0001319947-17-000020.txt : 20170523 0001319947-17-000020.hdr.sgml : 20170523 20170523083845 ACCESSION NUMBER: 0001319947-17-000020 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20170523 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20170523 DATE AS OF CHANGE: 20170523 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DSW Inc. CENTRAL INDEX KEY: 0001319947 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-SHOE STORES [5661] IRS NUMBER: 310746639 STATE OF INCORPORATION: OH FISCAL YEAR END: 0129 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-32545 FILM NUMBER: 17862723 BUSINESS ADDRESS: STREET 1: 810 DSW DRIVE CITY: COLUMBUS STATE: OH ZIP: 43219 BUSINESS PHONE: (614) 237-7100 MAIL ADDRESS: STREET 1: 810 DSW DRIVE CITY: COLUMBUS STATE: OH ZIP: 43219 8-K 1 a8-k5232017.htm 8-K Document


UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549
FORM 8-K
CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 23, 2017
DSW Inc.
(Exact name of registrant as specified in its charter)
 
 
 
 
 
Ohio
 
001-32545
 
31-0746639
(State or other Jurisdiction of Incorporation)
 
(Commission File Number)
 
(IRS Employer Identification No.)
 
 
 
810 DSW Drive, Columbus, Ohio
 
43219
(Address of Principal Executive Offices)
 
(Zip Code)
Registrant’s telephone number, including area code: (614) 237-7100
 
 N/A
(Former name or former address if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

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

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

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







ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
On May 23, 2017, the Company issued a press release regarding its consolidated financial results for the first quarter ended April 29, 2017. A copy of the press release announcing these financial results is attached as Exhibit 99.1 hereto and incorporated by reference herein.
Pursuant to General Instruction B.2 of Current Report on Form 8-K, the information in this Item 2.02 is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Furthermore, the information in this Item 2.02 shall not be deemed to be incorporated by reference into the filings of the Company under the Securities Act of 1933, as amended.

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(d) Exhibits.
 
 
 
Exhibit Number

 
Description
 
 
 
99.1

 
Press Release dated May 23, 2017































Signature  
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.  
 
 
 
 
DSW Inc.
 
 
 
By:
/s/ William L. Jordan

 
 
 
 
William L. Jordan
 
 
 
 
Executive Vice President and Chief Administrative Officer
 
 
 
 
 
Date:
May 23, 2017
 
 
 



 EX-99.1 2 q12017earningsrelease.htm EXHIBIT 99.1 Exhibit


Exhibit 99.1
DSW Inc. Reports First Quarter 2017 Financial Results

•
First quarter sales increased 1.4% to $691.1 million; comparable sales decreased 3.0%
•
Including $0.04 per share related to Ebuys acquisition related costs, restructuring costs and foreign exchange loss, first quarter Reported EPS of $0.28 per diluted share
•
First quarter Adjusted EPS of $0.32 per diluted share
•
Reiterates Fiscal 2017 EPS guidance of $1.45 to $1.55 per share

COLUMBUS, Ohio, May 23, 2017 - DSW Inc. (NYSE: DSW), a leading branded footwear and accessories retailer, announced financial results for the thirteen week period ended April 29, 2017, compared to the thirteen week period ended April 30, 2016.

Roger Rawlins, Chief Executive Officer stated, "First quarter sales were challenging, but trends improved during the quarter with comps turning positive in April. As expected, planned clearance activity and the addition of Ebuys drove lower gross margin and operating income. The investments we have made in our digital capabilities, such as our redesigned website and mobile app, drove robust growth in digital demand. We are intently focused on driving sequential top line improvements through key product and customer initiatives while balancing strategic investments with disciplined expense management."

First Quarter Operating Results
•
Sales increased 1.4% to $691.1 million, including $22.3 million of revenues from Ebuys.
•
Comparable sales decreased 3.0% compared to last year's 1.6% decrease.
•
Reported gross profit decreased by 180 bps, driven by planned clearance activity and the addition of Ebuys, offset by disciplined markdown management and favorable sourcing costs.
•
Reported operating expenses improved by 40 bps, due to tighter expense management.
•
Reported net income was $23.0 million, or $0.28 per diluted share, including pre-tax charges totaling $4.1 million, or $0.04 per share, related to the acquisition of Ebuys, restructuring costs and foreign exchange loss assumed in the process of pre-funding the upcoming Town Shoes acquisition.
•
Adjusted net income was $25.7 million, or $0.32 per diluted share.


First Quarter Balance Sheet Highlights
•
Cash, short-term and long-term investments totaled $254 million compared to $238 million in the first quarter last year.
•
Inventories were $575 million compared to $563 million for the same period last year. On a cost per square foot basis, inventories declined by 2.6%.






Fiscal 2017 Annual Outlook
The Company reiterated its full year outlook for adjusted earnings in the range of $1.45 to $1.55 per diluted share.


Webcast and Conference Call
The Company is hosting a conference call today at 8:30 am Eastern Time. The conference will be broadcast live over the internet and can be accessed at http://dswinc.investorroom.com. For those unable to listen to the live broadcast, an archived version will be available at the same location until May 30, 2017. The teleconference will be available on replay and can be accessed by dialing 1-877-344-7529 and entering passcode 10107186.


About DSW Inc.
DSW Inc. is a leading branded footwear and accessories retailer that offers a wide selection of brand name and designer dress, casual and athletic footwear and accessories for women, men and kids. As of May 23, 2017, DSW operates 510 stores in 43 states, the District of Columbia and Puerto Rico, and operates an e-commerce site, http://www.dsw.com, and a mobile website, http://m.dsw.com. DSW also supplies footwear to 377 leased locations in the United States under the Affiliated Business Group. DSW also owns Ebuys, Inc., a leading off price footwear and accessories retailer operating in digital marketplaces in North America, Europe, Australia and Asia. For store locations and additional information about DSW, visit http://www.dswinc.com. Follow DSW on Twitter at http://twitter.com/DSWShoeLovers and Facebook at http://www.facebook.com/DSW.































DSW INC.
FIRST QUARTER 2017 SEGMENT RESULTS
(unaudited)
Net sales by segment
 
Thirteen weeks ended
 
April 29, 2017
 
April 30, 2016
 
% change
 
 
 
 
 
 
 
(in thousands)
DSW segment
$
624,787

 
$
623,032

 
0.3
%
ABG segment
43,988

 
43,139

 
2.0
%
Other
22,327

 
15,096

 
47.9
%
DSW Inc.
$
691,102

 
$
681,267

 
1.4
%

Comparable sales change by reportable segment
 
Thirteen weeks ended
 
April 29, 2017
 
April 30, 2016
DSW segment
(3.1)%
 
(1.4)%
ABG segment
(1.7)%
 
(3.4)%
DSW Inc.
(3.0)%
 
(1.6)%

Stores and square footage data
 
April 29, 2017
 
April 30, 2016
DSW stores open, end of period
508

 
478

ABG stores open, end of period
379

 
385

DSW stores total square footage (in thousands)
10,449

 
9,955


Reported gross profit by segment
 
Thirteen weeks ended
 
April 29, 2017
 
April 30, 2016
DSW segment merchandise margin
42.8
 %
 
43.9
 %
Store occupancy expense
(10.9
)
 
(10.9
)
Distribution and fulfillment expenses
(2.3
)
 
(2.3
)
DSW segment gross profit
29.6
 %
 
30.7
 %
ABG segment merchandise margin
45.7
 %
 
46.6
 %
Store occupancy expense
(20.7
)
 
(20.4
)
Distribution and fulfillment expenses
(1.1
)
 
(1.1
)
ABG segment gross profit
23.9
 %
 
25.1
 %
Other segment merchandise margin
30.2
 %
 
34.6
 %
Marketplace fees
(12.4
)
 
(11.0
)
Fulfillment expenses
(17.4
)
 
(9.5
)
Other segment gross profit(1)
0.4
 %
 
14.1
 %
Total company gross profit
28.2
 %
 
30.0
 %

(1)
Other segment gross profit for the three months ended April 30, 2016 includes $0.2 million related to the step-up of the value of Ebuys' inventory.




Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
Any statements in this release that are not historical facts, including the statements made in our "Fiscal 2017 Annual Outlook," are forward-looking statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on the Company's current expectations and involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. These factors include, but are not limited to: our success in growing our store base and digital demand; our ability to protect our reputation; maintaining strong relationships with our vendors; our ability to anticipate and respond to fashion trends; our success in meeting customer expectations; disruption of our distribution and/or fulfillment operations; continuation of agreements with and our reliance on the financial condition of our affiliated business and international partners; our ability to successfully integrate Ebuys, Inc.; fluctuation of our comparable sales and quarterly financial performance; risks related to our information systems and data; 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 and marketing to drive traffic, sales and customer loyalty; uncertain general economic conditions; our reliance on foreign sources for merchandise and risks inherent to international trade; risks related to our handling of sensitive and confidential data; risks related to leases of our properties; risks related to prior and current acquisitions; risks related to future legislation, regulatory reform or policy changes; foreign currency exchange risk; and risks related to holdings of cash and investments. Additional factors that could cause our actual results to differ materially from our expectations are described in the Company's latest annual or quarterly report, as filed with the Securities and Exchange Commission. All forward-looking statements speak only as of the time when made. The Company undertakes no obligation to revise the forward-looking statements included in this press release to reflect any future events or circumstances.






DSW INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited and in thousands)
 
April 29, 2017
 
January 28, 2017
 
April 30, 2016
Assets
 
 
 
 
 
Cash and cash equivalents
$
79,673

 
$
110,657

 
$
59,462

Short-term investments
174,193

 
98,530

 
97,612

Accounts receivable, net
16,865

 
19,006

 
15,297

Inventories
575,171

 
499,995

 
563,317

Prepaid expenses and other current assets
36,230

 
31,078

 
32,166

Total current assets
882,132

 
759,266

 
767,854

Property and equipment, net
374,320

 
375,251

 
373,979

Long-term investments
—

 
77,904

 
80,456

Goodwill
79,689

 
79,689

 
80,684

Deferred income taxes
16,287

 
14,934

 
21,217

Equity investment in Town Shoes
13,705

 
15,830

 
18,389

Note receivable from Town Shoes
52,928

 
53,121

 
50,618

Intangible assets
34,044

 
35,108

 
40,614

Other assets
18,359

 
17,373

 
23,179

Total assets
$
1,471,464

 
$
1,428,476

 
$
1,456,990

Liabilities and shareholders' equity
 
 
 
 
 
Accounts payable
$
213,611

 
$
186,271

 
$
197,519

Accrued expenses
135,758

 
130,334

 
125,766

Total current liabilities
349,369

 
316,605

 
323,285

Non-current liabilities
176,807

 
174,383

 
200,138

Total shareholders' equity
945,288

 
937,488

 
933,567

Total liabilities and shareholders' equity
$
1,471,464

 
$
1,428,476

 
$
1,456,990






DSW INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited and in thousands, except per share amounts)
 
Thirteen weeks ended
 
April 29, 2017
 
April 30, 2016
Net sales
$
691,102

 
$
681,267

Cost of sales
(495,873
)
 
(476,910
)
   Gross profit
195,229

 
204,357

Operating expenses
(153,264
)
 
(154,196
)
Change in fair value of contingent consideration liability
(1,084
)
 
(1,445
)
   Operating profit
40,881

 
48,716

Interest income, net
561

 
521

Non-operating income (expense)
(1,504
)
 
164

  Pre-tax income from continuing operations
39,938

 
49,401

Income tax provision
(15,665
)
 
(19,078
)
Loss from Town Shoes
(1,306
)
 
(309
)
   Net income
$
22,967

 
$
30,014

Diluted earnings per share
$
0.28

 
$
0.36

Weighted average diluted shares
80,732

 
82,705






DSW INC.
NON-GAAP RECONCILIATION
(unaudited and in thousands, except per share amounts)
 
Thirteen weeks ended
 
April 29, 2017
 
April 30, 2016
Reported net income
$
22,967

 
$
30,014

Adjustments:
 
 
 
Inventory step-up costs(1)
—

 
160

Transaction costs(2)
—

 
2,157

Amortization of intangible assets(2)
1,018

 
732

Restructuring expenses(4)
537

 
—

Change in fair value of contingent consideration liability(3)
1,084

 
1,445

Foreign currency loss(5)
1,462

 
—

Total adjustments, pre-tax
4,101

 
4,494

Tax effect of adjustments
(1,404
)
 
(1,749
)
Total adjustments, after tax
2,697

 
2,745

Adjusted net income
$
25,664

 
$
32,759

Reported diluted earnings per share
$
0.28

 
$
0.36

Adjusted diluted earnings per share
$
0.32

 
$
0.40


(1)
Related to the step-up of the value of Ebuys' inventory, which is recorded in gross profit.

(2)
Related to costs associated with the acquisition of Ebuys and the amortization expense associated with $38.7 million of acquired intangibles, which are recorded within operating expenses.

(3)
The Company agreed to pay additional amounts to Ebuys contingent upon achievement of certain negotiated goals. The Company has recognized a liability for this contingent consideration based on the estimated fair value at the date of acquisition with any differences between the acquisition-date fair value and the ultimate settlement of the obligations being recognized as an adjustment to income from operations.

(4)
Relates to the Company's expense management initiative as recorded within operating expenses.

(5) Relates to foreign exchange loss on Canadian dollar investments related to the funding of our upcoming Town Shoes acquisition.

Non-GAAP Measures

In addition to earnings per share and net income determined in accordance with accounting principles generally accepted in the United States ("GAAP"), for purposes of evaluating operating performance, the Company uses adjusted earnings per share and net income, which adjust for the effects of acquisition costs and the amortization expense of acquired intangible assets related to the Ebuys acquisition, restructuring costs related to the Company's expense management initiative, as well as foreign currency loss on Canadian dollar investments. The unaudited reconciliation of adjusted results should not be construed as an alternative to the reported results determined in accordance with GAAP. These financial measures are not based on any standardized methodology and are not necessarily comparable to similar measures presented by other companies. The Company believes that this non-GAAP information is useful as an additional means for investors to evaluate the Company’s operating performance, when reviewed in conjunction with the Company’s GAAP statements. These amounts are not determined in accordance with GAAP and therefore should not be used exclusively in evaluating the Company’s business and operations.

SOURCE DSW Inc.
For further information: Christina Cheng, 1-855-893-5691, investorrelations@dswinc.com