Shoe Carnival Inc. again raised its guidance for the year after reporting third-quarter results that came in well above Wall Street targets. Same-store sales in the quarter jumped 30 percent.

Third Quarter Highlights

  • Record quarterly net income of $46.8 million and record diluted net income per share of $1.64;
  • Record quarterly net sales of $356.3 million and quarterly comparable-store sales increase of 30.1 percent;
  • Record quarterly gross profit of $144.1 million and quarterly gross profit margin of 40.4 percent;
  • Omnichannel growth model continues to gain traction as e-commerce comparable sales increased 12.5 percent compared to the prior-year period;
  • Shoe Perks customer loyalty program membership increased over 10 percent compared to the prior year with a total membership of over 28.5 million; and
  • Cash, cash equivalents, and investments were $191.2 million with no outstanding debt as of October 30, 2021.

EPS of $1.64 was well above Wall Street’s consensus estimate of $1.15. Sales of $356.3 million far exceeded Wall Street’s consensus estimate of  $314.7 million.

Mark Worden, Shoe Carnival’s President and CEO said, “This was by every measure that matters, our best quarter, of our best year, in our 43-year history. We achieved our highest quarterly earnings ever. Net income per share and operating income were both three times higher than the results of any prior third quarter. Store traffic was up over 40 percent and all of our comparable stores generated positive cash flow year to date. We are thankful to our millions of customers and over 5,000 team members for once again making us a Billion-Dollar Brand, as we aim to become a multibillion-dollar retailer in the years ahead.”

Third Quarter Financial Results
The company reported record net sales of $356.3 million for the third quarter of fiscal 2021, a 29.8 percent increase compared to net sales of $274.6 million for the third quarter of fiscal 2020. The increase resulted from continued broad-based demand for the company’s merchandise, with every major category increasing compared to the prior-year quarter. The continued easing of COVID-19 restrictions and its customer base returning to a more normal lifestyle, including going back to work and fully back to in-person learning, contributed to the increased demand.

Gross profit margin for the third quarter of fiscal 2021 increased 8.4 percentage points to 40.4 percent compared to 32.0 percent in the prior year. Merchandise margin increased 6.7 percentage points as a result of the high demand and less promotional activity compared to the third quarter of fiscal 2020. Buying, distribution and occupancy expenses declined 1.7 percentage points compared to the third quarter of fiscal 2020 due to the leveraging effect of higher sales, despite higher supply chain expense.

Selling, general and administrative expenses for the third quarter of fiscal 2021 increased $14.0 million to $81.6 million. Nearly half of the increase was due to increased advertising expense, with the remaining increase primarily attributable to store-level wages, including incentive compensation. As a percentage of net sales, these expenses decreased 1.8 percentage points to 22.9 percent due to the leveraging effect of higher sales.

Net income for the third quarter of fiscal 2021 was a record high at $46.8 million, or $1.64 per diluted share. For the third quarter of fiscal 2020, the company reported net income of $14.7 million, or $0.51 per diluted share. When it reported second-quarter results, the retailer said it expected diluted net income per share in the range of $1.10 to $1.15 and net sales in the range of $307 million to $315 million for the third quarter.

Nine Month Financial Results
Net sales for the first nine months of fiscal 2021 were in excess of one billion dollars at $1,017.0 million, compared to $722.9 million in the first nine months of fiscal 2020. Comparable store sales increased 41.6 percent for the first nine months of fiscal 2021.

The gross profit margin for the first nine months of fiscal 2021 was 40.3 percent compared to 27.9 percent in the same period last year. Selling, general and administrative expenses for the first nine months increased $39.7 million to $230.2 million. As a percentage of net sales, these expenses decreased to 22.6 percent compared to 26.3 percent in the first nine months of fiscal 2020.

Net income for the first nine months of fiscal 2021 was $134.3 million, or $4.69 per diluted share, compared to net income of $8.5 million, or $0.30 per diluted share, for the first nine months of fiscal 2020. The $4.69 of diluted net income per share earned through the first nine months of fiscal 2021 exceeded the diluted net income per share earned during the last five fiscal years combined.

Fiscal 2021 Outlook
Based on continued strength in the underlying business, the company again raised its outlook for full-year fiscal 2021 and currently anticipates diluted net income per share in the range of $5.00 to $5.10 and net sales in the range of $1.285 billion to $1.290 billion. When it reported second-quarter results, Shoe Carnival projected EPS in the range of $4.35 to $4.50 and net sales in the range of $1.21 billion to $1.23 billion.

CEO Succession and Board of Director Composition
As previously announced, effective September 30, 2021, Worden was appointed the company’s president and CEO and to the Board of Directors. Effective September 16, 2021, the company also appointed Diane Randolph, former chief information officer of Ulta Beauty, Inc., to its Board of Directors. Following the appointments of Worden and Randolph, the Board is composed of eight directors, and five are independent.

Store Updates
For the first nine months of fiscal 2021, the company has opened one store and closed seven stores. The company expects to close three additional stores during the remainder of fiscal 2021 compared to a total of four store openings and 13 store closings in fiscal 2020. With all comparable stores’ cash flow positive year to date, the company expects to move to net store openings as it enters 2022.

The company is currently in the process of modernizing its stores and plans to complete approximately 100 stores by the spring of 2022. The company has accelerated its overall goal and now expects to modernize 90 percent of its store fleet by 2025.

Share Repurchase Program
In the third quarter of fiscal 2021, the company repurchased 91,594 shares of common stock at a total cost of $3.2 million. The company has repurchased 208,662 shares of common stock in the first nine months of fiscal 2021 at a total cost of $7.1 million. As of October 30, 2021, the company had $42.9 million available for future repurchases under its share repurchase program. The company will continue to evaluate the repurchase of shares under the repurchase program during the remainder of fiscal 2021.

Photo courtesy Shoe Carnival