Shoe Carnival, Inc. had a solid performance for the fiscal second quarter ended August 3 as total net sales performance for the period exceeded the company’s expectation, with double-digit growth in Shoe Station, continued strengthening trends in Shoe Carnival and increases in e-commerce. Sales from the February 2024 acquisition of Rogan Shoes, Incorporated were said to be in line with the company’s expectation for the quarter and continue to be in line with the company’s full year sales expectation.

Consolidated net sales in second quarter were $332.7 million, a 12.9 percent increase compared to second quarter 2023.

Comparable store sales for the thirteen-week period ended August 3, 2024, declined 2.1 percent compared to the thirteen-week period ended August 5, 2023, reflecting positive momentum sequentially versus the 2024 first quarter and demonstrating flat comp sales results during June versus the corresponding fiscal month in the prior year.

Gross profit margin increased 30 basis points to 36.1 percent of net sales in the second quarter, said to be primarily on leverage in buying, distribution and occupancy on the higher sales. The company said second quarter 2024 marked the 14th consecutive quarter the company’s gross profit margin exceeded 35 percent.

As a percent of net sales, SG&A expenses in the quarter were 27.1 percent as compared to 27.4 percent in second quarter 2023, reflecting 30 basis points of leverage on the higher sales. Second quarter 2024 SG&A included higher expenses primarily related to the addition of Rogan’s.

Second quarter 2024 operating income totaled $30.1 million and increased 22.0 percent year-over-year versus, reportedly driven by higher net sales combined with gross profit margin expansion. Operating income in the quarter included $0.4 million in expenses related to the Rogan’s acquisition, of which $0.3 million were in cost of sales and $0.1 million were in SG&A.

Second quarter 2024 net income was $22.6 million, or 82 cents per diluted share, compared to second quarter 2023 net income of $19.4 million, or 71 cents per diluted share.

EPS growth in second quarter 2024 compared to the prior-year quarter was driven by the net sales performance and higher gross profit margin. On an adjusted basis, excluding the $0.4 million of expenses in the quarter related to the acquisition of Rogan’s, second quarter Adjusted EPS was 83 cents per share.

Merchandise Inventory
Second quarter 2024 inventory totaled $425.5 million, an increase of approximately $16.1 million versus second quarter 2023. The increase reflected the impacts of Rogan’s inventory acquired in February 2024, partially offset by continued inventory efficiencies in Shoe Carnival and Shoe Station as part of the company’s on-going inventory optimization improvement plan.

Consistent with previous guidance, Fiscal 2024 year-end inventory dollars are expected to be lower by approximately $20 million, or 5 percent, versus Fiscal 2023 year-end, excluding the impacts of the Rogan’s acquisition.

Store Count and Planned Store Growth
As of September 5, 2024, the company operated 430 stores, with 368 Shoe Carnival stores, 34 Shoe Station stores and the 28 Rogan’s locations acquired in February 2024.

The company has a strategic growth roadmap in place to surpass 500 stores in 2028, inclusive of organic growth and strategic M&A activity.

Share Repurchase Program
As of September 5, 2024, the company has $50 million available for future repurchases under its share repurchase program. During second quarter 2024, the Company did not repurchase any shares.

Capital Management and Cash Flow
The 2023 fiscal year end marked the 19th consecutive year the company ended a year with no debt, and through second quarter 2024, the company continued funding its operations and growth investments from operating cash flow and without debt.

Operating cash flow for year-to-date 2024 totaled $40.7 million compared to $22.4 million in prior year.

At the end of second quarter 2024, the company had approximately $84.5 million of cash, cash equivalents and marketable securities, an increase of $37.7 million compared to prior year.

Third Quarter 2024 Update
Sales accelerated during the peak Back-to-School season and continued through the month of August. The company achieved low-single digit comparable store sales growth for Fiscal August 2024, driven by growth of the Children’s and Athletics categories.

“Customer engagement continued to exceed our expectations and sales momentum accelerated rapidly during our most important shopping event of the year, the Back-to-School season. We achieved a net sales record this quarter, surpassing all previous second quarter sales in our company’s history. Gross profit margin expanded versus prior year, we gained significant market share, and we delivered earnings above our guidance in the quarter,” said Mark Worden, president and CEO, Shoe Carnival, Inc.

The company currently expects third quarter 2024 net sales to be approximately $320 million. This expectation includes the impact of the retail calendar shift, which resulted in approximately $20 million in net sales moving out of third quarter 2024 and into second quarter 2024 as compared to prior year.

The company currently expects GAAP EPS to be approximately $0.70 in third quarter 2024, with an income tax rate of approximately 25 percent.

Fiscal 2024 Outlook
Based on year-to-date results and the comparable store sales growth achieved during Back-to-School, the company is increasing guidance ranges as follows:

  • Net Sales: Increased range to $1.23 billion to $1.25 billion, representing growth of 5 percent to 6 percent versus Fiscal 2023. The prior guidance range was $1.21 billion to $1.25 billion.
  • Comparable Store Sales: Increased range to down 1.5 percent to up 1 percent versus Fiscal 2023 with expected growth of flat to up 5 percent for combined Q3 and Q4 of Fiscal 2024 compared to prior year. Prior guidance ranged down 3 percent to up 1 percent.
  • GAAP EPS: Increased range to $2.55 to $2.70 versus prior guidance range $2.50 to $2.70 per share.
  • Non-GAAP EPS (Adjusted EPS): Increased range to $2.60 to $2.75 per share versus prior guidance range of $2.55 to $2.75 per share.

The company noted in a media release that its Fiscal 2024 is a 52-week year and compares to a 53-week year in Fiscal 2023 and, combined with the impact of the retail calendar shift versus prior year, results in the loss of approximately $20 million in net sales in fourth quarter 2024 compared to fourth quarter 2023 with an estimated negative impact of approximately 10 cents on EPS.

Image courtesy Shoe Carnival