Shoe Carnival, Inc. announced net earnings for the 13-week fourth quarter increased 44 percent to $1.7 million as compared with net earnings of $1.2 million in the fourth quarter ended February 2, 2002. Diluted earnings per share increased 44 percent to $.13 per share from $.09 per share last year. Net earnings for the 52-week 2002 fiscal year increased 26 percent to $15.8 million, or $1.22 per diluted share, from $12.6 million, or $1.01 per diluted share, for the 2001 fiscal year.

Net sales for the fourth quarter increased 6 percent to $128.0 million from $120.6 million last year. Comparable store sales decreased 3.9 percent for the 13-week period.

The gross profit margin for the fourth quarter of 2002 increased to 26.9 percent from 25.8 percent in the fourth quarter of 2001. Selling, general and administrative expenses for the fourth quarter, as a percentage of sales, increased to 24.7 percent from 24.0 percent in last year’s fourth quarter.

Interest expense declined to $160,000 in the fourth quarter from $364,000 last year due to a substantial reduction in average borrowings and a lower effective interest rate. The effective income tax rate for the fourth quarter of 2002 and 2001 was 37.5 percent.

For the 52-week 2002 fiscal year, net sales increased 9 percent to $519.7 million from sales of $476.6 million for fiscal 2001. Comparable store sales decreased 0.4 percent for the 52-week period.

Commenting on the results, Mark Lemond, president and chief executive officer said, “We are extremely pleased with our record fourth quarter and full year 2002 results considering the tough retail climate. We aggressively managed our inventories, which led to improved gross margins. These gross margin increases along with stringent cost controls and lower interest expense helped us achieve substantial earnings growth.

“We continued to strengthen our balance sheet and ended the year in a solid financial position. Total inventories at year-end were up 7.7 percent on 14 percent square footage growth but down 5 percent on a per store basis. We generated $27.7 million in cash flow from operations, which equates to a 24 percent increase over 2001 and paid down $12.6 million in long-term debt. We believe that our strong balance sheet puts us in an excellent position to fund our store expansion program into 2003 and beyond.”

The Company opened 25 new stores to end the year with 207 stores. Management expects to accelerate new store growth in 2003 by opening approximately 40 new stores.

The Company also announced that June 12, 2003 has been set as the date for the Annual Meeting of Shareholders and April 4, 2003 was set as the shareholder record date.

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

                                   13 Weeks Ended          52 Weeks Ended
                               February 1, February 2, February 1, February 2,
                                   2003       2002        2003        2002

     Net sales                  $127,986   $120,606    $519,699    $476,556
     Cost of sales (including
      buying, distribution and
      occupancy costs)            93,507     89,498     369,912     341,425
     Gross profit                 34,479     31,108     149,787     135,131
     Selling, general and
      administrative expenses     31,648     28,892     123,658     112,736
     Operating income              2,831      2,216      26,129      22,395
     Interest expense                160        364         785       2,275
     Income before income taxes    2,671      1,852      25,344      20,120
     Income taxes                  1,002        694       9,504       7,545
     Net income                   $1,669     $1,158     $15,840     $12,575