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DSW’s Fiscal 4Q17 Bottom Line Topped Analyst Estimates

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Adjusted EPS exceeded estimates

DSW (DSW) reported fiscal 4Q17 results on March 13, 2018. The company’s adjusted EPS (earnings per share) came in at $0.38, which beat the analyst estimate of $0.27 driven by a higher gross margin. On a YoY (year-over-year) basis, adjusted EPS was up 90%. Adjusted EPS include the 53rd-week contribution of $0.06. Excluding this contribution, adjusted EPS were up 60%.

On a reported basis, the company’s EPS came in $0.15 compared with $0.38 in fiscal 4Q16. The company expects adjusted EPS to be in the range of $1.52 to $1.67 in fiscal 2018. The effective tax rate is likely to be 29% in fiscal 2018.

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Dividend and share repurchase activity

DSW remains committed to maximizing shareholder wealth despite heavy investments. In fiscal 2017, the company repurchased 0.5 million shares worth $9 million. The company added that it has purchased 13.1 million shares worth $326 million since 2013.

Also, on March 13, 2018, DSW increased its quarterly dividend by 25% to $0.25 per share, payable on April 6, 2018, to shareholders as of March 23, 2018. The company has paid dividends worth $299 million since 2013.

Store base update

As of February 3, 2018, DSW had 512 namesake stores and 293 ABG (affiliated business group) stores. Together, these two types of stores covered 10,485 thousand square feet. In fiscal 2018, the company expects to open seven to nine new locations.

For 2018, the company projects capital expenditure to be around $77 million, up from $62 million in fiscal 2017. The capex for the current fiscal year is expected to be driven by store openings as well the launch of DSW Kids to the store base. New store designs at five new locations will also add to higher capex for the year.

Peer performance

For Finish Line (FINL), analysts expect the company to deliver adjusted EPS of $0.57 in fiscal 4Q18, up ~14% from fiscal 4Q17 driven by the benefit of an extra week in the holiday quarter.

Foot Locker’s (FL) adjusted EPS (earnings per share) were $1.26, which marginally beat the analysts’ estimate of $1.25. Adjusted EPS take into consideration the 53rd week. However, on a YoY (year-over-year) basis, adjusted EPS declined 8% on account of a significant rise in the SG&A expenses.

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