What happened

Shares of DSW (NYSE:DSW) have jumped today, up by 8% as of 3:15 p.m. EST, after the shoe retailer reported strong third-quarter earnings results. DSW is on solid footing ahead of the holiday shopping season, raising its full-year guidance as a result.

So what

Revenue in the third quarter jumped 17% to $833 million, with comparable sales rising 7.3%. Analysts were only expecting comps to increase by 5.1%. That all translated into non-GAAP net income of $57.9 million, or $0.70 per share. Overall, both top- and bottom-line results crushed consensus estimates, which had called for $788.4 million in sales and an adjusted profit of $0.53 per share.

Woman shopping for shoes

Image source: Getty Images.

Gross margin expanded by 320 basis points, which DSW attributed to "favorable merchandise margin." That was offset by a precipitous increase in operating expenses. The company finished the quarter with $294 million in cash and investments on the balance sheet.

Now what

"Our investments in merchandising, marketing and talent drove continued top line momentum, with comp growth across all businesses," CEO Roger Rawlins said in a statement. "Additionally, the nationwide roll-out of DSW kids drove the most successful back-to-school season in our history and our recently acquired Canadian business delivered the best results in the last five years."

DSW raised its guidance for 2018, and now expects revenue to increase by 12% to 14%, up from its prior forecast of 6% to 9% growth. Comparable-sales growth should now be in the mid- to high-single-digit range, whereas DSW's prior outlook called for low- to mid-single-digit comps growth. Adjusted earnings per share for the year should be $1.70 to $1.85, compared to the previous range of $1.60 to $1.75 per share.

Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool recommends DSW. The Motley Fool has a disclosure policy.