Shoe Carnival, Inc. said it posted the highest quarterly earnings in the companys history in Q1, thanks in large part to their third consecutive quarter of comp store sales growth, along with continued gross margin improvement and leveraging of SG&A expenses against the increased sales figures.
President and CEO Mark Lemond pointed to changes the retailer has made in the fashion mix of its merchandise assortments and a new advertising campaign as key drivers for continued growth.
Lemond said they saw a great deal of disparity between the performance of their northern tier stores and the southern tier stores in the quarter. Weather is an obvious consideration since the southern stores comped six points better than the northern stores.
From a category standpoint, the total sandal business was “depressed” by the weather issues, but Lemond said they saw “nice increases” in mens and womens dress and casual product, along with athletic product across all genders.
The womens non-athletic business was up in mid-singles for the quarter, with gains coming in both dress and casual. SCVL is seeing lower profile Euro casual silhouettes perform well, particularly in the Juniors category. Lemond said the one disappointment came in the casual sandal business. Mens non-athletic also comped up in the mid-singles, with continued growth coming out of the mens casual business, again helped by the Euro casual looks.
The childrens non-athletic business was described as “not very good”, with the Easter shift playing a part in the softness here. SCVL did have a very good athletic business in childrens in Q1, comping up in mid-single-digits for the period. Combined, the childrens business was up in low-singles for the quarter.
Adult athletics was up in mid-singles as Shoe Carnival starts to benefit even more from an expanded performance offering for the family footwear sector. Lemond called out Nike, adidas a3, and Asics as key performers on the tech footwear side. He said that they are seeing much better upper designs in the running category, which he feels is helping drive the business further. The shift in mix here is pushing the average selling price up with their top three athletic brands as they turn more goods in the $70 to $75 price range. Classics also continue to perform for Carnival.
The GM improvement was a result of a 20 basis point increase in merchandise margins and a 30 basis point decline in buying, distribution, and occupancy costs.
SCVL sees second quarter diluted EPS in the 16 cents to 18 cents per share range, based on a total sales increase in the 7% to 10% range and comp store growth between 2% and 4% for the period.
May comps are currently trending up in mid-singles, a performance that Lemond said was “better than planned,” due to a stronger womens business. The EPS estimate assumes a $300,000 pre-tax charge to close two stores in the third quarter.
For the full year of 2005, earnings per diluted share are expected to range from $1.20 to $1.30. SCVL expects to open 12 to 14 stores in fiscal 2005 and close six stores. Five stores were opened in the first quarter and five or six stores are expected to open in the second quarter. They expect to close one store in Q2.
Inventories were up just 0.6% on a per-store basis.
| Shoe Carnival, Inc. | |||
| Fiscal First Quarter Results | |||
| (in $ millions) | 2005 | 2004 | Change |
| Total Sales | $160.70 | $145.50 | 10.50% |
| Gross Profit % | 29.60% | 29.10% | +50 bps |
| SG&A % | 23.6% | 23.9% | -30 bps |
| Net Income | $5.9 | $4.5 | +31.2% |
| Diluted EPS | 45¢ | 34¢ | +32.4% |
| Comp Sales | +5.5% | -2.2% | |
| Inven. @ Qtr End | $176.3 | $167.1 | +5.5% |
