Shoe Carnival, Inc. reported that net earnings for the fourth quarter ended January 31, 2004 were $113,000 compared with net earnings of $1.7 million in the fourth quarter last year. Diluted earnings per share were $0.01 per share compared with $0.13 per share last year.

Net sales for the fourth quarter increased 4.9 percent to $134.2 million from $128.0 million last year. Comparable store sales decreased 4.9 percent for the 13-week period.

The gross profit margin for the fourth quarter of 2003 decreased to 26.4 percent from 26.9 percent in the fourth quarter of 2002 due to the deleveraging effect of lower same store sales on buying, distribution and occupancy costs. Selling, general and administrative expenses for the fourth quarter, as a percentage of sales, increased to 26.0 percent from 24.7 percent in last year's fourth quarter primarily due to lower same store sales.

Due to an increase in state income taxes, the effective income tax rate for the full year increased to 38 percent and a year-to-date adjustment was included in the fourth quarter income taxes. The effective income tax rate for fourth quarter, including the year-to-date adjustment, was 66.5 percent. The effective income tax rate for last year's fourth quarter and full year was 37.5 percent.

Net earnings for the 52-week 2003 fiscal year were $12.2 million, or $0.94 per diluted share, compared with $15.8 million, or $1.22 per diluted share, for the 2002 fiscal year.

For the 52-week 2003 fiscal year, net sales increased 7.4 percent to $557.9 million from sales of $519.7 million for fiscal 2002. Comparable store sales decreased 3.0 percent for the 52-week period.

Commenting on the results, Mark Lemond, president and chief executive officer said, “We were disappointed with our fourth quarter and full year sales and earnings results during 2003. Our operating results were negatively impacted by weak traffic trends and high levels of promotional activity in the mid-tier retail sector.”

“We were pleased with our ability to control our inventory levels despite the lower than expected sales. We have kept a keen eye on our inventory levels during the past several quarters to better manage our markdown levels and will continue this operating philosophy for the foreseeable future. We remain committed to operating with lean inventory levels without sacrificing the overall shopping experience for our customers.”

“While we are hopeful for a stronger economy in 2004, we are not relying on macro economic improvements for improved results. During 2003, we challenged every aspect of our business and that process resulted in certain strategic initiatives that should enhance our performance. These initiatives are focused on improving our sales performance, particularly in newer markets, and increasing our gross profit margins while controlling our expenses. We intend to accomplish this by maintaining lean inventories, being less promotional, communicating more effectively with our target customer through our advertising, and focusing store growth in existing geographic areas.”

The Company opened 37 new stores in fiscal 2003 and closed 7 to end the year with 237 stores. Total gross retail selling square footage increased 14.6 percent to end the year at 2.75 million square feet.

Store growth in fiscal 2004 is expected to range from 20 to 25 stores, net of closings. Ten stores are expected to open in the first quarter.

2004 EPS Outlook

Earnings per diluted share in the first quarter of fiscal 2004 are expected to range from $0.43 to $0.47. This assumes an over all sales increase of between 12 and 13.5 percent and comparable store sales ranging from a decline of 1 percent to an increase of 1 percent. Earnings per diluted share for the first quarter of 2003 were $0.39.

For the full year of 2004 earnings per diluted share are expected to range from $1.10 to $1.20.

                          Shoe Carnival, Inc.
              Condensed Consolidated Statements of Income
                   (In thousands, except per share)

                      Thirteen     Thirteen    Fifty-two    Fifty-two
                     Weeks Ended Weeks Ended  Weeks Ended  Weeks Ended
                     January 31,  February 1, January 31,  February 1,
                         2004        2003        2004         2003
                     -----------  ----------- -----------  -----------

Net sales               $134,245     $127,986    $557,923     $519,699
Cost of sales
 (including buying,
  distribution and
  occupancy costs)        98,813       93,507     399,300      369,912
                     ----------- ------------ ----------- ------------

Gross profit              35,432       34,479     158,623      149,787
Selling, general and
 expenses                 34,881       31,648     138,178      123,658
                     ----------- ------------ ----------- ------------

Operating income             551        2,831      20,445       26,129
Interest expense             212          160         714          785
                     ----------- ------------ ----------- ------------

Income before income
 taxes                       339        2,671      19,731       25,344
Income tax expense           226        1,002       7,498        9,504
                     ----------- ------------ ----------- ------------

Net income              $    113     $  1,669    $ 12,233     $ 15,840
                     =========== ============ =========== ============

Net income per share:
   Basic                $    .01     $    .13    $    .96     $   1.26
                     =========== ============ =========== ============
   Diluted              $    .01     $    .13    $    .94     $   1.22