DSW Q4 Profit Up Despite Sales Decline

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DSW has been successful enticing shoppers to buy online with free shipping offers

DSW has been successful enticing shoppers to buy online with free shipping offers

Columbus, OH—DSW Inc. today said its fourth quarter profit were up 3.5% as lower costs offset flat sales.

For the quarter ended Feb. 1, the footwear and accessories specialty store posted a net profit of $28.11 million or 30 cents a share, compared to prior year’s $27.15 million, or 30 cents a share. (Results include a net loss of $700,000, or 1 cent a share from its luxury test). Excluding one-time costs, adjusted net was $28.7 million, or 31 cents a share, ahead of analysts’ average estimate for 29 cents.

Potential for 550 Stores

Net sales decreased 3.7% to $572.27 million, missing analysts’ estimate for $588.53 million in sales. Comparable store sales were flat after a 3.6% increase in fourth quarter last year.

“Business was stronger in November and December and weaker in January when some of the weather hit,” said Mike MacDonald, president/ceo.

Operating expenses dropped to $115.11 million from $126.02 million last year, and its income tax provision was down to $17.52 million, compared to $18.82 million a year ago.

Gross narrowed to 28% from 28.9%, as product costs fell 2.4%.

“We marked our fifth consecutive year of double digit earnings growth in 2013, with adjusted earnings per share of $1.88 compared to the prior year’s results of $1.67,” noted MacDonald. “Effective inventory management and our new systems enabled us to expand full year merchandise margin to 45.1%, which is just 10 basis points shy of our record margin in 2011.”

Moreover, the company now sees potential for 500 to 550 full-size stores, MacDonald said. “Reflecting the confidence in the future success of the DSW business model, our board of directors has approved a 50% increase to our quarterly dividend.”

Looking ahead to its full fiscal year, DSW forecast sales to increase 6% to 7% with comp store sales up in the low-single digit range. Per share earnings should fall between $1.80 and $1.95 a share. Analysts had predicted $2.09 a share.

Also this year, DSW plans to spend $10 million on its omnichannel program which will allow customers access to DSW’s entire inventory—across all stores, warehouses and online fulfillment centers—on line or via mobile device.



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