Why Shares of DSW Inc. Are Slumping Today

What happened

Shares of DSW Inc. (NYSE: DSW) slumped on Wednesday after the footwear retailer reported its first-quarter results. Both revenue and earnings came in above analyst estimates, and the company’s full-year earnings guidance was in line with expectations, but that wasn’t enough to prevent the stock from heading lower. Shares of DSW were down about 7.1% as of 12:05 p.m. EDT, after being down as much as 11.9% earlier in the day.

So what

DSW reported first-quarter revenue of $712 million, up 2.9% year over year and about $30 million above the average analyst estimate. Comparable sales rose 2.2% overall, better than a 3% decline in the prior-year period. DSW’s revenue included $5.6 million from Ebuys, which the company decided to shut down earlier this year.

Image source: DSW Inc.

Non-GAAP earnings per share came in at $0.39, up from $0.32 in the prior-year period and $0.02 higher than analysts were expecting. This number includes a $0.04 loss related to Ebuys. For the full year, DSW expects non-GAAP EPS in the range of $1.52 to $1.67. That compares a consensus analyst estimate of $1.62.

Now what

It’s hard to say exactly why DSW stock tumbled after a positive first-quarter report. Shares had gained about 56% over the past year prior to Wednesday’s plunge, so this may be a case of expectations outpacing what the company could deliver. Investors may have been expecting more than in-line earnings guidance for the full year.

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Timothy Green has no position in any of the stocks mentioned. The Motley Fool recommends DSW. The Motley Fool has a disclosure policy.

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