Shoe Carnival, Inc. (Nasdaq: SCVL) (the "Company"), a leading
retailer of footwear and accessories for the family, today reported
results for the first quarter ended April 29, 2023.
Highlights
- Customer count accelerated to a record high 32.7 million
loyalty members, up 12 percent versus prior year.
- Customer conversion climbed to highest level in 7 consecutive
quarters.
- Net sales declined 11.4 percent on lower traffic.
- Gross profit margin exceeded 35 percent for the 9th consecutive
quarter.
- Annual guidance is updated, reflective of first quarter results
and consumer trends.
Unfavorable weather and persistent consumer pressure from both
inflation and lower federal tax refunds negatively impacted first
quarter 2023 traffic. Top-line sales and bottom-line earnings in
first quarter 2023 were at the lower end of Company expectations,
but still ranked near the top of any first quarter in Company
history. Today, the Company is providing updated annual guidance,
reflective of first quarter results and consumer trends.
“Despite the slower than expected start to 2023, our customer
base grew at the fastest pace of the last three years, climbing to
a record high of 32.7 million members at quarter end. With the
continued strategic growth of our CRM and digital platforms, we now
reach a critical mass of American households, engaging with
approximately 1 out of every 8 adults ongoing, growth of nearly 65
percent from just five years ago. I am most pleased our instore
shopping experience is continuing to drive high conversion, and we
once again captured market share growth within this challenging
economic backdrop,” said Mark Worden, President and Chief Executive
Officer.
“As we move into summer and our most important back-to-school
season, we are positioned well for continued market share growth,
inventory improvement, and rapid cash generation. Our industry
leading merchant team and strategic partners have delivered a
compelling product assortment, and our athletic inventory position
is sharply improved versus the prior year position. With these
customer, instore experience and inventory improvements, we are
ready to fuel sales acceleration once the broader economic
conditions improve,” concluded Mr. Worden.
Operating Results
First quarter 2023 net sales of $281.2 million ranked in the top
three of any first quarter in Company history, but were down 11.4
percent compared to first quarter 2022. The lower net sales
compared to 2022 resulted primarily from reduced traffic. The
Company believes the lower traffic was primarily driven by
persistent inflation and a nearly 9 percent reduction in federal
tax refunds compared to first quarter 2022. Unfavorable weather
also impacted net sales, with spring seasonal product down
approximately 23 percent compared to first quarter 2022.
First quarter 2023 gross profit margin of 35.0 percent was down
50 basis points from prior year and continued to be over 500 basis
points higher versus pre-pandemic 2019. Merchandise margin
decreased 30 basis points compared to first quarter 2022,
reflecting an increase in promotional intensity. Buying,
distribution and occupancy (“BDO") costs were lower in the quarter
compared to first quarter 2022; however on lower sales, BDO
decreased gross profit margin by 20 basis points. The BDO costs
were lower in first quarter 2023 as freight and distribution costs
declined versus 2022 through active management, contract
renegotiation and normalization.
Selling, general and administrative expenses were controlled to
be nearly flat in first quarter 2023 compared to first quarter
2022, with higher depreciation and healthcare costs offset by
reduced selling costs.
First quarter 2023 net income was $16.5 million, or $0.60 per
diluted share (“EPS”), compared to first quarter 2022 of $26.9
million, or $0.95 per diluted share. The EPS earned in first
quarter 2023 was 30.4 percent higher than pre-pandemic first
quarter 2019.
Merchandise Inventory
As the athletic supply chain disruption experienced last year
has eased, a significantly improved athletic merchandise assortment
is expected to be available for back-to-school shopping this year.
Both aged inventory and seasonal carryover inventories are in line,
and there is no current expectation of deep discounting to
liquidate merchandise.
Significant progress was made in first quarter 2023 to reduce
inventory. First quarter 2023 ending inventory was approximately
$45 million higher than the prior year, compared to $105 million
higher than the prior year just three months ago. After
back-to-school shopping, the Company expects inventory to be lower
than last year and to be approximately $40 million lower by year
end 2023 compared to year end 2022.
Capital Management
The 2022 fiscal year end marked the 18thconsecutive year the
Company ended a year with no debt, and through the first quarter
2023, the Company has also funded its operations without debt. At
the end of first quarter 2023, the Company had $40+ million of
cash, cash equivalents and marketable securities and approximately
$100 million in borrowing capacity. With the expectation of strong
back-to-school shopping and conversion of current inventory into
cash, cash flow from operations is expected to more than fully fund
remodels and store growth planned in the back half of fiscal
2023.
Fiscal 2023 Updated Earnings Guidance
Given first quarter lower end results and consumer trends, the
Company has lowered its guidance for the full year and now expects
EPS, net sales and gross profit margin within the following ranges
for 2023, which includes 53 weeks:
- EPS: $3.60 to $3.85
- Net sales: $1.23 billion to $1.25 billion
- Gross profit margin: 36 to 37 percent
Store Count, Modernization and Planned Store Growth
The Company ended its first quarter 2023 with 397 total stores,
372 Shoe Carnival stores and 25 Shoe Station stores. During first
quarter 2023, the Company opened one Shoe Station store and the
Shoe Station e-commerce site, www.shoestation.com, went live. The
Company is on track to operate over 400 stores in third quarter
2023.
The Company is currently modernizing its Shoe Carnival fleet
through a multi-year, remodel program. Over 40 percent is currently
complete and by the end of fiscal 2023, the Company is on track to
complete approximately 60 percent of the stores.
The Company has a strategic growth roadmap in place to surpass
500 stores and be a multi-billion dollar retailer in 2028,
inclusive of organic and acquired growth.
Share Repurchase Program
As of April 29, 2023, the Company had $50 million available for
future repurchases under its share repurchase program, and during
first quarter 2023, the Company did not repurchase any shares.
Conference Call
Today, at 8:30 a.m. Eastern Time, the Company will host a
conference call to discuss the first quarter results. Participants
can listen to the live webcast of the call by visiting Shoe
Carnival's Investors webpage at www.shoecarnival.com. While the
question-and-answer session will be available to all listeners,
questions from the audience will be limited to institutional
analysts and investors. A replay of the webcast will be available
on the Company’s website beginning approximately two hours after
the conclusion of the conference call and will be archived for one
year.
Annual Shareholder Meeting
As previously announced, the Company will hold its Annual
Meeting of Shareholders at 8:30 a.m. Eastern Time on June 20, 2023.
Information about the annual meeting and related material,
including the Company's proxy statement and annual report, can be
found on the Company's Investors web page.
About Shoe Carnival
Shoe Carnival, Inc. is one of the nation’s largest family
footwear retailers, offering a broad assortment of dress, casual
and athletic footwear for men, women and children with emphasis on
national name brands. As of May 24, 2023, the Company operates 398
stores in 35 states and Puerto Rico under its Shoe Carnival and
Shoe Station banners and offers shopping at www.shoecarnival.com
and www.shoestation.com. Headquartered in Evansville, IN, Shoe
Carnival, Inc. trades on The Nasdaq Stock Market LLC under the
symbol SCVL. Press releases and annual reports are available on the
Company's website at www.shoecarnival.com.
Cautionary Statement Regarding Forward-Looking
Information
As used herein, “we”, “our” and “us” refer to Shoe Carnival,
Inc. This press release contains forward-looking statements, within
the meaning of the Private Securities Litigation Reform Act of
1995, that involve a number of risks and uncertainties. A number of
factors could cause our actual results, performance, achievements
or industry results to be materially different from any future
results, performance or achievements expressed or implied by these
forward-looking statements. These factors include, but are not
limited to: our ability to control costs and meet our labor needs
in a rising wage, inflationary, and/or supply chain constrained
environment; our ability to maintain current promotional intensity
levels; the effects and duration of economic downturns and
unemployment rates; our ability to achieve expected operating
results, synergies, and other benefits from the Shoe Station
acquisition within expected time frames, or at all; the potential
impact of national and international security concerns, including
those caused by war and terrorism, on the retail environment;
general economic conditions in the areas of the continental United
States and Puerto Rico where our stores are located; changes in the
overall retail environment and more specifically in the apparel and
footwear retail sectors; our ability to generate increased sales;
our ability to successfully navigate the increasing use of online
retailers for fashion purchases and the impact on traffic and
transactions in our physical stores; the success of the open-air
shopping centers where many of our stores are located and its
impact on our ability to attract customers to our stores; our
ability to attract customers to our e-commerce platform and to
successfully grow our omnichannel sales; the effectiveness of our
inventory management, including our ability to manage key
merchandise vendor relationships and direct-to-consumer
initiatives; changes in our relationships with other key suppliers;
changes in the political and economic environments in, the status
of trade relations with, and the impact of changes in trade
policies and tariffs impacting, China and other countries which are
the major manufacturers of footwear; the impact of competition and
pricing; our ability to successfully manage and execute our
marketing initiatives and maintain positive brand perception and
recognition; our ability to successfully manage our current real
estate portfolio and leasing obligations; changes in weather,
including patterns impacted by climate change; changes in consumer
buying trends and our ability to identify and respond to emerging
fashion trends; the impact of disruptions in our distribution or
information technology operations; the impact of natural disasters,
public health and political crises, civil unrest, and other
catastrophic events on our operations and the operations of our
suppliers, as well as on consumer confidence and purchasing in
general;
the duration and spread of a public health crisis, such as
COVID-19, and the mitigating efforts deployed, including the
effects of government stimulus on consumer spending; risks
associated with the seasonality of the retail industry; the impact
of unauthorized disclosure or misuse of personal and confidential
information about our customers, vendors and employees, including
as a result of a cybersecurity breach; our ability to successfully
execute our business strategy, including the availability of
desirable store locations at acceptable lease terms, our ability to
identify, consummate or effectively integrate future acquisitions,
our ability to implement and adapt to new technology and systems,
our ability to open new stores in a timely and profitable manner,
including our entry into major new markets, and the availability of
sufficient funds to implement our business plans; higher than
anticipated costs associated with the closing of underperforming
stores; the inability of manufacturers to deliver products in a
timely manner; an increase in the cost, or a disruption in the
flow, of imported goods; the impact of regulatory changes in the
United States, including minimum wage laws and regulations, and the
countries where our manufacturers are located; the resolution of
litigation or regulatory proceedings in which we are or may become
involved; continued volatility and disruption in the capital and
credit markets; future stock repurchases under our stock repurchase
program and future dividend payments.; and other factors described
in the Company’s SEC filings, including the Company’s latest Annual
Report on Form 10-K. In addition, these forward-looking statements
necessarily depend upon assumptions, estimates and dates that may
be incorrect or imprecise and involve known and unknown risks,
uncertainties and other factors. Accordingly, any forward-looking
statements included in this press release do not purport to be
predictions of future events or circumstances and may not be
realized. Forward-looking statements can be identified by, among
other things, the use of forward-looking terms such as “believes,”
“expects,” “aims,” “may,” “will,” “should,” “seeks,” “pro forma,”
“anticipates,” “intends” or the negative of any of these terms, or
comparable terminology, or by discussions of strategy or
intentions. Given these uncertainties, we caution investors not to
place undue reliance on these forward-looking statements, which
speak only as of the date hereof. We disclaim any obligation to
update any of these factors or to publicly announce any revisions
to the forward-looking statements contained in this press release
to reflect future events or developments.
Financial Tables Follow
SHOE CARNIVAL, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
(In thousands, except per share
data)
(Unaudited)
Thirteen
Thirteen
Weeks Ended
Weeks Ended
April 29, 2023
April 30, 2022
Net sales
$
281,184
$
317,527
Cost of sales (including buying,
distribution and occupancy costs)
182,667
204,664
Gross profit
98,517
112,863
Selling, general and administrative
expenses
77,578
77,479
Operating income
20,939
35,384
Interest income
(478
)
(32
)
Interest expense
66
95
Income before income taxes
21,351
35,321
Income tax expense
4,825
8,424
Net income
$
16,526
$
26,897
Net income per share:
Basic
$
0.61
$
0.96
Diluted
$
0.60
$
0.95
Weighted average shares:
Basic
27,223
27,996
Diluted
27,505
28,331
Cash dividends declared per share
$
0.100
$
0.090
SHOE CARNIVAL, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands)
(Unaudited)
April 29,
January 28,
April 30,
2023
2023
2022
ASSETS
Current Assets:
Cash and cash equivalents
$
32,587
$
51,372
$
86,179
Marketable securities
11,535
11,601
10,965
Accounts receivable
3,084
3,052
14,442
Merchandise inventories
389,508
390,390
345,021
Other
16,836
13,308
14,592
Total Current Assets
453,550
469,723
471,199
Property and equipment – net
150,487
141,435
110,033
Operating lease right-of-use assets
312,760
318,612
222,259
Intangible assets
32,600
32,600
32,600
Goodwill
12,023
12,023
11,698
Other noncurrent assets
15,209
15,388
13,945
Total Assets
$
976,629
$
989,781
$
861,734
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current Liabilities:
Accounts payable
$
55,853
$
78,850
$
116,837
Accrued and other liabilities
21,314
20,281
31,243
Current portion of operating lease
liabilities
58,077
58,154
51,287
Total Current Liabilities
135,244
157,285
199,367
Long-term portion of operating lease
liabilities
279,168
285,074
195,426
Deferred income taxes
14,526
11,844
409
Deferred compensation
9,809
9,840
10,482
Other
202
170
336
Total Liabilities
438,949
464,213
406,020
Total Shareholders’ Equity
537,680
525,568
455,714
Total Liabilities and Shareholders’
Equity
$
976,629
$
989,781
$
861,734
SHOE CARNIVAL, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Thirteen
Thirteen
Weeks Ended
Weeks Ended
April 29, 2023
April 30, 2022
Cash Flows From Operating Activities
Net income
$
16,526
$
26,897
Adjustments to reconcile net income to
net
cash provided by operating activities:
Depreciation and amortization
6,697
4,677
Stock-based compensation
1,209
1,240
Loss on retirement and impairment of
assets, net
19
22
Deferred income taxes
2,682
3,108
Non-cash operating lease expense
15,163
11,998
Other
180
304
Changes in operating assets and
liabilities:
Accounts receivable
(32
)
(283
)
Merchandise inventories
882
(59,816
)
Operating leases
(15,295
)
(12,942
)
Accounts payable and accrued
liabilities
(23,128
)
41,697
Other
(2,851
)
801
Net cash provided by operating
activities
2,052
17,703
Cash Flows From Investing Activities
Purchases of property and equipment
(15,005
)
(26,907
)
Investments in marketable securities
(21
)
(6
)
Sales of marketable securities
0
3,040
Net cash used in investing activities
(15,026
)
(23,873
)
Cash Flow From Financing Activities
Proceeds from issuance of stock
57
45
Dividends paid
(2,941
)
(2,576
)
Purchase of common stock for treasury
0
(20,515
)
Shares surrendered by employees to pay
taxes on
stock-based compensation awards
(2,927
)
(2,048
)
Net cash used in financing activities
(5,811
)
(25,094
)
Net decrease in cash and cash
equivalents
(18,785
)
(31,264
)
Cash and cash equivalents at beginning of
period
51,372
117,443
Cash and cash equivalents at end of
period
$
32,587
$
86,179
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230524005238/en/
Erik D. Gast Shoe Carnival Investor Relations (812) 867-4034
Shoe Carnival (NASDAQ:SCVL)
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