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Shoe Carnival (SCVL) Q2 Earnings Beat, Sales Miss Estimates

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Shoe Carnival, Inc. SCVL reported second-quarter fiscal 2020 results, with the bottom line surpassing the Zacks Consensus Estimate and the top line missing the same. On a year-on-year basis, earnings reflect a decline, while the top line improved.

Markedly digital sales were a key upside during the quarter. However, brick-and-mortar sales continued to remain sluggish due to the COVID-19 outbreak. Moreover, management is cautious regarding the uncertainties surrounding the pandemic and refrained from providing any guidance for fiscal 2020.

Shares of the company declined 13.2% in the after-hours trading session on Sep 1.

Q2 in Details

Shoe Carnival delivered earnings of 71 cents per share, which surpassed the Zacks Consensus Estimate of 57 cents. However, the metric declined 11.3% from the year-ago quarter’s reported figure.

Net sales totaled $300.8 million, which missed the Zacks Consensus Estimate of $316.3 million. Nevertheless, the top line rose 12.1% from the year-ago quarter’s reported figure. Comparable store sales increased 12.6% year over year.

Markedly e-commerce sales skyrocketed 332% on the back of high double-digit conversion rates. E-commerce sales contributed more than 20% to total sales in the second quarter compared with less than 6% in the year-ago quarter.

However, brick-and-mortar sales were adversely impacted by COVID-19 related store closures (in early second quarter) and delays in back-to-school shopping (in late second quarter).

Moving on, gross profit margin contracted 310 basis points (bps) to 27.5%. Merchandise margins went down 370 bps, as a percentage of net sales, owing to higher e-commerce shipping costs and increase in adult athletic sales that carry lower margins than non-athletic products. Buying distribution and occupancy costs declined 60 bps, due to leveraging impact from higher sales.

SG&A expenses increased $1.8 million during the reported quarter to $68.2 million. As a percentage of net sales, SG&A expenses contracted 210 bps to 22.7%.

Shoe Carnival, Inc. Price, Consensus and EPS Surprise

Shoe Carnival, Inc. Price, Consensus and EPS Surprise
Shoe Carnival, Inc. Price, Consensus and EPS Surprise

Shoe Carnival, Inc. price-consensus-eps-surprise-chart | Shoe Carnival, Inc. Quote

Other Financials

Shoe Carnival ended the quarter with cash and cash equivalents of $76.9 million and long-term portion of operating lease liabilities of $189.4 million. Also, merchandise inventories were $298.9 million. Management in its earnings call informed that as of 1 Aug, 2020, the company had no outstanding debt, while working capital stood at $200 million.

Free cash flow were $65.1 million at the end of the second quarter. The company’s borrowing capacity stood at $98.8 million.

For fiscal 2020, management expects capital expenditures in the range of $15-$16 million. It expects $8-$10 million to be used for store openings, remodeling and relocation.

Moving on, management informed that as on Aug 1, it has $43.1 million available under its share repurchase program. However, the company has no plans of executing share repurchases in fiscal 2020.

Store Updates

During the second quarter, Shoe Carnival opened two new stores while shuttering 10 stores. For fiscal 2020, management expects to open four stores, while closing 13 stores.

Price Performance & Zacks Rank

In the past three months, the Zacks Rank #3 (hold) company’s shares have gained 17.1% against the industry's decline of 4.1%.

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The Kroger Co. KR has an impressive long-term earnings growth rate of 5.5% and a Zacks Rank #2.

Tapestry TPR, a Zacks Rank #2 stock, has long-term earnings growth rate of 10%.

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