Shoe Carnival’s Q2 Profits Sink 34 Percent

Sales increased 0.8 percent to $166.7 million compared to $165.4 million for the second quarter of fiscal 2010. Comparable store sales decreased 1.1 percent. In the second quarter of fiscal 2010, comparable store sales increased 8.3 percent.

The gross profit margin for the second quarter of fiscal 2011 was 27.8 percent compared to 28.3 percent for the second quarter of fiscal 2010. The merchandise margin remained unchanged. Buying, distribution and occupancy costs increased 0.5 percent as a percentage of sales.

Selling, general and administrative expenses for the second quarter increased $1.5 million to $42.3 million. As a percentage of sales, these expenses increased to 25.3 percent compared to 24.7 percent in the second quarter of last year.

Speaking on the results, Mark Lemond, president and chief executive officer, said, “Our performance for the quarter fell short of our expectations, primarily as a result of a decline in customer traffic at our stores. We believe this was due, in part, to inclement weather conditions in many of our markets early and late in the quarter. We were also up against record setting second quarter results from last year, including an 8.3 percent comparable store sales increase that was driven by higher priced toning footwear. Currently, as we progress through the all-important back-to-school season, customer traffic trends have improved with comparable store sales increasing 6 percent month-to-date. We are optimistic that when consumers have a need to buy, like back-to-school, they will shop Shoe Carnival for the right assortment of value-priced family footwear. As a result, we anticipate third quarter comparable sales to increase in the range of 3.4 to 4.4 percent. This is on top of a comparable store sales increase of 7.2 percent in the third quarter last year.”

Lemond concluded, “I am very excited about the upcoming launch of our e-commerce site. We have incorporated the excitement and spontaneity of our stores into our new website, along with the great selection and value pricing we have built our reputation on. This new platform will also offer Shoe Carnival a tremendous opportunity for national brand exposure and long-term sales growth.”

Net sales during the first six months of fiscal 2011 increased $10.2 million to $365.1 million as compared to the same period last year. Comparable store sales increased 1.3 percent. Net earnings for the first half of 2011 were $12.6 million, or 94 cents per diluted share, compared to net earnings of $13.4 million, or $1.04 per diluted share, in the first half of last year. The gross profit margin for the first six months of 2011 was 29.6 percent compared to 29.9 percent last year. Selling, general and administrative expenses, as a percentage of sales, were 24.0 percent for the first six months of both periods.

Third Quarter Earnings Outlook

The company expects third quarter net sales to be in the range of $217 to $219 million with comparable store sales to increase in the range of 3.4 to 4.4 percent. Earnings per diluted share in the third quarter of fiscal 2011 are expected to be in the range of $0.77 to $0.81.

Store Growth

The company expects to open 17 new stores and close four stores in fiscal 2011. Store openings and closings by quarter are as follows:

                               New Stores    Store Closings
                               ———-    ————–
           1st Quarter 2011         4               0
           2nd Quarter 2011         5               2
           3rd Quarter 2011         7               1
           4th Quarter 2011         1               1
                               ———-    ————–
           Fiscal 2011             17               4
        
The five stores opened during the second quarter included locations in: