Shoe Carnival Inc.’s second quarter earnings slid 14.8 to $4.1 million, or 22 cents a share, missing Wall Street’s consensus target of 27 cents share. The family shoe chain slightly reduced its sales guidance for the year but maintained its EPS outlook.

Second Quarter Highlights

  • Net sales increased $4.1 million to $231.9 million compared to $227.8 million in the second quarter of fiscal 2015
  • Comparable store sales increased 0.5 percent in the second quarter of 2016
  • Per-store inventories were down 2.5 percent at the end of the quarter compared to the second quarter of fiscal 2015
  • Repurchased 966,828 shares of common stock at a total cost of $23.6 million under share repurchase program

“Our non-athletic footwear categories, particularly sandals, performed well in the second quarter. Shoe Perks, our loyalty program, continued to be a valuable tool for us as we increased shopping frequency and average order value across our most loyal customers to report an eighth consecutive quarterly increase in comparable store sales,” stated Cliff Sifford, Shoe Carnival’s President and CEO. “We remain focused on the execution of our multi-channel strategic initiatives to fuel future growth in sales and profitability. Going forward, we have confidence in our opportunities and our ability to capitalize on them while maintaining the financial flexibility to continue our commitment of returning value to our shareholders through share repurchases and consistent dividend payments.”

Second Quarter Financial Results

The Company reported net sales of $231.9 million for the second quarter of fiscal 2016, a 1.8 percent increase compared to net sales of $227.8 million for the second quarter of fiscal 2015. Comparable store sales increased 0.5 percent in the second quarter of fiscal 2016.

The gross profit margin for the second quarter of fiscal 2016 decreased to 29.0 percent compared to 29.1 percent in the second quarter of fiscal 2015. The merchandise margin decreased 0.4 percent. Buying, distribution and occupancy expenses decreased 0.3 percent as a percentage of sales.

Selling, general and administrative expenses for the second quarter of fiscal 2016 increased $2.2 million to $60.6 million. As a percentage of sales, these expenses increased to 26.1 percent compared to 25.6 percent in the second quarter of fiscal 2015.

The Company opened nine new stores in the second quarter of fiscal 2016 compared to five new stores in the second quarter of fiscal 2015.

Net earnings for the second quarter of fiscal 2016 were $4.1 million, or $0.22 per diluted share. For the second quarter of fiscal 2015, the Company reported net earnings of $4.8 million, or $0.24 per diluted share.

Six Month Financial Results

Net sales during the first six months of fiscal 2016 increased $11.8 million to $492.4 million compared to the same period last year. Comparable store sales for the twenty-six week period ended July 30, 2016, increased 1.6 percent. Net earnings for the first six months of fiscal 2016 were $14.8 million, or $0.78 per diluted share, compared to net earnings of $15.2 million, or $0.76 per diluted share, in the first six months of fiscal 2015. The gross profit margin for the first six months of fiscal 2016 was 29.0 percent compared to 29.3 percent in the same period last year. Selling, general and administrative expenses remained flat as a percentage of sales. The Company opened 12 stores and closed four stores during the first six months of fiscal 2016 compared to 12 store openings and 12 store closings in the first six months of fiscal 2015.

Fiscal 2016 Earnings Outlook

The Company is updating its annual fiscal 2016 sales outlook and is maintaining its diluted earnings per share outlook due to the positive benefit from the shares repurchased during the first half of the year. Fiscal 2016 net sales are now expected to be in the range of $1.012 billion to $1.016 billion, with a comparable store sales increase in the range of 1.5 percent to 2.0 percent. Earnings per diluted share for the fiscal year are expected to be in the range of $1.58 to $1.65. This represents an increase of 9 percent to 14 percent over fiscal 2015 earnings per diluted share of $1.45.

Previously, the company expected net sales to be in the range of $1.007 billion to $1.027 billion, with a comparable store sales increase in the range of 1.0 percent to 3.0 percent. The company didn’t change its outlook for earnings.

Store Growth

The company expects to open approximately 20 stores, including seven small-market stores, and close approximately ten stores in fiscal 2016. Store openings and closings by quarter for the fiscal year are as follows: