Shoe Carnival, Inc. net earnings for the 14-week fourth quarter increased 70.0% to $5.1 million compared with net earnings of $3.0 million in the 13-week fourth quarter ended January 28, 2006. Diluted EPS increased 68.2% to 37 cents per share compared with 22 cents per share last year. Net sales increased 8.3% to $177.2 million compared with $163.6 million last year. Sales of approximately $11.5 million were recorded in the extra week of Q4 2006. Comparable store sales for the 13-week period decreased 0.9%.
The gross profit margin for the fourth quarter of 2006 decreased to 28.1 percent compared to 28.6 percent for the fourth quarter of 2005. As a percentage of sales, the merchandise margin increased 0.3 percent and buying, distribution and occupancy costs increased 0.8 percent. The increase in buying, distribution and occupancy costs, as a percentage of sales, was due primarily to the incremental costs associated with the opening of a new distribution center during the fourth quarter of 2006.
Selling, general and administrative expenses for the fourth quarter, as a percentage of sales, decreased to 23.6 percent from 25.6 percent in the fourth quarter of 2005. This decrease resulted from lower incentive compensation, employee health care expense and store closing costs in addition to the leveraging effect of the sales generated in the extra week of the fourth quarter of 2006.
Operating income for the fourth quarter increased by 62.5 percent to $7.9 million from $4.9 million during the fourth quarter of 2005. Operating margin increased to 4.5 percent from 3.0 percent in the same period last year.
Net earnings for fiscal 2006 increased 26.5 percent to $23.8 million, or $1.73 per diluted share, compared with net income of $18.8 million, or $1.40 per diluted share, last year.
Net sales increased 4.0 percent to $681.7 million for the fiscal year compared with sales of $655.6 million last year. Comparable store sales for the 52-week period ended January 27, 2007 increased 1.5 percent.
Commenting on the results, Mark Lemond, chief executive officer and president said, “We achieved another record year in fiscal 2006, improving upon virtually every financial metric reported in fiscal 2005. Comparable store sales increased 1.5 percent in fiscal 2006 on top of the record breaking 6.9 percent increase in fiscal 2005. Higher gross profit margins and reduced administrative expenses resulted in increases of 27 percent in net earnings and 24 percent in earnings per diluted share.”
“We made significant progress in fiscal 2006 in two of our most important initiatives – enhancing the performance of our women's dress and casual merchandise and improving our new store sales productivity. In just two years, our women's non-athletic product has risen to 27 percent of our total sales from 23 percent in fiscal 2004. We are quickly approaching our goal of 28 to 30 percent of our total sales being generated by women's dress and casual merchandise.”
“Our new store performance also improved in fiscal 2006. Sales per square foot in the stores we opened in fiscal 2006 are trending approximately 90 percent of the chain's average sales per square foot. This ratio has significantly improved compared to the performance of stores opened over the prior few years.”
A number of infrastructure enhancements were initiated by the Company in fiscal 2006:
- New Distribution Center – Conversion to a 410,000 square foot distribution center was substantially completed during the fourth quarter of fiscal 2006. The Company estimates approximately $900,000 (or $0.04 per diluted share) of incremental costs were incurred in this conversion process.
- New Corporate Headquarters – Construction of a new, 60,000 square foot corporate headquarters commenced in June 2006 and the Company expects to occupy this leased facility in May 2007.
- Wide Area Network – A wide area network was implemented chain-wide in the fourth quarter of 2006. The WAN provides improved connectivity between the corporate headquarters, the new distribution center and individual stores.
- Markdown Optimization Software – The Company implemented Oracle's Retail Price Optimization Solution software during early fiscal 2006.
These key pieces of infrastructure will allow the Company to accelerate growth in fiscal 2007 and beyond. The Company expects to open 25 stores in fiscal 2007 and is currently planning a future store growth rate of 12 to 15 percent.
Mr. Lemond concluded by stating, “Focusing on fashion has resulted in record earnings for the past two years. In fiscal 2007, we will maintain that focus on fashion while we accelerate our store growth. These initiatives will be the key drivers of our future sales and earnings growth.”
Earnings per diluted share in the first quarter of fiscal 2007 are expected to range from $0.55 to $0.59. This assumes a total sales increase of between 4 and 6 percent and comparable store sales of between 1 and 3 percent. Included in the earnings guidance is an increase in distribution costs over the prior year first quarter of approximately $800,000, primarily for costs associated with the start-up of the new distribution center.
For the full year of fiscal 2007, earnings per diluted share are expected to range from $1.90 to $2.00.
During fiscal 2006, 14 new stores were opened and six were closed to end the year at 271 stores. Two stores were opened in the fourth quarter and one was closed. Total gross retail selling space increased 51,000 square feet on a net basis to end the fiscal year at 3.1 million square feet.
Store openings and closings by quarter and for the year are as follows:
New Stores Stores Closed
------------------------- --------------------
1st Quarter 2006 0 0
2nd Quarter 2006 4 2
3rd Quarter 2006 8 3
4th Quarter 2006 2 1
------------------------- --------------------
Fiscal 2006 14 6
The two stores opened during the fourth quarter included locations in:
City Market/Total Stores in Market
---------------------------------- -----------------------------------
Fort Myers, FL Fort Myers/1
Mercedes, TX Harlingen/4
SHOE CARNIVAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share)
Fourteen Thirteen Fifty-three Fifty-two
Weeks Ended Weeks Ended Weeks Ended Weeks Ended
February 3, January 28, February 3, January 28,
2007 2006 2007 2006
----------- ----------- ----------- -----------
Net sales $177,221 $163,570 $681,662 $655,638
Cost of sales
(including buying,
distribution and
occupancy costs) 127,475 116,853 482,888 465,942
----------- ----------- ----------- -----------
Gross profit 49,746 46,717 198,774 189,696
Selling, general and
administrative
expenses 41,814 41,836 161,144 158,860
----------- ----------- ----------- -----------
Operating income 7,932 4,881 37,630 30,836
Interest income (372) (117) (1,235) (170)
Interest expense 45 110 152 524
----------- ----------- ----------- -----------
Income before income
taxes 8,259 4,888 38,713 30,482
Income tax expense 3,133 1,873 14,949 11,692
----------- ----------- ----------- -----------
Net income $5,126 $3,015 $23,764 $18,790
----------- ----------- ----------- -----------
Net income per share:
Basic $0.38 $0.23 $1.78 $1.43
----------- ----------- ----------- -----------
Diluted $0.37 $0.22 $1.73 $1.40
----------- ----------- ----------- -----------
Average shares
outstanding:
Basic 13,469 13,246 13,373 13,128
----------- ----------- ----------- -----------
Diluted 13,833 13,586 13,744 13,457
----------- ----------- ----------- -----------
