Stock-based Compensation

3 Months Ended

Apr. 30, 2016

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

Stock-based Compensation

STOCK-BASED COMPENSATION

The DSW Inc. 2014 Long-Term Incentive Plan ("the 2014 Plan") provides for the issuance of equity awards to purchase up to 8.5 million DSW Inc. Common Shares. The Company began issuing shares under the 2014 Plan after the DSW Inc. 2005 Equity Incentive Plan expired in the second quarter of fiscal 2015. The 2014 Plan covers stock options, RSUs, PSUs, director stock units ("DSUs") and Stock Appreciation Rights ("SARs"). 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
	April 30, 2016		May 2, 2015
	(in thousands)
Stock options	$	1,677	$	1,996
Restricted stock units	1,230		867
Performance-based restricted stock units	682		658
Director stock units	68		42
Total	$	3,657	$	3,563

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

	Three months ended
	April 30, 2016
	Stock Options		RSUs		PSUs		DSUs
	(in thousands)
Outstanding, beginning of period	3,849		372		293		305
Granted	835		171		109		5
Options exercised/units vested	(17	)	(81	)	(32	)	(2	)
Forfeited	(16	)	(7	)	(2	)	—
Outstanding, end of period	4,651		455		368		308
Exercisable, end of period	2,347		—		—		—

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
	April 30, 2016
	Stock Options		RSUs		PSUs
Unrecognized compensation cost	$	18,126	$	9,968	$	6,178
Weighted average expense recognition period	2.4 years		2.2 years		2.3 years

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

	Three months ended
Assumptions:	April 30, 2016	May 2, 2015
Risk-free interest rate	1.5%	1.4%
Expected volatility of DSW Inc. Common Shares	36.0%	37.9%
Expected option term	5.4 years	5.1 years
Dividend yield	3.0%	2.1%
Other Data:
Weighted average grant date fair value	$6.59	$10.24

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 Inc. 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 Inc. will value the SARs at fair value until the expiration or exercise date using a Black-Scholes model. During the three months ended April 30, 2016 and May 2, 2015, DSW recorded a benefit of $0.3 million and expense of $3.5 million, respectively. As of April 30, 2016, the liability was $0.3 million.

The fair value of the SARs was estimated using the Black-Scholes pricing model with the following assumptions in each of the periods presented:

	As of
Assumptions:	April 30, 2016	January 30, 2016	May 2, 2015
Risk-free interest rate	0.2%	0.4%	0.2%
Expected volatility of DSW Inc. Class A Common Shares	30.7%	33.0%	25.7%
Expected term	0.1 years	0.4 years	1.0 year
Expected dividend yield	2.5%	2.5%	2.4%