Positive Q1 Comps Boost Shoe Carnival’s Earnings 20%

Shoe Carnival Reports Record First Quarter 2006 Results
Thursday May 18, 7:00 am ET
Net Income Increases 25 Percent

Shoe Carnival, Inc. net earnings for the first quarter increased 25% to $7.4 million as compared with net earnings of $5.9 million in the first quarter ended April 30, 2005. Diluted earnings per share increased 20% to 54 cents per share compared with 45 cents per share last year. Included in this year's diluted earnings per share are expenses related to stock-based compensation of three cents per share.

Net sales for the first quarter increased 4.8% to a first quarter record of $168.5 million from $160.7 million last year. Comparable store sales increased 4.1% for the 13-week period.

The gross profit margin for the first quarter of 2006 increased to 30.5 percent from 29.6 percent in the first quarter of 2005. Selling, general and administrative expenses for the first quarter, as a percentage of sales, decreased to 23.5 percent from 23.6 percent in last year's first quarter. For the first quarter, stock-based compensation of $663,000, or 0.4 percent of sales, was included in selling, general and administrative expenses. There was no stock-based compensation expense for the first quarter of last year.

Speaking on the results for the quarter, Mark Lemond, chief executive officer and president said, “We continued our success through the first fiscal quarter of 2006 with a 25 percent increase in net income. Our customers responded well to our improved product assortment, especially in our dress and casual categories. The result was a 4.1 percent increase in our comparable store sales for the quarter. This increase comes on top of the 5.5 percent comparable stores sales increase we achieved in the first quarter of 2005. The increase in our gross margins, along with our leveraging of expenses, led to a full percentage point increase in our operating margin from 6.0 percent to 7.0 percent.”

Earnings per diluted share in the second quarter of fiscal 2006 are expected to range from $0.23 to $0.25. This assumes a comparable store sales increase of 2 or 3 percent.

For the full year of 2006, we continue to expect diluted earnings per share to range from $1.65 to $1.75.

Currently, the Company expects to open between 13 to 15 stores in fiscal 2006 and close five stores. No stores were opened or closed in the first quarter. In the second quarter, the company expects to open three stores and close two stores.

                          SHOE CARNIVAL, INC.
              CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                   (In thousands, except per share)


                                             Thirteen       Thirteen
                                           Weeks Ended    Weeks Ended
                                         April 29, 2006 April 30, 2005
                                         -------------- --------------

Net sales                                      $168,469      $160,713
Cost of sales (including buying,
   distribution and occupancy costs)            117,019       113,074
                                           ------------   ------------

Gross profit                                     51,450        47,639
Selling, general and administrative
   expenses                                      39,634        37,864
                                           ------------   ------------

Operating income                                 11,816         9,775
Interest income                                    (208)          (11)
Interest expense                                     32           144
                                           ------------   ------------

Income before income taxes                       11,992         9,642
Income tax expense                                4,592         3,721
                                           ------------   ------------

Net income                                     $  7,400      $  5,921
                                           ============   ============

Net income per share:
   Basic                                       $    .56      $    .46
                                           ============   ============
   Diluted                                     $    .54      $    .45
                                           ============   ============

Average shares outstanding:
   Basic                                         13,247        12,923
                                           ============   ============
   Diluted                                       13,656        13,255
                                           ============   ============