DSW's shares dropped by 7.0 percent after it posted mixed results for its first fiscal quarter ended April 30, 2017. The American shoe retail chain's net income tumbled by 23.0 percent over the year-ago quarter to $23 million, with the company attributing this to planned clearance activity, restructuring costs, currency headwinds and the addition of Ebuys, which drove lower gross margin and operating income.
DSW's sales inched up by 1.4 percent to $691.1 million, exceeding Wall Street's forecast of $684.9 million, but comparable sales declined by 3.0 percent. The management said that sales were “challenging” during most of the period but noted an improvement in April, when comparable sales turned positive.
Roger Rawlins, the company's chief executive, said in a conference call with analysts that the investments the company has made in its digital capabilities, such as its redesigned website and mobile app, drove robust growth in digital demand. He added that the group is now focused on driving sequential top-line improvements through key product and customer initiatives, while balancing strategic investments with disciplined expense management.
Rawlins noted that sales of women's and men's dress shoes have been soft. Prior to the quarter, DSW had pulled back on sandals while increasing investments in athletic and women's dress shoes. He said that this strategy worked well in athletic, but not as well in the women's dress segment. As a result, the company is rightsizing its inventories of dress shoes while chasing the casual sandals segment.
Sales in the DSW division of the group were up by 0.3 percent to $624.8 million and the Affiliated Business Group segment rose by 2.0 percent to $44 million, while the “Other” segment jumped by 47.9 percent to $22.3 million. The company operated some 508 stores at the end of the quarter - up from 478 a year ago.
The gross margin of the group declined by 1.8 percentage points to 28.2 percent during the quarter, and the operating margin dropped by 1.3 percentage points 5.9 percent.
The company reiterated its profit outlook for the full year.