Shoe Carnival, Inc. reported net earnings in the third quarter fell 38.1% to $2.6 million, or 21 cents a share, from $4.2 million, or 33 cents, a year ago. Sales slid 2.2% to $170.1 million from $173.9 million with comps down 5%.

The gross profit margin for the third quarter was 27.2% compared to 29.1% for the third quarter of the prior year. As a percentage of sales, the merchandise margin decreased 1.1% while buying, distribution and occupancy costs increased 0.8%.

Selling, general and administrative expenses for the third quarter were $42.4 million, or 24.9% of sales, compared to $43.6 million, or 25.1% of sales, for the third quarter of 2007.

Mark Lemond, CEO and president said, “Our customers continue to be impacted by the economic downturn as buying habits have shifted to periods of need. We saw a definite lift in sales during the back-to-school season. However, sales trended lower during September and October when spending became more discretionary.”

Lemond continued, “Despite operating an additional 17 stores at the end of the third quarter and incurring store closing costs of an additional $321,000 as compared to the prior year, we were still able to decrease our selling, general and administrative expenses by $1.2 million or 0.2 percent as a percentage of sales. We are managing our business conservatively by focusing on reducing inventory and thereby generating cash flow. At the end of the third quarter, we reduced inventories on a per store basis by 8.0 percent and generated $10.8 million in cash provided by operations year-to-date. We had no borrowings on our line of credit at the end of the quarter and look to continue to manage our business to remain free of long-term debt.”

Net income for the first nine months of 2008 was $8.4 million, or 67 cents per diluted share, compared with net income of $11.7 million, or 87 cents per diluted share, in the first nine months of last year. Net sales for the first nine months was $490.7 million compared to net sales of $494.3 million for the same period last year. Comparable store sales for the thirty-nine week period ended Nov. 1, 2008 decreased 3.7% compared to the thirty-nine week period last year ended Nov. 3, 2007. The gross profit margin for the first nine months of 2008 was 27.6% compared to 28.5% last year. Selling, general and administrative expenses, as a percentage of sales, was 24.9% for both 2008 and 2007.

Currently, the company expects to open 24 new stores in fiscal 2008 and close 12 stores. The eight stores opened during the third quarter included locations in:
 
 Market/Total Stores in Market
 Rapid City, SD     Rapid City/1
 Grand Junction, CO     Grand Junction/1
 Uniontown, PA     Pittsburgh/3
 Monroe, LA     Monroe/1
 Meridian, ID     Boise/2
 League City, TX     Houston/9
 Baytown, TX     Houston/9
 Fort Smith, AR     Fort Smith/3

About The Author

Thomas J. Ryan

Thomas J. Ryan Senior Business Editor | SGB Media tryan@sgbonline.com | 917.375.4699

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SHOE CARNIVAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share)

       
Thirteen Thirteen Thirty-nine Thirty-nine
Weeks Ended Weeks Ended Weeks Ended Weeks Ended
November 1, 2008 November 3, 2007 November 1, 2008 November 3, 2007
       

 

 
Net sales $ 170,063 $ 173,881 $ 490,662 $ 494,339

Cost of sales (including buying, distribution and occupancy costs)

  123,746     123,320     355,119     353,740  
 
Gross profit 46,317 50,561 135,543 140,599

Selling, general and administrative expenses

  42,389     43,627     122,373     123,070  
 
Operating income 3,928 6,934 13,170 17,529
Interest income (62 ) (101 ) (138 ) (611 )
Interest expense   42     115     111     179  
 
Income before income taxes 3,948 6,920 13,197 17,961
Income tax expense   1,341     2,734     4,829     6,281  
 
Net income $ 2,607   $ 4,186   $ 8,368   $ 11,680  
 
Net income per share:
Basic $ .21   $ .33   $ .68   $ .89  
Diluted $ .21   $ .33