Ohio | 001-32545 | 31-0746639 | ||
(State or other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
810 DSW Drive, Columbus, Ohio | 43219 | |
(Address of Principal Executive Offices) | (Zip Code) |
N/A |
(Former name or former address if changed since last report.) |
Exhibit Number | Description | ||
99.1 |
DSW Inc. | ||||
By: | /s/ William L. Jordan | |||
William L. Jordan | ||||
Executive Vice President and Chief Administrative Officer | ||||
Date: | November 21, 2017 |
• | Third quarter sales increased 1.7% to $708.3 million; comparable sales decreased 0.4% |
• | First nine months sales increased 2.1% to $2.1 billion; comparable sales decreased 1.0% |
• | Including $0.40 per diluted share from net non-cash charges related to the impairment of Ebuys' goodwill and intangible assets, third quarter Reported EPS of $0.05 per diluted share |
• | Third quarter Adjusted EPS of $0.45 per diluted share |
• | Board of Directors declare quarterly dividend of $0.20 per share |
• | Full year outlook for Adjusted EPS of $1.40 to $1.45 per diluted share |
• | Sales increased 1.7% to $708.3 million. |
• | Comparable sales decreased 0.4% with a negative impact of 50 to 60 bps from hurricane disruption. |
• | Reported gross profit decreased by 120 bps due to our market share initiative, higher shipping expenses and costs related to the integration of Ebuys. |
• | Reported operating expenses, as a percent of sales, increased by 20 bps, with higher technology and marketing expenses offset by lower overhead costs. |
• | Reported net income was $4.0 million, or $0.05 per diluted share, including pre-tax charges totaling $52.7 million, or $0.40 per diluted share, related to net non-cash impairment charges related to goodwill and intangible assets, offset by a reduction in contingent consideration related to the Company's acquisition of Ebuys. |
• | Adjusted net income was $35.9 million, or $0.45 per diluted share, including weather related impact of approximately $0.05 per diluted share. |
• | Sales increased 2.1% to $2.1 billion. |
• | Comparable sales decreased 1.0% compared to last year's 1.6% decrease. |
• | Reported gross profit decreased by 80 bps, driven by incremental clearance activity and inventory reserves and distribution costs related to the ongoing integration of Ebuys. |
• | Reported operating expenses, as a percent of sales, improved by 10 bps due to tighter expense management. |
• | Reported net income was $55.6 million, or $0.69 per diluted share, including pre-tax charges totaling $59.9 million, or $0.45 per diluted share, related to acquisition and impairment costs, restructuring expenses and foreign exchange loss. |
• | Adjusted net income was $92.2 million, or $1.14 per diluted share. |
• | Cash and investments totaled $330 million compared to $216 million in the third quarter last year. |
• | During the quarter, the Company acquired 0.5 million shares for $9.4 million and has $524 million remaining in its current share repurchase program. Since 2013, the Company has returned to shareholders over $600 million in dividends and share repurchases. |
• | Inventories were $547 million compared to $563 million for the same period last year. Excluding Ebuys and Gordmans, inventories decreased 3% on a cost per square foot basis. |
Net sales by segment | |||||||||||||||||||||
Three months ended | Nine months ended | ||||||||||||||||||||
October 28, 2017 | October 29, 2016 | % change | October 28, 2017 | October 29, 2016 | % change | ||||||||||||||||
(dollars in thousands) | |||||||||||||||||||||
DSW segment | $ | 654,587 | $ | 639,136 | 2.4 | % | $ | 1,907,753 | $ | 1,866,096 | 2.2 | % | |||||||||
ABG segment | 31,059 | 36,154 | (14.1 | )% | 106,377 | 114,738 | (7.3 | )% | |||||||||||||
Other | 22,662 | 21,326 | 6.3 | % | 65,689 | 55,993 | 17.3 | % | |||||||||||||
DSW Inc. | $ | 708,308 | $ | 696,616 | 1.7 | % | $ | 2,079,819 | $ | 2,036,827 | 2.1 | % |
Comparable sales change by reportable segment | |||||||
Three months ended | Nine months ended | ||||||
October 28, 2017 | October 29, 2016 | October 28, 2017 | October 29, 2016 | ||||
DSW segment | (0.4)% | (1.8)% | (1.0)% | (1.5)% | |||
ABG segment | 0.5% | (4.6)% | (0.5)% | (3.1)% | |||
DSW Inc. | (0.4)% | (2.0)% | (1.0)% | (1.6)% |
Stores and square footage data | |||||
October 28, 2017 | October 29, 2016 | ||||
DSW stores open, end of period | 514 | 498 | |||
ABG stores open, end of period | 351 | 396 | |||
DSW stores total square footage (in thousands) | 10,534 | 10,273 |
Reported gross profit by segment | |||||||||||
Three months ended | Nine months ended | ||||||||||
October 28, 2017 | October 29, 2016 | October 28, 2017 | October 29, 2016 | ||||||||
DSW segment merchandise margin | 44.0 | % | 45.0 | % | 43.7 | % | 44.0 | % | |||
Store occupancy expense | (10.9 | ) | (10.8 | ) | (11.1 | ) | (11.1 | ) | |||
Distribution and fulfillment expenses | (2.2 | ) | (2.3 | ) | (2.2 | ) | (2.2 | ) | |||
DSW segment gross profit | 30.9 | % | 31.9 | % | 30.4 | % | 30.7 | % | |||
ABG segment merchandise margin | 44.3 | % | 43.5 | % | 44.3 | % | 44.1 | % | |||
Store occupancy expense | (20.2 | ) | (20.7 | ) | (20.6 | ) | (20.4 | ) | |||
Distribution and fulfillment expenses | (1.1 | ) | (1.1 | ) | (1.1 | ) | (1.1 | ) | |||
ABG segment gross profit | 23.0 | % | 21.7 | % | 22.6 | % | 22.6 | % | |||
Other segment merchandise margin | 18.1 | % | 27.7 | % | 22.7 | % | 31.6 | % | |||
Marketplace fees | (12.9 | ) | (12.4 | ) | (12.2 | ) | (11.8 | ) | |||
Fulfillment expenses | (17.0 | ) | (15.5 | ) | (17.5 | ) | (13.0 | ) | |||
Other segment gross profit(1) | (11.8 | )% | (0.2 | )% | (7.0 | )% | 6.8 | % | |||
Total Company gross profit | 29.2 | % | 30.4 | % | 28.8 | % | 29.6 | % |
(1) | Other segment gross profit for the three and nine months ended October 29, 2016 includes $0.5 million and $1.2 million, respectively, related to the step-up of the value of Ebuys' inventory. |
October 28, 2017 | January 28, 2017 | October 29, 2016 | |||||||||
Assets | |||||||||||
Cash and cash equivalents | $ | 149,485 | $ | 110,657 | $ | 60,962 | |||||
Short-term investments | 180,066 | 98,530 | 78,512 | ||||||||
Accounts receivable, net | 20,417 | 19,006 | 21,363 | ||||||||
Inventories | 546,553 | 499,995 | 562,701 | ||||||||
Prepaid expenses and other current assets | 25,445 | 31,078 | 24,579 | ||||||||
Total current assets | 921,966 | 759,266 | 748,117 | ||||||||
Property and equipment, net | 358,154 | 375,251 | 381,218 | ||||||||
Long-term investments | — | 77,904 | 76,126 | ||||||||
Goodwill | 25,899 | 79,689 | 77,208 | ||||||||
Deferred income taxes | 35,284 | 14,934 | 21,103 | ||||||||
Equity investment in Town Shoes | 7,180 | 15,830 | 17,996 | ||||||||
Note receivable from Town Shoes | 60,249 | 53,121 | 50,579 | ||||||||
Intangible assets | 3,135 | 35,108 | 38,243 | ||||||||
Other assets | 19,711 | 17,373 | 21,325 | ||||||||
Total assets | $ | 1,431,578 | $ | 1,428,476 | $ | 1,431,915 | |||||
Liabilities and shareholders' equity | |||||||||||
Accounts payable | $ | 194,313 | $ | 186,271 | $ | 161,262 | |||||
Accrued expenses | 141,990 | 130,334 | 143,653 | ||||||||
Total current liabilities | 336,303 | 316,605 | 304,915 | ||||||||
Non-current liabilities | 146,714 | 174,383 | 203,577 | ||||||||
Total shareholders' equity | 948,561 | 937,488 | 923,423 | ||||||||
Total liabilities and shareholders' equity | $ | 1,431,578 | $ | 1,428,476 | $ | 1,431,915 |
Three months ended | Nine months ended | ||||||||||||||
October 28, 2017 | October 29, 2016 | October 28, 2017 | October 29, 2016 | ||||||||||||
Net sales | $ | 708,308 | $ | 696,616 | $ | 2,079,819 | $ | 2,036,827 | |||||||
Cost of sales | (501,591 | ) | (484,836 | ) | (1,480,901 | ) | (1,433,829 | ) | |||||||
Operating expenses | (151,772 | ) | (147,412 | ) | (454,093 | ) | (446,696 | ) | |||||||
Goodwill and intangible assets impairment charges | (82,701 | ) | — | (82,701 | ) | — | |||||||||
Change in fair value of contingent consideration liability | 31,178 | (1,469 | ) | 28,926 | (5,080 | ) | |||||||||
Operating profit | 3,422 | 62,899 | 91,050 | 151,222 | |||||||||||
Interest income, net | 602 | 482 | 1,824 | 1,626 | |||||||||||
Non-operating income (expense) | (121 | ) | 80 | (2,304 | ) | 344 | |||||||||
Income before income taxes and income from Town Shoes | 3,903 | 63,461 | 90,570 | 153,192 | |||||||||||
Income tax provision | (1,496 | ) | (25,626 | ) | (35,510 | ) | (60,420 | ) | |||||||
Income from Town Shoes | 1,630 | 1,128 | 543 | 1,237 | |||||||||||
Net income | $ | 4,037 | $ | 38,963 | $ | 55,603 | $ | 94,009 | |||||||
Diluted earnings per share | $ | 0.05 | $ | 0.47 | $ | 0.69 | $ | 1.14 | |||||||
Weighted average diluted shares | 80,647 | 82,537 | 80,699 | 82,643 |
Three months ended | Nine months ended | ||||||||||||||
October 28, 2017 | October 29, 2016 | October 28, 2017 | October 29, 2016 | ||||||||||||
Reported net income | $ | 4,037 | $ | 38,963 | $ | 55,603 | $ | 94,009 | |||||||
Adjustments: | |||||||||||||||
Related to the Ebuys Acquisition: | |||||||||||||||
Goodwill and intangible assets impairment charges | 82,701 | — | 82,701 | — | |||||||||||
Inventory step-up costs | — | 532 | — | 1,225 | |||||||||||
Transaction costs | — | 4 | — | 2,288 | |||||||||||
Amortization of intangible assets | 1,019 | 1,072 | 3,055 | 2,902 | |||||||||||
Change in fair value of contingent consideration liability | (31,178 | ) | 1,469 | (28,926 | ) | 5,080 | |||||||||
Restructuring expenses | — | 1,349 | 829 | 4,075 | |||||||||||
Town acquisition costs | 77 | — | 77 | — | |||||||||||
Foreign currency loss | 48 | — | 2,209 | — | |||||||||||
Total adjustments, pre-tax | 52,667 | 4,426 | 59,945 | 15,570 | |||||||||||
Tax effect of adjustments | (20,768 | ) | (1,667 | ) | (23,310 | ) | (6,004 | ) | |||||||
Total adjustments, after tax | 31,899 | 2,759 | 36,635 | 9,566 | |||||||||||
Adjusted net income | $ | 35,936 | $ | 41,722 | $ | 92,238 | $ | 103,575 | |||||||
Reported diluted earnings per share | $ | 0.05 | $ | 0.47 | $ | 0.69 | $ | 1.14 | |||||||
Adjusted diluted earnings per share | $ | 0.45 | $ | 0.51 | $ | 1.14 | $ | 1.26 |