Shoe Carnival reported fourth-quarter earnings more than doubled as revenues improved 23.4 percent to $313.4 million. Earnings reached $20.6 million, or 72 cents a share, against $7.4 million, or 26 cents, a year ago. The footwear off-pricer expects fiscal year 2022 net sales to increase 4 to 7 percent on top of the 36.2 percent net sales growth achieved during fiscal 2021.

For the year, sales reached $1.33 billion against $976.8 million, a gain of 36.2 percent. Net income came to $154.9 million, or $5.53 a share, against earnings of $16.0 million, or 56 cents, a year ago.

“Our outstanding team members delivered double-digit sales growth and triple-digit EPS growth during every quarter of 2021, resulting in the best year in Shoe Carnival’s 43-year history. Fourth-quarter momentum was very strong as we closed out the year, with store traffic up 18 percent, net sales up 23 percent, and EPS growth of 177 percent versus the prior year,” said Mark Worden, president and CEO.

“Our strategic investments, and recent acquisition of a second retail banner, have us positioned very well for continued sales growth in 2022, and for rapid store expansion in the years ahead. We now expect to sustain operating income and EPS levels that are more than double the pre-pandemic record levels set in fiscal 2019.”

Fiscal 2022 Earnings Outlook

  • Net sales are expected to increase 4 to 7 percent compared to the prior year, on top of the 36.2 percent increase achieved during fiscal 2021;
  • Operating income is expected to be in the range of $142 million to $154 million, compared to the pre-pandemic record of $54.2 million in fiscal 2019;
  • EPS is expected to be in the range of $3.80 to $4.10, compared to $1.46 in fiscal 2019;
  • Return on equity is expected to be between 24 percent and 26 percent for shareholders; and
  • Shoe Carnival said it aims to add 10 plus stores in fiscal 2022 with accelerated growth to 20 plus additions beginning in fiscal 2023.

Operating Results
Fourth-quarter net sales grew 23.4 percent to $313.4 million, setting a new fourth-quarter record. Comparable store traffic increased 18 percent, driving comparable-store sales growth of 17.7 percent on top of a 6.4 percent increase in fiscal 2020.

Fourth-quarter gross profit margin was 37.3 percent in 2021 compared to 30.8 percent in 2020 and includes a $1.1 million one-time Shoe Station acquisition-related charge. Merchandise margin increased 5.1 percentage points, driven by fewer margin-dilutive promotions and higher average selling prices.

As a percentage of net sales, selling, general and administrative expenses (SG&A) increased 1.8 percentage points to 28.4 percent due to one-time acquisition-related expenses of $3.2 million and increased investment in advertising and store-level wages.

Fourth-quarter net income hit a record high at $20.6 million, or $0.72 per diluted share, compared to $7.4 million, or $0.26 per diluted share in the fourth quarter of 2020. Excluding the acquisition-related charges above, adjusted net income and diluted EPS in the fourth quarter of fiscal 2021 were $23.8 million and $0.83, respectively.

Full fiscal year 2021 net sales grew $353.6 million to $1.33 billion, the highest annual net sales in the company’s history. Comparable store sales increased 35.3 percent in fiscal 2021, rebounding from a comparable store sales decline of 5.3 percent in fiscal 2020 caused by the pandemic shutdown in the first quarter of 2020.

Gross profit margin for fiscal 2021 was 39.6 percent compared to 28.7 percent in fiscal 2020. SG&A expenses increased from $61.0 million to $319.1 million. As a percentage of net sales, SG&A expenses decreased to 24.0 percent compared to 26.5 percent in fiscal 2020.

Full fiscal year 2021 net income was a record $154.9 million, or $5.42 per diluted share. This compares to $16.0 million, or $0.56 per diluted share, in fiscal 2020 and $42.9 million, or $1.46 per diluted share, in fiscal 2019, which was the previous record. Excluding the acquisition-related charges incurred during the fourth quarter, adjusted net income and diluted EPS in fiscal 2021 were $158.1 million and $5.53, respectively.

Store Growth Update
During fiscal 2021, the company completed a multi-year store productivity improvement program. The result of this initiative is that all ongoing stores generated positive cash flow during fiscal 2021. The full fleet productivity is strong, generating sales of over $300 per square foot, net cash provided by operating activities of $148 million and free cash flow of $117 million. As such, the company has completed the program and expects limited, if any, store closings for the next several years.

Based on customer response to its store modernization program, the company has accelerated capital investments, and now aims to complete the rollout of the program across the fleet by the end of fiscal 2024. Approximately 20 percent of the store remodels were completed by the end of fiscal 2021, and the company expects 50 percent of the store remodels to be completed by the end of fiscal 2022.

In December, the company acquired substantially all of the assets of Shoe Station, Inc., a Southeast retailer of footwear and accessories. As of March 16, 2022, the company has completed back-office integrations approximately nine months ahead of schedule and expects to transition into store growth later in 2022.

The company’s strategic plan is to accelerate store count expansion during each of the next three years and aims to add 10-plus new stores during fiscal 2022, over 20 new stores in fiscal 2023 and over 25 new stores annually by fiscal 2024.

Photo courtesy Shoe Carnival