Shoe Carnival, Inc. second quarter net sales increased 5.4% to
$154.8 million for the thirteen-week period ended August 4, 2007
compared to sales of $146.9 million for the second quarter, 2006. Comparable store sales decreased 7.1% compared to the same period last year.
Net earnings for the second quarter were
$167,000 as compared with net earnings of $2.9 million in 2006. Diluted earnings per share were one penny per
share as compared with 21 cents per share last year.

The gross profit margin for the second quarter of 2007 decreased to 26.0
percent compared to 27.8 percent for the second quarter of 2006. As a
percentage of sales, the merchandise margin decreased 1.5 percent and
buying, distribution and occupancy costs increased 0.3 percent. Selling,
general and administrative expenses for the second quarter, as a
percentage of sales, increased to 25.9 percent from 24.8 percent in last
year's second quarter.

During the second quarter of fiscal 2007, the Company repurchased
662,000 shares of its outstanding common stock at a cost of $18.9
million. These repurchases are part of a $50.0 million stock buy-back
program, which will terminate upon the earlier of the repurchase of the
maximum amount or December 31, 2008. As of August 4, 2007, the amount
that remained available under the existing repurchase authorization was
$30.8 million. All repurchases under this program have been made
utilizing available cash on hand.

Speaking on the results for the quarter, Mark Lemond, chief executive
officer and president said, “Our second quarter sales were significantly
affected by a decline in customer traffic. Our comparable store sales
and traffic declines through most of the second quarter were similar to
those experienced in the first quarter. These declines accelerated
towards the tail-end of the second quarter and were significantly
affected by the shifting of back-to-school dates and sales tax-free days
later in August, particularly in Texas and Florida. While sales fell
short of our original expectations for the second quarter, we have been
aggressive in the liquidation of spring and summer product.
Consequently, per-store inventories at August 4, 2007 were flat compared
with inventories as of August 5, 2006.”

Net income for the first half of 2007 was $7.5 million, or $0.55 per
diluted share, compared with net income of $10.3 million, or $0.75 per
diluted share, last year. Net sales for the first six months increased
1.6 percent to $320.5 million from sales of $315.4 million for the same
period last year. Comparable store sales for the twenty-six week period
ended August 4, 2007 decreased 5.4 percent compared to the twenty-six
week period last year ended August 5, 2006. The gross profit margin for
the first six months of 2007 decreased to 28.1 percent from 29.3 percent
last year. Selling, general and administrative expenses, as a percentage
of sales, increased to 24.8 percent in the first six months of 2007 from
24.1 percent last year.

Third Quarter Outlook

Based on recent sales trends, and due in part to the shift in the retail
calendar affecting the second and third quarters, net sales for the
third quarter are expected to range from $183.0 million to $186.0
million. On a comparable week-for-week basis, the Company now expects
comparable store sales to be flat to slightly positive for the third
quarter this year. Consequently, earnings in the third quarter are
expected to range from $0.44 to $0.48 per diluted share.

Commenting on the third quarter outlook, Mr. Lemond said, “We, along
with other retailers, have seen lower customer traffic during the second
quarter. Although, we have seen traffic declines moderate in the early
back-to-school period, our current sales trend leaves us with an
expectation of flat to slightly positive comparable store sales in the
third quarter.

“We will continue to manage our inventories and expenses aggressively.
Our balance sheet is healthy and will support us as we continue our
store expansion program this year and next. We expect to open 25 stores
this year and between 30 and 40 stores in 2008.”

SHOE CARNIVAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
INCOME
(In thousands, except per share)

Thirteen Thirteen Twenty-six Twenty-six
Weeks Ended Weeks Ended Weeks Ended Weeks Ended

August 4,
2007

July 29,
2006

August 4,
2007

July 29,
2006

Net sales $ 154,805 $ 146,886 $ 320,458 $ 315,355
Cost of sales (including buying, distribution and occupancy costs)
114,558 106,045 230,420 223,064

Gross profit 40,247 40,841 90,038 92,291
Selling, general and administrative expenses
40,118 36,421 79,443 76,055

Operating income 129 4,420 10,595 16,236
Interest income (176 ) (302 ) (510 )

(510

)

Interest expense 32 42 64 74