Footwear retailer DSW announced third quarter sales results, showing a small sales gain despite missing the mark on earnings.
Net income was $4 million, or $0.05 per diluted share. This includes pre-tax charges around $52.7 million, or $0.40 per diluted share.
Adjusted net income was $35.9 million, or $0.45 per diluted share, which includes the weather related impact of the hurricane season, around $0.05 per diluted share. The $0.45 per diluted share comes in considerably lower than Thomson Reuters’ predictions of $0.53.
However, sales grew 1.7% to $708.3 million, compared to last year’s $696.6 million, while comparable sales fell 0.4% with a negative impact of 50 to 60 bps, due in part from hurricane disruption.
DSW CEO Roger Rawlins said that much of the company’s core business performed in-line with expectations for the third quarter, despite a tough hurricane season which affected comps and earnings. The company also felt the heat from lower sales in cold weather related product. However, the CEO said that a tight inventory management saved the company’s bottom line and helped avoid major markdwons, ending the quarter with inventories below last year.
“At Ebuys, we’ve moderated the long-term financial expectations and have reduced its carrying value on our balance sheet,” said Rawlins. “However, we believe the business provides valuable expertise to manage end-of-season clearance through online marketplaces. The successful integration of this business will unlock future synergies across our brand portfolio.”
Reported gross profit dropped by 120 bps due to market share initiative, higher shipping expenses and Ebuys integration costs.
“Our business model remains healthy, generating strong cash flow which allows us to invest in both organic and non-organic growth. We activated new customers, accelerated digital demand and continued to deliver concrete progress in many of our strategic priorities, such as our Power Stores, our new Lab Store and the expansion of DSW kids,” said Rawlins. “Additionally, we are starting to test several new services with our new Rewards VIP program that will further differentiate the DSW brand.”
DSW updated its fiscal year 2017 outlook to an adjusted earnings in the range of $1.40 to $1.45 per diluted share to show its lower expectations, in part for Ebuys and the impact of weather related issues during the quarter. Guidance does not include net charges related to the impairment of goodwill and intangible assets.