DSW surpassed financial forecasts with its fourth quarter results, surprising investors and analysts. Wall Street forecast diluted earnings per share of 7 cents, while the company posted diluted earnings per share of 14 cents. The company’s fourth quarter profit declined more than 60 percent, to $11.8 million when compared with a year ago profit of $30.8 million, or 35 cents per diluted share.

The company increased its sales 5 percent in the fourth quarter, raising revenue to $672 million from $640.2 million in the same period last year. Same-store sales rose 0.7 percent in the quarter, beating estimates for a decline between 2 percent and 3 percent. Year to date, sales have increased 5 percent to $2.6 billion; comparable sales have risen 0.8 percent; and diluted EPS fell 8.9 percent to $1.54.

DSW faced a number of challenges in the fourth quarter, including unseasonably warm weather and soft holiday sales. The company responded to the tough retail environment by aggressively discounting products to move inventory. DSW CEO Roger Rawlins said in a statement, “During the fourth quarter, we acted quickly to drive sales and gain market share, in the face of a challenging retail environment. While these actions negatively impacted operating margin in the near term, we believe they were the right steps to expand our customer base and exit the year with a clean inventory position.”

DSW also announced that it would be making changes to its stores in the near future. The biggest news was the plan to add children’s shoes to its stores. DSW has sold children’s shoes online since 2010, but only recently tested in-store sales, stocking children’s shoes at 22 of its 470 stores last year. The company plans to expand that number to 220 stores in time for back-to-school season. Each store will offer between 200 and 250 choices in the children’s department.

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