Q4 2012 Earnings Call Transcript

Transcript Call Date 03/19/2013

Operator: Good morning and welcome to the DSW Inc. 4Q '12 and Fiscal Year 2012 Earnings Conference Call. All participants will be in listen-only mode. Please note that this event is being recorded.

Now, I would like to turn the conference over to Christina Cheng. Ms. Cheng, please go ahead.

Christina Cheng - Director, IR: Thank you. Good morning, and welcome to DSW's fourth quarter conference call. Earlier today we issued a press release detailing the results of operations for the 14-week and 53-week periods ending February 2, 2013.

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 these forward-looking statements as a result of various important factors including those 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, our Vice Chairman and Chief Merchandising Officer and Doug Probst, our Chief Financial Officer. Doug will start with prepared remarks with a short discussion of our reported results and then highlight the details of our adjusted results for the fourth quarter and the full year. Mike will provide more details in our operating performance and our progress this year towards achieving our long-term strategic goals. He will also provide our guidance for fiscal year 2013. After our prepared remarks, we will open the call for Q&A.

With that, I turn the call over to Doug.

Douglas J. Probst - EVP and CFO: Thanks Christina, and good morning, everyone. Our reported net income for the 14-week fourth quarter was $27.1 million, or $0.59 per share which includes the $4.2 million after-tax charge for the impairment of an office lease assumed from RVI. This compares against last year's reported net income of $19.4 million or $0.37 per share which also includes a $3.7 million after-tax charge for items related to the merger with RVI.

Excluding these items related to the merger, adjusted net income was $31.4 million or $0.69 per share compared to last year's adjusted net income of $23.1 million or $0.51 per share, an increase of 35%. We estimate the 53rd week benefited our fourth quarter earnings by $0.09 per share assuming now allocation in the fixed cost. As we anticipated at the beginning of the year, this was the largest quarterly earnings increase this year primarily due to the 53rd week and the timing of our new store opening expenses.

While DSW is a geographically diverse company with stores in 41 states, a little over 25% of our sales are generated in the Northeast, the region most directly impacted by Superstorm Sandy. In hindsight, we estimated that the storm negatively impacted our Q4 sales and sales results by $8 million.

Sales for the fourth quarter increased by 15.7% to $594.3 million as comparable sales grew by 3.6% on top of the 5.6% increase for the same 13-week period in the prior year. For our DSW segment which includes, comps increased by 3.9%. Comps were driven by an increase in conversion and average unit retail. We opened one new DSW store for a total of 39 new stores in 2012.

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