Shoe Carnival, Inc. said double-digit traffic declines through the first three weeks of December will lead to fourth-quarter earnings missing targets. The family shoe chain now expects EPS in the fourth quarter in the range of 3 to 6 cents a share, down from 13 cents a year ago.
On Dec. 2 when reporting third-quarter results, Shoe Carnival forecast earnings of 18 cents to 22 cents a share.
The company now expects fourth quarter net sales to be in the range of $203 to $205 million with a comparable store sales decrease of 4 percent to flat comps. It previously expected sales to be in the range of $215 to $219 million with a comp increase in the range of 4.0 to 6.0 percent.
Speaking at ICR Xchange, Cliff Sifford, president and CEO, said the chain experienced a strong start to the fall selling season during October and November, producing comparable store sales gains of 5.4 percent and 7.8 percent, respectively. The gains were driven primarily by a mid-twenty percent increase in its boot classification for the family. Unfortunately, the first three weeks of December saw double-digit traffic declines. Traffic and sales improved Christmas week and New Year's week resulting in a comparable store sales decline of 6.1 percent for the month of December.
For January, it expects comps to be flat to down 4 percent.
Sifford said management isn’t certain was caused the sharp traffic decline in the first three weeks of December, suggesting it may be due to sales shifting to e-commerce during that period, excitement over marquee basketball launches at mall-based stores, or economic headwinds.
On the positive side, per-store inventories were down low single digits at the end of the period.
On trends, Sifford said the Bobs and Toms styles appear to be slowing down in favor of colorful canvas flats from brands such as Roxy, Madden Girl and Rocket Dog. The leather Sperry Top-Sider business is also moving toward more canvas product, which carries a lower-price point. Sperry Top-Sider continues to do well in men's and kids.
Skechers’ GoWalk product “is still on fire,” and remained the chain's number one selling brand even with the cold weather in November and December. Canvas such as Vans with colors particularly working with younger consumers.
Along with the overall strength in boots, flats are continuing to show solid gains and sandals “with bling on them” are also standing out. Women's dress shoes remain soft.
In athletic segment, canvas skate and running continues to be the strongest categories. Basketball isn't a critical category because the chain doesn't have the marquee models available at mall-based stores. Running was also hurt by the snow and cold weather in November and December but Sifford still said the chain has a “really really nice running business and we expect it to be robust as we head into the spring season.”
Shoe Carnival introduced some better women's shoes to 75 stores in September and the program will be expanded to 125 for spring and 140 to 150 for fall 2014. The better women’s models carry margins 100 basis points higher than women’s non-athletic categories in general. Among the brands introduced, Calvin Klein underperformed with Sifford estimating the looks were a “little too sophisticated” for the Shoe Carnival customer. But Anne Klein, Nine West, Report, Steve Madden, and Bandolino were all received well. Merrell “did not have a good season” in women's but did “very, very well” in men's and will be expanded on the men's side.
Regarding expansion, Shoe Carnival will add 38 to 40 stores in 2014, including its first in Miami, the suburbs of Detroit as well as Buffalo. Adding Miami and Detroit will enable Shoe Carnival to utilize national advertising for the first time that will help it reach markets such as Atlanta, Cleveland and Salt Lake City on a more regular basis that it couldn’t afford with localized marketing approaches. It still seems room to double its store base to around 750 over the next decade.
Shoe Carnival’s loyalty program doubled its member count to 3.1 million from 1.4 million last year, with its members accounting for 30 percent of December sales. The goal is to double loyalty members again in 2014, and then again in 2015.
E-commerce represented 30 percent of sales in December but the business overall remains below Shoe Carnival’s goal of having it represent 5 percent of sales. It currently represents the volume of its third or fourth largest store. A shift from a third party distribution center to company-owned one, shipping-from-web for store understocks, and direct shipping from vendors will all be rolled out this year to support the e-commerce business.
