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DSW Inc DSW
Q1 2012 Earnings Call Transcript

Transcript Call Date 05/22/2012

Operator: Good morning and welcome to the DSW First Quarter Financial Results Conference Call. All participants will be in listen-only mode. This event is being recorded.

Please note that various remarks made about the future expectations, plans and prospects of the Company constitute forward-looking statements. Actual results may differ materially from those indicated by those forward-looking statements as a result of various important factors including those listed in today's press release and in DSW's public filings with the SEC.

Joining us today are Mike MacDonald, President and CEO; Debbie Ferree, Vice Chairperson and Chief Merchandising Officer; Doug Probst, CFO; and Christina Cheng, Director of Investor Relations.

I would like to turn the conference over to Mr. Probst. Please go ahead, Sir.

Douglas J. Probst - EVP and CFO: Thank you, and good morning. I will comment on our results for the first quarter of 2012 and provide our guidance for the fiscal year. After that, I will turn the call over to Mike for his comments on the results and to share some insight on our strategic growth.

Our reported net income for the first quarter was $39.9 million, which included a net $4.3 million charge for items related to our merger with Retail Ventures. You can find these items detailed in the reconciliation of adjusted results attached to our press release issued earlier this morning.

On a reported basis, our earnings per share is $0.89. Excluding the RVI related charges of $0.09 adjusted EPS was $0.98 per share. As we've done in prior quarters, we'll first walk you through the major items associated with the merger and the specifics of where they are reflected on our P&L, so you have a clear comparison of our operational performance to last year.

The net $4.3 million in charges for RVI related items, break it down to the following major components. First, $325,000 in pre-tax cost included in SG&A, primarily due to legal fees related to RVI. Second, $5.3 million of non-cash, pre-tax cost for the change of the fair value of RVI related warrants. Please note that these warrants expire in June 2012 and finally, the removal of $1.3 million of non-cash after tax income from the discontinued operations, resulting from the closure of Filene's Basement.

Now that we have outlined these items, we will know focus our comments on the adjusted results which reflect the performance of our DSW operations. Net sales for the first quarter were $558.6 million, as comparable sales grew 7.6% on top of a 10.8% comp last year. This represented two-year comp of over 18%.

By segment, our comps for our DSW business which include DSW.com were up 8%. Our DSW store counts were driven mainly by an increase in traffic and average unit retail. Units per transaction in conversion were relatively flat to last year. We opened 10 new stores, relocated two stores and closed one store in the quarter. Mike will address their performance in his comments. Comps for the Leased Business division were up 2.3% after growing by 9.2% last year. Gross profit increased by 30 basis points to 34.5% due mainly to a 70 basis point decrease in occupancy rates.

Read our Earnings Call Transcript disclaimer.
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