DSW Earnings Preview: Double-Digit EPS Growth Expected

Retailer DSW

is scheduled to report fourth-quarter 2011 results tomorrow, March 20, before the opening bell. The company has seen net income and revenue both increase in three consecutive quarters, and the stock is about 25% higher than three months ago. Investors no doubt will be hoping for more of the same.

Analysts on average predict that DSW will post per-share earnings that are 16.3% higher than a year ago to $0.49 for the three months that ended in January. That EPS estimate is a penny less than it was 60 days ago. But note that per-share earnings topped consensus estimates by as much as 12 cents in the previous three quarters. Fourth-quarter revenue is expected to total $511.2 million, which would be up from $468.5 million in the same period of last year. Looking back to the third quarter, the specialty retailer said its profit rose 51.1% to $53.7 million, or $0.75 cents a share, from the year earlier, exceeding analyst expectations. Revenue rose 8.5% to $530.7 million. The company attributed strong results to higher sales of women's footwear and growth in the men's and accessories segments. DSW also lifted its full-year EPS outlook. For the full year, the consensus forecast calls for $2.98 per share earnings on revenue of $2.0 billion. That compares to $2.40 per share and $1.8 billion last year. Note that the EPS estimate is a penny less than it was 60 days ago, but still in the range of $2.96 and $2.99 that DSW offered recently.

DSW is a retailer of branded footwear and accessories in the United States. The company operates more than 325 stores in 40 states and leases more than 330 departments for other retailers. It also offers its designer dress, casual and athletic footwear and accessories online. DSW is headquartered in Columbus, Ohio. It was founded in 1917 and now has a market cap of $2.4 billion. Competitors include Brown Shoe

, Collective Brands

and Foot Locker

. Brown Shoe and Collective Brands both posted a fourth-quarter loss, and the former said it will close stores. Foot Locker posted a better-than-expected fourth-quarter profit due in part to cost cutting efforts.

and

During the three months that ended in January, DSW saw strong holiday sales and it opened a new designer shoe warehouse in Lawrence, N.Y. The retailer also said it plans to open 35 to 40 stores this year, an increase from its previous estimate.

DSW has a return on equity of 24.9% and a long-term earnings per share growth forecast of 12.5%. Sales increased 9.8% over the past five years. The P/E ratio is less than the industry average and the operating margin is higher than the industry average. DSW has a dividend rate of 1.1%. Eight of nine analysts polled who follow the stock recommend buying it. Their mean price target is more than 7% higher than the current share price. The share price is more than 25% higher than at the beginning of the year, as well as up more than 45% from a year ago. It has been above the 50-day and 200-day moving averages since mid January. Shares reached a multiyear high of $57.06 on Leap Day. Over the past six months, the stock outperformed the broader markets, but it has underperformed the competitors mentioned above.