Shoe Carnival, Inc. net earnings for the first quarter were $7.3 million, or 53 cents per diluted share, compared to net earnings of $7.4 million, or 54 cents per diluted share, for the prior year first quarter ended April 29, 2006. Net sales decreased 1.7% to $165.7 million compared with $168.5 million in 2006. Comparable store sales decreased 3.7%.
The gross profit margin for the first quarter of 2007 decreased to 30.0% compared to 30.5% for the first quarter of 2006. As a percentage of sales, the merchandise margin increased 1.0% and buying, distribution and occupancy costs increased 1.5%. The increase in buying, distribution and occupancy costs was due primarily to an increase in distribution costs and the de-leveraging effect of lower same store sales. Of the four cents increase in distribution costs, approximately $936,000, or four cents per diluted share, was related to converting to a new distribution center.
Selling, general and administrative expenses for the first quarter decreased $309,000 to $39.3 million from $39.6 million in the first quarter of 2006. However, as a percentage of sales, selling, general and administrative expenses for the first quarter increased to 23.7% from 23.5% in the first quarter of 2006 primarily due to higher store pre-opening costs. Pre-opening costs for the seven stores opened in the first quarter were $289,000, or 0.2% of sales. No stores were opened and no pre-opening costs were incurred in the first quarter of last year.
The effective income tax rate for the first quarter of fiscal 2007 was 32.0% compared to 38.3% in the first quarter of fiscal 2006. The reduction in the effective income tax rate was primarily due to a reduction in state income taxes from state incentives related to the investment in the new distribution center. The reduction in income tax expense related to the tax incentives equates to an increase of approximately five cents in earnings per diluted share for the quarter.
Speaking on the results for the quarter, Mark Lemond, chief executive officer and president said, “Industry-wide, early spring footwear sales at retail were not as strong as most retailers expected. While sales and earnings fell short of our original expectations for the first quarter, our merchandise team effectively managed our inventories and we ended the quarter with inventory levels that were slightly down on a per-store basis compared with the first quarter of last year.
“This year we have initiated what we anticipate to be a multi-year period of accelerated store growth. We expect to open up to 25 stores this year, including the seven stores we opened during the first quarter. In fiscal year 2008, we expect to accelerate new store growth to between 12 and 15 percent and hold the growth rate at that level for the foreseeable future. New store growth in fiscal 2007 will primarily come from filling-in existing larger, under-penetrated markets and opening stores in single-store markets where we typically see higher initial sales productivity. Supporting this growth strategy is our new 410,000 square foot distribution center, which is now handling the distribution needs of all of our stores, and our new 60,000 square foot corporate headquarters.”
Earnings per diluted share in the second quarter of fiscal 2007 are expected to range from $0.20 to $0.23 compared to $0.21 for the second quarter of 2006. This assumes comparable store sales ranging from a decrease of 1 percent to an increase of 1%.
Currently, the Company expects to open up to 25 stores in fiscal 2007 and close three stores. Store openings and closings by quarter and for the fiscal year are planned as follows:
New Stores Stores Closings
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1st Quarter 2007 7 0
2nd Quarter 2007 7 0
3rd Quarter 2007 9 1
4th Quarter 2007 2 2
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Fiscal 2007 25 3
The seven stores opened during the first quarter included locations in:
City Market/Total Stores in Market
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Castleton, IN Indianapolis/11
Marion, OH Marion/1
Sioux Falls, SD Sioux Falls/1
Oswego, IL Chicago/22
Memphis, TN Memphis/4
Fleming Island, FL Jacksonville/2
Wadsworth, OH Cleveland/4
Financial Tables Follow
SHOE CARNIVAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share)
Thirteen Thirteen
Weeks Ended Weeks Ended
May 5, 2007 April 29, 2006
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Net sales $ 165,653 $ 168,469
Cost of sales (including buying,
distribution and occupancy costs) 115,862 117,019
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Gross profit 49,791 51,450
Selling, general and administrative
expenses 39,325 39,634
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Operating income 10,466 11,816
Interest income (334) (208)
Interest expense 32 32
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Income before income taxes 10,768 11,992
Income tax expense 3,441 4,592
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Net income $ 7,327 $ 7,400
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Net income per share:
Basic $ .54 $ .56
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Diluted $ .53 $ .54
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Average shares outstanding:
Basic 13,499 13,247
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Diluted 13,865 13,656
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