Shoe Carnival Inc. reported a slight increase in year-over-year earnings in the third quarter on flat sales and improving margins.

“Our strong fiscal third-quarter results clearly demonstrated the strength and dedication of our team’s ability to execute on our strategic initiatives. We achieved same-store sales growth and delivered the most profitable quarter in Shoe Carnival’s history, despite the extended back-to-school season. This would not have been possible without the hard work of our Shoe Carnival team members, our incredibly solid vendor partnerships, and dedicated customers,” commented Cliff Sifford, Shoe Carnival’s vice chairman and chief executive officer.

“Our disciplined focus on financial flexibility and the strength of our business model continues to fuel our market-leading performance notwithstanding the ongoing disruption caused by the global pandemic. We are excited about our market share gains in the quarter and believe our enduring competitive advantages position us for future growth,” concluded Sifford.

Third Quarter Financial Results
The company reported net sales of $274.6 million for the third quarter, which was flat compared to the third quarter of fiscal 2019. Comparable store sales increased 0.9 percent. E-commerce sales increased over 150 percent and represented more than 13 percent of total sales in the third quarter of fiscal 2020.

Gross profit margin for the third quarter of fiscal 2020 increased to 32.0 percent compared to 30.9 percent in the third quarter of fiscal 2019. Merchandise margin increased 1.6 percent and buying, distribution and occupancy expenses increased 0.5 percent as a percentage of net sales compared to the third quarter of fiscal 2019. The increase in merchandise margin was primarily due to lower promotional activity during the quarter. The increase in buying, distribution and occupancy costs as a percentage of sales were primarily due to higher distribution expense.

Selling, general and administrative expenses for the third quarter of fiscal 2020 increased $1.0 million to $67.6 million. As a percentage of net sales, these expenses increased to 24.7 percent compared to 24.3 percent in the third quarter of fiscal 2019.

Net income for the third quarter of fiscal 2020 was $14.7 million, or $1.03 per diluted share. For the third quarter of fiscal 2019, the company reported net income of $13.7 million, or 94 cents per diluted share.

Nine Month Financial Results
Net sales for the first nine months of fiscal 2020 were $722.9 million compared to $796.7 million in the first nine months of fiscal 2019. Comparable store sales decreased 8.8 percent for the first nine months of fiscal 2020. The decrease in sales was due to temporary store closures in the first half of the year due to the global pandemic.

Net income for the first nine months of fiscal 2020 was $8.5 million, or $0.60 per diluted share, compared to net income of $39.4 million, or $2.66 per diluted share, for the first nine months of fiscal 2019. Included in the first nine months of fiscal 2019 was a tax benefit of approximately $1.9 million, or $0.13 per diluted share, associated with the vesting of equity-based compensation that was recorded in the first quarter of fiscal 2019.

The gross profit margin for the first nine months of fiscal 2020 was 27.9 percent compared to 30.4 percent in the same period last year. Selling, general and administrative expenses for the first nine months decreased $2.0 million to $190.5 million. As a percentage of net sales, these expenses increased to 26.3 percent compared to 24.2 percent in the first nine months of fiscal 2019 primarily due to the deleveraging effect of lower sales.

Fiscal 2020 Earnings Outlook
Shoe Carnival said, “We continue to closely monitor and manage the impact of COVID-19 and take action to maintain financial flexibility and keep our employees and customers safe. COVID-19 is expected to continue to affect macroeconomic conditions and consumer spending in the retail sector. Considerable uncertainty exists surrounding the impact the pandemic may have on the company’s sales and operations for the remainder of the fiscal year, including during the peak holiday shopping period. As a result, the company is not providing guidance for fiscal year 2020.”

Store Openings and Closings
One new store was opened in the third quarter of fiscal 2020 and no stores were closed. For the first nine months of fiscal 2020, the company has opened three stores and closed 12 stores. The company expects a total of four store openings and 13 store closings during fiscal 2020 compared to one store opening and six store closings in fiscal 2019.

Share Repurchase Program
As of October 31, 2020, the company had $43.1 million available for future repurchases under its share repurchase program. Due to the volatility this year, no shares have been repurchased in fiscal 2020, and the company does not anticipate repurchasing any shares in fiscal 2020 but will continue to reevaluate further share repurchases on an ongoing basis.

Photo courtesy Shoe Carnival