Shoe Carnival’s Q2 Profit More Than Triples

Included in the latest period was a 4 cents benefit resulting from a favorable resolution of a state tax position.

The gross profit margin for the second quarter increased 1.5% to 28.3% compared to 26.8% for the second quarter of the prior year. The merchandise margin increased 1.0%. The company's buying, distribution and occupancy costs decreased 0.5%, as a percentage of sales, due to the leverage associated with comparable store sales increases.

Selling, general and administrative expenses for the second quarter increased $1.7 million to $40.8 million; however, as a percentage of sales, these expenses decreased to 24.7% compared to 25.6% in the second quarter of 2009.

Speaking on the results, Mark Lemond, president and chief executive officer, said, “I am pleased to report that in the second quarter we were able to take advantage of consumer demand across each broad merchandise category and in every operations region. Our strong quarterly sales performance, when combined with a higher gross profit margin and controlled expenses, resulted in record second quarter earnings. While toning footwear was a key driver of our sales for the quarter, our non-athletic footwear, particularly sandals and other types of casual footwear for the family were also significant drivers of our sales increase.”

Lemond continued, “Our continued strong financial performance and today's positive footwear industry trends give us the confidence to remain optimistic about our outlook for the back-to-school sales season, which is traditionally our most important sales and earnings period. Comparable store sales for the first three weeks of August have increased approximately 6%, on top of an increase of 11% for the same period last year.”

Net sales during the first six months of 2010 increased $34.7 million to $354.9 million as compared to the same period last year. This sales increase was driven primarily by a comparable store sales increase of 10.8%. Net earnings for the first half of 2010 were $13.4 million, or $1.04 per diluted share, compared with net earnings of $5.1 million, or $0.41 per diluted share, in the first half of last year. Included in the diluted earnings per share for the first six months this year was a $0.06 charge for store closing and impairment costs and a $0.04 benefit resulting from a favorable resolution of a state tax position. The gross profit margin for the first six months of 2010 was 29.9% compared to 27.4% last year. Selling, general and administrative expenses, as a%age of sales, were 24.0% for the first six months of 2010 as compared to 24.7% in the first six months of 2009.

Third Quarter and Fiscal 2010 Earnings Outlook

The company expects third quarter net sales to be in the range of $196 to $202 million and comparable store sales to increase in the range of 3 to 6%. Earnings per diluted share in the third quarter of 2010 are expected to be in the range of 63 cents to 66 cents. Earnings per diluted share in the third quarter of fiscal 2009 were 59 cents a share.

For fiscal 2010, the company expects net sales to be in the range of $728 to $737 million and comparable store sales to increase in the range of 6.5 to 8%. Earnings per diluted share for fiscal 2010 are expected to range from $1.89 to $1.95. Earnings per diluted share for fiscal 2009 were $1.20.

Store Growth

The company expects to open 10 new stores and close seven stores in fiscal 2010. Three new stores were opened during the second quarter of fiscal 2010 and one store was closed.