Sterne Agee Neutral on Shoe Carnival

Sterne Agee is out with a research report on Shoe Carnival, Inc.

and it has a Neutral rating and a $26 price target on shares. In a note to clients, Sterne Agee writes, "SCVL reported 3Q11 EPS of $0.78 versus SALI/FC at $0.79/$0.78. SSS of 2.8% accelerated ~400 bps q/q despite a meaningfully more difficult multi-year compare. GPM of 30.2% increased 15bps y/y as merchandise margins were flat and fixed costs levered. SG&A of $42.3M (+2.5% y/y) levered 60 bps due to the adequate top line. The principal variance versus our estimates and guidance was a slightly weaker top line. Although the gap narrowed (200 bps versus 760 bps 2Q), inventory growth remained above the prevailing sales trajectory. SSS deteriorated throughout the quarter as cold weather comparisons from 3Q10 proved difficult to anniversary. Traffic and conversion were flat, while ASPs were up LSD. Toning sales were down 70% versus LY and were partially offset by strength in running and basketball sales. Men's and women's non athletic, and kids' shoe sales were up LSD. Management called out strength in the Crocs (CROX-$16.05-Buy) business, especially the new styles, and weakness in the Skechers (SKX-$12.28-Underperform) business led by toning and kids." Shares of SCVL closed at $22.76 yesterday.