Shoe Carnival, Inc. was the first of the family footwear retailers to report second quarter results and the tone set by the retailer may signal a broader problem for the mid-tier market this fall as some start to worry aloud about the health of the low- to moderate income consumer that is the lifeblood of this end of the market.


SCVL president and CEO Mark Lemond highlighted his concerns about their core consumer segment during a conference call with analysts to discuss Q2 results, suggesting that higher gas prices, housing and [sub-prime] mortgage issues, and increased consumer debt loads may be taking their toll, but also indicated that their core consumers –- especially urban consumers — did not respond favorably to the style and color direction many dress and casual brands took this spring. He noted lower traffic counts in the stores compared to last year.


While traditional athletic product has been on a decline, Shoe Carnival did note that skate product and other vulcanized footwear, especially canvas, is on the rise. Sports Executive Weekly is hearing the same at mid-tier department stores, family footwear and mall specialty. Whether the core consumer is shopping for value or has adopted this product as their non-low-profile fashion athletic silhouette of choice remains to be seen.


Mr. Lemond said that the skate product is strong and getting stronger and a number of key vendors are improving their offering in the category. He also noted that Carnival has recently picked up Etnies to enhance their offering here. He also called out Nike as their largest vendor and highlighted the development of new product initiatives with them. Cliff Sifford, SCVL’s chief merchant, noted that brands focused on the suburban consumer fared better than traditional urban brands. Timberland and Lugz “experienced large declines” in the period, while Skechers and clogs saw “very nice increases.” The children’s business saw a decline due to weakness in boy’s and girl’s fashion classics and boy’s basketball. He noted “very strong growth” in girl’s low-profile, boy’s skate, and fashion athletic. They continued to see a drain in adults from urban classics and pointed to K-Swiss and Reebok as issues. Sifford said that men’s basketball also continues to struggle. He called out skate, but also pointed to performance running, fashion athletic and Chuck Taylor product as positive contributors.


Looking at back-to-school, SCVL noted that less than 35% of their stores are in areas where schools have gone back, and with many kids delaying purchases of footwear until school starts, the shift has moved some sales into the third quarter. Lemond estimated that the shifting calendar, along with the movement of tax-free holidays into August, was responsible for about three points of the 7.1% comp store sales decline for the quarter. However, he also noted that they have not seen the expected lift in August either and estimated Q3 comps to be “flat to slightly positive” versus last year.


For the back half, Carnival has opted to keep their powder dry and has set aside more open-to-buy dollars for late Q3 and Q4 to gobble up product they expect to see hit the market after vendors assess back-to-school. There are clearly more goods in the pipeline this year versus last as vendors look for placement of cancelled goods and RTV’s.


>>> Canvas, skate and vulcanized are the buzz words this fall as the core suburban kid looks to make a fashion athletic statement of his own. Look for interesting hybrids for spring from non-skate brands adding some new twists here…