DSW's Q2 Earnings Meet Expectations, Revenues Miss

Shares of DSW Inc. DSW fell over 11% yesterday after the company posted mixed second-quarter fiscal 2015 results. Quarterly earnings per share from continuing operations of 42 cents came in line with the Zacks Consensus Estimate, whereas revenues of $627 million fell way short of the Zacks Consensus Estimate, pegged at $635 million.
 

 

The shoe retailer also reiterated its fiscal 2015 earnings guidance. Earnings per share are expected to be around $1.80—$1.90 for the fiscal while the Zacks Consensus Estimate stands at $1.90 per share.

On a year-over-year basis, adjusted earnings and sales registered growth of 13.5% and 6.8%.

Comparable-store sales (comps) grew 1.8% year over year compared with 0.8% growth registered in the year-ago quarter.

Gross profit advanced 11.3% to $191.3 million with the gross margin expanding 120 basis points (bps) to 30.5% due to reduced markdown activity. Operating profit also escalated 11.7% to $59.6 million with the operating margin expanding 40 bps to 9.5%.

Segment wise, the DSW segment's revenues were up 7% to $592.6 million while ABG segment's revenues increased 4% to $34.6 million.

DSW continues with its store expansion drive. The company is expected to open three new small format stores this fall and 7 locations in Canada during the current quarter. In the reported quarter, the company opened and closed one store each. As of Aug 25, 2015, DSW had 449 stores.

Financials

DSW ended the year with cash, short- and long-term investments of $471 million, compared with $465 million last year. Inventories came in at $505.2 million, compared with $415 million last year while on a cost per foot basis, it increased 14.2%. The company's total shareholders' equity stood at $1,065.7 million as of Aug 1, 2015, compared with $991.2 million as of Aug 2, 2014.

Capital expenditure for the quarter amounted to $26 million. While the company refrained from share repurchases, it announced a quarterly dividend of 20 cents per share, payable to shareholders on Sep 30, 2015.

This Ohio-based retailer currently holds a Zacks Rank #3 (Hold).

Stocks to Consider

Some better-ranked stocks in the same industry include Boot Barn Holdings, Inc. BOOT, Aéropostale, Inc. ARO and American Eagle Outfitters, Inc. AEO. Boot Barn Holdings sports Zacks Rank#1 (Strong Buy), while Aéropostale and American Eagle has a Zacks Rank #2 (Buy).  

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