaries are herein referred to collectively as DSW or the “Company”. DSW’s Class A Common Shares are listed on the New York Stock Exchange under the ticker symbol “DSW”.

DSW has two reportable segments: the DSW segment, which includes the DSW stores and dsw.com sales channels, and the Affiliated Business Group segment (previously known as the leased business division segment). DSW offers a wide assortment of brand name dress, casual and athletic footwear and accessories for women and men. As of October 27, 2012, DSW operated a total of 363 stores located in 41 states, the District of Columbia and Puerto Rico, and dsw.com. During the nine months ended October 27, 2012, DSW opened 38 new DSW stores and closed 1 DSW store.

DSW also operates leased departments for three retailers in its Affiliated Business Group segment. As of October 27, 2012, DSW supplied merchandise to 261 Stein Mart stores, 83 Gordmans stores and one Frugal Fannie’s store. During the nine months ended October 27, 2012, DSW added 18 new leased departments and ceased operations in 9 leased departments. DSW owns the merchandise and the fixtures, records sales of merchandise, net of returns through period end and excluding sales tax, and provides management oversight. The retailers provide the sales associates and retail space. DSW pays a percentage of net sales as rent, which is included in cost of sales as occupancy expense.

Basis of Presentation- The accompanying unaudited condensed consolidated interim financial statements should be read in conjunction with DSW’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 27, 2012 (the “2011 DSW Annual Report”). In the opinion of management, the unaudited condensed consolidated interim financial statements reflect all adjustments, consisting of normal recurring adjustments, which are necessary to present fairly the consolidated financial position, results of operations and cash flows for the periods presented.

2.     BACKGROUND

Merger with Retail Ventures, Inc. ("the Merger")- On May 26, 2011, Retail Ventures, Inc. (“Retail Ventures” or “RVI”) merged with and into DSW MS LLC (“Merger Sub”), with Merger Sub surviving the Merger and continuing as a wholly owned subsidiary of DSW. Upon the closing of the Merger, each outstanding RVI common share was converted into 0.435 DSW Class A Common Shares, unless the holder of each outstanding RVI common share properly and timely elected to receive a like amount of DSW Class B Common Shares.

The Merger was accounted for as a reverse merger with RVI as the accounting acquirer and DSW (the surviving legal entity) as the accounting acquiree. As the Merger was an equity transaction between entities under common control, purchase accounting was not applied. Pre-merger financial information presented in the DSW consolidated financial statements represents consolidated RVI financial information. References to Retail Ventures or RVI refer to the pre-merger entity. The pre-merger financial information was retrospectively recast for the following matters:

• Share and per share information- DSW recast all RVI historical share and per share information, including earnings per share, to reflect the exchange ratio of 0.435 for all periods presented.

• Segment presentation- DSW maintained its historical segment presentation, which is consistent with how the chief operating decision maker, as defined in Accounting Standard Codification ("ASC") 280, Segment Reporting, reviews the business. DSW sells products through three channels: DSW stores, dsw.com and the Affiliated Business Group. The reportable segments are the DSW segment, which includes the DSW stores and dsw.com sales channels, and the Affiliated Business Group segment. In order to reconcile to the condensed consolidated financial statements, DSW includes Other, which consists of assets, liabilities and expenses that are not attributable to the two reportable segments. The pre-merger or prior period condensed consolidated financial statements and notes were recast to reflect the two reportable segments and Other.

• Cost of sales- DSW conformed RVI's accounting policies and recast RVI's pre-merger or prior period financial statements and notes for distribution and fulfillment expenses and store occupancy costs historically reported by RVI within operating expenses to be consistent with DSW's historical classification of these costs within cost of sales.

8

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Principles of Consolidation- The condensed consolidated financial statements include the accounts of DSW and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. In fiscal 2009 and fiscal 2007, RVI disposed of its Filene's Basement operations and Value City operations, respectively.

Filene’s Basement- On April 21, 2009, RVI disposed of Filene’s Basement, Inc. and certain related entities to FB II Acquisition Corp., a newly formed entity owned by Buxbaum Holdings, Inc. (“Buxbaum”). RVI agreed to indemnify Buxbaum, FB II Acquisition Corp. and their owners against certain liabilities. On May 4, 2009, Filene’s Basement filed for bankruptcy protection. On June 18, 2009, following bankruptcy court approval, SYL LLC, a subsidiary of Syms Corp (“Syms”), purchased certain assets of Filene’s Basement. As of October 27, 2012, the Company had a liability of $6.7 million for guaranteed lease obligations related to leases assumed by Syms and a liability of less than $0.1 million related to leases not assumed by Syms. See Note 16 for additional disclosure regarding the guaranteed lease obligations.

3.     SIGNIFICANT ACCOUNTING POLICIES

Allowance for Doubtful Accounts-The Company monitors its exposure for credit losses and records related allowances for doubtful accounts. Allowances are estimated based upon specific accounts receivable balances, where a risk of default has been identified. As of October 27, 2012 and January 28, 2012, the Company’s allowances for doubtful accounts were $0.3 million and $0.6 million, respectively.

Inventories-Merchandise inventories are stated at lower of cost or market, determined using the retail inventory method. The retail inventory method is widely used in the retail industry due to its practicality. Under the retail inventory method, the valuation of inventories at cost and the resulting gross profits are determined by applying a calculated cost to retail ratio to the retail value of inventories. The cost of the inventory reflected on the balance sheet is decreased by charges to cost of sales at the time the retail value of the inventory is lowered through the use of markdowns, which are reductions in prices due to customers’ perception of value. Hence, earnings are negatively impacted as the merchandise is marked down prior to sale. Markdowns establish a new cost basis for inventory. Changes in facts or circumstances do not result in the reversal of previously recorded markdowns or an increase in the newly established cost basis. The markdown reserve requires management to make assumptions regarding customer preferences, fashion trends and consumer demand.

Inherent in the calculation of inventories are certain significant management judgments and estimates, including setting the original merchandise retail value, markdowns, and estimates of losses between physical inventory counts, or shrinkage, which combined with the averaging process within the retail inventory method, can significantly impact the ending inventory valuation at cost and the resulting gross profit. DSW records a reduction to inventories and a charge to cost of sales for shrinkage. Shrinkage is calculated as a percentage of sales from the last physical inventory date. Estimates are based on both historical experience as well as recent physical inventory results. Physical inventory counts are taken on an annual basis and have supported DSW’s shrinkage estimates.

Sales and Revenue Recognition- Revenues from merchandise sales are recognized upon customer receipt of merchandise, are net of returns through period end, exclude sales tax and are not recognized until collectibility is reasonably assured. For sales through the dsw.com sales channel, DSW defers revenue representing a time lag for shipments to be received by the customer and also includes revenue from shipping and handling in net sales while the related costs are included in cost of sales. Revenue from gift cards is deferred and recognized upon redemption of the gift card. The Company’s policy is to recognize income from breakage of gift cards when the likelihood of redemption of the gift card is remote.

Cost of Sales-In addition to the cost of merchandise, which includes markdowns and shrinkage, DSW includes in cost of sales expenses associated with distribution and fulfillment (including depreciation) and store occupancy (excluding depreciation and including store impairments). Distribution and fulfillment expenses are comprised of labor, benefits and other labor-related costs associated with the operations of the distribution and fulfillment centers. The non-labor costs include rent, depreciation, insurance, utilities, maintenance and other operating costs. Distribution and fulfillment expenses also include the transportation of merchandise to the distribution and fulfillment centers, from the distribution center to DSW’s stores and from the fulfillment center to the customer. Store occupancy expenses include rent, utilities, repairs, maintenance, insurance, janitorial costs and occupancy-related taxes, which are primarily real estate taxes passed to DSW by its landlords.

Operating Expenses- Operating expenses include expenses related to store management and store payroll costs, advertising, Affiliated Business Group operations, store depreciation and amortization, new store advertising and other new store costs (which are expensed as incurred) and corporate expenses. Corporate expenses include expenses related to buying, information technology, depreciation expense for corporate cost centers, marketing, legal, finance, outside

9

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

professional services, customer service center expenses, payroll and benefits for associates and payroll taxes.

Income Taxes- Income taxes are accounted for using the asset and liability method. The Company is required to determine the aggregate amount of income tax expense to accrue and the amount which will be currently payable based upon tax statutes of each jurisdiction in which the Company does business. In making these estimates, income is adjusted based on a determination of generally accepted accounting principles for items that are treated differently by the applicable taxing authorities. Deferred tax assets and liabilities, as a result of these differences, are reflected on DSW’s balance sheet for temporary differences that will reverse in subsequent years. A valuation allowance is established against deferred tax assets when it is more likely than not that some or all of the deferred tax assets will not be realized. DSW succeeded to RVI’s tax attributes as a result of the Merger.

Noncontrolling Interests- The noncontrolling interests represented the portion of legacy DSW’s total shareholders’ equity owned by unaffiliated investors in DSW prior to the Merger and net income attributable to the unaffiliated investors. The noncontrolling interest percentage was computed by the ratio of shares held by unaffiliated interests. After the Merger, noncontrolling interests were eliminated.

Sale of Subsidiary Stock- Prior to the Merger, sales of stock by a subsidiary were accounted for by RVI as capital transactions.

Recent Accounting Pronouncements

Fair Value- In May 2011, the Financial Accounting Standards Board ("FASB") issued an update to existing guidance related to fair value measurements on how to measure fair value and what disclosures to provide about fair value measurements. For fair value measurements categorized as level 3, a reporting entity should disclose quantitative information of the unobservable inputs and assumptions, a description of the valuation processes and narrative description of the sensitivity of the fair value to changes in unobservable inputs. This update was effective for interim and annual periods beginning after December 15, 2011. The adoption of this update in the first quarter of fiscal 2012 did not materially affect the Company's consolidated financial statements.

Comprehensive Income- In June 2011, the FASB issued an update to existing guidance related to the presentation of comprehensive income. The main provisions of this update provide that an entity that reports other comprehensive income has the option to present comprehensive income in either one continuous or two consecutive financial statements. The first option is a single statement that must present the components of net income and total net income, the components of other comprehensive income and total other comprehensive income and a total for comprehensive income. The second option is a two statement approach, in which an entity must present the components of net income and total net income in the first statement and that statement must be immediately followed by a financial statement that presents the components of other comprehensive income, a total for other comprehensive income, and a total for comprehensive income. The option in generally accepted accounting principles that permits the presentation of other comprehensive income in the statement of changes in equity has been eliminated. This update was effective for interim and annual periods beginning after December 15, 2011. In November 2011, the FASB issued a proposed update to indefinitely defer the requirement to present reclassification adjustments in the statement of operations. The Company elected to present a single statement of operations and comprehensive income for quarterly reporting beginning in the first quarter of fiscal 2012.

Goodwill- In September 2011, the FASB issued an update to existing guidance related to goodwill impairment testing. The amendments will allow an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. An entity no longer will be required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. The guidance also includes examples of the types of factors to consider in conducting the qualitative assessment. This update was effective for interim and annual periods beginning after December 15, 2011. The adoption of this update in the first quarter of fiscal 2012 did not affect the Company's consolidated financial statements.

Intangible Assets- In July 2012, the FASB issued an update to existing guidance related to impairment testing for indefinite-lived intangible assets. The amendments will allow an entity to first assess qualitative factors to determine whether it is necessary to perform the quantitative impairment test. An entity no longer will be required to test the fair value of an intangible asset unless the entity determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. This update is effective for interim and annual periods beginning after September 15, 2012. The Company does not expect the adoption of this update to affect its consolidated financial statements.

10

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

4.     RELATED PARTY TRANSACTIONS

Schottenstein Affiliates- As of October 27, 2012, the Schottenstein Affiliates, entities owned by or controlled by Jay L. Schottenstein, the executive chairman of the DSW board of directors, and members of his family, owned approximately 23% of DSW’s outstanding Common Shares representing approximately 69% of the combined voting power of DSW’s outstanding Common Shares. As of October 27, 2012, the Schottenstein Affiliates beneficially owned 0.7 million Class A Common Shares and 9.6 million Class B Common Shares.

DSW leases certain store locations owned by Schottenstein Affiliates as well as purchasing services and products from Schottenstein Affiliates. Accounts receivable from and payables to affiliates principally result from commercial transactions or affiliate transactions and normally settle in the form of cash in 30 to 60 days. As of January 28, 2012, the balance of related party receivables was $0.1 million. As of October 27, 2012 and January 28, 2012, the balance of related party payables was $1.1 million and $2.3 million, respectively.

See Note 17 regarding DSW's purchase of its corporate office headquarters, distribution center and trailer parking lot from certain Schottenstein Affiliates.

5.     STOCK-BASED COMPENSATION

Historically, both DSW and RVI issued stock-based compensation under their respective plans. After the Merger, DSW either cash settled or converted all outstanding units and options under the RVI 2000 Stock Incentive Plan (“the RVI Plan”) to be exercisable for DSW Class A Common Shares. The RVI stock-based compensation instruments were adjusted retrospectively for the conversion ratio. Excluding the converted options, the DSW 2005 Equity Incentive Plan ("the DSW Plan") was otherwise not affected as a result of the Merger.

DSW Stock Compensation Plan

The DSW Plan provides for the issuance of equity awards to purchase up to 7.6 million DSW Common Shares. The DSW Plan covers stock options, restricted stock units and director stock units. Eligible recipients include key employees of DSW and affiliates, as well as directors of DSW. Options generally vest 20% per year on a cumulative basis. Options granted under the DSW Plan generally remain exercisable for a period of ten years from the date of grant. Prior to fiscal 2005, DSW did not have a stock option plan or any equity units outstanding. Prior to the Merger, RVI accounted for all DSW share activity as a capital transaction of a subsidiary.

Stock Options- In connection with the special dividend of $2.00 paid on October 26, 2012, DSW adjusted its outstanding stock options under the anti-dilution provision by decreasing the grant price and increasing the number of shares to make the optionee whole as required under the DSW Plan. The following table summarizes DSW’s stock option activity:

	Nine months ended
	October 27, 2012
	(in thousands)
Outstanding, beginning of period	2,508
Granted	337
Increase in options from dividend adjustment	64
Exercised	(685	)
Forfeited	(41	)
Outstanding, end of period	2,183
Exercisable, end of period	934

DSW expensed $4.2 million and $3.9 million for the nine months ended October 27, 2012 and October 29, 2011, respectively, related to stock options. The weighted-average grant date fair value of each option granted in the nine months ended October 27, 2012 and October 29, 2011 was $25.17 and $20.44 per share, respectively. As of October 27, 2012, the total compensation cost related to nonvested DSW stock options not yet recognized was approximately $14.6 million with a weighted average expense recognition period remaining of 2.1 years. The following table illustrates the weighted-average assumptions used in the Black-Scholes pricing model for DSW options granted in each of the periods presented:    

11

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

	Nine months ended
Assumptions:	October 27, 2012	October 29, 2011
Risk-free interest rate	1.2%	2.4%
Expected volatility of DSW common stock	56.2%	55.1%
Expected option term	5.5 years	5.9 years
Expected dividend yield	1.2%	0.0%

Restricted Stock Units ("RSU")- In connection with the special dividend of $2.00 paid on October 26, 2012, DSW issued forfeitable dividend equivalent units as required under the anti-dilution provision of the DSW Plan to make the grantee whole. The following table summarizes DSW’s restricted stock unit activity:

	Nine months ended
	October 27, 2012
	(in thousands)
Outstanding, beginning of period	273
Granted	56
Vested	(96	)
Forfeited	(5	)
Outstanding, end of period	228

DSW expensed $1.2 million and $0.9 million for the nine months ended October 27, 2012 and October 29, 2011, respectively, related to restricted stock units. As of October 27, 2012, the total compensation cost related to nonvested restricted stock units not yet recognized was approximately $4.3 million with a weighted average expense recognition period remaining of 2.7 years. The weighted average exercise price for all restricted stock units is zero.

Director Stock Units- DSW issues stock units to directors who are not employees of DSW. During the nine months ended October 27, 2012 and October 29, 2011, DSW expensed $1.1 million and $0.9 million, respectively, for these grants. For new grants beginning in fiscal 2012, directors were given the option to exercise their units at a specified point in the future or upon completion of service. The following table summarizes DSW’s director stock unit activity:

	Nine months ended
	October 27, 2012
	(in thousands)
Outstanding, beginning of period	192
Granted	26
Exercised	(33	)
Outstanding, end of period	185

Retail Ventures Stock Compensation Plan

Prior to the Merger, the RVI Plan provided for the issuance of stock options to purchase up to 13.0 million RVI common shares (which represented 5.7 million DSW Common Shares factoring in the exchange ratio of 0.435 pursuant to the Merger) or the issuance of restricted stock to management, key employees of RVI and affiliates, consultants (as defined in the RVI Plan), and directors of RVI.

Impact of Merger- At the date of the Merger, all RVI stock options and Stock Appreciation Rights (“SARs”) granted to directors immediately vested resulting in compensation expense of $0.3 million. At the election of each option holder, options and SARs were either paid in cash at a value equal to the RVI share price at close of the market on May 25, 2011 less the exercise price, or converted to be exercisable for DSW Class A Common Shares adjusted for the exchange ratio of 0.435. Immediately after the Merger, DSW paid $7.0 million related to the settlement of these options and SARs, which was treated as a reduction of common stock value, and converted the remaining RVI options to 72,830 options exercisable for DSW Class A Common Shares. DSW recorded additional stock-based compensation expense of $0.3 million related to the cash settled options and SARs as the fair value the recipient received was greater than the fair value of the option they

12

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

held.

Stock Options and SARs- Excluding any expense related to the Merger, RVI expensed $0.1 million for the nine months ended October 29, 2011 related to stock options. RVI expensed less than $0.1 million during the nine months ended October 29, 2011 related to SARs.

Restricted Shares-RVI expensed $0.1 million for the nine months ended October 29, 2011 related to restricted shares. All restricted shares were settled in the first quarter of fiscal 2011.

6.     INVESTMENTS

The majority of DSW’s short-term available-for-sale investments are primarily municipal bonds with renewal dates of every 7 days, but longer stated maturities. Despite the long-term nature of the stated contractual maturities of these short-term investments, DSW has the ability to liquidate these securities at the renewal dates. For short-term held-to-maturity investments, which are primarily corporate bonds and municipal term notes, amortized cost approximates fair value. In addition to short-term investments, DSW has invested in long-term corporate bonds and municipal term notes to receive higher returns. These long-term investments have maturities greater than one year but less than three years and are classified as held-to-maturity.  The following table discloses the major categories of DSW’s investments as of the periods presented:

	Short-term investments				Long-term investments
	October 27, 2012		January 28, 2012		October 27, 2012		January 28, 2012
Available-for-sale:	(in thousands)
Bonds	$	21,925	$	134,322	—		—
Commercial paper	2,000		5,485		—		—
Total available-for-sale investments	23,925		139,807		—		—
Held-to-maturity:
Term notes and bonds	179,395		156,890		$	91,523	$	52,707
Investment – related party	—		—		1,151		1,151
Total investments	$	203,320	$	296,697	$	92,674	$	53,858

As of October 27, 2012 and January 28, 2012, short-term investments had gross holding gains of $0.3 million and $0.1 million, respectively, and as of both October 27, 2012 and January 28, 2012, gross holding losses of $0.1 million. As of October 27, 2012 and January 28, 2012, long-term investments had gross holding gains of $0.3 million and less than $0.1 million, respectively, and as of both October 27, 2012 and January 28, 2012, gross holding losses of $0.2 million.

7.     DEBT OBLIGATIONS AND WARRANT LIABILITIES

DSW $100 Million Secured Credit Facility ("the Credit Facility")- On June 30, 2010, DSW entered into a $100 million secured revolving credit facility with a term of four years that will expire on June 30, 2014. The Credit Facility allows the payment of dividends or redemption of stock provided that DSW meets the minimum cash and short-term investments requirement of $125 million, as defined in the Credit Facility. Additional covenants limit payments for capital expenditures to $125 million in any fiscal year, and if DSW has direct borrowings greater than $25 million, the Credit Facility also requires that DSW maintain a fixed charge coverage ratio of not less than 1.1 to 1.0. DSW paid $80.2 million for capital expenditures for the nine months ended October 27, 2012. DSW was not required to calculate a fixed charge coverage ratio for the nine months ended October 27, 2012.

As of October 27, 2012 and January 28, 2012, DSW had no outstanding borrowings under the Credit Facility, had availability under the facility of $90.9 million and $82.7 million, respectively, and had outstanding letters of credit of $9.1 million and $17.3 million, respectively.

Derivative Instruments- As of the effective time of the Merger, a subsidiary of DSW assumed RVI’s obligations under the Premium Income Exchangeable Securities (“PIES”) and warrants. The PIES were settled on September 15, 2011. In accordance with ASC 815, Derivatives and Hedging, DSW, and prior to the Merger, RVI, recognized all derivatives on the balance sheet at fair value based on the Black-Scholes pricing model using current market information. For derivatives that are not designated as hedges under ASC 815, changes in the fair values were recognized in earnings in the period of

13

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

change. There were no derivatives designated as hedges outstanding as of October 27, 2012 or January 28, 2012. DSW does not hold or issue derivative financial instruments for trading purposes.

Warrants-The warrants originally issued by RVI on September 26, 2002 and updated on July 5, 2005 in connection with previously paid credit facilities qualified as derivatives under ASC 815. The fair values of the warrants were recorded on the balance sheet within current liabilities. As of January 28, 2012, DSW had outstanding warrants for 753,185 DSW Common Shares, which have all been exercised as of October 27, 2012.

On March 14, 2012, DSW issued 411,963 of its Class B Common Shares, without par value, to the Schottenstein Affiliates in connection with the exercise of its outstanding warrant. The common shares were issued at an exercise price of $10.35 per share, for an aggregate cash purchase price of $4.3 million, and DSW paid accrued dividends of $0.8 million related to the Company's special dividend issued on September 30, 2011. In connection with this exercise and in addition to the purchase price, DSW reclassified $18.6 million from the warrant liability to paid in capital during the first quarter of fiscal 2012. In connection with this issuance, no underwriters were utilized, and no commissions were paid.

On May 31, 2012, DSW issued 341,222 of its Class B Common Shares, without par value, to the Schottenstein Affiliates in connection with the exercise of its outstanding warrants. The common shares were issued at an exercise price of $10.35 per share, for an aggregate cash purchase price of $3.5 million, and DSW paid accrued dividends of $0.7 million related to the Company's special dividend issued on September 30, 2011. In connection with this exercise and in addition to the purchase price, DSW reclassified $16.8 million from the warrant liability to paid in capital during the second quarter of fiscal 2012. In connection with this issuance, no underwriters were utilized, and no commissions were paid.

The fair value of the warrants was estimated using the Black-Scholes pricing model with the following assumptions for the period presented:

Assumptions:	January 28, 2012
Risk-free interest rate	0.1%
Expected volatility of common stock	43.5%
Expected term	0.4 years
Expected dividend yield	1.3%

The fair value and balance sheet location of DSW’s derivative liability were as follows for the period presented:

	Balance Sheet Location	January 28, 2012
		(in thousands)
Warrants – related party	Warrant liability	$	29,303

$143.75 Million Premium Income Exchangeable Securities^SM (“PIES”)- A subsidiary of DSW assumed, as of the effective time of the Merger, by supplemental indenture and supplemental agreement, all of RVI’s obligations with respect to the PIES. On September 15, 2011, DSW issued 3.8 million of its Class A Common Shares to the holders of the PIES. The embedded exchange feature of the PIES was accounted for as a derivative, which was recorded at fair value with changes in fair value in the statement of operations. Accordingly, the accounting for the embedded derivative addressed the variations in the fair value of the obligation to settle the PIES when the market value exceeded or was less than the threshold appreciation price.

The amount of interest expense recognized and the effective interest rate for the PIES were as follows for the period presented:

	Nine months ended
	October 29, 2011
	(in thousands)
Contractual interest expense	$	5,926
Amortization of debt discount	1,618
Total interest expense	$	7,544
Effective interest rate	8.6		%

14

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The effect of derivative instruments on DSW’s, and prior to the Merger, RVI’s, condensed consolidated statements of operations was as follows for the periods presented:

	Three months ended					Nine months ended
	October 27, 2012		October 29, 2011			October 27, 2012		October 29, 2011
	(in thousands)
Warrants – related party	$	—	$	159		$	6,121	$	14,052
Warrants – non-related party	—		—			—		1,192
Conversion feature of short-term debt	—		(21,083		)	—		41,651
(Income) expense related to the change in fair value of derivative instruments	$	—	$	(20,924	)	$	6,121	$	56,895

8.     FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Therefore, fair value is a market-based measurement based on assumptions of the market participants. As a basis for these assumptions, DSW classifies its fair value measurements under the following fair value hierarchy:

• Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that are publicly accessible. Active markets have frequent transactions with enough volume to provide ongoing pricing information.

• Level 2 inputs are other than level 1 inputs that are directly or indirectly observable. These can include unadjusted quoted prices for similar assets or liabilities in active markets, unadjusted quoted prices for identical assets or liabilities in inactive markets or other observable inputs.

• Level 3 inputs are unobservable inputs.

Financial Assets and Liabilities- The following table presents financial assets and liabilities at fair value as of the periods presented:

	As of October 27, 2012								As of January 28, 2012
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Assets:	(in thousands)
Cash and equivalents(a)	$	134,322	$	134,322	—		—		$	79,003	$	79,003	—		—
Short-term investments(b)	203,525		—		$	203,525	—		296,697		—		$	296,697	—
Long-term investments (b)(c)	92,803		—		91,652		$	1,151	53,858		—		52,707		$	1,151
	$	430,650	$	134,322	$	295,177	$	1,151	$	429,558	$	79,003	$	349,404	$	1,151
Liabilities:
Warrant liability(d)	$	—	—		—		—		$	29,303	—		$	29,303	—
	$	—	—		—		—		$	29,303	—		$	29,303	—

(a) Cash and equivalents primarily represent cash deposits and investments in money market funds held with financial institutions, as well as credit card receivables that generally settle within three days. The carrying amount approximates fair value because of the relatively short average maturity of the instruments.

(b) Available-for-sale and held-to maturity investments are valued using a market-based approach using level 2 inputs such as prices of similar assets in active markets. Held-to-maturity investments are held at amortized cost.

(c) The long-term investment - related party is evaluated for other-than-temporary impairment on an annual basis or when a triggering event occurs using a discounted cash flow valuation model using level 3 inputs such as the financial condition of the entity.

15

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(d) The underlying assumptions for fair value measurement of the warrant liability is detailed in Note 7. Prior to exercise, the Company classified its warrant liability within level 2 as the valuation inputs are based on observable market data.

The following table presents the activity related to level 3 fair value measurements for the long-term investment-related party for the periods presented:

	Three months ended
	October 27, 2012		October 29, 2011
	(in thousands)
Carrying value at the beginning of the period	$	1,151	$	1,047
Carrying value at the end of the period	$	1,151	$	1,047

	Nine months ended
	October 27, 2012		October 29, 2011
	(in thousands)
Carrying value at the beginning of the period	$	1,151	$	952
Activity related to long-term investment - related party	—		95
Carrying value at the end of the period	$	1,151	$	1,047

Non-Financial Assets and Liabilities- DSW periodically evaluates the carrying amount of its long-lived assets, primarily property and equipment, and finite lived intangible assets when events and circumstances warrant such a review to ascertain if any assets have been impaired. The carrying amount of a long-lived asset or asset group is considered impaired when the carrying value of the asset or asset group exceeds the expected future cash flows from the asset or asset group. The reviews are conducted at the lowest identifiable level, which includes a store. The impairment loss recognized is the excess of the carrying value of the asset or asset group over its fair value, based on a discounted cash flow analysis using a discount rate determined by management. Should an impairment loss be realized, it will generally be included in cost of sales. There were no significant non-recurring fair value measurements recorded for the nine months ended October 27, 2012.

In the third quarter of fiscal 2011, DSW recognized an impairment loss of $1.6 million on assets used in a leased office facility assumed in the Merger. Based on the projected future cash flows under the lease, DSW determined that the carrying value exceeded the expected future cash flows from the asset group and recorded a full impairment after determining fair value.

The following table presents the activity related to the fair value of assets held and used that realized an impairment loss for the periods presented:

	As of October 29, 2011						Total Losses
	Level 1	Level 2	Level 3		Fair Value as of the Impairment Date		Three months ended October 29, 2011		Nine months ended October 29, 2011
	(in thousands)
Assets held and used			$	—	$	—	$	1,626	$	1,626

9.     EARNINGS PER SHARE AND SHAREHOLDERS' EQUITY

Earnings per Share- Basic earnings per share is based on net income and a simple weighted average of common shares outstanding. For periods prior to the Merger, share count was determined by adjusting all historical RVI shares by the exchange ratio of 0.435. Diluted earnings per share reflects the potential dilution of common shares adjusted, related to outstanding RVI stock options and SARs (prior to the Merger), outstanding DSW stock options and RSUs (after the Merger) and warrants calculated using the treasury stock method. As PIES were exchangeable for DSW Class A Common Shares, they were included as potentially dilutive instruments based on the DSW common share price, after the Merger and before the settlement.

16

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

For all periods presented, where there was a loss in fair value of warrants (prior to and after the Merger) and PIES (after the Merger), the loss was included in the calculation of the net income and the corresponding shares were excluded from the diluted share count, if the effect was anti-dilutive.

The following is a reconciliation of the net income used in the calculation of diluted earnings per share computations for the periods presented for net income from continuing operations, net of noncontrolling interests:

	Three months ended					Nine months ended
	October 27, 2012		October 29, 2011			October 27, 2012		October 29, 2011
	(in thousands)
Net income from continuing operations, net of noncontrolling interests for basic earnings per share	$	50,115	$	53,669		$	118,040	$	155,248
Less: (gain) in fair value of PIES, net of tax effected interest expense, amortization of debt discount and amortization of deferred financing fees	—		(20,167		)	—		(6,019		)
Add: loss in fair value of warrants	—		159			—		—
Net income from continuing operations, net of noncontrolling interests for diluted earnings per share	$	50,115	$	33,661		$	118,040	$	149,229

The following is a reconciliation of the net income used in the calculation of diluted earnings per share computations for the periods presented for net income, net of noncontrolling interests:

	Three months ended					Nine months ended
	October 27, 2012		October 29, 2011			October 27, 2012		October 29, 2011
	(in thousands)
Net income, net of noncontrolling interests for basic earnings per share	$	50,115	$	53,674		$	119,293	$	155,421
Less: (gain) in fair value of PIES, net of tax effected interest expense, amortization of debt discount and amortization of deferred financing fees	—		(20,167		)	—		(6,019		)
Add: loss in fair value of warrants	—		159			—		—
Net income, net of noncontrolling interests for diluted earnings per share	$	50,115	$	33,666		$	119,293	$	149,402

The following is a reconciliation of the number of shares used in the calculation of diluted earnings per share computations for the periods presented:

	Three months ended		Nine months ended
	October 27, 2012	October 29, 2011	October 27, 2012	October 29, 2011
	(in thousands)
Weighted average shares outstanding	44,664	41,214	44,266	32,545
Assumed exercise of dilutive DSW stock options	742	799	780	474
Assumed exercise of dilutive DSW RSUs	117	161	127	91
Assumed exercise of dilutive RVI stock options and SARs	—	—	—	87
Assumed exercise of dilutive PIES	—	1,977	—	1,584
Assumed exercise of dilutive warrants	—	588	—	—
Number of shares for computation of diluted earnings per share	45,523	44,739	45,173	34,781

17

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Options and RSUs- For the third quarter of fiscal 2012, the amount of securities outstanding as of October 27, 2012 and October 29, 2011 that were not included in the computation of dilutive earnings per share because the effect would be anti-dilutive was approximately 0.3 million and 0.4 million, respectively. For the year-to-date period, the amount of securities outstanding as of October 27, 2012 and October 29, 2011 that were not included in the computation of dilutive earnings per share because the effect would be anti-dilutive was approximately 0.3 million and 0.2 million, respectively.

Warrants- Warrants were anti-dilutive for certain periods presented and were not included in the calculation of diluted shares for those certain periods. For the nine months ended October 27, 2012 and October 29, 2011, the assumed exercise of warrants excluded was 0.2 million and 0.6 million, respectively. There were no warrants outstanding during the third quarter of fiscal 2012.

PIES- For the three and nine months ended October 29, 2011, the assumed exercise of 2.0 million and 1.6 million, respectively, common shares that would convert upon redemption of the PIES were included in the calculation of shares as they were dilutive. The total amount of common shares that would convert upon redemption of the PIES based on the average of DSW's share prices was 3.8 million, but the assumed conversion is prorated as the PIES were only included in the calculation of earnings per share after the Merger.

Shareholders' Equity- On June 18, 2012, DSW announced that its Board of Directors had authorized the Company to repurchase up to $100 million of Company common shares over the next twelve months. The share repurchase program may be suspended, modified or discontinued at any time, and the Company has no obligation to repurchase any amount of its common shares under the program. As of October 27, 2012, DSW has not made any repurchases under this program.

10.    INCOME TAXES

The provision for income taxes is based on the current estimate of the annual effective tax rate and is adjusted as necessary for quarterly events.

For the three and nine months ended October 27, 2012, the effective tax rate of 38.1% and 39.4%, respectively, primarily reflects the impact of state and local taxes, and for the nine months ended October 27, 2012, the effective tax rate was also impacted by the change in fair value of warrants included in book income but not tax income.

For the three months ended October 29, 2011, the effective tax rate of 32.7% reflects the impact of the change in fair value of the warrants and PIES, which are included for book income, but not for tax income. For the nine months ended October 29, 2011, the effective tax rate of (72.0)% was favorably impacted by the release of the valuation allowance and other merger related tax items, which has been reflected as an income tax benefit in the Company’s condensed consolidated statements of operations. DSW was able to release the valuation allowance on RVI’s deferred tax assets as a result of the Company’s expected future taxable income. In addition, as a result of the Merger, the deferred tax liability related to RVI’s historical basis in DSW and the deferred tax asset related to the PIES were eliminated.

Consistent with its historical financial reporting, the Company has elected to classify interest expense related to income tax liabilities, when applicable, as part of interest expense in its consolidated statements of operations rather than income tax expense. The Company will continue to classify income tax penalties as part of operating expenses in its consolidated statements of operations.

11.    PROPERTY AND EQUIPMENT

The balance sheet caption "Property and equipment, net" was comprised of the following for the periods presented:

	October 27, 2012			January 28, 2012
	(in thousands)
Property and equipment:
Furniture, fixtures and equipment	$	333,816		$	295,162
Leasehold improvements	253,361			215,519
Total property and equipment	587,177			510,681
Accumulated depreciation and amortization	(310,681		)	(274,955		)
Property and equipment, net	$	276,496		$	235,726

18

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

12.     ACCRUED EXPENSES

The balance sheet caption "Accrued expenses" was comprised of the following for the periods presented:

	October 27, 2012		January 28, 2012
	(in thousands)
Gift cards and merchandise credits	$	24,738	$	28,248
Compensation	18,746		33,427
Taxes	18,957		13,128
Customer loyalty program	17,440		14,577
Other	50,375		37,618
Total accrued expenses	$	130,256	$	126,998

Customer Loyalty Program- DSW maintains a customer loyalty program for the DSW stores and dsw.com sales channels in which program members earn reward certificates that result in discounts on future purchases. Upon reaching the target-earned threshold, the members receive reward certificates for these discounts which expire six months after being issued. DSW accrues the anticipated redemptions of the discount earned at the time of the initial purchase. To estimate these costs, DSW makes assumptions related to customer purchase levels and redemption rates based on historical experience.

13.     OTHER NON-CURRENT LIABILITIES

The balance sheet caption "Other non-current liabilities" was comprised of the following for the periods presented:

	October 27, 2012		January 28, 2012
	(in thousands)
Construction and tenant allowances	$	74,479	$	62,474
Deferred rent	39,480		35,673
Other	9,200		15,617
Total other non-current liabilities	$	123,159	$	113,764

Construction and Tenant Allowances- DSW receives cash allowances from landlords, which are deferred and amortized on a straight-line basis over the noncancelable terms of the lease as a reduction of rent expense.

Deferred Rent- Many of the Company’s operating leases contain predetermined fixed increases of the minimum rentals during the initial lease terms. For these leases, the Company recognizes the related rental expense on a straight-line basis over the noncancelable terms of the lease. The Company records the difference between the amounts charged to expense and the rent paid as deferred rent and begins amortizing such deferred rent upon the delivery of the lease location by the lessor.

14.    PENSION PLAN

Merger Sub is responsible for the Filene’s Basement defined benefit pension plan (the "plan") that RVI assumed as part of its sale of Filene's Basement in fiscal 2009. Benefits were frozen as of April 30, 2000. The Company’s funding policy is to contribute annually the amount required to meet ERISA ("Employee Retirement Income Security Act") funding standards and that is tax deductible under the Internal Revenue Code of 1986, as amended. The Company made contributions of $1.2 million to the plan during the nine months ended October 27, 2012. The Company uses a January 31 measurement date for the plan.

On December 1, 2011, DSW adopted a plan amendment to terminate the plan with a proposed termination date of March 22, 2012. DSW is currently awaiting regulatory approval. Prior to the pension plan being fully funded, certain regulatory approvals and participant settlement elections need to be obtained. In the second quarter of fiscal 2012, DSW reclassified the non-current pension liability to a current liability, accrued expenses, as DSW has been communicating with the regulatory authorities and expects resolution of the pension plan within the next twelve months.

The components of net periodic benefit cost are comprised of the following for the periods presented:

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

	Three months ended						Nine months ended
	October 27, 2012			October 29, 2011			October 27, 2012			October 29, 2011
	(in thousands)
Interest cost	$	230		$	251		$	690		$	752
Expected return on plan assets	(302		)	(237		)	(906		)	(709		)
Amortization of net loss	100			74			298			222
Loss recognized due to settlements	67						67
Net periodic benefit cost	$	95		$	88		$	149		$	265

15.    SEGMENT REPORTING

DSW maintained its historical segment presentation, but recast its segment presentation to include Other. In order to reconcile to the condensed consolidated financial statements, DSW includes Other, which consists of assets, liabilities and expenses that are not attributable to the two reportable segments, primarily related to assets and liabilities of the former RVI operations.

The Company sells products through three channels: DSW stores, dsw.com and the Affiliated Business Group. The reportable segments are the DSW segment, which includes the DSW stores and dsw.com sales channels, and the Affiliated Business Group segment. DSW has identified such segments based on internal management reporting and responsibilities and measures segment profit as gross profit, which is defined as net sales less cost of sales. All operations are located in the United States. The goodwill balance of $25.9 million outstanding as of both October 27, 2012 and January 28, 2012 is recorded in the DSW segment related to the DSW stores.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

	DSW segment		Affiliated Business Group segment		Other			Total
	(in thousands)
Three months ended October 27, 2012
Net sales	$	559,312	$	33,422	—			$	592,734
Gross profit	193,363		6,808		—			200,171
Capital expenditures	37,700		162		—			37,862
Three months ended October 29, 2011
Net sales	$	491,929	$	38,818	—			$	530,747
Gross profit	174,173		6,109		—			180,282
Capital expenditures	20,462		199		—			20,661
Nine months ended October 27, 2012
Net sales	$	1,562,707	$	100,817	—			$	1,663,524
Gross profit	531,848		21,158		—			553,006
Capital expenditures	83,212		366		—			83,578
Nine months ended October 29, 2011
Net sales	$	1,396,433	$	114,212	—			$	1,510,645
Gross profit	485,501		22,483		—			507,984
Capital expenditures	54,818		436		—			55,254
As of October 27, 2012
Total assets	$	1,206,867	$	95,684	$	7		$	1,302,558
As of January 28, 2012
Total assets	$	1,118,217	$	89,740	$	(57	)	$	1,207,900

16.    COMMITMENTS AND CONTINGENCIES

Legal Proceedings- DSW is involved in various legal proceedings that are incidental to the conduct of its business. DSW estimates the range of liability related to pending litigation where the amount of the range of loss can be estimated. DSW records its best estimate of a loss when the loss is considered probable. When a liability is probable and there is a range of estimated loss, DSW records the most likely estimated liability related to the claim. Although it is not possible to predict with certainty the eventual outcome of any litigation, in the opinion of management, the amount of any potential liability with respect to current legal proceedings will not be material to DSW’s results of operations or financial condition. As additional information becomes available, DSW will assess the potential liability related to its pending litigation and revise the estimates as needed.

As previously reported, on March 8, 2005, Retail Ventures announced that it had learned of the theft of credit card and other information from a portion of DSW's customers. DSW incurred a loss of approximately $6.0 million relating to this incident. DSW filed a claim for coverage with its insurance carrier, which the insurance carrier denied. DSW brought suit in federal district court and won a ruling that coverage applied and was awarded $6.8 million in damages. The insurance company appealed that decision, and oral arguments on the appeal occurred in July 2012. On August 23, 2012, DSW received notification from the Sixth Circuit Court of Appeals that the damages award was affirmed, and in September 2012, DSW received $7.2 million from the insurance carrier, $1.9 million of which represented accrued interest on the award. As this was a gain contingency resulting from a litigation, DSW recognized the award at the time of receipt of cash from the insurance carrier. In the statement of operations, $5.3 million is classified as other operating income, which is included in operating expenses, and $1.9 million related to interest is classified as interest income.

Guarantees and Liabilities related to Discontinued Operations-As of the effective time of the Merger, a subsidiary of

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

DSW assumed the obligations under RVI’s guarantees related to discontinued operations. DSW may become subject to various risks related to guarantees and in certain circumstances may be responsible for certain other liabilities related to discontinued operations. Changes in the amount of guarantees and liabilities related to discontinued operations are included in the income or loss from discontinued operations on the statements of operations. DSW records its best estimate of a loss when the loss is considered probable. When a liability is probable and there is a range of estimated loss, DSW records the most likely estimated liability related to the guarantee. Additionally, if the underlying obligations are paid down or otherwise liquidated by the primary obligor, subject to certain statutory requirements, DSW will recognize a reduction of the associated liability.

Filene’s Basement- Following the Merger, a subsidiary of DSW, Merger Sub, assumed RVI’s obligations under lease guarantees for three Filene’s Basement retail store locations for leases assumed by Syms in its purchase of Filene’s Basement in 2009. On November 2, 2011, Syms and Filene’s Basement filed for bankruptcy protection and liquidated all of their stores in December 2011. DSW recorded a liability of $9.0 million related to lease guarantees for two locations in fiscal 2011 and in the first quarter of fiscal 2012, adjusted the liability to $7.0 million based on current information available to DSW, which resulted in an update of DSW's most likely estimated liability. DSW assumed the lease for the third location in fiscal 2011.These lease guarantees are described in more detail below.

Union Square, NY- RVI guaranteed Filene’s Basement’s obligations for the Union Square location when RVI owned Filene’s Basement, and the landlord at the Union Square location has brought a lawsuit against Merger Sub in the Supreme Court of the State of New York seeking payment under the guarantee. DSW believes that the liability under the guarantee may be limited based on the ultimate disposition of the lease and/or the guarantee may not be enforceable. In April 2012, the landlord advised DSW that it had signed a lease with a tenant and asserted that DSW is responsible for shortfalls and rent while the space is unoccupied. The expected range of loss is from no loss to $8 million.

Bergen, NJ- RVI guaranteed Filene’s Basement’s obligations for the Bergen location when RVI owned Filene’s Basement. The lease expires in September 2017. The landlord at the Bergen location has brought a lawsuit against Merger Sub in the Supreme Court of the State of New Jersey seeking payment under the guarantee. The lease guarantee expressly caps Merger Sub's liability at $3 million. Filene’s Basement ceased operating at the Bergen location earlier in the year prior to the bankruptcy, and a third party is operating in a portion of the space leased by Filene’s Basement. Currently, the ultimate disposition of the lease is unknown. DSW could successfully assert that the guarantee is not enforceable resulting in limited or no liability to DSW. The expected range of loss is from no loss to $3 million.

Contractual Obligations-As of October 27, 2012, DSW has entered into various construction commitments, including capital items to be purchased for projects that were under construction, or for which a lease has been signed. DSW’s obligations under these commitments were approximately $1.8 million as of October 27, 2012. In addition, DSW has signed lease agreements for 15 new store locations expected to be opened over the next twelve to eighteen months, with total annual rent of approximately $5.5 million. In connection with the new lease agreements, DSW will receive a total of $9.0 million of construction and tenant allowance reimbursements for expenditures at these locations.

In the third quarter of fiscal 2011, DSW recorded a liability of $5.5 million related to a lease assumed in the Merger. The non-cash impairment charge was included in operating expenses. DSW estimated its future liability under this lease based on its current lease and sublease payments and executory costs. DSW estimated inflationary increases in its executory costs and used its credit-adjusted risk free rate to present value its liability. The loss was partially offset by the elimination of the deferred rent liability of $2.1 million, as rent would no longer be recorded on a straight-line basis.

17.    SUBSEQUENT EVENTS

Corporate Headquarters and Distribution Center Acquisition- On October 31, 2012, DSW entered into an agreement of purchase and sale (the “Purchase Agreement”) with 4300 East Fifth Avenue LLC, an Ohio limited liability company, 4300 Venture 34910 LLC, a Delaware limited liability company, and 4300 Venture 6729 LLC, a Delaware limited liability company (each a “Seller” and collectively “Sellers”, which are all Schottenstein Affiliates), pursuant to which DSW acquired on November 1, 2012 all of the Sellers' ownership interest in 810 AC LLC, an Ohio limited liability company (the “Acquisition”). Prior to the closing of the Acquisition, Sellers transferred certain Properties (as defined in the Purchase Agreement) to 810 AC LLC, portions of which Properties were previously leased by DSW for its corporate office headquarters, its 700,000 square foot distribution center and a trailer parking lot. DSW expects certain portions of the Properties to continue to be leased by unrelated and related parties. As consideration for the Acquisition, DSW paid to Sellers $72 million in cash, subject to credits and adjustments as provided in the Purchase Agreement.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

On November 1, 2012, in connection with the completion of the Acquisition, 4300 East Fifth Avenue LLC and DSW's wholly owned subsidiary, 810 AC LLC, entered into a cost sharing agreement (the “Cost Sharing Agreement”) pursuant to which 810 AC LLC will contribute $3 million to the cost of replacing the roof of a building on the Properties.

Also on November 1, 2012, 810 AC LLC and Schottenstein Property Group, LLC, an Ohio limited liability company (“SPG”) which is a Schottenstein Affiliate, entered into a management agreement (the “Management Agreement”) pursuant to which SPG will provide management, operation, repair, maintenance, replacement, and supervision services with respect to the properties that are the subject of the Management Agreement, collect rent from other tenants, and provide other landlord services with respect to such tenants. SPG had previously managed the Properties. As compensation, DSW will pay SPG 4% of rents, or approximately $0.2 million on an annual basis, collected from lessees of certain portions of the Properties, plus reimbursement for certain costs pursuant to the Management Agreement. The term of the Management Agreement is three years, with automatic one-year extensions after the initial term. The Management Agreement can be terminated by either party with 60 days notice.

Since each of the Sellers and SPG are Schottenstein Affiliates, the audit committee of DSW's board of directors has reviewed and approved the Purchase Agreement, the Acquisition, the Cost Sharing Agreement, and the Management Agreement, consistent with DSW's related party transaction policy and determined that the transaction was fair and reasonable for the properties. As this was a transaction between entities under common control, as provided by ASC 805, Business Combinations, there will be no adjustment to the historical cost carrying amounts of assets transferred to DSW. The difference between the historical cost carrying amounts and the consideration transferred is an equity transaction. DSW will also reduce the cost basis of the assets by the balance of tenant allowances and deferred rent recorded related to the properties.

Dividends- On November 20, 2012, DSW announced that the Board of Directors approved a quarterly cash dividend of $0.18 per share. The quarterly dividend will be paid on December 28, 2012 to shareholders of record at the close of business on December 17, 2012.

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Item 2.     Management's Discussion and Analysis of Financial Condition and Results of Operations.

All references to “we,” “us,” “our,” “DSW” or the “Company” in this Quarterly Report on Form 10-Q mean DSW Inc. and its wholly owned subsidiaries, including DSW Shoe Warehouse, Inc. (“DSWSW”), except where it is made clear that the term only means DSW Inc. DSW Class A Common Shares are listed for trading under the ticker symbol “DSW” on the New York Stock Exchange (“NYSE”). Prior to the merger with Retail Ventures, Inc. (the “Merger”) completed on May 26, 2011, DSW was a controlled subsidiary of Retail Ventures, Inc. ("RVI" or "Retail Ventures"). RVI common shares, without par value, which traded under the symbol “RVI”, were delisted from the New York Stock Exchange on May 26, 2011.

Company Overview

DSW is a leading U.S. branded footwear and accessories specialty retailer operating 363 shoe stores in 41 states, the District of Columbia and Puerto Rico as of October 27, 2012, and dsw.com. We offer a wide assortment of brand name and designer dress, casual and athletic footwear for women and men, as well as accessories through our DSW stores and dsw.com. We also offer kids' shoes exclusively on dsw.com. In addition, we operate 345 leased departments for three other retailers as of October 27, 2012. Our typical DSW customers are brand, value, quality and style conscious shoppers who have a passion for fashionable footwear and accessories. Our core focus is to create a distinctive shopping experience that satisfies both the rational and emotional shopping needs of our DSW customers by offering them a vast, exciting assortment of in-season styles combined with the convenience and value they desire. Our DSW stores average approximately 22,000 square feet and carry approximately 24,000 pairs of shoes. We believe this combination of assortment, convenience and value differentiates us from our competitors and appeals to consumers from a broad range of socioeconomic and demographic backgrounds.

On May 26, 2011, RVI merged with and into DSW MS LLC (“Merger Sub”), with Merger Sub surviving the Merger and continuing as a wholly owned subsidiary of DSW. Upon the closing of the Merger, each outstanding RVI common share was converted into 0.435 DSW Class A Common Shares, unless the holder properly and timely elected to receive a like amount of DSW Class B Common Shares. The Merger was accounted for as a reverse merger with RVI as the accounting acquirer and DSW (the surviving legal entity) as the accounting acquiree. As the Merger was an equity transaction between entities under common control, purchase accounting was not applied. Pre-merger financial information presented in the DSW consolidated financial statements represents consolidated RVI financial information. References to Retail Ventures or RVI refer to the pre-merger entity. The pre-merger financial information was retrospectively recast for the following matters:

• Share and per share information- DSW recast all RVI historical share and per share information, including earnings per share, to reflect the exchange ratio of 0.435 for all periods presented.

• Segment presentation- DSW maintained its historical segment presentation. DSW sells products through three channels: DSW stores, dsw.com and its Affiliated Business Group. The reportable segments are the DSW segment, which includes the DSW stores and dsw.com sales channels, and the its Affiliated Business Group segment. In order to reconcile to the consolidated financial statements, DSW includes Other, which consists of assets, liabilities and expenses that are not attributable to the two reportable segments. The pre-merger or prior period consolidated financial statements and notes were recast to reflect the two reportable segments and Other.

• Cost of sales- DSW conformed RVI's accounting policies and recast RVI's pre-merger or prior period financial statements and notes for distribution and fulfillment expenses and store occupancy costs historically reported by RVI within operating expenses to be consistent with DSW's historical classification of these costs within cost of sales.

Cautionary Statement Regarding Forward-Looking Information for Purposes of the “Safe Harbor” Provisions of the Private Securities Litigation Reform Act of 1995

Some of the statements in this Quarterly Report on Form 10-Q contain forward-looking statements which reflect our current views with respect to, among other things, future events and financial performance. Such forward-looking statements can be identified by the use of forward-looking words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of those words or other comparable words. Any forward-looking statements contained in this Quarterly Report on Form 10-Q are based upon current plans, estimates, expectations and assumptions relating to our operations, results of operations, financial condition, growth strategy and liquidity. The inclusion of this forward-looking information should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved. Such forward-looking statements are subject to numerous 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. In addition to those factors described under “Part I, Item 1A. Risk Factors,” in the DSW Form 10-K filed on March 27, 2012 and under “Part

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II, Item 1A. Risk Factors,” included in this Form 10-Q, some important factors that could cause actual results, performance or achievements for DSW to differ materially from those discussed in forward-looking statements include, but are not limited to, the following:

• our success in opening and operating new stores on a timely and profitable basis;

• continuation of supply agreements and the financial condition of our affiliated 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;

• risks related to failure of our tenants to renew their leases in our newly acquired properties; and

• the realization of risks related to the Merger, including risks related to pre-merger RVI guarantees of certain Filene’s Basement leases and RVI's assumption of a pension plan.

If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results, performance or achievements may vary materially from what we have projected. Furthermore, new factors emerge from time to time and it is not possible for management to predict all such factors, nor can it assess the impact of any such factor on the business or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statement speaks only as of the date on which such statement is made, and, except as required by law, DSW undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events.

Results of Operations

Overview

During the nine months ended October 27, 2012, DSW Inc. generated a 6.1% increase in comparable sales and a 10.1% increase in total sales. This comparable sales increase is in addition to a comparable sales increase of 9.2% for the same period last year. The increase in comparable sales was a result of an increase in traffic and conversion. All merchandise categories reported a positive comparable sales performance, with no single category driving the overall sales increase. We renamed our former leased business division in the third quarter of fiscal 2012, and it is now known as the Affiliated Business Group to better reflect the broader range of retail capabilities and formats we can offer to potential partners.

In the nine months ended October 27, 2012, DSW Inc.'s merchandise margin rate decreased 60 basis points as a percentage of net sales over the nine months ended October 29, 2011 as a result of increased markdowns. Overall gross profit as a percentage of net sales decreased 40 basis points. Occupancy leverage was partially offset by incremental distribution and fulfillment expenses to support business growth initiatives and the expansion of the fulfillment center to support dsw.com growth.

Excluding the impact of DSW and RVI merger-related transaction costs and other RVI-related expenses of $16.6 million in the nine months ended October 29, 2011, operating expenses in the nine months ended October 27, 2012 increased 20 basis points as a percentage of net sales over the prior year. This increase was primarily due to new store expenses, which were partially offset by the receipt of an award for damages from litigation related to a denied claim from our insurance carrier related to the 2005 theft of credit card data and other information from a portion of DSW's customers and leverage of home office overhead. In September 2012, DSW received $7.2 million from the insurance carrier, $5.3 million of which was included in operating income and $1.9 million of which represented accrued interest on the award and was included in interest income.

We continue to make investments in our business that are critical to long-term growth, as well as returning value to our shareholders. During the nine months ended October 27, 2012, we invested $83.6 million in capital expenditures compared to $55.3 million during the nine months ended October 29, 2011. Our capital expenditures during the nine months ended October 27, 2012 were primarily related to opening new stores, the distribution center reconfiguration, expansion of the fulfillment center, store remodels and business infrastructure. As a result of our financial condition, we have declared quarterly dividends of $0.51 year-to-date, and on October 26, 2012, we paid a special dividend of $2.00 per share. As of October 27, 2012, our cash and short-term investments balance was $337.6 million and long-term investments were $92.7 million.

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As of October 27, 2012, we operated 363 DSW stores, dsw.com and leased departments in 261 Stein Mart stores, 83 Gordmans stores, and one Frugal Fannie's store. DSW has two reportable segments: the DSW segment, which includes the DSW stores and dsw.com sales channels, and the Affiliated Business Group segment.

The following table sets forth, for the periods indicated, the percentage relationships to net sales of the listed items included in our condensed consolidated statements of operations:    

	Three months ended		Nine months ended
	October 27, 2012	October 29, 2011	October 27, 2012	October 29, 2011
Net sales	100.0%	100.0%	100.0%	100.0%
Cost of sales	(66.2)	(66.0)	(66.8)	(66.4)
Gross profit	33.8	34.0	33.2	33.6
Operating expenses	(20.5)	(22.7)	(21.4)	(22.5)
Change in fair value of derivative instruments	—	3.9	(0.3)	(3.7)
Operating profit	13.3	15.2	11.5	7.4
Interest income (expense), net	0.4	(0.2)	0.2	(0.6)
Income from continuing operations before income taxes	13.7	15.0	11.7	6.8
Income tax (provision) benefit	(5.2)	(4.9)	(4.6)	4.9
Income from continuing operations	8.5	10.1	7.1	11.7
Income from discontinued operations, net of tax	—	0.0	0.1	0.0
Net income	8.5	10.1	7.2	11.7
Less: net income attributable to the noncontrolling interests	—	—	—	(1.4)
Net income, net of noncontrolling interests	8.5%	10.1%	7.2%	10.3%

THREE MONTHS ENDED OCTOBER 27, 2012 COMPARED TO THREE MONTHS ENDED OCTOBER 29, 2011

Net Sales. Net sales for the third quarter of fiscal 2012 increased 11.7% from the third quarter of fiscal 2011. The following table summarizes the increase in our net sales:

	Three months ended October 27, 2012
	(in millions)
Net sales for the three months ended October 29, 2011	$	530.7
Increase in comparable sales	31.9
Net increase from non-comparable and closed store sales	30.1
Net sales for the three months ended October 27, 2012	$	592.7

The following table summarizes our net sales by reportable segment and in total:

	Three months ended
	October 27, 2012		October 29, 2011
	(in millions)
DSW segment	$	559.3	$	491.9
Affiliated Business Group segment	33.4		38.8
Total DSW Inc.	$	592.7	$	530.7

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The following table summarizes our comparable sales change by reportable segment and in total:

	Three months ended
	October 27, 2012	October 29, 2011
DSW segment	6.6%	5.2%
Affiliated Business Group segment	1.8%	4.9%
DSW Inc.	6.3%	5.2%

Our increase in total net sales for the DSW segment was a result of both comparable and non-comparable sales growth. We opened 26 new DSW stores this quarter. The increase in comparable sales was primarily a result of an increase in transactions driven by more customers visiting our stores and dsw.com and an increase in conversion due to more of those customers making a purchase, as well as an increase in average unit retail. For the DSW segment, all merchandise categories had positive comparable sales. DSW segment comparable sales increased in women's footwear by 4%, men's by 11%, athletic by 9% and accessories by 13%.

The decrease in total net sales for our Affiliated Business Group segment was the result of the bankruptcy of Filene's Basement in fiscal 2011 and the resulting closure of its 27 stores.

Gross Profit. Gross profit is defined as net sales less cost of sales. Gross profit decreased as a percentage of net sales to 33.8% in the third quarter of fiscal 2012 from 34.0% in the third quarter of fiscal 2011. By reportable segment and in total, gross profit as a percentage of net sales was:

	Three months ended
	October 27, 2012	October 29, 2011
DSW segment	34.6%	35.4%
Affiliated Business Group segment	20.4%	15.7%
DSW Inc.	33.8%	34.0%

For the DSW segment, total gross profit decreased 80 basis points as a result of a decrease in merchandise margin and an increase in distribution and fulfillment expenses, partially offset by a decrease in store occupancy expense. Merchandise margin, defined as gross profit excluding occupancy and distribution and fulfillment expenses, a non-GAAP measure, for the DSW segment decreased as a percentage of net sales to 46.3% for the third quarter of fiscal 2012 from 47.0% for the third quarter of fiscal 2011 as a result of an increase in markdowns. Store occupancy expense for the DSW segment remained relatively flat as a percentage of net sales at 9.7% for the third quarter of fiscal 2012 compared to 9.8% for the third quarter of fiscal 2011. Distribution and fulfillment expenses as a percentage of net sales increased to 2.0% for the third quarter of fiscal 2012 from 1.8% for the third quarter of fiscal 2011 primarily due to the expansion of dsw.com.

Gross profit for our Affiliated Business Group segment increased 470 basis points as a percentage of net sales for the third quarter of fiscal 2012 primarily related to a decrease in markdowns and a decrease in occupancy expense. In the third quarter of fiscal 2011, we recorded an inventory impairment of $1.7 million for our inventory in Filene’s Basement and Syms stores following the announcement of their filing for bankruptcy protection.

Operating Expenses. Operating expenses as a percentage of net sales were 20.5% and 22.7% for the third quarter of fiscal 2012 and the third quarter of fiscal 2011, respectively. In the third quarter of fiscal 2012, DSW received an award of damages of $5.3 million from our insurance carrier related to a denied claim, partially offset by related expense of $1.3 million, which resulted in leverage of operating expenses of 70 basis points.

Excluding the impact of DSW and RVI merger-related transaction costs and other RVI-related expenses of $5.3 million in the third quarter of fiscal 2011, operating expenses as a percentage of net sales were 21.7% in the third quarter of fiscal 2011. For the third quarter of fiscal 2012, operating expenses related to RVI was $0.3 million. Excluding the impact of the award, operating expenses as a percentage of net sales was 21.2% for the third quarter of fiscal 2012. The 50 basis point leverage was a result of leverage of 40 basis points from the planned shift in marketing expenses from the fall to spring season, leverage of 110 basis points of home office overhead expenses and reduced incentive compensation, which were partially offset by a deleverage of 100 basis points related to new store and store expenses.

Change in Fair Value of Derivative Instruments. During the third quarter of fiscal 2011, DSW recorded a non-cash charge of $0.2 million, related to the change in the fair value of warrants, which settled in the first half of fiscal 2012. In addition, during the third quarter of fiscal 2011, DSW recorded a non-cash reduction of expense of $21.1 million related to the change in the fair value of the

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conversion feature of the PIES, which settled in the third quarter of fiscal 2011.

Interest Income (Expense), Net. As a result of the elimination of PIES interest expense due to the settlement of the PIES in the third quarter of fiscal 2011, we now have interest income, net for the third quarter of fiscal 2012rather than interest expense, net for thethird quarter of fiscal 2011. In the third quarter of fiscal 2012, we also received interest of $1.9 million related to the award of damages from our insurance carrier.

Income Taxes. Our effective tax rate for the third quarter of fiscal 2012 was 38.1%, compared to 32.7% for the third quarter of fiscal 2011. The effective tax rate of 38.1% for the third quarter of fiscal 2012 reflects the impact of state and local taxes. The effective tax rate for the third quarter of fiscal 2011 reflects the impact of state and local taxes and the impact of the changes in fair value of the warrants and PIES, which are included for book income but not tax income.

Income from Discontinued Operations, Net of Tax.During the third quarter of fiscal 2012, there was no income from discontinued operations. During the third quarter of fiscal 2011, income from discontinued operations, net of tax, was due to a revaluation of a guarantee due to changes in facts and circumstances related to the guarantee.

NINE MONTHS ENDED OCTOBER 27, 2012 COMPARED TO NINE MONTHS ENDED OCTOBER 29, 2011

Net Sales. Net sales for the nine months ended October 27, 2012 increased 10.1% from the nine months ended October 29, 2011. The following table summarizes the increase in our net sales:

	Nine months ended October 27, 2012
	(in millions)
Net sales for the nine months ended October 29, 2011	$	1,510.6
Increase in comparable sales	88.7
Net increase from non-comparable and closed store sales	64.2
Net sales for the nine months ended October 27, 2012	$	1,663.5

The following table summarizes our net sales by reportable segment and in total:

	Nine months ended
	October 27, 2012		October 29, 2011
	(in millions)
DSW segment	$	1,562.7	$	1,396.4
Affiliated Business Group segment	100.8		114.2
Total DSW Inc.	$	1,663.5	$	1,510.6

The following table summarizes our comparable sales change by reportable segment and in total:

	Nine months ended
	October 27, 2012	October 29, 2011
DSW segment	6.3%	9.5%
Affiliated Business Group segment	2.5%	6.0%
DSW Inc.	6.1%	9.2%

Our increase in total net sales for the DSW segment was a result of both comparable and non-comparable sales growth. We had a net increase of 37 DSW stores this year. The increase in comparable sales was primarily a result of an increase in transactions driven by more customers visiting our stores and dsw.com and an increase in conversion due to more of those customers making a purchase. For the DSW segment, all merchandise categories had positive comparable sales. DSW segment comparable sales increased in women's footwear by 5%, men's by 9%, athletic by 7% and accessories by 10%.

The decrease in total net sales for our Affiliated Business Group segment was the result of the bankruptcy of Filene's Basement in fiscal 2011 and the resulting closure of its 27 stores.

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Gross Profit. Gross profit is defined as net sales less cost of sales. Gross profit decreased as a percentage of net sales to 33.2% in the nine months ended October 27, 2012 from 33.6% in the nine months ended October 29, 2011. By reportable segment and in total, gross profit as a percentage of net sales was:

	Nine months ended
	October 27, 2012	October 29, 2011
DSW segment	34.0%	34.8%
Affiliated Business Group segment	21.0%	19.7%
DSW Inc.	33.2%	33.6%

For the DSW segment, total gross profit decreased 80 basis points as a result of a decrease in merchandise margin and an increase in distribution and fulfillment expenses, partially offset by a decrease in store occupancy expense. Merchandise margin, defined as gross profit excluding occupancy and distribution and fulfillment expenses, a non-GAAP measure, for the DSW segment decreased as a percentage of net sales to 46.1% for the nine months ended October 27, 2012 from 46.7% for the nine months ended October 29, 2011 primarily due to an increase in markdowns. Store occupancy expense for the DSW segment decreased as a percentage of net sales to 10.0% for the nine months ended October 27, 2012 from 10.2% for the nine months ended October 29, 2011 primarily as a result of the comparable sales increase. Distribution and fulfillment expenses increased as a percentage of net sales to 2.0% for the nine months ended October 27, 2012 from 1.8% for the nine months ended October 29, 2011 primarily due to incremental labor to support business growth initiatives surrounding the reconfiguration of the Columbus distribution center and the expansion of the fulfillment center to support dsw.com growth.

Gross profit for the Affiliated Business Group segment increased 130 basis points as a percentage of net sales for the nine months ended October 27, 2012 primarily due to a decrease in occupancy expense.

Operating Expenses. Operating expenses as a percentage of net sales were 21.4% and 22.5% for the nine months ended October 27, 2012 and the nine months ended October 29, 2011, respectively. In the third quarter of fiscal 2012, DSW received an award of damages of $5.3 million from our insurance carrier related to a denied claim, partially offset by related expense of $1.3 million, which resulted in leverage of operating expenses of 20 basis points.

Excluding the impact of DSW and RVI merger-related transaction costs and other RVI-related expenses of $16.6 million in the nine months ended October 29, 2011, operating expenses as a percentage of net sales were 21.4% for the nine months ended October 29, 2011. For the nine months ended October 27, 2012, operating expenses related to RVI were $0.6 million. Excluding the impact of the award of damages, operating expenses as a percentage of net sales was 21.6% for the nine months ended October 27, 2012. Of the 20 basis point deleverage, we leveraged home office overhead expenses by 60 basis points primarily due to reduced incentive compensation, which was partially offset by a deleverage of 80 basis points related to new store and store expenses.

Change in Fair Value of Derivative Instruments. During the nine months ended October 27, 2012 and the nine months ended October 29, 2011, DSW, and prior to the Merger, RVI, recorded a non-cash charge of $6.1 million and $15.2million, respectively, related to the change in the fair value of warrants, which settled in the first half of fiscal 2012. In addition, during the nine months ended October 29, 2011, the Company recorded a non-cash charge of $41.7 million related to the change in the fair value of the conversion feature of the PIES, which settled in the third quarter of fiscal 2011. The change in the fair value of the derivatives was primarily due to the increase in stock price.

Interest Income (Expense), Net.As a result of the elimination of PIES interest expense due to the settlement of the PIES in the third quarter of fiscal 2011, we now have interest income, net for the nine months ended October 27, 2012rather than interest expense, net for thenine months ended October 29, 2011. In the third quarter of fiscal 2012, we also received interest of $1.9 million related to the award of damages from our insurance carrier.

Income Taxes. Our effective tax rate for the nine months ended October 27, 2012 was 39.4%, compared to (72.0)% for the nine months ended October 29, 2011. The effective tax rate of 39.4% for the nine months ended October 27, 2012 reflects the impact of state and local taxes and the change in fair value of the warrants, which are included for book income but not in tax income. The effective tax rate of (72.0)% for the nine months ended October 29, 2011 was favorably impacted by the release of the valuation allowance and other merger related tax items.

Income from Discontinued Operations, Net of Tax.During the nine months ended October 27, 2012, income from discontinued operations, net of tax, was due to reduction in expected payments under our lease guarantees for Filene's Basement. During the

29

nine months ended October 29, 2011, income from discontinued operations, net of tax, was due to a revaluation of a guarantee due to changes in facts and circumstances related to the guarantee.

Noncontrolling Interests. As of the effective time of the Merger, there were no noncontrolling interests and thus no net income attributable to the noncontrolling interests in the nine months ended October 27, 2012.For the nine months ended October 29, 2011, net income attributable to the noncontrolling interests was $20.7 million.

Non-GAAP Financial Measures

DSW utilizes merchandise margin, a non-GAAP financial measure, to explain its gross profit performance. Management believes this non-GAAP measure is an indication of the Company’s performance as the measure provides a consistent means of comparing performance between periods and competitors as retailers differ on their definition of cost of sales. Management uses this non-GAAP measure to assist in the evaluation of the performance of our segments and to make operating decisions. Within Management’s Discussion and Analysis, DSW discloses merchandise margin, store occupancy expenses and distribution and fulfillment expenses, which reconcile to gross profit.

Seasonality

Our business is subject to seasonal merchandise trends when our customers’ interest in new seasonal styles increases. New spring styles are introduced in the first quarter, and new fall styles are introduced in the third quarter. Unlike many other retailers, we do not experience a significant increase in net sales during our fourth quarter associated with the winter holiday season.

Liquidity and Capital Resources

Our primary ongoing cash flow requirements are for inventory purchases, capital expenditures made in connection with our store expansion, improving our information systems, the remodeling of existing stores and infrastructure growth. Our working capital and inventory levels typically build seasonally. We believe that we have sufficient financial resources and access to financial resources at this time. We are committed to a cash management strategy that maintains liquidity to adequately support the operation of the business, our growth strategy and to withstand unanticipated business volatility. We believe that cash generated from DSW operations, together with our current levels of cash and investments as well as availability under our revolving credit facility, should be sufficient to maintain our ongoing operations, support seasonal working capital requirements, fund capital expenditures related to projected business growth for the foreseeable future and continue payments of dividends to our shareholders.

Net Working Capital. Net working capital is defined as current assets less current liabilities. Net working capital increased to $600.1 million as of October 27, 2012 from $560.5 million as of January 28, 2012, primarily due to an increase in inventory to support new stores and planned sales increases and a decrease in warrant liability due to exercises. The increase in net working capital was partially offset by a decrease in deferred income taxes due to utilization of net operating losses to offset our taxable income and a net decrease of cash and equivalents and short-term investments due to payment of a special dividend offset by operating cash flows. As of October 27, 2012 and January 28, 2012, the current ratio was 3.0 and 2.8, respectively.

Operating Cash Flows. For the nine months ended October 27, 2012, our net cash provided by operations was $177.2 million compared to $130.9 million for the nine months ended October 29, 2011 driven primarily by DSW's utilization of RVI’s federal net operating losses and tax credits to offset its taxable income, which generated significant cash tax savings, and we believe should continue to generate cash tax savings in the remainder of fiscal 2012 and fiscal 2013.

Although our plan for continued expansion could place increased demands on our financial, managerial, operational and administrative resources and result in increased demands on management, we do not believe that our anticipated growth plan will have an unfavorable impact on our operations or liquidity. Uncertainty in the United States economy could result in reductions in customer traffic and comparable sales in our existing stores with the resultant increase in inventory levels and markdowns. Reduced sales may result in reduced operating cash flows if we are not able to appropriately manage inventory levels or leverage expenses. These potential negative economic conditions may also affect future profitability and may cause us to reduce the number of future store openings, impair goodwill or impair long-lived assets.

Hurricane Sandy, which severely affected the Mid-Atlantic and Northeast United States in late October and early November 2012, caused closures at a number of our stores. As of the date of this filing, all of the impacted locations have reopened, except for one store. This location was damaged and is not expected to reopen until late 2012. Our exposure for our loss on inventory and impairment on fixed assets is limited to our deductible on our insurance. We are evaluating the impact of the storm on our fourth quarter results including our ability to recover any losses through business interruption insurance coverage.

30

Investing Cash Flows. For the nine months ended October 27, 2012, our net cash used in investing activities was $30.6 million compared to $35.8 million for the nine months ended October 29, 2011. During the nine months ended October 27, 2012, we incurred $83.5 million in capital expenditures, of which $59.4 million related to stores and $24.1 million related to information technology, the reconfiguration of the Columbus distribution center, the expansion of the dsw.com fulfillment center and business infrastructure. During the nine months ended October 27, 2012, we had net sales of short-term and long-term investments of $49.7 million compared to net sales of short-term and long-term investments of $19.6 million during the nine months ended October 29, 2011.

We expect to spend approximately $110 million for capital expenditures in fiscal 2012, excluding our fourth quarter $72 million purchase of our corporate office headquarters, distribution center and trailer parking lot. Our future investments will depend primarily on the number of stores we open and remodel, infrastructure (including any future headquarters expansion) and information technology programs that we undertake and the timing of these expenditures. Year to date, we have opened 38 stores in fiscal 2012 and plan to open one additional store before the end of fiscal 2012. We plan to open 25 to 30 new stores in fiscal 2013. During fiscal 2011, the average investment required to open a typical new DSW store was approximately $2.1 million, excluding any construction and tenant allowances. Of this amount, gross inventory typically accounted for $0.7 million, fixtures and leasehold improvements typically accounted for $1.1 million and new store advertising and other new store expenses typically accounted for $0.3 million.

In addition to our investments in new stores and remodeling stores, we have invested in the reconfiguration of the Columbus distribution center and the expansion of the dsw.com fulfillment center to support business growth. With the purchase of our corporate office headquarters, we now have the ability to gradually expand our campus as needed over the next five to ten years. Currently, portions of the properties are leased to related and unrelated parties for annual rental income.

Financing Cash Flows. For the nine months ended October 27, 2012, our net cash used by financing activities was $91.3 million compared to net cash used by financing activities of $92.6 million for the nine months ended October 29, 2011. The change in cash provided by financing activities was primarily related to the payment of dividends partially offset by increased proceeds from the exercise of stock options and the increase in the cash provided by the exercise of warrants for the nine months ended October 27, 2012. Excluding the payment of dividends, exercise of warrants and exercise of stock options, net cash used by financing activities for the nine months ended October 29, 2011 were related to the Merger with RVI, and those activities did not recur in fiscal 2012.

On June 18, 2012, DSW announced that its Board of Directors has authorized the Company to repurchase up to $100 million of Company common shares over the next twelve months. The repurchase program will be funded using the Company's available cash. The share repurchase program may be suspended, modified or discontinued at any time, and the Company has no obligation to repurchase any amount of its common shares under the program. As ofOctober 27, 2012, DSW has not made any repurchases under this program.

Our Credit Facility and other liquidity considerations are described more fully below:

$100 Million Credit Facility ("Credit Facility"). On June 30, 2010, we entered into a $100 million secured revolving credit facility with a term of four years that will expire on June 30, 2014. Our Credit Facility allows the payment of dividends and redemption of our stock by us or our subsidiaries provided that we meet the minimum cash and short-term investments requirement of $125 million as defined in the Credit Facility. Additional covenants limit our payments for capital expenditures to $125 million in any fiscal year, and if we have direct borrowings greater than $25 million, our Credit Facility also requires that we maintain a fixed charge coverage ratio of not less than 1.1 to 1.0. We paid $80.2 million for capital expenditures for the nine months ended October 27, 2012. As of October 27, 2012, we were not required to calculate the fixed charge coverage ratio as we did not have direct borrowings greater than $25 million. We had availability under the Credit Facility of $90.9 million and outstanding letters of credit of $9.1 million as of October 27, 2012.

Our October 31, 2012 purchase of our corporate office headquarters, distribution center and trailer parking lot for $72 million was considered a permitted acquisition under our credit facility rather than a capital expenditure, and thus there was no violation of our credit facility covenant that limits capital expenditures to $125 million in any fiscal year.

Other Liquidity Considerations

Warrants.On May 31, 2012, DSW issued 341,222 of its Class B Common Shares, without par value, to the Schottenstein Affiliates in connection with the exercise of its outstanding warrants. The common shares were issued at an exercise price of $10.35 per share, for an aggregate cash purchase price of $3.5 million, and DSW paid accrued dividends of $0.7 million related to the Company's special dividend issued on September 30, 2011. In connection with this issuance, no underwriters were utilized and no

31

commissions were paid.

On March 14, 2012, DSW issued 411,963 of its Class B Common Shares, without par value, to the Schottenstein Affiliates in connection with the exercise of its outstanding warrant. The common shares were issued at an exercise price of $10.35 per share, for an aggregate cash purchase price of $4.3 million, and DSW paid accrued dividends of $0.8 million related to the Company's special dividend issued on September 30, 2011. In connection with this issuance, no underwriters were utilized and no commissions were paid.

On April 28, 2011, RVI issued 221,037 common shares (which represent 96,151 DSW Common Shares factoring in the exchange ratio of 0.435 subsequent to the Merger), without par value, to Millennium Partners, L.P. (“Millennium”) in connection with Millennium’s exercise of its outstanding warrant that was originally issued by RVI. The common shares were issued at an exercise price of $4.50 per share, for an aggregate cash purchase price of $1.0 million. In connection with this exercise, the Company reclassified $3.6 million from the warrant liability to paid in capital during the first quarter of fiscal 2011, for a total of $4.6 million increase to paid in capital. In connection with this issuance, no underwriters were utilized, and no commissions were paid.

RVI credit facility.In connection with the completion of the Merger, DSW repaid RVI’s obligations during the second quarter of fiscal 2011 under the RVI credit facility with SEI, a Schottenstein Affiliate, of $11.0 million in principal and $0.1 million in interest.

Contractual Obligations

We had outstanding letters of credit that totaled approximately $9.1 million and $17.3 million, respectively, as of October 27, 2012 and January 28, 2012 under our Credit Facility. If certain conditions are met under these arrangements, we would be required to satisfy the obligations in cash. Due to the nature of these arrangements and based on historical experience and future expectations, we do not expect to make any significant payment outside of terms set forth in these arrangements.

As of October 27, 2012, we have entered into various construction commitments, including capital items to be purchased for projects that were under construction, or for which a lease has been signed. Our obligations under these commitments were approximately $1.8 million as of October 27, 2012. In addition, we have signed lease agreements for 15 new store locations expected to be opened over the next twelve to eighteen months, with total annual rent of approximately $5.5 million. In connection with the new lease agreements, we will receive a total of $9.0 million of construction and tenant allowance reimbursements for expenditures at these locations.

As of October 27, 2012, we operated all of our stores, warehouses and corporate office headquarters from leased facilities. On October 31, 2012, we purchased our corporate office headquarters, distribution facility and a trailer parking lot. Lease obligations are accounted for either as operating leases or as capital leases based on lease by lease review at lease inception. The Company had no capital leases outstanding as of October 27, 2012 or January 28, 2012.

Off-Balance Sheet Arrangements

As of October 27, 2012, DSW has not entered into any "off-balance sheet" arrangements, as that term is described by the Securities and Exchange Commission.

Proposed Accounting Standards

The Financial Accounting Standards Board (“FASB”) periodically issues Accounting Standard Updates, some of which require implementation by a date falling within or after the close of the fiscal year. See Note 3 to the Condensed Consolidated Financial Statements for a discussion of the new accounting standards implemented.

Critical Accounting Policies

As discussed in Notes 1, 2, and 3 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, the preparation of our condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of commitments and contingencies at the date of the condensed consolidated financial statements and reported amounts of revenues and expenses during the reporting period. We base these estimates and judgments on our historical experience and other factors we believe to be relevant, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. The process of determining significant estimates is fact-specific and takes into account factors such as historical experience, current and expected economic conditions, product mix, and in some cases, actuarial and appraisal

32

techniques. We constantly re-evaluate these significant factors and make adjustments where facts and circumstances dictate.

Item 3.    Quantitative and Qualitative Disclosures About Market Risk.

Cash and Investments- Our cash and equivalents have maturities of 90 days or fewer. At times, cash and equivalents may be in excess of Federal Deposit Insurance Corporation (“FDIC”) insurance limits. We also have investments in various short-term and long-term investments. Our available-for-sale investments generally renew every 7 days, and we also have held-to-maturity investments that have terms greater than 365 days. These financial instruments may be subject to interest rate risk through lost income should interest rates increase during their term to maturity and thus may limit our ability to invest in higher income investments.

$100 Million Credit Facility- As of October 27, 2012, there was no long-term debt outstanding. Future borrowings, if any, would bear interest at rates in accordance with our credit facility and would be subject to interest rate risk. Because we have no outstanding debt, we do not believe that a hypothetical adverse change of 1% in interest rates would have a material effect on our financial position.

Item 4.    Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We, under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, performed an evaluation of our disclosure controls and procedures, as such term is defined in Securities Exchange Act Rules 13a-15(e) and 15d-15(e). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded, as of the end of the period covered by this report, that such disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

No change was made in our internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) or 15d -15(e), during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

33

PART II.    OTHER INFORMATION

Item 1.    Legal Proceedings.

Guarantee of Union Square lease- RVI guaranteed Filene’s Basement’s obligations for the Union Square location when RVI owned Filene’s Basement, and in February 2012, the landlord at the Union Square location brought a lawsuit against Merger Sub in the Supreme Court of the State of New York seeking payment under the guarantee. A third party has entered into a lease for this location, but the landlord has asserted that DSW is responsible for rent and certain costs while the space is unoccupied. We believe that the guarantee may not be enforceable and/or that the amount of liability under the guarantee may be limited. We will continue to monitor our potential liability regarding this lease obligation.

Guarantee of Bergen, NJ lease- RVI guaranteed Filene’s Basement’s obligations for the Bergen location when RVI owned Filene’s Basement. In July 2012, the landlord at the Bergen, NJ location brought a lawsuit against Merger Sub in the Supreme Court of the State of New Jersey seeking payment under the guarantee. A third party is operating in a portion of the space leased by Filene’s Basement, but the landlord has asserted that DSW is responsible for rent and certain costs. We believe that the guarantee may not be enforceable and/or that the amount of liability under the guarantee may be limited. We will continue to monitor our potential liability regarding this lease obligation.

Other legal proceedings- Other than the proceedings noted above, we are involved in various legal proceedings that are incidental to the conduct of our business. We estimate the range of liability related to pending litigation where the amount of the range of loss can be estimated. We record our best estimate of a loss when the loss is considered probable. When a liability is probable and there is a range of estimated loss, we record the most likely estimated liability related to the claim. Although it is not possible to predict with certainty the eventual outcome of any litigation, in the opinion of management, the amount of any potential liability with respect to these proceedings will not be material to our results of operations or financial condition.

Item 1A. Risk Factors.

The following risk factors supplement DSW’s risk factors set forth in Part I, Item 1A of our last Annual Report on Form 10-K for the fiscal year ended January 28, 2012.

Prior to the Merger, RVI had actual liabilities and significant contingent liabilities. As of the effective time of the Merger, Merger Sub, a subsidiary of DSW, assumed RVI's obligations with respect to these actual liabilities and contingent liabilities, if they become actual liabilities, which could adversely affect DSW’s financial condition.

Merger Sub assumed the obligations of RVI for the guaranteed lease obligations. On November 2, 2011, Syms and Filene’s Basement filed for bankruptcy protection. RVI guaranteed the obligations of Filene’s Basement in connection with three leases for retail store locations. Merger Sub may be responsible for any obligations of RVI under these guarantees. These leases expire in January 2017, September 2017 and October 2024. DSW assumed one of these leases. We have recorded a liability of $6.7 million associated with the remaining lease guarantees.

The landlord at the Union Square location has brought a lawsuit against Merger Sub seeking to recoup payments under the guarantee. A third party has entered into a lease for this location, but the landlord has asserted that DSW is responsible for rent while the space was unoccupied. We believe that the guarantee may not be enforceable and/or that the amount of liability under the guarantee may be limited. If the guarantee is deemed to be enforceable, the new lease may not release Merger Sub from liability under the original guarantee.

In July 2012, the landlord at the Bergen, NJ location brought a lawsuit against Merger Sub in the Supreme Court of the State of New Jersey seeking payment under the guarantee. A third party is operating in a portion of the space leased by Filene’s Basement, but the landlord has asserted that DSW is responsible for rent and certain costs. We believe that the guarantee may not be enforceable and/or that the amount of liability under the guarantee may be limited. We will continue to monitor our potential liability regarding these lease obligations.

In addition, if the assumptions or estimates regarding the amount of any actual or contingent liabilities made by the Company were incorrect or become incorrect due to changes in economic conditions, among other reasons, this could cause the amount of any actual liability to exceed the amounts estimated, which could have a material adverse effect on DSW’s financial condition.

34

DSW is exposed to risk through leases of certain portions of its properties.

On October 31, 2012, DSW entered into an agreement of purchase and sale (the “Purchase Agreement”) with 4300 East Fifth Avenue LLC, an Ohio limited liability company, 4300 Venture 34910 LLC, a Delaware limited liability company, and 4300 Venture 6729 LLC, a Delaware limited liability company (each a “Seller” and collectively “Sellers”, which are all Schottenstein Affiliates), pursuant to which DSW acquired on November 1, 2012 all of the Sellers' ownership interest in 810 AC LLC, an Ohio limited liability company (the “Acquisition”). Prior to the closing of the Acquisition, Sellers transferred certain Properties (as defined in the Purchase Agreement) to 810 AC LLC, portions of which Properties were previously leased by DSW for its corporate office headquarters, its 700,000 square foot distribution center and a trailer parking lot. DSW expects certain portions of the Properties to continue to be leased by unrelated and related parties.

Certain portions of the Properties are leased to both unrelated and related parties, which provides rental income. The largest tenant's lease is expected to renew in June 2013 for another two year term, but either party can terminate after each two year renewal option and the tenant can terminate at any time with 60 days notice. In the event that one or more tenants do not renew their leases, the foregoing circumstances or events could have a material adverse effect on our financial condition.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

(a) Recent sales of unregistered securities. None.

(b) Use of Proceeds. Not applicable.

(c) Purchases of equity securities by the issuer and affiliated purchasers.

DSW made no purchases of its Common Shares during the three months ended October 27, 2012.

$100 Million Share Repurchase Program-On June 18, 2012, DSW announced that its Board of Directors has authorized the Company to repurchase up to $100 million of Company common shares over the next twelve months. The repurchase program will be funded using the Company's available cash. The share repurchase program may be suspended, modified or discontinued at any time, and the Company has no obligation to repurchase any amount of its common shares under the program. As ofOctober 27, 2012, DSW has not made any repurchases under this program.

Dividends- The payment of any future dividends is at the discretion of our Board of Directors and is based on our future earnings, cash flow, financial condition, capital requirements, changes in U.S. taxation, general economic condition and any other relevant factors. It is anticipated that dividends will be declared on a quarterly basis. Our Credit Facility allows the payment of dividends by us or our subsidiaries provided that we meet the minimum cash and short-term investments requirement of $125 million, as defined in our Credit Facility.

Item 3.    Defaults Upon Senior Securities. None.

Item 4.    Mine Safety Disclosure. Not Applicable.

Item 5.    Other Information. None.

Item 6.    Exhibits. See Index to Exhibits on page 37.

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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 thereunto duly authorized.

DSW INC.

(Registrant)

Date: November 30, 2012	By:	/s/ Douglas J. Probst
		Douglas J. Probst
		Executive Vice President and Chief Financial Officer
		(principal financial and accounting officer and duly authorized officer)

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INDEX TO EXHIBITS

Exhibit Number		Description
2.1		Agreement of Purchase and Sale, dated October 31, 2012, among DSW Inc., 4300 East Fifth Avenue LLC, 4300 Venture 34910 LLC, and 4300 Venture 6729 LLC. Incorporated by reference to Exhibit 2.1 to Form 8-K filed November 1, 2012.
10.1		Cost Sharing Agreement, dated November 1, 2012, between 4300 East Fifth Avenue LLC and 810 AC LLC, a wholly owned subsidiary of DSW. Incorporated by reference to Exhibit 10.1 to Form 8-K filed November 1, 2012.
10.2		Management Agreement, dated November 1, 2012, between Schottenstein Property Group, LLC and 810 AC LLC, a wholly owned subsidiary of DSW. Incorporated by reference to Exhibit 10.2 to Form 8-K filed November 1, 2012.
10.3	*	Lease Agreement, dated February 23, 2012, between 810 AC LLC, a wholly owned subsidiary of DSW and successor of 4300 Venture 34910 LLC and SB Capital Acquisition, LLC, for the premises known as 4010 East Fifth Avenue located in Columbus.
31.1	*	Rule 13a-14(a)/15d-14(a)     Certification of Chief Executive Officer
31.2	*	Rule 13a-14(a)/15d-14(a)     Certification of Chief Financial Officer
32.1	*	Section 1350 Certification of     Chief Executive Officer
32.2	*	Section 1350 Certification of     Chief Financial Officer
101	*	XBRL Instance Document

* Filed herewith

37

EX-10.3

Lease Agreement

Between

4300 VENTURE 34910 LLC

a Delaware limited liability company

Landlord

and

SB CAPITAL ACQUISITIONS, LLC

a(n) Delaware limited liability company

Tenant

4010 East Fifth Avenue

Columbus, Ohio 43219

Dated as of: February 23, 2012

TABLE OF CONTENTS

			Page
1. BASIC LEASE PROVISIONS AND DEFINITIONS.			1
	(a)	Landlord:	1
	(b)	Tenant:	1
	(c)	Landlord’s Mailing Address:	1
	(d)	Tenant’s Mailing Address:	1
	(e)	Property:	2
	(f)	Premises:	2
	(g)	Initial Term:	2
	(h)	Permitted Use:	2
	(i)	Base Rent:	2
	(j)	Security Deposit:	3
	(k)	Initial Tenant Charges:	3
	(l)	Rent Mailing Address:	3
	(m)	Declaration:	3
	(n)	Broker(s): None	3
	(o)	Rent Commencement Date:	3
	(p)	Guarantor	3
2. TERM.			3
3. DELIVERY OF PREMISES; LANDLORD’S WORK AND TENANT’S WORK.			3
4. RENEWAL OPTION.			4
5. BASE RENT.			4
6. COMMON AREAS.			5
7. OPERATING COSTS.			5
8. TAXES.			6
9. LANDLORD’S INSURANCE.			6
10. PAYMENT OF TENANT CHARGES.			7
11. USE.			7
12. TRADE FIXTURES.			7
13. MAINTENANCE BY LANDLORD.			8
14. MAINTENANCE BY TENANT.			8
15. UTILITIES.			9
16. ALTERATIONS.			9
17. ASSIGNMENT AND SUBLETTING.			10
18. EMINENT DOMAIN.			10
19. DAMAGE BY FIRE.			11
20. TENANT’S INDEMNIFICATION, LIABILITY AND CASUALTY INSURANCE.			11
21. RELEASE AND WAIVER OF SUBROGATION.			11
22. DEFAULT.			12
23. LANDLORD’S REMEDIES.			12
24. SIGNS, AWNINGS AND CANOPIES.			15

			Page
25. SUBORDINATION.			16
26. ESTOPPEL CERTIFICATE.			16
27. INSPECTION.			16
28. FORCE MAJEURE.			17
29. LANDLORD’S LIABILITY.			17
30. NOTICES.			17
31. QUIET ENJOYMENT.			17
32. NO WAIVERS.			18
33. SUCCESSORS AND ASSIGNS.			18
34. TERMINATION/HOLDOVER.			18
35. SECURITY DEPOSIT.			19
36. MECHANIC’S LIENS.			18
37. HAZARDOUS SUBSTANCES.			19
38. LEASE GUARANTY			20
39. MISCELLANEOUS PROVISIONS.			20
	(a)	Entire Agreement: Modification.	20
	(b)	Interpretation.	20
	(c)	Waiver of Jury Trial.	20
	(d)	Choice of Law.	20
	(e)	Brokerage Commission.	20
	(f)	Short Form Lease.	21
	(g)	Submission of Lease.	21
	(h)	Tenant Authority.	21
	(i)	Right to Mortgage.	21
	(j)	Counterparts.	22
	(k)	OFAC List.	22

- - -

EXHIBITS

Exhibit “A”    Site Plan

Exhibit “A-1”    Floor Plan

Exhibit “B”    Rules and Regulations

Exhibit “C”    Prohibited Uses

Exhibit “D”    Sign Criteria

Exhibit “E”    Landlord’s Work

Exhibit “F”    Delivery Date Certification

Exhibit “G”    Lease Guaranty

Exhibits and schedules omitted pursuant to Item 601(b)(2) of Regulation S-K. DSW agrees to furnish a supplemental copy of an omitted exhibit or schedule to the SEC upon request.

LEASE AGREEMENT

THIS LEASE AGREEMENT (this “Lease”), made as of the 23rd day of February, 2012 (the “Effective Date”) by and between 4300 VENTURE 34910 LLC, a Delaware limited liability company (“Landlord”), and SB CAPITAL ACQUISITIONS, LLC, a(n) Delaware limited liability company (“Tenant”).

W I T N E S S E T H

FOR AND IN CONSIDERATION of the mutual covenants and agreements contained in this Lease, the parties covenant and agree as follows:

1.BASIC LEASE PROVISIONS AND DEFINITIONS. The following capitalized terms whenever used in this Lease shall have the meanings set forth in this Section 1:

(a)Landlord:    4300 Venture 34910 LLC

(b)Tenant:     SB Capital Acquisitions, LLC

(c)Landlord’s Mailing Address:

4300 Venture 34910 LLC

c/o Schottenstein Property Group

4300 East Fifth Avenue

Columbus, Ohio 43219

Attn: Sr. Vice President

with a copy to:

4300 Venture 34910 LLC

c/o Schottenstein Property Group

4300 East Fifth Avenue

Columbus, Ohio 43219

Attn: General Counsel

4300 Venture 34910 LLC

c/o Schottenstein Property Group

4300 East Fifth Avenue

Columbus, Ohio 43219

Attn: Lease Administration

(d)Tenant’s Mailing Address:

Attn:

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(e)Property: That certain parcel of land consisting of approximately 24.958 acres, located in the City of Columbus, County of Franklin, State of Ohio, as more particularly shown on the attached Exhibit “A” to this Lease, and the improvements constructed or to be constructed thereon. The property is part of the Columbus International Aircenter. The Columbus International Aircenter comprises approximately 170.497 acres, more or less, of real property, including areas which are adjacent to Columbus International Airport (the “Airport”).

Tenant acknowledges that the Columbus International Aircenter may be used for storage, repair, loading and unloading of airplanes and other services associated with the Airport and airplanes. Tenant further acknowledges that these uses generate substantial noise and other emissions and covenants that Tenant will not interfere with these uses of the Columbus International Aircenter. Tenant consents to the above uses of the Columbus International Aircenter and agrees that such use shall not interfere with Tenant’s use of the Premises.

(f)Premises: Approximately 15,262 square feet of interior building space located at 4010 East Fifth Avenue, Columbus, Ohio, as crosshatched or otherwise designated on the floor plan attached as Exhibit “A-1” to this Lease. Landlord and Tenant shall execute and deliver the Delivery Date and Rent Certification in the form and substance attached as Exhibit “F” hereto (the “Certification”) confirming, among other things, the term of this Lease.

(g)Initial Term: The period commencing on the Delivery Date (as defined in Section 3(a)) and ending five (5) years following (i) the last day of the month in which the Rent Commencement Date (as defined in Section 1(o)) occurs, if the Rent Commencement Date does not fall on the first day of a calendar month, or (ii) the last day of the month immediately preceding the month in which the Rent Commencement Date occurs, if the Rent Commencement Date is the first day of a calendar month.

(h)Permitted Use: General business offices and no other use or purpose (“Permitted Use”). Any variation or deviation from Permitted Use, including, but not limited to, the prohibited uses identified in Exhibit “C” attached hereto and made a part hereof, shall be deemed a material default of this Lease.

(i)Base Rent:

For years 1-5, Base Rent shall be Ten and 60/100 Dollars per square foot ($10.60/sq. ft.) of Gross Leasable Area, estimated to be One Hundred Sixty-one Thousand Seven Hundred Seventy-seven and 20/100 Dollars ($161,777.20) annually, payable in equal monthly installments of Thirteen Thousand Four Hundred Eighty-one and 43/100 Dollars ($13,481.20) per month (or a portion thereof for a fraction of a month), in advance on the first day of each and every month during the Initial Term hereof;

Option 1 – For years 6-10, Base Rent shall be increased to Eleven and 66/100 Dollars per square foot ($11.66/sq. ft.) of Gross Leasable Area, estimated to be One Hundred Seventy-seven Thousand Nine Hundred Fifty-four and 92/100 Dollars ($177,954.92) annually, payable in equal monthly installments of Fourteen Thousand Eight Hundred Twenty-nine and 58/100 Dollars ($14,829.48) per month (or a portion thereof for a fraction of a month), in advance on the first day of each and every month during the renewal Term hereof.

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(j)Security Deposit:    N/A            

(k)Initial Tenant Charges: $0.97/sq. ft. per annum, subject to adjustment in accordance with Section 10.

(l)Rent Mailing Address:

4300 Venture 34910 LLC

Department L-2646

Columbus, OH 43260-2646

(m)Declaration: The term “Declaration” shall mean that certain Declaration of Restrictions and Easements, dated October 17, 1997, and recorded as Instrument No. 199710170122036, Recorder's Office, Franklin County, Ohio and Tenant agrees to comply with all provisions thereof.

(n)Broker(s):    None            

(o)Rent Commencement Date: The date which is thirty (30) days following the Delivery Date (as defined in Section 3).

(p)Guarantor: SB Capital Group, LLC

2.TERM.

(a)The Initial Term of this Lease shall commence on the Effective Date and shall terminate five (5) years following (i) the last day of the month in which the Rent Commencement Date (as defined in Section 3) occurs, if the Rent Commencement Date does not fall on the first day of a calendar month, or (ii) the last day of the month immediately preceding the month in which the Rent Commencement Date occurs, if the Rent Commencement Date is the first day of a calendar month. The phrase “Term” as used in this Lease shall mean the Initial Term and all renewal terms, if exercised.

(b)So long as Tenant is not in default hereunder, Tenant shall have the right to elect to terminate the Term of this Lease by notice to Landlord delivered at any time after January 31, 2013, which termination shall be effective twelve (12) months after such notice, or such later date as specified in such notice, together with payment by Tenant of the unamortized balance of the costs incurred by Landlord in performing Landlord’s Work, which equal $91,489.21.

3.DELIVERY OF PREMISES; LANDLORD’S WORK AND TENANT’S WORK.

(a)Following the full execution and delivery of this Lease, Landlord shall construct and perform those items identified on Exhibit “E” attached hereto and made a part hereof (the “Landlord’s Work”). Landlord shall deliver to Tenant written notice of the date on which the Landlord’s Work is substantially complete (the “Delivery Date”). Promptly upon receipt of such written notice, and prior to taking possession of the Premises, Tenant shall examine and inspect the Premises and shall identify any and all punch list items (the “Punch List Items”), which shall be corrected and completed by Landlord within thirty (30) days following the Delivery Date. Tenant’s acceptance of possession shall constitute conclusive evidence that the Premises are in good order and satisfactory condition and that the Landlord’s Work has been

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constructed and performed in accordance with Exhibit “E” attached hereto and made a part hereof.

(b)Within thirty (30) days following the Delivery Date, Landlord and Tenant shall execute and deliver the Certification, confirming, among other things, the date Landlord Delivered possession of the Premises and acknowledging that Tenant accepts the Premises “As Is” (subject only to Landlord’s obligation to correct and complete the Punch List Items ).

(c)From and after the Delivery Date or, if earlier, the date on which Tenant enters the Premises for the purposes of constructing Tenant improvements to the Premises (“Tenant’s Work”) or for any other purpose, Tenant shall observe and perform all of the terms, covenants, conditions, and obligations set forth in this Lease, except for the obligations to pay Base Rent, Tenant’s pro rata share of Operating Costs (as hereinafter defined), Tenant’s pro rata share of Real Estate Taxes (as hereinafter defined), and Tenant’s pro rata share of Insurance Charges (as hereinafter defined) (all of which shall be abated until the Rent Commencement Date).

(d)Notwithstanding anything to the contrary set forth herein, at all times during the Term and upon the expiration or earlier termination of the Term, the Tenant’s Work and all other improvements or alterations to the Premises shall be the property of Landlord, and Tenant shall not obtain or acquire any interest (equitable or otherwise) in any improvements or alterations to the Premises.

4.RENEWAL OPTION. Provided that Tenant is in occupancy of the Premises and operating its business for the Permitted Use and is not then in default under this Lease, Tenant shall have the option to renew this Lease for one (1) additional successive term of five (5) years by delivering written notice thereof to Landlord at least six (6) months prior to the expiration of the Initial Term. All the terms and conditions of this Lease shall remain in effect during any renewal term, except that Base Rent shall be increased as set forth in this Lease.

5.BASE RENT.

(a)Commencing on the Rent Commencement Date, Tenant covenants to pay Base Rent and all other Rent (as defined below) to Landlord, without notice or demand, and without deduction or offset. Base Rent shall be payable on the Rent Commencement Date and then on the first day of each month, in advance, in equal monthly installments. Base Rent for any partial months of the Term shall be prorated on the basis of a thirty (30) day month. All payments of Base Rent and all other Rent owed to Landlord under this Lease shall be paid to Landlord at the Rent Mailing Address as set forth in Section 1(l), or to Landlord at such other address as Landlord may from time to time designate in writing.

(b)The term “Rent” shall include Base Rent, Tenant Charges (as defined in Section 10), and any and all other charges and amounts (collectively “Additional Rent”) due to Landlord under this Lease.

6.COMMON AREAS.

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(a)All common areas and other common facilities made available from time to time by Landlord in or about the Property (collectively, “Common Areas”) shall be subject to the exclusive control and management of Landlord. Common Areas shall include all areas, space, facilities, equipment, signs, and special services from time to time made available for the common and joint use and benefit of Landlord, Tenant, and other tenants and occupants of the Property, such as sidewalks, parking areas, access roads, driveways, landscaped areas, truck service ways, loading docks that are not exclusive to one tenant or group of tenants, and utility facilities.

Exhibit “A-1” sets forth the layout of the Common Areas, buildings, and improvements of the Property (collectively the “Property Improvements”), but this diagram shall not be deemed to be a warranty on the part of Landlord that the Property Improvements will be constructed or maintained in accordance with this layout. Landlord shall have the right to expand the Property Improvements to adjoining or nearby property and to add to, remove, relocate, replace, and/or otherwise change the Common Areas or any other Property Improvements as currently existing or as may be later constructed and to make all such other changes to the size, location, and arrangement of the Common Areas or any other Property Improvements as Landlord deems advisable.

(b)Tenant shall have a non-exclusive license to use the Common Areas (as they exist now or at any time during the Term may exist) in common with Landlord and other tenants, occupants, and other parties that Landlord allows to use the Property, provided that such use by Tenant shall be for access and parking only. Landlord agrees to operate and maintain the Common Areas in a manner consistent with good commercial real estate practice. Landlord will have the right to (i) establish, modify, and enforce reasonable rules and regulations with respect to the Property and Common Areas; (ii) close all or any portion of the Common Areas to prevent the acquisition of public rights therein, for construction, or for other purposes; and (iii) perform or permit such other acts in and to the Common Areas that Landlord in the exercise of good business judgment deems to be advisable. A copy of Landlord’s current Rules and Regulations are attached hereto as Exhibit “B” and made a part hereof.

(c)Tenant acknowledges that it shall have no right of access to Columbus International Airport by virtue of this Lease. Any such access may only be pursuant to the terms of a separate agreement between Tenant and the Columbus International Airport Authority.

7.OPERATING COSTS. Tenant shall pay to Landlord as Additional Rent a share of the Property “Operating Costs”. As used in this Lease, “Operating Costs” shall mean the total costs and expenses incurred by Landlord in operating, maintaining, and repairing the Property, the Common Areas, and the Property Improvements, including without limitation, the cost and expense of landscaping, gardening, and planting; paving, patching, painting, and line painting of all parking areas, drives, and roadways; Common Area maintenance and cleaning, sanitary control, snow removal, and trash, garbage and other refuse removal, including costs related to trash compactors; repair, maintenance, and painting of sidewalks, pavements, light fixtures, signs, roofs, roof skins and downspouts; repair, maintenance, and painting of buildings (including, but not limited to, the exterior and load-bearing walls, floor slabs, and foundations); pest control; general repairs; fire protection; security services (if any); costs of all types of insurance coverages carried by Landlord for the Property (excluding “Insurance Charges” that are otherwise paid by Tenant under Section 9 below); assessments and other charges due under the Declaration, if any; maintenance, repair, and replacement of utility systems servicing the

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Property; costs of lighting and other utilities serving the Property; depreciation of machinery and equipment owned and used in operation, maintenance, and repair of the Property, or the rental charges for such machinery and equipment; capital improvements, repairs, and replacements (provided that, with respect to any such improvement, repair, or replacement, the cost shall be amortized on a straight-line basis over the useful life of such improvement, repair, or replacement); the cost to Landlord for management; administrative, and overhead costs equal to ten percent (10%) of the foregoing Operating Costs as described in this provision. Landlord may cause any and all of the aforesaid services relating to Operating Costs to be provided by an independent contractor or contractors.

Tenant’s share of Operating Costs shall be computed by multiplying the total amount of the Operating Costs by a fraction (“Tenant’s Fractional Share”), the numerator of which shall be the Gross Leasable Area of the Premises, and the denominator of which shall be the total leasable floor area in the Property. Tenant’s share of Operating Costs shall be paid in accordance with Section 10 below.

8.TAXES. Tenant shall pay to Landlord, in accordance with Section 10 below, a share of Real Estate Taxes, which shall be computed by multiplying the total amount of Real Estate Taxes by Tenant’s Fractional Share (in such calculation, “Excluded Parcels” shall mean those portions of the Property as to which real estate taxes thereon are not included in the total of Real Estate taxes for which Tenant is being charged a share hereunder).

The term “Real Estate Taxes” shall mean all taxes and assessments (special or otherwise) levied or assessed directly or indirectly against the Property (other than Excluded Parcels that are separately assessed for real estate tax purposes, if any) and other taxes arising out of the use and/or occupancy of the Property, imposed by any taxing authority having jurisdiction over the Property, and shall include expenses and reasonable attorney’s fees incurred by Landlord in contesting the validity or amount of any such taxes or assessments or in seeking a rebate of taxes or assessments. Real Estate Taxes shall not include franchise, capital stock, income, estate or inheritance taxes personal in nature to Landlord.

Tenant shall also pay promptly when due or make reimbursement to Landlord for all taxes imposed upon Tenant’s Rent, lease, and business operation, including without limitation, all sales taxes, value added taxes, documentary taxes, stamp taxes, and other taxes assessed upon the consideration to be received by Landlord for this Lease, or upon the personal property of Tenant.

9.LANDLORD’S INSURANCE. Landlord agrees to maintain a “special form” policy of commercial property insurance and commercial general liability insurance on the Premises and Property, in types and amounts as reasonably determined by Landlord. Tenant agrees to pay Landlord, in accordance with Section 10 below, a share of the premiums (the “Insurance Charges”) paid by Landlord and attributable to such commercial property insurance, commercial general liability insurance, insurance for such other risks that Landlord may elect or be required to carry, and rent insurance, which share shall be computed by multiplying the total amount of Insurance Charges by Tenant’s Fractional Share.

10.PAYMENT OF TENANT CHARGES. Landlord shall estimate the amounts that Tenant will owe for Operating Costs, Real Estate Taxes, and Insurance Charges (collectively

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the “Tenant Charges”) on the basis of periods of twelve (12) consecutive months as designated by Landlord, and Tenant shall pay one-twelfth of such estimate of Tenant Charges on a monthly basis in advance together with payment of Base Rent. As of the Rent Commencement Date, the Tenant Charges shall be equal to the “Initial Tenant Charges” amount set forth in Section 1(k) above. Landlord may revise the estimate of Tenant Charges from time to time and change Tenant’s monthly estimated payment of Tenant Charges accordingly. Landlord shall furnish Tenant annually (within four (4) months after the end of the applicable twelve (12) month period) with a statement of the actual Tenant Charges for the period in question, and there shall be an adjustment between Landlord and Tenant of Tenant Charges owed by Tenant for such period. Any amount owed to Landlord for an underpayment of the actual Tenant Charges shall be made within twenty (20) days after receipt by Tenant of the billing therefor. Tenant Charges at the beginning or end of the Term for periods of less than twelve (12) full calendar months shall be appropriately adjusted by Landlord.

11.USE. The Premises shall be used solely for the Permitted Use and for no other use or purpose. Without limiting the generality of the foregoing, Tenant shall not permit the Premises to be used for the Prohibited Uses as set forth in Exhibit “C” attached hereto and incorporated as a part hereof. Tenant shall comply with all federal, state and municipal laws, ordinances and regulations relating to the Premises and the business conducted therein. Tenant shall not use or permit to be used any advertising medium or device, such as phonograph, radio or public address system, without the prior written consent of Landlord. Tenant shall not use, or permit to be used, the Premises for any illegal or immoral purpose. Tenant shall not use or permit the use of the Premises for the generation, storage, treatment, use, sale, transportation or disposal of any chemical, material or substance that could pose a hazard to the health and safety of the other tenants and occupants of the Property or in violation of any law, rule or regulation relating to hazardous substances of any applicable governmental authority. Tenant shall comply with all environmental laws relating to Tenant’s business and use and occupancy of the Premises. As a material inducement to Landlord to enter into this Lease, Tenant agrees to operate its business in the Premises at all times during the term of this Lease. The provisions of this Section 11 are intended solely for the benefit of Landlord and are not intended for the benefit of any other tenant of the Property. No other tenant of the Property shall have the right to enforce or cause Landlord to enforce the provisions hereof; nor shall Tenant have the right to enforce or cause Landlord to enforce this or any similar provision in any other lease for space in the Property.

12.TRADE FIXTURES. Tenant shall have the right to install its equipment and trade fixtures in the Premises, provided such installation shall not interfere with the construction of the building in which the Premises is located, and such installation shall be at the sole risk and expense of Tenant. All equipment and trade fixtures installed in the Premises by Tenant shall remain the property of, and shall be removable by, Tenant at the expiration of this Lease if (i) Tenant is not in default hereunder and (ii) Tenant agrees promptly to repair or reimburse Landlord for the cost of repairing all damage to the Premises occasioned by the removal of said trade fixtures. Equipment and fixtures that are integral to the operation of the Premises as a real estate unit generally, such as HVAC, plumbing, electrical, and illumination equipment or wall-to-wall carpeting (as opposed to loose area rugs), or that are permanently installed in the Premises (such as built-in cabinets) shall not be considered trade fixtures and shall not be removed by Tenant.

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13.MAINTENANCE BY LANDLORD. Landlord covenants that it will, within a reasonable time after being notified in writing by Tenant of the need therefor, make such repairs to the roof, outside walls (except windows and doors), gutters, downspouts, floor slab, and foundation of the building of which the Premises is a part as may be necessary in order to keep such building in good condition, unless said repairs are occasioned by the negligence or willful act of Tenant or any of its agents, employees or contractors, in which event such repairs shall be made at the expense of Tenant, subject to Section 21 below. Landlord will not be responsible for any damages resulting from any leak or defect in the roof, sidewalks, gutters, downspouts, floor slab, or foundation unless such damage is due to Landlord’s failure to make repairs thereto within a reasonable time after having been notified by Tenant of the need therefor. These covenants made by Landlord are subject to reimbursement as applicable pursuant to the provisions of Section 10 above.

14.MAINTENANCE BY TENANT.

(a)Tenant agrees that it will, at its own cost and expense, keep the interior of the Premises and the appurtenances thereto, including without limitation the heating and air conditioning systems, toilets, plumbing lines, sprinkler system, windows, glass, electric lines, fixtures, and equipment, in good condition and repair, making such replacements as may be necessary from time to time. Tenant shall be responsible for all repairs and replacements necessary to keep the Premises and the appurtenances thereto in good order and condition except those which Landlord has expressly agreed to make under the provisions of Section 13 of this Lease. Tenant further shall be responsible, at Tenant’s sole cost and expense, for the maintenance, repair, and replacement, as necessary, of any and all dock(s) serving the Premises. Landlord hereby assigns all available warranties, if any, to Tenant for systems which Tenant is required to maintain, and shall upon request provide copies of same to Tenant.

(b)Tenant shall store all trash, rubbish and garbage in fully-closed containers at the rear of the Premises. Tenant shall not burn or otherwise dispose of any trash, waste, rubbish or garbage in or about the Premises. Tenant shall pay for the cost of trash and rubbish removal or pay its pro-rata share, in the event that Landlord provides for trash and rubbish removal.

(c)In connection with the requirements of this Section 14, Tenant agrees to obtain and maintain from a reputable company a quarterly maintenance contract on the heating and air conditioning systems and to furnish Landlord with a copy of said contract on the Rent Commencement Date.

(d)Tenant agrees that it will, at Tenant’s expense, comply with any mandatory preventative maintenance items required by insurance carriers, rating authorities or public officials to minimize loss frequency and/or severity within the Premises.

(e)Tenant shall keep the Premises free from insects pests and vermin of all kinds, and for that purpose Tenant shall use, at Tenant’s cost, such pest extermination contractor as Landlord may direct and at such intervals as Landlord may reasonably require.

(f)Sprinkler systems, if any, located in Tenant’s area shall be maintained, at Tenant’s sole expense, in accordance with National Fire Protection Association standards to ensure proper operation. Sprinkler control valves (interior and exterior) located in Tenant’s area shall be monitored by supervisory alarm service. In the event local or state codes do not require alarm systems, Tenant shall provide alarm service on all sprinkler systems to detect

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water flow and tampering with exterior and interior main control valves of the sprinkler system servicing Tenant’s premises. Moreover, it shall be Tenant’s responsibility to contact the Commercial Property Manager at 4300 East Fifth Avenue, Columbus, Ohio 43219, (614) 449-6890, in the event the sprinkler system in the demised premises is ever shut off for any reason, and advise same of any damage occasioned or caused by the actions of Tenant, its agents, invitees, or employees, and/or as a result of Tenant’s repair obligations hereunder. Tenant shall replace all sprinkler heads due to painting or environmental exposure from Tenant’s operations. All other cost of maintaining the sprinkler system in Tenant’s area shall be paid by Tenant.

15.UTILITIES. Tenant agrees to be responsible and pay for all public utility services rendered or furnished to the Premises during the Term hereof, including, but not limited to, heat, water, gas, electric, steam, telephone service and sewer services, together with all taxes, levies, or other charges on such utility services when the same become due and payable. Should any utility service not be separately metered, then Tenant shall be responsible for its pro rata share thereof as determined from time to time and billed by Landlord. Tenant acknowledges that Landlord may sub-meter water. Landlord shall not be liable for the quality or quantity of or interference involving such utilities unless due directly to Landlord’s negligence.

During the Term hereof or any renewal or extension period, whether the Premises are occupied or unoccupied, Tenant agrees to maintain heat sufficient to heat the Premises so as to avert any damage to the Premises on account of cold weather.

16.ALTERATIONS.Tenant shall not make any exterior or structural alterations to the Premises without Landlord’s prior written consent, which may be withheld by Landlord for any or no reason in Landlord’s sole discretion. Tenant may make interior, non-structural alterations and improvements to the Premises after Tenant has obtained Landlord’s prior written approval, which shall not be unreasonably withheld, conditioned, or delayed, of the plans and specifications of the work to be performed and has satisfied Landlord’s requirements for bonding, insurance, and other contractor requirements. All alterations and improvements shall be performed in a first-class manner, using new materials, in a good and workmanlike manner, in accordance with all applicable Laws, and in strict accordance with the plans and specifications approved by Landlord. In no event shall Tenant make any change to the Premises that lessens the value of the Premises or violates any laws or other legal requirements, the Declaration, if applicable, or the provisions of any mortgage on the Property. Work done by Tenant under the provisions of this paragraph shall not interfere with the use by other tenants of their premises on the Property. Tenant shall indemnify and save harmless the Landlord from and against all mechanics liens or claims by reason of repairs, alterations or improvements which may be made by Tenant to the Premises.

17.ASSIGNMENT AND SUBLETTING.

(a)Tenant shall not assign, sublease, transfer, or encumber any interest in this Lease or allow any third party to use or occupy all or any portion of the Premises (a “Transfer”) without the prior written consent of Landlord, which consent shall not be unreasonably withheld. Without limiting the generality of the foregoing, Tenant hereby acknowledge and agrees that Landlord’s consent shall not be considered unreasonably withheld if (i) the proposed transferee’s financial condition is not adequate for the obligations such transferee is assuming in connection with the proposed Transfer; (ii) the transferee’s business or reputation is not suitable for the Property, considering the tenant mix of the Property, the business and reputation

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of the other tenants, and the character and quality of the Property, or would result in a violation of another tenant’s rights under its lease; (iii) the transferee is a current tenant or occupant of the Property; or (iv) Tenant is in default beyond any applicable notice and cure period. Any attempted Transfer in violation of this Section 17, shall, exercisable in Landlord’s sole and absolute discretion, be void. Consent by Landlord to one or more Transfers shall not operate as a waiver of Landlord’s rights to approve any subsequent Transfers. If Landlord withholds its consent to any Transfer contrary to the provisions of this Section 17, Tenant’s sole remedy shall be to seek an injunction in equity to compel performance by Landlord to give its consent, and Tenant expressly waives any right to damages in the event of such withholding by Landlord of its consent. In no event shall any Transfer release or relieve Tenant from any obligation under this Lease or any liability hereunder.

(b)Tenant shall pay to Landlord fifty percent (50%) of all cash and other consideration which Tenant receives as a result of a Transfer that is in excess of the rent payable to Landlord hereunder for the portion of the Premises and Term covered by the Transfer within ten (10) days following receipt thereof by Tenant.

(c)If Tenant is a corporation, limited liability company, partnership, or similar entity, and the person, persons, or entity which owns or controls a majority of the voting interests at the time changes for any reason (including, but not limited to, a merger, consolidation, or reorganization), such change of ownership or control shall constitute a Transfer. The foregoing shall not apply so long as Tenant is an entity whose outstanding stock is listed on a nationally recognized security exchange.

(d)In the event that Tenant seeks Landlord’s consent for an assignment, Tenant shall, along with the request submit a payment of Five Hundred Dollars ($500.00) to Landlord as payment to defer the cost of Landlord’s review of the assignment request.

18.EMINENT DOMAIN. If any part of the Premises shall be taken by governmental authority pursuant to its power of eminent domain (or Landlord conveys any part of the Premises pursuant to a threat thereof), then the Premises shall be reduced in proportion to the amount so taken or conveyed, unless the amount taken shall be so great that it would be impractical for Tenant, to continue operation, in which event this Lease shall be canceled and terminated as of the date of such taking. All compensation awarded for any taking of the Premises or the Property shall belong solely to and be the property of Landlord, and Tenant assigns to Landlord all of Tenant’s rights with respect hereto. However, Tenant may apply for reimbursement from the condemning authority (if permitted by law) for moving expenses, removal of Tenant’s equipment and/or trade fixtures, or loss of Tenant’s business good will, provided that any such reimbursement shall not reduce the amount of the award otherwise recoverable from the condemning authority by Landlord. If a portion of the Premises is taken and this Lease is not terminated, Landlord shall at its own expense restore the remaining portion of the Premises to a complete architectural unit, provided that (i) Landlord shall in no event be obligated to incur costs and expenses in excess of the condemnation award or proceeds actually received by Landlord and (ii) such work shall not exceed the scope of the Landlord’s Work. Furthermore, in the event of such taking, the Rent shall be reduced proportionately based in the percentage of the Premises taken and not restored by Landlord.

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19.DAMAGE BY FIRE. If the Premises shall be damaged by fire or other casualty during the Term hereof, Landlord agrees that it will restore the Premises in accordance with the standard unit specifications set forth on Exhibit “E” with reasonable dispatch, insofar as the proceeds from Landlord’s insurance permit and provided that Landlord’s mortgagee does not require insurance proceeds to be paid to it. All other repairs shall be conducted at the sole expense of Tenant. If the Premises are rendered untenantable in whole or in part as a result of damage, the Base Rent payable hereunder shall be equitably and proportionately abated (according to loss of use) during the period intervening between the date of such damage and the date the Premises are restored; provided, however, that if such damage occurs during the last two (2) years of the Term and exceeds fifty percent (50%) of the insurable value of the Premises at the time such damage occurs, unless Tenant has duly exercised an option to renew pursuant to the terms hereof or any further options subsequently granted by Landlord in writing, Landlord may terminate this Lease as of the date of such damage by giving Tenant written notice of its intention to do so within thirty (30) days after such damage occurs. If this Lease is so terminated, then Rent payable hereunder shall be abated as of the date of such damage, and Tenant shall remove all of its property from the Premises within fifteen (15) days after the notice of termination is given.

20.TENANT’S INDEMNIFICATION, LIABILITY AND CASUALTY INSURANCE. Tenant agrees that it will indemnify, defend, and hold Landlord, its successors, assigns, agents, members and employees, harmless from any and all injury or damage to person or property in, on or about the Premises, and all injury or damage occurring elsewhere on or about the Property as a result of any use of or operations on or about the Premises or of the negligence or willful misconduct of Tenant, its agents or employees, including, without limitation, all costs, expenses (including reasonable attorney’s fees), claims or suits arising in connection therewith. Tenant covenants that it will, at all times during the Term hereof, at its own cost and expense, carry commercial general liability insurance on the Premises (including Common Areas adjoining the Premises) with coverage for each occurrence of at least $3,000,000.00 combined single limit for personal and bodily injury, death and property damage, which insurance shall name Landlord and any mortgagee as additional named insureds. Tenant further covenants that it will, at all times during the Term, at its own cost and expense, carry “special form” property insurance against damage by fire, extended coverage and other perils, in an amount equal to the replacement value thereon: (1) all parts of the Premises for which Tenant is responsible under the terms of this Lease; (2) Tenant’s furniture, fixtures, and equipment in the Premises; and (3) all tenant leasehold improvements. At the time this Lease is executed and thereafter during the term hereof within (i) fifteen (15) days after request therefor by Landlord, and (ii) fifteen (15) days after each policy renewal, Tenant shall furnish to Landlord certificates and evidence of insurance evidencing the continuous existence during the term of this Lease of all insurance required to be carried by Tenant hereunder. If Tenant fails to provide such insurance, Landlord may (but shall not be obligated to) do so and collect the cost thereof as Rent. Landlord and any mortgagee shall not be liable for any damage to persons or property sustained in or about the Premises, howsoever caused.

21.RELEASE AND WAIVER OF SUBROGATION. Landlord and Tenant mutually release and discharge each other (as well as the officers, directors, partners, agents and employees of each other) from responsibility and liability (by way of subrogation or otherwise for loss or damage to any building, structure or other property (real or personal) of the other party, or any resulting loss of income that is an insured loss under the terms of the insurance policies) of the releasing party or that involves a fire, casualty or other risk or loss required to

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be insured against under this Lease. This release and discharge shall be applicable even though such loss or damage may have been caused by the negligence of the party hereby released. Landlord and Tenant agree to include a waiver of subrogation endorsement in each of their respective casualty insurance policies.

22.DEFAULT.

(a)In the event Tenant shall be in default in the performance of any of the terms, covenants, conditions or provisions herein contained, including but not limited to the Rules and Regulations attached hereto as Exhibit “B” after Landlord has given Tenant thirty (30) days prior written notice of such non-performance (or such additional reasonable time as Tenant may require if cure is not practicable within such thirty (30) day period and Tenant has commenced the cure and is diligently continuing to completion not to exceed ninety (90) days), or in the event Tenant shall become insolvent or shall make a general assignment for the benefit of its creditors, or in the event a receiver shall be appointed for Tenant or a substantial part of its property and such receiver is not removed within thirty (30) days after appointment, Tenant shall be deemed to be in default under the terms of this Lease (each such event, an “Event of Default”) and Landlord may, in addition to all other remedies available at law or in equity, exercise the remedies set forth in Section 23 hereof.

(b)In the event Landlord has failed to receive the payment of any installment of Rent, Tenant shall be deemed to be in default under the terms of this Lease, and Landlord may, in addition to all other remedies available at law or in equity, exercise the remedies set forth in Section 23 hereof.

23.LANDLORD’S REMEDIES.

(a)Upon the occurrence of any Event of Default, Landlord may do any one or more of the following:

(i) Without terminating Tenant’s obligation to pay Rent, elect to terminate this Lease and the tenancy created hereby by giving Notice to Tenant, which termination shall be effective as of the date of such Notice or any later date therein specified by Landlord in such Notice (and on the effective date of such termination, all obligations and liabilities of Landlord hereunder shall terminate), and, without further Notice, Landlord shall have the right to repossess the Premises, by summary proceedings or otherwise, and remove Tenant and all other person and property from the Premises, without liability for damage to, and without obligation to store, such property. After such termination, Landlord may change the locks. Landlord shall be entitled to recover all loss and damage Landlord may suffer by reason of such termination, whether through inability to relet the Premises on satisfactory terms or otherwise, including without limitation, the following (without duplication by any element of damages):

(1) accrued Rent to the effective date of termination together with late charges and interest thereon at the rate of eighteen percent (18%) per annum (the “Default Rate”) from the date owed through the date paid; plus

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(2) the cost of recovering the Premises, including without limitation, attorneys’ fees; plus

(3) all costs of enforcing this Lease, including, without limitation, the provisions of this subparagraph (a) against Tenant; plus

(4) costs and expenses incurred by Landlord for any repairs, maintenance, changes, alterations and improvements to the Premises to prevent damage, advertising costs, brokerage commissions, and reasonable attorneys’ fees (collectively, “Reletting Costs”); plus

(5) the present value of the Rent (discounted at a rate of interest equal to eight percent (8%) per annum (the Discount Rate)) that would have accrued under this Lease for the Term, reduced by the present value of the actual Rent, discounted at the Discount Rate, received from Landlord’s successful reletting of the Premises. It being agreed, however, that Landlord’s obligation to relet or attempt to relet the Premises is subject to the provisions of subparagraph (b) below. For purposes of computing the amount of Rent that would have accrued after the effective date of termination, obligations for real estate taxes, insurance costs shall be projected, based upon the rate of increase, if any, in such items from the Rent Commencement Date through the termination date; plus

(6) any other costs or amounts necessary to compensate Landlord for all damages caused by Tenant’s failure to perform its obligations hereunder.

or

(ii) Elect to immediately, or at any time (whereupon all obligations and liability of Landlord hereunder shall terminate) thereafter, and without terminating this Lease, enter into and upon the Premises or any part thereof and take absolute possession of the same, expel or remove Tenant and any other person or entity who may be occupying the Premises, remove any and all of their property from the Premises, and change the locks. Tenant covenants and agrees that notwithstanding any such re-entry by Landlord, it shall pay and be liable for (on the days originally fixed herein for the payment thereof) amounts equal to the several installments of Rent and other charges reserved as they would, under the terms of this Lease, become due if Landlord had not re-entered as aforesaid, together with all Reletting Costs, and whether the Premises be relet or remain vacant in whole or in part or for a period less than the remainder of the Term, or for the whole thereof.

In the event of an Event of Default, Landlord shall not be deemed to have terminated this Lease (or the Term thereof) unless Landlord delivers a Notice to Tenant that expressly terminates this Lease.

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(b)In the event of an Event of Default as set forth in Section 22 above, Landlord may relet the Premises or any part therefor, for such term and on such terms and conditions as Landlord, in its sole discretion, may determine. Landlord agrees, at the cost of Tenant, to take commercially reasonable efforts to relet the Premises. Rent received by Landlord from such reletting shall be applied first to Reletting Costs, second, to the payment of any indebtedness other than Rent due hereunder from Tenant to Landlord (in such order as Landlord shall determine), third, to the payment of Rent due and unpaid hereunder (in such order as Landlord shall determine), and the residue, if any, shall be held by Landlord and applied to the payment of other obligations of Tenant to Landlord as the same become due; and Tenant shall satisfy and pay to Landlord any deficiency upon demand therefor from time to time. No such re-entry or taking of possession of the Premises by Landlord shall be construed as an election on Landlord’s part to terminate this Lease unless a written notice of such termination is given to Tenant pursuant to subparagraph (a)(i) above. If Landlord relets the Premises, either before or after the termination of this Lease, all such rentals received from such Lease shall be and remain the exclusive property of Landlord, and Tenant shall not, at any time, be entitled to recover any such rental, provided, however, that Tenant shall be given credit for all rents received. Landlord may at any time, upon an occurrence of an Event of Default whether before or after a reletting, elect to terminate this Lease pursuant to subparagraph (a)(i) above.

(c)New Locks; Disposition of Property. If Landlord terminates the Lease pursuant to subparagraph (a) above or terminates Tenant’s possession under subparagraph (b) above, (1) Landlord shall have no obligation whatsoever to tender to Tenant a key for new locks installed at the Premises, and (2) any and all property which Landlord has the right to remove from the Premises pursuant to subparagraph (a) or subparagraph (b) above, shall at Tenant’s sole cost and expense, be (a) stored and/or (b) sold at private or public sale for such price as Landlord may obtain, with the proceeds of any such sale being applied to amounts due from Tenant to Landlord under this Lease (including Landlord’s attorneys’ fees and other costs incurred in the removal, storage and/or sale of such items), with any remainder to be paid to Tenant.

(d)Pursuit of any of the foregoing remedies shall not preclude pursuit of any other remedies provided in this Lease or any other remedies provided by law, nor shall pursuit of any remedy herein provided constitute a forfeiture or waiver of any Rent due to Landlord hereunder or of any damage accruing to Landlord by reason of the violation of any of the terms, provisions and covenants herein contained. Forbearance by Landlord to enforce one or more of the remedies herein provided upon the occurrence of a Tenant Event of Default shall not be deemed or construed to constitute a waiver of such Event of Default.

(e)Late Charges and Interest. Any Rent not paid when due shall bear interest beginning ten (10) days after the due date at the Default Rate, or until payment is received by Landlord. In addition, Tenant shall pay Landlord a late charge equal to ten percent (10%) of the amount ten (10) days overdue to compensate Landlord for the extra costs Landlord will incur as a result of such late payment. The parties agree that (1) it would be impractical and extremely difficult to fix the actual damage that Landlord will suffer on account of Tenant’s late payment, (2) such interest and late charges represent a fair and reasonable estimate of the detriment that Landlord will suffer by reason of late payment by Tenant, and (3) the payment of interest and late charges are distinct and separate in that the payment of interest is to compensate Landlord for the use of Landlord’s money by Tenant, while the payment of late charge is to compensate Landlord for Landlord’s processing, administrative and other costs

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incurred by Landlord as a result of Tenant’s delinquent payments. Acceptance of such late charges and interest payments shall not be deemed consent by Landlord to late payments, nor a waiver of Landlord’s right to insist upon timely payments at any time, nor a waiver of any remedies to which Landlord is entitled as a result of the late payment of Rent.

(f)Landlord’s Cure of Tenant Defaults. If Tenant fails to perform any non-monetary obligation under this Lease for thirty (30) days after Notice thereof by Landlord (except that no Notice shall be required in emergencies), Landlord shall have the right (but not the duty), to perform such obligation on behalf and for the account of Tenant. In such event, Tenant shall reimburse Landlord upon demand, as Additional Rent, for all expenses incurred by Landlord in performing such obligation together with an amount equal to ten percent (10%) thereof for Landlord’s overhead, and interest thereon at the Default Rate from the date such expenses were incurred. Landlord’s performance of Tenant’s obligations hereunder shall not be deemed a waiver or release of Tenant therefrom, or a waiver of any remedies to which Landlord is entitled to as a result of Tenant’s failure to perform.

(g)Bad Rent Checks. If during any five (5) year period under the Term Landlord receives two (2) or more checks from Tenant which are returned by Tenant’s bank for insufficient funds, Landlord may require that all checks thereafter be bank certified or cashier’s checks (without limiting Landlord’s other remedies). All bank service charges resulting from any bad checks shall be paid by Tenant.

(h)Other Matters. No re-entry or repossession, repairs, changes, alterations, additions, reletting, acceptance of keys from Tenant, or any other action or omission by Landlord shall be construed as an election by Landlord to terminate this Lease or Tenant’s right to possession, or to accept a surrender of the Premises, nor shall the same operate to release the Tenant in whole or in part from any of Tenant’s obligations hereunder, unless express written notice of such intention is sent by Landlord to Tenant. Landlord may bring suits for amounts owed by Tenant hereunder or any portions thereof, as the same accrue or after the same have accrued, and no suit or recovery of any portion due hereunder shall be deemed a waiver of Landlord’s right to collect all amounts to which Landlord is entitled hereunder, nor shall the same serve as any defense to any subsequent suit brought for any amount not theretofore reduced to judgment. Landlord shall be under no obligation to observe or perform any provision of this Lease on its part to be observed or performed which accrues after the date of any Event of Default by Tenant. The times set forth herein for the curing of violations by Tenant are of the essence.

(i)Mitigation of Damages. If Landlord terminates this Lease or Tenant’s right to possession, Landlord shall have the obligation to mitigate damages to the extent required by applicable law. If Landlord is required by applicable law to mitigate damages under this Lease: (1) Landlord shall be required only to use commercially reasonable efforts to mitigate, which shall not exceed such efforts as Landlord generally uses to lease other premises in the Property, (2) Landlord will not be deemed to have failed to mitigate and such mitigation shall be deemed complete if Landlord leases all portions of the Premises.

24.SIGNS, AWNINGS AND CANOPIES. Subject to Tenant obtaining all required municipal and other governmental approvals and any other approvals deemed reasonably necessary by Landlord under the Declaration, if applicable, as the case may be, Tenant shall install, at its expense, exterior signage in conformity with the sign criteria of Landlord attached as Exhibit “D”, or such other sign criteria as Landlord may hereafter promulgate in its reasonable

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business discretion. Except for the signage designated on Exhibit “D”, Tenant agrees not to place any other sign, advertising matter or the like on the exterior of the Premises without Landlord’s prior written consent. All of Tenant’s signs and other displays shall be of professional quality and shall be consistent and compatible with a first-class industrial property. Under no circumstances shall Tenant place hand-lettered advertising on any window or door of the Premises or anywhere on the exterior of the Premises. No exterior identification signs attached to any building of the Property shall be of the following type: (i) flashing, moving or audible signs; (ii) exposed neon tubes, exposed ballast boxes, or exposed transformers, provided that Tenant shall have the right to employ any methods necessary for the installation of internally illuminated self-contained channel letters and further providedthat such signs shall be permitted if a part of a national tenant’s prototypical signage; or (iii) paper or cardboard signs other than professionally prepared interior window signs advertising special sales within the subject premises, temporary signs (exclusive of contractor signs and professionally prepared “grand opening” banners), stickers or decals, provided, however, the foregoing shall not prohibit the placement at the entrance of each such premises a sticker or decal which contains the phrase “no solicitation” or words of like import. All signs of Tenant shall be subject to and shall comply at all times with applicable governmental requirements. No awnings or canopies shall be erected without Landlord’s prior written consent. Tenant agrees to maintain all signs in good condition and repair.

25.SUBORDINATION. Tenant agrees and acknowledges that this Lease shall be subject and subordinate to any and all mortgages and deeds of trust that may now or hereafter affect this Lease or the real property of which the Premises forms a part, and to all terms, provisions, renewals, modifications, consolidations, replacements and extensions thereof. Such subordination shall be automatic and self-operative and no further instrument of subordination shall be necessary unless required by any mortgagee in which event Tenant agrees, within ten (10) days after request by Landlord or the mortgagee, to execute any agreement reasonably required by such mortgagee to memorialize such subordination, provided that such agreement shall provide that, for so long as Tenant has fully and faithfully performed all of the terms, conditions, covenants, and obligations set forth in this Lease, Tenant’s right to use and occupy the Premises shall remain nondisturbed by the mortgagee and those acting by or through the mortgagee. Tenant further agrees to attorn to any successor to Landlord’s interest in the Premises, including any mortgagee, ground lessor or future holder of a mortgage or to any purchaser at foreclosure (or by deed in lieu of foreclosure) (“Mortgagee”) upon all of the terms and conditions of this Lease.

26.ESTOPPEL CERTIFICATE. Within ten (10) days after receipt of a request therefor, Tenant agrees to deliver to Landlord and/or to any actual or prospective purchaser, Mortgagee or other third party designated by Landlord a duly executed and acknowledged instrument certifying to Tenant’s best knowledge (i) whether this Lease is in full force and effect (and if not, why), (ii) as to the existence of any default, (iii) whether there are any defenses, counterclaims or offsets to such default, (iv) whether there has been any modification or amendment to this Lease, and (v) as to such other matters relating to this Lease as may be reasonably requested. Any such certificate may be relied upon by Landlord and by any other person to whom it has been exhibited or delivered, and the contents of the certificate shall be biding upon Tenant.

27.INSPECTION. Tenant agrees to allow Landlord or its representatives or prospective purchasers or Mortgagees, at any reasonable hour, to enter the Premises for the purpose of

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inspecting the same, for making any repairs deemed necessary or desirable, or for showing the Premises to any party. Tenant will allow “For Rent” signs to be placed on the front walls or doorways of the Premises and to remain thereon without hindrance or molestation during the last six (6) months of the Term.

28.FORCE MAJEURE. In the event either party hereto shall be delayed or hindered in, or prevented from, the performance of any act required hereunder by reason of hurricane, tornado (or comparable weather conditions of unusual security) strikes, lock-outs, labor troubles, inability to procure materials, failure of power, restrictive governmental laws or regulations, riots, insurrection, war or other reason of a like nature not the fault of the party delayed in performing work or doing acts required under the terms of this Lease, then performance of such act shall be excused for the period of the delay and the period for the performance of any such act shall be extended for a period equivalent to the period of such delay; provided, however, that the provisions of this Section 28 shall not operate to excuse Tenant, nor shall Tenant in any event be excused, from prompt payment of Rent.

29.LANDLORD’S LIABILITY. Tenant acknowledges that Landlord’s liability under this Lease shall be limited to Landlord’s equity interest in the Property, and any judgment against Landlord shall be satisfied solely out of the proceeds of sale of Landlord’s equity interest in the Property. No judgment rendered against Landlord shall give rise to any right of execution or levy against Landlord’s other assets. No individual who is Landlord or any member or partner of any joint venture, tenancy in common, firm, partnership or other form of joint ownership that is Landlord, or their heirs, personal representatives, successors and assigns, shall have any personal liability to Tenant, or to any person claiming under or through Tenant, for any amount or in any capacity. Such exculpation of liability shall be absolute and without exception whatsoever. Nothing in this Section 29, however, shall bar Tenant from seeking and enforcing any equitable remedy of Tenant against Landlord, but any such equitable remedy that can be cured by the expenditure of money may be enforced personally against Landlord only to the extent of Landlord’s equity interest in the Property. Furthermore, it is understood and agreed that in each and every instance in which Landlord’s approval or consent is required under this Lease, Landlord shall not be liable for damages (whether direct, consequential or otherwise) by reason of its failure to grant such approval or consent (unless Landlord is found to have acted in bad faith), and Tenant’s sole remedy shall be an action for injunctive relief or specific performance.

30.NOTICES. Any notice, request, demand, approval or consent given or required to be given under this Lease shall be in writing and shall be deemed to have been given if and when (i) posted in the United States registered or certified mail, return receipt requested, postage prepaid, (ii) delivered by hand, or (iii) delivered by overnight express delivery by a nationally-recognized commercial courier service, and in any event addressed to Landlord at Landlord’s Mailing Address or addressed to Tenant at Tenant’s Mailing Address (“Notice”). Either party may at any time change its address for Notice purposes by sending a notice to the other party advising of the new address.

31.QUIET ENJOYMENT. Provided that Tenant has performed all of its obligations under this Lease, Landlord covenants that Tenant shall have and enjoy quiet and peaceable possession of the Premises during the Term free of molestation by Landlord, subject to the provisions of this Lease, the Declaration, if applicable, and of all mortgages, ground leases, encumbrances and other matters of record affecting title to the Property.

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32.NO WAIVERS. The failure of Landlord to insist, in any one or more instances, upon strict performance by Tenant of any covenant of this Lease shall not be construed as a waiver or relinquishment for the future of such covenant, but the same shall continue and remain in full force and effect. The receipt by Landlord or its Agent of Rent with knowledge of the breach or any covenant hereof shall not be deemed a waiver of such breach, and no waiver by Landlord of any provision hereof shall be deemed to have been agreed upon unless expressed in writing signed by the parties hereto.

33.SUCCESSORS AND ASSIGNS. This Lease and all terms, covenants, conditions and provisions herein contained shall be binding upon and shall inure to the benefit of the parties hereto and their respective personal representatives, heirs, successors and (if and when assigned in accordance with the provisions hereof) assigns.

34.TERMINATION/HOLDOVER. On expiration or sooner termination of the Term, Tenant shall surrender to Landlord the Premises and all Tenant’s improvements and alterations in good, clean, orderly, and undamaged condition, except for ordinary wear and tear or condemnation or destruction of the Premises as covered by Sections 18 and 19 and except for trade fixtures that Tenant has removed under the provisions of Section 12. Tenant shall deliver to Landlord all keys to the Premises, remove all its personal property and make repairs and reimbursements pursuant to Section 12 within the above stated time. Landlord may elect to retain or dispose of, in any manner, any alterations or Tenant’s personal property that Tenant does not remove from the Premises on expiration or termination of the Term. Title to any such alterations or Tenant’s personal property that Landlord elects to retain or dispose of after expiration of the Term shall vest in Landlord. Tenant waives all claims against Landlord for any damage to Tenant resulting from Landlord’s retention or disposition of any such alterations or personal property. Tenant shall be liable to Landlord for Landlord’s costs of storing, removing, and disposing of any alterations or Tenant’s personal property which Landlord does not elect to acquire.

If Tenant fails to surrender the Premises on the date that the Term of this Lease expires or terminates, Tenant’s continued occupancy shall be deemed to be a tenancy-at-will (and not a tenancy from month-to-month or from year-to-year) cancelable by Landlord upon forty (48) hours’ prior oral or written notice, and such tenancy shall be subject to all of the provisions of this Lease, except that Base Rent during the holdover tenancy shall be equal to one hundred fifty percent (150%) the Base Rent in effect immediately prior to the end of the Term.

35.SECURITY DEPOSIT. Tenant has deposited with the Landlord the amount set forth in Section 1(j) as security for the performance by Tenant of every covenant and condition of this Lease. If Tenant shall default in respect of any covenant or condition of this Lease, including but not limited to the payment of Rent, Landlord may apply the whole or any part of such security deposit to the payment of any amount in default or any other amount which Landlord may be required to spend by reason of Tenant’s default. Tenant shall pay Landlord, on demand, the amount so applied which shall be added to the security deposits so that the same will be restored to its original amount. Should the Premises be conveyed by Landlord, the security deposit or any balance thereof may be turned over to Landlord’s grantee, and if the same be turned over as aforesaid, Tenant hereby releases Landlord from any and all liability with respect to security deposit and its application or return, and Tenant agrees to look solely to such grantee for such application or return. Should Tenant comply with all of the covenants and conditions of this Lease, the security deposit or any balance thereof shall be returned to Tenant (or at the

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option of Landlord, to the last assignee of Tenant’s interest in this Lease) at the expiration of the term hereof. Tenant shall not be entitled to any interest on the security deposit.

36.MECHANIC’S LIENS. Tenant agrees that it will, at all times during the term of this Lease, take any and all steps necessary to prevent the filing of mechanic’s liens against the Premises. If any mechanic’s or other liens, or order for the payment of money, shall be filed against the Premises, or any building or improvements within the Property, by reason of Tenant’s change or alteration thereto, Tenant shall cause the same to be canceled or discharged of record within ten (10) days after notice of filing, by bond or otherwise, at the expense of Tenant, and Tenant shall also defend on behalf of Landlord, at Tenant’s sole cost and expense, any action, suit or proceeding which may be brought thereon for the enforcement of such lien, liens or orders, and Tenant shall pay any damage and satisfactorily discharge any judgment entered therein and save harmless Landlord from any claim, attorney fees or damage therefrom. In the event Tenant fails to remove such lien, liens or orders within thirty (30) days of filing, Landlord may have said lien, liens or orders removed and Tenant agrees to reimburse any amount paid by Landlord to remove said lien, liens or order within ten (10) days after notice of filing, including reasonable attorney’s fees.

37.HAZARDOUS SUBSTANCES.

(a)During the term of this Lease, Tenant shall not suffer, allow, permit or cause the generation, accumulation, storage, possession, release or threat of release of any hazardous substance or toxic material, as those terms are used in the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended, and any regulations promulgated thereunder, or any other present or future federal, state or local laws, ordinances, rules and regulations. Tenant shall indemnify and hold Landlord harmless from any and all liabilities, penalties, demands, actions, costs and expenses (including without limitation reasonable attorney fees), remediation and response costs incurred or suffered by Landlord directly or indirectly arising due to the breach of Tenant’s obligations set forth in this Section. Such indemnification shall survive expiration or earlier termination of this Lease. At the expiration or sooner termination hereof, Tenant shall return the Premises to Landlord in substantially the same condition as existed on the date of commencement hereof free of any hazardous substances in, on or from the demised premises.

(b)Prior to any renovation or demolition activities containing any asbestos containing materials or asbestos containing building materials, as defined by federal, state or local laws, ordinances, rules and regulations, which are the responsibility of Tenant hereunder, or in connection with any renovation or demolition by Tenant, Tenant shall notify Landlord at least thirty (30) days prior to commencing such renovation or demolition. Such notification shall include the scope of work to be performed and the schedule of the renovation or demolition. Tenant shall be responsible for compliance with all applicable asbestos and environmental regulations for its own employees and any other persons under their control or direction, including but not limited to employee training.

(c)Tenant shall be solely responsible for the cost, and/or expense for the identification, containment, treatment, and/or required remediation activities associated with the removing of any “hazardous materials” which are brought to, created on, and/or disposed upon the Premises and/or Property by Tenant or any contractor, agent or employee of Tenant. As used in this Lease, the term “hazardous material” shall mean: (a) any “hazardous substance” as defined in §101(14) of the Comprehensive Environmental response, Compensation and

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Liability Act, 42 U.S.C. § 9601(14) amended; (b) any “hazardous waste”; (c) petroleum or petroleum products, crude oil or any by-products thereof, natural gas or synthetic gas used for fuel; and (d) any additional substances or materials which at some time are classified or considered to be hazardous or toxic under the laws of the State of Ohio or any other ordinances, laws and/or regulations of all governmental authorities having jurisdiction [the materials described in clauses (a) through (d) above are collectively referred to herein as “hazardous materials”]. The obligations of Tenant under this Section 37 shall survive the expiration or sooner termination of this Lease.

(d)Landlord shall be solely responsible for the cost, and/or expense for the identification, containment, treatment, and/or required remediation activities associated with the removing of any “hazardous materials” which are brought to, created on, and/or disposed upon the Property by Landlord or any contractor, agent or employee of Landlord, or which may presently be located on the Premises. Landlord represents that to its actual knowledge without any investigation, there are no “hazardous materials” in violation of the law in the Premises or in any of the common areas of the Property.

38.LEASE GUARANTY. Landlord’s obligations under this Lease are conditioned upon receipt of a Guaranty of Lease in the form attached as Exhibit “G” executed by the Guarantor and receipt of satisfactory evidence of the authority of the Guarantor to execute the Guaranty of Lease.

39.MISCELLANEOUS PROVISIONS.

(a)Entire Agreement: Modification. This Lease represents the final understanding and agreement between Landlord and Tenant and incorporates all negotiations between the parties. This Lease cannot be modified except by writing signed by the party against whom the modification is to be enforced.

(b)Interpretation. The captions and headings in this Lease are for the purposes of reference only and shall not limit or define the meaning of the provisions of this Lease. References to any specific gender shall be deemed to include the other gender or neuter, as applicable, references to “expiration” shall include “termination” and vice-versa, and references to the singular shall include the plural and vice-versa, all as the context may require. If Tenant consists of multiple parties, the liability of such parties shall be joint and several, and the release of any one or more of such Parties shall not affect the liability of any other party not expressly released in writing. This Lease shall not be construed more strictly against one party than the other, it being recognized that both Landlord and Tenant have contributed substantially and materially to the preparation of this Lease.

(c)Waiver of Jury Trial. Landlord and Tenant hereby mutually waive any and all rights which either party may have to request a jury trial in any proceeding at law or in equity in any court of competent jurisdiction.

(d)Choice of Law. This lease shall be governed by Ohio Law.

(e)Brokerage Commission. Landlord and Tenant each warrant and represent to the other that they did not deal with any real estate broker in connection with the negotiation, execution and delivery of this Lease. Each party agrees to indemnify, defend, and save the other harmless from and against any and all liabilities, costs, causes of action, damages and

20

expenses, including, without limitation, attorneys’ fees, with respect to or arising out of any claims made by any real estate broker, agent or finder with respect to this lease in breach of the foregoing representation. The provisions of this Section shall survive the expiration or earlier termination of this Lease.

(f)Short Form Lease. Tenant agrees not to record this Lease. However, upon the request of either party, the other party shall join in the execution of a “short form lease” for the purposes of recordation, including such terms of this Lease (other than economic terms) as are typically included in such document. Either party may record such “short form lease” at its own expense.

(g)Submission of Lease. This Lease does not constitute an offer to lease, and Landlord shall not be bound by this Lease until it is executed and unconditionally delivered by both parties.

(h)Tenant Authority. (i) If Tenant is a partnership, each person executing this Lease on behalf of Tenant warrants that Tenant is a validly existing partnership qualified to do business under the laws of the state in which the Property is located, that such partnership has the full right and authority to enter into this Lease and that no other partners other than those signing this Lease on behalf of Tenant must join in this execution; and (ii) if Tenant is a corporation, each person executing this Lease on behalf of Tenant hereby warrants that (1) Tenant is a duly constituted corporation qualified to do business and in good standing in the state in which the Property is located; (2) such corporation has the full right and authority to enter into this Lease, and (3) each person signing this Lease on behalf of the Tenant has been duly authorized by the board of directors of Tenant to execute and deliver this Lease on behalf of the corporation and that no other signatures are necessary.

(i)Right to Mortgage.

(i) Landlord reserves the right to subject and subordinate this Lease at all times to the lien of any deed of trust, mortgage or mortgages now or hereafter placed upon Landlord’s interest in the Premises; provided, however, that no default by Landlord, under any deed of trust, mortgage or mortgages, shall affect Tenant’s rights under this Lease, so long as Tenant performs the obligations imposed upon it hereunder and is not in default hereunder, and Tenant attorns to the holder of such deed of trust or mortgage, its assignee, or the purchaser at any foreclosure sale. Tenant shall execute any instrument presented to Tenant for the purpose of effecting such subordination. If Tenant, within ten (10) days after submission of such instrument, fails to execute same, Landlord is hereby authorized to execute same as attorney-in-fact for Tenant.

(ii) Wherever notice is required to be given to Landlord pursuant to the terms of this Lease, Tenant will likewise give such notice to any mortgagee of Landlord’s interest in the demised premises upon notice of such mortgagee’s name and address from Landlord. Furthermore, such mortgagee shall have the same rights to cure any default on the part of Landlord that Landlord would have had.

21

(j)Counterparts. This Lease may be executed in separate counterparts, each of which when so executed shall be an original, but all of which together shall constitute but one and the same instrument.

(k)OFAC List. Tenant hereby represents and warrants its compliance with all applicable anti-money laundering laws, including, without limitation, the USA Patriot Act, and the laws administered by the United States Treasury Department’s Office of Foreign Assets Control (“OFAC”), including, without limitation, Executive Order 13224. Tenant further represents and warrants (i) that it is not, and it is not owned or controlled by any person or entity on OFAC’s List of Specially Designated Nationals and Blocked Persons, which, as of the date hereof, may be accessed through the following Internet address: http://www.treas.gov/offices/enforcement/ofac; and (ii) that it is not a person otherwise identified by government or legal authority as a person with whom a U.S. Person is prohibited from transacting business.  Tenant covenants and agrees to deliver to Landlord any certification or other evidence requested from time to time by Landlord in its reasonable discretion confirming Tenant’s compliance with this subsection (k).

22

WITNESS the following signatures:

LANDLORD:

4300 VENTURE 34910 LLC,

a Delaware limited liability company

By:    4300 East Fifth Avenue LLC

an Ohio limited liability company

Its:    Member

By:    Jubilee-Aircenter L.L.C.

a Delaware limited liability company

Its:    Manager

By:    Schottenstein Realty LLC

a Delaware limited liability company

Its:    Managing Member

By:    /s/ Joseph Schottenstein    

Print Name: Joseph Schottenstein    

Its:    Executive Vice President    

23

TENANT:

SB CAPITAL ACQUISITIONS, LLC,

a(n) Delaware Limited Liability Company

By:    /s/ Stephen Chovan                

Print Name:    Stephen Chovan            

Title:    CFO                        

24

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

I, Michael R. MacDonald, certify that:

1.      I have reviewed this quarterly report on Form 10-Q of DSW Inc.;

2.      Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.      Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.      The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:

(a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)    Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)    Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.      The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)     Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

November 30, 2012	By:	/s/ Michael R. MacDonald
		Michael R. MacDonald,
		President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS

I, Douglas J. Probst, certify that:

1.      I have reviewed this quarterly report on Form 10-Q of DSW Inc.;

2.      Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.      Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.      The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)    Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)    Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.      The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)     Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

November 30, 2012	By:	/s/ Douglas J. Probst
		Douglas J. Probst,
		Executive Vice President and Chief Financial Officer

EX-32.1

EXHIBIT 32.1

SECTION 1350 CERTIFICATION *

In connection with the Quarterly Report of DSW Inc. (the “Company”) on Form 10-Q for the period ended October 27, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael R. MacDonald, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

November 30, 2012	By:	/s/ Michael R. MacDonald
		Michael R. MacDonald, President and Chief Executive Officer

* This Certification is being furnished as required by Rule 13a-14(b) under the Securities Exchange Act of 1934 (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code, and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section. This Certification shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act, except as otherwise stated in such filing.

A signed original of this written statement required by 18 U.S.C. § 1350 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

EXHIBIT 32.2

SECTION 1350 CERTIFICATION *

In connection with the Quarterly Report of DSW Inc. (the “Company”) on Form 10-Q for the period ended October 27, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Douglas J. Probst, Executive Vice President, and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

November 30, 2012	By:	/s/ Douglas J. Probst
		Douglas J. Probst,
		Executive Vice President and Chief Financial Officer

* This Certification is being furnished as required by Rule 13a-14(b) under the Securities Exchange Act of 1934 (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code, and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section. This Certification shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act, except as otherwise stated in such filing.

A signed original of this written statement required by 18 U.S.C. § 1350 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

EARNINGS PER SHARE AND SHAREHOLDERS' EQUITY (Tables)

9 Months Ended

Oct. 27, 2012

EARNINGS PER SHARE AND SHAREHOLDERS' EQUITY [Abstract]

Reconciliation of Net Income Used in the Calculation of Earnings Per Share

The following is a reconciliation of the net income used in the calculation of diluted earnings per share computations for the periods presented for net income from continuing operations, net of noncontrolling interests:

	Three months ended					Nine months ended
	October 27, 2012		October 29, 2011			October 27, 2012		October 29, 2011
	(in thousands)
Net income from continuing operations, net of noncontrolling interests for basic earnings per share	$	50,115	$	53,669		$	118,040	$	155,248
Less: (gain) in fair value of PIES, net of tax effected interest expense, amortization of debt discount and amortization of deferred financing fees		—		(20,167	)		—		(6,019	)
Add: loss in fair value of warrants		—		159			—		—
Net income from continuing operations, net of noncontrolling interests for diluted earnings per share	$	50,115	$	33,661		$	118,040	$	149,229

The following is a reconciliation of the net income used in the calculation of diluted earnings per share computations for the periods presented for net income, net of noncontrolling interests:

	Three months ended					Nine months ended
	October 27, 2012		October 29, 2011			October 27, 2012		October 29, 2011
	(in thousands)
Net income, net of noncontrolling interests for basic earnings per share	$	50,115	$	53,674		$	119,293	$	155,421
Less: (gain) in fair value of PIES, net of tax effected interest expense, amortization of debt discount and amortization of deferred financing fees		—		(20,167	)		—		(6,019	)
Add: loss in fair value of warrants		—		159			—		—
Net income, net of noncontrolling interests for diluted earnings per share	$	50,115	$	33,666		$	119,293	$	149,402

Reconciliation of the Number of Shares Used in the Calculation of Diluted Earnings per Share

The following is a reconciliation of the number of shares used in the calculation of diluted earnings per share computations for the periods presented:

	Three months ended				Nine months ended
	October 27, 2012		October 29, 2011		October 27, 2012		October 29, 2011
	(in thousands)
Weighted average shares outstanding		44,664		41,214		44,266		32,545
Assumed exercise of dilutive DSW stock options		742		799		780		474
Assumed exercise of dilutive DSW RSUs		117		161		127		91
Assumed exercise of dilutive RVI stock options and SARs		—		—		—		87
Assumed exercise of dilutive PIES		—		1,977		—		1,584
Assumed exercise of dilutive warrants		—		588		—		—
Number of shares for computation of diluted earnings per share		45,523		44,739		45,173		34,781

XML

INCOME TAXES (Details)	3 Months Ended		9 Months Ended
	Oct. 27, 2012	Oct. 29, 2011	Oct. 27, 2012	Oct. 29, 2011
INCOME TAXES [Abstract]
Effective Income Tax Rate	38.10%	32.70%	39.40%	(72.00%)

XML

RELATED PARTY TRANSACTIONS (Details) (USD $) In Thousands, except Share data in Millions, unless otherwise specified	3 Months Ended
	Oct. 27, 2012	Jan. 28, 2012
Related Party Transaction [Line Items]
Settlement period of transaction, minimum (in days)	30 days
Settlement period of transaction, maximum (in days)	60 days
Related party receivables	$ 0	$ 96
Related party payables	$ 1,098	$ 2,304
Schottenstein Affiliates [Member]
Related Party Transaction [Line Items]
Outstanding common shares owned (in hundredths)	23.00%
Combined voting power of outstanding common shares (in hundredths)	69.00%
Schottenstein Affiliates [Member] | Common Class A [Member]
Related Party Transaction [Line Items]
Number of shares owned by Schottenstein Affiliates (in shares)	0.7
Schottenstein Affiliates [Member] | Common Class B [Member]
Related Party Transaction [Line Items]
Number of shares owned by Schottenstein Affiliates (in shares)	9.6

XML

PROPERTY AND EQUIPMENT (Details) (USD $) In Thousands, unless otherwise specified	Oct. 27, 2012	Jan. 28, 2012
Property and equipment:
Furniture, fixtures and equipment	$ 333,816	$ 295,162
Leasehold improvements	253,361	215,519
Total property and equipment	587,177	510,681
Accumulated depreciation and amortization	(310,681)	(274,955)
Property and equipment, net	$ 276,496	$ 235,726

XML

BACKGROUND (Details) (USD $) In Millions, unless otherwise specified	9 Months Ended
	Oct. 27, 2012	Oct. 27, 2012 Filene's Basement commitments [Member]	Oct. 27, 2012 Property Lease Guarantee [Member]	Apr. 28, 2012 Property Lease Guarantee [Member]
BACKGROUND [Abstract]
Reverse stock split, Merger conversion ratio (in hundredths)	0.435
Number of channels the company sells product through	3
Number of reportable segments	2
Loss Contingencies [Line Items]
Remaining minimum lease payments		$ 6.7	$ 0.1	$ 7.0

XML

SEGMENT REPORTING (Policies)

9 Months Ended

Oct. 27, 2012

SEGMENT REPORTING [Abstract]

Segment Reporting

DSW maintained its historical segment presentation, but recast its segment presentation to include Other. In order to reconcile to the condensed consolidated financial statements, DSW includes Other, which consists of assets, liabilities and expenses that are not attributable to the two reportable segments, primarily related to assets and liabilities of the former RVI operations.

The Company sells products through three channels: DSW stores, dsw.com and the Affiliated Business Group. The reportable segments are the DSW segment, which includes the DSW stores and dsw.com sales channels, and the Affiliated Business Group segment. DSW has identified such segments based on internal management reporting and responsibilities and measures segment profit as gross profit, which is defined as net sales less cost of sales. All operations are located in the United States. The goodwill balance of $25.9 million outstanding as of both October 27, 2012 and January 28, 2012 is recorded in the DSW segment related to the DSW stores.

XML

OTHER NON-CURRENT LIABILITIES (Details) (USD $) In Thousands, unless otherwise specified	Oct. 27, 2012	Jan. 28, 2012
OTHER NON-CURRENT LIABILITIES [Abstract]
Construction and tenant allowances	$ 74,479	$ 62,474
Deferred rent	39,480	35,673
Other	9,200	15,617
Total other non-current liabilities	$ 123,159	$ 113,764

XML

SUBSEQUENT EVENTS

9 Months Ended

Oct. 27, 2012

SUBSEQUENT EVENTS [Abstract]

SUBSEQUENT EVENTS

17.   SUBSEQUENT EVENTS

Corporate Headquarters and Distribution Center Acquisition- On October 31, 2012, DSW entered into an agreement of purchase and sale (the "Purchase Agreement") with 4300 East Fifth Avenue LLC, an Ohio limited liability company, 4300 Venture 34910 LLC, a Delaware limited liability company, and 4300 Venture 6729 LLC, a Delaware limited liability company (each a "Seller" and collectively "Sellers", which are all Schottenstein Affiliates), pursuant to which DSW acquired on November 1, 2012 all of the Sellers' ownership interest in 810 AC LLC, an Ohio limited liability company (the "Acquisition"). Prior to the closing of the Acquisition, Sellers transferred certain Properties (as defined in the Purchase Agreement) to 810 AC LLC, portions of which Properties were previously leased by DSW for its corporate office headquarters, its 700,000 square foot distribution center and a trailer parking lot. DSW expects certain portions of the Properties to continue to be leased by unrelated and related parties. As consideration for the Acquisition, DSW paid to Sellers $72 million in cash, subject to credits and adjustments as provided in the Purchase Agreement.

On November 1, 2012, in connection with the completion of the Acquisition, 4300 East Fifth Avenue LLC and DSW's wholly owned subsidiary, 810 AC LLC, entered into a cost sharing agreement (the "Cost Sharing Agreement") pursuant to which 810 AC LLC will contribute $3 million to the cost of replacing the roof of a building on the Properties.

Also on November 1, 2012, 810 AC LLC and Schottenstein Property Group, LLC, an Ohio limited liability company ("SPG") which is a Schottenstein Affiliate, entered into a management agreement (the "Management Agreement") pursuant to which SPG will provide management, operation, repair, maintenance, replacement, and supervision services with respect to the properties that are the subject of the Management Agreement, collect rent from other tenants, and provide other landlord services with respect to such tenants. SPG had previously managed the Properties. As compensation, DSW will pay SPG 4% of rents, or approximately $0.2 million on an annual basis, collected from lessees of certain portions of the Properties, plus reimbursement for certain costs pursuant to the Management Agreement.  The term of the Management Agreement is three years, with automatic one-year extensions after the initial term. The Management Agreement can be terminated by either party with 60 days notice.

Since each of the Sellers and SPG are Schottenstein Affiliates, the audit committee of DSW's board of directors has reviewed and approved the Purchase Agreement, the Acquisition, the Cost Sharing Agreement, and the Management Agreement, consistent with DSW's related party transaction policy and determined that the transaction was fair and reasonable for the properties. As this was a transaction between entities under common control, as provided by ASC 805, Business Combinations, there will be no adjustment to the historical cost carrying amounts of assets transferred to DSW. The difference between the historical cost carrying amounts and the consideration transferred is an equity transaction. DSW will also reduce the cost basis of the assets by the balance of tenant allowances and deferred rent recorded related to the properties.

Dividends- On November 20, 2012, DSW announced that the Board of Directors approved a quarterly cash dividend of $0.18 per share. The quarterly dividend will be paid on December 28, 2012 to shareholders of record at the close of business on December 17, 2012.

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INVESTMENTS (Details) (USD $)	9 Months Ended
	Oct. 27, 2012	Jan. 28, 2012
Investment disclosure [Abstract]
Days that short-term available-for-sale investments renew (in days)	7
Bond investments maturity, minimum (in years)	1
Bond investments maturity, maximum (in years)	3
Gross unrealized gains on short-term investments	$ 300,000	$ 100,000
Gross unrealized losses on short-term investments	100,000	100,000
Gross unrealized gains from long-term held-to-maturity investments	300,000	100,000
Gross unrealized losses on long-term held-to-maturity investments	200,000	200,000
Schedule of Investments, Reported Amounts, by Category [Line Items]
Short-term investments	203,320,000	296,697,000
Long-term investments	92,674,000	53,858,000
Available-for-sale Securities [Member]
Schedule of Investments, Reported Amounts, by Category [Line Items]
Short-term investments	23,925,000	139,807,000
Long-term investments	0	0
Available-for-sale Securities [Member] | Term notes and bonds [Member]
Schedule of Investments, Reported Amounts, by Category [Line Items]
Short-term investments	21,925,000	134,322,000
Long-term investments	0	0
Available-for-sale Securities [Member] | Commercial paper [Member]
Schedule of Investments, Reported Amounts, by Category [Line Items]
Short-term investments	2,000,000	5,485,000
Long-term investments	0	0
Held-to-maturity Securities [Member] | Term notes and bonds [Member]
Schedule of Investments, Reported Amounts, by Category [Line Items]
Short-term investments	179,395,000	156,890,000
Long-term investments	91,523,000	52,707,000
Held-to-maturity Securities [Member] | Equity investment - related party [Member]
Schedule of Investments, Reported Amounts, by Category [Line Items]
Short-term investments	0	0
Long-term investments	$ 1,151,000	$ 1,151,000

XML

OTHER NON-CURRENT LIABILITIES (Tables)

9 Months Ended

Oct. 27, 2012

OTHER NON-CURRENT LIABILITIES [Abstract]

Other Non-current Liabilities

The balance sheet caption "Other non-current liabilities" was comprised of the following for the periods presented:

	October 27, 2012		January 28, 2012
	(in thousands)
Construction and tenant allowances	$	74,479	$	62,474
Deferred rent	39,480		35,673
Other	9,200		15,617
Total other non-current liabilities	$	123,159	$	113,764

XML

DEBT OBLIGATIONS AND WARRANT LIABILITIES (Tables)

9 Months Ended

Oct. 27, 2012

DEBT OBLIGATIONS AND WARRANT LIABILITIES [Abstract]

Assumptions Used for Fair Value Calculations

The fair value of the warrants was estimated using the Black-Scholes pricing model with the following assumptions for the period presented:

Assumptions:	January 28, 2012
Risk-free interest rate		0.1	%
Expected volatility of common stock		43.5	%
Expected term	0.4 years
Expected dividend yield		1.3	%

Fair Values and Balance Sheet Locations of Derivative Liabilities

The fair value and balance sheet location of DSW's derivative liability were as follows for the period presented:

	Balance Sheet Location	January 28, 2012
		(in thousands)
Warrants – related party	Warrant liability	$	29,303

Interest Expense Recognized

The amount of interest expense recognized and the effective interest rate for the PIES were as follows for the period presented:

	Nine months ended
	October 29, 2011
	(in thousands)
Contractual interest expense	$	5,926
Amortization of debt discount	1,618
Total interest expense	$	7,544
Effective interest rate	8.6		%

Effect of Derivative Instruments

The effect of derivative instruments on DSW's, and prior to the Merger, RVI's, condensed consolidated statements of operations was as follows for the periods presented:

	Three months ended					Nine months ended
	October 27, 2012		October 29, 2011			October 27, 2012		October 29, 2011
	(in thousands)
Warrants – related party	$	—	$	159		$	6,121	$	14,052
Warrants – non-related party		—		—			—		1,192
Conversion feature of short-term debt		—		(21,083	)		—		41,651
(Income) expense related to the change in fair value of derivative instruments	$	—	$	(20,924	)	$	6,121	$	56,895

XML

FAIR VALUE MEASUREMENTS (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	9 Months Ended					9 Months Ended
	Oct. 29, 2011	Oct. 27, 2012		Oct. 29, 2011	Jan. 28, 2012		Oct. 27, 2012 Long-term Investments [Member]	Oct. 29, 2011 Long-term Investments [Member]	Jul. 28, 2012 Long-term Investments [Member]	Jul. 29, 2011 Long-term Investments [Member]	Oct. 27, 2012 Level 1 [Member]		Jan. 28, 2012 Level 1 [Member]		Oct. 27, 2012 Level 2 [Member]		Jan. 28, 2012 Level 2 [Member]		Oct. 27, 2012 Level 3 [Member]		Jan. 28, 2012 Level 3 [Member]		Oct. 29, 2011 Level 3 [Member]
Assets [Abstract]
Cash and equivalents		$ 134,322	[1]		$ 79,003	[1]					$ 134,322	[1]	$ 79,003	[1]	$ 0	[1]	$ 0	[1]	$ 0	[1]	$ 0	[1]
Short-term investments		203,525	[2]		296,697	[2]					0	[2]	0	[2]	203,525	[2]	296,697	[2]	0	[2]	0	[2]
Long-term investments		92,803	[2],[3]		53,858	[2],[3]					0	[2],[3]	0	[2],[3]	91,652	[2],[3]	52,707	[2],[3]	1,151	[2],[3]	1,151	[2],[3]
Total assets		430,650			429,558						134,322		79,003		295,177		349,404		1,151		1,151
Liabilities [Abstract]
Warrant liability		0	[4]		29,303	[4]					0	[4]	0	[4]	0	[4]	29,303	[4]	0	[4]	0	[4]
Total liabilities		0			29,303						0		0		0		29,303		0		0
Activity related to fair value of assets held and used that realized an impairment loss [Abstract]
Assets held and used, Fair Value as of the Impairment Date	0			0																			0
Assets held and used, Total Losses	1,626	0		1,626
Activity related to level 3 fair value measurements [Roll forward]
Carrying value at the beginning of the period							1,151	952	1,151	1,047
Activity related to equity investment - related party							0	95
Carrying value at the end of the period							$ 1,151	$ 1,047	$ 1,151	$ 1,047
Settlement period for credit card receivables		3 days

[1] Cash and equivalents primarily represent cash deposits and investments in money market funds held with financial institutions, as well as credit card receivables that generally settle within three days. The carrying amount approximates fair value because of the relatively short average maturity of the instruments.

[2] Available-for-sale and held-to maturity investments are valued using a market-based approach using level 2 inputs such as prices of similar assets in active markets. Held-to-maturity investments are held at amortized cost.

[3] The long-term investment - related party is evaluated for other-than-temporary impairment on an annual basis or when a triggering event occurs using a discounted cash flow valuation model using level 3 inputs such as the financial condition of the entity.

[4] The underlying assumptions for fair value measurement of the warrant liability is detailed in Note 7. Prior to exercise, the Company classified its warrant liability within level 2 as the valuation inputs are based on observable market data.

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SUBSEQUENT EVENTS (Details) (USD $) In Millions, except Per Share data, unless otherwise specified	9 Months Ended
	Oct. 27, 2012	Oct. 29, 2011	Oct. 27, 2012 Subsequent Event [Member]	Oct. 31, 2012 Subsequent Event [Member] sqft
Subsequent Event [Line Items]
Dividends Payable, Date Declared			Nov. 20, 2012
Dividends paid (in dollars per share)	$ 2.51	$ 2.15	$ 0.18
Dividends Payable, Date to be Paid			Dec. 28, 2012
Dividends Payable, Date of Record			Dec. 17, 2012
Square footage of distribution center (in square feet)				700,000
Asset acquisition, cash paid				$ 72
Contribution to cost for replacing the roof of building				3
Rent paid, percentage (in hundredths)				4.00%
Payments for Rent				$ 0.2
Term of Agreement				3 years
Extension term of agreement after initial term				1 year
Notice period of termination of agreement				60 days

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SIGNIFICANT ACCOUNTING POLICIES (Details) (USD $) In Millions, unless otherwise specified	Oct. 27, 2012	Jan. 28, 2012
SIGNIFICANT ACCOUNTING POLICIES [Abstract]
Allowance for Doubtful Accounts Receivable	$ 0.3	$ 0.6

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BUSINESS OPERATIONS AND BASIS OF PRESENTATION

9 Months Ended

Oct. 27, 2012

BUSINESS OPERATIONS AND BASIS OF PRESENTATION [Abstract]

BUSINESS OPERATIONS AND BASIS OF PRESENTATION

1. BUSINESS OPERATIONS AND BASIS OF PRESENTATION

Business Operations- DSW and its wholly owned subsidiaries are herein referred to collectively as DSW or the "Company". DSW's Class A Common Shares are listed on the New York Stock Exchange under the ticker symbol "DSW".

DSW has two reportable segments: the DSW segment, which includes the DSW stores and dsw.com sales channels, and the Affiliated Business Group segment (previously known as the leased business division segment). DSW offers a wide assortment of brand name dress, casual and athletic footwear and accessories for women and men. As of October 27, 2012, DSW operated a total of 363 stores located in 41 states, the District of Columbia and Puerto Rico, and dsw.com. During the nine months ended October 27, 2012, DSW opened 38 new DSW stores and closed 1 DSW store.

DSW also operates leased departments for three retailers in its Affiliated Business Group segment. As of October 27, 2012, DSW supplied merchandise to 261 Stein Mart stores, 83 Gordmans stores and one Frugal Fannie's store. During the nine months ended October 27, 2012, DSW added 18 new leased departments and ceased operations in 9 leased departments. DSW owns the merchandise and the fixtures, records sales of merchandise, net of returns through period end and excluding sales tax, and provides management oversight. The retailers provide the sales associates and retail space. DSW pays a percentage of net sales as rent, which is included in cost of sales as occupancy expense.

Basis of Presentation- The accompanying unaudited condensed consolidated interim financial statements should be read in conjunction with DSW's Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on March 27, 2012 (the "2011 DSW Annual Report"). In the opinion of management, the unaudited condensed consolidated interim financial statements reflect all adjustments, consisting of normal recurring adjustments, which are necessary to present fairly the consolidated financial position, results of operations and cash flows for the periods presented.

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PENSION PLAN (Tables)

9 Months Ended

Oct. 27, 2012

PENSION PLAN [Abstract]

Components of Net Periodic Benefit Cost

The components of net periodic benefit cost are comprised of the following for the periods presented:

	Three months ended						Nine months ended
	October 27, 2012			October 29, 2011			October 27, 2012			October 29, 2011
	(in thousands)
Interest cost	$	230		$	251		$	690		$	752
Expected return on plan assets		(302	)		(237	)		(906	)		(709	)
Amortization of net loss		100			74			298			222
Loss recognized due to settlements		67						67
Net periodic benefit cost	$	95		$	88		$	149		$	265

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EARNINGS PER SHARE AND SHAREHOLDERS' EQUITY (Policies)

9 Months Ended

Oct. 27, 2012

EARNINGS PER SHARE AND SHAREHOLDERS' EQUITY [Abstract]

Earnings Per Share

Earnings per Share- Basic earnings per share is based on net income and a simple weighted average of common shares outstanding. For periods prior to the Merger, share count was determined by adjusting all historical RVI shares by the exchange ratio of 0.435. Diluted earnings per share reflects the potential dilution of common shares adjusted, related to outstanding RVI stock options and SARs (prior to the Merger), outstanding DSW stock options and RSUs (after the Merger) and warrants calculated using the treasury stock method. As PIES were exchangeable for DSW Class A Common Shares, they were included as potentially dilutive instruments based on the DSW common share price, after the Merger and before the settlement.

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FAIR VALUE MEASUREMENTS (Policies)

9 Months Ended

Oct. 27, 2012

FAIR VALUE MEASUREMENTS [Abstract]

Cash and Cash Equivalents

(a) Cash and equivalents primarily represent cash deposits and investments in money market funds held with financial institutions, as well as credit card receivables that generally settle within three days. The carrying amount approximates fair value because of the relatively short average maturity of the instruments.

Impairment or Disposal of Long-Lived Assets

Non-Financial Assets and Liabilities- DSW periodically evaluates the carrying amount of its long-lived assets, primarily property and equipment, and finite lived intangible assets when events and circumstances warrant such a review to ascertain if any assets have been impaired. The carrying amount of a long-lived asset or asset group is considered impaired when the carrying value of the asset or asset group exceeds the expected future cash flows from the asset or asset group. The reviews are conducted at the lowest identifiable level, which includes a store. The impairment loss recognized is the excess of the carrying value of the asset or asset group over its fair value, based on a discounted cash flow analysis using a discount rate determined by management. Should an impairment loss be realized, it will generally be included in cost of sales. There were no significant non-recurring fair value measurements recorded for the nine months ended October 27, 2012.

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ACCRUED EXPENSES (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Oct. 27, 2012	Jan. 28, 2012
ACCRUED EXPENSES [Abstract]
Gift cards and merchandise credits	$ 24,738	$ 28,248
Compensation	18,746	33,427
Taxes	18,957	13,128
Customer loyalty program	17,440	14,577
Other	50,375	37,618
Total accrued expenses	$ 130,256	$ 126,998
Number of months that certificates expire after being issued	6 months

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SEGMENT REPORTING (Tables)

9 Months Ended

Oct. 27, 2012

SEGMENT REPORTING [Abstract]

Segment Information

The Company sells products through three channels: DSW stores, dsw.com and the Affiliated Business Group. The reportable segments are the DSW segment, which includes the DSW stores and dsw.com sales channels, and the Affiliated Business Group segment. DSW has identified such segments based on internal management reporting and responsibilities and measures segment profit as gross profit, which is defined as net sales less cost of sales. All operations are located in the United States. The goodwill balance of $25.9 million outstanding as of both October 27, 2012 and January 28, 2012 is recorded in the DSW segment related to the DSW stores.

	DSW segment		Affiliated Business Group segment		Other			Total
	(in thousands)
Three months ended October 27, 2012
Net sales	$	559,312	$	33,422		—		$	592,734
Gross profit		193,363		6,808		—			200,171
Capital expenditures		37,700		162		—			37,862
Three months ended October 29, 2011
Net sales	$	491,929	$	38,818		—		$	530,747
Gross profit		174,173		6,109		—			180,282
Capital expenditures		20,462		199		—			20,661
Nine months ended October 27, 2012
Net sales	$	1,562,707	$	100,817		—		$	1,663,524
Gross profit		531,848		21,158		—			553,006
Capital expenditures		83,212		366		—			83,578
Nine months ended October 29, 2011
Net sales	$	1,396,433	$	114,212		—		$	1,510,645
Gross profit		485,501		22,483		—			507,984
Capital expenditures		54,818		436		—			55,254
As of October 27, 2012
Total assets	$	1,206,867	$	95,684	$	7		$	1,302,558
As of January 28, 2012
Total assets	$	1,118,217	$	89,740	$	(57	)	$	1,207,900

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INCOME TAXES (Policies)

9 Months Ended

Oct. 27, 2012

INCOME TAXES [Abstract]

Income Taxes

Income Taxes- Income taxes are accounted for using the asset and liability method. The Company is required to determine the aggregate amount of income tax expense to accrue and the amount which will be currently payable based upon tax statutes of each jurisdiction in which the Company does business. In making these estimates, income is adjusted based on a determination of generally accepted accounting principles for items that are treated differently by the applicable taxing authorities. Deferred tax assets and liabilities, as a result of these differences, are reflected on DSW's balance sheet for temporary differences that will reverse in subsequent years. A valuation allowance is established against deferred tax assets when it is more likely than not that some or all of the deferred tax assets will not be realized. DSW succeeded to RVI's tax attributes as a result of the Merger.

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ACCRUED EXPENSES (Policies)

9 Months Ended

Oct. 27, 2012

ACCRUED EXPENSES [Abstract]

Customer Loyalty Program

Customer Loyalty Program- DSW maintains a customer loyalty program for the DSW stores and dsw.com sales channels in which program members earn reward certificates that result in discounts on future purchases. Upon reaching the target-earned threshold, the members receive reward certificates for these discounts which expire six months after being issued. DSW accrues the anticipated redemptions of the discount earned at the time of the initial purchase. To estimate these costs, DSW makes assumptions related to customer purchase levels and redemption rates based on historical experience.

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Oct. 27, 2012	Oct. 29, 2011
Cash flows from operating activities:
Net income	$ 119,293	$ 176,116
Less: income from discontinued operations, net of tax	(1,253)	(173)
Income from continuing operations	118,040	175,943
Adjustments to reconcile net income to net cash provided by operating activities from continuing operations:
Amortization of debt issuance costs and discount on debt	151	6,031
Depreciation and amortization	42,076	38,218
Capital transactions of subsidiary	0	2,778
DSW and RVI stock-based compensation expense	5,360	3,346
Deferred income taxes	70,213	(118,142)
Change in fair value of derivative instruments	6,121	56,895
Loss on disposal of long-lived assets	1,400	936
Impairment of long-lived assets	0	1,626
Impairment of lease	0	3,394
Excess tax benefits related to stock option exercises	(8,450)	(4,469)
Other	20,589	10,671
Change in working capital, assets and liabilities:
Accounts receivable, net	(9,249)	(760)
Inventories	(88,077)	(68,932)
Prepaid expenses and other current assets	1,557	9,830
Accounts payable	19,058	4,625
Accrued expenses	(1,575)	8,952
Net cash provided by operating activities from continuing operations	177,214	130,942
Cash flows from investing activities:
Cash paid for property and equipment	(80,203)	(55,356)
Purchases of available-for-sale investments	(38,130)	(114,900)
Purchases of held-to-maturity investments	(195,468)	(149,314)
Maturities and sales of available-for-sale investments	157,527	144,174
Maturities of held-to-maturity investments	125,721	139,663
Activity related to long-term investment - related party	0	(95)
Net cash used in investing activities from continuing operations	(30,553)	(35,828)
Cash flows from financing activities:
Loan proceeds from related party loan	0	11,000
Payment of related party loan	0	(11,000)
Proceeds from exercise of stock options	11,244	4,025
Shares withheld to satisfy income tax withholdings for restricted stock unit vesting and option exercises	(5,748)	0
Cash settlement of RVI options and SARs	0	(7,000)
Debt issuance costs	0	(2,625)
Cash paid for fractional shares	0	(28)
Dividends paid	(113,080)	(92,401)
Proceeds from the exercise of warrants	7,792	995
Excess tax benefits related to stock option exercises	8,450	4,469
Net cash used in financing activities from continuing operations	(91,342)	(92,565)
Net increase in cash and equivalents from continuing operations	55,319	2,549
Cash and equivalents, beginning of period	79,003	99,126
Cash and equivalents, end of period	134,322	101,675
Supplemental disclosures of cash flow information:
Cash paid during the period for interest	0	7,291
Cash paid during the period for income taxes	4,871	24,552
Proceeds from construction and tenant allowances	10,115	7,079
Non-cash operating, investing and financing activities:
Balance of accounts payable and accrued expenses due to property and equipment purchases	13,047	7,408
Amortization of investment discounts and premiums	4,913	4,249
Additional paid in capital transferred from warrant liability due to warrant exercises	35,424	3,584
Settlement of PIES with Class A Common Shares	$ 0	$ 181,776

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OTHER NON-CURRENT LIABILITIES (Policies)

9 Months Ended

Oct. 27, 2012

OTHER NON-CURRENT LIABILITIES [Abstract]

Construction and Tenant Allowances

Construction and Tenant Allowances- DSW receives cash allowances from landlords, which are deferred and amortized on a straight-line basis over the noncancelable terms of the lease as a reduction of rent expense.

Deferred Rent

Deferred Rent- Many of the Company's operating leases contain predetermined fixed increases of the minimum rentals during the initial lease terms. For these leases, the Company recognizes the related rental expense on a straight-line basis over the noncancelable terms of the lease. The Company records the difference between the amounts charged to expense and the rent paid as deferred rent and begins amortizing such deferred rent upon the delivery of the lease location by the lessor.

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PROPERTY AND EQUIPMENT (Tables)

9 Months Ended

Oct. 27, 2012

PROPERTY AND EQUIPMENT [Abstract]

Property and Equipment, Net

The balance sheet caption "Property and equipment, net" was comprised of the following for the periods presented:

	October 27, 2012			January 28, 2012
	(in thousands)
Property and equipment:
Furniture, fixtures and equipment	$	333,816		$	295,162
Leasehold improvements	253,361			215,519
Total property and equipment	587,177			510,681
Accumulated depreciation and amortization	(310,681		)	(274,955		)
Property and equipment, net	$	276,496		$	235,726

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EARNINGS PER SHARE AND SHAREHOLDERS' EQUITY (Details) (USD $)	3 Months Ended		9 Months Ended
	Oct. 27, 2012	Oct. 29, 2011	Oct. 27, 2012	Oct. 29, 2011
EARNINGS PER SHARE AND SHAREHOLDERS' EQUITY [Abstract]
Reverse stock split, conversion ratio (in hundredths)			0.435
Reconciliation of net income used in the calculation of diluted earnings per share [Abstract]
Net income from continuing operations, net of noncontrolling interests for basic earnings per share	$ 50,115,000	$ 53,669,000	$ 118,040,000	$ 155,248,000
Net income, net of noncontrolling interests for basic earnings per share	50,115,000	53,674,000	119,293,000	155,421,000
Less: (gain) in fair value of PIES, net of tax effected interest expense, amortization of debt discount and amortization of deferred financing fees	0	(20,167,000)	0	(6,019,000)
Add: loss in fair value of warrants	0	159,000	0	0
Net income from continuing operations, net of noncontrolling interests for diluted earnings per share	50,115,000	33,661,000	118,040,000	149,229,000
Net income, net of noncontrolling interests for diluted earnings per share	50,115,000	33,666,000	119,293,000	149,402,000
Reconciliation of the number of shares used in the calculation of diluted earnings (loss) per share [Abstract]
Weighted average shares outstanding (in shares)	44,664,000	41,214,000	44,266,000	32,545,000
Assumed exercise of dilutive PIES (in shares)	0	1,977,000	0	1,584,000
Assumed exercise of dilutive warrants (in shares)	0	588,000	0	0
Number of shares for computation of diluted earnings per share (in shares)	45,523,000	44,739,000	45,173,000	34,781,000
Shareholders' equity:
Amount authorized under the share repurchase program			$ 100,000,000
Warrants [Member]
Diluted earnings per share [Abstract]
Securities outstanding not included in computation of diluted earning per share			200,000	600,000
Options and RSUs [Member]
Diluted earnings per share [Abstract]
Securities outstanding not included in computation of diluted earning per share	300,000	400,000	300,000	200,000
PIES [Member]
Diluted earnings per share [Abstract]
Common shares that would convert upon redemption (in shares)			3,800,000
RVI [Member] | Stock options and SARs [Member]
Reconciliation of the number of shares used in the calculation of diluted earnings (loss) per share [Abstract]
Assumed exercise of dilutive securities (in shares)	0	0	0	87,000
DSW [Member] | Stock Options [Member]
Reconciliation of the number of shares used in the calculation of diluted earnings (loss) per share [Abstract]
Assumed exercise of dilutive securities (in shares)	742,000	799,000	780,000	474,000
DSW [Member] | Restricted Stock Units [Member]
Reconciliation of the number of shares used in the calculation of diluted earnings (loss) per share [Abstract]
Assumed exercise of dilutive securities (in shares)	117,000	161,000	127,000	91,000

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CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (USD $) In Thousands, unless otherwise specified	Oct. 27, 2012		Jan. 28, 2012
ASSETS
Cash and equivalents	$ 134,322		$ 79,003
Short-term investments	203,320		296,697
Accounts receivable, net	26,245		16,900
Accounts receivable from related parties	0		96
Inventories	422,467		334,390
Prepaid expenses and other current assets	22,891		24,448
Deferred income taxes	90,100		116,473
Total current assets	899,345		868,007
Property and equipment, net	276,496		235,726
Long-term investments	92,674		53,858
Goodwill	25,899		25,899
Deferred income taxes	0		15,653
Other assets	8,144		8,757
Total assets	1,302,558		1,207,900
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable	167,858		148,944
Accounts payable to related parties	1,098		2,304
Accrued expenses	130,256		126,998
Warrant liability	0	[1]	29,303	[1]
Total current liabilities	299,212		307,549
Other non-current liabilities	123,159		113,764
Deferred income taxes	21,708		0
Commitments and contingencies
Shareholders' equity:
Preferred Shares, no par value; 100,000,000 authorized; no shares issued or outstanding	0		0
Retained earnings (Accumulated deficit)	5,980		(1,739)
Accumulated other comprehensive loss	(7,911)		(8,486)
Total shareholders' equity	858,479		786,587
Total liabilities and shareholders' equity	1,302,558		1,207,900
Common Class A [Member]
Shareholders' equity:
Common Shares	680,266		624,948
Common Class B [Member]
Shareholders' equity:
Common Shares	$ 180,144		$ 171,864

[1] The underlying assumptions for fair value measurement of the warrant liability is detailed in Note 7. Prior to exercise, the Company classified its warrant liability within level 2 as the valuation inputs are based on observable market data.

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BUSINESS OPERATIONS AND BASIS OF PRESENTATION (Details)	9 Months Ended
	Oct. 27, 2012
BUSINESS OPERATIONS AND BASIS OF PRESENTATION [Abstract]
Number of Reportable Segments	2
Schedule of Stores Supplied With Merchandise [Line Items]
Number of Stores	363
Number of States in which Entity Operates	41
Number of new stores opened	38
Number of stores closed	1
Number of retailers operated as leased departments	3
Number of new leased departments added	18
Number of leased departments ceased	9
Stein Mart Stores [Member]
Schedule of Stores Supplied With Merchandise [Line Items]
Number of stores supplied by the entity	261
Gordmans Stores [Member]
Schedule of Stores Supplied With Merchandise [Line Items]
Number of stores supplied by the entity	83
Frugal Fannie's Stores [Member]
Schedule of Stores Supplied With Merchandise [Line Items]
Number of stores supplied by the entity	1

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (unaudited) (USD $) In Thousands, except Share data, unless otherwise specified	Common Class A [Member]	Common Class B [Member]	Treasury Shares [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Noncontrolling Interest [Member]	Total
Balance at Jan. 29, 2011	$ 330,022		$ (59)	$ (78,940)	$ (5,842)	$ 243,688	$ 488,869
Balance (in shares) at Jan. 29, 2011	21,873,000		3,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Income from continuing operations				155,248		20,695	175,943
Income from discontinued operations, net of tax - Filene's Basement				173			173
Exchange of Class B Common Shares for Class A Common Shares	5,195	(5,195)					0
Exchange of Class B Common Shares for Class A Common Shares (in shares)	337,000	(337,000)
Dividends paid				(93,906)			(93,906)
Change in minimum pension liability, net of tax benefit of $284 and $210, respectively							0
Pre merger share and shareholders' equity activity
Capital transactions of subsidiary				2,778		6,467	9,245
Net settlement of restricted shares	(345)						(345)
Net settlement of restricted shares (in shares)	(10,000)
RVI stock-based compensation expense, before related tax effects	157						157
Exercise of stock options, net of settlement of taxes	1,051						1,051
Exercise of stock options, net of settlement of taxes (in shares)	108,000
Exercise of warrants	4,579						4,579
Exercise of warrants (in shares)	96,000
Merger-related share and shareholders' equity activity:
Purchase of noncontrolling interest	270,850					(270,850)	0
Purchase of noncontrolling interest (in shares)	17,121,000
Exchange of Class A Common Shares for Class B Common Shares	(177,059)	177,059					0
Exchange of Class A Common Shares for Class B Common Shares (in shares)	(11,507,000)	11,507,000
Retirement of treasury shares	(59)		59				0
Retirement of treasury shares (in shares)			(3,000)
Fractional shares settled in cash	(28)						(28)
Fractional shares settled in cash (in shares)	(1,000)
Cash settlement of RVI options and SARs	(7,000)						(7,000)
Stock-based compensation expense related to cash settled RVI options and SARs	255						255
RVI stock-based compensation expense, before related tax effects	339						339
Post-merger share and shareholders' equity activity:
DSW stock-based compensation expense, before related tax effects	2,595						2,595
Exercise of DSW stock options, net of settlement of taxes	2,974						2,974
Exercise of DSW stock options, net of settlement of taxes (in shares)	168,000
Stock units granted	29						29
Stock units granted (in shares)	8,000
Vesting of restricted stock units, net of settlement of taxes	(30)						(30)
Vesting of restricted stock units, net of settlement of taxes (in shares)	1,000
Excess tax benefit related to stock option exercises	4,469						4,469
Settlement of PIES with Class A Common Shares	181,776						181,776
Settlement of PIES with Class A Common Shares (in shares)	3,827,000
Balance at Oct. 29, 2011	619,770	171,864	0	(14,647)	(5,842)	0	771,145
Balance (in shares) at Oct. 29, 2011	32,021,000	11,170,000	0
Balance at Jan. 28, 2012	624,948	171,864		(1,739)	(8,486)		786,587
Balance (in shares) at Jan. 28, 2012	32,121,760	11,169,972
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Income from continuing operations				118,040			118,040
Income from discontinued operations, net of tax - Filene's Basement				1,253			1,253
Stock-based compensation expense, before related tax effects	5,360						5,360
Stock units granted	1,076						1,076
Stock units granted (in shares)	26,000
Exercise of stock options, net of settlement of taxes	7,354						7,354
Exchange of Class B Common Shares for Class A Common Shares	34,936	(34,936)					0
Exchange of Class B Common Shares for Class A Common Shares (in shares)	2,270,000	(2,270,000)
Dividends paid				(111,574)			(111,574)
Change in minimum pension liability, net of tax benefit of $284 and $210, respectively					575		575
Pre merger share and shareholders' equity activity
Exercise of stock options, net of settlement of taxes (in shares)							685,000
Exercise of warrants		43,216					43,216
Exercise of warrants (in shares)		753,000
Exercise of stock options, net of settlement of taxes (in shares)	559,000
Post-merger share and shareholders' equity activity:
Stock units granted (in shares)							337,000
Vesting of restricted stock units, net of settlement of taxes	(1,858)						(1,858)
Vesting of restricted stock units, net of settlement of taxes (in shares)	66,000
Excess tax benefit related to stock option exercises	8,450						8,450
Settlement of PIES with Class A Common Shares							0
Balance at Oct. 27, 2012	$ 680,266	$ 180,144		$ 5,980	$ (7,911)		$ 858,479
Balance (in shares) at Oct. 27, 2012	35,043,163	9,653,102

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SEGMENT REPORTING (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Oct. 27, 2012	Oct. 29, 2011	Oct. 27, 2012	Oct. 29, 2011	Jan. 28, 2012
SEGMENT REPORTING [Abstract]
Number of Reportable Segments			2
Number of sales channels	3		3
Segment Reporting Information [Line Items]
Goodwill balance	$ 25,899		$ 25,899		$ 25,899
Segment information [Abstract]
Net sales	592,734	530,747	1,663,524	1,510,645
Gross profit	200,171	180,282	553,006	507,984
Capital expenditures	37,862	20,661	83,578	55,254
Total assets	1,302,558		1,302,558		1,207,900
DSW [Member]
Segment Reporting Information [Line Items]
Goodwill balance	25,899		25,899		25,899
Segment information [Abstract]
Net sales	559,312	491,929	1,562,707	1,396,433
Gross profit	193,363	174,173	531,848	485,501
Capital expenditures	37,700	20,462	83,212	54,818
Total assets	1,206,867		1,206,867		1,118,217
Affiliated Business Group segment [Member]
Segment information [Abstract]
Net sales	33,422	38,818	100,817	114,212
Gross profit	6,808	6,109	21,158	22,483
Capital expenditures	162	199	366	436
Total assets	95,684		95,684		89,740
Other [Member]
Segment information [Abstract]
Net sales	0	0	0	0
Gross profit	0	0	0	0
Capital expenditures	0	0	0	0
Total assets	$ 7		$ 7		$ (57)

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STOCK-BASED COMPENSATION (Tables)

9 Months Ended

Oct. 27, 2012

STOCK-BASED COMPENSATION [Abstract]

Stock Option Plan Activity

Stock Options- In connection with the special dividend of $2.00 paid on October 26, 2012, DSW adjusted its outstanding stock options under the anti-dilution provision by decreasing the grant price and increasing the number of shares to make the optionee whole as required under the DSW Plan. The following table summarizes DSW's stock option activity:

	Nine months ended
	October 27, 2012
	(in thousands)
Outstanding, beginning of period		2,508
Granted		337
Increase in options from dividend adjustment		64
Exercised		(685	)
Forfeited		(41	)
Outstanding, end of period		2,183
Exercisable, end of period		934

Weighted-average Assumptions Used for Options Granted

DSW expensed $4.2 million and $3.9 million for the nine months ended October 27, 2012 and October 29, 2011, respectively, related to stock options. The weighted-average grant date fair value of each option granted in the nine months ended October 27, 2012 and October 29, 2011 was $25.17 and $20.44 per share, respectively. As of October 27, 2012, the total compensation cost related to nonvested DSW stock options not yet recognized was approximately $14.6 million with a weighted average expense recognition period remaining of 2.1 years. The following table illustrates the weighted-average assumptions used in the Black-Scholes pricing model for DSW options granted in each of the periods presented:

	Nine months ended
Assumptions:	October 27, 2012			October 29, 2011
Risk-free interest rate		1.2	%		2.4	%
Expected volatility of DSW common stock		56.2	%		55.1	%
Expected option term	5.5 years			5.9 years
Expected dividend yield		1.2	%		0.0	%

Restricted Stock Unit Activity

Restricted Stock Units ("RSU")- In connection with the special dividend of $2.00 paid on October 26, 2012, DSW issued forfeitable dividend equivalent units as required under the anti-dilution provision of the DSW Plan to make the grantee whole. The following table summarizes DSW's restricted stock unit activity:

	Nine months ended
	October 27, 2012
	(in thousands)
Outstanding, beginning of period		273
Granted		56
Vested		(96	)
Forfeited		(5	)
Outstanding, end of period		228

Director Stock Unit Activity

Director Stock Units- DSW issues stock units to directors who are not employees of DSW. During the nine months ended October 27, 2012 and October 29, 2011, DSW expensed $1.1 million and $0.9 million, respectively, for these grants. For new grants beginning in fiscal 2012, directors were given the option to exercise their units at a specified point in the future or upon completion of service. The following table summarizes DSW's director stock unit activity:

	Nine months ended
	October 27, 2012
	(in thousands)
Outstanding, beginning of period		192
Granted		26
Exercised		(33	)
Outstanding, end of period		185

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PENSION PLAN

9 Months Ended

Oct. 27, 2012

PENSION PLAN [Abstract]

PENSION PLAN

14.      PENSION PLAN

Merger Sub is responsible for the Filene's Basement defined benefit pension plan (the "plan") that RVI assumed as part of its sale of Filene's Basement in fiscal 2009. Benefits were frozen as of April 30, 2000. The Company's funding policy is to contribute annually the amount required to meet ERISA ("Employee Retirement Income Security Act") funding standards and that is tax deductible under the Internal Revenue Code of 1986, as amended.  The Company made contributions of $1.2 million to the plan during the nine months ended October 27, 2012. The Company uses a January 31 measurement date for the plan.

On December 1, 2011, DSW adopted a plan amendment to terminate the plan with a proposed termination date of March 22, 2012. DSW is currently awaiting regulatory approval.  Prior to the pension plan being fully funded, certain regulatory approvals and participant settlement elections need to be obtained. In the second quarter of fiscal 2012, DSW reclassified the non-current pension liability to a current liability, accrued expenses, as DSW has been communicating with the regulatory authorities and expects resolution of the pension plan within the next twelve months.

The components of net periodic benefit cost are comprised of the following for the periods presented:

	Three months ended						Nine months ended
	October 27, 2012			October 29, 2011			October 27, 2012			October 29, 2011
	(in thousands)
Interest cost	$	230		$	251		$	690		$	752
Expected return on plan assets		(302	)		(237	)		(906	)		(709	)
Amortization of net loss		100			74			298			222
Loss recognized due to settlements		67						67
Net periodic benefit cost	$	95		$	88		$	149		$	265

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INVESTMENTS (Tables)

9 Months Ended

Oct. 27, 2012

INVESTMENTS [Abstract]

Investments

The majority of DSW's short-term available-for-sale investments are primarily municipal bonds with renewal dates of every 7 days, but longer stated maturities. Despite the long-term nature of the stated contractual maturities of these short-term investments, DSW has the ability to liquidate these securities at the renewal dates. For short-term held-to-maturity investments, which are primarily corporate bonds and municipal term notes, amortized cost approximates fair value. In addition to short-term investments, DSW has invested in long-term corporate bonds and municipal term notes to receive higher returns. These long-term investments have maturities greater than one year but less than three years and are classified as held-to-maturity.  The following table discloses the major categories of DSW's investments as of the periods presented:

	Short-term investments				Long-term investments
	October 27, 2012		January 28, 2012		October 27, 2012		January 28, 2012
Available-for-sale:	(in thousands)
Bonds	$	21,925	$	134,322		—		—
Commercial paper		2,000		5,485		—		—
Total available-for-sale investments		23,925		139,807		—		—
Held-to-maturity:
Term notes and bonds		179,395		156,890	$	91,523	$	52,707
Investment – related party		—		—		1,151		1,151
Total investments	$	203,320	$	296,697	$	92,674	$	53,858

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COMMITMENTS AND CONTINGENCIES

9 Months Ended

Oct. 27, 2012

COMMITMENTS AND CONTINGENCIES [Abstract]

COMMITMENTS AND CONTINGENCIES

16.  COMMITMENTS AND CONTINGENCIES

Legal Proceedings- DSW is involved in various legal proceedings that are incidental to the conduct of its business. DSW estimates the range of liability related to pending litigation where the amount of the range of loss can be estimated. DSW records its best estimate of a loss when the loss is considered probable. When a liability is probable and there is a range of estimated loss, DSW records the most likely estimated liability related to the claim. Although it is not possible to predict with certainty the eventual outcome of any litigation, in the opinion of management, the amount of any potential liability with respect to current legal proceedings will not be material to DSW's results of operations or financial condition. As additional information becomes available, DSW will assess the potential liability related to its pending litigation and revise the estimates as needed.

As previously reported, on March 8, 2005, Retail Ventures announced that it had learned of the theft of credit card and other information from a portion of DSW's customers. DSW incurred a loss of approximately $6.0 million relating to this incident. DSW filed a claim for coverage with its insurance carrier, which the insurance carrier denied. DSW brought suit in federal district court and won a ruling that coverage applied and was awarded $6.8 million in damages. The insurance company appealed that decision, and oral arguments on the appeal occurred in July 2012. On August 23, 2012, DSW received notification from the Sixth Circuit Court of Appeals that the damages award was affirmed, and in September 2012, DSW received $7.2 million from the insurance carrier, $1.9 million of which represented accrued interest on the award. As this was a gain contingency resulting from a litigation, DSW recognized the award at the time of receipt of cash from the insurance carrier. In the statement of operations, $5.3 million is classified as other operating income, which is included in operating expenses, and $1.9 million related to interest is classified as interest income.

Guarantees and Liabilities related to Discontinued Operations-As of the effective time of the Merger, a subsidiary of DSW assumed the obligations under RVI's guarantees related to discontinued operations. DSW may become subject to various risks related to guarantees and in certain circumstances may be responsible for certain other liabilities related to discontinued operations. Changes in the amount of guarantees and liabilities related to discontinued operations are included in the income or loss from discontinued operations on the statements of operations. DSW records its best estimate of a loss when the loss is considered probable. When a liability is probable and there is a range of estimated loss, DSW records the most likely estimated liability related to the guarantee. Additionally, if the underlying obligations are paid down or otherwise liquidated by the primary obligor, subject to certain statutory requirements, DSW will recognize a reduction of the associated liability.

Filene's Basement- Following the Merger, a subsidiary of DSW, Merger Sub, assumed RVI's obligations under lease guarantees for three Filene's Basement retail store locations for leases assumed by Syms in its purchase of Filene's Basement in 2009. On November 2, 2011, Syms and Filene's Basement filed for bankruptcy protection and liquidated all of their stores in December 2011. DSW recorded a liability of $9.0 million related to lease guarantees for two locations in fiscal 2011 and in the first quarter of fiscal 2012, adjusted the liability to $7.0 million based on current information available to DSW, which resulted in an update of DSW's most likely estimated liability. DSW assumed the lease for the third location in fiscal 2011.These lease guarantees are described in more detail below.

Union Square, NY- RVI guaranteed Filene's Basement's obligations for the Union Square location when RVI owned Filene's Basement, and the landlord at the Union Square location has brought a lawsuit against Merger Sub in the Supreme Court of the State of New York seeking payment under the guarantee. DSW believes that the liability under the guarantee may be limited based on the ultimate disposition of the lease and/or the guarantee may not be enforceable. In April 2012, the landlord advised DSW that it had signed a lease with a tenant and asserted that DSW is responsible for shortfalls and rent while the space is unoccupied. The expected range of loss is from no loss to $8 million.

Bergen, NJ- RVI guaranteed Filene's Basement's obligations for the Bergen location when RVI owned Filene's Basement. The lease expires in September 2017. The landlord at the Bergen location has brought a lawsuit against Merger Sub in the Supreme Court of the State of New Jersey seeking payment under the guarantee. The lease guarantee expressly caps Merger Sub's liability at $3 million. Filene's Basement ceased operating at the Bergen location earlier in the year prior to the bankruptcy, and a third party is operating in a portion of the space leased by Filene's Basement. Currently, the ultimate disposition of the lease is unknown. DSW could successfully assert that the guarantee is not enforceable resulting in limited or no liability to DSW. The expected range of loss is from no loss to $3 million.

Contractual Obligations-As of October 27, 2012, DSW has entered into various construction commitments, including capital items to be purchased for projects that were under construction, or for which a lease has been signed. DSW's obligations under these commitments were approximately $1.8 million as of October 27, 2012. In addition, DSW has signed lease agreements for 15 new store locations expected to be opened over the next twelve to eighteen months, with total annual rent of approximately $5.5 million. In connection with the new lease agreements, DSW will receive a total of $9.0 million of construction and tenant allowance reimbursements for expenditures at these locations.

In the third quarter of fiscal 2011, DSW recorded a liability of $5.5 million related to a lease assumed in the Merger. The non-cash impairment charge was included in operating expenses. DSW estimated its future liability under this lease based on its current lease and sublease payments and executory costs. DSW estimated inflationary increases in its executory costs and used its credit-adjusted risk free rate to present value its liability. The loss was partially offset by the elimination of the deferred rent liability of $2.1 million, as rent would no longer be recorded on a straight-line basis.

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (unaudited) (Parenthetical) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended	9 Months Ended
	Oct. 27, 2012	Oct. 27, 2012	Oct. 29, 2011
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (unaudited) [Abstract]
Dividends paid (in dollars per share)		$ 2.51	$ 2.15
Change in minimum pension liability, taxes	$ 284	$ 210

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CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (Parenthetical) (USD $)	Oct. 27, 2012	Jan. 28, 2012
Shareholders' equity:
Preferred Shares, par value (in dollars per share)	$ 0	$ 0
Preferred Shares, authorized (in shares)	100,000,000	100,000,000
Preferred Shares, issued (in shares)	0	0
Preferred Shares, outstanding (in shares)	0	0
Common Class A [Member]
Shareholders' equity:
Common Shares, par value (in dollars per share)
Common Shares, authorized (in shares)	170,000,000	170,000,000
Common Shares, issued (in shares)	35,043,163	32,121,760
Common Shares, outstanding (in shares)	35,043,163	32,121,760
Common Class B [Member]
Shareholders' equity:
Common Shares, par value (in dollars per share)
Common Shares, authorized (in shares)	100,000,000	100,000,000
Common Shares, issued (in shares)	9,653,102	11,169,972
Common Shares, outstanding (in shares)	9,653,102	11,169,972

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EARNINGS PER SHARE AND SHAREHOLDERS' EQUITY

9 Months Ended

Oct. 27, 2012

EARNINGS PER SHARE AND SHAREHOLDERS' EQUITY [Abstract]

EARNINGS PER SHARE AND SHAREHOLDERS' EQUITY

9.      EARNINGS PER SHARE AND SHAREHOLDERS' EQUITY

Earnings per Share- Basic earnings per share is based on net income and a simple weighted average of common shares outstanding. For periods prior to the Merger, share count was determined by adjusting all historical RVI shares by the exchange ratio of 0.435. Diluted earnings per share reflects the potential dilution of common shares adjusted, related to outstanding RVI stock options and SARs (prior to the Merger), outstanding DSW stock options and RSUs (after the Merger) and warrants calculated using the treasury stock method. As PIES were exchangeable for DSW Class A Common Shares, they were included as potentially dilutive instruments based on the DSW common share price, after the Merger and before the settlement.

For all periods presented, where there was a loss in fair value of warrants (prior to and after the Merger) and PIES (after the Merger), the loss was included in the calculation of the net income and the corresponding shares were excluded from the diluted share count, if the effect was anti-dilutive.

The following is a reconciliation of the net income used in the calculation of diluted earnings per share computations for the periods presented for net income from continuing operations, net of noncontrolling interests:

	Three months ended					Nine months ended
	October 27, 2012		October 29, 2011			October 27, 2012		October 29, 2011
	(in thousands)
Net income from continuing operations, net of noncontrolling interests for basic earnings per share	$	50,115	$	53,669		$	118,040	$	155,248
Less: (gain) in fair value of PIES, net of tax effected interest expense, amortization of debt discount and amortization of deferred financing fees		—		(20,167	)		—		(6,019	)
Add: loss in fair value of warrants		—		159			—		—
Net income from continuing operations, net of noncontrolling interests for diluted earnings per share	$	50,115	$	33,661		$	118,040	$	149,229

The following is a reconciliation of the net income used in the calculation of diluted earnings per share computations for the periods presented for net income, net of noncontrolling interests:

	Three months ended					Nine months ended
	October 27, 2012		October 29, 2011			October 27, 2012		October 29, 2011
	(in thousands)
Net income, net of noncontrolling interests for basic earnings per share	$	50,115	$	53,674		$	119,293	$	155,421
Less: (gain) in fair value of PIES, net of tax effected interest expense, amortization of debt discount and amortization of deferred financing fees		—		(20,167	)		—		(6,019	)
Add: loss in fair value of warrants		—		159			—		—
Net income, net of noncontrolling interests for diluted earnings per share	$	50,115	$	33,666		$	119,293	$	149,402

The following is a reconciliation of the number of shares used in the calculation of diluted earnings per share computations for the periods presented:

	Three months ended				Nine months ended
	October 27, 2012		October 29, 2011		October 27, 2012		October 29, 2011
	(in thousands)
Weighted average shares outstanding		44,664		41,214		44,266		32,545
Assumed exercise of dilutive DSW stock options		742		799		780		474
Assumed exercise of dilutive DSW RSUs		117		161		127		91
Assumed exercise of dilutive RVI stock options and SARs		—		—		—		87
Assumed exercise of dilutive PIES		—		1,977		—		1,584
Assumed exercise of dilutive warrants		—		588		—		—
Number of shares for computation of diluted earnings per share		45,523		44,739		45,173		34,781

Options and RSUs- For the third quarter of fiscal 2012, the amount of securities outstanding as of October 27, 2012 and October 29, 2011 that were not included in the computation of dilutive earnings per share because the effect would be anti-dilutive was approximately 0.3 million and 0.4 million, respectively. For the year-to-date period, the amount of securities outstanding as of October 27, 2012 and October 29, 2011 that were not included in the computation of dilutive earnings per share because the effect would be anti-dilutive was approximately 0.3 million and 0.2 million, respectively.

Warrants- Warrants were anti-dilutive for certain periods presented and were not included in the calculation of diluted shares for those certain periods. For the nine months ended October 27, 2012 and October 29, 2011, the assumed exercise of warrants excluded was 0.2 million and 0.6 million, respectively. There were no warrants outstanding during the third quarter of fiscal 2012.

PIES- For the three and nine months ended October 29, 2011, the assumed exercise of 2.0 million and 1.6 million, respectively, common shares that would convert upon redemption of the PIES were included in the calculation of shares as they were dilutive. The total amount of common shares that would convert upon redemption of the PIES based on the average of DSW's share prices was 3.8 million, but the assumed conversion is prorated as the PIES were only included in the calculation of earnings per share after the Merger.

Shareholders' Equity- On June 18, 2012, DSW announced that its Board of Directors had authorized the Company to repurchase up to $100 million of Company common shares over the next twelve months.  The share repurchase program may be suspended, modified or discontinued at any time, and the Company has no obligation to repurchase any amount of its common shares under the program. As of October 27, 2012, DSW has not made any repurchases under this program.

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Document and Entity Information	9 Months Ended
	Oct. 27, 2012	Nov. 27, 2012 Common Class A [Member]	Nov. 27, 2012 Common Class B [Member]
Document and Entity Information [Abstract]
Entity Registrant Name	DSW Inc.
Entity Central Index Key	0001319947
Current Fiscal Year End Date	--02-02
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Class of Stock [Line Items]
Entity Common Stock, Shares Outstanding		35,083,912	9,653,102
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q3
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Oct. 27, 2012

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INCOME TAXES

9 Months Ended

Oct. 27, 2012

INCOME TAXES [Abstract]

INCOME TAXES

10.      INCOME TAXES

The provision for income taxes is based on the current estimate of the annual effective tax rate and is adjusted as necessary for quarterly events.

For the three and nine months ended October 27, 2012, the effective tax rate of 38.1% and 39.4%, respectively, primarily reflects the impact of state and local taxes, and for the nine months ended October 27, 2012, the effective tax rate was also impacted by the change in fair value of warrants included in book income but not tax income.

For the three months ended October 29, 2011, the effective tax rate of 32.7% reflects the impact of the change in fair value of the warrants and PIES, which are included for book income, but not for tax income. For the nine months ended October 29, 2011, the effective tax rate of (72.0)% was favorably impacted by the release of the valuation allowance and other merger related tax items, which has been reflected as an income tax benefit in the Company's condensed consolidated statements of operations. DSW was able to release the valuation allowance on RVI's deferred tax assets as a result of the Company's expected future taxable income. In addition, as a result of the Merger, the deferred tax liability related to RVI's historical basis in DSW and the deferred tax asset related to the PIES were eliminated.

Consistent with its historical financial reporting, the Company has elected to classify interest expense related to income tax liabilities, when applicable, as part of interest expense in its consolidated statements of operations rather than income tax expense. The Company will continue to classify income tax penalties as part of operating expenses in its consolidated statements of operations.

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Oct. 27, 2012	Oct. 29, 2011	Oct. 27, 2012	Oct. 29, 2011
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (unaudited) [Abstract]
Net sales	$ 592,734	$ 530,747	$ 1,663,524	$ 1,510,645
Cost of sales	(392,563)	(350,465)	(1,110,518)	(1,002,661)
Operating expenses	(121,734)	(120,310)	(355,775)	(339,557)
Change in fair value of derivative instruments	0	20,924	(6,121)	(56,895)
Operating profit	78,437	80,896	191,110	111,532
Interest expense	(205)	(1,743)	(651)	(11,171)
Interest income	2,780	592	4,189	1,957
Interest income (expense), net	2,575	(1,151)	3,538	(9,214)
Income from continuing operations before income taxes	81,012	79,745	194,648	102,318
Income tax (provision) benefit	(30,897)	(26,076)	(76,608)	73,625
Income from continuing operations	50,115	53,669	118,040	175,943
Income from discontinued operations, net of tax - Value City	0	5	0	173
Income from discontinued operations, net of tax - Filene's Basement	0	0	1,253	0
Income from discontinued operations, net of tax	0	5	1,253	173
Net income	50,115	53,674	119,293	176,116
Less: net income attributable to the noncontrolling interests	0	0	0	(20,695)
Net income, net of noncontrolling interests	50,115	53,674	119,293	155,421
Basic and diluted earnings per share:
Basic earnings per share from continuing operations, net of noncontrolling interests (in dollars per share)	$ 1.12	$ 1.30	$ 2.67	$ 4.77
Diluted earnings per share from continuing operations, net of noncontrolling interests (in dollars per share)	$ 1.10	$ 0.75	$ 2.61	$ 4.29
Basic earnings per share from discontinued operations (in dollars per share)	$ 0.00	$ 0.00	$ 0.03	$ 0.01
Diluted earnings per share from discontinued operations (in dollars per share)	$ 0.00	$ 0.00	$ 0.03	$ 0.00
Basic earnings per share, net of noncontrolling interests (in dollars per share)	$ 1.12	$ 1.30	$ 2.69	$ 4.78
Diluted earnings per share, net of noncontrolling interests (in dollars per share)	$ 1.10	$ 0.75	$ 2.64	$ 4.30
Shares used in per share calculations:
Basic (in shares)	44,664	41,214	44,266	32,545
Diluted (in shares)	45,523	44,739	45,173	34,781
Other Comprehensive Income:
Change in minimum pension liability, net of tax benefit of $284 and $210, respectively	451	0	575	0
Comprehensive income	$ 50,566	$ 53,674	$ 119,868	$ 155,421

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RELATED PARTY TRANSACTIONS

9 Months Ended

Oct. 27, 2012

RELATED PARTY TRANSACTIONS [Abstract]

RELATED PARTY TRANSACTIONS

4.      RELATED PARTY TRANSACTIONS

Schottenstein Affiliates- As of October 27, 2012, the Schottenstein Affiliates, entities owned by or controlled by Jay L. Schottenstein, the executive chairman of the DSW board of directors, and members of his family, owned approximately 23% of DSW's outstanding Common Shares representing approximately 69% of the combined voting power of DSW's outstanding Common Shares. As of October 27, 2012, the Schottenstein Affiliates beneficially owned 0.7 million Class A Common Shares and 9.6 million Class B Common Shares.

DSW leases certain store locations owned by Schottenstein Affiliates as well as purchasing services and products from Schottenstein Affiliates. Accounts receivable from and payables to affiliates principally result from commercial transactions or affiliate transactions and normally settle in the form of cash in 30 to 60 days. As of January 28, 2012, the balance of related party receivables was $0.1 million. As of October 27, 2012 and January 28, 2012, the balance of related party payables was $1.1 million and $2.3 million, respectively.

See Note 17 regarding DSW's purchase of its corporate office headquarters, distribution center and trailer parking lot from certain Schottenstein Affiliates.

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SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Oct. 27, 2012

SIGNIFICANT ACCOUNTING POLICIES [Abstract]

SIGNIFICANT ACCOUNTING POLICIES

3.      SIGNIFICANT ACCOUNTING POLICIES

Allowance for Doubtful Accounts-The Company monitors its exposure for credit losses and records related allowances for doubtful accounts. Allowances are estimated based upon specific accounts receivable balances, where a risk of default has been identified. As of October 27, 2012 and January 28, 2012, the Company's allowances for doubtful accounts were $0.3 million and $0.6 million, respectively.

Inventories-Merchandise inventories are stated at lower of cost or market, determined using the retail inventory method. The retail inventory method is widely used in the retail industry due to its practicality. Under the retail inventory method, the valuation of inventories at cost and the resulting gross profits are determined by applying a calculated cost to retail ratio to the retail value of inventories. The cost of the inventory reflected on the balance sheet is decreased by charges to cost of sales at the time the retail value of the inventory is lowered through the use of markdowns, which are reductions in prices due to customers' perception of value. Hence, earnings are negatively impacted as the merchandise is marked down prior to sale. Markdowns establish a new cost basis for inventory. Changes in facts or circumstances do not result in the reversal of previously recorded markdowns or an increase in the newly established cost basis. The markdown reserve requires management to make assumptions regarding customer preferences, fashion trends and consumer demand.

Inherent in the calculation of inventories are certain significant management judgments and estimates, including setting the original merchandise retail value, markdowns, and estimates of losses between physical inventory counts, or shrinkage, which combined with the averaging process within the retail inventory method, can significantly impact the ending inventory valuation at cost and the resulting gross profit. DSW records a reduction to inventories and a charge to cost of sales for shrinkage. Shrinkage is calculated as a percentage of sales from the last physical inventory date. Estimates are based on both historical experience as well as recent physical inventory results. Physical inventory counts are taken on an annual basis and have supported DSW's shrinkage estimates.

Sales and Revenue Recognition- Revenues from merchandise sales are recognized upon customer receipt of merchandise, are net of returns through period end, exclude sales tax and are not recognized until collectibility is reasonably assured. For sales through the dsw.com sales channel, DSW defers revenue representing a time lag for shipments to be received by the customer and also includes revenue from shipping and handling in net sales while the related costs are included in cost of sales. Revenue from gift cards is deferred and recognized upon redemption of the gift card. The Company's policy is to recognize income from breakage of gift cards when the likelihood of redemption of the gift card is remote.

Cost of Sales-In addition to the cost of merchandise, which includes markdowns and shrinkage, DSW includes in cost of sales expenses associated with distribution and fulfillment (including depreciation) and store occupancy (excluding depreciation and including store impairments). Distribution and fulfillment expenses are comprised of labor, benefits and other labor-related costs associated with the operations of the distribution and fulfillment centers. The non-labor costs include rent, depreciation, insurance, utilities, maintenance and other operating costs. Distribution and fulfillment expenses also include the transportation of merchandise to the distribution and fulfillment centers, from the distribution center to DSW's stores and from the fulfillment center to the customer. Store occupancy expenses include rent, utilities, repairs, maintenance, insurance, janitorial costs and occupancy-related taxes, which are primarily real estate taxes passed to DSW by its landlords.

Operating Expenses- Operating expenses include expenses related to store management and store payroll costs, advertising, Affiliated Business Group operations, store depreciation and amortization, new store advertising and other new store costs (which are expensed as incurred) and corporate expenses. Corporate expenses include expenses related to buying, information technology, depreciation expense for corporate cost centers, marketing, legal, finance, outside professional services, customer service center expenses, payroll and benefits for associates and payroll taxes.

Income Taxes- Income taxes are accounted for using the asset and liability method. The Company is required to determine the aggregate amount of income tax expense to accrue and the amount which will be currently payable based upon tax statutes of each jurisdiction in which the Company does business. In making these estimates, income is adjusted based on a determination of generally accepted accounting principles for items that are treated differently by the applicable taxing authorities. Deferred tax assets and liabilities, as a result of these differences, are reflected on DSW's balance sheet for temporary differences that will reverse in subsequent years. A valuation allowance is established against deferred tax assets when it is more likely than not that some or all of the deferred tax assets will not be realized. DSW succeeded to RVI's tax attributes as a result of the Merger.

Noncontrolling Interests- The noncontrolling interests represented the portion of legacy DSW's total shareholders' equity owned by unaffiliated investors in DSW prior to the Merger and net income attributable to the unaffiliated investors. The noncontrolling interest percentage was computed by the ratio of shares held by unaffiliated interests. After the Merger, noncontrolling interests were eliminated.

Sale of Subsidiary Stock- Prior to the Merger, sales of stock by a subsidiary were accounted for by RVI as capital transactions.

Recent Accounting Pronouncements

Fair Value- In May 2011, the Financial Accounting Standards Board ("FASB") issued an update to existing guidance related to fair value measurements on how to measure fair value and what disclosures to provide about fair value measurements. For fair value measurements categorized as level 3, a reporting entity should disclose quantitative information of the unobservable inputs and assumptions, a description of the valuation processes and narrative description of the sensitivity of the fair value to changes in unobservable inputs. This update was effective for interim and annual periods beginning after December 15, 2011. The adoption of this update in the first quarter of fiscal 2012 did not materially affect the Company's consolidated financial statements.

Comprehensive Income- In June 2011, the FASB issued an update to existing guidance related to the presentation of comprehensive income. The main provisions of this update provide that an entity that reports other comprehensive income has the option to present comprehensive income in either one continuous or two consecutive financial statements. The first option is a single statement that must present the components of net income and total net income, the components of other comprehensive income and total other comprehensive income and a total for comprehensive income.  The second option is a two statement approach, in which an entity must present the components of net income and total net income in the first statement and that statement must be immediately followed by a financial statement that presents the components of other comprehensive income, a total for other comprehensive income, and a total for comprehensive income. The option in generally accepted accounting principles that permits the presentation of other comprehensive income in the statement of changes in equity has been eliminated. This update was effective for interim and annual periods beginning after December 15, 2011. In November 2011, the FASB issued a proposed update to indefinitely defer the requirement to present reclassification adjustments in the statement of operations. The Company elected to present a single statement of operations and comprehensive income for quarterly reporting beginning in the first quarter of fiscal 2012.

Goodwill- In September 2011, the FASB issued an update to existing guidance related to goodwill impairment testing. The amendments will allow an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. An entity no longer will be required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. The guidance also includes examples of the types of factors to consider in conducting the qualitative assessment. This update was effective for interim and annual periods beginning after December 15, 2011. The adoption of this update in the first quarter of fiscal 2012 did not affect the Company's consolidated financial statements.

Intangible Assets- In July 2012, the FASB issued an update to existing guidance related to impairment testing for indefinite-lived intangible assets. The amendments will allow an entity to first assess qualitative factors to determine whether it is necessary to perform the quantitative impairment test. An entity no longer will be required to test the fair value of an intangible asset unless the entity determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. This update is effective for interim and annual periods beginning after September 15, 2012. The Company does not expect the adoption of this update to affect its consolidated financial statements.

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SEGMENT REPORTING

9 Months Ended

Oct. 27, 2012

SEGMENT REPORTING [Abstract]

SEGMENT REPORTING

15.      SEGMENT REPORTING

DSW maintained its historical segment presentation, but recast its segment presentation to include Other. In order to reconcile to the condensed consolidated financial statements, DSW includes Other, which consists of assets, liabilities and expenses that are not attributable to the two reportable segments, primarily related to assets and liabilities of the former RVI operations.

The Company sells products through three channels: DSW stores, dsw.com and the Affiliated Business Group. The reportable segments are the DSW segment, which includes the DSW stores and dsw.com sales channels, and the Affiliated Business Group segment. DSW has identified such segments based on internal management reporting and responsibilities and measures segment profit as gross profit, which is defined as net sales less cost of sales. All operations are located in the United States. The goodwill balance of $25.9 million outstanding as of both October 27, 2012 and January 28, 2012 is recorded in the DSW segment related to the DSW stores.

	DSW segment		Affiliated Business Group segment		Other			Total
	(in thousands)
Three months ended October 27, 2012
Net sales	$	559,312	$	33,422		—		$	592,734
Gross profit		193,363		6,808		—			200,171
Capital expenditures		37,700		162		—			37,862
Three months ended October 29, 2011
Net sales	$	491,929	$	38,818		—		$	530,747
Gross profit		174,173		6,109		—			180,282
Capital expenditures		20,462		199		—			20,661
Nine months ended October 27, 2012
Net sales	$	1,562,707	$	100,817		—		$	1,663,524
Gross profit		531,848		21,158		—			553,006
Capital expenditures		83,212		366		—			83,578
Nine months ended October 29, 2011
Net sales	$	1,396,433	$	114,212		—		$	1,510,645
Gross profit		485,501		22,483		—			507,984
Capital expenditures		54,818		436		—			55,254
As of October 27, 2012
Total assets	$	1,206,867	$	95,684	$	7		$	1,302,558
As of January 28, 2012
Total assets	$	1,118,217	$	89,740	$	(57	)	$	1,207,900

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PROPERTY AND EQUIPMENT

9 Months Ended

Oct. 27, 2012

PROPERTY AND EQUIPMENT [Abstract]

PROPERTY AND EQUIPMENT

11.      PROPERTY AND EQUIPMENT

The balance sheet caption "Property and equipment, net" was comprised of the following for the periods presented:

	October 27, 2012			January 28, 2012
	(in thousands)
Property and equipment:
Furniture, fixtures and equipment	$	333,816		$	295,162
Leasehold improvements	253,361			215,519
Total property and equipment	587,177			510,681
Accumulated depreciation and amortization	(310,681		)	(274,955		)
Property and equipment, net	$	276,496		$	235,726

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DEBT OBLIGATIONS AND WARRANT LIABILITIES

9 Months Ended

Oct. 27, 2012

DEBT OBLIGATIONS AND WARRANT LIABILITIES [Abstract]

DEBT OBLIGATIONS AND WARRANT LIABILITIES

7.      DEBT OBLIGATIONS AND WARRANT LIABILITIES

DSW $100 Million Secured Credit Facility ("the Credit Facility")- On June 30, 2010, DSW entered into a $100 million secured revolving credit facility with a term of four years that will expire on June 30, 2014. The Credit Facility allows the payment of dividends or redemption of stock provided that DSW meets the minimum cash and short-term investments requirement of $125 million, as defined in the Credit Facility. Additional covenants limit payments for capital expenditures to $125 million in any fiscal year, and if DSW has direct borrowings greater than $25 million, the Credit Facility also requires that DSW maintain a fixed charge coverage ratio of not less than 1.1 to 1.0. DSW paid $80.2 million for capital expenditures for the nine months ended October 27, 2012. DSW was not required to calculate a fixed charge coverage ratio for the nine months ended October 27, 2012.

As of October 27, 2012 and January 28, 2012, DSW had no outstanding borrowings under the Credit Facility, had availability under the facility of $90.9 million and $82.7 million, respectively, and had outstanding letters of credit of $9.1 million and $17.3 million, respectively.

Derivative Instruments- As of the effective time of the Merger, a subsidiary of DSW assumed RVI's obligations under the Premium Income Exchangeable Securities ("PIES") and warrants. The PIES were settled on September 15, 2011. In accordance with ASC 815, Derivatives and Hedging, DSW, and prior to the Merger, RVI, recognized all derivatives on the balance sheet at fair value based on the Black-Scholes pricing model using current market information. For derivatives that are not designated as hedges under ASC 815, changes in the fair values were recognized in earnings in the period of change. There were no derivatives designated as hedges outstanding as of October 27, 2012 or January 28, 2012. DSW does not hold or issue derivative financial instruments for trading purposes.

Warrants-The warrants originally issued by RVI on September 26, 2002 and updated on July 5, 2005 in connection with previously paid credit facilities qualified as derivatives under ASC 815. The fair values of the warrants were recorded on the balance sheet within current liabilities. As of January 28, 2012, DSW had outstanding warrants for 753,185 DSW Common Shares, which have all been exercised as of October 27, 2012.

On March 14, 2012, DSW issued 411,963 of its Class B Common Shares, without par value, to the Schottenstein Affiliates in connection with the exercise of its outstanding warrant. The common shares were issued at an exercise price of $10.35 per share, for an aggregate cash purchase price of $4.3 million, and DSW paid accrued dividends of $0.8 million related to the Company's special dividend issued on September 30, 2011. In connection with this exercise and in addition to the purchase price, DSW reclassified $18.6 million from the warrant liability to paid in capital during the first quarter of fiscal 2012. In connection with this issuance, no underwriters were utilized, and no commissions were paid.

On May 31, 2012, DSW issued341,222of its Class B Common Shares, without par value, to the Schottenstein Affiliates in connection with the exercise of its outstanding warrants. The common shares were issued at an exercise price of $10.35 per share, for an aggregate cash purchase price of$3.5 million, and DSW paid accrued dividends of $0.7 million related to the Company's special dividend issued on September 30, 2011. In connection with this exercise and in addition to the purchase price, DSW reclassified $16.8 million from the warrant liability to paid in capital during the second quarter of fiscal 2012. In connection with this issuance, no underwriters were utilized, and no commissions were paid.

The fair value of the warrants was estimated using the Black-Scholes pricing model with the following assumptions for the period presented:

Assumptions:	January 28, 2012
Risk-free interest rate		0.1	%
Expected volatility of common stock		43.5	%
Expected term	0.4 years
Expected dividend yield		1.3	%

The fair value and balance sheet location of DSW's derivative liability were as follows for the period presented:

	Balance Sheet Location	January 28, 2012
		(in thousands)
Warrants – related party	Warrant liability	$	29,303

$143.75 Million Premium Income Exchangeable SecuritiesSM ("PIES")- A subsidiary of DSW assumed, as of the effective time of the Merger, by supplemental indenture and supplemental agreement, all of RVI's obligations with respect to the PIES. On September 15, 2011, DSW issued 3.8 million of its Class A Common Shares to the holders of the PIES.  The embedded exchange feature of the PIES was accounted for as a derivative, which was recorded at fair value with changes in fair value in the statement of operations. Accordingly, the accounting for the embedded derivative addressed the variations in the fair value of the obligation to settle the PIES when the market value exceeded or was less than the threshold appreciation price.

The amount of interest expense recognized and the effective interest rate for the PIES were as follows for the period presented:

	Nine months ended
	October 29, 2011
	(in thousands)
Contractual interest expense	$	5,926
Amortization of debt discount	1,618
Total interest expense	$	7,544
Effective interest rate	8.6		%

The effect of derivative instruments on DSW's, and prior to the Merger, RVI's, condensed consolidated statements of operations was as follows for the periods presented:

	Three months ended					Nine months ended
	October 27, 2012		October 29, 2011			October 27, 2012		October 29, 2011
	(in thousands)
Warrants – related party	$	—	$	159		$	6,121	$	14,052
Warrants – non-related party		—		—			—		1,192
Conversion feature of short-term debt		—		(21,083	)		—		41,651
(Income) expense related to the change in fair value of derivative instruments	$	—	$	(20,924	)	$	6,121	$	56,895

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COMMITMENTS AND CONTINGENCIES (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended	9 Months Ended				12 Months Ended						9 Months Ended
	Oct. 29, 2011	Oct. 27, 2012	Oct. 27, 2012 New Store Leases [Member]	Oct. 27, 2012 New Store Leases [Member] Minimum [Member]	Oct. 27, 2012 New Store Leases [Member] Maximum [Member]	Jan. 28, 2012 Property Lease Guarantee [Member]	Oct. 27, 2012 Property Lease Guarantee [Member]	Jul. 28, 2012 Property Lease Guarantee [Member]	Apr. 28, 2012 Property Lease Guarantee [Member]	Oct. 27, 2012 Property Lease Guarantee [Member] Filene's Basement, Union Square, NY [Member]	Oct. 27, 2012 Property Lease Guarantee [Member] Filene's Basement, Bergen Mall, NJ [Member]	Oct. 27, 2012 Insurance Claims [Member]
Syms and Filene's Basement Bankruptcy [Abstract]
DSW loss												$ 6.0
Awarded damages												6.8
Number of locations with lease guarantees assumed								3
Other Asset Impairment Charges	5.5					9.0
Remaining minimum lease payments							0.1		7.0
Received insurance carrier		7.2
Accrued Interest		1.9
Other Operating Income		5.3
Interest Income, Operating		1.9
Lease guarantee, minimum liability										0	0
Lease guarantee, maximum liability										8	3
Deferred rent liability	2.1
Contractual Obligations [Abstract]
Commitment obligations			1.8
Number of new store locations for which lease agreements signed			15
Period of time over which new store locations to be opened (in months)				12 months	18 months
Total annual rent for new store locations			5.5
Construction and tenant allowance reimbursements to be received			$ 9.0

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STOCK-BASED COMPENSATION

9 Months Ended

Oct. 27, 2012

STOCK-BASED COMPENSATION [Abstract]

STOCK-BASED COMPENSATION

5.      STOCK-BASED COMPENSATION

Historically, both DSW and RVI issued stock-based compensation under their respective plans. After the Merger, DSW either cash settled or converted all outstanding units and options under the RVI 2000 Stock Incentive Plan ("the RVI Plan") to be exercisable for DSW Class A Common Shares. The RVI stock-based compensation instruments were adjusted retrospectively for the conversion ratio. Excluding the converted options, the DSW 2005 Equity Incentive Plan ("the DSW Plan") was otherwise not affected as a result of the Merger.

DSW Stock Compensation Plan

The DSW Plan provides for the issuance of equity awards to purchase up to 7.6 million DSW Common Shares. The DSW Plan covers stock options, restricted stock units and director stock units. Eligible recipients include key employees of DSW and affiliates, as well as directors of DSW. Options generally vest 20% per year on a cumulative basis. Options granted under the DSW Plan generally remain exercisable for a period of ten years from the date of grant. Prior to fiscal 2005, DSW did not have a stock option plan or any equity units outstanding. Prior to the Merger, RVI accounted for all DSW share activity as a capital transaction of a subsidiary.

Stock Options- In connection with the special dividend of $2.00 paid on October 26, 2012, DSW adjusted its outstanding stock options under the anti-dilution provision by decreasing the grant price and increasing the number of shares to make the optionee whole as required under the DSW Plan. The following table summarizes DSW's stock option activity:

	Nine months ended
	October 27, 2012
	(in thousands)
Outstanding, beginning of period		2,508
Granted		337
Increase in options from dividend adjustment		64
Exercised		(685	)
Forfeited		(41	)
Outstanding, end of period		2,183
Exercisable, end of period		934

DSW expensed $4.2 million and $3.9 million for the nine months ended October 27, 2012 and October 29, 2011, respectively, related to stock options. The weighted-average grant date fair value of each option granted in the nine months ended October 27, 2012 and October 29, 2011 was $25.17 and $20.44 per share, respectively. As of October 27, 2012, the total compensation cost related to nonvested DSW stock options not yet recognized was approximately $14.6 million with a weighted average expense recognition period remaining of 2.1 years. The following table illustrates the weighted-average assumptions used in the Black-Scholes pricing model for DSW options granted in each of the periods presented:

	Nine months ended
Assumptions:	October 27, 2012			October 29, 2011
Risk-free interest rate		1.2	%		2.4	%
Expected volatility of DSW common stock		56.2	%		55.1	%
Expected option term	5.5 years			5.9 years
Expected dividend yield		1.2	%		0.0	%

Restricted Stock Units ("RSU")- In connection with the special dividend of $2.00 paid on October 26, 2012, DSW issued forfeitable dividend equivalent units as required under the anti-dilution provision of the DSW Plan to make the grantee whole. The following table summarizes DSW's restricted stock unit activity:

	Nine months ended
	October 27, 2012
	(in thousands)
Outstanding, beginning of period		273
Granted		56
Vested		(96	)
Forfeited		(5	)
Outstanding, end of period		228

DSW expensed $1.2 million and $0.9 million for the nine months ended October 27, 2012 and October 29, 2011, respectively, related to restricted stock units. As of October 27, 2012, the total compensation cost related to nonvested restricted stock units not yet recognized was approximately $4.3 million with a weighted average expense recognition period remaining of 2.7 years. The weighted average exercise price for all restricted stock units is zero.

Director Stock Units- DSW issues stock units to directors who are not employees of DSW. During the nine months ended October 27, 2012 and October 29, 2011, DSW expensed $1.1 million and $0.9 million, respectively, for these grants. For new grants beginning in fiscal 2012, directors were given the option to exercise their units at a specified point in the future or upon completion of service. The following table summarizes DSW's director stock unit activity:

	Nine months ended
	October 27, 2012
	(in thousands)
Outstanding, beginning of period		192
Granted		26
Exercised		(33	)
Outstanding, end of period		185

Retail Ventures Stock Compensation Plan

Prior to the Merger, the RVI Plan provided for the issuance of stock options to purchase up to 13.0 million RVI common shares (which represented 5.7 million DSW Common Shares factoring in the exchange ratio of 0.435 pursuant to the Merger) or the issuance of restricted stock to management, key employees of RVI and affiliates, consultants (as defined in the RVI Plan), and directors of RVI.

Impact of Merger- At the date of the Merger, all RVI stock options and Stock Appreciation Rights ("SARs") granted to directors immediately vested resulting in compensation expense of $0.3 million. At the election of each option holder, options and SARs were either paid in cash at a value equal to the RVI share price at close of the market on May 25, 2011 less the exercise price, or converted to be exercisable for DSW Class A Common Shares adjusted for the exchange ratio of 0.435. Immediately after the Merger, DSW paid $7.0 million related to the settlement of these options and SARs, which was treated as a reduction of common stock value, and converted the remaining RVI options to 72,830 options exercisable for DSW Class A Common Shares. DSW recorded additional stock-based compensation expense of $0.3 million related to the cash settled options and SARs as the fair value the recipient received was greater than the fair value of the option they held.

Stock Options and SARs-  Excluding any expense related to the Merger, RVI expensed $0.1 million for the nine months ended October 29, 2011 related to stock options. RVI expensed less than $0.1 million during the nine months ended October 29, 2011 related to SARs.

Restricted Shares-RVI expensed $0.1 million for the nine months ended October 29, 2011 related to restricted shares. All restricted shares were settled in the first quarter of fiscal 2011.

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INVESTMENTS

9 Months Ended

Oct. 27, 2012

INVESTMENTS [Abstract]

INVESTMENTS

6.      INVESTMENTS

The majority of DSW's short-term available-for-sale investments are primarily municipal bonds with renewal dates of every 7 days, but longer stated maturities. Despite the long-term nature of the stated contractual maturities of these short-term investments, DSW has the ability to liquidate these securities at the renewal dates. For short-term held-to-maturity investments, which are primarily corporate bonds and municipal term notes, amortized cost approximates fair value. In addition to short-term investments, DSW has invested in long-term corporate bonds and municipal term notes to receive higher returns. These long-term investments have maturities greater than one year but less than three years and are classified as held-to-maturity.  The following table discloses the major categories of DSW's investments as of the periods presented:

	Short-term investments				Long-term investments
	October 27, 2012		January 28, 2012		October 27, 2012		January 28, 2012
Available-for-sale:	(in thousands)
Bonds	$	21,925	$	134,322		—		—
Commercial paper		2,000		5,485		—		—
Total available-for-sale investments		23,925		139,807		—		—
Held-to-maturity:
Term notes and bonds		179,395		156,890	$	91,523	$	52,707
Investment – related party		—		—		1,151		1,151
Total investments	$	203,320	$	296,697	$	92,674	$	53,858

As of October 27, 2012 and January 28, 2012, short-term investments had gross holding gains of $0.3 million and $0.1 million, respectively, and as of both October 27, 2012 and January 28, 2012, gross holding losses of $0.1 million. As of October 27, 2012 and January 28, 2012, long-term investments had gross holding gains of $0.3 million and less than $0.1 million, respectively, and as of both October 27, 2012 and January 28, 2012, gross holding losses of $0.2 million.

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FAIR VALUE MEASUREMENTS

9 Months Ended

Oct. 27, 2012

FAIR VALUE MEASUREMENTS [Abstract]

FAIR VALUE MEASUREMENTS

8.      FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Therefore, fair value is a market-based measurement based on assumptions of the market participants. As a basis for these assumptions, DSW classifies its fair value measurements under the following fair value hierarchy:

• Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that are publicly accessible. Active markets have frequent transactions with enough volume to provide ongoing pricing information.

• Level 2 inputs are other than level 1 inputs that are directly or indirectly observable. These can include unadjusted quoted prices for similar assets or liabilities in active markets, unadjusted quoted prices for identical assets or liabilities in inactive markets or other observable inputs.

• Level 3 inputs are unobservable inputs.

Financial Assets and Liabilities- The following table presents financial assets and liabilities at fair value as of the periods presented:

	As of October 27, 2012								As of January 28, 2012
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Assets:	(in thousands)
Cash and equivalents(a)	$	134,322	$	134,322		—		—	$	79,003	$	79,003		—		—
Short-term investments(b)		203,525		—	$	203,525		—		296,697		—	$	296,697		—
Long-term investments (b)(c)		92,803		—		91,652	$	1,151		53,858		—		52,707	$	1,151
	$	430,650	$	134,322	$	295,177	$	1,151	$	429,558	$	79,003	$	349,404	$	1,151
Liabilities:
Warrant liability(d)	$	—		—		—		—	$	29,303		—	$	29,303		—
	$	—		—		—		—	$	29,303		—	$	29,303		—

(a) Cash and equivalents primarily represent cash deposits and investments in money market funds held with financial institutions, as well as credit card receivables that generally settle within three days. The carrying amount approximates fair value because of the relatively short average maturity of the instruments.

(b) Available-for-sale and held-to maturity investments are valued using a market-based approach using level 2 inputs such as prices of similar assets in active markets. Held-to-maturity investments are held at amortized cost.

(c) The long-term investment - related party is evaluated for other-than-temporary impairment on an annual basis or when a triggering event occurs using a discounted cash flow valuation model using level 3 inputs such as the financial condition of the entity.

(d) The underlying assumptions for fair value measurement of the warrant liability is detailed in Note 7. Prior to exercise, the Company classified its warrant liability within level 2 as the valuation inputs are based on observable market data.

The following table presents the activity related to level 3 fair value measurements for the long-term investment-related party for the periods presented:

	Three months ended
	October 27, 2012		October 29, 2011
	(in thousands)
Carrying value at the beginning of the period	$	1,151	$	1,047
Carrying value at the end of the period	$	1,151	$	1,047

	Nine months ended
	October 27, 2012		October 29, 2011
	(in thousands)
Carrying value at the beginning of the period	$	1,151	$	952
Activity related to long-term investment - related party		—		95
Carrying value at the end of the period	$	1,151	$	1,047

Non-Financial Assets and Liabilities- DSW periodically evaluates the carrying amount of its long-lived assets, primarily property and equipment, and finite lived intangible assets when events and circumstances warrant such a review to ascertain if any assets have been impaired. The carrying amount of a long-lived asset or asset group is considered impaired when the carrying value of the asset or asset group exceeds the expected future cash flows from the asset or asset group. The reviews are conducted at the lowest identifiable level, which includes a store. The impairment loss recognized is the excess of the carrying value of the asset or asset group over its fair value, based on a discounted cash flow analysis using a discount rate determined by management. Should an impairment loss be realized, it will generally be included in cost of sales. There were no significant non-recurring fair value measurements recorded for the nine months ended October 27, 2012.

In the third quarter of fiscal 2011, DSW recognized an impairment loss of $1.6 million on assets used in a leased office facility assumed in the Merger. Based on the projected future cash flows under the lease, DSW determined that the carrying value exceeded the expected future cash flows from the asset group and recorded a full impairment after determining fair value.

The following table presents the activity related to the fair value of assets held and used that realized an impairment loss for the periods presented:

	As of October 29, 2011						Total Losses
	Level 1	Level 2	Level 3		Fair Value as of the Impairment Date		Three months ended October 29, 2011		Nine months ended October 29, 2011
	(in thousands)
Assets held and used			$	—	$	—	$	1,626	$	1,626

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COMMITMENTS AND CONTINGENCIES (Policies)

9 Months Ended

Oct. 27, 2012

COMMITMENTS AND CONTINGENCIES [Abstract]

Commitments and Contingencies

Legal Proceedings- DSW is involved in various legal proceedings that are incidental to the conduct of its business. DSW estimates the range of liability related to pending litigation where the amount of the range of loss can be estimated. DSW records its best estimate of a loss when the loss is considered probable. When a liability is probable and there is a range of estimated loss, DSW records the most likely estimated liability related to the claim. Although it is not possible to predict with certainty the eventual outcome of any litigation, in the opinion of management, the amount of any potential liability with respect to current legal proceedings will not be material to DSW's results of operations or financial condition. As additional information becomes available, DSW will assess the potential liability related to its pending litigation and revise the estimates as needed.

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DEBT OBLIGATIONS AND WARRANT LIABILITIES (Details) (USD $)	0 Months Ended		3 Months Ended		9 Months Ended		12 Months Ended
	May 31, 2012	Mar. 14, 2012	Oct. 27, 2012	Oct. 29, 2011	Oct. 27, 2012	Oct. 29, 2011	Jan. 28, 2012
Credit Facility [Abstract]
Limitation of capital expenditures						$ 125,000,000
Minimum borrowings requiring the entity to maintain a fixed charge ratio						25,000,000
Fixed Charge Ratio						1.1
Capital expenditures					80,203,000	55,356,000
Warrants and premium income exchangeable securities [Abstract]
Aggregate cash purchase price					7,792,000	995,000
Accrued dividend paid	700,000	800,000
Reclass from the warrant liability to paid in capital upon exercise of warrants	16,800,000	18,600,000
Assumptions [Abstract]
Risk-free interest rate (in hundredths)							0.10%
Expected volatility of common stock (in hundredths)							43.50%
Expected term (in years)							4 months 24 days
Expected dividend yield (in hundredths)							1.30%
Interest expense recognized and effective interest rate [Abstract]
Contractual interest expense						5,926,000
Amortization of debt discount						1,618,000
Total interest expense						7,544,000
Effective interest rate (in hundredths)				8.60%		8.60%
Fair value balance sheet location [Abstract]
Effect of derivative instruments on condensed consolidated statements of operations			0	(20,924,000)	6,121,000	56,895,000
Assumption of obligations with respect to PIES				143,750,000		143,750,000
Warrants - Related Party [Member]
Fair value balance sheet location [Abstract]
Derivative liabilities							29,303,000
Effect of derivative instruments on condensed consolidated statements of operations			0	159,000	6,121,000	14,052,000
Warrants - Non Related Party [Member]
Fair value balance sheet location [Abstract]
Effect of derivative instruments on condensed consolidated statements of operations			0	0	0	1,192,000
Conversion Feature of short-term Debt [Member]
Fair value balance sheet location [Abstract]
Effect of derivative instruments on condensed consolidated statements of operations			0	(21,083,000)	0	41,651,000
Warrants [Member] | DSW Common Shares [Member]
Warrants and premium income exchangeable securities [Abstract]
Warrants outstanding (in shares)							753,185
Exercise price (in dollars per share)	$ 10.35	$ 10.35
Aggregate cash purchase price	3,500,000	4,300,000
Credit Facility [Member]
Credit Facility [Abstract]
Initiation date					Jun. 30, 2010
Credit Facility, maximum capacity			100,000,000		100,000,000
Credit Facility, term						4 years
Expiration date					Jun. 30, 2014
Credit Facility, available capacity			90,900,000		90,900,000
Credit Facility, amount outstanding			9,100,000		9,100,000
Credit Facility [Member] | Accordion Feature [Member]
Credit Facility [Abstract]
Cash and short term investments requirement for dividend payment and stock redemption			125,000,000		125,000,000
Credit Facility [Member] | Letter of Credit [Member]
Credit Facility [Abstract]
Credit Facility, available capacity							82,700,000
Credit Facility, amount outstanding							17,300,000
Common Class A [Member] | Premium Income Exchangeable Securities [Member] | DSW Common Shares [Member]
Warrants and premium income exchangeable securities [Abstract]
Exercise of warrants and premium income exchangeable securities (in shares)				3,800,000		3,800,000
Common Class B [Member] | Warrants [Member] | DSW Common Shares [Member]
Warrants and premium income exchangeable securities [Abstract]
Exercise of warrants and premium income exchangeable securities (in shares)	341,222	411,963

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OTHER NON-CURRENT LIABILITIES

9 Months Ended

Oct. 27, 2012

OTHER NON-CURRENT LIABILITIES [Abstract]

OTHER NON-CURRENT LIABILITIES

13.  OTHER NON-CURRENT LIABILITIES

The balance sheet caption "Other non-current liabilities" was comprised of the following for the periods presented:

	October 27, 2012		January 28, 2012
	(in thousands)
Construction and tenant allowances	$	74,479	$	62,474
Deferred rent	39,480		35,673
Other	9,200		15,617
Total other non-current liabilities	$	123,159	$	113,764

Construction and Tenant Allowances- DSW receives cash allowances from landlords, which are deferred and amortized on a straight-line basis over the noncancelable terms of the lease as a reduction of rent expense.

Deferred Rent- Many of the Company's operating leases contain predetermined fixed increases of the minimum rentals during the initial lease terms. For these leases, the Company recognizes the related rental expense on a straight-line basis over the noncancelable terms of the lease. The Company records the difference between the amounts charged to expense and the rent paid as deferred rent and begins amortizing such deferred rent upon the delivery of the lease location by the lessor.

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BACKGROUND (Policies)

9 Months Ended

Oct. 27, 2012

BACKGROUND [Abstract]

Principles of Consolidation

Principles of Consolidation- The condensed consolidated financial statements include the accounts of DSW and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. In fiscal 2009 and fiscal 2007, RVI disposed of its Filene's Basement operations and Value City operations, respectively.

Filene's Basement- On April 21, 2009, RVI disposed of Filene's Basement, Inc. and certain related entities to FB II Acquisition Corp., a newly formed entity owned by Buxbaum Holdings, Inc. ("Buxbaum"). RVI agreed to indemnify Buxbaum, FB II Acquisition Corp. and their owners against certain liabilities. On May 4, 2009, Filene's Basement filed for bankruptcy protection. On June 18, 2009, following bankruptcy court approval, SYL LLC, a subsidiary of Syms Corp ("Syms"), purchased certain assets of Filene's Basement. As of October 27, 2012, the Company had a liability of $6.7 million for guaranteed lease obligations related to leases assumed by Syms and a liability of less than $0.1 million related to leases not assumed by Syms. See Note 16 for additional disclosure regarding the guaranteed lease obligations.

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STOCK-BASED COMPENSATION (Details) (USD $)	9 Months Ended
	Oct. 27, 2012	Oct. 29, 2011	Oct. 26, 2012
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
RVI stock-based compensation expense, before related tax effects		$ 157,000
Reverse stock split, Merger conversion ratio (in hundredths)	0.435
Assumptions [Abstract]
Risk-free interest rate (in hundredths)	1.20%	2.40%
Expected volatility of DSW common stock (in hundredths)	56.20%	55.10%
Expected option term (in years)	5 years 6 months	5 years 10 months 24 days
Expected dividend yield (in hundredths)	1.20%	0.00%
Stock-based compensation expense related to cash settled RVI options and SARs		255,000
Stock options activity [Roll forward]
Outstanding, beginning of period (in shares)	2,508,000
Granted (in shares)	337,000
Increase in options from dividend adjustment	64,000
Exercised (in shares)	(685,000)
Forfeited (in shares)	(41,000)
Outstanding, end of period (in shares)	2,183,000
Exercisable, end of period	934,000
DSW Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shared-based compensation expense	4,200,000	3,900,000
DSW Stock-Based Compensation Plans [Abstract]
Number of shares authorized (in shares)	7,600,000
Annual vesting percentage (in hundredths)	20.00%
Exercise period from date of grant (in years)	10Y
Assumptions [Abstract]
Weighted average grant date fair value (in dollars per share)	$ 25.17	$ 20.44
Compensation cost not yet recognized related to nonvested awards	14,600,000
Weighted average expense recognition period (in years)	2 years 1 month 6 days
DSW Plan [Member] | Stock Options [Member]
DSW Stock-Based Compensation Plans [Abstract]
Special dividend of paid			$ 2.00
DSW Plan [Member] | Restricted Stock Units [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shared-based compensation expense	1,200,000	900,000
DSW Stock-Based Compensation Plans [Abstract]
Special dividend of paid			$ 2.00
Outstanding, beginning of period (in units)	273,000
Granted (in units)	56,000
Outstanding, end of period (in units)	228,000
Assumptions [Abstract]
Compensation cost not yet recognized related to nonvested awards	4,300,000
Weighted average expense recognition period (in years)	2 years 8 months 12 days
Weighted average exercise price	$ 0
Equity instruments other than options [Roll forward]
Outstanding, beginning of period (in units)	273,000
Granted (in units)	56,000
Vested (in units)	(96,000)
Forfeited (in units)	(5,000)
Outstanding, end of period (in units)	228,000
DSW Plan [Member] | Director Stock Units [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shared-based compensation expense	1,100,000	900,000
DSW Stock-Based Compensation Plans [Abstract]
Outstanding, beginning of period (in units)	192,000
Granted (in units)	26,000
Outstanding, end of period (in units)	185,000
Equity instruments other than options [Roll forward]
Outstanding, beginning of period (in units)	192,000
Granted (in units)	26,000
Vested (in units)	(33,000)
Outstanding, end of period (in units)	185,000
RVI Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
RVI stock-based compensation expense, before related tax effects		339,000
Reverse stock split, Merger conversion ratio (in hundredths)		0.435
Equivalent number of Common Shares factoring in conversion ratio (in shares)		5,700,000
DSW Stock-Based Compensation Plans [Abstract]
Number of shares authorized (in shares)		13,000,000
Settlement of options		7,000,000
Number of remaining options converted to options exercisable for Class A common shares (in shares)		72,830
Assumptions [Abstract]
Stock-based compensation expense related to cash settled RVI options and SARs		255,000
RVI Plan [Member] | Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shared-based compensation expense		100,000
RVI Plan [Member] | Stock Appreciation Rights (SARs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shared-based compensation expense		100,000
RVI Plan [Member] | Restricted Shares [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shared-based compensation expense		$ 100,000

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ACCRUED EXPENSES (Tables)

9 Months Ended

Oct. 27, 2012

ACCRUED EXPENSES [Abstract]

Accrued Expenses

The balance sheet caption "Accrued expenses" was comprised of the following for the periods presented:

	October 27, 2012		January 28, 2012
	(in thousands)
Gift cards and merchandise credits	$	24,738	$	28,248
Compensation	18,746		33,427
Taxes	18,957		13,128
Customer loyalty program	17,440		14,577
Other	50,375		37,618
Total accrued expenses	$	130,256	$	126,998

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (unaudited) (Parenthetical) (USD $) In Thousands, unless otherwise specified	3 Months Ended	9 Months Ended
	Oct. 27, 2012	Oct. 27, 2012
Other Comprehensive Income:
Change in minimum pension liability, taxes	$ 284	$ 210

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BACKGROUND

9 Months Ended

Oct. 27, 2012

BACKGROUND [Abstract]

BACKGROUND

2.      BACKGROUND

Merger with Retail Ventures, Inc. ("the Merger")- On May 26, 2011, Retail Ventures, Inc. ("Retail Ventures" or "RVI") merged with and into DSW MS LLC ("Merger Sub"), with Merger Sub surviving the Merger and continuing as a wholly owned subsidiary of DSW. Upon the closing of the Merger, each outstanding RVI common share was converted into 0.435 DSW Class A Common Shares, unless the holder of each outstanding RVI common share properly and timely elected to receive a like amount of DSW Class B Common Shares.

The Merger was accounted for as a reverse merger with RVI as the accounting acquirer and DSW (the surviving legal entity) as the accounting acquiree. As the Merger was an equity transaction between entities under common control, purchase accounting was not applied.Pre-merger financial information presented in the DSW consolidated financial statements represents consolidated RVI financial information. References to Retail Ventures or RVI refer to the pre-merger entity. The pre-merger financial information was retrospectively recast for the following matters:

● Share and per share information- DSW recast all RVI historical share and per share information, including earnings per share, to reflect the exchange ratio of 0.435 for all periods presented.

● Segment presentation- DSW maintained its historical segment presentation, which is consistent with how the chief operating decision maker, as defined in Accounting Standard Codification ("ASC") 280, Segment Reporting, reviews the business. DSW sells products through three channels: DSW stores, dsw.com and the Affiliated Business Group. The reportable segments are the DSW segment, which includes the DSW stores and dsw.com sales channels, and the Affiliated Business Group segment. In order to reconcile to the condensed consolidated financial statements, DSW includes Other, which consists of assets, liabilities and expenses that are not attributable to the two reportable segments. The pre-merger or prior period condensed consolidated financial statements and notes were recast to reflect the two reportable segments and Other.

● Cost of sales- DSW conformed RVI's accounting policies and recast RVI's pre-merger or prior period financial statements and notes for distribution and fulfillment expenses and store occupancy costs historically reported by RVI within operating expenses to be consistent with DSW's historical classification of these costs within cost of sales.

Principles of Consolidation- The condensed consolidated financial statements include the accounts of DSW and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. In fiscal 2009 and fiscal 2007, RVI disposed of its Filene's Basement operations and Value City operations, respectively.

Filene's Basement- On April 21, 2009, RVI disposed of Filene's Basement, Inc. and certain related entities to FB II Acquisition Corp., a newly formed entity owned by Buxbaum Holdings, Inc. ("Buxbaum"). RVI agreed to indemnify Buxbaum, FB II Acquisition Corp. and their owners against certain liabilities. On May 4, 2009, Filene's Basement filed for bankruptcy protection. On June 18, 2009, following bankruptcy court approval, SYL LLC, a subsidiary of Syms Corp ("Syms"), purchased certain assets of Filene's Basement. As of October 27, 2012, the Company had a liability of $6.7 million for guaranteed lease obligations related to leases assumed by Syms and a liability of less than $0.1 million related to leases not assumed by Syms. See Note 16 for additional disclosure regarding the guaranteed lease obligations.

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PENSION PLAN (Details) (USD $)	3 Months Ended		9 Months Ended
	Oct. 27, 2012	Oct. 29, 2011	Oct. 27, 2012	Oct. 29, 2011
Change in plan assets [Roll Forward]
Employer contributions			$ 1,200,000
Components of net periodic benefit cost [Abstract]
Interest cost	230,000	251,000	690,000	752,000
Expected return on plan assets	(302,000)	(237,000)	(906,000)	(709,000)
Amortization of net loss	100,000	74,000	298,000	222,000
Loss recognized due to settlements	67,000		67,000
Net periodic benefit cost	$ 95,000	$ 88,000	$ 149,000	$ 265,000

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SIGNIFICANT ACCOUNTING POLICIES (Policies)

9 Months Ended

Oct. 27, 2012

SIGNIFICANT ACCOUNTING POLICIES [Abstract]

Allowance for Doubtful Accounts

Allowance for Doubtful Accounts-The Company monitors its exposure for credit losses and records related allowances for doubtful accounts. Allowances are estimated based upon specific accounts receivable balances, where a risk of default has been identified. As of October 27, 2012 and January 28, 2012, the Company's allowances for doubtful accounts were $0.3 million and $0.6 million, respectively.

Inventories

Inventories-Merchandise inventories are stated at lower of cost or market, determined using the retail inventory method. The retail inventory method is widely used in the retail industry due to its practicality. Under the retail inventory method, the valuation of inventories at cost and the resulting gross profits are determined by applying a calculated cost to retail ratio to the retail value of inventories. The cost of the inventory reflected on the balance sheet is decreased by charges to cost of sales at the time the retail value of the inventory is lowered through the use of markdowns, which are reductions in prices due to customers' perception of value. Hence, earnings are negatively impacted as the merchandise is marked down prior to sale. Markdowns establish a new cost basis for inventory. Changes in facts or circumstances do not result in the reversal of previously recorded markdowns or an increase in the newly established cost basis. The markdown reserve requires management to make assumptions regarding customer preferences, fashion trends and consumer demand.

Inherent in the calculation of inventories are certain significant management judgments and estimates, including setting the original merchandise retail value, markdowns, and estimates of losses between physical inventory counts, or shrinkage, which combined with the averaging process within the retail inventory method, can significantly impact the ending inventory valuation at cost and the resulting gross profit. DSW records a reduction to inventories and a charge to cost of sales for shrinkage. Shrinkage is calculated as a percentage of sales from the last physical inventory date. Estimates are based on both historical experience as well as recent physical inventory results. Physical inventory counts are taken on an annual basis and have supported DSW's shrinkage estimates.

Sales and Revenue Recognition

Sales and Revenue Recognition- Revenues from merchandise sales are recognized upon customer receipt of merchandise, are net of returns through period end, exclude sales tax and are not recognized until collectibility is reasonably assured. For sales through the dsw.com sales channel, DSW defers revenue representing a time lag for shipments to be received by the customer and also includes revenue from shipping and handling in net sales while the related costs are included in cost of sales. Revenue from gift cards is deferred and recognized upon redemption of the gift card. The Company's policy is to recognize income from breakage of gift cards when the likelihood of redemption of the gift card is remote.

Shipping and Handling Cost

Sales and Revenue Recognition- Revenues from merchandise sales are recognized upon customer receipt of merchandise, are net of returns through period end, exclude sales tax and are not recognized until collectibility is reasonably assured. For sales through the dsw.com sales channel, DSW defers revenue representing a time lag for shipments to be received by the customer and also includes revenue from shipping and handling in net sales while the related costs are included in cost of sales. Revenue from gift cards is deferred and recognized upon redemption of the gift card. The Company's policy is to recognize income from breakage of gift cards when the likelihood of redemption of the gift card is remote.

Gift Cards

Sales and Revenue Recognition- Revenues from merchandise sales are recognized upon customer receipt of merchandise, are net of returns through period end, exclude sales tax and are not recognized until collectibility is reasonably assured. For sales through the dsw.com sales channel, DSW defers revenue representing a time lag for shipments to be received by the customer and also includes revenue from shipping and handling in net sales while the related costs are included in cost of sales. Revenue from gift cards is deferred and recognized upon redemption of the gift card. The Company's policy is to recognize income from breakage of gift cards when the likelihood of redemption of the gift card is remote.

Cost of Sales

Cost of Sales-In addition to the cost of merchandise, which includes markdowns and shrinkage, DSW includes in cost of sales expenses associated with distribution and fulfillment (including depreciation) and store occupancy (excluding depreciation and including store impairments). Distribution and fulfillment expenses are comprised of labor, benefits and other labor-related costs associated with the operations of the distribution and fulfillment centers. The non-labor costs include rent, depreciation, insurance, utilities, maintenance and other operating costs. Distribution and fulfillment expenses also include the transportation of merchandise to the distribution and fulfillment centers, from the distribution center to DSW's stores and from the fulfillment center to the customer. Store occupancy expenses include rent, utilities, repairs, maintenance, insurance, janitorial costs and occupancy-related taxes, which are primarily real estate taxes passed to DSW by its landlords.

Operating Expenses

Operating Expenses- Operating expenses include expenses related to store management and store payroll costs, advertising, Affiliated Business Group operations, store depreciation and amortization, new store advertising and other new store costs (which are expensed as incurred) and corporate expenses. Corporate expenses include expenses related to buying, information technology, depreciation expense for corporate cost centers, marketing, legal, finance, outside professional services, customer service center expenses, payroll and benefits for associates and payroll taxes.

Income Taxes

Income Taxes- Income taxes are accounted for using the asset and liability method. The Company is required to determine the aggregate amount of income tax expense to accrue and the amount which will be currently payable based upon tax statutes of each jurisdiction in which the Company does business. In making these estimates, income is adjusted based on a determination of generally accepted accounting principles for items that are treated differently by the applicable taxing authorities. Deferred tax assets and liabilities, as a result of these differences, are reflected on DSW's balance sheet for temporary differences that will reverse in subsequent years. A valuation allowance is established against deferred tax assets when it is more likely than not that some or all of the deferred tax assets will not be realized. DSW succeeded to RVI's tax attributes as a result of the Merger.

Noncontrolling Interests

Noncontrolling Interests- The noncontrolling interests represented the portion of legacy DSW's total shareholders' equity owned by unaffiliated investors in DSW prior to the Merger and net income attributable to the unaffiliated investors. The noncontrolling interest percentage was computed by the ratio of shares held by unaffiliated interests. After the Merger, noncontrolling interests were eliminated.

Sale of Subsidiary Stock

Sale of Subsidiary Stock- Prior to the Merger, sales of stock by a subsidiary were accounted for by RVI as capital transactions.

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FAIR VALUE MEASUREMENTS (Tables)

9 Months Ended

Oct. 27, 2012

FAIR VALUE MEASUREMENTS [Abstract]

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

Financial Assets and Liabilities- The following table presents financial assets and liabilities at fair value as of the periods presented:

	As of October 27, 2012								As of January 28, 2012
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Assets:	(in thousands)
Cash and equivalents(a)	$	134,322	$	134,322		—		—	$	79,003	$	79,003		—		—
Short-term investments(b)		203,525		—	$	203,525		—		296,697		—	$	296,697		—
Long-term investments (b)(c)		92,803		—		91,652	$	1,151		53,858		—		52,707	$	1,151
	$	430,650	$	134,322	$	295,177	$	1,151	$	429,558	$	79,003	$	349,404	$	1,151
Liabilities:
Warrant liability(d)	$	—		—		—		—	$	29,303		—	$	29,303		—
	$	—		—		—		—	$	29,303		—	$	29,303		—

(a) Cash and equivalents primarily represent cash deposits and investments in money market funds held with financial institutions, as well as credit card receivables that generally settle within three days. The carrying amount approximates fair value because of the relatively short average maturity of the instruments.

(b) Available-for-sale and held-to maturity investments are valued using a market-based approach using level 2 inputs such as prices of similar assets in active markets. Held-to-maturity investments are held at amortized cost.

(c) The long-term investment - related party is evaluated for other-than-temporary impairment on an annual basis or when a triggering event occurs using a discounted cash flow valuation model using level 3 inputs such as the financial condition of the entity.

(d) The underlying assumptions for fair value measurement of the warrant liability is detailed in Note 7. Prior to exercise, the Company classified its warrant liability within level 2 as the valuation inputs are based on observable market data.

Activity Related to Level 3 Fair Value Measurements

The following table presents the activity related to level 3 fair value measurements for the long-term investment-related party for the periods presented:

	Three months ended
	October 27, 2012		October 29, 2011
	(in thousands)
Carrying value at the beginning of the period	$	1,151	$	1,047
Carrying value at the end of the period	$	1,151	$	1,047

	Nine months ended
	October 27, 2012		October 29, 2011
	(in thousands)
Carrying value at the beginning of the period	$	1,151	$	952
Activity related to long-term investment - related party		—		95
Carrying value at the end of the period	$	1,151	$	1,047

Activity Related to the Fair Value of Assets Held

The following table presents the activity related to the fair value of assets held and used that realized an impairment loss for the periods presented:

	As of October 29, 2011						Total Losses
	Level 1	Level 2	Level 3		Fair Value as of the Impairment Date		Three months ended October 29, 2011		Nine months ended October 29, 2011
	(in thousands)
Assets held and used			$	—	$	—	$	1,626	$	1,626

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ACCRUED EXPENSES

9 Months Ended

Oct. 27, 2012

ACCRUED EXPENSES [Abstract]

ACCRUED EXPENSES

12.   ACCRUED EXPENSES

The balance sheet caption "Accrued expenses" was comprised of the following for the periods presented:

	October 27, 2012		January 28, 2012
	(in thousands)
Gift cards and merchandise credits	$	24,738	$	28,248
Compensation	18,746		33,427
Taxes	18,957		13,128
Customer loyalty program	17,440		14,577
Other	50,375		37,618
Total accrued expenses	$	130,256	$	126,998

Customer Loyalty Program- DSW maintains a customer loyalty program for the DSW stores and dsw.com sales channels in which program members earn reward certificates that result in discounts on future purchases. Upon reaching the target-earned threshold, the members receive reward certificates for these discounts which expire six months after being issued. DSW accrues the anticipated redemptions of the discount earned at the time of the initial purchase. To estimate these costs, DSW makes assumptions related to customer purchase levels and redemption rates based on historical experience.