Shoe Carnival, Inc. (Nasdaq: SCVL) (the “Company”), a leading
retailer of footwear and accessories for the family, today reported
results for the second quarter ended July 29, 2023.
Highlights
- Net sales and diluted earnings per share improved from first
quarter 2023 as a result of investments in branding, advertising
and in-store experience.
- Softness in urban markets led to comparable sales down 6.5
percent versus prior year.
- Shoe Station net sales increased low-single digits in second
quarter 2023; growth accelerated in August to mid-teens during
back-to-school, both versus prior year.
- Gross profit margin exceeded 35 percent for the 10th
consecutive quarter.
- Annual guidance is updated, reflective of second quarter
results and ongoing consumer trends.
“Our second quarter results demonstrated the momentum of our
strategy within the context of a challenging economic backdrop. We
delivered improvement on net sales, earnings per share and market
share growth versus first quarter 2023, while also increasing
investment in our branding, advertising and in-store experience. In
August, we opened our 400th store and surpassed over half of our
stores being modernized,” said Mark Worden, President and Chief
Executive Officer.
“We saw improving conditions related to the impact of inflation
in the second quarter, but some of our urban customers remain
challenged in the current economic environment. As such, we are
taking a measured approach to the balance of the year. Given the
strength of our balance sheet and our strategy, we are in a strong
position to grow as the economy improves and continue to actively
evaluate both organic and acquisition-related opportunities,” said
Mr. Worden.
Back-to-School Update
Market conditions continued to modestly improve in early third
quarter 2023 versus second quarter 2023. August sales and profits
were among the highest of any month in the Company’s 45-year
history, with product margins approaching record highs. The August
back-to-school shopping period accounts for half of the Company’s
third quarter gross profit, and with the results achieved to date,
the Company remains on track to deliver its full year gross profit
margin guidance of 36 to 37 percent.
Fiscal 2023 Earnings Outlook
The Company now expects to deliver on the following annual
guidance for 2023, which includes 53 weeks compared to 52 weeks in
2022:
2023
Guidance
Diluted earnings per share ("EPS")
$3.10 to $3.25
Net sales (in billions)
$1.19 to $1.21
Gross profit margin
36% to 37%
SG&A (in millions)
$321 to $327
SG&A as a percent of net sales
~27%
Operating income (in millions)
$109 to $116
Net income (in millions)
$85 to $89
Return on beginning equity
16% to 17%
Cash flows from operations (in
millions)
$120 to $130
Capital expenditures (in millions)
$55 to $65
Merchandise inventories (in millions)
- ~$40
Comparable store sales
-8% to -6%
New stores
6 to 10
Second Quarter Operating Results
Net sales were $294.6 million, down 5.7 percent in the quarter
compared to second quarter 2022, with comparable store sales down
6.5 percent. While overall conditions improved from earlier in
2023, soft traffic results continued within lower income households
and urban markets, partially offset by 5.4 percent e-commerce net
sales growth and growth from the new Shoe Station stores.
E-commerce net sales were favorably impacted by the February 2023
launch of shoestation.com and increased net sales through
shoecarnival.com. With an improved brand name assortment this year,
net sales of athletic merchandise in second quarter 2023 were flat
compared to the second quarter 2022 despite lower store
traffic.
Gross profit margin was 35.8 percent, down 40 basis points, with
merchandise margin down 20 basis points. Buying, distribution and
occupancy (“BDO”) costs were lower in the quarter compared to the
prior year as freight and distribution costs have continued to
decrease, partially offset by investment in store modernization and
by rent associated with operating more stores. However, on the
lower net sales, BDO decreased gross profit margin by 20 basis
points.
Selling, General and Administrative expenses (“SG&A”) were
$80.8 million in second quarter 2023, or 27.4 percent of net sales.
$6.2 million of the increase in SG&A compared to second quarter
2022 resulted from strategic investments in brand initiatives,
advertising and the in-store experience.
The effective tax rate in second quarter 2023 of 22.3 percent
was lower than the prior year rate of 25.6 percent. The effective
tax rate for the full year is expected to be between 24 and 25
percent compared to 25.2 percent in 2022.
Second quarter 2023 net income was $19.4 million, or $0.71 per
diluted share, compared to second quarter 2022 net income of $28.9
million, or $1.04 per diluted share. The EPS in second quarter 2023
improved versus first quarter 2023 by 18.3 percent and is nearly 80
percent higher than any other second quarter in Company history
prior to 2021.
Merchandise Inventory
Significant progress was made in the first half of 2023 to
reduce total inventory and optimize inventory positions for an
improved athletic assortment of national named brands. Second
quarter 2023 ending inventory was approximately $24 million higher
than the prior year, comparing favorably to first quarter 2023 when
ending inventory was approximately $44 million higher than the
prior year and fiscal 2022 year end when inventory was $105 million
higher than the prior year end. With back-to-school shopping in
progress, inventory is on track to be below prior year levels in
September and to achieve the annual guidance for inventory to be
approximately $40 million lower by year end 2023 compared to year
end 2022. Both aged inventory and seasonal carryover inventories
are in line, and there is currently no expectation of deep
discounting to liquidate merchandise.
Store Count, Modernization and Planned Store Growth
In August 2023, the Company opened its 400th store, now
operating 373 Shoe Carnival stores and 27 Shoe Station stores.
Store productivity and profitability have increased sharply for the
fleet since the last time the Company operated 400 stores in 2018.
The multi-year fleet productivity and rationalization improvement
plan contributed to sales per door increasing more than 15 percent
and profit contribution per door increasing more than 40 percent
compared to 2018 levels.
The Company is currently modernizing its Shoe Carnival fleet
through a multi-year remodel program. As of July 29, 2023, over 50
percent of the modernization initiative was complete, and the
Company is on track to be approximately 65 percent complete during
the summer of 2024.
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.
Capital Management
The 2022 fiscal year end marked the 18th consecutive year the
Company ended a year with no debt, and through year-to-date August,
the Company continued to fund its operations without debt. As of
yesterday, the Company had over $90 million of cash, cash
equivalents, and marketable securities and approximately $100
million in borrowing capacity. At the end of second quarter 2023,
the Company had nearly $47 million of cash, cash equivalents and
marketable securities and approximately $100 million in borrowing
capacity. Cash flow from operations is expected to more than fully
fund store remodels and growth planned in the back half of fiscal
2023.
Share Repurchase Program
As of July 29, 2023, the Company had $50 million available for
future repurchases under its share repurchase program. During
second 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 second 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.
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 August 29, 2023, the Company operates
400 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,” “on track,” “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
Twenty-six
Twenty-six
Weeks Ended
Weeks Ended
Weeks Ended
Weeks Ended
July 29, 2023
July 30, 2022
July 29, 2023
July 30, 2022
Net sales
$
294,615
$
312,268
$
575,799
$
629,795
Cost of sales (including buying,
distribution and occupancy costs)
189,150
199,138
371,817
403,802
Gross profit
105,465
113,130
203,982
225,993
Selling, general and administrative
expenses
80,803
74,341
158,381
151,820
Operating income
24,662
38,789
45,601
74,173
Interest income
(433
)
(138
)
(911
)
(170
)
Interest expense
71
65
137
160
Income before income taxes
25,024
38,862
46,375
74,183
Income tax expense
5,583
9,953
10,408
18,377
Net income
$
19,441
$
28,909
$
35,967
$
55,806
Net income per share:
Basic
$
0.71
$
1.05
$
1.32
$
2.01
Diluted
$
0.71
$
1.04
$
1.31
$
1.99
Weighted average shares:
Basic
27,336
27,590
27,280
27,784
Diluted
27,410
27,812
27,449
28,061
Cash dividends declared per
share
$
0.100
$
0.090
$
0.200
$
0.180
SHOE CARNIVAL, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands)
(Unaudited)
July 29,
January 28,
July 30,
2023
2023
2022
ASSETS
Current Assets:
Cash and cash equivalents
$
34,562
$
51,372
$
51,620
Marketable securities
12,218
11,601
10,994
Accounts receivable
3,961
3,052
10,677
Merchandise inventories
409,342
390,390
385,510
Other
25,281
13,308
18,131
Total Current Assets
485,364
469,723
476,932
Property and equipment – net
159,186
141,435
124,789
Operating lease right-of-use assets
339,598
318,612
254,537
Intangible assets
32,600
32,600
32,600
Goodwill
12,023
12,023
10,786
Other noncurrent assets
14,433
15,388
14,871
Total Assets
$
1,043,204
$
989,781
$
914,515
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current Liabilities:
Accounts payable
$
77,429
$
78,850
$
113,826
Accrued and other liabilities
19,999
20,281
22,893
Current portion of operating lease
liabilities
57,335
58,154
52,523
Total Current Liabilities
154,763
157,285
189,242
Long-term portion of operating lease
liabilities
307,326
285,074
226,115
Deferred income taxes
14,631
11,844
4,436
Deferred compensation
10,596
9,840
10,779
Other
369
170
311
Total Liabilities
487,685
464,213
430,883
Total Shareholders’ Equity
555,519
525,568
483,632
Total Liabilities and Shareholders’
Equity
$
1,043,204
$
989,781
$
914,515
SHOE CARNIVAL, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Twenty-six
Twenty-six
Weeks Ended
Weeks Ended
July 29, 2023
July 30, 2022
Cash Flows From Operating Activities
Net income
$
35,967
$
55,806
Adjustments to reconcile net income to
net
cash provided by operating activities:
Depreciation and amortization
13,822
10,416
Stock-based compensation
2,326
2,741
Loss on retirement and impairment of
assets, net
59
83
Deferred income taxes
2,787
7,135
Non-cash operating lease expense
27,627
23,497
Other
251
384
Changes in operating assets and
liabilities:
Accounts receivable
(909
)
3,481
Merchandise inventories
(18,952
)
(100,305
)
Operating leases
(27,181
)
(24,794
)
Accounts payable and accrued
liabilities
(927
)
40,514
Other
(12,518
)
(10,040
)
Net cash provided by operating
activities
22,352
8,918
Cash Flows From Investing Activities
Purchases of property and equipment
(30,629
)
(50,198
)
Investments in marketable securities
(41
)
(11
)
Sales of marketable securities
0
3,040
Net cash used in investing activities
(30,670
)
(47,169
)
Cash Flow From Financing Activities
Proceeds from issuance of stock
110
93
Dividends paid
(5,675
)
(5,064
)
Purchase of common stock for treasury
0
(20,515
)
Shares surrendered by employees to pay
taxes on
stock-based compensation awards
(2,927
)
(2,086
)
Net cash used in financing activities
(8,492
)
(27,572
)
Net decrease in cash and cash
equivalents
(16,810
)
(65,823
)
Cash and cash equivalents at beginning of
period
51,372
117,443
Cash and cash equivalents at end of
period
$
34,562
$
51,620
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230829501691/en/
Steve R. Alexander Shoe Carnival Investor Relations (812)
867-4034
Shoe Carnival (NASDAQ:SCVL)
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