DSW announced that its fourth-quarter profit rose by 3.5 percent as softer sales were offset by reduced costs. For the quarter ended Feb. 1, the American shoe retailer reported a net profit of $28.1 million, including a net after-tax loss of $0.7 million from its luxury test, up from $27.1 million a year earlier, which included a $4.2 million in legacy charges from RVI. Net income adjusted to exclude non-recurring items was $28.7 million, as compared to adjusted net income for the same period last year of $31.4 million.
Reported sales fell 3.7 percent to $572.3 million for the 13-week period ended Feb. 1, 2014, compared with fourth-quarter sales of $594 million for the 14-week period ended Feb. 2, 2013. Excluding the extra week last year, sales were up 3.8 percent. Sales on a same-store basis were flat. This follows an increase of 3.6 percent during the fourth quarter of fiscal 2012.
The company operated 397 DSW stores as of Feb. 1, 2014, compared with 364 stores as of Feb. 2, 2013.
For the f52-week period ended Feb. 1, 2014, sales rose 4.9 percent to $2.4 billion, as compared to last year's sales of $2.3 billion for the 53-week period ended Feb. 2, 2013. Comparable sales increased by 0.2 percent. This follows an increase of 5.5 percent during the 53- week period ended Feb. 2, 2013.
DSW's net income for the full year reached $151.3 million, including a net after-tax loss of $12.2 million for the company's luxury test, and a net after-tax charge of $9.2 million from the termination of the pension plan assumed in conjunction with the RVI merger. This compares to last year's net income of $146.4 million, which included $9.4 million in after-tax non-cash charges related to RVI and a $3.6 million after-tax award from credit card litigation. Net income adjusted for these non-recurring items was $172.8 million, up from adjusted net income of $152.2 million in the previous fiscal year.
The company said that effective inventory management enabled it to expand full year merchandise margin to 45.1 percent, just 10 basis points short of its record margin in 2011. The SG&A rate was reduced by 80 bps to 20.4 percent, which led to the company's highest-ever operating margin of 11.7 percent.
Reflecting confidence in the future success of its business model, the company announced a 50 percent increase in dividends. It also updated its store build-out potential for full-size units to a range of 500 to 550 stores.
For the full year, the company expects sales growth of 6 percent to 7 percent, with a comparable sales increase in the low single-digit range and the opening of around 35 new stores. Full year earnings per share are expecte- to range between $1.80 and $1.95, including omni-channel related expenses of $10 million or about $0.07 per share. Adjusted earnings per share in 2013 were $1.88, compared with the prior year's result of $1.67 per share. The company expects omni-channel investments to have a positive effect on earnings beginning in 2015.