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Shoe Carnival Reports Third Quarter Fiscal 2019 Results

EVANSVILLE, Ind.--(BUSINESS WIRE)--

Reports Record Quarterly Diluted Earnings Per Share

Reports Comparable Store Sales Increase of 3.5 Percent

Raises Fiscal 2019 Net Sales and Earnings Outlook

Shoe Carnival, Inc. (SCVL) (“the Company”), a leading retailer of moderately priced footwear and accessories, today reported results for the third quarter and nine months ended November 2, 2019.

Third Quarter Highlights

  • Net sales increased 2.0 percent to $274.6 million compared to the third quarter last year
  • Record earnings per diluted share of $0.94, a 23.7 percent increase over prior year quarter, surpassing the previous record of $0.91 achieved in the first quarter of this fiscal year
  • Comparable store sales increased 3.5 percent
  • Repurchased 521,800 shares of common stock at a total cost of $16.9 million
  • Cash and cash equivalents were $33.7 million with no outstanding debt as of November 2, 2019

Cliff Sifford, Shoe Carnival’s Vice Chairman and Chief Executive Officer, commented, “We are very pleased with our broad-based strength across all product categories, geographies and sales channels in the third quarter. Our record earnings were fueled by solid comparable store sales growth throughout the quarter, including our seventeenth consecutive positive comparable store sales for the month of August. This demonstrates that Shoe Carnival remains a destination for back-to-school family footwear. Our customer-centric organization and fun, engaging shopping environment continues to resonate with consumers and gives us confidence in our raised outlook for fiscal 2019. Going forward, we believe our strong foundation, combined with the recent addition of new customer-data driven resources, positions us well for sustainable, profitable growth for many years to come.”

Third Quarter Financial Results

The Company reported net sales of $274.6 million for the third quarter of fiscal 2019, a 2.0 percent increase compared to net sales of $269.2 million for the third quarter of fiscal 2018. Comparable store sales increased 3.5 percent for the third quarter of fiscal 2019.

Gross profit margin for the third quarter of fiscal 2019 increased 0.7 percent to 30.9 percent compared to 30.2 percent in the third quarter of fiscal 2018. Merchandise margin increased 0.5 percent and buying, distribution and occupancy expenses decreased 0.2 percent as a percentage of net sales compared to the third quarter of fiscal 2018.

Selling, general and administrative expenses for the third quarter of fiscal 2019 increased $1.4 million to $66.6 million. As a percentage of net sales, these expenses remained flat at 24.3 percent compared to the third quarter of fiscal 2018.

Net income for the third quarter of fiscal 2019 was $13.7 million, or $0.94 per diluted share. For the third quarter of fiscal 2018, the Company reported net income of $12.0 million, or $0.76 per diluted share.

Nine Month Financial Results

Net sales for the first nine months of fiscal 2019 increased $1.7 million to $796.7 million compared to the first nine months of fiscal 2018. Comparable store sales increased 1.6 percent for the first nine months of fiscal 2019.

Net income for the first nine months of fiscal 2019 were $39.4 million, or $2.66 per diluted share, compared to net income of $36.8 million, or $2.36 per diluted share, in the first nine months of fiscal 2018. Included in the first nine months of fiscal 2019 was a tax benefit in connection with the vesting of equity-based compensation of approximately $1.9 million, or $0.13 per diluted share, that was recorded in the first quarter of this fiscal year. The gross profit margin for the first nine months of fiscal 2019 was 30.4 percent compared to 30.5 percent in the same period last year. Selling, general and administrative expenses for the first nine months decreased $1.5 million to $192.5 million. As a percentage of net sales, these expenses decreased to 24.2 percent compared to 24.4 percent in the first nine months of fiscal 2018.

Store Openings and Closings

The Company opened its one new store for the fiscal year in the third quarter of fiscal 2019 and closed one store for a total of five store closures during the fiscal year compared to opening three stores and closing 14 stores during fiscal 2018.

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

 

 

New Stores

 

 

Store Closings

 

First quarter 2019

 

 

0

 

 

 

2

 

Second quarter 2019

 

 

0

 

 

 

2

 

Third quarter 2019

 

 

1

 

 

 

1

 

Fourth quarter 2019

 

 

0

 

 

 

0

 

Fiscal year 2019

 

 

1

 

 

 

5

 

The new store opened during the third quarter was located in:

City

 

Market

 

Total Stores in

the Market

 

Jeffersonville, IN

 

Louisville, KY

 

 

8

 

 

Fiscal 2019 Outlook

The Company is raising its annual outlook based on its results year-to-date and its outlook for the remainder of the fiscal year. The Company now expects annual diluted earnings per share of $2.85 to $2.89 compared to its previous guidance of $2.77 to $2.83. This compares to diluted earnings per share of $2.45 in the prior fiscal year. Total net sales for the fiscal year 2019 are now expected to be in the range of $1.033 billion to $1.036 billion and the Company is reiterating its annual comparable store sales guidance of a low single-digit increase.

Conference Call

Today, at 4:30 p.m. Eastern Time, the Company will host a conference call to discuss the third 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 investors and analysts. 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 moderately priced dress, casual and athletic footwear for men, women and children with emphasis on national name brands. As of November 21, 2019, the Company operates 393 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 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 online 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; 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; 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; 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; 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

 

 

Thirty-nine

 

 

Thirty-nine

 

 

 

Weeks Ended

 

 

Weeks Ended

 

 

Weeks Ended

 

 

Weeks Ended

 

 

 

November 2, 2019

 

 

November 3, 2018

 

 

November 2, 2019

 

 

November 3, 2018

 

Net sales

 

$

274,645

 

 

$

269,181

 

 

$

796,676

 

 

$

794,992

 

Cost of sales (including buying, distribution

and occupancy costs)

 

 

189,911

 

 

 

187,963

 

 

 

554,707

 

 

 

552,666

 

Gross profit

 

 

84,734

 

 

 

81,218

 

 

 

241,969

 

 

 

242,326

 

Selling, general and administrative expenses

 

 

66,584

 

 

 

65,202

 

 

 

192,537

 

 

 

194,063

 

Operating income

 

 

18,150

 

 

 

16,016

 

 

 

49,432

 

 

 

48,263

 

Interest income

 

 

(163

)

 

 

(273

)

 

 

(580

)

 

 

(392

)

Interest expense

 

 

34

 

 

 

37

 

 

 

155

 

 

 

113

 

Income before income taxes

 

 

18,279

 

 

 

16,252

 

 

 

49,857

 

 

 

48,542

 

Income tax expense

 

 

4,553

 

 

 

4,206

 

 

 

10,426

 

 

 

11,766

 

Net income

 

$

13,726

 

 

$

12,046

 

 

$

39,431

 

 

$

36,776

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.95

 

 

$

0.80

 

 

$

2.71

 

 

$

2.40

 

Diluted

 

$

0.94

 

 

$

0.76

 

 

$

2.66

 

 

$

2.36

 

Weighted average shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

14,404

 

 

 

15,071

 

 

 

14,544

 

 

 

15,282

 

Diluted

 

 

14,556

 

 

 

15,812

 

 

 

14,826

 

 

 

15,544

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per share

 

$

0.085

 

 

$

0.080

 

 

$

0.250

 

 

$

0.235

 

SHOE CARNIVAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

 

 

 

November 2,

 

 

February 2,

 

 

November 3,

 

 

 

2019

 

 

2019

 

 

2018

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

33,707

 

 

$

67,021

 

 

$

39,699

 

Accounts receivable

 

 

2,470

 

 

 

1,219

 

 

 

2,322

 

Merchandise inventories

 

 

298,002

 

 

 

257,539

 

 

 

300,510

 

Other

 

 

10,868

 

 

 

11,534

 

 

 

11,762

 

Total Current Assets

 

 

345,047

 

 

 

337,313

 

 

 

354,293

 

Property and equipment – net

 

 

69,147

 

 

 

70,605

 

 

 

74,471

 

Deferred income taxes

 

 

7,678

 

 

 

9,622

 

 

 

8,866

 

Other noncurrent assets

 

 

3,692

 

 

 

459

 

 

 

389

 

Operating lease right-of-use assets

 

 

222,148

 

 

 

0

 

 

 

0

 

Total Assets

 

$

647,712

 

 

$

417,999

 

 

$

438,019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

66,089

 

 

$

48,715

 

 

$

56,270

 

Accrued and other liabilities

 

 

22,052

 

 

 

22,069

 

 

 

28,094

 

Current portion of operating lease liabilities

 

 

42,481

 

 

 

0

 

 

 

0

 

Total Current Liabilities

 

 

130,622

 

 

 

70,784

 

 

 

84,364

 

Long-term portion of operating lease liabilities

 

 

202,138

 

 

 

0

 

 

 

0

 

Deferred lease incentives

 

 

0

 

 

 

22,171

 

 

 

23,478

 

Accrued rent

 

 

0

 

 

 

8,436

 

 

 

8,808

 

Deferred compensation

 

 

13,220

 

 

 

12,108

 

 

 

11,811

 

Other

 

 

984

 

 

 

67

 

 

 

806

 

Total Liabilities

 

 

346,964

 

 

 

113,566

 

 

 

129,267

 

Total Shareholders’ Equity

 

 

300,748

 

 

 

304,433

 

 

 

308,752

 

Total Liabilities and Shareholders’ Equity

 

$

647,712

 

 

$

417,999

 

 

$

438,019

 

SHOE CARNIVAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Thirty-nine

 

 

Thirty-nine

 

 

 

Weeks Ended

 

 

Weeks Ended

 

 

 

November 2, 2019

 

 

November 3, 2018

 

Cash Flows From Operating Activities

 

 

 

 

 

 

 

 

Net income

 

$

39,431

 

 

$

36,776

 

Adjustments to reconcile net income to net

cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

12,652

 

 

 

16,551

 

Stock-based compensation

 

 

5,207

 

 

 

7,604

 

Loss/(gain) on retirement and impairment of assets, net

 

 

767

 

 

 

(1,412

)

Deferred income taxes

 

 

1,944

 

 

 

(684

)

Non-cash operating lease expense

 

 

30,932

 

 

 

0

 

Lease incentives

 

 

0

 

 

 

298

 

Other

 

 

1,111

 

 

 

(6,882

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(1,251

)

 

 

4,218

 

Merchandise inventories

 

 

(40,463

)

 

 

(40,010

)

Operating lease liabilities

 

 

(34,306

)

 

 

0

 

Accounts payable and accrued liabilities

 

 

17,173

 

 

 

23,330

 

Other

 

 

(5,165

)

 

 

(2,009

)

Net cash provided by operating activities

 

 

28,032

 

 

 

37,780

 

 

 

 

 

 

 

 

 

 

Cash Flows From Investing Activities

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(15,081

)

 

 

(5,021

)

Other

 

 

8

 

 

 

1,489

 

Net cash used in investing activities

 

 

(15,073

)

 

 

(3,532

)

 

 

 

 

 

 

 

 

 

Cash Flow From Financing Activities

 

 

 

 

 

 

 

 

Borrowings under line of credit

 

 

20,000

 

 

 

0

 

Payments on line of credit

 

 

(20,000

)

 

 

0

 

Proceeds from issuance of stock

 

 

148

 

 

 

148

 

Dividends paid

 

 

(4,466

)

 

 

(3,593

)

Purchase of common stock for treasury

 

 

(30,915

)

 

 

(39,046

)

Shares surrendered by employees to pay taxes on

restricted stock

 

 

(11,040

)

 

 

(312

)

Net cash used in financing activities

 

 

(46,273

)

 

 

(42,803

)

Net decrease in cash and cash equivalents

 

 

(33,314

)

 

 

(8,555

)

Cash and cash equivalents at beginning of period

 

 

67,021

 

 

 

48,254

 

Cash and cash equivalents at end of period

 

$

33,707

 

 

$

39,699

 

 

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