DSW Inc. Earnings Cheat Sheet: Five Straight Quarters of Double-Digit Growth

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

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DSW Earnings Cheat Sheet for the Third Quarter

Results: Net income for DSW Inc. rose to $53.7 million (75 cents per share). The company reported a loss of $3.3 million (16 cents per share) in the year-ago quarter.

Revenue: Rose 8.5% to $530.7 million from the year earlier quarter.

Actual vs. Wall St. Expectations: DSW reported adjusted net income of 88 cents per share. By that measure, the company beat the mean estimate of 80 cents per share. Analysts were expecting revenue of $531.7 million.

Quoting Management: “Our strong performance continued into the fall season, further demonstrating our increasing relevance as a destination for great brands, fashion and value in the footwear industry,” stated Mike MacDonald , President and Chief Executive Officer, DSW Inc. “During the quarter, we generated an 8.5% increase in total sales and a 5.2% increase in comparable sales, for a two-year comparable sales gain of 15% and a three year comparable sales increase of 24%. DSW remained a top choice for women’s footwear, led by a strong performance in boots. We continued to capitalize on sales opportunities in men’s and accessories – both of which remained our fastest growth categories. Our new store performance exceeded our expectations and e-commerce sales remained robust. We were also pleased with our leased business division, which recorded solid sales growth. Our balance sheet remained strong at quarter end even as we invested in our long-term growth and returned value to our shareholders in the form of both a regular quarterly cash and special cash dividend. We are confident in our strategies and continue to expect fiscal 2011 to represent a strong year of growth, and as a result we have increased our annual guidance.”

Key Stats:

The company has now seen net income rise in three straight quarters. In the second quarter, net income rose more than fivefold and in the first quarter, the figure rose 27.2%.

Revenue has risen the past four quarters. Revenue increased 14.7% to $476.3 million in the second quarter. The figure rose 12% in the first quarter from the year earlier and climbed 16.3% in the fourth quarter of the last fiscal year from the year-ago quarter.

The company has now topped analyst estimates for the last three quarters. It beat the mark by 16 cents in the second quarter and by 10 cents in the first quarter.

Gross margins grew 1.4 percentage points to 34%. The growth seemed to be driven by increased revenue, as the figure rose 8.5% from the year earlier quarter while costs rose 6.2%.

Looking Forward: Over the past ninety days, the average estimate for the fourth quarter has fallen from 49 cents per share to 46 cents, indicating that analysts are growing pessisimistic about the company’s performance next quarter. The average estimate for the fiscal year is $2.87 per share, a rise from $2.80 ninety days ago.

Competitors to Watch: Collective Brands Inc. (NYSE:PSS), Genesco Inc. (NYSE:GCO), Foot Locker, Inc. (NYSE:FL), Shoe Carnival, Inc. (NASDAQ:SCVL), Bakers Footwear Group Inc (BKRS), The Finish Line, Inc. (NASDAQ:FINL), Shoe Pavilion, Inc. (SHOEQ), and Prima Moda S.A. (NYSE:PMA).

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