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DSW (DSW) Q2 Earnings & Sales Surpass Estimates, Ups View

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Shares of DSW Inc. (DSW - Free Report) soared 22.2% during the trading session on Aug 28, driven by robust second-quarter fiscal 2018 results and upbeat outlook. The company reported the third straight quarter of positive earnings surprise, wherein adjusted earnings of 63 cents a share beat the Zacks Consensus Estimate of 47 cents. Moreover, the figure was up 65.8% from the year-ago quarter, buoyed by increased top line.

Notably, the stock has rallied 20.7% in a month, outperforming the industry’s growth of 5.2%.


DSW generated total revenues of $795.3 million, up 16.4% from the year-ago period, which surpassed the Zacks Consensus Estimate of $694 million. Comparable sales for the quarter grew 9.7% compared with 0.6% witnessed in the year-ago period driven by VIP program and digital marketing investments. Additionally, the company witnessed positive comps for the first quarter since 2015.

In the quarter under review, gross margin expanded 280 basis points to approximately 32.1%, mainly due to higher merchandise margin and occupancy leverage.

DSW Inc. Price, Consensus and EPS Surprise

Segment Details

Total revenues including net sales came in at $793.7 million in the quarter, up 16.4% from the year-ago period. Within net sales, U.S. Retail segment (previously named DSW segment) revenues climbed 9.9% year over year to $691.8 million, primarily owing to a 9.6% increase in comparable sales.

Sales in Canada Retail segment reported $72.5 million. Other segment revenues declined 43.4% to $29.4 million in the reported quarter.

Store Update

During the quarter under review, the company operated 984 stores. In the United States, it has 517 DSW and 289 ABG outlets. It currently has 113 Shoe Warehouse stores, 27 DSW Designer Shoe warehouse outlets and 38 Town Shoe stores. Moving ahead, the company intends to open three to six new stores this year and close 38 Town Shoe stores based in Canada.

Other Financial Details

DSW ended second-quarter fiscal 2018 with cash and cash equivalents of $216 million and total equity of $919.5 million. Moreover, it declared a quarterly dividend of 25 cents per share payable on Oct 5, 2018 as of record on Sep 24, 2018.

Also, management incurred capital expenditures of $15 million in the quarter which includes $2 million in Canada retail business.


The company updated its fiscal 2018 guidance, wherein it anticipates adjusted earnings in the range of $1.60-$1.75 per share, up from the previous view of $1.52-$1.67 per share. Further, DSW revenue is expected to increase in the range of 6-9%, up from the prior forecast of 1-3% decline.

Comparable sales growth is projected to rise in the low to mid-single digit range as compared to low single digit range. Capital expenditure is expected to be $90 million in fiscal 2018.

Interested in the Retail Space? Check These

Urban Outfitters, Inc. (URBN - Free Report) has a long-term earnings growth rate of 12% and carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Boot Barn Holdings, Inc. (BOOT - Free Report) has a long-term earnings growth rate of 23% and carries a Zacks Rank #1.

Target Corp. (TGT - Free Report) has a long-term earnings growth rate of 5.6% and a Zacks Rank #2 (Buy).

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