~~our competitiveness with respect to style, price, brand availability and customer service;~~


•	our success in growing our store base and digital demand;


•	our ability to successfully integrate the businesses acquired in fiscal 2018 or realize the anticipated benefits of the acquisitions after we complete our integration efforts;


•	our ability to protect our reputation and to maintain the brands we license;


•	maintaining strong relationships with our vendors, manufacturers and wholesale customers;


•	our ability to anticipate and respond to fashion trends, consumer preferences and changing customer expectations;


•	risks related to the loss or disruption of our distribution and/or fulfillment operations;


•	continuation of agreements with and our reliance on the financial condition of Stein Mart;


•	our ability to execute our strategies;


•	fluctuation of our comparable sales and quarterly financial performance;


•	risks related to the loss or disruption of our information systems and data;


•	our ability to prevent or mitigate breaches of our information security and the compromise of sensitive and confidential data;


•	failure to retain our key executives or attract qualified new personnel;


•	our reliance on our loyalty programs and marketing to drive traffic, sales and customer loyalty;


•	risks related to leases of our properties;


•	our competitiveness with respect to style, price, brand availability and customer service;

our reliance on foreign sources for merchandise and risks inherent to international trade;

~~uncertainty related~~the imposition of new tariffs on our products;

exposure to ~~future legislation, regulatory reform, policy changes, or interpretive guidance on existing legislation, including the impact of the Tax Cuts and Jobs Act;~~foreign tax contingencies;

~~uncertain general economic conditions;~~

~~risks related to holdings of cash and investments and access to liquidity; and~~


•	uncertainty related to future legislation, regulatory reform, policy changes, or interpretive guidance on existing legislation;


•	uncertain general economic conditions;


•	risks related to holdings of cash and investments and access to liquidity; and

fluctuations in foreign currency exchange rates.

If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results, performance or achievements may vary materially from what we have projected. Furthermore, new factors emerge from time to time and it is not possible for management to predict all such factors, nor can management assess the impact of any such factor on the business or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statement speaks only as of the date on which such statement is made, and, except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events.

Executive Overview

We started the fiscal year with a significant tax benefit resulting from corporate tax reform, which we are reinvesting towards our growth initiative by driving higher market share through positive comparable sales growth. Accordingly, we are investing in product, marketing, people, and innovation to expand DSW’s category leadership and market share, differentiate our brand, and ultimately strengthen our competitive position.

~~Our merchandising strategy focuses on increasing key item sourcing, strategic category distortions and the expansion of DSW kids, which delivered close to a 10% comparable sales increase in~~In the second quarter of fiscal ~~2018.~~2019, we saw continued progress toward our previously disclosed strategies with reported sales and earnings that position us well to reaffirm our annual guidance. Our expectations have been exceeded with our newly acquired businesses. The Canada Retail segment delivered increased comparable sales and margin growth, benefiting from moving their digital offering to our platform used in the U.S. and the launch of new loyalty programs for our Canadian customers. The Brand Portfolio segment gives us the capability to design, source and market differentiated product for our customers and better position us to grow private label brands at DSW in the U.S. We ~~completed~~remain on track to convert the production of our ~~kids roll out~~DSW private label to the Brand Portfolio segment in fiscal 2020. At that time, we expect to realize the benefits of having greater exclusivity in product offerings at higher margins.

In the U.S. Retail segment, we had continued positive results across our seasonal product categories, in particular sandals, and with ~~94 new locations and bringing~~ our ~~kids~~Kids line. We believe our efforts to increase the differentiation of our product offering, ~~chainwide this year. The kids business makes us more competitive during the important back-to-school season.~~

We saw solid returns from our marketing investments, with growth in new customer transactions, average spend per member, rewards redemption and member activation rate. We launched our new redesigned loyalty program, DSW VIP, providing customers a program with a simpler points structure, enhanced shipping options and new benefits for engagingcombined with the DSW brand. This marks an important milestone in our strategy to elevate our brand with new customer experiences. The strong customer response to our marketing campaign contributed to higher traffic activity during the quarter.

~~As part~~advantages of our ~~focus on improving customer engagement, we have updated~~strong loyalty base and our ~~processes~~vast omni-channel capabilities, separate us from competitors, place us in a good position to ~~more efficiently allocate labor between task-specific~~mitigate any tariff headwinds and ~~customer-facing functions while adding more store labor hours~~contribute to ~~provide better customer coverage during peak hours. We implemented this new labor model during~~ the ~~second quarter of fiscal 2018.~~

~~Under our innovation agenda, we also expanded the pilot~~achievement of our ~~new store design~~near and long-term goals.

Comparability

There are a number of items that affect comparability when reviewing our results of operations for the periods presented in this Quarterly Report on Form 10-Q. Significant items to additional locations this quarter. This format enables us to increase physical capacity to showcase more product choices and carry more product. Furthermore, we continue to develop new service offerings that drive traffic. Based on favorable customer response, we are in the process of identifying new locations to pilot this format.consider include:

On May 10, 2018, we ~~completed~~acquired the remaining interest in TSL that we did not previously own. For the three and six months ended August 3, 2019 and for the three months ended August 4, 2018, TSL results were included in the condensed consolidated results of operations as a wholly-owned subsidiary. For the six months ended August 4, 2018, the loss from our equity investment interest in TSL for the first quarter of fiscal 2018 was included in our condensed consolidated results of operations. Due to the acquisition of the remaining interest in TSL during the second quarter of fiscal 2018, we remeasured to fair value our previously held assets, which included our equity investment in TSL and notes and accounts receivable from TSL. After completing a comprehensive review of our Canadian acquisition, we have decided to focus our efforts on its three largest banners closest to our core competency and target customer. These three banners account for approximately 85% of sales with solid growth prospects.

As a result of the remeasurement, we ~~are exiting~~recorded a loss of $34.0 million to non-operating income (expenses), net. Also during the ~~smallest banner,~~second quarter of fiscal 2018, we reclassified a net loss of $12.2 million of foreign currency translation related to the previously held balances from accumulated other comprehensive loss to non-operating income (expenses), net. In addition, with the TSL acquisition being accounted for as a step acquisition, the purchase price included the fair value of our previously held assets, which ~~has experienced~~considered the valuation of the TSL enterprise. This valuation identified that the resulting goodwill was not supportable as the value of the acquired net assets exceeded the enterprise fair value. As a ~~decline~~result, during the three months ended August 4, 2018, we recorded a goodwill impairment charge, which resulted in ~~profitability~~impairing all of TSL’s goodwill.

On November 5, 2018, we completed the acquisition of Camuto Group. For the three and six months ended August 3, 2019, Camuto Group's results were included in ~~recent years. We are focused on aligning~~ the ~~DSW Canada banner closer~~condensed consolidated results of operations as a wholly-owned subsidiary with no amounts included for the three and six months ended August 4, 2018.

During the six months ended August 3, 2019, we incurred integration and restructuring costs related to our ~~U.S. business~~prior year acquisition activity, which consisted primarily of $3.6 million in severance, a $6.1 million termination fee for terminating two JVs, and ~~strengthening inventory~~$2.4 million of professional fees and ~~merchandising processes.~~other integration costs. During the six months ended August 4, 2018, we incurred restructuring costs of $2.7 million in severance, primarily related to changes in our store labor model.

The six months ended August 4, 2018 included the wind-down operations of Ebuys during the first quarter of fiscal 2018, which included lease exit and other termination costs and incremental income tax expense.

Financial Summary

Total revenue increased to $860.2 million for the three months ended August 3, 2019 from $795.3 million for the three months ended August 4, ~~2018 from $683.0 million for the three months ended July 29, 2017.~~2018. The ~~16.4%~~8.2% increase in total revenue was primarily driven by incremental ~~sales~~revenue from ~~TSL, a 9.7% increase in comparable sales, and an increase from non-comparable store sales,~~the acquired Camuto Group business, partially offset by the ~~loss~~impact of ~~sales~~stores closed since the end of ~~Gordmans~~the second quarter of fiscal 2018, primarily the Town Shoes banner stores, and ~~the exit of Ebuys. The~~a 0.6% decrease in comparable ~~sales increase was driven by growth in all categories and channels.~~sales.

During the three months ended August ~~4, 2018,~~3, 2019, gross profit as a percentage of net sales was ~~32.1%~~30.0%, ~~an increase~~a decrease of ~~290~~210 basis points from ~~29.2%~~32.1% in the previous year. The ~~increase~~decrease in the gross profit rate was primarily driven by ~~favorable merchandise margin and~~a benefit recognized in the ~~impact~~second quarter of fiscal 2018 as a result of adjusting our loyalty programs deferred revenue due to the relaunch of the ~~exit~~DSW VIP rewards program, the inclusion of ~~Ebuys during~~Camuto Group, which operates at a lower gross profit rate, and higher shipping costs in the current ~~year. Effective inventory management delivered better in-stock rates, which resulted in improved conversion and regular price selling that drove~~year associated with higher ~~margins.~~digital penetration.

Net income for the three months ended August 3, 2019 was $27.4 million, or $0.37 per diluted share, which included net after-tax charges of $8.3 million, or $0.11 per diluted share, primarily related to integration and restructuring expenses associated with the businesses acquired in fiscal 2018. Net loss for the three months ended August 4, 2018 was $38.4 million, or $0.48 loss per diluted share, which included net after-tax charges of $89.3 million, or $1.11 per diluted share, primarily related to the acquisition of the Canadian retail business. Net income for the three months ended July 29, 2017 was $28.7 million, or $0.36 per diluted share, which included net after-tax charges of $2.0 million, or $0.02 per share, related to the amortization of intangibles and the change in fair value of the contingent consideration liability associated with the acquisition of Ebuys, restructuring costs and foreign exchange net losses.

~~In addition to the acquisition of TSL, we~~We have continued making investments in our business that support our long-term growth objectives. During the ~~three~~six months ended August ~~4, 2018,~~3, 2019, we invested ~~$32.1~~$40.3 million in capital expenditures compared to ~~$28.1~~$32.1 million during the ~~three~~six months ended ~~July 29, 2017.~~August 4, 2018. Our capital expenditures during the first half of fiscal ~~2018~~2019 primarily related to six new store openings, multiple store remodels and investments in business infrastructure. ~~We plan to open nine new DSW stores in the U.S., with no planned openings in Canada post-acquisition, in fiscal 2018.~~

Results of Operations

~~The following represents components~~Comparison of ~~our consolidated results of operations,~~the Three Months Ended August 3, 2019 with ~~associated percentages of total revenue:~~

Three months ended Six months ended
(dollars in thousands) August 4, 2018 July 29, 2017 August 4, 2018 July 29, 2017
Revenue:
Net sales $ 793,735
99.8 % $ 681,721
99.8 % $ 1,504,172
99.8 % $ 1,372,540
99.8 %
Franchise and other revenue 1,533
0.2
1,291
0.2
3,198
0.2
2,510
0.2
Total revenue 795,268
100.0
683,012
100.0
1,507,370
100.0
1,375,050
100.0
Cost of sales (539,240 ) (67.8 ) (482,424 ) (70.6 ) (1,044,452 ) (69.3 ) (976,158 ) (71.0 )
Franchise costs (293 ) —
—
—
(573 ) —
—
—
Operating expenses (195,026 ) (24.5 ) (152,554 ) (22.3 ) (363,166 ) (24.1 ) (309,122 ) (22.5 )
Impairment charges (36,240 ) (4.6 ) —
—
(36,240 ) (2.4 ) —
—
Change in fair value of contingent consideration liability —
—
(1,168 ) (0.2 ) —
—
(2,252 ) (0.2 )
Operating profit 24,469
3.1
46,866
6.9
62,939
4.2
87,518
6.4
Interest income, net 805
0.1
661
0.1
1,469
0.1
1,222
0.1
Non-operating expenses, net (47,349 ) (6.0 ) (679 ) (0.1 ) (49,486 ) (3.3 ) (2,183 ) (0.2 )
Income (loss) before income taxes and income (loss) from equity investment (22,075 ) (2.8 ) 46,848
6.9
14,922
1.0
86,557
6.3
Income tax provision (16,281 ) (2.0 ) (18,390 ) (2.7 ) (27,671 ) (1.8 ) (33,975 ) (2.5 )
Income (loss) from equity investment —
—
219
—
(1,310 ) (0.1 ) (1,087 ) (0.1 )
Net income (loss) $ (38,356 ) (4.8 )% $ 28,677
4.2 % $ (14,059 ) (0.9 )% $ 51,495
3.7 %

the Three ~~and Six~~ Months Ended August 4, 2018 ~~Compared to Three and Six Months Ended July 29, 2017~~



	Three months ended
	August 3, 2019					August 4, 2018					Change
(dollars in thousands, except per share amounts)	Amount			% of Total Revenue		Amount			% of Total Revenue		Amount			%
Revenue:
Net sales	$	849,640		98.8	%	$	793,735		99.8	%	$	55,905		7.0	%
Commission, franchise and other revenue	10,558			1.2		1,533			0.2		9,025			588.7	%
Total revenue	860,198			100.0		795,268			100.0		64,930			8.2	%
Cost of sales	(594,779		)	(69.1	)	(539,240		)	(67.8	)	(55,539		)	10.3	%
Operating expenses	(226,616		)	(26.3	)	(195,319		)	(24.5	)	(31,297		)	16.0	%
Income from equity investment in ABG-Camuto	2,464			0.2		—			—		2,464			NM
Impairment charges	—			—		(36,240		)	(4.6	)	36,240			NM
Operating profit	41,267			4.8		24,469			3.1		16,798			68.7	%
Interest income (expense), net	(1,972		)	(0.2	)	805			0.1		(2,777		)	NM
Non-operating income (expenses), net	199			0.0		(47,349		)	(6.0	)	47,548			NM
Income (loss) before income taxes	39,494			4.6		(22,075		)	(2.8	)	61,569			NM
Income tax provision	(12,087		)	(1.4	)	(16,281		)	(2.0	)	4,194			(25.8	)%
Net income (loss)	$	27,407		3.2	%	$	(38,356	)	(4.8	)%	$	65,763		NM
Basic and diluted earnings (loss) per share:
Basic earnings (loss) per share	$	0.37				$	(0.48	)			$	0.85		NM
Diluted earnings (loss) per share	$	0.37				$	(0.48	)			$	0.85		NM
Weighted average shares used in per share calculations:
Basic shares	73,529					80,265					(6,736		)	(8.4	)%
Diluted shares	74,316					80,265					(5,949		)	(7.4	)%

NM - Not meaningful

Net ~~Sales~~

~~Net sales for the three months ended August 4, 2018 increased 16.4% compared to the three months ended July 29, 2017.~~ Sales- The following summarizes the ~~change~~changes in ~~total~~consolidated net sales from the same period last year:

(in thousands) Three months ended August 4, 2018 Six months ended August 4, 2018
Net sales for the same period last year $ 681,721
$ 1,372,540
Increase in comparable sales 60,633
75,371
Net increase from non-comparable store sales and other changes 3,430
36,153
Increase due to TSL sales 72,532
72,532
Loss of sales from Gordmans and Ebuys (24,581 ) (52,424 )
Total net sales $ 793,735
$ 1,504,172



(in thousands)	Three months ended August 3, 2019
Consolidated net sales for the same period last year	$	793,735
Decrease in comparable sales⁽¹⁾	(4,753		)
Net decrease from non-comparable sales and other changes	(2,124		)
Loss of net sales from closed stores	(16,152		)
Incremental external net sales from Camuto Group	78,934
Consolidated net sales	$	849,640

(1)

A store is considered comparable when in operation for at least 14 months at the beginning of the fiscal year. Stores are added to the comparable base at the beginning of the year and are dropped for comparative purposes in the quarter they are closed. Comparable sales includes e-commerce sales. Stores in Canada from the TSL acquisition that were in operation for at least 14 months at the beginning of fiscal 2019, along with its e-commerce sales, were added to the comparable base beginning with the second quarter of fiscal 2019. Comparable sales for the Canada Retail segment exclude the impact of foreign currency translation and are calculated by translating current period results at the foreign currency exchange rate used in the comparable period in the prior year. The calculation of comparable sales varies across the retail industry and, as a result, the calculations of other retail companies may not be consistent with our calculation.

The following summarizes net sales by segment:

Three months ended Six months ended
(in thousands) August 4, 2018 July 29, 2017 Change August 4, 2018 July 29, 2017 Change
U.S. Retail segment $ 691,757
$ 629,691
$ 62,066
$ 1,361,541
$ 1,254,195
$ 107,346
Canada Retail segment 72,532
—
72,532
72,532
—
72,532
Other⁽¹⁾
29,446
52,030
(22,584 ) 70,099
118,345
(48,246 )
Total net sales $ 793,735
$ 681,721
$ 112,014
$ 1,504,172
$ 1,372,540
$ 131,632


~~(1)~~	~~Other represents net sales for ABG and Ebuys.~~



	Three months ended					Change
(dollars in thousands)	August 3, 2019			August 4, 2018		Amount			%		Comparable Sales %
Segment net sales:
U.S. Retail	$	677,920		$	691,757	$	(13,837	)	(2.0	)%	(1.5)%
Canada Retail	63,306			72,532		(9,226		)	(12.7	)%	8.1%
Brand Portfolio	95,422			—		95,422			NM		NA
Other	29,480			29,446		34			0.1	%	1.6%
	866,128			793,735		72,393			9.1	%
Elimination of intersegment net sales	(16,488		)	—		(16,488		)	NM
Consolidated net sales	$	849,640		$	793,735	$	55,905		7.0	%	(0.6)%

~~The following summarizes our comparable sales change:~~NM - Not meaningful

NA - Not applicable

Three months ended Six months ended
August 4, 2018 July 29, 2017 August 4, 2018 July 29, 2017
U.S. Retail segment 9.6 % 0.6 % 5.7 % (1.3 )%
Other - ABG 12.2 % (0.1 )% 8.2 % (1.0 )%
Total Company 9.7 % 0.6 % 5.8 % (1.3 )%

Our increase in total net sales for the three and six months ended August 4, 2018 over the same period last year was primarily driven by the incremental sales from TSL and the increase in comparable and non-comparable store sales, partially offset by the loss of sales of Gordmans stores and the exit of Ebuys. Within the U.S. Retail segment, comparable sales ~~increased as we had higher~~decreased due to lower comparable transactions ~~partially offset by~~and a decline in comparable average dollar sales per ~~transaction. We continue~~transaction, primarily in the women's and men's categories partially offset by an increase in comparable sales in our seasonal categories and kids. Within the Canada Retail segment, comparable sales increased due to ~~have strong growth in~~higher comparable average dollar sales per transaction, primarily as a result of the significant improvements to its digital ~~demand with a trend of increasing our store fulfillment of digital orders.~~platform and lower clearance inventory.

Commission, Franchise and Other ~~Revenue~~

~~Franchise~~Revenue- Commission, franchise and other revenue consists of ~~merchandise sales,~~commission income for First Cost design and buying services in the Brand Portfolio segment, royalties and other fees paid by franchisees, ~~as well as~~and rental income on owned and leased properties.

Gross ~~Profit~~

Profit- Gross profit is ~~determined~~defined as net sales, which excludes commission, franchise and other revenue, less cost of sales, calculated as follows:


	Three months ended						Six months ended						Three months ended
(in thousands)	August 4, 2018			July 29, 2017			August 4, 2018			July 29, 2017
													August 3, 2019					August 4, 2018					Change
(dollars in thousands)													Amount			% of Net Sales		Amount			% of Net Sales		Amount		%		Basis Points
Net sales	$	793,735		$	681,721		$	1,504,172		$	1,372,540		$	849,640		100.0	%	$	793,735		100.0	%
Cost of sales	(539,240		)	(482,424		)	(1,044,452		)	(976,158		)	(594,779		)	(70.0	)	(539,240		)	(67.9	)
Gross profit	$	254,495		$	199,297		$	459,720		$	396,382		$	254,861		30.0	%	$	254,495		32.1	%	$	366	0.1	%	(210	)
Gross profit as a percentage of net sales	32.1		%	29.2		%	30.6		%	28.9		%

The following ~~presents~~summarizes gross profit ~~and their components as a percentage of net sales:~~by segment:

Three months ended Six months ended
August 4, 2018 July 29, 2017 August 4, 2018 July 29, 2017
U.S. Retail segment:
Merchandise margin 45.9 % 44.4 % 44.3 % 43.8 %
Store occupancy expenses (10.6 ) (11.4 ) (10.6 ) (11.2 )
Distribution and fulfillment expenses (2.1 ) (2.1 ) (2.3 ) (2.2 )
Gross profit 33.2
30.9
31.4
30.4
Canada Retail segment:
Merchandise margin 41.2
—
41.2
—
Store occupancy expenses (14.9 ) —
(14.9 ) —
Distribution and fulfillment expenses (1.2 ) —
(1.2 ) —
Gross profit 25.1
—
25.1
—
Other - gross profit 22.7
8.5
19.3
12.7
Total Company gross profit 32.1 % 29.2 % 30.6 % 28.9 %



	Three months ended
	August 3, 2019					August 4, 2018				Change
(dollars in thousands)	Amount			% of Segment Net Sales		Amount		% of Segment Net Sales		Amount			%		Basis Points
Segment gross profit:
U.S. Retail	$	208,056		30.7	%	$	229,601	33.2	%	$	(21,545	)	(9.4	)%	(250	)
Canada Retail	21,939			34.7	%	18,218		25.1	%	$	3,721		20.4	%	960
Brand Portfolio	19,261			20.2	%	—		—	%	$	19,261		NM		NM
Other	6,041			20.5	%	6,676		22.7	%	$	(635	)	(9.5	)%	(220	)
	255,297					254,495
Intercompany eliminations	(436		)			—
Consolidated gross profit	$	254,861				$	254,495

NM - Not meaningful

The U.S. Retail segment ~~merchandise~~gross profit margin ~~increased 150 basis points for~~decreased primarily driven by a benefit recognized in the second quarter of fiscal 2018 as a result of adjusting our loyalty programs deferred revenue due to the relaunch of the DSW VIP rewards program, the deleverage of store occupancy and distribution and fulfillment expenses, and higher shipping costs in the current year associated with higher online orders. The Canada Retail segment gross profit margin improved due to lower clearance activity with improvements in the inventory position. The inclusion of Camuto Group, which operates at a lower gross profit rate, decreased the consolidated gross profit margin rate.

Operating Expenses- For the three months ended August 4, 2018 and increased 50 basis points for the six months ended August 4, 2018 over the same periods last year primarily due to lower markdowns, partially offset by higher shipping costs. U.S. Retail segment store occupancy expenses as a percentage of net sales was favorable due to improved leverage. Other gross profit margin increased primarily due to the exit of Ebuys during the current year.

~~Operating Expenses~~

~~For the three and six months ended August 4, 2018,~~3, 2019, operating expenses as a percentage of total revenue increased ~~220 and 160~~180 basis points ~~respectively,~~ over the same ~~periods~~period last year primarily driven by ~~an increase in marketing investments and~~ the impact of ~~lease exit charges, acquisition-related costs,~~including Camuto Group in the consolidated results and integration and restructuring ~~charges,~~costs.

Income from Equity Investment in ABG-Camuto- We account for our equity investment in ABG-Camuto using the equity method of accounting, with the net earnings attributable to our 40% investment being classified within operating profit. ABG-Camuto is an integral part of the Brand Portfolio segment, given the licensing agreement between us and ~~consolidating results of TSL during the current period, partially offset by lower store expenses.~~ABG-Camuto, which allows us to sell licensed branded products to wholesale customers.

Impairment ~~Charges~~

Charges- With the TSL acquisition being accounted for as a step acquisition, the purchase price included the fair value of our previously held assets, which considered the valuation of the TSL enterprise. This valuation identified that the resulting goodwill was not supportable as the value of the acquired net assets exceeded the enterprise fair value. As a result, during the three months ended August 4, 2018, we recorded a goodwill impairment charge, which resulted in impairing all of TSL’s goodwill.

Non-operating ~~Expenses, net~~

Income (Expenses), net- Due to the acquisition of the remaining interest in TSL during the second quarter of fiscal 2018, we remeasured to fair value our previously held assets, which included our equity investment in TSL and notes and accounts receivable from TSL. As a result of the remeasurement, we recorded a loss of $34.0 million to non-operating ~~expenses,~~income (expenses), net. Also during the second quarter of fiscal 2018, we reclassified a net loss of $12.2 million of foreign currency translation related to the previously held balances from accumulated other comprehensive loss to non-operating ~~expenses,~~income (expenses), net.

Income Taxes- Our effective tax rate changed from a negative 73.8% for the three months ended August 4, 2018, reflecting a tax provision on net loss, to a positive 30.6% for the three months ended August 3, 2019. The effective tax rate was impacted by valuation allowances and the goodwill impairment associated with the TSL acquisition during the three months ended August 4, 2018.

Comparison of the Six Months Ended August 3, 2019 with the Six Months Ended August 4, 2018



	Six months ended
	August 3, 2019					August 4, 2018					Change
(dollars in thousands, except per share amounts)	Amount			% of Total Revenue		Amount			% of Total Revenue		Amount			%
Revenue:
Net sales	$	1,719,632		98.9	%	$	1,504,172		99.8	%	$	215,460		14.3	%
Commission, franchise and other revenue	19,081			1.1		3,198			0.2		15,883			496.7	%
Total revenue	1,738,713			100.0		1,507,370			100.0		231,343			15.3	%
Cost of sales	(1,208,735		)	(69.5	)	(1,044,452		)	(69.3	)	(164,283		)	15.7	%
Operating expenses	(449,422		)	(25.8	)	(363,739		)	(24.1	)	(85,683		)	23.6	%
Income from equity investment in ABG-Camuto	4,692			0.2		—			—		4,692			NM
Impairment charges	—			—		(36,240		)	(2.4	)	36,240			NM
Operating profit	85,248			4.9		62,939			4.2		22,309			35.4	%
Interest income (expense), net	(3,773		)	(0.2	)	1,469			0.1		(5,242		)	NM
Non-operating expenses, net	(143		)	0.0		(49,486		)	(3.3	)	49,343			(99.7	)%
Income before income taxes and loss from equity investment in TSL	81,332			4.7		14,922			1.0		66,410			445.0	%
Income tax provision	(22,731		)	(1.3	)	(27,671		)	(1.8	)	4,940			(17.9	)%
Loss from equity investment in TSL	—			—		(1,310		)	(0.1	)	1,310			NM
Net income (loss)	$	58,601		3.4	%	$	(14,059	)	(0.9	)%	$	72,660		NM
Basic and diluted earnings (loss) per share:
Basic earnings (loss) per share	$	0.78				$	(0.18	)			$	0.96		NM
Diluted earnings (loss) per share	$	0.77				$	(0.18	)			$	0.95		NM
Weighted average shares used in per share calculations:
Basic shares	75,267					80,187					(4,920		)	(6.1	)%
Diluted shares	76,281					80,187					(3,906		)	(4.9	)%

NM - Not meaningful

Net Sales- The following summarizes the changes in consolidated net sales from the same period last year:

~~Income Taxes~~



(in thousands)	Six months ended August 3, 2019
Consolidated net sales for the same period last year	$	1,504,172
Increase in comparable sales	16,127
Net increase from non-comparable sales and other changes	3,021
Loss of net sales from closed stores	(19,535		)
Incremental external net sales from 2018 acquired businesses	221,479
Loss of net sales from the exit of Ebuys	(5,632		)
Consolidated net sales	$	1,719,632

The following summarizes net sales by segment:



	Six months ended					Change
(dollars in thousands)	August 3, 2019			August 4, 2018		Amount			%		Comparable Sales %
Segment net sales:
U.S. Retail	$	1,369,760		$	1,361,541	$	8,219		0.6	%	0.7%
Canada Retail	115,122			72,532		42,590			58.7	%	8.1%
Brand Portfolio	196,289			—		196,289			NM		NA
Other	65,087			70,099		(5,012		)	(7.1	)%	2.5%
	1,746,258			1,504,172		242,086			16.1	%
Elimination of intersegment net sales	(26,626		)	—		(26,626		)	NM
Consolidated net sales	$	1,719,632		$	1,504,172	$	215,460		14.3	%	1.1%

NM - Not meaningful

NA - Not applicable

Within the U.S. Retail segment, comparable sales increased due to higher comparable transactions partially offset by a decline in comparable average dollar sales per transaction. The comparable sales for the Canada Retail segment reflect the stores that were added to the comparable base beginning with the second quarter of fiscal 2019.

Commission, Franchise and Other Revenue- Commission, franchise and other revenue consists of commission income for First Cost design and buying services in the Brand Portfolio segment, royalties and other fees paid by franchisees, and rental income on owned and leased properties.

Gross Profit- Gross profit is defined as net sales, which excludes commission, franchise and other revenue, less cost of sales, calculated as follows:



	Six months ended
	August 3, 2019					August 4, 2018					Change
(dollars in thousands)	Amount			% of Net Sales		Amount			% of Net Sales		Amount		%		Basis Points
Net sales	$	1,719,632		100.0	%	$	1,504,172		100.0	%
Cost of sales	(1,208,735		)	(70.3	)	(1,044,452		)	(69.4	)
Gross profit	$	510,897		29.7	%	$	459,720		30.6	%	$	51,177	11.1	%	(90	)

~~On December 22, 2017, the~~The following summarizes gross profit by segment:



	Six months ended
	August 3, 2019					August 4, 2018				Change
(dollars in thousands)	Amount			% of Segment Net Sales		Amount		% of Segment Net Sales		Amount			%		Basis Points
Segment gross profit:
U.S. Retail	$	417,947		30.5	%	$	427,945	31.4	%	$	(9,998	)	(2.3	)%	(90	)
Canada Retail	37,686			32.7	%	18,218		25.1	%	$	19,468		106.9	%	760
Brand Portfolio	41,255			21.0	%	—		—	%	$	41,255		NM		NM
Other	15,352			23.6	%	13,557		19.3	%	$	1,795		13.2	%	430
	512,240					459,720
Intercompany eliminations	(1,343		)			—
Consolidated gross profit	$	510,897				$	459,720

NM - Not meaningful

The U.S. ~~Tax Reform was enacted~~Retail segment gross profit margin declined primarily driven by a benefit recognized in the ~~U.S.,~~second quarter of fiscal 2018 as a result of adjusting our loyalty programs deferred revenue due to the relaunch of the DSW VIP rewards program and higher shipping costs in the current year associated with higher digital penetration, partially offset by higher initial markups and lower markdowns. The Canada Retail segment gross profit margin improved due to lower clearance activity. The inclusion of Camuto Group, which operates at a lower gross profit rate, decreased the consolidated gross profit margin rate.

Operating Expenses- For the six months ended August 3, 2019, operating expenses as a percentage of total revenue increased 170 basis points over the same period last year primarily driven by the impact of the acquired businesses, integration and restructuring costs and the change in accounting for previously exited leased space as a result of the transition to ASU 2016-02, partially offset by the exit of Ebuys during the previous year.

Income from Equity Investment in ABG-Camuto- We account for our equity investment in ABG-Camuto using the equity method of accounting, with the net earnings attributable to our 40% investment being classified within operating profit. ABG-Camuto is an integral part of the Brand Portfolio segment, given the licensing agreement between us and ABG-Camuto, which allows us to sell licensed branded products to wholesale customers.

Impairment Charges- With the TSL acquisition being accounted for as a step acquisition, the purchase price included the ~~reduction in~~fair value of our previously held assets, which considered the ~~federal statutory tax rate from 35% to 21%. Offsetting~~valuation of the ~~favorable impact from~~TSL enterprise. This valuation identified that the ~~U.S. Tax Reform,~~resulting goodwill was not supportable as the value of the acquired net assets exceeded the enterprise fair value. As a result, during the six months ended August 4, 2018, we ~~had additional tax provision expense~~recorded a goodwill impairment charge, which resulted in impairing all of ~~$24.0 million due to recording a valuation allowance associated with deferred tax assets and nondeductible discrete items, primarily related~~TSL’s goodwill.

Non-operating Expenses, net- Due to the ~~charges recorded as~~acquisition of the remaining interest in TSL during the second quarter of fiscal 2018, we remeasured to fair value our previously held assets, which included our equity investment in TSL and notes and accounts receivable from TSL. As a result of the ~~acquisition~~remeasurement, we recorded a loss of ~~TSL. As~~$34.0 million to non-operating income (expenses), net. Also during the second quarter of fiscal 2018, we reclassified a ~~result, our~~net loss of $12.2 million of foreign currency translation related to the previously held balances from accumulated other comprehensive loss to non-operating income (expenses), net.

Income Taxes- Our effective tax rate changed from ~~39.8% for the six months ended July 29, 2017 to~~ 203.3% for the six months ended August 4, 2018 to 27.9% for the six months ended August 3, 2019. The decrease in the effective tax rate was primarily driven by valuation allowances and the goodwill impairment associated with the TSL acquisition during the six months ended August 4, 2018.

Seasonality

Our business is subject to seasonal merchandise trends driven by the change in weather conditions and our customers' interest in new seasonal styles. New spring styles are primarily introduced in the first quarter and new fall styles are primarily introduced in the third quarter.

Liquidity and Capital Resources

Overview

Our primary ongoing operating cash flow requirements are for inventory purchases, capital expenditures for new stores, improving our information technology systems and infrastructure growth. Our working capital and inventory levels ~~typically build~~fluctuate seasonally. ~~On May 10,~~

During the six months ended August 3, 2019, we repurchased 6.1 million Class A common shares at a cost of $125.0 million, which was partially funded with borrowings on the revolving line of credit, with $351.6 million of Class A common shares that remain authorized under the program as of August 3, 2019. During the six months ended August 4, 2018, we ~~acquired the remaining interest in TSL using cash on hand for $36.2 million CAD ($28.2 million USD), net of acquired cash of $8.5 million CAD ($6.6 million USD).~~

~~As a result~~did not repurchase any Class A common shares. The share repurchase program may be suspended, modified or discontinued at any time, and we have no obligation to repurchase any amount of our ~~decision to exit~~common shares under the ~~Town Shoes banner by~~program. Shares will be repurchased in the ~~end of fiscal 2018 or early fiscal 2019, we estimate the total cost of approximately $20.0 million to $25.0 million to exit the Town Shoes banner representing lease exit charges, severance,~~open market at times and ~~inventory write-downs.~~in amounts considered appropriate based on price and market conditions.

We are committed to a cash management strategy that maintains liquidity to adequately support the operation of the business, pursue our growth strategy and withstand unanticipated business volatility. We believe that cash generated from our operations, together with our current levels of cash and investments, as well as availability under our Credit Facility, are sufficient over the next 12 months and the foreseeable future to maintain our ongoing operations, support seasonal working capital requirements, fund capital expenditures, and repurchase common shares under our share repurchase program.

Operating Cash Flows

For the six months ended August ~~4, 2018,~~3, 2019, net cash provided by operations was ~~$106.6~~$34.2 million compared to ~~$44.6~~$106.6 million for the six months ended ~~July 29, 2017.~~August 4, 2018. The ~~increase~~change was driven by ~~an increase~~a decrease in net income after adjusting for non-cash activity, including depreciation and amortization, stock-based compensation, impairment charges, the loss on previously held assets in TSL, loss on foreign currency reclassified from accumulated other comprehensive loss, ~~stock-based compensation,~~ the change in deferred income taxes, and lease exit ~~charges.~~charges, primarily due to including the net loss from Camuto Group during the first half of fiscal 2019. In addition, we had an increased use of cash to fund working capital requirements during the first quarter of fiscal 2019 due to the addition of the acquired businesses, which uses cash for working capital requirements in the first half of the year consistent with our U.S. retail operations.

Investing Cash Flows

For the six months ended August 3, 2019, our net cash provided by ~~operations increased~~investing activities was $4.5 million, which was due to ~~working~~proceeds from the sale of available-for sale-securities exceeding capital ~~changes as a result~~expenditures of ~~the timing of inventory receipts and payments to merchandise vendors, as well as a reduction in Canada Retail inventory through clearance activity.~~

~~Investing Cash Flows~~

~~For~~$40.3 million. During the six months ended August 4, 2018, our net cash used in investing activities was $25.7 million, which was due to the acquisition of TSL, capital expenditures of $32.1 million and $16.0 million of additional borrowings by TSL prior to the acquisition, partially offset by the net liquidation of our available-for sale-securities. During the six months ended July 29, 2017, our net cash used in investing activities was $35.3 million, which included the payment of $28.1 million for capital expenditures and $5.7 million of additional borrowings by TSL.

Financing Cash Flows

For the six months ended August ~~4, 2018,~~3, 2019, our net cash used in financing activities was ~~$41.1~~$87.2 million compared to ~~$31.5~~$41.1 million for the six months ended ~~July 29, 2017.~~August 4, 2018. Net cash used in financing activities was primarily related to the payment of ~~dividends, which was increased from $0.20 per share in fiscal 2017 to $0.25 per share in fiscal 2018.~~

~~On August 17, 2017, the Board of Directors authorized the~~dividends. The repurchase of an additional $500.0 million of DSW common shares under our share repurchase program, which was added to the $33.5 million remaining from the previous authorization. During the six months ended August 4, 2018 and July 29, 2017, we did not repurchase any Class A common shares, with $524.1 million of Class A common shares ~~that remain authorized~~ under the ~~program as of August 4, 2018. The~~ share repurchase program ~~may be suspended, modified or discontinued at any time, and we have no obligation to repurchase any amount~~during six months ended August 3, 2019 was partially financed using our revolving line of ~~our common shares under the program. Shares will be repurchased in the open market at times and in amounts considered appropriate based on price and market conditions.~~credit.

Debt

Credit Facility- On August 25, 2017, we entered into a senior unsecured revolving credit agreement (the "Credit Facility") with a maturity date of August 25, 2022 that replaced our previous secured revolving credit agreement and letter of credit agreement. ~~The~~On October 10, 2018, the Credit Facility ~~provides~~was amended to include the acquisition of Camuto Group as a permitted acquisition and, following the acquisition, to utilize an accordion feature that provided for an increase to the revolving line of credit. On November 5, 2018, following the acquisition of Camuto Group, the amended Credit Facility was increased with no change to the sub-limits. As of August 3, 2019, the Credit Facility provided a revolving line of credit up to ~~$300~~$400 million, with sub-limits for the issuance of up to $50 million in letters of credit, swing loan advances of up to $15 million, and the issuance of up to $75 million in foreign currency revolving loans and letters of credit. The Credit Facility may be ~~further increased by up to $100 million subject to agreed-upon terms and conditions. The Credit Facility may be~~ used to provide funds for working capital, capital expenditures, ~~dividends and~~ share repurchases, other expenditures, and permitted acquisitions as defined by the Credit Facility. Our Credit Facility allows the payments of dividends by us or our subsidiaries, provided that immediately before and after a dividend payment there is no event of default, as defined in our Credit Facility.

Loans issued under the revolving line of credit bear interest, at our option, at a base rate or an alternate base rate as defined in the Credit Facility plus a margin based on our leverage ratio, with ~~any~~an interest rate of 4.1% as of August 3, 2019. Any loans issued in CAD ~~bearing~~bear interest at the alternate base rate plus a margin based on our leverage ratio. Interest on letters of credit issued under the Credit Facility is variable based on our leverage ratio and the type of letters of ~~credit.~~credit, with an interest rate of 1.7% as of August 3, 2019. Commitment fees are based on the average unused portion of the Credit Facility at a variable rate based on our leverage ratio. As of August ~~4, 2018,~~3, 2019, we had no$235.0 million outstanding ~~borrowings~~ under the Credit Facility and ~~$1.2~~$1.3 million in letters of credit issued, resulting in ~~$298.8~~$163.7 million available for borrowings. Interest expense related to the Credit Facility includes interest on borrowings and letters of credit, ~~interest,~~ commitment fees and the amortization of debt issuance costs.

Debt Covenants- The Credit Facility contains financial and other covenants, including, but not limited to, limitations on indebtedness, liens and investments, as well as the maintenance of a leverage ratio not to exceed 3.25:1 and a fixed charge coverage ratio not to be less than 1.75:1. As a result of the acquisition of Camuto Group, we have elected to increase the leverage ratio whereby we must maintain a leverage ratio not to exceed 3.50:1 as of the end of the fourth quarter of fiscal 2018 and for the subsequent three quarters. A violation of any of the covenants could result in a default under the Credit Facility that would permit the lenders to restrict our ability to further access the Credit Facility for loans and letters of credit and require the immediate repayment of any outstanding loans under the Credit Facility. As of August ~~4, 2018,~~3, 2019, we were in compliance with all financial covenants.

Capital Expenditure Plans

We expect to spend approximately ~~$90~~$75.0 million to $85.0 million for capital expenditures in fiscal ~~2018, which now includes our planned capital expenditures related to the Canada Retail segment.~~2019. Our future investments will depend primarily on the number of stores we open and remodel, infrastructure and information technology projects that we undertake and the timing of these expenditures. WeDuring fiscal 2019, we plan to open ~~nine~~approximately 17 to 21 new DSW stores in the U.S. in fiscal 2018 with no planned openings in Canada post-acquisition. The average investment required to open a new DSW store in the U.S. is approximately $1.4 million prior to construction and tenant allowances, which average $0.4 million. Of this amount, gross inventory typically accounts for $0.5 million, fixtures and leasehold improvements typically account for $0.7 million, and new store advertising and other new store expenses typically account for $0.2 million.stores.

Off-Balance Sheet Liabilities and Other Contractual Obligations

We do not have any material off-balance sheet arrangements as defined by Item 303(a)(4) of Regulation S-K.

We have included a summary of our contractual obligations as of February ~~3, 2018~~2, 2019 in our Annual Report on Form 10-K for the fiscal year ended February ~~3, 2018. As of August 4, 2018, we have entered into various noncancelable purchase and service agreements resulting in purchase obligations of approximately $21.8 million.~~2, 2019. There have been no ~~other~~ material changes in contractual obligations outside the ordinary course of business since February ~~3, 2018.~~2, 2019.

~~Recent Accounting Pronouncements~~

~~The information related to recent accounting pronouncements as set forth in Note 1,~~ ~~Significant Accounting Policies, of the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q is incorporated herein by reference.~~

Critical Accounting Policies and Estimates

The preparation of our condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and disclosure of commitments and contingencies at the date of the condensed consolidated financial statements and reported amounts of revenue and expenses during the reporting period. We base these estimates and judgments on factors we believe to be relevant, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. The process of determining

significant estimates is fact-specific and takes into account factors such as historical experience, current and expected economic conditions, product mix, and in some cases, actuarial and appraisal techniques. We constantly re-evaluate these significant factors and make adjustments where facts and circumstances dictate.

While we believe that the factors considered provide a meaningful basis for the accounting policies applied in the preparation

of the condensed consolidated financial statements, we cannot guarantee that our estimates and assumptions will be accurate. As the determination of these estimates requires the exercise of judgment, actual results may differ from those estimates, and such differences may be material to our condensed consolidated financial statements. During the first quarter of fiscal 2018, we adopted the new accounting standard for revenue recognition, ASU 2014-09 and the related amendments, using the full retrospective method, as disclosed in more detail in Note 3, ~~Revenue,~~ ~~of the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.~~ There have been no ~~other~~ material changes to the application of critical accounting policies disclosed in our Annual Report on Form 10-K for the fiscal year ended February ~~3, 2018, except for the following additional policy:~~2, 2019.



~~Policy~~	~~Judgments and Estimates~~	~~Effect if Actual Results Differ from Assumptions~~
~~Business combinations.~~ We account for business combinations using the acquisition method of accounting, which requires that once control is obtained, all the assets acquired and liabilities assumed be recorded at their respective fair values at the date of acquisition. The determination of fair values of assets and liabilities acquired requires estimates and the use of valuation techniques when market value is not readily available. Any excess of purchase price over the fair value of net tangible and intangible assets acquired is allocated to goodwill.	The fair value for property and equipment was determined using the cost and market approaches. The fair value of inventories, which is made up of finished goods, was determined based on market assumptions for realizing a reasonable profit after selling costs. For intangible assets, we generally use the income approach to determine fair value. The income approach requires management to make significant estimates and assumptions. These estimates and assumptions primarily include the use of discount rates, growth rates, royalty rates, and forecasts of revenue and operating income. The discount rates applied to the projections reflect the risk factors associated with those projections.	Although we believe our estimates of fair value are reasonable, actual financial results could differ from those estimates due to the inherent uncertainty involved in making such estimates. The final determination of the fair value of certain assets and liabilities is completed within a one-year measurement period from the acquisition date. Changes in assumptions concerning future financial results or other underlying assumptions after the final determination of the fair value could result in impairment charges to long lived assets and/or intangible assets acquired.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We have market risk exposure related to interest rates and foreign currency exchange rates. Market risk is measured as the potential negative impact on earnings, cash flows or fair values resulting from a hypothetical change in interest rates or foreign currency exchange rates over the next year. We currently do not utilize hedging instruments to mitigate these market risks.

Interest Rate Risk

We hold available-for-sale ~~investments. Our results of operations~~securities, which are not materially affected by changes in market interest rates. Also, as of August ~~4, 2018,~~3, 2019, we ~~did not have borrowings~~had $235.0 million outstanding on our revolving line of credit under our Credit Facility. Borrowings under our Credit Facility ~~and, consequently, did not have any material exposure to interest rate market risks during or at the end of this period. However, as any future borrowings under our Credit Facility will be at~~are based on a variable rate of interest, ~~we could potentially be impacted should we require significant borrowings in the future,~~which exposes us to interest rate market risks, particularly during a period of rising interest rates. The impact of a hypothetical 100 basis point increase in interest rates on our revolving line of credit would not result in a material amount of additional expense over a 12-month period based on the balance as of August 3, 2019.

Foreign Currency Exchange Risk

We are ~~primarily~~ exposed to the impact of foreign exchange rate risk primarily through our ~~TSL~~ operations in Canada, where the functional currency is the Canadian ~~dollar.~~dollar, as well as foreign denominated cash accounts. A hypothetical 10% movement in the ~~Canadian dollar~~exchange rates could result in a ~~$5.0~~$3.0 million foreign currency translation fluctuation, which would be recorded in accumulated other comprehensive loss within the condensed consolidated balance sheets, and ~~$4.6~~$2.1 million of foreign currency revaluation, which would be recorded in non-operating ~~expenses,~~income (expenses), net within the condensed consolidated statements of operations.

During the second quarter of fiscal 2018, as a result of acquiring the remaining interest in TSL, we reclassified a net loss of $12.2 million of foreign currency translation related to the previously held balances from accumulated other comprehensive loss to non-operating expenses, net.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We, under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, performed an evaluation of our disclosure controls and procedures, as such term is defined in Exchange Act Rules 13a-15(e) and 15d-15(e). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded, as of the end of the period covered by this report, that such disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

~~Except as noted in the following sentence, no~~No change was made in our internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d -15(e), during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. As a result of acquiring the remaining interest in TSL, we have incorporated internal controls over significant processes specific to the acquisition that we believe are appropriate and necessary in consideration of accounting for the acquisition, consolidation, and financial reporting.

In accordance with guidance issued by the SEC, companies are permitted to exclude acquisitions from their final assessment of internal control over financial reporting during the year of the acquisition while integrating the acquired operations. As a result of acquiring the remaining interest in TSL on May 10, 2018, TSL became a consolidated subsidiary and ceased being accounted for under the equity method. Management's assessment of internal control over financial reporting is expected to exclude the internal controls of TSL.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The information set forth in Note ~~14,~~ 16, Commitments and Contingencies - Legal Proceedings, of the ~~Condensed Consolidated Financial Statements~~condensed consolidated financial statements of this Quarterly Report on Form 10-Q is incorporated herein by reference.

Item 1A. Risk Factors

~~As of the date of the filing, there have been no material changes to the~~The following risk factors ~~previously disclosed~~supplement and update our risk factors as set forth in Part I, Item ~~1A,~~1A. Risk Factors of our Annual Report on Form 10-K for the fiscal year ended February ~~3, 2018.~~2, 2019.

The imposition of new tariffs on our products could have a material adverse effect on our business and financial performance.

The U.S. Government has placed tariffs on certain goods imported from China and may impose new tariffs on goods imported from China and other countries, including footwear and other products that we import. All of the Brand Portfolio segment products are manufactured from third-party manufacturing facilities outside the U.S., whereas our retail merchandise is purchased from both domestic and foreign vendors. Many of our domestic vendors import a large portion of their merchandise from abroad. We believe almost all of our merchandise was manufactured outside the U.S., with the majority manufactured in China. In retaliation, China has responded by imposing tariffs on a wide range of products imported from the U.S. and by adjusting the value of its currency. If additional tariffs or trade restrictions are implemented by the U.S. or other countries in connection with a global trade war, the resulting escalation of trade tensions could have a material adverse effect on world trade and the global economy. While it is too early to predict whether or how the recently enacted tariffs will impact our business, the imposition of tariffs on footwear or other items imported by us from China could require us to increase prices to our customers or, if unable to do so, result in lowering our gross margin on products sold, which could have a material adverse effect on our business and financial performance. Alternatively, we may seek to shift production outside of China, resulting in significant costs and disruption to our business. Even in the absence of further tariffs or trade restrictions, the related uncertainty and the market's fear of an economic slowdown could lead to a decrease in consumer spending and we may experience lower net sales than expected. Reduced net sales may result in reduced operating cash flows if we are not able to appropriately manage inventory levels or leverage expenses.

We are exposed to foreign tax contingencies as a result of the acquisition of Camuto Group, which could have a material adverse effect on our financial performance.

During the due diligence procedures performed related to the acquisition of Camuto Group, we identified probable contingent liabilities associated with unpaid foreign payroll and other taxes that could also result in assessed penalties and interest. We have developed an estimate of the range of outcomes related to these obligations of $14.8 million to $30.0 million for obligations we are aware of at this time. We are continuing to assess the exposure, which may result in material changes to these estimates, and we may identify additional contingent liabilities. We believe that the Sellers are obligated to indemnify us for any payments to foreign taxing authorities for the periods up to the acquisition date. Although a portion of the purchase price is held in escrow and another portion is held in a restricted bank account, there can be no assurance that we will successfully collect all amounts that we may be obligated to settle with the foreign taxing authorities.


Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds

Share Repurchase Program

On August 17, 2017, the Board of Directors authorized the repurchase of an additional $~~500.0~~500 million of Class A common shares under our share repurchase program, which was added to the $33.5 million remaining from the previous authorization. The share repurchase program may be suspended, modified or discontinued at any time, and we have no obligation to repurchase any amount of our common shares under the program. Shares will be repurchased in the open market at times and in amounts considered appropriate based on price and market conditions.

The following table sets forth the Class A common share repurchases during the most recent quarter:

(in thousands, except per share amounts)
(a)
Total Number of Shares Purchased⁽¹⁾

(b)
Average Price Paid per Share

(c)
Total Number of Shares Purchased as Part of Publicly Announced Programs

(d)
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Programs
May 6, 2018 to June 2, 2018 2
$ 25.16
—
$ 524,094
June 3, 2018 to July 7, 2018 1
$ 24.73
—
$ 524,094
July 8, 2018 to August 4, 2018 —
$ —
—
$ 524,094
3
$ 24.96
—



(in thousands, except per share amounts)	(a) Total Number of Shares Purchased	(b) Average Price Paid per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Programs	(d) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Programs
May 5, 2019 to June 1, 2019	—	$	—	—	$	401,564
June 2, 2019 to July 6, 2019⁽¹⁾	2,669	$	18.74	2,668	$	351,564
July 7, 2019 to August 3, 2019	—	$	—	—	$	351,564
Total	2,669	$	18.74	2,668


(1)	The total number of shares repurchased includes the shares repurchased as part of publicly announced programs (the average price paid per share includes any broker commissions) and 856 shares withheld in connection with tax payments due upon vesting of employee restricted stock awards.

Dividends

The payment of any future dividends is at the discretion of our Board of Directors and is based on our future earnings, cash flow, financial condition, capital requirements, changes in taxation laws, general economic condition and any other relevant factors. It is anticipated that dividends will be declared on a quarterly basis. Our Credit Facility allows the payments of dividends by us or our subsidiaries, provided that immediately before and after a dividend payment there is no event of default, as defined in our Credit Facility. On August 29, 2019, the Board of Directors declared a quarterly cash dividend payment of $0.25 per share for both Class A and Class B common shares. The dividend will be paid on October 4, 2019 to shareholders of record at the close of business on September 20, 2019.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

None.

Item 6. Exhibits



Exhibit No.		Description
3.1		Amended and Restated Articles of Incorporation, ~~of DSW Inc.~~ dated ~~November 1, 2013.~~March 19, 2019. Incorporated by reference to Exhibit 3.1 to ~~DSW's~~ Form ~~8-K~~10-K (file no. 001-32545) filed ~~November 4, 2013~~March 26, 2019..
3.2		Amended and Restated Code of ~~Regulations of the registrant.~~Regulations. Incorporated by reference to Exhibit 3.2 to Form 10-K (file no. 001-32545) filed April 13, ~~2006~~2006..
4.1		Specimen Class A Common Shares Certificate. Incorporated by reference to Exhibit 4.1 to Form ~~10-K~~10-Q (file no. 001-32545) filed ~~April 13, 2006.~~June 4, 2019.
31.1*		Rule 13a-14(a)/15d-14(a) Certification - Principal Executive Officer.
31.2*		Rule 13a-14(a)/15d-14(a) Certification - Principal Financial Officer.
32.1*		Section 1350 Certification - Principal Executive Officer.
32.2*		Section 1350 Certification - Principal Financial Officer.
101*		~~XBRL Instance Documents~~The following materials from the Designer Brands Inc. Quarterly Report on Form 10-Q for the quarter ended August 3, 2019, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Statements of Operations for the three and six months ended August 3, 2019 and August 4, 2018; (ii) Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended August 3, 2019 and August 4, 2018; (iii) Condensed Consolidated Balance Sheets as of August 3, 2019, February 2, 2019 and August 4, 2018; (iv) Condensed Consolidated Statements of Shareholders’ Equity for the three and six months ended August 3, 2019 and August 4, 2018; (v) Condensed Consolidated Statements of Cash Flows for the six months ended August 3, 2019 and August 4, 2018; and (vi) Notes to Condensed Consolidated Financial Statements.
104*		Cover Page Interactive Data File, formatted in iXBRL and contained in Exhibit 101.


*	Filed herewith

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

~~DSW~~DESIGNER BRANDS INC.



Date:	August 30, ~~2018~~2019	By:	/s/ Jared Poff
			Jared Poff
			~~Senior~~Executive Vice President and Chief Financial Officer
			(Principal Financial ~~and Accounting~~ Officer and duly authorized officer)

3336



Ohio			31-0746639
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

810 DSW Drive,	Columbus,	Ohio	43219
(Address of principal executive offices)			(Zip Code)



Title of each class	Trading Symbol	Name of each exchange on which registered
Class A Common Shares, without par value	DBI	New York Stock Exchange



Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ ~~Yes~~ o No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). þ ~~Yes~~ o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer	þ	☑	Accelerated filer	o	☐
Non-accelerated filer	o	~~(Do not check if a smaller reporting company)~~☐	Smaller reporting company	o	☐
			Emerging growth company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

~~Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).~~ o ~~Yes~~ þ No ☐



	Three months ended						Six months ended
	August 4, 2018			July 29, 2017			August 4, 2018			July 29, 2017
Net income (loss)	$	(38,356	)	$	28,677		$	(14,059	)	$	51,495
Other comprehensive income (loss), net of income taxes:
Foreign currency translation gain (loss)	(1,365		)	10,657			(6,050		)	6,537
Unrealized net gain (loss) on debt securities	27			(23		)	(317		)	33
Reclassification adjustment for net losses realized in net income (loss)	12,260			527			14,165			2,107
Total other comprehensive income, net of income taxes	10,922			11,161			7,798			8,677
Total comprehensive income (loss)	$	(27,434	)	$	39,838		$	(6,261	)	$	60,172



	August 4, 2018			February 3, 2018			July 29, 2017
ASSETS
Cash and cash equivalents	$	215,996		$	175,932		$	89,305
Investments	73,119			124,605			182,062
Accounts receivable	17,259			17,532			16,596
Accounts receivable from related parties	—			1,704			1,146
Inventories	596,956			501,903			527,305
Prepaid expenses and other current assets	73,763			49,197			45,529
Total current assets	977,093			870,873			861,943
Property and equipment, net	387,621			355,199			364,552
Goodwill	25,899			25,899			79,689
Intangible assets	20,285			135			33,065
Deferred income taxes	14,235			27,711			18,792
Equity investment in TSL	—			6,096			10,350
Notes receivable from TSL	—			115,895			60,094
Other assets	19,883			19,709			18,144
Total assets	$	1,445,016		$	1,421,517		$	1,446,629
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable	$	228,921		$	178,449		$	164,659
Accounts payable to related parties	519			859			718
Accrued expenses	145,776			148,226			124,343
Total current liabilities	375,216			327,534			289,720
Non-current liabilities	150,316			138,732			142,499
Contingent consideration liability	—			—			36,456
Total liabilities	525,532			466,266			468,675
Commitments and contingencies
Shareholders' equity:
Common shares paid-in capital, no par value	971,653			961,245			953,868
Treasury shares, at cost	(325,906		)	(325,906		)	(316,531		)
Retained earnings	301,006			354,979			370,874
Basis difference related to acquisition of commonly controlled entity	(24,993		)	(24,993		)	(24,993		)
Accumulated other comprehensive loss	(2,276		)	(10,074		)	(5,264		)
Total shareholders' equity	919,484			955,251			977,954
Total liabilities and shareholders' equity	$	1,445,016		$	1,421,517		$	1,446,629



þ☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



o☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



		Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Operations		1
Condensed Consolidated Statements of Comprehensive Income (Loss)		2
Condensed Consolidated Balance Sheets		3
Condensed Consolidated Statements of ~~Cash Flows~~Shareholders' Equity		4
Condensed Consolidated Statements of Cash Flows	5
Notes to the Condensed Consolidated Financial Statements		56
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		2223
Item 3. Quantitative and Qualitative Disclosures About Market Risk		2932
Item 4. Controls and Procedures		3033
PART II. OTHER INFORMATION
Item 1. Legal Proceedings		3033
Item 1A. Risk Factors		3033
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		3034
Item 3. Defaults Upon Senior Securities		3134
Item 4. Mine Safety Disclosures		3134
Item 5. Other Information		3134
Item 6. Exhibits		3235
Signature		3336



	August 3, 2019			February 2, 2019			August 4, 2018
ASSETS
Cash and cash equivalents	$	51,762		$	99,369		$	215,996
Investments	25,504			69,718			73,119
Accounts receivable, net	85,162			68,870			17,259
Inventories	706,168			645,317			596,956
Prepaid expenses and other current assets	55,561			71,945			73,763
Total current assets	924,157			955,219			977,093
Property and equipment, net	402,779			409,576			387,621
Operating lease assets	975,963			—			—
Goodwill	116,280			89,513			25,899
Intangible assets	21,112			46,129			20,285
Deferred tax assets	29,515			30,283			14,235
Equity investment in ABG-Camuto	55,033			58,125			—
Other assets	32,407			31,739			19,883
Total assets	$	2,557,246		$	1,620,584		$	1,445,016
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable	$	289,457		$	261,625		$	229,440
Accrued expenses	173,437			201,535			145,776
Current operating lease liabilities	185,969			—			—
Total current liabilities	648,863			463,160			375,216
Debt	235,000			160,000			—
Non-current operating lease liabilities	905,546			—			—
Other non-current liabilities	38,590			165,047			150,316
Total liabilities	1,827,999			788,207			525,532
Commitments and contingencies
Shareholders' equity:
Common shares paid-in capital, no par value	988,305			978,794			971,653
Treasury shares, at cost	(498,436		)	(373,436		)	(325,906		)
Retained earnings	266,957			254,718			301,006
Basis difference related to acquisition of commonly controlled entity	(24,993		)	(24,993		)	(24,993		)
Accumulated other comprehensive loss	(2,586		)	(2,706		)	(2,276		)
Total shareholders' equity	729,247			832,377			919,484
Total liabilities and shareholders' equity	$	2,557,246		$	1,620,584		$	1,445,016



	Number of shares				Amounts
	Class A common shares		Class B common shares	Treasury shares	Common shares paid in capital		Treasury shares			Retained earnings			Basis difference related to acquisition of commonly controlled entity			Accumulated other comprehensive loss			Total
Three months ended August 3, 2019
Balance, May 4, 2019	67,434		7,733	18,501	$	982,093	$	(448,436	)	$	257,453		$	(24,993	)	$	(3,266	)	$	762,851
Net income	—		—	—	—		—			27,407			—			—			27,407
Stock-based compensation activity	145		—	—	6,212		—			—			—			—			6,212
Repurchase of Class A common shares	(2,668	)	—	2,668	—		(50,000		)	—			—			—			(50,000		)
Dividends ($0.25 per share)	—		—	—	—		—			(17,903		)	—			—			(17,903		)
Other comprehensive income	—		—	—	—		—			—			—			680			680
Balance, August 3, 2019	64,911		7,733	21,169	$	988,305	$	(498,436	)	$	266,957		$	(24,993	)	$	(2,586	)	$	729,247
Three months ended August 4, 2018
Balance, May 5, 2018	72,470		7,733	13,091	$	965,623	$	(325,906	)	$	359,342		$	(24,993	)	$	(13,198	)	$	960,868
Net loss	—		—	—	—		—			(38,356		)	—			—			(38,356		)
Stock-based compensation activity	91		—	—	6,030		—			—			—			—			6,030
Dividends ($0.25 per share)	—		—	—	—		—			(19,980		)	—			—			(19,980		)
Other comprehensive income	—		—	—	—		—			—			—			10,922			10,922
Balance, August 4, 2018	72,561		7,733	13,091	$	971,653	$	(325,906	)	$	301,006		$	(24,993	)	$	(2,276	)	$	919,484
Six months ended August 3, 2019
Balance, February 2, 2019	70,672		7,733	15,091	$	978,794	$	(373,436	)	$	254,718		$	(24,993	)	$	(2,706	)	$	832,377
Cumulative effect of accounting change	—		—	—	—		—			(9,556		)	—			—			(9,556		)
Net income	—		—	—	—		—			58,601			—			—			58,601
Stock-based compensation activity	317		—	—	9,511		—			—			—			—			9,511
Repurchase of Class A common shares	(6,078	)	—	6,078	—		(125,000		)	—			—			—			(125,000		)
Dividends ($0.50 per share)	—		—	—	—		—			(36,806		)	—			—			(36,806		)
Other comprehensive income	—		—	—	—		—			—			—			120			120
Balance, August 3, 2019	64,911		7,733	21,169	$	988,305	$	(498,436	)	$	266,957		$	(24,993	)	$	(2,586	)	$	729,247
Six months ended August 4, 2018
Balance, February 3, 2018	72,294		7,733	13,091	$	961,245	$	(325,906	)	$	354,979		$	(24,993	)	$	(10,074	)	$	955,251
Net loss	—		—	—	—		—			(14,059		)	—			—			(14,059		)
Stock-based compensation activity	267		—	—	10,408		—			—			—			—			10,408
Dividends ($0.50 per share)	—		—	—	—		—			(39,914		)	—			—			(39,914		)
Other comprehensive income	—		—	—	—		—			—			—			7,798			7,798
Balance, August 4, 2018	72,561		7,733	13,091	$	971,653	$	(325,906	)	$	301,006		$	(24,993	)	$	(2,276	)	$	919,484



(in thousands)	Final Purchase Price and Allocation
Purchase price:
Cash consideration, net of cash acquired	$	28,152
Replacement stock-based awards attributable to pre-acquisition services	196
Fair value of previously held assets	92,242
	$	120,590
Fair value of assets and liabilities acquired:
Inventories	$	66,072
Other current assets	3,687
Property and equipment	41,008
Goodwill	43,022
Intangible assets	20,689
Accounts payable and accrued expenses	(33,196		)
Non-current liabilities	(20,692		)
	$	120,590



(in USD and in thousands)	Preliminary Purchase Price and Allocation as of May 10, 2018
Purchase price:
Cash consideration, net of cash acquired	$	28,152
Replacement stock-based awards attributable to pre-acquisition services	196
Fair value of previously held assets	92,242
	$	120,590
Fair value of assets and liabilities acquired:
Inventories	$	58,822
Other current assets	3,608
Property and equipment	41,601
Goodwill	37,044
Intangible assets	20,689
Accounts payable and accrued expenses	(33,248		)
Non-current liabilities	(7,926		)
	$	120,590



(in thousands)	Preliminary Purchase Price and Allocation as of November 5, 2018			Measurement Period Adjustments			Revised Purchase Price and Allocation as of August 3, 2019
Purchase price -
Cash consideration, net of cash acquired	$	171,251		$	—		$	171,251
Fair value of assets and liabilities acquired:
Accounts receivable	$	83,939		$	3,980		$	87,919
Inventories	74,499			(758		)	73,741
Other current assets	7,197			1,045			8,242
Property and equipment	43,906			960			44,866
Goodwill	63,614			26,767			90,381
Intangible asset	27,000			(21,700		)	5,300
Other assets	13,351			—			13,351
Accounts payable and other liabilities	(122,811		)	(2,195		)	(125,006		)
Non-current liabilities	(19,444		)	(8,099		)	(27,543		)
	$	171,251		$	—		$	171,251



(in thousands)	Six Months Ended August 3, 2019
Balance at beginning of period	$	58,125
Share of net earnings	4,692
Distributions received	(7,784		)
Balance at end of period	$	55,033



	Three months ended July 29, 2017								Six months ended July 29, 2017
(in thousands, except per share amounts)	As Reported			Adjustments		As Adjusted			As Reported			Adjustments		As Adjusted
Net sales	$	680,409		1,312		$	681,721		$	1,371,511		1,029		$	1,372,540
Franchise and other revenue	$	—		1,291		$	1,291		$	—		2,510		$	2,510
Total revenue	$	—		683,012		$	683,012		$	—		1,375,050		$	1,375,050
Cost of sales	$	(483,437	)	1,013		$	(482,424	)	$	(979,310	)	3,152		$	(976,158	)
Operating expenses	$	(149,057	)	(3,497	)	$	(152,554	)	$	(302,321	)	(6,801	)	$	(309,122	)
Operating profit	$	46,747		119		$	46,866		$	87,628		(110	)	$	87,518
Income before income taxes and income (loss) from equity investment	$	46,729		119		$	46,848		$	86,667		(110	)	$	86,557
Income tax provision	$	(18,349	)	(41	)	$	(18,390	)	$	(34,014	)	39		$	(33,975	)
Net income	$	28,599		78		$	28,677		$	51,566		(71	)	$	51,495
Total comprehensive income	$	39,760		78		$	39,838		$	60,243		(71	)	$	60,172
Diluted earnings per share	$	0.35		0.01		$	0.36		$	0.64		—		$	0.64



	Three months ended						Six months ended
(in thousands)	August 3, 2019			August 4, 2018			August 3, 2019			August 4, 2018
Gift cards:
Beginning of period	$	30,066		$	28,151		$	34,998		$	32,792
Gift cards redeemed and breakage recognized to net sales	(21,843		)	(21,761		)	(44,098		)	(44,034		)
Gift cards issued	20,054			20,401			37,377			38,033
End of period	$	28,277		$	26,791		$	28,277		$	26,791
Loyalty programs:
Beginning of period	$	16,153		$	22,111		$	16,151		$	21,282
Loyalty certificates redeemed and expired and other adjustments recognized to net sales	(9,507		)	(16,750		)	(18,828		)	(23,385		)
Deferred revenue for loyalty points issued	9,388			11,425			18,711			18,889
End of period	$	16,034		$	16,786		$	16,034		$	16,786



	Three months ended						Six months ended
(in thousands)	August 4, 2018			July 29, 2017			August 4, 2018			July 29, 2017
Gift cards:
Beginning of period	$	28,151		$	27,802		$	32,792		$	30,829
Gift cards redeemed and breakage recognized to net sales	(21,761		)	(25,132		)	(44,034		)	(44,440		)
Gift cards issued	20,401			22,136			38,033			38,417
End of period	$	26,791		$	24,806		$	26,791		$	24,806
Loyalty programs:
Beginning of period	$	22,111		$	21,287		$	21,282		$	19,889
Loyalty certificates redeemed and expired and other adjustments recognized to net sales	(16,750		)	(7,529		)	(23,385		)	(14,185		)
Deferred revenue for loyalty points issued	11,425			7,848			18,889			15,902
End of period	$	16,786		$	21,606		$	16,786		$	21,606



	Number of shares
(in thousands)	Stock Options		Time-Based RSUs		Performance-Based RSUs
Outstanding - beginning of period	4,001		989		596
Granted	—		841		358
Exercised / vested	(99	)	(111	)	(97	)
Forfeited / expired	(38	)	(56	)	—
Outstanding - end of period	3,864		1,663		857


(1)	Upon transition to ASU 2016-02 at the beginning of fiscal 2019, amounts for construction and tenant allowance receivables due from landlords were netted against the operating lease liabilities.


(1)	Construction in progress is comprised primarily of the construction of leasehold improvements and furniture and fixtures related to unopened stores and internal-use software under development.



(in thousands)	Cost		Accumulated Amortization			Net
August 3, 2019
Definite-lived customer relationships	$	6,661	$	(1,064	)	$	5,597
Indefinite-lived trademarks and tradenames	15,515		—			15,515
	$	22,176	$	(1,064	)	$	21,112
February 2, 2019
Definite-lived:
Customer relationships	$	28,375	$	(1,010	)	$	27,365
Favorable leasehold interests	3,513		(295		)	3,218
Indefinite-lived trademarks and tradenames	15,546		—			15,546
	$	47,434	$	(1,305	)	$	46,129
August 4, 2018
Definite-lived:
Customer relationships	$	1,378	$	(114	)	$	1,264
Favorable leasehold interests	3,522		(101		)	3,421
Indefinite-lived trademarks and tradenames	15,600		—			15,600
	$	20,500	$	(215	)	$	20,285


(1)	Other is comprised of various other accrued expenses that we expect will settle within one year of the applicable ~~period, including amounts owed under our vendor payment program described below.~~period.



	August 3, 2019
Other operating lease information:
Weighted-average remaining lease term	6.3 years
Weighted-average discount rate	3.9	%



(in thousands)	Unrelated Parties			Related Parties			Total
Remainder of fiscal 2019	$	96,844		$	3,937		$	100,781
Fiscal 2020	233,961			9,364			243,325
Fiscal 2021	216,107			8,697			224,804
Fiscal 2022	182,432			7,418			189,850
Fiscal 2023	142,408			4,573			146,981
Future fiscal years thereafter	314,601			15,493			330,094
	1,186,353			49,482			1,235,835
Less discounting impact on operating leases	(138,305		)	(6,015		)	(144,320		)
Total operating lease liabilities	1,048,048			43,467			1,091,515
Less current operating lease liabilities	(178,091		)	(7,878		)	(185,969		)
Non-current operating lease liabilities	$	869,957		$	35,589		$	905,546



(in thousands)
Contingent consideration liability - beginning of period	$	33,204
Accretion in value	2,252
Other adjustments	1,000
Contingent consideration liability - end of period	$	36,456


(1)	Gross profit is defined as net sales, which excludes commission, franchise and other revenue, less cost of sales.



(in thousands, except per share amounts)	(a) Total Number of Shares Purchased⁽¹⁾	(b) Average Price Paid per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Programs	(d) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Programs
May 6, 2018 to June 2, 2018	2	$	25.16	—	$	524,094
June 3, 2018 to July 7, 2018	1	$	24.73	—	$	524,094
July 8, 2018 to August 4, 2018	—	$	—	—	$	524,094
	3	$	24.96	—