Exhibit 99.1
DSW INC. REPORTS 2006 SECOND QUARTER
FINANCIAL RESULTS
COLUMBUS, Ohio, August 30, 2006/PRNewswire/ — DSW Inc. (NYSE: DSW), a leading branded footwear specialty retailer, announced net income of $15.3 million on net sales of $301.3 million for the second quarter ended July 29, 2006, compared with net income of $9.3 million on net sales of $276.2 million for the comparable period last year.
Diluted earnings per share were $0.35 for the second quarter of 2006 compared with $0.28 for last year’s second quarter.
The second quarter 2005 results include $3.9 million of interest expense on a dividend note to the Company’s controlling shareholder, Retail Ventures, Inc. (NYSE: RVI). After adjusting for the dividend interest and the significant increase in shares as a result of the Company’s initial public offering in June 2005, pro forma net income for the second quarter of 2005 was $11.6 million, or $0.26 per share. The exhibit at the end of this release reconciles the non-GAAP pro forma net income and diluted earnings per share to the reported net income and diluted earnings per share for second quarter 2005.
Comparable store sales for the second quarter of 2006 increased 2.2% compared with the same period last year.
Six Month Results
For the six months ended July 29, 2006, net income was $32.9 million on net sales of $617.8 million, compared with net income of $16.2 million on net sales of $558.0 million for the comparable period last year.
Diluted earnings per share for the six months ended July 29, 2006, were $0.74 compared with $0.53 for the same period last year.
The fiscal 2005 six-month results include $6.6 million of interest expense on a dividend note to the Company’s controlling shareholder, Retail Ventures, Inc., and $6.5 million for the accrual for losses associated with the data theft announced March 2005. After adjusting for the dividend interest, the data theft accrual and the significant increase in shares as a result of the Company’s initial public offering in June 2005, pro forma net income for the fiscal 2005 six-month period was $24.1 million, or $0.55 per share. The exhibit at the end of this release reconciles the non-GAAP pro forma net income and diluted earnings per share to the reported net income and diluted earnings per share for the fiscal 2005 six-month period.
Comparable store sales for the six months ended July 29, 2006 increased 3.2% compared with the same period last year.

 

 

2006 Outlook
The Company reiterated its previous estimate for fiscal 2006 annual diluted earnings per share of $1.24 to $1.27. Comparable store sales are projected to increase 3-5% and the Company plans to open 30 DSW stores during the year.
Webcast and Conference Call
To hear the Company’s live second quarter earnings conference call, log on to www.DSWshoes.com at 8:00 a.m. ET today, Wednesday, August 30, 2006 or call 1-866-277-1184 and reference passcode 23706620. To hear a replay of the earnings call, which will be available approximately two hours after the conference call ends, dial 1-888-286-8010, followed by passcode 79238948. An audio replay of the conference call, as well as additional financial information, will also be available at www.DSWshoes.com.
About DSW Inc.
DSW Inc., headquartered in Columbus, Ohio, is a leading U.S. branded footwear specialty retailer that offers a wide selection of brand name and designer dress, casual and athletic footwear for women and men. As of August 29, 2006, DSW operated 209 stores in 33 states and supplied footwear to 242 leased locations (26 for related retailers and 216 for non-related retailers) in the United States. For store locations and additional information about DSW, visit www.DSWshoes.com.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
Any statements in this release that are not historical or current facts are forward-looking statements. All forward-looking statements in this release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. Certain of these risks and uncertainties are described in the Company’s latest annual or quarterly report, as filed with the SEC. These risk factors include, but are not limited to: the Company’s success in opening and operating new stores on a timely and profitable basis; maintaining good relationships with vendors; ability to anticipate and respond to fashion trends; fluctuation of comparable store sales and quarterly financial performance; disruption of distribution operations; dependence on Retail Ventures, Inc. for key services; failure to retain key executives or attract qualified new personnel; remaining competitive with respect to style, price, brand availability and customer service; declining general economic conditions; risks inherent to international trade; and security risks related to our electronic processing and transmission of confidential customer information. Management undertakes no obligation to revise these forward-looking statements included in this press release to reflect any future events or circumstances.
Contact: DSW Investor Relations, 614-872-1474
Source: DSW Inc.

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DSW INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
                 
    July 29,     January 28,  
    2006     2006  
ASSETS
                
Cash and equivalents
   $ 104,326     $ 124,759  
Short-term investments
     46,925       —  
Accounts receivable, net
     6,757       4,088  
Inventories
     222,029       216,698  
Prepaid expenses and other assets
     14,303       13,981  
Deferred income taxes
     19,372       18,591  
 
Total current assets
     413,712       378,117  
 
 
                
Property and equipment, net
     97,859       95,921  
Goodwill
     25,899       25,899  
Tradenames and other intangibles, net
     5,784       6,216  
Deferred income taxes and other assets
     2,017       1,562  
 
Total assets
   $ 545,271     $ 507,715  
 
 
                
LIABILITIES AND SHAREHOLDERS’ EQUITY
                
Accounts payable
   $ 86,725     $ 85,520  
Accrued expenses
     53,536       54,069  
 
Total current liabilities
     140,261       139,589  
 
 
                
Other noncurrent liabilities
     65,146       63,410  
Total shareholders’ equity
     339,864       304,716  
 
Total liabilities and shareholders’ equity
   $ 545,271     $ 507,715  
 

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DSW INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
(Unaudited)
                                 
    Three Months Ended     Six Months Ended  
    July 29,     July 30,     July 29,     July 30,  
    2006     2005     2006     2005  
Net sales
   $ 301,302     $ 276,211     $ 617,789     $ 558,017  
Cost of sales
     (216,200 )     (199,848 )     (439,400 )     (398,856 )
 
Gross profit
     85,102       76,363       178,389       159,161  
Operating expenses
     (62,005 )     (55,675 )     (127,403 )     (123,420 )
 
Operating profit
     23,097       20,688       50,986       35,741  
Interest income (expense), net
     1,975       (5,012 )     3,299       (8,533 )
 
Earnings before income taxes
     25,072       15,676       54,285       27,208  
Income tax provision
     (9,731 )     (6,425 )     (21,425 )     (10,977 )
 
Net income
   $ 15,341     $ 9,251     $ 32,860     $ 16,231  
 
 
                                
Basic and diluted earnings per share:
                                
Basic
   $ 0.35     $ 0.28     $ 0.75     $ 0.53  
Diluted
   $ 0.35     $ 0.28     $ 0.74     $ 0.53  
 
                                
Shares used in per share calculations:
                                
Basic
     43,909       33,390       43,902       30,546  
Diluted
     44,210       33,472       44,177       30,588  

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Exhibit
(in thousands, except per share amounts)
                         
            Three Months Ended        
            July 30,        
    Proforma     2005     As reported  
    Non-GAAP     Adjustments (1)     GAAP  
Net Sales
   $ 276,211             $ 276,211  
Cost of sales
     (199,848 )             (199,848 )
 
                    
Gross profit
     76,363               76,363  
Operating expenses
     (55,675 )             (55,675 )
 
                    
Operating profit
     20,688               20,688  
Interest expense, net
     (1,092 )     (3,920 )     (5,012  
           
Earnings before income taxes
     19,596       (3,920 )     15,676  
Income tax provision (3)
     (7,993 )     1,568       (6,425 )
           
Net income
     11,603       (2,352 )     9,251  
 
                        
Weighted average outstanding shares, diluted (2)
     44,127       (10,655)       33,472  
Diluted earnings per share
     0.26               0.28  
                         
            Six Months Ended        
            July 30,        
    Proforma     2005     As reported  
    Non-GAAP     Adjustments (1)     GAAP  
Net Sales
   $ 558,017             $ 558,017  
Cost of sales
     (398,856 )             (398,856 )
 
                    
Gross profit
     159,161               159,161  
Operating expenses
     (116,920 )     (6,500 )     (123,420 )
           
Operating profit
     42,241       (6,500 )     35,741  
Interest expense, net
     (1,941 )     (6,592 )     (8,533 )
           
Earnings before income taxes
     40,300       (13,092 )     27,208  
Income tax provision (3)
     (16,214 )     5,237       (10,977 )
           
Net income
     24,086       (7,855 )     16,231  
 
                        
Weighted average outstanding shares, diluted (2)
     44,127       (13,539)       30,588  
Diluted earnings per share
     0.55               0.53  
 
(1)   The Company believes the use of pro forma results provide meaningful information for the three and six months ended July 30, 2005 due to: i) the significant increase in share count as a result of the Company’s initial public offering on June 29, 2005, ii) the interest expense in the first three and six-month periods of fiscal 2005 attributable to a $190 million dividend note which was repaid with the proceeds of the initial public offering, and iii) the $6.5 million accrual for the data theft which was recorded in the first quarter of fiscal 2005. The pro forma data is presented as if the initial public offering occurred on the first day of fiscal 2005 and the dividend note interest and data theft accrual are non-recurring or unusual charges.
 
(2)   Amount is based on the number of shares outstanding, plus the assumed exercise of dilutive stock options and restricted stock units, as of the quarter ended July 30, 2005, the first quarter end following the Company’s initial public offering on June 29, 2005, and eliminates the weighting effect to equal total shares at period end.
 
(3)   The tax effect on the pro forma adjustments is calculated using an approximate annual tax rate of 40%.

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