DSW Inc. (
DSW)
Q3 2009 Earnings Call Transcript
November 24, 2009 8:00 a.m. ET
Executives
Leslie Neville - Director of Investor Relations
Douglas J. Probst - Executive Vice President and Chief Financial Officer
Michael R. MacDonald - President and Chief Executive Officer
Deborah L. Ferrée - Vice Chairman and Chief Merchandising Officer
Analysts
Jeff Black - Barclays Capital
Christopher Svezia - Susquehanna Financial Group
David Mann - Johnson Rice & Company LLC
Michael Shrekgast - Longacre
John Zolidis - Buckingham Research
Dana Walker - Kalmar Investments
Presentation
Operator
Good day, ladies and gentlemen and welcome to the Third Quarter 2009 DSW Incorporated Earnings Conference Call. My name is (Chenelle) and I’ll be your operator for today.
At this time, all participants are in listen only mode. Later, we will conduct a question-and-answer session. If at any time, you require operator assistance, please press star followed by zero and we’ll be happy to assist you. As a reminder this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today’s call, Ms Leslie Neville, Director of Investor Relations.
Leslie Neville
Thank you and good morning. Welcome to DSW’s third quarter 2009 earnings conference call. With me today in Columbus are Mike MacDonald, our CEO; Deborah Ferrée, Vice Chair Person and Chief Merchandising Officer and Doug Probst, our CFO.
Before we proceed, please note that earlier this morning we issued a press release detailing the results of operations for the quarter ended October 31st, 2009. Various remarks we make about the future expectations, plans, and prospects of the company constitute forward-looking statements.
The actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors including those listed in today’s press release and in our public filings with the SEC.
So with that, I will turn it over to Doug Probst.
Douglas J. Probst
Thanks, Leslie. Good morning everyone. We will begin with the financial performance for the third quarter and then update our outlook for 2009.
Net sales for the third quarter increased 14% to $444.6 million. Same-store sales increased 8.7% to the comparable period versus the decrease of 4.1% last year. By segment, our comps for our DSW business were up 9.8% while our lease business comps were down 1.5%.
The merchandise margin rate for the third quarter increased 220 basis points to 46.3% compared to last years 44.1% as we experienced significant regular price sell-through throughout the quarter.
Occupancy expense rates decreased due to the positive comps and an increased focus on negotiating rent concessions from landlords. The improvement in merchandise margin and occupancy expense combined with leveraging in our distribution and fulfillment centers resulted in a gross profit rate increase of 520 basis points to a record high of 33.1%.
The SG&A rate increased to 23.0% in the quarter; however, excluding the increase in the year-to-date bonus accrual, the SG&A rate decreased 160 basis points to last year due to the increased sales, excellent execution in our stores and marketing departments and an overall concerted effort to control expenses. The net result was a 470 basis point increase in the operating income rate to 10.1% of sales.
