8-K: Shoe Carnival Reports Third Quarter Fiscal 2024 Results, Reaffirms Full-Year Guidance

Shoe Carnival met earnings per share expectations for the third quarter of 2024, despite sales being impacted by a retail calendar shift and weather events, and is expanding its store rebannering strategy.

Summary

• Shoe Carnival reported third-quarter 2024 net sales of $306.9 million, compared to $319.9 million in the same period last year, with a $20 million impact from a retail calendar shift.
• Excluding the calendar shift, net sales increased by 2.2 percent year-over-year.
• Year-to-date net sales reached $939.9 million, a 4.9 percent increase compared to the previous year.
• Comparable store sales decreased by 4.1 percent in the third quarter, influenced by hurricanes and warm weather.
• The gross profit margin was 36.0 percent, a decrease of 80 basis points year-over-year, but marking the 15th consecutive quarter above 35 percent.
• SG&A expenses were 28.0 percent of net sales, a slight decrease of 10 basis points year-over-year.
• Operating income for the quarter was $24.5 million, down from $27.9 million in the prior year.
• Net income was $19.2 million, or $0.70 per diluted share, compared to $21.9 million, or $0.80 per diluted share, in the third quarter of 2023.
• Adjusted EPS was $0.71, in line with expectations.
• The company expects the Rogans acquisition to contribute over $80 million in net sales for fiscal year 2024, with $22.3 million in the third quarter and $63.9 million year-to-date.
• Shoe Carnival is accelerating the integration of Rogans and expects $2.5 million in total synergies, with half of that expected in the second half of fiscal year 2024.
• The company is expanding its store rebannering strategy, with 10 stores converted to Shoe Station and plans to convert an additional 25 stores in the first half of fiscal year 2025.
• The company has $50 million available for future share repurchases.
• The company ended the quarter with $91.1 million in cash, cash equivalents, and marketable securities, an increase of $20 million year-over-year.
• The company has updated its full-year net sales guidance to $1.20 billion to $1.23 billion, representing growth of 2 percent to 4.5 percent versus fiscal 2023.
• Full-year GAAP EPS is expected to be in the range of $2.55 to $2.70, and adjusted EPS is expected to be in the range of $2.60 to $2.75.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive. While sales were impacted by external factors, the company met EPS expectations, is expanding its store rebannering strategy, and is seeing positive results from the Rogans acquisition. The reiteration of full-year guidance also contributes to the positive sentiment.

Positives

• The company achieved EPS expectations for the third quarter.
• Year-to-date net sales show a solid growth of 4.9 percent.
• The store rebannering strategy is showing promising results with over 10 percent increase in sales and profitability in rebannered stores.
• The Rogans acquisition is progressing well, with accelerated integration and synergy capture.
• The company has a strong cash position with $91.1 million in cash, cash equivalents, and marketable securities.
• The company has reiterated its full-year EPS guidance.
• The company has no debt and is funding operations and growth investments from operating cash flow.

Negatives

• Third-quarter net sales decreased compared to the same period last year, primarily due to a retail calendar shift.
• Comparable store sales declined by 4.1 percent in the third quarter.
• Gross profit margin decreased by 80 basis points compared to the prior year.
• Operating income decreased compared to the third quarter of 2023.
• Net sales guidance for the full year has been lowered.

Risks

• The company's sales were negatively impacted by a retail calendar shift, hurricanes, and warm weather.
• The company faces risks related to economic downturns, competition, and changes in consumer buying trends.
• The company's performance is subject to weather patterns and the seasonality of the retail industry.
• The company is exposed to risks related to supply chain disruptions, cybersecurity breaches, and the integration of acquisitions.
• The company's future performance is dependent on its ability to successfully execute its business strategy, including store expansion and technology implementation.

Future Outlook

The company has updated its full-year net sales guidance to $1.20 billion to $1.23 billion, representing growth of 2 percent to 4.5 percent versus fiscal 2023. Full-year GAAP EPS is expected to be in the range of $2.55 to $2.70, and adjusted EPS is expected to be in the range of $2.60 to $2.75.

Management Comments

• Mark Worden, President and Chief Executive Officer, stated that the company's Back-to-School results were strong, with comparable store sales growth and robust margins.
• Mark Worden also noted that the company's flexible digital-first marketing campaign and brand assortment drove demand and profitability in line with expectations.
• Mr. Worden expressed pride in the team for delivering profit results despite hurricanes and warm weather impacting sales.
• Mr. Worden concluded that the company is expanding the rebanner test to an additional 25 stores during the first half of 2025 as part of its long-term vision.

Industry Context

The results reflect the challenges faced by retailers due to weather events and calendar shifts, while also highlighting the potential of strategic initiatives like store rebannering and acquisitions. The company's focus on digital marketing and brand assortment aligns with broader industry trends.

Comparison to Industry Standards

• While Shoe Carnival's year-to-date sales growth of 4.9% is positive, it is important to compare this to other footwear retailers such as Foot Locker (FL) and DSW (now Designer Brands Inc. DBI).
• Foot Locker's recent results have shown a decline in sales, indicating that Shoe Carnival is performing better than some of its direct competitors.
• DSW has been focusing on its own brand and digital sales, which is similar to Shoe Carnival's strategy, but DSW's overall performance has been mixed.
• The 36% gross profit margin is within the range of industry standards, but the 80 basis point decrease year-over-year is a concern that needs to be monitored.
• The store rebannering strategy is a unique approach that is not widely adopted by other retailers, making it difficult to compare directly, but the early results are promising.
• The Rogans acquisition is a strategic move to expand market share, similar to other retailers acquiring smaller brands to grow their footprint.

Stakeholder Impact

• Shareholders may be encouraged by the company's ability to meet EPS expectations and the positive results from the store rebannering strategy.
• Employees may be impacted by the integration of Rogans and the expansion of the store rebannering strategy.
• Customers may benefit from the expanded store network and improved shopping experience.
• Suppliers may be impacted by the company's changing store network and acquisition strategy.

Next Steps

• The company plans to expand the store rebannering test to 25 additional stores in the first half of Fiscal 2025.
• The company will continue to integrate the Rogans acquisition and capture synergies.
• The company will host a conference call to discuss its third quarter results.

Key Dates

Keywords

Shoe Carnival, footwear, retail, earnings, sales, store rebannering, Rogans acquisition, EPS, gross profit, comparable store sales