Shoe Carnival Q2 Net Up 26% Despite 3.7% Comp Decline

Shoe Carnival, Inc. reported that net income for the second quarter of fiscal 2004 increased 26% to $1.9 million, or 15 cents per diluted share, compared with net income of $1.5 million, or 12 cents per dilted share, in the second quarter of fiscal 2003. Net sales for the second quarter of 2004 increased 2.7% to $138.1 million from $134.5 million last year. Comparable store sales decreased by 3.7 percent for the 13-week period.

Gross profit margins for the second quarter of 2004 increased to 27.7 percent from 27.5 percent last year. Selling, general and administrative expenses, as a percentage of sales, decreased to 25.3 percent from 25.5 percent in the second quarter of 2003. New store pre-opening costs incurred in the second quarter of 2004 were $147,000, or 0.1 percent of sales, compared with $828,000, or 0.6 percent of sales last year. The Company also stated that back-to-school sales have started slow, and sales and gross margins for the first 10 days of August have been below expectations. Based on the uncertainty of the current sales trend, the Company does not anticipate giving earnings guidance for the third quarter until the August sales results are reported.

During the first half of 2004, 13 new stores were opened, two of which were opened in the second quarter. An additional nine stores are expected to open in the second half of 2004. The Company expects to close two stores late in the fourth quarter of this year.

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

                           Thirteen   Thirteen  Twenty-six Twenty-six
                             Weeks      Weeks      Weeks      Weeks
                             Ended      Ended      Ended      Ended
                            July 31,  August 2,   July 31,  August 2,
                             2004       2003       2004       2003

Net sales                   $138,130   $134,463   $283,592   $271,313
Cost of sales (including
 buying, distribution and
 occupancy costs)             99,869     97,512    202,886    193,481


Gross profit                  38,261     36,951     80,706     77,832
Selling, general and
 administrative expenses      34,897     34,309     69,662     66,896


Operating income               3,364      2,642     11,044     10,936
Interest expense                 178        176        371        342


Income before income taxes     3,186      2,466     10,673     10,594
Income tax expense             1,242        925      4,162      3,973


Net income                    $1,944     $1,541     $6,511     $6,621


Net income per share:
   Basic                        $.15       $.12       $.51       $.52

   Diluted                      $.15       $.12       $.50       $.51