Shoe Carnival, Inc. has acquired Rogan Shoes, Inc., a 53-year-old work and family footwear company with 28 store locations in Wisconsin, Minnesota, and Illinois.
The purchase price was $45 million, subject to further adjustments, and funded entirely with cash on hand.
The acquisition is expected to be immediately accretive to the company’s fiscal 2024 earnings and generate approximately $84 million in sales and approximately $10 million in operating income, excluding transaction and integration costs. The company has an 18-month integration plan in place and expects to capture an additional $1.5 million in synergies annually and to realize half of the profit synergies by fiscal 2025 and the full amount by fiscal 2026. Strategic and cost synergies will be achieved by integrating Rogan’s into the Shoe Station growth banner and leveraging the company’s existing systems and capabilities.
The Rogan’s acquisition advances the company’s strategy to be the nation’s leading family footwear retailer. It immediately positions the company as the market leader in Wisconsin, and it establishes a store base in Minnesota, creating additional expansion opportunities. Following the integration of the acquisition into the company’s Shoe Station growth banner, the combined banner sales are expected to surpass $200 million by fiscal 2025. With the acquisition, the company’s store count increases to an all-time high of 429, keeping the company on track to achieve its target of operating over 500 stores in 2028.
Mark Worden, president & CEO of Shoe Carnival, stated, “Our growth strategy is focused on becoming the nation’s leading family footwear retailer through a combination of organic growth initiatives and M&A activity that expands our geographic footprint and customer base. Over the past five decades, the Rogan family has built a brand that is well known and trusted throughout the state of Wisconsin. As such, they have established a clear market leadership position in Wisconsin for work and family footwear, with a compelling assortment, great customer service, and a highly committed team of employees.”
“I am excited about the new opportunities for Rogan’s as it becomes part of the Shoe Carnival family,” said Pat Rogan, CEO of Rogan’s. “We share a strong focus on customers and employees, and this transaction provides the additional scale and expertise to drive future growth, create efficiencies, and expand profitability with that shared focus as the foundation.”
Fiscal 2023 Preliminary Results
For the fiscal year ended February 3, 2024, Shoe Carnival, Inc. achieved the high end of management’s sales expectations with net sales of $1.176 billion for the year, driven by strong sales growth during the December holiday period.
Diluted earnings per share are said to be in line with expectations to be between $2.65 and $2.75 a share, with preliminary results in the mid-range, excluding any transaction costs related to the Rogan’s acquisition. The company’s inventory optimization plan over-delivered annual expectations, reducing inventory levels by over $40 million, or over 10 percent, compared to the prior year.
Carnival ended fiscal 2023 with over $110 million of cash, cash equivalents and marketable securities on hand, an increase of over $45 million versus the prior year. Fiscal year 2023 marks the 19th consecutive year the company ended the year with no debt, fully funding operations, new store growth, and store remodels entirely with cash on hand. Additionally, the company is funding the Rogan’s acquisition entirely with cash flow generated in fiscal 2023.
The foregoing expected results are preliminary and remain subject to the completion of normal quarter and year-end accounting procedures and closing adjustments.
The company will provide its guidance for fiscal 2024 in March when it reports final audited financial results for fiscal 2023. On a preliminary basis, the company currently expects to grow fiscal 2024 total net sales in the low- to mid-single-digit range, driven by the newly acquired Rogan’s business, Shoe Station banner growth, e-commerce growth, and continued CRM expansion. Partially offsetting these growth drivers is the comparison to the 53rd week in fiscal 2023 that will not recur in fiscal 2024 and the expectation of a challenging economic backdrop continuing in early 2024.
KPMG LLP served as financial and due diligence advisor to Shoe Carnival, and Faegre Drinker Biddle & Reath LLP served as its legal advisor in connection with the Rogan’s acquisition. TM Capital served as the exclusive financial advisor to Rogan.
Image courtesy Rogan’s
