Shoe Carnival Inc (SCVL) Faces Headwinds in Q3 Fiscal 2023 Amid Unseasonable Weather
Shoe Carnival Inc (NASDAQ:SCVL) reports a 6.4% decrease in net sales for the third quarter ended October 28, 2023.
Gross profit margin remains strong at 36.8%, marking the 11th consecutive quarter above 35%.
Company lowers annual guidance due to soft seasonal sales and uncertain holiday shopping outlook.
Shoe Station banner contributes positively with low-double digit net sales increase and accretive operating income margin.
On November 16, 2023, Shoe Carnival Inc (NASDAQ:SCVL) released its 8-K filing, detailing the financial results for the third quarter of fiscal year 2023. The company faced challenges due to unseasonably hot weather, which led to a decline in seasonal and non-athletic fall sales. Despite these challenges, Shoe Carnival Inc (NASDAQ:SCVL) maintained a strong gross profit margin and saw growth in its children's category during the Back-to-School season.
Financial Performance Overview
Shoe Carnival Inc (NASDAQ:SCVL) reported net sales of $319.9 million, a decrease of 6.4% compared to the third quarter of 2022. Comparable store sales were down 7.4%, primarily due to a softening in sales post Labor Day. The children's category, however, experienced low-single digit growth, contributing to the second highest category sales in the company's history. The Shoe Station banner saw a low-double digit increase in net sales compared to the previous year, bolstered by new store openings and the launch of its e-commerce site.
The company's gross profit margin stood at 36.8%, exceeding 35% for the 11th consecutive quarter. This sustained margin performance is a testament to the company's profit transformation strategy. However, the margin did see a 150 basis point decline from the third quarter of 2022, attributed to increased promotions due to slower boot sales.
Income Statement and Balance Sheet Highlights
Shoe Carnival Inc (NASDAQ:SCVL) reported a net income of $21.9 million, or $0.80 per diluted share, a decrease from $32.7 million, or $1.18 per diluted share, in the third quarter of 2022. Selling, General and Administrative expenses (SG&A) increased to $89.8 million, or 28.1% of net sales, reflecting higher advertising investments. The effective tax rate for the quarter was 23.8%, lower than the previous year's 25.6%.
From a balance sheet perspective, the company ended the quarter with $59.9 million in cash and cash equivalents, an increase from the previous year. Merchandise inventories were 6% lower than the prior year, aligning with the company's inventory optimization plan.
Outlook and Strategic Initiatives
Shoe Carnival Inc (NASDAQ:SCVL) has revised its annual guidance for 2023, now expecting diluted earnings per share (EPS) between $2.65 and $2.75, with net sales ranging from $1.16 to $1.18 billion. The company anticipates a gross profit margin of approximately 36% and an SG&A expense between $323 to $327 million. The revised outlook includes an expected decline in comparable store sales of 8.5% to 9.5%.
Despite the near-term challenges, Shoe Carnival Inc (NASDAQ:SCVL) remains committed to its strategic growth roadmap, aiming to surpass 500 stores and become a multi-billion dollar retailer by 2028. The company continues to modernize its store fleet and has relaunched its shoecarnival.com website to enhance customer experience.
Capital Management and Shareholder Returns
Shoe Carnival Inc (NASDAQ:SCVL) remains debt-free and has increased its dividend by 20% during the quarter, marking a 166% increase since the third quarter of 2020. The company also repurchased shares worth approximately $5.4 million under its share repurchase program.
As Shoe Carnival Inc (NASDAQ:SCVL) navigates through the current retail landscape, it continues to focus on delivering value to its shareholders while adapting to market conditions. The company's ability to maintain robust gross profit margins and execute strategic growth initiatives positions it to capitalize on future opportunities.
Explore the complete 8-K earnings release (here) from Shoe Carnival Inc for further details.
This article first appeared on GuruFocus.
