Fourth quarter earnings at Shoe Carnival Inc. fell 93% and comparable store sales declined 4.9% versus the year-ago quarter, but The Street appeared to like the company’s forward-looking strategy as they sent SCVL shares up 5.4% for the week to close at $16.64 Friday.

Carnival reported that Q4 net earnings were $113,000, or a penny a diluted share, compared with net earnings of $1.7 million, or 13 cents per diluted share, in the fourth quarter last year. Net sales for the quarter increased 4.9% to $134.2 million from $128.0 million last year.

Gross margin declined 50 basis points to 26.4% from 26.9% in the year-ago period. Management said that the Athletic categories outperformed the company as a whole for the quarter, posting a “low single-digit” comp store gain for the quarter.

Shoe Carnival saw continued strength in Basketball, Skate, and Retro product. The Walking category was said to have declined for SCVL and the industry as a whole due to the lack of exciting product.

Athletic sales made up 52% of total sales in Q4.
Management also said they continue to see “positive sales trends” within its Athletic departments.

The new strategy for the company includes fewer store-wide promotions in favor of a more focused approach to “markdowns on poor-performing and slow-moving products” in an attempt to become less dependent on BOGO’s that include all SKU’s.

The new strategy comes on the heels of a quarter and a year the retailer would just as soon leave behind as “traffic suffered throughout the year”, merchandise margins decreased in Q4, and new stores failed to live up to the performance of existing stores.

Initial year sales for new stores used to average sales at 85% of the existing average store sales. SCVL said that number has declined to about 75% to 80%, and said it was “still not a bad number”.

SCVL will also embark on a new advertising strategy that will see it focus resources on those markets with the greatest opportunity to improve the sales performance and reduce the spend in markets where the enjoy deep penetration and larger market share. Carnival will also move to more television advertising and reduce the amount of print and radio. Lastly, SCVL will focus a larger portion of its efforts in the key Easter, BTS and Holiday periods.

Carnival will also focus future store expansion to “existing large and small markets” within its current “geographic footprint”.

The company also sees some benefit from the closure of the Just for Feet stores since they overlap in 29 markets. Carnival president and CEO Mark Lemmond saw little impact form the GOB sales and said they had heard that the JFF stores were not “chock full of inventory” and “a lot of the inventory is not good inventory”.