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Why Shares of DSW Inc. Jumped Today

By Timothy Green - Mar 13, 2018 at 4:39PM

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Solid earnings growth and a big dividend increase lit a fire under the shoe retailer's stock.

What happened

Shares of DSW Inc. ( DBI -3.66% ) jumped on Tuesday after the footwear retailer released a mixed fiscal fourth-quarter report. Revenue missed analysts' expectations, but earnings were better than expected, which in combination with a 25% dividend increase was enough to send the stock up 10% for the day.

So what

DSW's fiscal Q4 revenue of $720 million was up 6.7% year over year, but about $8.2 million below the analysts' average estimate for the period, which ended Jan. 28. Comparable-store sales rose 1.3%, a vastly improved result compared to the 7% decline it reported in the prior-year period.

The outside of a DSW store.

Image source: DSW.

Non-GAAP EPS came in at $0.38, up from $0.20 in the prior-year period and $0.11 better than analysts' consensus expectation. GAAP EPS tumbled 60% to $0.15, dragged down by costs related to the liquidation of Ebuys, restructuring, acquisition-related expenses, and a one-time adjustment related to the recent corporate tax cuts. Going forward, DSW expects its effective tax rate to be about 29%, down from a prior rate of 39%.

DSW expects revenue to decline by 1% to 3% in fiscal 2018, although it forecasts a rise of 2% to 4% when factoring out its exit from non-core businesses and the 53rd week in fiscal 2017. Non-GAAP EPS is expected to fall between $1.52 and $1.67, up 4% to 14% year over year (again, after adjusting for fiscal 2017's extra week)

Now what

On top of beating analysts' estimates for earnings, DSW announced a 25% dividend increase. The next quarterly distribution will be $0.25 per share, payable on April 6 to shareholders of record on March 23.

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