DSW Earnings: Margin Expansion Driven by Revenue Growth, Profit Rises

DSW Inc. (NYSE:DSW) reported net income above Wall Street’s expectations for the first quarter. DSW is a branded footwear specialty retailer in the United States.

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DSW Earnings Cheat Sheet for the First Quarter

Results: Net income for DSW Inc. rose to $39.9 million (86 cents per share) vs. $38.1 million ($1.74 per share) in the same quarter a year earlier. This marks a rise of 4.6% from the year-earlier quarter.

Revenue: Rose 10.9% to $558.6 million from the year-earlier quarter.

Actual vs. Wall St. Expectations: DSW Inc. reported adjusted net income of 98 cents per share. By that measure, the company beat the mean estimate of 90 cents per share. Analysts were expecting revenue of $548.1 million.

Quoting Management: “We are delighted with our strong start to the year, a further validation of the increasing preference for DSW by our customers and the strong execution of our strategies by our DSW team. During the quarter, total company sales grew by 10.9% to $558.6 million, including a 7.6% increase in comparable sales, following a 10.8% comparable sales gain last year reflecting balanced growth across categories,” stated Mike MacDonald, President and Chief Executive Officer, DSW Inc. “Earnings were at record levels despite absorbing incremental costs related to the acceleration in our store expansion.”

Key Stats:

The company has now surpassed analyst estimates for four quarters in a row. It beat the mark by 2 cents in the fourth quarter of the last fiscal year, by 8 cents in the third quarter of the last fiscal year, and by 16 cents in the second quarter of the last fiscal year.

Revenue has increased for four consecutive quarters. Revenue increased 9.7% to $513.7 million in the fourth quarter of the last fiscal year. The figure rose 8.5% in the third quarter of the last fiscal year from the year earlier and climbed 14.7% in the second quarter of the last fiscal year from the year-ago quarter.

Gross margins grew 0.3 percentage point to 34.5%. The growth seemed to be driven by increased revenue, as the figure rose 10.9% from the year-earlier quarter, while costs rose 10.4%.

Looking Forward: Over the past sixty days, the outlook for the company’s performance next quarter has become increasingly unfavorable. The average estimate for the second quarter is 76 cents per share, a drop from 80 cents. At $3.31 per share, the average estimate for the fiscal year has fallen from $3.34 ninety days ago.

(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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