Retail Ventures Posts Papered Q1 Profit

NEW YORK – Retail Ventures Inc. late Monday reported that it swung to a profit from a year-ago loss in the first quarter.

However, the move to black ink from red was based almost entirely on changes in its investments – described as “change in fair value of derivative instruments” on its income statement.

In the 13 weeks ended May 5, the Columbus, Ohio-based operator of Value City, DSW and Filene’s Basement reported net income of $2.7 million, or $0.05 a diluted share, versus a net loss of $64.9 million, or $1.58, in the 2006 quarter.

Deleting the investment fluctuation, Retail Ventures would have reported a net loss of $9.8 million, or $0.21, versus a net loss of $139,000, or no cents, in last year’s quarter. Analysts expected a non-GAAP loss of $0.14.

Sales increased 4.5% to $754.1 million from $721.5 million but fell 5.2% on a comparable-store basis. The consensus estimate for revenues was $790.7 million.

Gross margin was flat at 40.3% of sales during both periods.

As previously reported, DSW’s sales grew 12.8%, $357 million, as its comps fell 3.6%. Sales at Value City dropped 8.3%, to $288.2 million, as comps retreated 8.7%. At Filene’s Basement, sales were up 20.1%, to $108.8 million, and comps were also up, rising 1.6%.

In its breakdown of operating income by division, the company reported that Value City’s loss grew to $13.2 million from a loss of $9.6 million a year ago while Filene’s Basement’s loss more than doubled, to $8.7 million from a year-ago loss of $3.6 million. DSW operating income grew to $37.2 million from a profit of $27.9 million in the 2006 period.

At the end of the first quarter, Retail Ventures operated 113 Value City Department Stores, 230 DSW stores and 34 Filene’s Basement units. DSW also supplies footwear for 332 unaffiliated retailers.