Shoe Carnival Sees Shift in Categories and a Later BTS Season Hurt Athletics in Q2…

Shoe Carnival was the latest retailer to report a slow start to the back-to-school selling season, a trend that has clearly impacted the sale of athletic footwear for the later part of the retail second quarter and the early part of the third quarter. SCVL said the impact was felt less in their southern tier stores, where schools have already opened. The other impact on the Carnival athletic footwear business is the move to low-profile, Euro Sport, or Sport Fusion footwear that they put in their young men’s and junior’s category.

That move, along with the growth of the women’s dress business and strength in casual and fashion urban looks, helped push the women’s non-athletic business up to 26% of total sales in the second quarter compared to 23.5% in the year-ago period, thanks to a double-digit comp gain in the business for the period. Casual sandals continued to be soft for the quarter, posting a mid-single-digit decline for the period. The women’s non-athletic business is up in mid-singles through the August month-to-date period.

The trend to buy-now, wear-now purchasing has pushed the selling season back into late August and early September for most retailers and Shoe Carnival experienced the same shift as positive comp performance dwindled toward the end of the period and then picked up again as August progressed. May comps were up 7.1% and June was up 6.7%, but July comped down 4.8%, which SCVL said was due entirely to a 14% comp sales drop in the last week of the month.

Mark Lemond, company president and CEO, said the business comped negative in the first two weeks of August, but the third week was “almost double-digit positive.” Sales in the southern tier were said to be “very strong” and exceeding expectations. Lemond said that they could exceed their current Q3 guidance if the northern stores follow a similar pattern.

Men’s non-athletic saw mid-single-digit growth for Q2, with double-digit gains in young men’s and the fashion urban business.

Cliff Sifford, Carnival’s EVP/GMM, said the low-profile look “continues to build steam” as the Midwest consumer gets used to the look. He said there may be some apprehension on the part of the consumer when it comes to the category, but sees them making purchases once they get to school and see how others are dressing with the low-profile silhouettes. He cited the move to skinnier denim looks as one catalyst for growth here.

Sifford sees the same influence responsible for the shift to technical running, skate, and women’s athletic mules. While adult athletic sales were down in low-singles for the quarter, Sifford said the decline came at the end of July and was centered in weakness in basketball, fashion and basic classics, and men’s cross-training.

He emphasized repeatedly that the decline in the business was not an athletic issue, rather a shift from heavier looks to running and other sleaker, more low-profile athletic-inspired looks. The fact that they do not include some of that product in athletic also hurt the numbers there. Management said they will start to see their athletic business pick up once they increase inventories in the technical running category.

Carnival is seeing some improvement in the athletic business as they move through August and are now positive for the period, but Sifford said he didn’t expect to see positive men’s athletic comps for Q3 due to the basketball and cross-training issue.

Athletic was 51% of the total business in Q2, but is expected to be around 50% for the balance of the year and into next year. However, Sifford also stressed that the higher average selling price on the running product is higher than both the low-profile goods that are picking up and the athletic categories that are slowing down. They are focused on $60 to $80 product from Nike, adidas, and Asics.

The children’s business, which includes athletic, was down in low-singles for the quarter, hurt by a double-digit decrease in children’s athletic in July.

Inventories on a per-store basis were up about 1.7% at quarter-end, which Lemond said was due entirely to goods in transit at the end of July.

SCVL plans to open a total of 15 stores for the year, with seven of those opened in Q2. They will also close eight stores for the year, with two closing in Q2 and another three closing in the third period.

Third quarter EPS is seen in the 43 cents to 45 cents range on a comp sales gain in the 1% to 3% range.

>>> Not surprised on the move away from basketball and cross-training… Skate is starting to see some lower profile looks as well…