DSW Inc (NYSE:DSW) share price soared more than 10% after exceeding earnings expectation by $0.11 per share; the company’s financial numbers for the fourth quarter rose significantly in comparison to the last-year period. The company believes its business growth strategies led it to generate record sales for fiscal 2017.
The board of directors announced a new quarterly dividend of $0.25 per share, up 20% from previous divided. The double-digit dividend growth reflects the management confidence in its future fundamentals.
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DSW Review of Financial Numbers and Dividend Safety
DSW generated total revenue of $2.8 billion in fiscal 2017 compared to $2.6 billion in last year, driven by a growth in digital sales, momentum in the core business and the successful expansion of DSW Kids.
>>Abercrombie & Fitch Share Price Doubled
Roger Rawlins, Chief Executive Officer, stated, “Our fourth quarter performance capped our first year of adjusted earnings growth since 2013. Our initiatives drove comparable sales growth and strong margin improvement at the DSW Segment this quarter”.
The company generated full-year adjusted EPS growth of 4% to $1.52 per diluted share, the first increase in the last four years.
It returned almost $73.2 million to shareholders in the form of dividends and buybacks. The earnings growth in fiscal 2017 strengthened its cash generation potential – which allowed it to raise the dividend by 25% for fiscal 2018.
It’s operating, and free cash flows have provided a complete cover to its capital requirements and dividend payments. DSW had generated $212 million in operating cash flows in 2017, compared to capital requirements of $87 million. Thus, the company was left with $125 million in free cash flows when dividend payments accounted for only $64 million. The huge gap in free cash flows and dividend payments have led the company to raise the dividend by 25% for 2018.
The Outlook is Stable
The company expects to sustain the momentum in FY2018, amid increasing digital sales and the expansion of DSW Kids platform. The company expects mid-single digit growth in sales, earnings and cash flow for fiscal 2018.
“We are drawing on our strong cash flow and the benefit from U.S. Tax Reform to enhance shareholder returns by boosting our quarterly dividend and reinvesting in strategic initiatives that will advance DSW’s dominant position in the marketplace in the years to come,” stated Mr. Rawlins.
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