Kerry Jackson, Shoe Carnival's CFO, speaking at CL King's Best Idea's conference, said that the family footwear retailer doesn't know whether the current promotional climate may lead to some “permanent change” in retailing, but he said Shoe Carnival is benefiting from consumer's search for greater value.


Answering a question on the promotional climate, Jackson noted that it's tough the downturn has caused “structural changes” in the consumer. In particular, consumers don't have as much access to credit and debt. They're also focusing reducing debt levels.


“Once they de-lever, will they go back to their free-spending ways? We don't know,” said Jackson.  “But right now they're value shopping. What you're seeing is customers exiting the mall and the lifestyle centers and coming to where they see value, which is the strip center. It's someone like Wal-Mart, Target, TJ Maxx, Marshalls, Ross, Shoe Carnival Old Navy – they're gravitating towards that. And we have an inherent benefit that most of our real estate is in strip centers.”

Jackson also noted that smart inventory management can help a retailer raise merchandise margins in a promotional climate.
Merchandise margins were down 100 basis points in Q3 2008 and 200 basis points in Q4 2008 following the economic meltdown. “We were almost giving always shoes to get them out the door to get clean next season,” said Jackson. But once inventories were better aligned at most retailers and vendors, merchandise margins increased in Q2 this year because it didn't have to resort to aggressive markdowns. The gain came despite a 6% comp decline.


Asked about buying in a promotional climate, Jackson said the chain had been buying broader for the last several years but has been “tightening up those SKUs to hone in on winners” in the downturn. Although partly benefitting from a tax-holiday shift, Shoe Carnival's BTS comps were up 6% through August, thanks to the stocking of a deeper selection of Converse in a wide range of colors and deeper buys in Skechers and Nike.