On Sept. 6, DSW (NYSE:DSW) released second-quarter earnings for the period ended Aug. 4.

  • Promotional events led to a strong 5.9% increase in comps and a 15.7% rise in total sales.
  • Management blamed falling margins on aggressive inventory management. However, its strategy was not effective, as inventory levels ballooned 16.3% on the balance sheet.
  • The company is confident that improvement is on its way, so it reiterated its previous yearly guidance of $1.63-$1.68 on 0%-3% comps.
  • Despite the unfashionable results this quarter, the Motley Fool CAPS community gives the shoe company a four-star rating (out of five). Fellow competitor Collective Brands (NYSE:PSS) receives three stars, while Macy's (NYSE:M) isn't faring as well, at only two stars.

(Figures in millions, except per-share data)

Income Statement Highlights

Q2 2007

Q2 2006

Change

Sales

$348.7

$301.3

15.7%

Net Profit

$6.5

$15.3

(57.5%)

EPS

$0.15

$0.35

(57.1%)

Diluted Shares

44.3

44.2

0.3%

Get back to basics with the income statement.

Margin Checkup

Q2 2007

Q2 2006

Change*

Gross Margin

23.3%

28.2%

(4.9)

Operating Margin

2.4%

7.7%

(5.3)

Net Margin

1.9%

5.1%

(3.2)

*Expressed in percentage points.

Margins are the earnings engine.

Balance Sheet Highlights

Assets

Q2 2007

Q2 2006

Change

Cash + ST Invest.

$175.3

$151.3

15.9%

Accounts Rec.

$12.5

$6.8

84.5%

Inventory

$258.1

$222.0

16.3%

Liabilities

Q2 2007

Q2 2006

Change

Accounts Payable

$134.0

$86.7

54.5%

The balance sheet reflects the company's health.

Cash Flow Highlights

Not posting a cash flow statement is a major fashion don't.

Related Foolishness:

Fool by Numbers is designed to give you the raw earnings information in a timely fashion, putting all the numbers you need in one easy-to-read place. But at The Motley Fool, we believe numbers tell only part of the story, so check Fool.com for more of our in-depth discussion of what the numbers mean. This data has been provided by Netscribes. To provide feedback on this article, please click on the "feedback" button below.