Shoe Carnival’s Q4 Net Slides on 3 Percent Comp Decline

The gross profit margin for the fourth quarter of fiscal 2011 decreased to 28.3 percent from 30.0 percent in the fourth quarter of fiscal 2010. The merchandise margin decreased 1.5 percent, while buying, distribution and occupancy costs increased 0.2 percent, as a percentage of sales.

Selling, general and administrative expenses for the fourth quarter decreased $463,000 to $46.6 million. As a percentage of sales, these expenses decreased 0.6 percent as compared to the fourth quarter of fiscal 2010.

Speaking on the results, Mark Lemond, president and chief executive officer, said, “Our fourth quarter sales results were in line with our revised guidance of $181 to $182 million issued early in January. However, we exceeded the high end of our earnings guidance of $0.23 per share by $0.01. Consumer demand for fall footwear, particularly boots, declined significantly as a result of the unseasonably warm weather. Consequently, heavy promotional activity was required during the fourth quarter to effectively sell through this inventory, thus reducing our sales and merchandise margin. The decline in comparable store sales of three percent and the 150 basis point decline in the merchandise margin were attributed to the sales and margin decline in the boot category.”

Fiscal 2011 Results

Net sales increased 3.2 percent to $762.5 million for fiscal 2011, compared to net sales of $739.2 million for fiscal 2010. Comparable store sales increased 0.7 percent in fiscal 2011. Net earnings for fiscal 2011 were $26.4 million, or $1.97 per diluted share, compared to net earnings of $26.8 million, or $2.05 per diluted share in the prior year. The gross profit margin for fiscal 2011 decreased to 29.5 percent from 30.0 percent last year. Selling, general and administrative expenses, as a percentage of sales, were 24.0 percent for fiscal 2011, as compared to 24.3 percent for the prior year.

Lemond continued, “We experienced significant fluctuations in consumer demand during 2011, as compared to 2010 when strong fashion trends aided us in setting record-breaking sales and earnings results. While toning footwear and boots were key drivers of our sales for 2010, sales of this footwear declined substantially in 2011. Toning footwear experienced a yearlong decline in popularity while the sale of fall product never materialized with the same strength as last year. However, I am very pleased with our ability to manage our inventories and control our costs despite the challenges presented by these changes in consumer demand. We achieved $1.97 in earnings per diluted share for 2011, which is second only to the record $2.05 in earnings per diluted share achieved last year.”

Lemond concluded, “We are excited about our growth opportunities as we move into 2012, despite certain continued economic headwinds. We expect to open approximately 30 new stores with over one-third of these stores located in two new major markets – the Dallas/Fort Worth Metroplex and Puerto Rico. These new major markets, coupled with our new e-commerce site launched in the third quarter of 2011, offer Shoe Carnival an opportunity to realize significant additional exposure for our brand.”

First Quarter Fiscal 2012 EPS Outlook

Earnings per diluted share in the first quarter of fiscal 2012 are expected to be in the range of 75 cents to 78 cents. This increase assumes net sales in the range of $219 to $222 million with a comparable store sales increase of 5.5 to 7.0 percent. In the first quarter of fiscal 2011, comparable store sales increased 3.4 percent and earnings per diluted share were 75 cents a share. Included in the company’s first quarter of 2012 earnings guidance is an increase in pre-opening costs, including pre-opening rent expense, of $1.3 million, or 6 cents per diluted share. This is due to the acceleration of store openings in the first quarter of fiscal 2012 (13 store openings compared to four in the first quarter of last year).

Store Growth

During fiscal 2011, the company opened 17 new stores and closed four stores to end the year at 327 stores. One store was opened in the fourth quarter and one was closed. Total retail selling space increased to 3.6 million square feet from 3.4 million square feet at the end of fiscal 2010.