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DSW Stock Down 5.3% despite Better-than-Expected Earnings

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Stock down

This morning, DSW (DSW) stock was trading 5.3% lower at 7:27 AM EST despite the company posting strong first-quarter results. The company’s sales of $710.4 million and adjusted EPS of $0.39 beat Wall Street’s projections of $682.3 million and $0.37, respectively.

DSW also reaffirmed its fiscal 2018 EPS guidance, but it offered no update on the sales outlook. For fiscal 2018, the company expects adjusted EPS in the range of $1.52–$1.67. Earlier, the company had guided for sales to fall in the range of 1%–3% due to the Ebuys exit and the lack of an additional week in the year. Excluding these factors, sales were expected to increase 2%–4%.

DSW also announced that it purchased the remaining stake in Town Shoes for $35 million on May 10. Also, it unveiled its DSW VIP loyalty program that offers customers benefits like free shipping and gifting points.

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First quarter in detail

On a YoY (year-over-year) basis, sales were up 2.8%. The DSW segment reported 7.3% growth in sales to $669.7 million, but the Other segment’s revenue was down 38.7% to $40.7 million.

The company’s total revenue includes total net sales and franchise and other revenue. It was up 2.9% to $712.1 million.

DSW’s overall comps (13 weeks) were up 2.2%. DSW’s segment comps were up 2%, while the ABG segment reported comps growth of 5.1%.

DSW’s gross margin was up by 40 basis points to 28.9%. The improvement was driven by the winding up of the Ebuys business. However, operating expenses increased 7.4% to $168.1 million. Higher operating expenses led to a decline of 5.4% in operating profit to $38.5 million.

On a reported basis, EPS—including charges related to the Town Shoes buyout and Ebuys exit—were $0.30, compared $0.28 in the first quarter of 2017.

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