)- a leading footwear and accessories retailer - has recently
reported better-than-expected fiscal third quarter 2012 (ended
October 27, 2012) financial results, and also provided guidance
for fiscal year 2012. The quarterly adjusted earnings per share
came in at $1.02, escalating 15.9% from the comparable quarter's
earnings of 88 cents in the last year. Moreover, it came way
ahead of the Zacks Consensus Estimate of 89 cents a share.
Including the one-time items, earnings for the third quarter
stood at $1.10 per share compared with 75 cents in the prior-year
Quarter in Detail
Net sales for the quarter increased 11.7% year over year to
$592.7 million from $530.7 million in the year-ago quarter, due
to a rise of 6.3% in comparable store sales. The company
experienced growth in its comps for thirteen back-to-back
quarters. Moreover, DSW surpassed the revenue estimate polled by
Zacks analysts of $588.0 million.
Gross profit for the quarter came in at $200.2 million,
representing an increase of about 11.0% year over year. However,
we observe a year over year contraction of 20 basis points in
gross margin, which came in at 33.8%. The contraction in gross
margin was attributable to fall in merchandise margin, partially
offset by increased certificate redemptions from their reward
Adjusted selling general and administrative (SG&A)
expenses, as a percentage of sales fell 50 basis points to 21.2%.
The fall in SG&A expenses was mainly due to reduction in
advertising expenses, lower incentive compensation and leverage
on fixed costs, partially offset by rise in pre-opening costs
related to the opening of 26 new stores in the quarter.
Adjusted operating profit registered a growth of 14.5% year
over year to $74.7 million from $65.2 million, whereas operating
margin expended 30 basis points to 12.6% in the quarter.
Other Financial Details
DSW boasts a debt-free balance sheet. The company ended the
quarter with cash and cash equivalents of $134.3 million.
Inventory at the end of the quarter stood at $422.5 million,
increasing about 12.0% from the prior-year period. Shareholders'
equity came in at $858.5 million at the end of the quarter.
Capital expenditure for the quarter was $38.0 million mainly
attributable to new store openings, various remodels and the
launch of new distribution centers.
DSW has raised its lower end of adjusted earnings per share
guidance for fiscal 2012 to $3.30-$3.40, representing an average
increase of approximately 11.7% from the prior-year earnings of
$3.00 per share. Earlier, the company had guided earnings per
share to fall in the range of $3.25-$3.40 for fiscal 2012. The
Zacks Consensus Estimate for the fiscal stands at $3.30 per
The company continues to expect comps growth in the range of
mid-single-digit for the full year. The guidance so provided by
the company includes the effect of Hurricane Sandy.
Moreover, management disclosed that the company is planning to
open a total of 39 new stores in the rest of fiscal 2012 and
announced its plan of launching 25-30 new stores in fiscal
DSW performed far better than its peer
J. C. Penney Company Inc.
), which posted third-quarter adjusted loss of 93 cents a share
against earnings of 18 cents in the year-ago quarter. The Zacks
Consensus Estimate for the quarter was of a loss of 8 cents.
Columbus, Ohio-based DSW Inc. operates 364 stores in 41 states
as of November 20, 2012, (including 26 new stores launched during
the quarter and one new store opened in Riverhead, New York on
November 20, 2012) and supplies footwear to 344 leased locations
in the U.S. It also runs an e-commerce site www.dsw.com and a
mobile website m.dsw.com.
DSW currently carries a Zacks #3 Rank, implying short-term
Hold rating on the stock for the next 1-3 months.
DSW INC CL-A (DSW): Free Stock Analysis
PENNEY (JC) INC (JCP): Free Stock Analysis
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