I'm not sure you would've wanted to be in the earnings shoes of DSW (NYSE:DSW) yesterday. The shoe seller reported a sharp drop in net income -- for the second quarter, the company booked $0.15 per diluted share vs. $0.35 per diluted share in the year-ago period. That's a 57% decline. Talk about blisters on the corporate feet! The only good news was that sales did increase almost 16%. The news sent the stock sliding 7% in after- hours trading.

The six-month period's bottom line wasn't impressive, either, although it wasn't as dramatically bad. Net income declined 8% to $0.68 per diluted share. Again, though, the top line did its part by bringing in a double-digit gain of 14%.

The company was able to grow its same-store sales for the quarter -- DSW achieved a little less than 6% in comps growth this quarter vs. 2.2% in last year's quarter. That should put some pep in the step of shareholders, although the six-month comps growth rate was a dismal 0.9%, a steep decline from the 3.2% appreciation in the metric observed in the comparable time frame.

From a valuation standpoint, DSW actually looks quite decent. The PEG ratio on the stock is currently less than 1. Management still expects to earn between $1.63 and $1.68 per share for the year, and analysts think the company might earn close to $2 per share next year. In addition, analysts are looking for DSW to grow 20% over the next five years. I calculate a forward-looking PEG ratio of approximately 0.7 based on this information.

DSW is cheap, assuming that management can hit these numbers. The stats presented here are definitely in conflict with each other -- top line's good, bottom line's not so hot, six-month comps are horrible, quarterly comps are not. Pricing pressures and promotional discounts have taken their toll on this quarter, but as Billy Fisher pointed out back in June, they were to be expected.

Bottom line, I like DSW's valuation and its top-line growth, as well as the fact that it is opening more locations, but I'd like to wait a quarter or so for some more stats to get a good feel on where costs are heading and why its margins aren't nearly as good as industry averages. DSW is in the trenches competing with Collective Brands (NYSE:PSS) and the footwear departments at retailers like J.C. Penney (NYSE:JCP) and Macy's (NYSE:M) -- we'll have to see if DSW can keep in step with the competition and hit its own expectations. For now, it's not a shoe-in for my portfolio.

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Fool contributor Steven Mallas owns none of the companies mentioned. As of this writing, he was ranked 11,578 out of more than 60,000 investors in the Motley Fool CAPS system. Don't know what CAPS is? Check it out. The Fool has a disclosure policy.