Shoe Carnival continued to outperform in its fiscal fourth quarter. The family footwear retailer capitalized on a focused operational and financial performance, an established e-commerce platform and solid experience and talent in the executive ranks, merchant team and store operations during a challenging year for retail.
Company CEO and Vice Chairman Cliff Sifford, who will hand off the CEO job in September, reported on a conference call with analysts that a strong balance sheet enabled it to forgo furloughs of staff during the year, which allowed the company to strengthen vendor relationships and keep its focus on growing the business profitably.
Sifford, who will remain vice chairman, will hand the CEO reins to the current President and Chief Customer Officer Matt Worden on September 30, 2021.
The company also announced other moves in its executive ranks: EVP and Chief Merchandising Officer Carl Scibetta adds “Senior” to his EVP role;
Marc Chilton was appointed EVP and chief retail operations officer, succeeding Tim Baker next month; and Patrick Edwards was promoted to chief accounting officer reporting to Senior EVP/CFO/CAO Kerry Jackson.
The accolades for Sifford came from all sides, receiving recognition as a strong footwear merchant and his focus on the balance sheet, operational improvement and building stronger relationships with the consumer.
“Cliff’s decisions during his tenure as CEO helped make Shoe Carnival a healthy, consumer-centric company it is today,” Worden expressed. “First, investing in consumer technology enhancements put us in a position to succeed during an incredibly volatile market this past year. Making significant investments in our e-commerce platform and customer relationship capabilities were key catalysts to achieving the record results we achieved the last three quarters following the pandemic store closures while at the same time laying a foundation for continued growth well into the future.”
Sifford was just as complementary to his team, sharing that he has always had complete confidence in the organization’s SCVL team. “Our stores are run by the most tenured management team in the shoe business. They open the doors every morning as if they are opening their own business. They have passion and skills, which creates an unstoppable combination. We have built the best merchant team in the shoe business, made up of tenured professionals who have industry-leading institutional knowledge of our customers and how they shop. Our management team on every level also has a tremendous track record and passion for the success of this unique concept,” he said. “We have accomplished so much together, both financially and operationally, over the last nine years. From a financial perspective, we grew revenues to over $1 billion, delivered 11 consecutive years of comparable store sales growth leading into 2020, realized best-in-class merchandise margins, and maintained disciplined capital management throughout various economic cycles, most recently as it relates to the COVID-19 pandemic.”
“The team’s efforts and Cliff’s leadership helped Shoe Carnival grow its e-commerce business to nearly 20 percent of revenues after its re-launch. We were ready when our customers needed it most,” said Worden.
For the full fiscal year, e-commerce sales grew over $110 million, or 175 percent, versus the prior year. Shoe Carnival e-commerce sales grew triple digits in every quarter during 2020. Product margin associated with e-commerce sales was up over 300 basis points compared to the prior-year quarter and improved over 150 basis points for the full year. E-commerce sales represented approximately 19 percent of company sales for 2020 compared to roughly 6 percent in fiscal 2019.
Sifford also shared that the company reinvigorated its Shoe Perks loyalty program that grew to 26 million members whom they frequently communicate from 1 million members they “could not communicate with.” Sifford said that Shoe Perks was responsible for approximately 67 percent of overall SCVL sales in fiscal 2020.
“It was just a year ago when we announced the closing of all our retail stores and, as a team, we quickly shifted gears to meet the needs of our customers exponentially growing our e-commerce business,” Sifford shared. “By June, we had safely reopened our stores faster than any of our competitors. Looking back on what we were able to achieve in a time of such uncertainty makes me incredibly proud to have had the opportunity to lead this organization.”
Worden shared how a stronger relationship with its customers and data analytics enabled Shoe Carnival to grow its business and bolster its bottom line.
“In addition to providing the preferred consumer experience in the channel, another key part of our strategy is to increase merchandise margins by reducing promotional intensity,” Worden explained. “The consumer data that we’ve been able to collect and analyze has enabled a sharp reduction in promotional intensity and the elimination of many low-ROI customer promotions and marketing activities. We’ve pivoted away from a heavy historical reliance on BOGO half-off.” He said the company instead used its CRM platform and analytics to segment and personalize compelling product offers. “Eliminating promotional intensity resulted in an increased product margin, up over 300 basis points for Q4,” he reported. “We’ve been so encouraged by the consumer response to this strategy that we have accelerated our plans. For example, we eliminated all those BOGO half-off promotions for the current quarter with continued encouraging consumer results and sales exceeding expectations.”
Worden said it added over 2 million new members, or nearly 10 percent growth year-over-year, in consumers they directly reach. “For our Gold consumer membership, the basket size for this group was approximately $70 for the year, generating over $15 more per order than numbers,” he shared. “We remain focused on growing our relationship with this segment of consumers and see robust growth opportunities with both our athletic and non-athletic strategic brand partners.”
Worden also said that Holiday-focused customer acquisition efforts drove strong results. “Consumers who are non-loyalty members grew sales in the teens for Q4, increasing the total year to mid-single-digit sales growth,” he said. “Our targeted digital marketing capabilities were key in acquiring these new customers and converting into record sales levels. Our strategy to rapidly accelerate our digital capabilities and specifically our strategic e-commerce plans far exceeded our 2020 expectations.”
Turning to the retailer’s category performance for the quarter, Senior EVP and Chief Merchandising Officer Carl Scibetta reported on the call that adult athletics continued to outperform in Q4, increasing in the mid-teens overall driven by solid growth in both women’s and men’s product categories, which were up mid-teens for the quarter. He shared that it continues to deliver triple-digit athletic e-commerce comparable sales increases.
“Our leadership position in the marketplace enables us to continue to deliver the broad trend-right assortments our customers are looking for,” he expressed. “Sales in women’s non-athletic categories were driven by comfort sports shoes as customers continue to work and quarantine at home. Boots salesdrove sales in men’s non-athletic categories. The increase was from both the work boot category and the casual hiking boot category, which were bought as people got tired of being confined in their homes and ventured out for exercise.”
Dress shoes were reportedly down double-digits, which Scibetta said reflected a more casual, active lifestyle as many offices remain closed. Kids’ comparable store sales were up mid-teens for the fourth quarter. “Once schools in many markets returned to some form of in-class learning, we experienced strong sales in children’s casuals and the athletic categories,” he shared. Kids’ non-athletic was up mid-teens, and kids’ athletic was up in the low-teens.
“We believe in the strength of this [merchant] team, and the fact that we did not furlough our buying staff has given us an advantage with the supply chain,” Scibetta suggested. “We continue to work closely with our vendor partners to deliver fresh new products and replenish key categories and classifications. We are monitoring our supply chain very closely and reacting when needed.”
Scibetta said that SCVL ended the quarter with inventory down 8 percent on a per-store basis. “The industry is currently experiencing major supply chain issues from the factories to the ports and the ports to our DC,” he said.
The company reported that overall net sales grew 5.8 percent to $253.9 million in the fiscal fourth quarter ended January 31. Comparable store sales increased 6.4 percent for the period. SCVL said in a release that the sales increase during the fourth quarter correlated with the issuance of government stimulus toward the end of the calendar year 2020.
The fourth quarter’s gross margins improved 170 basis points to 30.8 percent of sales compared to 29.1 percent in the fiscal 2019 fourth quarter. Merchandise margin increased 1.6 percent, and buying, distribution and occupancy expenses decreased 0.1 percent as a percentage of net sales compared to the fourth quarter of fiscal 2019. The increase in merchandise margin was said to be primarily due to lower promotional activity during the quarter but was partially offset by higher shipping costs associated with the rise in e-commerce sales.
Selling, general and administrative expenses for the fourth quarter increased $2.5 million to $67.6 million compared to the fourth quarter of fiscal 2019. The increase was primarily attributable to costs supporting increased e-commerce sales. As a percentage of net sales, these expenses were leveraged to 26.6 percent compared to 27.1 percent in the fourth quarter of fiscal 2019.
Net income for the fiscal fourth quarter was $7.4 million, or 52 cents per diluted share, compared to net income of $3.5 million, or 24 cents per diluted share, in the prior-year quarter.
“At quarter-end, the company had no debt and approximately $106 million in cash and cash equivalents,” Worden said in wrapping up his comments on the call. “The strength of our balance sheet, coupled with our outstanding team and their dedication to executing our consumer-centric strategy, has allowed us to achieve our strongest Q4 operating results in what has been one of the most difficult periods for retail in modern history.”
Worden said the company chose to take a conservative capital approach during the pandemic and would continue to do so with new store growth for 2021. “Our strategy is to continue to accelerate our store fleet four-wall profit contribution,” he explained. “In 2021, we plan not to renew approximately ten leases on stores that do not drive long-term profit potential nor connect with our most valuable consumers. We anticipate opening one new store this year.” He also announced a strategic plan to modernize the company’s most profitable stores across the fleet.
“Our goal is to have approximately two-thirds of our store fleet modernized in the three to five years ahead,” he said. “This will be achieved through a robust annual remodel plan, relocations where we have strong customer opportunities in the market but underperforming real estate, and reigniting new store growth. We are currently finalizing our beta test mode on store experience and design enhancements and are very pleased with our consumer learning. We plan to move ahead rapidly with rollouts this year, assuming COVID-19 does not disrupt our development plans.”
Photos courtesy Shoe Carnival
