Shoe Carnival Inc. reported earnings vaulted 114 percent as margins improved and same-store sales ran up 6.4 percent.

“Our exceptional results for fiscal year 2020 were achieved thanks to the resiliency and dedication of the Shoe Carnival team, the unwavering support of our loyal customers, and our ongoing partnership with vendors. Our unique concept, operational excellence initiatives, and strategic investments in our CRM and e-commerce capabilities were critical through this period of great uncertainty. I want to offer heartfelt gratitude to our team members and vendors for their tremendous efforts and to our customers for their loyalty and dedication to Shoe Carnival,” commented Cliff Sifford, Shoe Carnival’s vice chairman and chief executive officer. “With consumer shopping habits upended by the pandemic, our team quickly shifted to meet customer needs by exponentially growing our e-commerce business and re-opening our stores safely by early June. Our multi-year investment in a world-class CRM platform played a significant role in our success during the year, driving increased sales and margins through segmented, personalized marketing.”

Sifford continued, “As we enter 2021, we remain financially strong and will leverage the invaluable knowledge we have gained to navigate through a changing dynamic. To date, our fiscal first quarter 2021 results are shaping up to show continued momentum and are on track for record first-quarter sales and earnings. We remain focused on maintaining our financial flexibility and expanding market share while placing an added emphasis on our merchandising strategy and in-store experience. Also, we will continue to enhance our e-commerce capabilities, delivering growth well ahead of our previous expectations. With so much great work being done, I am looking forward to another strong year for the Shoe Carnival team.”

Fourth Quarter Financial Results
The company reported net sales of $253.9 million for the fourth quarter of fiscal 2020, a 5.8 percent increase compared to net sales of $239.9 million for the fourth quarter of fiscal 2019. Comparable store sales increased 6.4 percent for the fourth quarter of fiscal 2020. The sales increase during the fourth quarter correlated with the issuance of government stimulus toward the end of the calendar year 2020.

The fourth quarter of fiscal 2020 was $7.4 million, or $0.52 per diluted share. For the fourth quarter of fiscal 2019, the company reported a net income of $3.5 million, or $0.24 per diluted share.

Gross profit margin for the fourth quarter of fiscal 2020 increased to 30.8 percent compared to 29.1 percent in the fourth quarter of fiscal 2019. Merchandise margin increased 1.6 percent and buying, distribution and occupancy expenses decreased 0.1 percent as a percentage of net sales compared to the fourth quarter of fiscal 2019. The increase in merchandise margin was primarily due to lower promotional activity during the quarter but was partially offset by higher shipping costs associated with the rise in e-commerce sales.

Selling, general and administrative expenses for the fourth quarter increased $2.5 million to $67.6 million compared to the fourth quarter of fiscal 2019. The increase was primarily attributable to costs supporting increased e-commerce sales. As a percentage of net sales, these expenses were leveraged to 26.6 percent compared to 27.1 percent in the fourth quarter of fiscal 2019.

Fiscal Year 2020 Financial Results
Net sales during fiscal 2020 decreased $59.8 million to $976.8 million. This included a $106.3 million year-over-year decrease in first-quarter net sales resulting from the temporary closure of the company’s physical stores due to the global pandemic, followed by a cumulative increase in sales in the remainder of the fiscal year. E-commerce sales increased 175 percent compared to fiscal 2019 and represented approximately 19 percent of net sales in fiscal 2020. Overall, comparable store sales declined 5.3 percent in fiscal 2020, comprised of a 42.3 percent decline in the first quarter, followed by a 6.9 percent cumulative increase over the remainder of the fiscal year.

Net income for fiscal 2020 was $16.0 million, or $1.12 per diluted share, compared to net income of $42.9 million, or $2.92 per diluted share, in fiscal 2019. Included in fiscal 2019 earnings was a tax benefit in connection with the vesting of equity-based compensation of approximately $1.9 million, or $0.13 per diluted share.

Gross profit margin for fiscal 2020 was 28.7 percent compared to 30.1 percent in fiscal 2019. Merchandise margin decreased 0.6 percent and buying, distribution and occupancy expenses increased 0.8 percent as a percentage of net sales compared to fiscal 2019. The decrease in merchandise margin was primarily due to increased shipping costs associated with the higher level of e-commerce sales. The decrease was partially offset by being less promotional throughout fiscal 2020. The increase in buying, distribution and occupancy costs as a percentage of sales were primarily due to increased distribution costs resulting from recent investments at the company’s distribution center and the deleveraging effect of lower sales.

Selling, general and administrative expenses for fiscal 2020 increased $0.5 million to $258.1 million. As a percentage of net sales, these expenses deleveraged to 26.5 percent compared to 24.9 percent in fiscal 2019.

Store Openings and Closings
The company opened four stores and closed 13 stores during fiscal 2020 compared to one store opening and six store closings in fiscal 2019.

Share Repurchase Program
Due to the volatility this year, no shares were repurchased in fiscal 2020. As of January 30, 2021, $50.0 million was available for future repurchases under the new share repurchase program. The company plans to resume the repurchase of shares under the repurchase program in fiscal 2021 under the assumption that general economic conditions will stabilize and the pandemic will have significantly less impact on the company’s performance and operations.

Fiscal 2021 Earnings Outlook
Given the continued uncertainty surrounding COVID-19 and its impact on consumer spending behaviors and recent supply chain disruptions, the company will not be introducing annual guidance at this time. Instead, the company is offering an initial view of its first quarter of fiscal 2021.

Based on fiscal 2021 first quarter-to-date results, the company currently anticipates record first-quarter sales and earnings, with sales anticipated to be at least $273 million and diluted net income per share of at least $1.40. In the year-ago period, sales were $147.5 million, a 41.9 percent decrease due to store closures tied to the pandemic’s emergence. The net loss in the year-ago period was $16.2 million, or $1.16 per share.

Photo courtesy Shoe Carnival