Shoe Carnival, Inc. continued to see a tough retail climate in the third quarter, as they experienced declines in almost all categories except athletic and women’s flats.  Back-to-school was described as positive, but macroeconomic issues and the weather continue to play a large role in the health of the business.  Management said they started to see some signs of life from the middle income consumer, but are experiencing sharper downturns in traffic and sales from the ethnic community.

The retailer posted positive comp store sales during the back-to-school period, but business slowed in October and September until the last week and a half of the quarter when traffic picked up again. The gross margin decline was directly attributable to the deleveraging effect on buying, distribution, and occupancy costs. Merchandise margins improved by 50 basis points, much of it due to better management of inventories and markdowns.  Total inventories on a per store basis were down approximately 1.5% at quarter-end compared to the end of Q3 2006.  Adding new brands and product also helped as new programs from Nike and New Balance, and the addition of Etnies, led to higher margins.  SCVL added Heelys for the fourth quarter.

Store traffic was down about 6% for Q3, while stores that service the ethnic consumer saw traffic decline just under 10% for the period.

Management said all merchandise departments posted a decline in comp store sales except for the adult athletic department, which posted a small comp store increase.  They said they have started to see additional positive signs in the athletic business over the last few weeks, especially in the women's athletic business.

In women's non-athletic, the only area that showed positive performance was the casual category, with flats being the strongest.  All other categories trended down with the largest decreases coming from the junior and seasonal categories.  In men's non-athletic, SCVL saw “good sales” out of the traditional preppy categories of boat shoes and slip-ons, while the work category continued to perform well.  Boots and rugged casuals “did not perform” in either men’s or women’s.

In children's shoes, boy’s basketball and boy’s and girl’s fashion classics remained soft, as did boots.  They did see “nice increases” in girl’s athletic, low profile, skate and molded footwear.

Due to the back-to-school shifts in Florida and Texas, Carnival posted a small comp store increase for the quarter in adult athletics, driven primarily by growth in the skate classification for both men and women. Performance running and Chucks also were called out as performing well.  Classics product continued to trend down.