Shoe Carnival Inc. reported a loss in the fourth quarter taking a impairment charge for 7 stores in Puerto Rico.

Fourth Quarter Highlights

  • Net sales increased $0.5 million to $234.2 million
  • Comparable store sales decreased 1.2 percent
  • Gross profit margin was 27.5 percent
  • Net loss was $0.9 million, or a loss of 5 cents per diluted share, which includes non-cash impairment charges of $3.6 million, or 12 cents per diluted share, for seven Puerto Rico stores
  • Non-GAAP adjusted net income was $1.3 million, or 7 cents per diluted share, excluding the non-cash impairment charges referenced above
  • Repurchased 285,000 shares of common stock at a total cost of $7.2 million under share repurchase programs
  • Inventory was down $13.2 million, or 6.8 percent on a per-store basis
  • Cash and cash equivalents of $62.9 million and no outstanding bank debt as of January 28, 2017

“Our comparable stores sales performance was in-line with the updated expectations we provided in January and our gross profit margin came in better than we anticipated,” said Cliff Sifford, Shoe Carnival’s president and CEO. “Our team took decisive actions to promote our seasonal boot footwear to ensure we ended 2016 in a clean inventory position. We believe the strong athletic footwear cycle we experienced during the year will continue into 2017 and we are pleased with the early results from our casual sandal footwear.”

Sifford continued, “Looking ahead, we believe we are well positioned to execute on our strategic initiatives. We have the financial flexibility with the strength of our balance sheet and cash flow to enhance value for shareholders by investing in our business and through our existing dividend and share repurchase programs.”

Fourth Quarter Financial Results
The company reported net sales of $234.2 million for the fourth quarter of fiscal 2016, a 0.2 percent increase, compared to net sales of $233.7 million for the fourth quarter of fiscal 2015. Comparable store sales decreased 1.2 percent in the fourth quarter of fiscal 2016.

Gross profit margin for the fourth quarter of fiscal 2016 decreased to 27.5 percent compared to 29.2 percent in the fourth quarter of fiscal 2015. Merchandise margin decreased 1.3 percent and buying, distribution and occupancy expenses increased 0.4 percent as a percentage of net sales compared to the fourth quarter of fiscal 2015.

Selling, general and administrative expenses (“SG&A”) for the fourth quarter of fiscal 2016 increased $4.2 million to $65.9 million, or 28.1 percent of net sales. SG&A in the fourth quarter of fiscal 2016 included non-cash impairment charges of $3.6 million for seven Puerto Rico stores. Excluding these non-cash impairment charges, adjusted SG&A increased $0.7 million to $62.4 million, or 26.6 percent of net sales in the fourth quarter of fiscal 2016.

Net loss for the fourth quarter of fiscal 2016 was $0.9 million, or a loss of 5 cents per diluted share. Included in the fourth quarter of 2016 were the previously mentioned non-cash impairment charges of 12 cents per diluted share. Adjusted net income was $1.3 million, or 7 cents per diluted share, in the fourth quarter of fiscal 2016. For the fourth quarter of fiscal 2015, net earnings were $4.2 million, or 21 cents per diluted share.

Fiscal Year 2016 Financial Results
Net sales during fiscal 2016 increased $17.1 million to $1.001 billion compared to $984 million in fiscal 2015. Comparable store sales for the fifty-two week period ended January 28, 2017 increased 0.5 percent. Net earnings for fiscal 2016 were $23.5 million, or $1.28 per diluted share, compared to net earnings of $28.8 million, or $1.45 per diluted share, in fiscal 2015. Adjusted net income was $25.7 million, or $1.40 per diluted share, for fiscal 2016.

The gross profit margin for fiscal 2016 was 28.9 percent compared to 29.5 percent last year. Merchandise margin decreased 0.6 percent while buying, distribution and occupancy costs, as a percentage of sales, remained flat compared to prior year. SG&A for fiscal 2016 increased $7.4 million to $251.3 million, or 25.1 percent of net sales. For fiscal 2016, SG&A included the previously mentioned non-cash impairment charges of $3.6 million. Excluding these non-cash impairment charges, adjusted SG&A increased $3.9 million to $247.8 million, or 24.8 percent of net sales, in fiscal 2016.

Store Growth
The company opened 19 stores and closed nine stores during fiscal 2016 compared to opening 20 stores and closing 15 stores during fiscal 2015.

Share Repurchase Program
For the fiscal year ended January 28, 2017, the company repurchased approximately 1.7 million shares of its common stock, at an average price of $25.10 per share, for a total cost of $42.6 million. On December 6, 2016, the company’s Board of Directors authorized a new share repurchase program for up to $50 million of its outstanding common stock, effective January 1, 2017. The new share repurchase program replaced the existing $50 million share repurchase program which expired in accordance with its terms on December 31, 2016. As of January 28, 2017, the company had $42.8 million available for future stock repurchases under the new $50 million stock repurchase program.

Fiscal 2017 Earnings Outlook
The company expects fiscal 2017 net sales to be in the range of $1.028 billion to $1.040 billion, with comparable store sales flat to up low single digits. Earnings per diluted share for the fiscal year are expected to be in the range of $1.45 to $1.54. Fiscal 2016 earnings per diluted share were $1.28 and adjusted earnings per diluted share were $1.40.

Photo courtesy Shoe Carnival