Shares of Shoe Carnival, Inc. jumped Wednesday after the off-price footwear retailer reported fourth-quarter profits that blew past expectations to cap off a record year.
Shares closed Wednesday at $34.49, up $3.06, or 9.74 percent.
On a conference call with analysts, Mark Worden, president and CEO, said Shoe Carnival generated more profit for its shareholders during 2021 than the prior six years combined.
“No doubt 2021 presented a challenging macro environment. COVID-19 and supply chain disruptions required our exceptional merchandising team and operators to navigate ongoing complications,” said Worden. “Inflation and a tight job market made clear how essential our team members are and how important our commitment to investing in competitive wages, compelling benefits and long-term career growth is. One element was constant for Shoe Carnival every quarter in 2021: our customers shopped in-person at record levels and, when they did, the merchandise assortment delivered on their family’s footwear needs.”
In the quarter ended January 29, profits surged 178 percent to $20.6 million, or 72 cents a share, from $7.4 million, or 26 cents, a year ago. Excluding charges related to the acquisition of Shoe Station on December 3, 2021, adjusted net income reached $23.8 million, or 83 cents, far ahead of Wall Street’s consensus estimate of 44 cents.
Gross profit margin was 37.3 percent in 2021, a Q4 record high for Shoe Carnival and up more than 650 basis points compared to the fourth quarter of 2020. The improvement was driven primarily by continued strength in its merchandise margin, which increased 5.1 percentage points, driven by fewer margin-dilutive promotions and higher average selling prices. Excluding one-time acquisition costs, our Q4 gross profit margin was 37.6 percent.
Buying, distribution and occupancy expenses decreased 140 basis points as a percentage of sales compared to the fourth quarter of 2020 despite higher supply chain expenses. As a percent of sales, SG&A expense increased 1.8 percentage points to 28.4 percent due to one-time acquisition-related expenses of $3.2 million and increased investment in advertising and store-level wages
Revenues in the quarter improved 23.4 percent to $313.4 million, topping analysts’ consensus target of $278.5 million and setting a new fourth-quarter record. Comparable store traffic increased 18 percent, driving comparable-store sales growth of 17.7 percent on top of a 6.4 percent increase in fiscal 2020.
Brick-and-mortar comparable store sales were up 22.1 percent, and e-commerce was primarily flat in the fourth quarter compared to a year ago.
Carl Scibetta, CMO, said that across all merchandise categories, comparable store sales for the quarter were up double-digits versus 2020, and margins were up 710 basis points versus the year-ago period and 1,030 basis points versus 2019.
“Even though inflation could affect margin levels in 2022, we feel the changes in our promotional strategies and the power of our CRM program has fundamentally changed the merchandise marketing levels for the company going forward,” said Scibetta.
Kids comparable stores in the fourth quarter were up in the low 20s. Both athletic and non-athletic kid sales were up over 20 percent. Men’s non-athletic comps were up in the high 20s, led by dress and casual shoe categories. Women’s non-athletic comparable store sales were up in the low 20s driven by dress, casual and sports shoes. Adult athletics were up in the low double-digits.
Scibetta said non-athletic shoes across men’s, women’s and children’s “have made a huge comeback” over the last year. We are seeing customers back to buying non-athletic shoes. Across customer groups, non-athletic sales grew by over 20 percent in the fourth quarter, while athletics continued to grow by low-teens percentage points. Currently, we have a 50/50 non-athletic/athletic merchandise portfolio, which has us well-positioned for growth and mitigates risks related to changes in consumer demand. We feel this balance gives us an advantage over the competition.”
For the current year, Shoe Carnival is projecting growth in both athletic and non-athletic. However, Scibetta added, “Growth is projected at a higher rate in non-athletic than in athletic based on consumer trends, recent history and new fashion that has emerged in the no-athletic side of the business.”
In the year, sales reached $1.33 billion against $976.8 million in 2020, a gain of 36.2 percent.
Net income in the year came to $154.9 million, or $5.53 a share; this compares to $16.0 million, or 56 cents, in fiscal 2020 and $42.9 million, or $1.46 per diluted share, in fiscal 2019, which was the previous record. Excluding the acquisition-related charges incurred during the fourth quarter, adjusted net income was $158.1 million, or $5.53.
“Our industry faces potential challenges this spring,” said Scibetta. “Consumer spending will be impacted as the stimulus programs of 2021 are no longer, and the supply chain and inflation issues continue. We aren’t immune from these challenges, but, thankfully, we are well-positioned to continue to increase our market share due to our strong management and vendor relations. Our inventory levels are up versus last year, and our stores are ready for spring selling, and we are winning with strong merchandise categories and assortments.”
Shoe Carnival’s fiscal 2022 outlook includes:
- Net sales are expected to increase 4-to-7 percent compared to the prior year on top of the 36.2 percent increase achieved during fiscal 2021;
- Operating income is expected to be in the range of $142 million to $154 million compared to the pre-pandemic record of $54.2 million in fiscal 2019;
- EPS is expected to be in the range of $3.80 to $4.10 compared to $1.46 in fiscal 2019;
- Return on equity is expected to be between 24 percent and 26 percent for shareholders; and
- Shoe Carnival aims to add ten plus stores in fiscal 2022 with the accelerated growth of over 20 new stores in fiscal 2023 and over 25 new stores annually by fiscal 2024. As of March 16, the company operates 393 stores in 35 states.
Photo courtesy Shoe Carnival