Cliff Sifford participated in his final earnings conference call with analysts as Shoe Carnival CEO this week. The family footwear retailer once again reported fiscal second-quarter results that exceeded expectations on the top and bottom line and drove the family footwear retailer to increase its third-quarter and full-year guidance.
As previously reported in SGB, Mark Worden, the company’s president and chief customer officer, will become president and CEO, effective September 30, when Sifford retires from his CEO post. Sifford, who has served as Shoe Carnival’s CEO since 2012, will remain on the SCVL Board of Directors as vice-chairman.
Shoe Carnival Inc. posted record net sales of $332.3 million for the fiscal 2021 second quarter ended July 31, a 10.5 percent increase compared to the 2020 fiscal second quarter. Comparable store sales increased 11.4 percent for the second quarter of 2021 compared to the prior-year comp period and jumped 25.5 percent compared to fiscal Q2 2019. Brick and mortar comp-store sales were up 25.8 percent in Q2 compared to the 2020 comp period and up 19 percent compared to the second quarter of 2019. E-commerce sales were down “inline” with expectations versus Q2 last year when e-commerce comp surged 332 percent but was up 140 percent compared to the second quarter of 2019.
“We made a purposeful decision to buy for growth in the second quarter as we anticipated a return to more normalized consumer demand for the period,” shared Senior EVP and Chief Merchandising Officer Carl Scibetta. “For example, we increased our inventory position for dress shoes to be in line with pre-COVID levels in anticipation of a surge of events like weddings and graduation parties, which typically occur in the second quarter.”
Scibetta reported that all product categories were up double-digits versus the 2019 comp period. Second-quarter brick and mortar sales were said to be up over 20 percent in the quarter versus 2019, with every major category doing well as “family lifestyles returned to a more normal level in travel and entertainment increased.”
The chief merchant reported that comp-store sales in kids athletic and non-athletic were very strong, with sales in non-athletic driven by casual and seasonal products. “Sales in boys and girls also performed well, consistent with what we have seen over the last several quarters,” offered Scibetta. Comp sales in the men’s non-athletic categories were reportedly up over 30 percent versus 2019. “Increases were driven by men’s canvas seasonal and all boot categories,” according to Scibetta. Comparable store sales in women’s non-athletic categories were up in the high-20 percent for the quarter. Scibetta said sales on women’s sports seasonal and dress drove the category, but demand for additional product categories had increased as communities continue to reopen.
Adult athletics sales were up in the high-teens on a comparable store basis versus the 2019 comp quarter, despite moving to several states tax-free events to fiscal Q3. “Both men’s and women’s athletics had strong performances with sales driven by the basketball, skate and core categories,” Scibetta detailed.
“These growth results included a mid-teen increase in customer conversion within our brick and mortar stores, fueling double-digit comp-store sales increases across all geographic divisions over the same period two years prior,” said incoming CEO Mark Worden.
Second-quarter gross margin came in at 40.9 percent of net sales, a record high for Shoe Carnival and up more than 1,300 basis points compared to the second quarter of 2020, driven primarily by what Senior EVP and CFO Kerry Jackson described as “tremendous merchandise margins” in the quarter. Buying, distribution and occupancy expenses reportedly “decreased slightly” as a percentage of sales compared to Q2 2020.
“To put a finer point on our incredible growth, when compared to 2019, second quarter 2021 gross profit margin grew by more than 1,000 basis points, driven by a 960 basis point improvement in merchandise margin and a 50 basis point improvement in buying, distribution and occupancy expenses as a percentage of sales,” explained Jackson.
SG&A expenses increased $7.8 million in Q2 to $76.0 million, expanding to 22.9 percent of net sales compared to 22.7 percent in Q2 2020 and increasing 190 basis points from Q2 2019 due to a “significant increase in sales.” The increase in the SG&A was said to be driven by higher employee compensation expenses related to increased store level wages and incentive compensation due to “continued record performance.”
Operating margins were 18 percent of net sales in Q2, compared to 4.8 percent in the second quarter of 2020. “When compared to second quarter 2019, second quarter 2021 operating income increased an extraordinary $44 million,” said Jackson. He said SCVL could sustain future operating margins of at least 8 percent when the retail environment has normalized.
“We achieved our highest operating profit on record during the quarter, which was nearly four times what we reported in the second quarter of fiscal 2019,” Worden noted.
Net income for the second quarter of 2021 was $44.2 million compared to $10.1 million in Q2 last year. Diluted earnings per share increased by $1.19 versus Q2 last year to $1.54 per diluted share in the 2021 second quarter and increased $1.14 per share versus the 2019 comp period.
SCVL ended the quarter with inventory of $308.1 million, up $9.3 million compared to the comparable 2020 quarter-end, signifying an increase of 4.2 percent on a per-store basis. Compared to the 2019 second quarter-end, inventory was down 0.9 percent on a per-store basis.
As of July 31, 2021, Shoe Carnival had no outstanding debt, and total cash, cash equivalents and marketable securities were $163.9 million.
“Given the continued record-setting performance achieved fiscal year-to-date, we are significantly increasing our full-year guidance,” reported Worden. “Our increased guidance reflects our confidence in the business fundamentals, our strong competitive positioning and record results achieved year-to-date. In addition, given the start to the back to school season far outpaced earlier expectations and any prior back-to-school start, we will also be offering third-quarter fiscal 2021 guidance that represents significant growth over last year.”
Worden reported that for the first three weeks of August, overall store traffic was up over 50 percent compared to 2020, and “schools did not return to normal due to COVID-19.” He said that for the first three weeks of Q3, ended August 21, comparable sales were up nearly 60 percent versus 2020 and up 23 percent compared to August 2019.
SCVL now expects third-quarter diluted earnings per share in the range of $1.10 to $1.15 and net sales in the range of $307 million to $315 million for the third quarter of fiscal 2021. Additionally, the retailer raised its full-year fiscal 2021 guidance and now expects diluted earnings per share in the range of $4.35 to $4.50 and net sales in the range of $1.21 billion to $1.23 billion.
Photo courtesy Shoe Carnival, Cliff Sifford, Mark Worden
