Shoe Carnival's sales for the fourth quarter declined 9.4% to $156.9 million from $164.3 million last year, as comps decreased 8.3%. The family footwear chain lost $3.0 million, or 24 cents a share, in the period against earnings of $1.1 million, or 9 cents, a year earlier. Included in the fourth quarter of 2008 were store closing costs of 12 cents per share compared with 8 cents a share in the fourth quarter last year.
The gross profit margin for the fourth quarter of 2008 was 24.7% compared to 27.5% for the fourth quarter of 2007. The merchandise margin decreased 2.0% due to a more promotional holiday sales period and our aggressive clearance of seasonal product during the quarter. This clearance activity allowed us to reduce our per-store inventory levels at the end of the quarter by almost 10%, compared to the prior year. Buying, distribution and occupancy costs increased 0.8%, as a percentage of sales, due primarily to the deleveraging effect of lower sales.
Selling, general and administrative expenses for the fourth quarter were $43.6 million, which was flat with the prior year. As a percentage of sales, selling, general and administrative expenses increased to 27.8% from 26.5% in the fourth quarter of 2007, due to the deleveraging effect of lower sales. Store closing costs in the quarter were $2.4 million, of which, $1.9 million was a non-cash impairment charge to fixed assets. Included in last year's fourth quarter were $1.4 million in stores closing costs, including a non-cash impairment charge to fixed assets of $1.2 million.
Fiscal 2008 Results
Net sales were $647.6 million for fiscal 2008, compared to net sales of $658.7 million last year. Comparable store sales decreased 4.6% for the 52-week period.
Net earnings for fiscal 2008 were $5.3 million, or 43 cents per share, compared to net earnings of $12.8 million, or 97 cents, for fiscal 2007.
Mark Lemond, chief executive officer and president said, “Faced with a deteriorating economy, we continued to operate our business in a conservative fashion in the fourth quarter. Despite operating 13 more stores at the end of the quarter, we were able to keep operating expenses flat with last year. Additionally, our merchants and store managers did a commendable job of controlling inventories, which resulted in a year-over-year decline in per-store inventories of almost 10%.
“During the full fiscal year 2008, we were able to generate free cash flow of $13.9 million and end the year with $24.8 million in cash and equivalents, with no interest bearing debt.”
Lemond continued, “We expect the retail footwear environment will continue to be challenging, at least through the first half of fiscal 2009. As a result, we have planned our advertising, sales promotions and inventory strategies accordingly. Our inventory levels at year end leave us well positioned for both spring transition and market-place purchasing opportunities. Our priority for 2009, is to manage our business to increase market share, generate free cash flow and maintain our strong financial position.”
Store Growth
During fiscal 2008, 24 new stores were opened and 11 were closed to end the year at 304 stores. Two stores were opened in the fourth quarter and eight were closed. On a net basis, selling space increased 97,000 square feet during fiscal 2008 bringing total retail selling space to 3.3 million square feet.
Store openings and closings by quarter and for the year are as follows:
New Stores Stores Closed
1st Quarter 2008 2 0
2nd Quarter 2008 12 2
3rd Quarter 2008 8 1
4th Quarter 2008 2 8
Fiscal 2008 24 11
The stores that opened during the fourth quarter included locations in:
City Market/Total Stores in Market
Salt Lake City, UT Salt Lake City/3
Houston, TX Houston/10
In fiscal 2009, the company expects to open approximately 15 stores, 10 of which are expected to open in the first quarter. About ten stores are expected to close during the year.
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SHOE CARNIVAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share) | |||||||||||||||
| Thirteen | Thirteen | Fifty-two | Fifty-two | ||||||||||||
| Weeks Ended | Weeks Ended | Weeks Ended | Weeks Ended | ||||||||||||
January 31, 2009 | February 2, 2008 | January 31, 2009 | February 2, 2008 | ||||||||||||
| |||||||||||||||
| Net sales | $ | 156,910 | $ | 164,341 | $ | 647,572 | $ | 658,680 | |||||||
Cost of sales (including buying, | 118,125 | 119,091 | 473,244 | 472,831 | |||||||||||
| Gross profit | 38,785 | 45,250 | 174,328 | 185,849 | |||||||||||
Selling, general and administrative expenses | 43,580 | 43,647 | 165,953 | 166,717 | |||||||||||
| Operating (loss) income | (4,795 | ) | 1,603 | 8,375 | 19,132 | ||||||||||
| Interest income | (10 | ) | (79 | ) | (148 | ) | (690 | ) | |||||||
| Interest expense | 42 | 85 | 153 | 264 | |||||||||||
| (Loss) income before income taxes | (4,827 | ) | 1,597 | 8,370 | 19,558 | ||||||||||
| Income tax (benefit) expense | (1,778 | ) | 470 | 3,051 | 6,751 | ||||||||||
| Net (loss) income | $ | (3,049 | ) | $ | 1,127 | $ | 5,319 | $ | 12,807 | ||||||
| Net (loss) income per share: | |||||||||||||||
| Basic | $ | (0.24 | ) | ||||||||||||
