Q1 2013 Earnings Call Transcript

Transcript Call Date 05/29/2013

Operator: Good morning, and welcome to the DSW First Quarter 2013 Earnings Conference Call. All participants will be in listen-only mode. Please note that this event is being recorded.

I would now like to turn the conference over to Christina Cheng, Director of Investor Relations. Please go ahead.

Christina Cheng - Director, IR: Thank you. Good morning, and welcome to DSW's first quarter conference call. Earlier today, we issued a press release detailing the results of operations for the 13-week period ending May 4, 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 due to various important factors including those listed in today's press release and DSW's public filings with the SEC.

Joining us today are Mike MacDonald, President and CEO; Debbie Ferree, Chief Merchandising Officer; and Doug Probst, Chief Financial Officer. Doug will start the prepared remarks with a short discussion of our reported results and then highlight the details of our adjusted results for the first quarter. 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 a revised outlook for fiscal year 2013. After our prepared remarks, we will turn the floor over to Q&A.

With that, I will turn the call over to Doug.

Douglas J. Probst - EVP and CFO: Thanks, Christina, and good morning, everyone. Our reported net income for the 13 weeks ended May 4, 2013, was $34.5 million or $0.75 per share, which includes a net charge of $11.4 million or $0.25 per share from our luxury initiative. This compares to last year's reported net income of $39.9 million or $0.89 per share, which included a net charge of $4.3 million or $0.09 per share related to our merger with RVI.

Most of the $0.25 net charge from our luxury test was for an inventory reserve that we established based on our actual selling experience to-date. We believe this reserve reflects more realistic expectations for selling the balance of the inventory over the remainder of the year. We were disappointed with the results from the luxury initiative, and we'll evaluate our future luxury plans in light of these results. Mike will comment more fully on luxury in his remarks.

Adjusted net income in our base business was $45.9 million or $1 per share an increase of 2% over last year's adjusted net income of $44.1 million or $0.98 per share. The balance of my comments will focus on our base business, which excludes luxury and the RVI merger from last year.

Total sales for the first quarter increased by 7.7% to $601 million, which does include, $5.2 million of luxury sales with comparable sales declining, by 2.4% on top of the 7.6% comp increase last year. For the DSW segment, which includes, comps also decreased, by 2.4%.

As you recall, we disclosed in our last earnings call that comp sales declined by 5% in the first six weeks of fiscal 2013. As we move through March, the business actually weakened from that level. However, in April, we saw a very healthy sales, rebound that allowed us to finish with the – finish the quarter with the negative 2.4% comp performance in the DSW segment.

Read our Earnings Call Transcript disclaimer.
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