DSW has announced a definitive agreement to acquire Ebuys, an off-price e-commerce footwear and accessories retailer with a presence in North America, Europe, Australia and Asia. The transaction is expected to close over the next 30 days.
The initial purchase payment of $61 million is being funded using cash on hand. It includes an upfront payment of $62.5 million followed by future payments dependent on the performance of Ebuys. The impact of the acquisition, excluding purchase accounting adjustments and transaction costs, is expected to be modestly accretive to DSW's earnings per share in fiscal 2016.
Ebuys is expected to contribute approximately $100 million in sales this year. It is supposed to add a business to DSW's portfolio that will strategically scale its off-price sourcing capabilities, while expanding its presence into digital marketplaces and creating opportunities to serve international customers online.
Ebuys will maintain its offices in San Diego, California, and Antioch, Tennessee, and will continue to operate as a distinct business within DSW. David Duong will continue to lead the team as Ebuys' chief executive.
DSW posted earnings for the quarter ending Jan. 31, 2016 that plunged by 61.8 percent from the corresponding period a year ago to $11.8 million, as it faced a “challenging retail environment.” While sales increased by 5.0 percent to $672 million, the operating margin dropped by 5 percentage points to 2.5 percent.
For the full year, sales were up by 5.0 percent over the prior year to $2.60 billion, but net income dropped by 11.3 percent to $136 million and the operating margin lost 1.6 percentage points, down to 8.1 percent.
Roger Rawlins, chief executive of the American shoe retail chain, said margins for both the quarter and the year were impacted by the company's efforts to drive sales and gain market share through aggressive discounting, in the face of a challenging retail environment, partly caused by the unseasonably warm weather this past autumn.
Despite these challenges, DSW said it achieved several important milestones in 2015, including the opening of 40 new stores in the U.S. and 11 new DSW locations by Town Shoes in Canada. The company now operates 470 stores in 42 states, the District of Columbia and Puerto Rico. It also grew digital demand by 22.0 percent in the full year, aided by the roll-out of Buy Online Pick-Up In Store and Buy Online Ship to Store.
DSW said it will intensify its focus in 2016 on delivering value to customers and drive additional growth by entering new categories, markets and digital channels. For the full year ending January 28, 2017, the company forecasts revenue growth of 8.0 to 10.0 percent. The company also expects to open 34 stores and close two.