Market Overview

Shoe Carnival Reports Second Quarter Fiscal 2018 Financial Results

Share:

Reports Comparable Store Sales Increase of 6.7 Percent

Raises Fiscal Year 2018 Earnings Per Diluted Share Outlook

Shoe Carnival, Inc. (NASDAQ:SCVL) ("the Company"), a leading retailer
of moderately priced footwear and accessories, today reported results
for the second quarter and six months ended August 4, 2018.

Second Quarter Highlights

  • Net sales increased 14.2 percent to $268.4 million compared to the
    second quarter last year, with approximately $19.7 million of this
    increase attributable to the one-week shift in the calendar due to
    fiscal 2017 being a 53-week year
  • Comparable store sales increased 6.7 percent
  • Earnings per diluted share increased 217 percent to $0.76
  • Cash and cash equivalents were $38.4 million with no outstanding bank
    debt as of August 4, 2018
  • Inventory was down 2.0 percent on a per-store basis

Cliff Sifford, Shoe Carnival's President and Chief Executive Officer,
commented, "We are pleased with our strong financial results for the
second quarter which exceeded our expectations. Our mid-single digit
comparable store sales increase was primarily driven by a double-digit
increase in women's non-athletic footwear with most of our other major
footwear categories up mid-single digits. This positive trend has
accelerated into the back-to-school season with comparable store sales
up 7.7 percent through the first three weeks of August. This sales
increase was on top of a 7.0 percent increase in the full month of
August last year. We believe we remain well positioned for future growth
and based on these strong operational and financial results, as well as
our outlook for the remainder of the year, we are raising our annual
earnings guidance."

Second Quarter Financial Results

Net sales of $268.4 million increased 14.2 percent for the second
quarter ended August 4, 2018, compared to net sales of $235.1 million
for the second quarter ended July 29, 2017. Comparable store sales for
the thirteen-week period ended August 4, 2018 increased 6.7 percent
compared to the thirteen-week period ended August 5, 2017.

Gross profit margin for the second quarter of fiscal 2018 increased to
31.2 percent compared to 29.0 percent in the second quarter of fiscal
2017. Merchandise margin increased 0.2 percent and buying, distribution
and occupancy expenses decreased 2.0 percent as a percentage of net
sales compared to the second quarter of fiscal 2017.

Selling, general and administrative expenses for the second quarter of
fiscal 2018 increased $7.0 million to $68.9 million. The increase in
expense was primarily due to incentive and equity compensation as a
result of the improved financial performance of the Company and
advertising expense to support back-to-school sales. As a percentage of
net sales, these expenses decreased to 25.6 percent compared to 26.3
percent in the second quarter of fiscal 2017.

Net income for the second quarter of fiscal 2018 was $11.8 million, or
$0.76 per diluted share. For the second quarter of fiscal 2017, the
Company reported net income of $3.9 million, or $0.24 per diluted share.

Six Month Financial Results

Net sales during the six months ended August 4, 2018 increased $37.4
million to $525.8 million compared to the six months ended July 29,
2017. Comparable store sales for the twenty-six week period ended August
4, 2018 increased 4.0 percent compared to the twenty-six week period
ended August 5, 2017.

Net earnings for the first six months of fiscal 2018 were $24.7 million,
or $1.59 per diluted share, compared to net earnings of $12.1 million,
or $0.73 per diluted share, in the first six months of fiscal 2017. The
gross profit margin for the first six months of fiscal 2018 was 30.6
percent compared to 28.7 percent in the same period last year. Selling,
general and administrative expenses for the first six months increased
$8.1 million to $128.9 million. As a percentage of net sales, these
expenses decreased to 24.5 percent compared to 24.7 percent in the first
six months of fiscal 2017. The Company closed six stores during the
first six months of fiscal 2018 compared to 12 store openings and nine
store closings in the first six months of fiscal 2017.

Store Openings and Closings

The Company expects to open approximately three stores and close
approximately 15 to 17 stores during fiscal 2018 compared to opening 19
stores and closing 26 stores during fiscal 2017.

Expected store openings and closings by quarter for the fiscal year are
as follows:

  New Stores   Store Closings
1st quarter 2018 0 3
2nd quarter 2018 0 3
3rd quarter 2018 3 3
4th quarter 2018 0 6 - 8
Fiscal year 2018 3 15 - 17

Fiscal 2018 Outlook

The Company is raising its fiscal 2018 outlook as follows:

  • Net sales in the range of $1.016 billion to $1.020 billion, with
    comparable store sales up low single digits;
  • Earnings per diluted share in the range of $2.07 to $2.15. Fiscal 2017
    earnings per diluted share were $1.15 and adjusted earnings per
    diluted share were $1.49.

Conference Call

Today, at 4:30 p.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.

Non-GAAP Adjusted Results

The non-GAAP adjusted results for the full year of fiscal 2017 discussed
herein exclude the impact of a gain on insurance proceeds recorded in
cost of sales related to hurricane affected stores, non-cash impairment
charges for underperforming stores and additional stock-based
compensation expense recorded in selling, general and administrative
expenses and additional income tax expense associated with the enactment
of the U.S. Tax Cuts and Jobs Act of 2017 (the "Tax Act"). These
adjusted results are provided to enhance the user's overall
understanding of the Company's historical operations and financial
performance. Specifically, the Company believes the adjusted results
provide investors with relevant period-to-period comparisons of the
Company's core operations. The unaudited adjusted results are provided
in addition to, and not as alternatives for, the Company's reported
results determined in accordance with generally accepted accounting
principles. A complete reconciliation of actual results to the adjusted
results appears below in the table entitled "Reconciliation of GAAP to
Non-GAAP Financial Measures."

About Shoe Carnival

Shoe Carnival, Inc. is one of the nation's largest family footwear
retailers, offering a broad assortment of moderately priced dress,
casual and athletic footwear for men, women and children with emphasis
on national name brands. As of August 28, 2018, the Company operates 402
stores in 35 states and Puerto Rico, and offers online shopping at www.shoecarnival.com.
Headquartered in Evansville, IN, Shoe Carnival trades on The NASDAQ
Stock Market LLC under the symbol SCVL. Shoe Carnival's press releases
and annual report are available on the Company's website at www.shoecarnival.com.

Cautionary Statement Regarding Forward-Looking Information

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: general economic
conditions in the areas of the continental United States in which our
stores are located and the impact of the ongoing economic crisis and
hurricane recovery in Puerto Rico on sales at, and cash flows of, our
stores located in Puerto Rico; the effects and duration of economic
downturns and unemployment rates; changes in the overall retail
environment and more specifically in the apparel and footwear retail
sectors; our ability to generate increased sales at our stores; our
ability to successfully navigate the increasing use of on-line retailers
for fashion purchases and the impact on traffic and transactions in our
physical stores; our ability to attract customers to our e-commerce
website and to successfully grow our e-commerce sales; the potential
impact of national and international security concerns on the retail
environment; changes in our relationships with key suppliers; the impact
of competition and pricing; our ability to successfully manage and
execute our marketing initiatives and maintain positive brand perception
and recognition; changes in weather patterns, 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 effectiveness of our inventory management; the impact of
natural disasters on our stores, as well as on consumer confidence and
purchasing in general; 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 cyber-security breach; our ability
to manage our third-party vendor relationships; our ability to
successfully execute our business strategy, including the availability
of desirable store locations at acceptable lease terms, 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; 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 regulatory changes in the United States and the countries
where our manufacturers are located; the resolution of litigation or
regulatory proceedings in which we are or may become involved; our
ability to meet our labor needs while controlling costs; the impact of
the U.S. Tax Cuts and Jobs Act of 2017; and 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," "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.

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
August 4, 2018 July 29, 2017 August 4, 2018 July 29, 2017
 
Net sales $ 268,366 $ 235,064 $ 525,811 $ 488,453

Cost of sales (including buying, distribution and occupancy costs)

  184,585     166,837     364,703     348,070  
 
Gross profit 83,781 68,227 161,108 140,383
 

Selling, general and administrative expenses

  68,850     61,803     128,861     120,732  
 
Operating income 14,931 6,424 32,247 19,651
Interest income (117 ) (1 ) (119 ) (2 )
Interest expense   36     149     76     191  
 
Income before income taxes 15,012 6,276 32,290 19,462
Income tax expense   3,237     2,380     7,560     7,335  
 
Net income $ 11,775   $ 3,896   $ 24,730   $ 12,127  
 
Net income per share:
Basic $ 0.77   $ 0.24   $ 1.60   $ 0.73  
Diluted $ 0.76   $ 0.24   $ 1.59   $ 0.73  
 
Weighted average shares:
Basic   15,249     16,091     15,387     16,453  
Diluted   15,367     16,094     15,446     16,457  
 
Cash dividends declared per share $ 0.080   $ 0.075   $ 0.155   $ 0.145  
 
SHOE CARNIVAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 
  August 4,   February 3,   July 29,
2018 2018 2017
 
ASSETS
Current Assets:
Cash and cash equivalents $ 38,405 $ 48,254 $ 18,531
Accounts receivable 3,918 6,270 2,798
Merchandise inventories 336,907 260,500 357,467
Other   12,094   5,562   7,029
Total Current Assets 391,324 320,586 385,825
Property and equipment - net 77,254 86,276 96,046
Deferred income taxes 8,384 8,182 10,072
Other noncurrent assets   343   536   869
Total Assets $ 477,305 $ 415,580 $ 492,812
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 90,928 $ 41,739 $ 93,829
Accrued and other liabilities   25,659   15,045   20,367
Total Current Liabilities 116,587 56,784 114,196
Long-term debt 0 0 26,700
Deferred lease incentives 25,006 29,024 28,909
Accrued rent 9,124 10,132 10,977
Deferred compensation 12,074 11,372 11,141
Other   750   966   686
Total Liabilities 163,541 108,278 192,609
Total Shareholders' Equity   313,764   307,302   300,203
Total Liabilities and Shareholders' Equity $ 477,305 $ 415,580 $ 492,812
 
SHOE CARNIVAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
  Twenty-six   Twenty-six
Weeks Ended Weeks Ended
August 4, 2018 July 29, 2017
 
Cash Flows From Operating Activities
Net income $ 24,730 $ 12,127

Adjustments to reconcile net income to net cash provided by (used
in) operating activities:

Depreciation and amortization 11,219 11,961
Stock-based compensation 3,403 927
Loss on retirement and impairment of assets (227 ) 1,705
Deferred income taxes (202 ) (472 )
Lease incentives 170 1,560
Other (4,577 ) (3,140 )
Changes in operating assets and liabilities:
Accounts receivable 2,587 1,626
Merchandise inventories (76,407 ) (77,821 )
Accounts payable and accrued liabilities 58,562 27,356
Other   (5,125 )   (2,329 )
Net cash provided by (used in) operating activities   14,133     (26,500 )
 
Cash Flows From Investing Activities
Purchases of property and equipment (2,661 ) (12,737 )
Other   283     0  
Net cash used in investing activities   (2,378 )   (12,737 )
 
Cash Flows From Financing Activities
Borrowings under line of credit 0 79,200
Payments on line of credit 0 (52,500 )
Proceeds from issuance of stock 107 142
Dividends paid (2,393 ) (2,389 )
Purchase of common stock for treasury (19,043 ) (29,343 )
Shares surrendered by employees to pay taxes on restricted stock  

(275

)

 

(286

)

Net cash used in financing activities   (21,604 )   (5,176 )
Net decrease in cash and cash equivalents (9,849 ) (44,413 )
Cash and cash equivalents at beginning of period   48,254     62,944  
Cash and Cash Equivalents at End of Period $ 38,405   $ 18,531  
 
SHOE CARNIVAL, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In thousands, except per share data)
(Unaudited)
 
  Fifty-three
Weeks Ended
February 3,
  2018  
 
Reported net income per diluted share $ 1.15
Gain on insurance proceeds (0.21 )
Non-cash impairment charges 0.21
Additional stock-based compensation expense associated with the Tax
Act
0.12
Tax effect of gain on insurance proceeds, non-cash impairment
charges and stock-based compensation expense
(0.05 )
Additional income tax expense on re-measurement of deferred tax
assets and liabilities
  0.27  
Adjusted diluted earnings per share $ 1.49  

View Comments and Join the Discussion!