þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from | to |
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) |
Not Applicable |
(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, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act. | |||||||
Large accelerated filer | þ | Accelerated filer | o | ||||
Non-accelerated filer | o | (Do not check if a smaller reporting company) | Smaller reporting company | o | |||
Emerging growth company | o | ||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 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 |
Page | ||
PART I. FINANCIAL INFORMATION | ||
Item 1. Financial Statements | ||
Part II. OTHER INFORMATION | ||
PART I. | FINANCIAL INFORMATION |
Item 1. | Financial Statements |
Three months ended | Six months ended | ||||||||||||||
July 29, 2017 | July 30, 2016 | July 29, 2017 | July 30, 2016 | ||||||||||||
Net sales | $ | 680,409 | $ | 658,944 | $ | 1,371,511 | $ | 1,340,211 | |||||||
Cost of sales | (483,437 | ) | (472,083 | ) | (979,310 | ) | (948,993 | ) | |||||||
Operating expenses | (149,057 | ) | (145,088 | ) | (302,321 | ) | (299,284 | ) | |||||||
Change in fair value of contingent consideration liability | (1,168 | ) | (2,166 | ) | (2,252 | ) | (3,611 | ) | |||||||
Operating profit | 46,747 | 39,607 | 87,628 | 88,323 | |||||||||||
Interest expense | (47 | ) | (50 | ) | (94 | ) | (99 | ) | |||||||
Interest income | 708 | 673 | 1,316 | 1,243 | |||||||||||
Interest income, net | 661 | 623 | 1,222 | 1,144 | |||||||||||
Non-operating income (expense) | (679 | ) | 100 | (2,183 | ) | 264 | |||||||||
Income before income taxes and income (loss) from Town Shoes | 46,729 | 40,330 | 86,667 | 89,731 | |||||||||||
Income tax provision | (18,349 | ) | (15,716 | ) | (34,014 | ) | (34,794 | ) | |||||||
Income (loss) from Town Shoes | 219 | 418 | (1,087 | ) | 109 | ||||||||||
Net income | $ | 28,599 | $ | 25,032 | $ | 51,566 | $ | 55,046 | |||||||
Basic and diluted earnings per share: | |||||||||||||||
Basic earnings per share | $ | 0.36 | $ | 0.31 | $ | 0.64 | $ | 0.67 | |||||||
Diluted earnings per share | $ | 0.35 | $ | 0.30 | $ | 0.64 | $ | 0.67 | |||||||
Weighted average shares used in per share calculations: | |||||||||||||||
Basic shares | 80,317 | 82,053 | 80,267 | 82,003 | |||||||||||
Diluted shares | 80,714 | 82,655 | 80,729 | 82,691 |
Three months ended | Six months ended | ||||||||||||||
July 29, 2017 | July 30, 2016 | July 29, 2017 | July 30, 2016 | ||||||||||||
Net income | $ | 28,599 | $ | 25,032 | $ | 51,566 | $ | 55,046 | |||||||
Other comprehensive income (loss), net of income taxes: | |||||||||||||||
Foreign currency translation gain (loss) | 10,657 | (4,903 | ) | 6,537 | 7,246 | ||||||||||
Unrealized net gain on available-for-sale securities (net of tax expense of $55, $14, $0 and $130, respectively) | (23 | ) | 150 | 33 | 276 | ||||||||||
Reclassification adjustment for net losses realized in net income (net of tax expense of $65, $0, $0 and $0, respectively) | 527 | — | 2,107 | — | |||||||||||
Total other comprehensive income (loss), net of income taxes | 11,161 | (4,753 | ) | 8,677 | 7,522 | ||||||||||
Total comprehensive income | $ | 39,760 | $ | 20,279 | $ | 60,243 | $ | 62,568 |
July 29, 2017 | January 28, 2017 | July 30, 2016 | |||||||||
ASSETS | |||||||||||
Cash and cash equivalents | $ | 89,305 | $ | 110,657 | $ | 62,324 | |||||
Short-term investments | 182,062 | 98,530 | 103,467 | ||||||||
Accounts receivable | 16,596 | 18,456 | 18,848 | ||||||||
Accounts receivable from related parties | 1,146 | 550 | 81 | ||||||||
Inventories | 527,305 | 499,995 | 556,183 | ||||||||
Prepaid expenses and other current assets | 38,469 | 31,074 | 30,040 | ||||||||
Prepaid rent to related parties | 3 | 4 | 12 | ||||||||
Total current assets | 854,886 | 759,266 | 770,955 | ||||||||
Property and equipment, net | 364,552 | 375,251 | 379,643 | ||||||||
Long-term investments | — | 77,904 | 77,901 | ||||||||
Goodwill | 79,689 | 79,689 | 81,043 | ||||||||
Deferred income taxes | 18,765 | 14,934 | 20,690 | ||||||||
Long-term prepaid rent to related parties | 715 | 768 | 821 | ||||||||
Equity investment in Town Shoes | 10,350 | 15,830 | 17,261 | ||||||||
Note receivable from Town Shoes | 60,094 | 53,121 | 50,200 | ||||||||
Intangible assets | 33,065 | 35,108 | 39,316 | ||||||||
Other assets | 17,429 | 16,605 | 21,145 | ||||||||
Total assets | $ | 1,439,545 | $ | 1,428,476 | $ | 1,458,975 | |||||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||
Accounts payable | $ | 164,659 | $ | 185,497 | $ | 198,584 | |||||
Accounts payable to related parties | 718 | 774 | 656 | ||||||||
Accrued expenses | 121,934 | 130,334 | 115,192 | ||||||||
Total current liabilities | 287,311 | 316,605 | 314,432 | ||||||||
Non-current liabilities | 142,499 | 141,179 | 143,562 | ||||||||
Contingent consideration liability | 36,456 | 33,204 | 59,611 | ||||||||
Total liabilities | 466,266 | 490,988 | 517,605 | ||||||||
Commitments and contingencies | — | — | — | ||||||||
Shareholders' equity: | |||||||||||
Common shares paid-in capital, no par value; 250,000 Class A Common Shares authorized; 85,201, 85,038 and 84,570 issued, respectively; 72,610, 72,447 and 74,359 outstanding, respectively; 100,000 Class B Common Shares authorized, 7,733 issued and outstanding | 953,868 | 946,351 | 936,572 | ||||||||
Preferred shares, no par value; 100,000 authorized; no shares issued or outstanding | — | — | — | ||||||||
Treasury shares, at cost, 12,591, 12,591 and 10,211 outstanding, respectively | (316,531 | ) | (316,531 | ) | (266,531 | ) | |||||
Retained earnings | 366,199 | 346,602 | 309,503 | ||||||||
Basis difference related to acquisition of commonly controlled entity | (24,993 | ) | (24,993 | ) | (24,993 | ) | |||||
Accumulated other comprehensive loss | (5,264 | ) | (13,941 | ) | (13,181 | ) | |||||
Total shareholders' equity | 973,279 | 937,488 | 941,370 | ||||||||
Total liabilities and shareholders' equity | $ | 1,439,545 | $ | 1,428,476 | $ | 1,458,975 |
Six months ended | |||||||
July 29, 2017 | July 30, 2016 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 51,566 | $ | 55,046 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 41,972 | 40,389 | |||||
Stock-based compensation expense | 7,851 | 7,316 | |||||
Deferred income taxes | (3,831 | ) | 1,125 | ||||
Loss (income) from Town Shoes | 1,087 | (109 | ) | ||||
Change in fair value of contingent consideration liability | 2,252 | 3,611 | |||||
Loss on disposal of long-lived assets | 217 | 702 | |||||
Loss on foreign currency transactions | 2,161 | — | |||||
Amortization of investment discounts and premiums | 314 | 759 | |||||
Change in operating assets and liabilities: | |||||||
Accounts receivable | 1,264 | (1,842 | ) | ||||
Inventories | (27,310 | ) | (41,795 | ) | |||
Prepaid expenses and other current assets | (8,061 | ) | 7,946 | ||||
Accounts payable | (18,949 | ) | (17,059 | ) | |||
Accrued expenses | (9,016 | ) | 3,256 | ||||
Other | 3,120 | 1,799 | |||||
Net cash provided by operating activities | 44,637 | 61,144 | |||||
Cash flows from investing activities: | |||||||
Cash paid for property and equipment | (28,139 | ) | (51,934 | ) | |||
Purchases of available-for-sale investments | (83,872 | ) | (57,484 | ) | |||
Sales of available-for-sale investments | 82,436 | 178,980 | |||||
Additional borrowings by Town Shoes | (5,689 | ) | (6,641 | ) | |||
Acquisition of Ebuys | — | (60,411 | ) | ||||
Net cash provided by (used in) investing activities | (35,264 | ) | 2,510 | ||||
Cash flows from financing activities: | |||||||
Proceeds from exercise of stock options | 358 | 429 | |||||
Net change in vendor payment program | 847 | — | |||||
Cash paid for income taxes for stock-based compensation shares withheld | (692 | ) | (1,104 | ) | |||
Dividends paid | (31,969 | ) | (32,683 | ) | |||
Net cash used in financing activities | (31,456 | ) | (33,358 | ) | |||
Net increase (decrease) in cash, cash equivalents, and restricted cash | (22,083 | ) | 30,296 | ||||
Cash, cash equivalents, and restricted cash, beginning of period | 115,311 | 40,171 | |||||
Cash, cash equivalents, and restricted cash, end of period | $ | 93,228 | $ | 70,467 | |||
Supplemental disclosures of cash flow information: | |||||||
Cash paid during the period for income taxes | $ | 46,092 | $ | 25,685 | |||
Non-cash investing and financing activities: | |||||||
Property and equipment purchases not yet paid | $ | 5,711 | $ | 4,944 | |||
Ebuys contingent purchase price | $ | — | $ | 56,000 |
Preliminary Purchase Price as of March 4, 2016 | Adjustments | Final Purchase Price as of January 28, 2017 | |||||||||
(in thousands) | |||||||||||
Purchase price: | |||||||||||
Cash consideration | $ | 60,411 | $ | (635 | ) | $ | 59,776 | ||||
Contingent consideration | 56,000 | (2,645 | ) | 53,355 | |||||||
$ | 116,411 | $ | (3,280 | ) | $ | 113,131 | |||||
Fair value of assets and liabilities acquired: | |||||||||||
Accounts and other receivables | $ | 1,623 | $ | (287 | ) | $ | 1,336 | ||||
Inventory | 30,152 | 18 | 30,170 | ||||||||
Other current assets | 191 | 335 | 526 | ||||||||
Property and equipment | 1,221 | 22 | 1,243 | ||||||||
Goodwill | 54,785 | (995 | ) | 53,790 | |||||||
Intangible assets | 41,301 | (2,600 | ) | 38,701 | |||||||
Accounts payable and other long-term liabilities | (12,862 | ) | 227 | (12,635 | ) | ||||||
$ | 116,411 | $ | (3,280 | ) | $ | 113,131 |
July 29, 2017 | January 28, 2017 | July 30, 2016 | |||||||||
(in thousands) | |||||||||||
Cash and cash equivalents | $ | 89,305 | $ | 110,657 | $ | 62,324 | |||||
Restricted cash, included in prepaid expenses and other current assets | 3,923 | 4,654 | 8,143 | ||||||||
Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statements of cash flows | $ | 93,228 | $ | 115,311 | $ | 70,467 |
• | Level 1 - Quoted prices in active markets for identical assets or liabilities. |
• | Level 2 - Quoted prices for similar assets or liabilities in active markets or inputs that are observable. |
• | Level 3 - Unobservable inputs in which little or no market activity exists. |
Six months ended | |||||||||||||||||||||||
July 29, 2017 | July 30, 2016 | ||||||||||||||||||||||
Foreign Currency Translation | Available-for-Sale Securities | Total | Foreign Currency Translation | Available-for-Sale Securities | Total | ||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Accumulated other comprehensive loss - beginning of period | $ | (13,699 | ) | $ | (242 | ) | $ | (13,941 | ) | $ | (20,530 | ) | $ | (173 | ) | $ | (20,703 | ) | |||||
Other comprehensive income (loss) before reclassifications | 6,537 | 33 | 6,570 | 7,246 | 276 | 7,522 | |||||||||||||||||
Amounts reclassified to non-operating income | 2,161 | (54 | ) | 2,107 | — | — | — | ||||||||||||||||
Other comprehensive income (loss) | 8,698 | (21 | ) | 8,677 | 7,246 | 276 | 7,522 | ||||||||||||||||
Accumulated other comprehensive income (loss) - end of period | $ | (5,001 | ) | $ | (263 | ) | $ | (5,264 | ) | $ | (13,284 | ) | $ | 103 | $ | (13,181 | ) |
Six Months Ended July 30, 2016 | |||
(in thousands) | |||
Net cash provided by investing activities, as previously reported | $ | 2,043 | |
Eliminated the impact of the increase in restricted cash | 467 | ||
Net cash provided by investing activities, as adjusted | $ | 2,510 | |
Net increase in cash and cash equivalents, as previously reported | $ | 29,829 | |
Eliminated the impact of the increase in restricted cash | 467 | ||
Net increase in cash, cash equivalents, and restricted cash, as adjusted | $ | 30,296 | |
Cash and cash equivalents, beginning of period, as previously reported | $ | 32,495 | |
Included restricted cash | 7,676 | ||
Cash, cash equivalents, and restricted cash, beginning of period, as adjusted | $ | 40,171 | |
Cash and cash equivalents, end of period, as previously reported | $ | 62,324 | |
Included restricted cash | 8,143 | ||
Cash, cash equivalents, and restricted cash, end of period, as adjusted | $ | 70,467 |
Three months ended | Six months ended | ||||||||||
July 29, 2017 | July 30, 2016 | July 29, 2017 | July 30, 2016 | ||||||||
(in thousands) | |||||||||||
Weighted average shares outstanding - Basic shares | 80,317 | 82,053 | 80,267 | 82,003 | |||||||
Dilutive effect of stock-based compensation awards | 397 | 602 | 462 | 688 | |||||||
Weighted average shares outstanding - Diluted shares | 80,714 | 82,655 | 80,729 | 82,691 |
Three months ended | Six months ended | ||||||||||||||
July 29, 2017 | July 30, 2016 | July 29, 2017 | July 30, 2016 | ||||||||||||
(in thousands) | |||||||||||||||
Stock options | $ | 1,586 | $ | 1,547 | $ | 3,337 | $ | 3,224 | |||||||
Restricted stock units | 655 | 640 | 1,485 | 1,870 | |||||||||||
Performance-based restricted stock units | 970 | 550 | 1,947 | 1,232 | |||||||||||
Director stock units | 1,031 | 922 | 1,082 | 990 | |||||||||||
$ | 4,242 | $ | 3,659 | $ | 7,851 | $ | 7,316 |
Six months ended | |||
July 29, 2017 | July 30, 2016 | ||
Assumptions: | |||
Risk-free interest rate | 1.9% | 1.5% | |
Expected volatility | 34.4% | 36.0% | |
Expected option term | 5.5 years | 5.4 years | |
Dividend yield | 3.9% | 3.0% | |
Other data: | |||
Weighted average grant date fair value | $4.17 | $6.59 |
Six months ended July 29, 2017 | |||||||||||
Stock Options | RSUs | PSUs | DSUs | ||||||||
(in thousands) | |||||||||||
Outstanding - beginning of period | 3,799 | 351 | 250 | 311 | |||||||
Granted | 1,756 | 285 | 258 | 71 | |||||||
Exercised / vested | (35 | ) | (58 | ) | (34 | ) | (45 | ) | |||
Forfeited / expired | (327 | ) | (63 | ) | (3 | ) | — | ||||
Outstanding - end of period | 5,193 | 515 | 471 | 337 |
Short-term Investments | Long-term Investments | ||||||||||||||||||||||
July 29, 2017 | January 28, 2017 | July 30, 2016 | July 29, 2017 | January 28, 2017 | July 30, 2016 | ||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Available-for-sale investments: | |||||||||||||||||||||||
Carrying value | $ | 182,325 | $ | 98,793 | $ | 103,051 | $ | — | $ | 77,882 | $ | 78,068 | |||||||||||
Unrealized gains included in accumulated other comprehensive loss | 99 | 101 | 455 | — | 133 | 33 | |||||||||||||||||
Unrealized losses included in accumulated other comprehensive loss | (362 | ) | (364 | ) | (39 | ) | — | (111 | ) | (200 | ) | ||||||||||||
Total investments | $ | 182,062 | $ | 98,530 | $ | 103,467 | $ | — | $ | 77,904 | $ | 77,901 |
July 29, 2017 | |||||||||||||||
Total | Level 1 | Level 2 | Level 3 | ||||||||||||
(in thousands) | |||||||||||||||
Financial assets: | |||||||||||||||
Cash and cash equivalents | $ | 89,305 | $ | 89,305 | — | — | |||||||||
Short-term investments | 182,062 | 2,265 | $ | 179,797 | — | ||||||||||
$ | 271,367 | $ | 91,570 | $ | 179,797 | $ | — | ||||||||
Financial liabilities - | |||||||||||||||
Contingent consideration liability | $ | 36,456 | — | — | $ | 36,456 | |||||||||
$ | 36,456 | $ | — | $ | — | $ | 36,456 |
January 28, 2017 | |||||||||||||||
Total | Level 1 | Level 2 | Level 3 | ||||||||||||
(in thousands) | |||||||||||||||
Financial assets: | |||||||||||||||
Cash and cash equivalents | $ | 110,657 | $ | 110,657 | — | — | |||||||||
Short-term investments | 98,530 | 2,446 | $ | 96,084 | — | ||||||||||
Long-term investments | 77,904 | 431 | 77,473 | — | |||||||||||
$ | 287,091 | $ | 113,534 | $ | 173,557 | $ | — | ||||||||
Financial liabilities - | |||||||||||||||
Contingent consideration liability | $ | 33,204 | — | — | $ | 33,204 | |||||||||
$ | 33,204 | $ | — | $ | — | $ | 33,204 |
July 30, 2016 | |||||||||||||||
Total | Level 1 | Level 2 | Level 3 | ||||||||||||
(in thousands) | |||||||||||||||
Financial assets: | |||||||||||||||
Cash and cash equivalents | $ | 62,324 | $ | 62,324 | — | ||||||||||
Short-term investments | 103,467 | 120 | $ | 103,347 | |||||||||||
Long-term investments | 77,901 | 314 | 77,587 | ||||||||||||
$ | 243,692 | $ | 62,758 | $ | 180,934 | $ | — | ||||||||
Financial liabilities - | |||||||||||||||
Contingent consideration liability | $ | 59,611 | — | — | $ | 59,611 | |||||||||
$ | 59,611 | $ | — | $ | — | $ | 59,611 |
July 29, 2017 | January 28, 2017 | July 30, 2016 | |||||||||
(in thousands) | |||||||||||
Land | $ | 1,110 | $ | 1,110 | $ | 1,110 | |||||
Buildings | 12,485 | 12,485 | 12,485 | ||||||||
Building and leasehold improvements | 398,129 | 393,505 | 378,355 | ||||||||
Furniture, fixtures and equipment | 417,226 | 408,653 | 382,687 | ||||||||
Software | 135,844 | 123,460 | 121,848 | ||||||||
Construction in progress(1) | 28,008 | 27,456 | 35,628 | ||||||||
Total property and equipment | 992,802 | 966,669 | 932,113 | ||||||||
Accumulated depreciation and amortization | (628,250 | ) | (591,418 | ) | (552,470 | ) | |||||
Property and equipment, net | $ | 364,552 | $ | 375,251 | $ | 379,643 |
(1) | Construction in progress is comprised primarily of the construction of leasehold improvements and furniture and fixtures related to unopened stores and internal-use software under development. |
July 29, 2017 | January 28, 2017 | July 30, 2016 | |||||||||
(in thousands) | |||||||||||
Gift cards and merchandise credits | $ | 40,327 | $ | 45,743 | $ | 38,062 | |||||
Compensation | 14,830 | 17,132 | 15,184 | ||||||||
Taxes | 17,182 | 21,764 | 18,887 | ||||||||
Customer loyalty program | 12,410 | 11,502 | 11,401 | ||||||||
Other (1) | 37,185 | 34,193 | 31,658 | ||||||||
$ | 121,934 | $ | 130,334 | $ | 115,192 |
(1) | Other is comprised of deferred revenue, sales return allowance, and various other accrued expenses, including amounts owed under our vendor payment program described below. |
July 29, 2017 | January 28, 2017 | July 30, 2016 | |||||||||
(in thousands) | |||||||||||
Construction and tenant allowances | $ | 84,002 | $ | 87,886 | $ | 89,460 | |||||
Deferred rent | 38,187 | 37,779 | 37,814 | ||||||||
Accrual for lease obligations | 7,328 | 7,283 | 8,584 | ||||||||
Other (1) | 12,982 | 8,231 | 7,704 | ||||||||
$ | 142,499 | $ | 141,179 | $ | 143,562 |
(1) | Other is comprised of various other accrued expenses that we expect will settle beyond one year from the end of the period. |
Six months ended | |||||||
July 29, 2017 | July 30, 2016 | ||||||
(in thousands) | |||||||
Contingent consideration liability - beginning of period | $ | 33,204 | $ | — | |||
Preliminary purchase price | — | 56,000 | |||||
Accretion in value | 2,252 | 3,611 | |||||
Other adjustments | 1,000 | — | |||||
Contingent consideration liability - end of period | $ | 36,456 | $ | 59,611 |
DSW segment | ABG segment | Other | Total | ||||||||||
(in thousands) | |||||||||||||
Three months ended July 29, 2017 | |||||||||||||
Net sales | $ | 628,379 | 31,330 | 20,700 | $ | 680,409 | |||||||
Gross profit | $ | 192,538 | 6,438 | (2,004 | ) | $ | 196,972 | ||||||
Three months ended July 30, 2016 | |||||||||||||
Net sales | $ | 603,927 | 35,446 | 19,571 | $ | 658,944 | |||||||
Gross profit | $ | 177,885 | 7,217 | 1,759 | $ | 186,861 | |||||||
Six months ended July 29, 2017 | |||||||||||||
Net sales | $ | 1,253,166 | 75,318 | 43,027 | $ | 1,371,511 | |||||||
Gross profit | $ | 377,188 | 16,936 | (1,923 | ) | $ | 392,201 | ||||||
Six months ended July 30, 2016 | |||||||||||||
Net sales | $ | 1,226,959 | 78,585 | 34,667 | $ | 1,340,211 | |||||||
Gross profit | $ | 369,304 | 18,030 | 3,884 | $ | 391,218 |
• | 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, consumer preferences and changing customer expectations; |
• | risks related to the loss or disruption of our distribution and/or fulfillment operations; |
• | continuation of agreements with and our reliance on the financial condition of 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 the loss or disruption of our information systems and data; |
• | our ability to prevent breaches of our information security and the compromise of sensitive and confidential data; |
• | failure to retain our key executives or attract qualified new personnel; |
• | our 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 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 and access to liquidity. |
(1) | A store or affiliated shoe department is considered comparable when in operation for at least 14 months at the beginning of the fiscal year. Stores or affiliated business departments, as the case may be, are added to the comparable base at the beginning of the year and are dropped for comparative purposes in the quarter they are closed. Comparable sales includes sales from dsw.com and currently excludes sales from Gordmans and Ebuys. The calculation of comparable sales varies across the retail industry and, as a result, the calculations of other retail companies may not be consistent with our calculation. |
Three months ended | Six months ended | ||||||
July 29, 2017 | July 30, 2016 | July 29, 2017 | July 30, 2016 | ||||
Net sales | 100.0% | 100.0% | 100.0% | 100.0% | |||
Cost of sales | (71.1) | (71.6) | (71.4) | (70.8) | |||
Gross profit | 28.9 | 28.4 | 28.6 | 29.2 | |||
Operating expenses | (21.9) | (22.0) | (22.0) | (22.3) | |||
Change in fair value of contingent consideration liability | (0.1) | (0.4) | (0.2) | (0.3) | |||
Operating profit | 6.9 | 6.0 | 6.4 | 6.6 | |||
Interest income, net | 0.1 | 0.1 | 0.1 | 0.1 | |||
Non-operating income (expense) | (0.1) | 0.0 | (0.2) | 0.0 | |||
Income before income taxes and income (loss) from Town Shoes | 6.9 | 6.1 | 6.3 | 6.7 | |||
Income tax provision | (2.7) | (2.4) | (2.4) | (2.6) | |||
Income (loss) from Town Shoes | 0.0 | 0.1 | (0.1) | 0.0 | |||
Net income | 4.2% | 3.8% | 3.8% | 4.1% |
Three months ended July 29, 2017 | Six months ended July 29, 2017 | ||||||
(in thousands) | |||||||
Net sales for the same period last year | $ | 658,944 | $ | 1,340,211 | |||
Increase (decrease) in comparable sales | 3,590 | (15,872 | ) | ||||
Net increase from non-comparable store sales, Gordmans, Ebuys and other changes | 17,875 | 47,172 | |||||
Total net sales | $ | 680,409 | $ | 1,371,511 |
Three months ended | Six months ended | ||||||||||||||||||||||
July 29, 2017 | July 30, 2016 | Change | July 29, 2017 | July 30, 2016 | Change | ||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
DSW segment | $ | 628,379 | $ | 603,927 | $ | 24,452 | $ | 1,253,166 | $ | 1,226,959 | $ | 26,207 | |||||||||||
ABG segment | 31,330 | 35,446 | (4,116 | ) | 75,318 | 78,585 | (3,267 | ) | |||||||||||||||
Other(1) | 20,700 | 19,571 | 1,129 | 43,027 | 34,667 | 8,360 | |||||||||||||||||
Total net sales | $ | 680,409 | $ | 658,944 | $ | 21,465 | $ | 1,371,511 | $ | 1,340,211 | $ | 31,300 |
(1) | Other represents net sales for Ebuys and franchise activity with the Apparel Group. |
Three months ended | Six months ended | ||||||
July 29, 2017 | July 30, 2016 | July 29, 2017 | July 30, 2016 | ||||
DSW segment | 0.6% | (1.2)% | (1.3)% | (1.3)% | |||
ABG segment | (0.1)% | (1.0)% | (1.0)% | (2.3)% | |||
Total Company | 0.6% | (1.2)% | (1.3)% | (1.4)% |
Three months ended | Six months ended | ||||||||||
July 29, 2017 | July 30, 2016 | July 29, 2017 | July 30, 2016 | ||||||||
DSW segment merchandise margin | 44.1 | % | 43.1 | % | 43.5 | % | 43.5 | % | |||
Store occupancy expenses | (11.4 | ) | (11.5 | ) | (11.2 | ) | (11.2 | ) | |||
Distribution and fulfillment expenses | (2.1 | ) | (2.1 | ) | (2.2 | ) | (2.2 | ) | |||
DSW segment gross profit | 30.6 | % | 29.5 | % | 30.1 | % | 30.1 | % | |||
ABG segment merchandise margin | 42.3 | % | 41.7 | % | 44.3 | % | 44.3 | % | |||
Occupancy expenses | (20.6 | ) | (20.2 | ) | (20.7 | ) | (20.3 | ) | |||
Distribution and fulfillment expenses | (1.1 | ) | (1.1 | ) | (1.1 | ) | (1.1 | ) | |||
ABG segment gross profit | 20.6 | % | 20.4 | % | 22.5 | % | 22.9 | % | |||
Other segment merchandise margin - Ebuys | 19.8 | % | 34.0 | % | 25.1 | % | 34.2 | % | |||
Marketplace fees | (11.2 | ) | (12.0 | ) | (11.8 | ) | (11.5 | ) | |||
Fulfillment expenses | (18.3 | ) | (13.0 | ) | (17.8 | ) | (11.5 | ) | |||
Other segment gross profit - Ebuys | (9.7 | )% | 9.0 | % | (4.5 | )% | 11.2 | % | |||
Total Company gross profit | 28.9 | % | 28.4 | % | 28.6 | % | 29.2 | % |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
(a) Total Number of Shares Purchased | (b) Average Price Paid per Share | (c) Total Number of Shares Purchased as Part of Publicly Announced Programs | (d) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Programs | ||||||||||
(in thousands, except per share amounts) | |||||||||||||
April 30, 2017 to May 27, 2017 | — | $ | — | — | $ | 33,469 | |||||||
May 28, 2017 to July 1, 2017(1) | 2 | $ | 16.80 | — | $ | 33,469 | |||||||
July 2, 2017 to July 29, 2017 | — | $ | — | — | $ | 33,469 | |||||||
2 | $ | 16.80 | — |
(1) | The total number of shares repurchased relates to shares withheld in connection with tax payments due upon vesting of employee restricted stock awards. |
Item 6. | Exhibits |
Date: | August 25, 2017 | By: | /s/ Jared Poff | |
Jared Poff | ||||
Senior Vice President and Chief Financial Officer | ||||
(Principal Financial and Accounting Officer and duly authorized officer) |
Exhibit No. | Description | |
3.1 | ||
3.2 | ||
4.1 | ||
31.1* | ||
31.2* | ||
32.1* | ||
32.2* | ||
101* | XBRL Instance Documents |
August 25, 2017 | By: | /s/ Roger Rawlins |
Roger Rawlins | ||
Chief Executive Officer |
August 25, 2017 | By: | /s/ Jared Poff |
Jared Poff | ||
Senior Vice President and Chief Financial Officer |
(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. |
August 25, 2017 | By: | /s/ Roger Rawlins |
Roger Rawlins | ||
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. |
(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. |
August 25, 2017 | By: | /s/ Jared Poff |
Jared Poff | ||
Senior 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. |
Document and Entity Information - shares |
6 Months Ended | |
---|---|---|
Jul. 29, 2017 |
Aug. 18, 2017 |
|
Class of Stock [Line Items] | ||
Entity Registrant Name | DSW Inc. | |
Entity Central Index Key | 0001319947 | |
Current Fiscal Year End Date | --02-03 | |
Entity Filer Category | Large Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Jul. 29, 2017 | |
Document Fiscal Year Focus | 2017 | |
Document Fiscal Period Focus | Q2 | |
Amendment Flag | false | |
Entity Well-known Seasoned Issuer | Yes | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes | |
Class A Common Shares | ||
Class of Stock [Line Items] | ||
Entity Common Stock, Shares Outstanding | 72,616,519 | |
Class B Common Shares | ||
Class of Stock [Line Items] | ||
Entity Common Stock, Shares Outstanding | 7,732,786 |
Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jul. 29, 2017 |
Jul. 30, 2016 |
Jul. 29, 2017 |
Jul. 30, 2016 |
|
Net sales | $ 680,409 | $ 658,944 | $ 1,371,511 | $ 1,340,211 |
Cost of sales | (483,437) | (472,083) | (979,310) | (948,993) |
Operating expenses | (149,057) | (145,088) | (302,321) | (299,284) |
Business Combination, Contingent Consideration Arrangements, Change in Amount of Contingent Consideration, Liability | (1,168) | (2,166) | (2,252) | (3,611) |
Operating profit | 46,747 | 39,607 | 87,628 | 88,323 |
Interest expense | (47) | (50) | (94) | (99) |
Interest income | 708 | 673 | 1,316 | 1,243 |
Interest income, net | 661 | 623 | 1,222 | 1,144 |
Nonoperating Income (Expense) | (679) | 100 | (2,183) | 264 |
Income (Loss) from Continuing Operations before Equity Method Investments, Income Taxes, Noncontrolling Interest | 46,729 | 40,330 | 86,667 | 89,731 |
Income tax provision | (18,349) | (15,716) | (34,014) | (34,794) |
Income (loss) from Town Shoes | 219 | 418 | (1,087) | 109 |
Net income | $ 28,599 | $ 25,032 | $ 51,566 | $ 55,046 |
Basic and diluted earnings (loss) per share [Abstract]: | ||||
Basic earnings per share | $ 0.36 | $ 0.31 | $ 0.64 | $ 0.67 |
Diluted earnings per share | $ 0.35 | $ 0.30 | $ 0.64 | $ 0.67 |
Shares used in per share calculations [Abstract]: | ||||
Basic shares | 80,317 | 82,053 | 80,267 | 82,003 |
Diluted shares | 80,714 | 82,655 | 80,729 | 82,691 |
Condensed Consolidated Comprehensive Income Statement - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jul. 29, 2017 |
Jul. 30, 2016 |
Jul. 29, 2017 |
Jul. 30, 2016 |
|
Statement of Comprehensive Income [Abstract] | ||||
Net income | $ 28,599 | $ 25,032 | $ 51,566 | $ 55,046 |
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Gain (Loss) Arising During Period, Net of Tax | 10,657 | (4,903) | 6,537 | 7,246 |
Other Comprehensive Income (Loss), before Reclassifications, Net of Tax | (23) | 150 | 33 | 276 |
Reclassification from AOCI, Current Period, Net of Tax, Attributable to Parent | 527 | 0 | 2,107 | 0 |
Other Comprehensive Income (Loss), Net of Tax, Portion Attributable to Parent | 11,161 | (4,753) | 8,677 | 7,522 |
Comprehensive Income (Loss), Net of Tax, Attributable to Parent | $ 39,760 | $ 20,279 | $ 60,243 | $ 62,568 |
Condensed Consolidated Comprehensive Income Statement Of Other Comprehensive Income (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jul. 29, 2017 |
Jul. 30, 2016 |
Jul. 29, 2017 |
Jul. 30, 2016 |
|
Statement of Comprehensive Income (Parenthetical) [Abstract] | ||||
Other Comprehensive Income (Loss), Unrealized Holding Gain (Loss) on Securities Arising During Period, Tax | $ 55 | $ 14 | $ 0 | $ 130 |
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI for Sale of Securities, Tax | $ 65 | $ 0 | $ 0 | $ 0 |
Business Operations and Basis of Presentation |
6 Months Ended |
---|---|
Jul. 29, 2017 | |
Business Operations and Basis of Presentation [Abstract] | |
Business Description and Basis of Presentation [Text Block] | BUSINESS OPERATIONS AND BASIS OF PRESENTATION Business Operations- DSW Inc., an Ohio corporation, together with its wholly-owned subsidiaries, is the destination for fabulous footwear brands and accessories at a great value every single day. We offer a wide assortment of brand name dress, casual and athletic footwear and accessories for women, men and kids. We conduct business in two reportable segments: the DSW segment ("DSW"), which includes DSW stores and dsw.com, and the Affiliated Business Group ("ABG") segment. The ABG segment partners with three other retailers to help build and optimize their in-store and online footwear businesses. ABG supplies merchandise for the shoe departments of Stein Mart, Gordmans, and Frugal Fannie's. On March 13, 2017, Gordmans filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code and announced its plan to liquidate inventory and other assets. Stage Stores, Inc. acquired 58 of the Gordmans' stores and we have signed an agreement to provide services for these stores through the end of fiscal 2017. We also have an equity investment in Town Shoes Limited ("Town Shoes"). Town Shoes is the market leader in Canada for the sale of branded footwear offered in stores and on e-commerce sites under the banners of The Shoe Company, Shoe Warehouse, Town Shoes and DSW. During fiscal 2016, we completed several transactions that supported our efforts to grow market share within footwear and accessories domestically and internationally. On March 4, 2016, we acquired Ebuys, Inc. ("Ebuys"), a leading off price footwear and accessories retailer operating in digital marketplaces. Ebuys sells products to customers located in North America, Europe, Australia and Asia. On August 2, 2016, we signed an agreement with the Apparel Group as an exclusive franchise partner in the Gulf Coast region of the Middle East. Under this franchise agreement, the first franchise store opened during the second quarter of fiscal 2017, and we plan to expand the DSW banner by up to 40 stores across the territory. Basis of Presentation- The accompanying unaudited, condensed consolidated financial statements have been prepared by management in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, we do not include all of the information and footnotes required by GAAP for complete financial statements. The accompanying financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. All such adjustments are of a normal recurring nature. The condensed consolidated financial position, results of operations and cash flows for these interim periods are not necessarily indicative of the results that may be expected in future periods. The balance sheet at January 28, 2017 has been derived from the audited financial statements at that date. The financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended January 28, 2017, filed with the U.S. Securities and Exchange Commission on March 23, 2017. Fiscal Year- Our fiscal year ends on the Saturday nearest to January 31. References to a fiscal year refer to the calendar year in which the fiscal year begins. |
Acquisition and Equity Method Investment |
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Equity Method Investments and Joint Ventures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity Method Investments and Joint Ventures Disclosure [Text Block] | ACQUISITION AND EQUITY INVESTMENT Acquisition of Ebuys- On March 4, 2016, we acquired 100% ownership of Ebuys for cash and future amounts to be paid to the sellers of Ebuys contingent upon achievement of certain milestones. During fiscal 2016, we had purchase price adjustments based on working capital adjustments and measurement period adjustments of the contingent consideration liability, based on additional information about facts and circumstances that existed at the acquisition date that were obtained after that date. We also made various measurement period adjustments for the assets and liabilities acquired. The preliminary and final purchase price and the allocation of the total consideration to the fair values of the assets and liabilities acquired consisted of the following:
The final fair value of intangible assets includes $22.3 million for online retailer and customer relationships based on using the excess earnings method, $11.0 million for tradenames based on using the relief from royalty method, and $5.4 million for non-compete agreements based on using the with-and-without method. The categorization of the fair value framework used for these methods are considered Level 3 due to the subjective nature of the unobservable inputs used to determine the fair value. The goodwill represents the intangible assets that do not qualify for separate recognition and is primarily the result of expected synergies, vertical integration as a market for selling aged inventory, online presence, and the acquired workforce. Goodwill related to this acquisition is deductible for income tax purposes. During fiscal 2016 and 2017, we also made adjustments to the contingent consideration liability based on Ebuys' results of operations and revised projections for the contingent periods and accretion in value. These adjustments were not considered measurement period adjustments and were recognized as an adjustment to income from operations. Equity Investment in Town Shoes- In May 2014, we acquired a 49.2% interest in Town Shoes for $75.1 million Canadian dollars ("CAD") ($68.9 million United States dollars ("USD")), which included the purchase of an unsecured subordinated note from Town Shoes issued on February 14, 2012 that earns payment-in-kind interest at 12% and matures on February 14, 2022. As of July 29, 2017, our ownership percentage was 46.3%. The dilution of our ownership is due to Town Shoes' employee exercise of stock options. Our ownership stake provides 50% voting control and board representation equal to the co-investor. Additionally, the Town Shoes co-investor holds a put option to sell the remaining interest in Town Shoes in fiscal 2017 to the Company and for the subsequent two years. We hold a call option to purchase the remaining interest in Town Shoes in fiscal 2018, and for the subsequent two years, if the Town Shoe co-investor has not exercised their put option. During fiscal 2015, we invested $100 million CAD in available-for-sale securities denominated in CAD in anticipation of funding the future purchase of the remaining interest in Town Shoes. As of July 29, 2017, these available-for-sale securities are classified as short-term investments based on management's intent to exercise the call option to purchase the remaining interest in Town Shoes in the first half of fiscal 2018. |
Significant Accounting Policies |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Significant Accounting Policies | SIGNIFICANT ACCOUNTING POLICIES Accounting Policies- The complete summary of significant accounting policies is included in the notes to the consolidated financial statements as presented in our Annual Report on Form 10-K for the fiscal year ended January 28, 2017. Principles of Consolidation- The consolidated financial statements include the accounts of DSW Inc. and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. All amounts are in USD, unless otherwise noted. Use of Estimates- The preparation of 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 contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Significant estimates are required as a part of sales returns, depreciation, amortization, inventory valuation, contingent consideration liability, customer loyalty program reserve, recoverability of long-lived assets and intangible assets, legal reserves, accrual for lease obligations and establishing reserves for self-insurance. Although these estimates are based on management's knowledge of current events and actions it may undertake in the future, actual results could differ from these estimates. Cash, Cash Equivalents, and Restricted Cash- Cash and cash equivalents represent cash, money market funds and credit card receivables that generally settle within three days. Restricted cash represents cash that is restricted as to withdrawal or usage and consists of a mandatory cash deposit with the lender for outstanding letters of credit. The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same such amounts shown in the condensed consolidated statements of cash flows:
Fair Value- 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. Assets and liabilities recorded at fair value are categorized using defined hierarchical levels related to the subjectivity associated with the inputs to fair value measurements as follows:
Accumulated Other Comprehensive Income (Loss)- Changes for the balances of each component of accumulated other comprehensive loss were as follows (all amounts are net of tax):
Adopted Accounting Standards- In the first quarter of fiscal 2017, we adopted the Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU") 2016-09, Improvements to Employee Share-Based Payment Accounting, which eliminated the requirement to recognize excess tax benefits in common shares paid-in capital and the requirement to evaluate tax deficiencies for common shares paid-in capital or income tax expense classification, and provides for these benefits or deficiencies to be recorded as an income tax expense or benefit on a prospective basis. For the consolidated statements of cash flows, excess tax benefits related to stock-based compensation is no longer presented, on a retroactive basis, as a financing activity cash inflow and as an operating activity cash outflow. As we did not have any excess tax benefits related to stock-based compensation during the six months ended July 30, 2016, the adoption of ASU 2016-09 did not result in a change in the activity presented in the statements of cash flows. In the first quarter of fiscal 2017, we early adopted ASU 2016-18, Statement of Cash Flows - Restricted Cash, which requires that the consolidated statements of cash flows provides the change in the total of cash, cash equivalents, and restricted cash. As a result of this adoption, we no longer show the changes in restricted cash balances as a component of cash flows from investing activities but instead include the balances of restricted cash together with cash and cash equivalents for the beginning and end of the periods presented. As a result of adopting ASU 2016-18, we adjusted the statements of cash flows on a retroactive basis as follows:
Recent Accounting Pronouncements- In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which provides a single comprehensive accounting standard for revenue recognition for contracts with customers and supersedes current guidance. Under ASU 2014-09, companies will recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the payment to which a company expects to be entitled in exchange for those goods or services. The standard also will require enhanced disclosures and provide more comprehensive guidance for transactions such as service revenue and contract modifications. The standard is effective for us in the first quarter of fiscal 2018, which we plan to adopt using the full retrospective method where each prior period presented is restated. We have completed an assessment identifying areas of impact to our financial statements, including sales returns, licensing arrangements, gift cards, and our loyalty and co-branded credit card programs. The adoption of the new standard will result in changes in classification between net sales, other revenues, cost of sales, and operating expenses. For income from breakage of gift cards, which is currently recognized as a reduction to operating expenses when the redemption of the gift card is deemed remote, the new standard will require classification within net sales recognized proportionately over the expected redemption period. Also upon adoption of the standard, we will no longer use the incremental cost method and record to cost of sales for our loyalty program, rather we will use a deferred revenue model. We do not expect the adoption of ASU 2014-09 will have a material impact to our reported net sales, operating profit, net income, shareholders’ equity or cash flows, with the primary impacts of adopting the new standard relating to changes in classification of amounts shown on the consolidated financial statements and additional disclosures. In February 2016, the FASB issued ASU 2016-02, Leases, which will change how lessees account for leases. For most leases, a liability will be recorded on the balance sheet based on the present value of future lease obligations with a corresponding right-of-use asset. Primarily for those leases currently classified by us as operating leases, we will recognize a single lease cost on a straight-line basis based on the combined amortization of the lease obligation and the right-of-use asset. Other leases will be required to be accounted for as financing arrangements similar to current accounting for capital leases. Upon transition, we will recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The standard is effective for us in the first quarter of fiscal 2019 with early adoption permitted. We will not early adopt ASU 2016-02 and we expect the standard will have a material impact to our consolidated balance sheets. We are continuing to assess and evaluate the full impact of the standard on our financial statements and we are developing an implementation plan. In January 2017, the FASB issued ASU 2017-04, Simplifying the Accounting for Goodwill Impairment, which simplifies the subsequent measurement of goodwill by eliminating the requirement to determine the implied fair value of goodwill to measure an impairment of goodwill. Rather, goodwill impairment charges will be calculated as the amount by which a reporting unit's carrying amount exceeds its fair value. The standard is effective for us for our annual or any interim goodwill impairment tests during fiscal 2020 and early adoption is permitted. We intend to early adopt ASU 2017-04 for our annual or any interim goodwill impairment tests during fiscal 2017. |
Related Party Transactions |
6 Months Ended |
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Jul. 29, 2017 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | RELATED PARTY TRANSACTIONS Accounts receivable, accounts payable, and prepaid expenses associated with related parties are separately presented on the consolidated balance sheets. Accounts receivable from and payables to related parties normally settle in the form of cash in 30 to 60 days. Schottenstein Affiliates As of July 29, 2017, the Schottenstein Affiliates, entities owned or controlled by Jay L. Schottenstein, the executive chairman of our Board of Directors, and members of his family, beneficially owned approximately 19% of the Company's outstanding Common Shares, representing approximately 51% of the combined voting power. As of July 29, 2017, the Schottenstein Affiliates beneficially owned 7.3 million Class A Common Shares and 7.7 million Class B Common Shares. Leases with Related Parties- We lease our fulfillment center and certain store locations owned by Schottenstein Affiliates. During the three months ended July 29, 2017 and July 30, 2016, we recorded rent expense from leases with Schottenstein Affiliates of $2.3 million and $2.0 million, respectively. During the six months ended July 29, 2017 and July 30, 2016, we recorded rent expense from leases with Schottenstein Affiliates of $4.6 million and $4.1 million, respectively. Basis Difference Related to Acquisition of Commonly Controlled Entity- The basis difference related to acquisition of commonly controlled entity balance, as shown on our consolidated balance sheets, relates to a legal entity acquisition in fiscal 2012 from certain Schottenstein Affiliates. The legal entity owned property that was previously leased by us. As this was a transaction between entities under common control, there was no adjustment to the historical cost carrying amounts of assets transferred to the Company. The difference between the historical cost carrying amounts and the consideration transferred was reflected as an equity transaction. Other Purchases and Services- During the three months ended July 29, 2017 and July 30, 2016, we had other purchases and services from Schottenstein Affiliates of $0.4 million and $0.3 million, respectively. During the six months ended July 29, 2017 and July 30, 2016, we had other purchases and services from Schottenstein Affiliates of $0.7 million and $0.6 million, respectively. Town Shoes Our ownership percentage in Town Shoes is 46.3%, which provides us a 50% voting control and board representation equal to the co-investor, and is treated as an equity investment. Management Agreement- We have a management agreement with Town Shoes under which we provide certain information technology and management services. During the three and six months ended July 29, 2017, we recognized income of $0.3 million and $0.6 million, respectively. During the three and six months ended July 30, 2016, no services were provided. License Agreement- We license the use of our tradename and trademark, DSW Designer Shoe Warehouse, to Town Shoes for a royalty fee based on a percentage of net sales from its Canadian DSW stores, which are included in net sales. The license is exclusive and non-transferable for use in Canada. During the three months ended July 29, 2017 and July 30, 2016, we recognized royalty income of $0.2 million and $0.1 million, respectively. During the six months ended July 29, 2017 and July 30, 2016, we recognized royalty income of $0.3 million and $0.2 million, respectively. Other Purchases and Services- During the three and six months ended July 29, 2017, Town had other purchases and services from us of $0.7 million and $1.6 million, respectively. During the three and six months ended July 30, 2016, no other purchases and services were provided. David Duong, CEO of Ebuys On March 4, 2016, we acquired 100% ownership of Ebuys from its co-founders, including David Duong, who continues to serve on the board of directors of Ebuys, for cash and future amounts to be paid to the co-founders contingent upon achievement of certain milestones. See Note 13, Commitments and Contingencies, for the estimated fair value of the contingent consideration liability and changes recognized. Mr. Duong will receive 50% of any future payments of the contingent consideration. |
Earnings per Share and Shareholders' Equity |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings per Share and Shareholders' Equity | EARNINGS PER SHARE Basic earnings per share is based on net income and the weighted average of Class A and Class B Common Shares outstanding. Diluted earnings per share reflects the potential dilution of common shares adjusted for outstanding stock options, restricted stock units ("RSUs"), performance-based restricted stock units ("PSUs"), and director stock units ("DSUs") calculated using the treasury stock method. The following is a reconciliation of the number of shares used in the calculation of earnings per share:
For the three months ended July 29, 2017 and July 30, 2016, the number of potential shares that were not included in the computation of dilutive earnings per share because the effect would be anti-dilutive was approximately 4.6 million and 3.6 million, respectively. For the six months ended July 29, 2017 and July 30, 2016, the number of potential shares that were not included in the computation of dilutive earnings per share because the effect would be anti-dilutive was approximately 4.3 million and 3.3 million, respectively. |
Stock-based Compensation |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based Compensation | STOCK-BASED COMPENSATION Stock-based compensation expense consisted of the following:
The fair value for stock option awards was estimated at the grant date using the Black-Scholes pricing model with the following weighted average assumptions for the options granted:
The following table summarizes the stock-based compensation award activity:
As of July 29, 2017, 4.7 million shares of Class A Common Shares remain available for future stock-based compensation grants under the 2014 Long-Term Incentive Plan. |
Investments |
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Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block] | INVESTMENTS We hold available-for-sale investments primarily in bonds and term notes. Investments consisted of the following:
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Fair Value Measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | FAIR VALUE MEASUREMENTS Financial Assets and Liabilities- Financial assets and liabilities measured at fair value on a recurring basis consisted of the following:
The short-term and long-term investments categorized as Level 2 were valued using a market-based approach using inputs such as prices of similar assets in active markets. See Note 13, Commitments and Contingencies, for the estimated fair value (categorized as Level 3) of the contingent consideration liability and changes recognized. We have financial assets and liabilities not required to be measured at fair value on a recurring basis, which primarily consist of accounts receivables, note receivable from Town Shoes, and accounts payables. The carrying value of accounts receivables and accounts payables approximated their fair values due to their short-term nature. As of July 29, 2017, January 28, 2017 and July 30, 2016, the fair value of the note receivable from Town Shoes was $52.5 million, $45.7 million and $43.6 million, respectively, compared to the carrying value of $60.1 million, $53.1 million and $50.2 million, respectively. We estimated the fair value of the note receivable based upon current interest rates offered on similar instruments. The change in fair value is based on the change in comparable rates on similar instruments. Based on our intention and ability to hold the note until maturity or the exercise of the put/call option, the carrying value is not other-than-temporarily impaired. |
Property and Equipment, Net |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property and equipment, net | PROPERTY AND EQUIPMENT, NET Property and equipment consisted of the following:
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Accrued Expenses |
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Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued Expenses | ACCRUED EXPENSES Accrued expenses consisted of the following:
To better facilitate the processing efficiency of certain vendor payments, during fiscal 2016 we entered into a vendor payment program with a payment processing intermediary. Under the vendor payment program, the intermediary makes regularly-scheduled payments to participating vendors and we, in turn, settle monthly with the intermediary. The net change in the outstanding balance is reflected as a financing activity in the consolidated statements of cash flows. |
Non-Current Liabilities |
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Other Liabilities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Non-Current Liabilities | NON-CURRENT LIABILITIES Non-current liabilities consisted of the following:
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Debt Obligations |
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Debt Disclosure [Abstract] | |
Debt Obligations and Warrant Liabilities | DEBT Credit Facility- On August 2, 2013, we entered into a secured revolving credit agreement (the "Credit Facility") that provides revolving credit up to $100 million. The Credit Facility, together with the Letter of Credit Agreement (defined below), amended and restated the prior credit facility, dated June 30, 2010. The Credit Facility is secured by a lien on substantially all of DSW Inc.'s personal property assets and its subsidiaries, with certain exclusions, and may be used to provide funds for general corporate purposes, to provide for ongoing working capital requirements and to make permitted acquisitions. Revolving credit loans bear interest under the Credit Facility at our option under: (a) a base rate option at a rate per annum equal to the highest of (i) the Federal Funds Open Rate (as defined in the Credit Facility), plus 0.5%, (ii) the Lender's prime rate, and (iii) the Daily LIBOR Rate (as defined in the Credit Facility) plus 1.0%, plus in each instance an applicable margin, which is between 1.00 and 1.25, based upon revolving credit availability; or (b) a LIBOR option at a rate equal to the LIBOR Rate (as defined in the Credit Facility), plus an applicable margin based upon our revolving credit availability. In addition, the Credit Facility contains restrictive covenants relating to the management and operation of our business. These covenants, among other things, limit or restrict our ability to grant liens on our assets, limit our ability to incur additional indebtedness, limit our ability to enter into transactions with affiliates and limit our ability to merge or consolidate with another entity. Our Credit Facility allows the payment of dividends by us or our subsidiaries, provided that we meet the minimum cash and investments requirement of $125 million, as defined in the Credit Facility. An additional covenant limits payments for capital expenditures to $200 million in any fiscal year. As of July 29, 2017, we had no outstanding borrowings under the Credit Facility with availability of $100 million and we were in compliance with all covenants. Interest expense related to the Credit Facility includes fees, such as commitment and line of credit fees. Letter of Credit Agreement- Also on August 2, 2013, we entered into a letter of credit agreement (the "Letter of Credit Agreement"). The Letter of Credit Agreement provides for the issuance of letters of credit up to $50 million. The facility for the issuance of letters of credit is secured by a cash collateral account containing cash in an amount equal to 103% of the face amount of any letter of credit extension (105% for extensions denominated in foreign currency) and is used for general corporate purposes. The Letter of Credit Agreement requires compliance with conditions precedent that must be satisfied prior to issuing any letter of credit or extension. In addition, the Letter of Credit Agreement contains restrictive covenants relating to the management and operation of our business. These covenants, among other things, limit or restrict our ability to grant liens on our assets, limit our ability to incur additional indebtedness, limit our ability to enter into transactions with affiliates and limit our ability to merge or consolidate with another entity. An event of default may cause the applicable interest rate and fees to increase by 2% per annum. As of July 29, 2017, we were in compliance with all covenants. As of July 29, 2017, January 28, 2017 and July 30, 2016, we had outstanding letters of credit under the Letter of Credit Agreement of $3.6 million, $3.8 million, and $7.9 million, respectively. |
Commitments and Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies | COMMITMENTS AND CONTINGENCIES Contingent Consideration Liability- The contingent consideration liability resulted from the acquisition of Ebuys and is based on a defined earnings performance measure for fiscal years 2017, 2018 and 2019 with no defined maximum earn-out. The contingent consideration liability is based on our estimated fair value with any differences between the final acquisition-date fair value and the estimated settlement of the obligation, as remeasured each reporting period, being recognized as an adjustment to income from operations. Activity for the contingent consideration liability was as follows:
Legal Proceedings- We are involved in various legal proceedings that are incidental to the conduct of our business. Although it is not possible to predict with certainty the eventual outcome of any litigation, we believe the amount of any potential liability with respect to current legal proceedings will not be material to the results of operations or financial condition. As additional information becomes available, we will assess any potential liability related to pending litigation and revise the estimates as needed. Guarantee- As a result of a previous merger, we provided a guarantee for a lease commitment that is scheduled to expire in 2024 of a location that has been leased to a third party. If the third party does not pay the rent or vacates the premise, we may be required to make full rent payments to the landlord. Contractual Obligations- As of July 29, 2017, 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 $0.7 million as of July 29, 2017. In addition, we have entered into various noncancelable purchase and service agreements. The obligations under these agreements were approximately $13.0 million as of July 29, 2017. |
Segment Reporting |
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Segment Reporting Disclosure [Text Block] | SEGMENT REPORTING Our two reportable segments, which are also operating segments, are the DSW segment, which includes DSW stores and dsw.com, and the ABG segment. Other includes Ebuys and franchise activity with the Apparel Group. The following provides certain financial data by segment reconciled to the consolidated financial statements:
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Subsequent Events |
6 Months Ended |
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Jul. 29, 2017 | |
Subsequent Events [Abstract] | |
Subsequent Events [Text Block] | SUBSEQUENT EVENTS On August 17, 2017, the Board of Directors authorized the repurchase of an additional $500 million of DSW Common Shares under our share repurchase program. On August 22, 2017, the Board of Directors declared a quarterly cash dividend payment of $0.20 per share for both Class A and Class B Common Shares. The dividend will be paid on September 29, 2017 to shareholders of record at the close of business on September 19, 2017. On August 25, 2017, we entered into a new senior unsecured revolving credit agreement (the "New Credit Facility") with a maturity date of August 25, 2022 that provides a revolving line of credit up to $300 million, with sub-limits for the issuance of up to $50 million in letters of credit, swing loan advances of up to $15 million, and the issuance of up to $75 million in foreign currency revolving loans and letters of credit. The New Credit Facility replaces the Credit Facility and the Letter of Credit Agreement dated August 2, 2013. The New Credit Facility may be further increased by up to $100 million subject to agreed upon terms and conditions. The New Credit Facility may be used to provide funds for ongoing and seasonal working capital, capital expenditures, dividends and share repurchases, other expenditures, and permitted acquisitions (as defined). The interest rates and fees under the New Credit Facility fluctuate based on our leverage ratio. The New Credit Facility allows us to select our interest rate for each borrowing from multiple interest rate options that are generally derived from the prime rate or LIBOR. In addition, the New Credit Facility contains financial and other covenants, including, but not limited to, limitations on indebtedness, liens and investments, as well as the maintenance of a leverage ratio not to exceed 3.25:1 and a fixed charge coverage ratio not to be less than 1.75:1. A violation of any of the covenants could result in a default under the New Credit Facility that would permit the lenders to restrict our ability to further access the New Credit Facility for loans and letters of credit and require the immediate repayment of any outstanding loans under the New Credit Facility. As of August 25, 2017, we were in compliance with the covenants of the New Credit Facility. |
Business Operations and Basis of Presentation Business Operations and Basis of Presentation (Policies) |
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Jul. 29, 2017 | |
Basis of Accounting, Policy [Abstract] | |
Basis of Accounting, Policy [Policy Text Block] | Basis of Presentation- The accompanying unaudited, condensed consolidated financial statements have been prepared by management in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, we do not include all of the information and footnotes required by GAAP for complete financial statements. The accompanying financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. All such adjustments are of a normal recurring nature. The condensed consolidated financial position, results of operations and cash flows for these interim periods are not necessarily indicative of the results that may be expected in future periods. The balance sheet at January 28, 2017 has been derived from the audited financial statements at that date. The financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended January 28, 2017, filed with the U.S. Securities and Exchange Commission on March 23, 2017. |
Fiscal Period, Policy [Policy Text Block] | Fiscal Year- Our fiscal year ends on the Saturday nearest to January 31. References to a fiscal year refer to the calendar year in which the fiscal year begins. |
Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consolidation, Policy [Policy Text Block] | Principles of Consolidation- The consolidated financial statements include the accounts of DSW Inc. and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. All amounts are in USD, unless otherwise noted. |
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Use of Estimates, Policy [Policy Text Block] | Use of Estimates- The preparation of 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 contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Significant estimates are required as a part of sales returns, depreciation, amortization, inventory valuation, contingent consideration liability, customer loyalty program reserve, recoverability of long-lived assets and intangible assets, legal reserves, accrual for lease obligations and establishing reserves for self-insurance. Although these estimates are based on management's knowledge of current events and actions it may undertake in the future, actual results could differ from these estimates. |
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Cash and Cash Equivalents, Restricted Cash and Cash Equivalents, Policy [Policy Text Block] | Cash, Cash Equivalents, and Restricted Cash- Cash and cash equivalents represent cash, money market funds and credit card receivables that generally settle within three days. Restricted cash represents cash that is restricted as to withdrawal or usage and consists of a mandatory cash deposit with the lender for outstanding letters of credit. The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same such amounts shown in the condensed consolidated statements of cash flows:
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Fair Value Measurement, Policy [Policy Text Block] | Fair Value- 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. Assets and liabilities recorded at fair value are categorized using defined hierarchical levels related to the subjectivity associated with the inputs to fair value measurements as follows:
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Comprehensive Income, Policy [Policy Text Block] | Accumulated Other Comprehensive Income (Loss)- Changes for the balances of each component of accumulated other comprehensive loss were as follows (all amounts are net of tax):
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New Accounting Pronouncements and Changes in Accounting Principles [Text Block] | Adopted Accounting Standards- In the first quarter of fiscal 2017, we adopted the Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU") 2016-09, Improvements to Employee Share-Based Payment Accounting, which eliminated the requirement to recognize excess tax benefits in common shares paid-in capital and the requirement to evaluate tax deficiencies for common shares paid-in capital or income tax expense classification, and provides for these benefits or deficiencies to be recorded as an income tax expense or benefit on a prospective basis. For the consolidated statements of cash flows, excess tax benefits related to stock-based compensation is no longer presented, on a retroactive basis, as a financing activity cash inflow and as an operating activity cash outflow. As we did not have any excess tax benefits related to stock-based compensation during the six months ended July 30, 2016, the adoption of ASU 2016-09 did not result in a change in the activity presented in the statements of cash flows. In the first quarter of fiscal 2017, we early adopted ASU 2016-18, Statement of Cash Flows - Restricted Cash, which requires that the consolidated statements of cash flows provides the change in the total of cash, cash equivalents, and restricted cash. As a result of this adoption, we no longer show the changes in restricted cash balances as a component of cash flows from investing activities but instead include the balances of restricted cash together with cash and cash equivalents for the beginning and end of the periods presented. As a result of adopting ASU 2016-18, we adjusted the statements of cash flows on a retroactive basis as follows:
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New Accounting Pronouncements, Policy [Policy Text Block] | Recent Accounting Pronouncements- In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which provides a single comprehensive accounting standard for revenue recognition for contracts with customers and supersedes current guidance. Under ASU 2014-09, companies will recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the payment to which a company expects to be entitled in exchange for those goods or services. The standard also will require enhanced disclosures and provide more comprehensive guidance for transactions such as service revenue and contract modifications. The standard is effective for us in the first quarter of fiscal 2018, which we plan to adopt using the full retrospective method where each prior period presented is restated. We have completed an assessment identifying areas of impact to our financial statements, including sales returns, licensing arrangements, gift cards, and our loyalty and co-branded credit card programs. The adoption of the new standard will result in changes in classification between net sales, other revenues, cost of sales, and operating expenses. For income from breakage of gift cards, which is currently recognized as a reduction to operating expenses when the redemption of the gift card is deemed remote, the new standard will require classification within net sales recognized proportionately over the expected redemption period. Also upon adoption of the standard, we will no longer use the incremental cost method and record to cost of sales for our loyalty program, rather we will use a deferred revenue model. We do not expect the adoption of ASU 2014-09 will have a material impact to our reported net sales, operating profit, net income, shareholders’ equity or cash flows, with the primary impacts of adopting the new standard relating to changes in classification of amounts shown on the consolidated financial statements and additional disclosures. In February 2016, the FASB issued ASU 2016-02, Leases, which will change how lessees account for leases. For most leases, a liability will be recorded on the balance sheet based on the present value of future lease obligations with a corresponding right-of-use asset. Primarily for those leases currently classified by us as operating leases, we will recognize a single lease cost on a straight-line basis based on the combined amortization of the lease obligation and the right-of-use asset. Other leases will be required to be accounted for as financing arrangements similar to current accounting for capital leases. Upon transition, we will recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The standard is effective for us in the first quarter of fiscal 2019 with early adoption permitted. We will not early adopt ASU 2016-02 and we expect the standard will have a material impact to our consolidated balance sheets. We are continuing to assess and evaluate the full impact of the standard on our financial statements and we are developing an implementation plan. In January 2017, the FASB issued ASU 2017-04, Simplifying the Accounting for Goodwill Impairment, which simplifies the subsequent measurement of goodwill by eliminating the requirement to determine the implied fair value of goodwill to measure an impairment of goodwill. Rather, goodwill impairment charges will be calculated as the amount by which a reporting unit's carrying amount exceeds its fair value. The standard is effective for us for our annual or any interim goodwill impairment tests during fiscal 2020 and early adoption is permitted. We intend to early adopt ASU 2017-04 for our annual or any interim goodwill impairment tests during fiscal 2017. |
Earnings per Share and Shareholders' Equity Earnings per Share and Shareholders' Equity (Policies) |
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Earnings Per Share [Abstract] | |
Earnings Per Share, Policy [Policy Text Block] | Basic earnings per share is based on net income and the weighted average of Class A and Class B Common Shares outstanding. Diluted earnings per share reflects the potential dilution of common shares adjusted for outstanding stock options, restricted stock units ("RSUs"), performance-based restricted stock units ("PSUs"), and director stock units ("DSUs") calculated using the treasury stock method. |
Segment Reporting (Policies) |
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Jul. 29, 2017 | |
Segment Reporting [Abstract] | |
Segment Reporting, Policy [Policy Text Block] | Our two reportable segments, which are also operating segments, are the DSW segment, which includes DSW stores and dsw.com, and the ABG segment. Other includes Ebuys and franchise activity with the Apparel Group. |
Acquisition and Equity Method Investment (Tables) |
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Equity Method Investments and Joint Ventures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block] | The preliminary and final purchase price and the allocation of the total consideration to the fair values of the assets and liabilities acquired consisted of the following:
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Significant Accounting Policies Significant Accounting Policies (Tables) |
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Schedule of Cash, cash equivalents, and restricted cash [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restrictions on Cash and Cash Equivalents [Table Text Block] | The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same such amounts shown in the condensed consolidated statements of cash flows:
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Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block] | Changes for the balances of each component of accumulated other comprehensive loss were as follows (all amounts are net of tax):
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New Accounting Pronouncement, Early Adoption [Table Text Block] | As a result of adopting ASU 2016-18, we adjusted the statements of cash flows on a retroactive basis as follows:
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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 earnings per share:
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Schedule of Share-based Compensation Expense [Table Text Block] | Stock-based compensation expense consisted of the following:
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Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block] | The fair value for stock option awards was estimated at the grant date using the Black-Scholes pricing model with the following weighted average assumptions for the options granted:
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Stock Option Plan Activity | The following table summarizes the stock-based compensation award activity:
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Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Marketable Securities [Table Text Block] | We hold available-for-sale investments primarily in bonds and term notes. Investments consisted of the following:
|
Fair Value Measurements (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 29, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis | Financial assets and liabilities measured at fair value on a recurring basis consisted of the following:
|
Property and Equipment, Net (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 29, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property and Equipment, Net | Property and equipment consisted of the following:
|
Accrued Expenses (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 29, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued Expenses | Accrued expenses consisted of the following:
|
Non-Current Liabilities(Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 29, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Liabilities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Non-current Liabilities | Non-current liabilities consisted of the following:
|
Commitments and Contingencies Schedule of Business Acquisitions, Contingent Consideration (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 29, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Business Acquisitions by Acquisition, Contingent Consideration [Table Text Block] | Activity for the contingent consideration liability was as follows:
|
Segment Reporting (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 29, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information | The following provides certain financial data by segment reconciled to the consolidated financial statements:
|
Business Operations Store Data (Details) |
6 Months Ended |
---|---|
Jul. 29, 2017 | |
Schedule of Stores Supplied With Merchandise [Line Items] | |
Number of Reportable Segments | 2 |
Number of retailers operated as leased departments | 3 |
Apparel Group [Member] | |
Affiliated Business Group [Abstract] | |
Number of stores supplied by the entity | 40 |
Gordmans Stores [Member] | |
Affiliated Business Group [Abstract] | |
Stores acquired | 58 |
Significant Accounting Policies Significant Accounting Policies (Details) - USD ($) $ in Thousands |
Jul. 29, 2017 |
Jan. 28, 2017 |
Jul. 30, 2016 |
---|---|---|---|
Schedule of Cash, cash equivalents, and restricted cash [Abstract] | |||
Cash and cash equivalents | $ 89,305 | $ 110,657 | $ 62,324 |
Restricted Cash and Cash Equivalents, Current | 3,923 | 4,654 | 8,143 |
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents | $ 93,228 | $ 115,311 | $ 70,467 |
Earnings per Share and Shareholders' Equity Calculation of Earnings per Share (Details) - shares shares in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jul. 29, 2017 |
Jul. 30, 2016 |
Jul. 29, 2017 |
Jul. 30, 2016 |
|
Reconciliation of the number of shares used in the calculation of diluted earnings (loss) per share [Abstract] | ||||
Basic shares | 80,317 | 82,053 | 80,267 | 82,003 |
Dilutive effect of stock-based compensation awards | 397 | 602 | 462 | 688 |
Diluted shares | 80,714 | 82,655 | 80,729 | 82,691 |
Earnings per Share and Shareholders' Equity Anti-Dilutive Securities (Details) - shares shares in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jul. 29, 2017 |
Jul. 30, 2016 |
Jul. 29, 2017 |
Jul. 30, 2016 |
|
Diluted earnings per share [Abstract] | ||||
Securities outstanding not included in computation of diluted earnings per share | 4.6 | 3.6 | 4.3 | 3.3 |
Investments (Details) - USD ($) $ in Thousands |
6 Months Ended | 12 Months Ended | |
---|---|---|---|
Jul. 29, 2017 |
Jul. 30, 2016 |
Jan. 28, 2017 |
|
Schedule of Investments, Reported Amounts, by Category [Line Items] | |||
Short-term investments | $ 182,062 | $ 103,467 | $ 98,530 |
Long-term investments | 0 | 77,901 | 77,904 |
Current available for sale Securities Unrecognized Holding Gain | 99 | 455 | 101 |
Long-Term Available for Sale Securities Unrecognized Holding Gain | 0 | 33 | 133 |
Current Available for Sale Securities Unrecognized Holding Loss | (362) | (39) | (364) |
Available-for-sale Securities, Change in Net Unrealized Holding Gain (Loss), Net of Tax | 0 | (200) | (111) |
Carrying value | Available-for-sale Securities [Member] | |||
Schedule of Investments, Reported Amounts, by Category [Line Items] | |||
Short-term investments | 182,325 | 103,051 | 98,793 |
Long-term investments | $ 0 | $ 78,068 | $ 77,882 |
Property and Equipment, Net (Details) - USD ($) $ in Thousands |
Jul. 29, 2017 |
Jan. 28, 2017 |
Jul. 30, 2016 |
---|---|---|---|
Property and equipment [Abstract]: | |||
Land | $ 1,110 | $ 1,110 | $ 1,110 |
Buildings and Improvements, Gross | 12,485 | 12,485 | 12,485 |
Leasehold Improvements, Gross | 398,129 | 393,505 | 378,355 |
Furniture and Fixtures, Gross | 417,226 | 408,653 | 382,687 |
Capitalized Computer Software, Gross | 135,844 | 123,460 | 121,848 |
Construction in Progress, Gross | 28,008 | 27,456 | 35,628 |
Total property and equipment | 992,802 | 966,669 | 932,113 |
Accumulated depreciation and amortization | (628,250) | (591,418) | (552,470) |
Property and equipment, net | $ 364,552 | $ 375,251 | $ 379,643 |
Accrued Expenses (Details) - USD ($) $ in Thousands |
Jul. 29, 2017 |
Jan. 28, 2017 |
Jul. 30, 2016 |
---|---|---|---|
Payables and Accruals [Line Items] | |||
Gift cards and merchandise credits | $ 40,327 | $ 45,743 | $ 38,062 |
Compensation | 14,830 | 17,132 | 15,184 |
Taxes | 17,182 | 21,764 | 18,887 |
Customer loyalty program | 12,410 | 11,502 | 11,401 |
Other (1) | 37,185 | 34,193 | 31,658 |
Total accrued expenses | $ 121,934 | $ 130,334 | $ 115,192 |
Non-Current Liabilities (Details) - USD ($) $ in Thousands |
Jul. 29, 2017 |
Jan. 28, 2017 |
Jul. 30, 2016 |
---|---|---|---|
Other Liabilities Disclosure [Abstract] | |||
Construction and tenant allowances | $ 84,002 | $ 87,886 | $ 89,460 |
Deferred rent | 38,187 | 37,779 | 37,814 |
Restructuring Reserve | 7,328 | 7,283 | 8,584 |
Other (1) | 12,982 | 8,231 | 7,704 |
Total non-current liabilities | $ 142,499 | $ 141,179 | $ 143,562 |
Credit Facility (Details) - USD ($) $ in Millions |
6 Months Ended | ||
---|---|---|---|
Aug. 02, 2013 |
Jun. 30, 2010 |
Jul. 29, 2017 |
|
Debt Instrument [Line Items] | |||
Line of Credit Facility, Initiation Date | Aug. 02, 2013 | Jun. 30, 2010 | |
Line of Credit Facility, Maximum Borrowing Capacity | $ 100 | ||
Credit Facility [Abstract] | |||
Credit Facility, Cash and Short Term Investment Requirement | 125 | ||
Limitation of Capital Expenditures | 200 | ||
Line of Credit Facility, Remaining Borrowing Capacity | $ 100 |
Letter of Credit Agreement (Details) - USD ($) $ in Millions |
Aug. 02, 2013 |
Jul. 29, 2017 |
Jan. 28, 2017 |
Jul. 30, 2016 |
---|---|---|---|---|
Letter of Credit [Line Items] | ||||
Letter of Credit Facility, Initiation Date | Aug. 02, 2013 | |||
Letter of Credit Agreement, Maximum Borrowing Capacity | $ 50.0 | |||
Collateral Requirement (Domestic) | 103.00% | |||
Letter of Credit Agreement, Cash Collateral Requirement (Foreign Currency) | 105.00% | |||
Letters of Credit Outstanding, Amount | $ 3.6 | $ 3.8 | $ 7.9 |
Commitments and Contingencies (Details) - USD ($) $ in Thousands |
6 Months Ended | ||||
---|---|---|---|---|---|
Jul. 29, 2017 |
Jul. 30, 2016 |
Jan. 28, 2017 |
Mar. 04, 2016 |
Jan. 30, 2016 |
|
Purchase Commitment, Excluding Long-term Commitment [Line Items] | |||||
Preliminary Business Combination, Contingent Consideration Liability | $ 0 | $ 56,000 | $ 56,000 | ||
Accretion Expense | 2,252 | 3,611 | |||
Contingent Consideration Other Adjustments | 1,000 | 0 | |||
Business Combination, Contingent Consideration, Liability | 36,456 | $ 59,611 | $ 33,204 | $ 0 | |
Contractual Obligations [Abstract] | |||||
Purchase Commitment, Remaining Minimum Amount Committed | 700 | ||||
Unrecorded Unconditional Purchase Obligation, Due within Five Years | $ 13,000 |
Segment Reporting (Details) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jul. 29, 2017
USD ($)
|
Jul. 30, 2016
USD ($)
|
Jul. 29, 2017
USD ($)
|
Jul. 30, 2016
USD ($)
|
|
Segment Reporting Information [Line Items] | ||||
Number of Reportable Segments | 2 | |||
Segment information [Abstract] | ||||
Net sales | $ 680,409 | $ 658,944 | $ 1,371,511 | $ 1,340,211 |
Gross profit | 196,972 | 186,861 | 392,201 | 391,218 |
Other Segments [Member] | ||||
Segment information [Abstract] | ||||
Net sales | 20,700 | 19,571 | 43,027 | 34,667 |
Gross profit | (2,004) | 1,759 | (1,923) | 3,884 |
Affiliated Business Group segment [Member] | ||||
Segment information [Abstract] | ||||
Net sales | 31,330 | 35,446 | 75,318 | 78,585 |
Gross profit | 6,438 | 7,217 | 16,936 | 18,030 |
DSW [Member] | ||||
Segment information [Abstract] | ||||
Net sales | 628,379 | 603,927 | 1,253,166 | 1,226,959 |
Gross profit | $ 192,538 | $ 177,885 | $ 377,188 | $ 369,304 |
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