Shoe Carnival Continues to Grab Women’s Business…

Shoe Carnival, Inc. posted its highest quarterly earnings in its history in the fiscal third quarter ended October 29, thanks in large part to a whopping 21.2% comparable store increase in the month of October that lifted the quarterly top-line and increased the opportunity to leverage expenses for the period. SG&A expenses as a percent of sales were reduced by a full percentage point to 23.1% of sales in the period and gross margins improved 50 basis points for the quarter. The retailer benefited from increases in both traffic and average ticket out the door.

The October same-store sales numbers, coupled with a 2.4% comp sales gain in August and a nice 6.5% comp sales increase in September, led to an 8.3% comp sales gain for the third quarter. The momentum, which really picked up in the back half of October when the weather turned colder in much of the country, has continued into November, which comped up in low-double-digits for the first two weeks.

The increase for the third quarter was driven by a big gain in the women’s non-athletic business, which was up more than 20% for the period, along with a mid-double-digit gain in the men’s non-athletic business. Carnival has been on a mission to improve these two categories since much of the business here is in private label or quasi-branded product that delivers more margin. Also in that mix is the Euro casual or fusion product that is athletically inspired, but is reported by the retailer in the casual category.

Mark Lemond, president and CEO of Shoe Carnival, said the women’s growth in Q3 was driven by the dress and boots categories, both of which posted comp sales increases in excess of 40% for the period. The men’s business was driven by the low-profile Euro casual looks, along with fashion, urban casual, and boots. The adult athletic business finished the quarter on a high note, posting a double-digit increase in October after “starting slowly in August and September,” as the women’s business here also outpaced the men’s growth. Men’s and women’s running are the key growth vehicles, but women’s fashion classics and casual athletic “also made a recovery as the season progressed.”

The women’s business expanded to about 22.5% of the total business in Q3, up from roughly 20% in the year-ago period, while men’s made up 13.5% of the total, and children’s, including athletics, contributed approximately 18.5% of sales. Adult athletic made up 41.5% of total sales for the period and delivered 56% of revenues when combining adult and children’s. In the children’s business, it was athletic outperforming the non-athletic categories for the period, driven by the boy’s skate and girl’s running categories. The total children’s business comped up in mid-singles for the quarter. Accessories comps were up in mid-single-digits for Q3.

Inventories at quarter-end were essentially flat to last year on a comp basis and Lemond applauded the merchant team for replacing inventory with core fill-in styles and close-outs, and opportunity buys.

Mr. Lemond said the outlook for spring athletic product was exciting, particularly because of the strength of the Nike product in the pipeline. He said running is still the dominant category in both men’s and women’s. He also called out Asics as a key driver for the technical end of the business and also said they have some exciting programs planned with New Balance for next year. He said the average selling price in athletic is “increasing somewhat.”

The retailer sees fourth quarter EPS in the range of 13 cents to 15 cents per diluted share, compared with nine cents a share in the year-ago period. Comps are expected to increase 3% to 5% for the quarter. Full year earnings are expected to be in the $1.31 to $1.33 per diluted share range.