Stock-based Compensation

3 Months Ended

May 02, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-based Compensation

STOCK-BASED COMPENSATION

The DSW Inc. 2014 Equity Incentive Plan ("the 2014 Plan") provides for the issuance of equity awards to purchase up to 8.5 million DSW Common Shares. The Company will begin issuing shares under the 2014 Plan after the DSW Inc. 2005 Equity Incentive Plan expires in the second quarter of fiscal 2015. The 2014 Plan covers stock options, RSUs, PSUs and director stock units ("DSU"). Eligible recipients include key employees of DSW Inc. and affiliates, as well as directors. Options generally vest 20% per year on a cumulative basis. Options granted under the 2014 Plan generally remain exercisable for a period of ten years from the date of grant.

Stock-Based Compensation Expense- The following table summarizes stock-based compensation expense:

	Three months ended
	May 2, 2015		May 3, 2014
	(in thousands)
Stock Options	$	1,996	$	1,915
Restricted Stock Units	867		730
Performance-Based Restricted Stock Units	658		203
Director Stock Units	42		40
Total	$	3,563	$	2,888

Stock Options, RSUs, PSUs and DSUs- The following table summarizes all stock-based compensation activity:

	Three months ended
	May 2, 2015
	Stock Options		RSUs		PSUs	DSUs
	(in thousands)
Outstanding, beginning of period	3,156		320		173	360
Granted	877		80		145	3
Options exercised/units vested	(224	)	(83	)	—	(1	)
Forfeited	(31	)	(10	)	—	—
Outstanding, end of period	3,778		307		318	362
Exercisable, end of period	1,969		—		—	—

The following table summarizes the total compensation cost related to nonvested shares not yet recognized and the weighted average expense recognition period remaining (amounts in thousands):

	Three months ended
	May 2, 2015
	Stock Options		RSUs		PSUs
Unrecognized compensation cost	$	18,470	$	6,736	$	8,448
Weighted average expense recognition period	2.4 years		2.1 years		2.4 years

The following table illustrates the weighted average assumptions used in the Black-Scholes pricing model for DSW stock options granted in each of the periods presented:    

	Three months ended
Assumptions:	May 2, 2015	May 3, 2014
Risk-free interest rate	1.4%	1.9%
Expected volatility of DSW Common Shares	37.9%	45.8%
Expected option term	5.1 years	5.4 years
Dividend yield	2.1%	2.3%
Other Data:
Weighted average grant date fair value	$10.24	$12.50

Stock Appreciation Rights (“SARs”)- The 2014 Plan also covers the issuance of SARs. DSW Inc. entered into a SARs agreement with a non-employee on June 16, 2014, wherein DSW Inc. granted a total of 0.5 million SARs in two equal tranches with respect to DSW Class A Common Shares. On April 16, 2015, DSW provided notice of termination of the agreement with the non-employee resulting in an acceleration of the vesting of the SARs as outlined in the agreement, and the SARs remain exercisable until June 2016. DSW will value the SARs at fair value until the expiration or exercise date using a Black-Scholes model. The expense in the first quarter of fiscal 2015 is $3.5 million, of which $2.8 million was incremental expense due to the acceleration of vesting.

The fair value of the SARs was estimated using the Black-Scholes pricing model with the following assumptions for the period presented:

Assumptions:	As of May 2, 2015
Risk-free interest rate	0.2%
Expected volatility of DSW Common Shares	25.7%
Expected term	1.0 year
Expected dividend yield	2.4%