Source: Company reports

1Q16 RESULTS

DSW reported 1Q16 revenues of $681.3 million, up 3.9% year over year but below the consensus estimate of $698.8 million. Sales included $15.1 million from the acquisition of Ebuys; excluding this figure, sales increased by 1.6%, as did comps. Adjusted gross profit declined by 251 basis points year over year due to higher markdowns and the addition of Ebuys. Operating expenses as a percentage of revenue increased year over year due to higher spending on marketing, technology investments and higher corporate expenses. Non-operating income in the year-ago quarter included a foreign exchange benefit of $3.3 million, or $0.02 per share. Comps decreased by 1.5% in the DSW segment, by 3.4% in the ABG (Affiliated Business Group) segment and by 1.6% at DSW Inc. Adjusted EPS, which excludes $0.04 per share relating to an acquisition, was $0.40, missing the $0.46 consensus estimate.

2016 OUTLOOK

Management commented that it had reduced sales and earnings guidance to reflect current trends in a challenging environment and so that inventory, expenses and capital investments are aligned to expand earnings as trends improve. Management also commented that investments in technology, stores, and marketing and support services have increased revenues but not profits, and that it is therefore assessing its cost structure. DSW reduced its 2016 comp guidance to a 1%–2% decline from an increase of 1%–2% previously. It also reduced its revenue growth guidance to 6%–7% from 8%–10% previously and lowered its adjusted EPS guidance to $1.32–$1.42 from $1.54–$1.64 previously.