Reports Record Quarterly Net Sales
Reports Comparable Store Sales Increase of 12.6 Percent
Provides Business Update on COVID-19 and Back-to-School
Shoe Carnival, Inc. (Nasdaq: SCVL) (the “Company”), a leading
retailer of moderately priced footwear and accessories, today
reported results for the second quarter and six months ended August
1, 2020 and provided a business update on COVID-19.
Second Quarter Highlights
- Net sales were an all-time quarterly record $300.8 million
- Net income was $10.1 million, or $0.71 per diluted share
- All brick-and-mortar stores reopened by the end of the second
quarter after being closed on March 19, 2020 due to COVID-19
- Comparable store sales increased 12.6 percent
- E-commerce sales increased 332 percent
- During the quarter Shoe Perks customer loyalty membership
surpassed 25 million members
- As of August 1, 2020, cash and cash equivalents were $76.9
million and no cash borrowings were outstanding on the Company’s
$100 million line of credit
“The strength of our team was on full display during the second
fiscal quarter. Our customer-centric culture and exceptional
operational execution enabled us to swiftly and safely welcome our
loyal shoppers and new customers into our stores. At the same time,
our strategic investments in technology supported sustained
triple-digit growth in e-commerce sales. The positive response by
both our in-store and online customers led to record quarterly
revenues and comparable same store sales growth of 12.6 percent. We
also achieved an important milestone surpassing 25 million Shoe
Perks loyalty members,” commented Cliff Sifford, Shoe Carnival’s
Vice Chairman and Chief Executive Officer.
“The COVID pandemic has undoubtedly created significant
uncertainty across the U.S. which has shifted our typical
back-to-school season. Nearly all schools within the markets we
operate in have, at a minimum, delayed their start dates. Despite
this, we continue to see our customers shop Shoe Carnival for their
back-to-school needs. Given the shift in the back-to-school season,
we anticipate that the majority of the volume we typically see in
August will shift later into our third quarter extending the
back-to-school season through the end of October. As we look
forward, we remain focused on executing our long-term strategic
plan. Combined with our strong vendor partnerships and dedicated
team, this vision will further propel Shoe Carnival to be America’s
favorite family footwear retailer.”
Second Quarter Financial Results
The Company reported record net sales of $300.8 million for the
second quarter exceeding the previous record set in the third
quarter of fiscal 2017 by 4.6 percent. Comparable store sales
increased 12.6 percent. E-commerce sales increased 332 percent and
represented more than 20 percent of total sales in the second
quarter of fiscal 2020. Brick-and-mortar sales were adversely
impacted by COVID related closures early in the second quarter and
COVID related delays in back-to-school shopping late in the
quarter.
Gross profit margin for the second quarter of fiscal 2020
decreased to 27.5 percent compared to 30.6 percent in the second
quarter of fiscal 2019. Merchandise margin decreased 3.7 percent
and buying, distribution and occupancy expenses decreased 0.6
percent as a percentage of net sales compared to the second quarter
of fiscal 2019. The decrease in merchandise margin was primarily
due to higher shipping costs associated with e-commerce sales and
an increase in adult athletic sales, which typically carry lower
margins than non-athletic product. Of the $32.6 million increase in
net sales, $29.0 million was attributable to adult athletic sales.
The decrease in buying, distribution and occupancy costs as a
percentage of sales was primarily due to the leveraging effect of
higher sales.
Selling, general and administrative expenses for the second
quarter of fiscal 2020 increased $1.8 million to $68.2 million. As
a percentage of net sales, these expenses decreased to 22.7 percent
compared to 24.8 percent in the second quarter of fiscal 2019
primarily due to the leveraging effect of higher sales.
Net income for the second quarter of fiscal 2020 was $10.1
million, or $0.71 per diluted share. For the second quarter of
fiscal 2019, the Company reported net income of $11.8 million, or
$0.80 per diluted share.
Six Month Financial Results
Net sales for the first six months of fiscal 2020 were $448.3
million compared to $522.0 million in the first six months of
fiscal 2019. Comparable store sales decreased 14.0 percent for the
first six months of fiscal 2020.
Net loss for the first six months of fiscal 2020 was $6.1
million, or a loss of $0.44 per diluted share, compared to net
income of $25.7 million, or $1.71 per diluted share, for the first
six months of fiscal 2019. Included in the first six months of
fiscal 2019 was a tax benefit of approximately $1.9 million, or
$0.13 per diluted share, associated with the vesting of
equity-based compensation that was recorded in the first quarter of
fiscal 2019.
The gross profit margin for the first six months of fiscal 2020
was 25.4 percent compared to 30.1 percent in the same period last
year. Selling, general and administrative expenses for the first
six months decreased $3.0 million to $122.9 million. As a
percentage of net sales, these expenses increased to 27.4 percent
compared to 24.1 percent in the first six months of fiscal
2019.
Business Update – COVID-19
The safety and well-being of the Company’s customers, employees
and business partners remains a top priority. The Company continues
to closely monitor and respond to COVID-19 and take steps and
dedicate resources to minimize the impact of the pandemic on
operations. An update for the second quarter is as follows:
- Continued to provide stores with a regular supply of personal
protective equipment (PPE) and enhance chain wide cleaning,
sanitation and social distancing procedures;
- Developed a mandatory safety plan for corporate office and
distribution center employees, which includes daily health
screening and other safety measures;
- Continued to pay employees while our stores were closed and
assess the benefits of the related Coronavirus Aid, Relief, and
Economic Security (CARES) Act payroll tax credit;
- Enhanced liquidity by eliminating a covenant under the
Company’s credit facility through the first quarter of fiscal year
2021 that may have limited access to increased borrowing
capacity;
- E-commerce has been fully operational throughout the COVID-19
pandemic and represents over 20 percent of total net sales in the
second quarter. E-commerce traffic has increased over 100 percent
compared to the prior year;
- Approximately 50 percent of stores were reopened by early May
and substantially all of the Company’s stores were open in early
June. After reopening, stores experienced increases in conversion,
total average transaction and units per transactions despite
reduced traffic due to COVID-19;
- The back-to-school shopping period has also been impacted by
COVID-19, with nearly all of the schools within the markets that
Shoe Carnival operates in have, at a minimum, delayed school start
dates. As a result, this important selling period has shifted
largely into the third quarter, negatively impacting the final two
weeks of July.
Fiscal 2020 Earnings Outlook
The COVID-19 pandemic is expected to continue to affect
macroeconomic conditions and consumer spending in the retail
sector. Considerable uncertainty exists surrounding the impact the
pandemic may have on the Company’s sales and operations for the
remainder of the fiscal year. As a result, the Company is not
providing guidance for fiscal year 2020.
Store Openings and Closings
Two new stores were opened in the second quarter of fiscal 2020
and ten stores were closed. For the first six months of fiscal
2020, the Company has opened two stores and closed 12 stores. The
Company expects a total of four store openings and 13 store
closings during fiscal 2020 compared to one store opening and six
store closings in fiscal 2019.
Share Repurchase Program
As of August 1, 2020, the Company had $43.1 million available
for future repurchases under its share repurchase program. No
shares have been repurchased in fiscal 2020 and the Company does
not anticipate repurchasing any shares in fiscal 2020 but will
continue to reevaluate further share repurchases on an ongoing
basis.
Conference Call
Today, at 4:30 p.m. Eastern Time, the Company will host a
conference call to discuss the second quarter results. Participants
can listen to the live webcast of the call by visiting Shoe
Carnival's Investors webpage at www.shoecarnival.com. While the
question-and-answer session will be available to all listeners,
questions from the audience will be limited to institutional
analysts and investors. A replay of the webcast will be available
on the Company’s website beginning approximately two hours after
the conclusion of the conference call and will be archived for one
year.
About Shoe Carnival
Shoe Carnival, Inc. is one of the nation’s largest family
footwear retailers, offering a broad assortment of moderately
priced dress, casual and athletic footwear for men, women and
children with emphasis on national name brands. As of September 1,
2020, the Company operates 382 stores in 35 states and Puerto Rico,
and offers online shopping at www.shoecarnival.com. Headquartered
in Evansville, IN, Shoe Carnival trades on The Nasdaq Stock Market,
LLC under the symbol SCVL. Shoe Carnival's press releases and
annual report are available on the Company's website at
www.shoecarnival.com.
Cautionary Statement Regarding Forward-Looking
Information
This press release contains forward-looking statements, within
the meaning of the Private Securities Litigation Reform Act of
1995, that involve a number of risks and uncertainties, including,
but not limited to, statements regarding the reopening of our
stores, expected sales trends, the expected continued impact of
COVID-19 on consumer spending in the retail sector, and other
statements regarding uncertainties involving COVID-19 and its
impact on our operations. A number of factors could cause our
actual results, performance, achievements or industry results to be
materially different from any future results, performance or
achievements expressed or implied by these forward-looking
statements. These factors include, but are not limited to: the
duration and spread of the COVID-19 outbreak, mitigating efforts
deployed by government agencies and the public at large, and the
overall impact from such outbreak on the operations of our stores,
economic conditions, financial market volatility, consumer spending
and our supply chain and distribution processes; general economic
conditions in the areas of the continental United States in which
our stores are located and the impact of the ongoing economic
crisis in Puerto Rico on sales at, and cash flows of, our stores
located in Puerto Rico; the effects and duration of economic
downturns and unemployment rates; changes in the overall retail
environment and more specifically in the apparel and footwear
retail sectors; our ability to generate increased sales at our
stores; our ability to successfully navigate the increasing use of
online retailers for fashion purchases and the impact on traffic
and transactions in our physical stores; the success of the
open-air shopping centers where our stores are located and its
impact on our ability to attract customers to our stores; our
ability to attract customers to our e-commerce website and to
successfully grow our e-commerce sales; the potential impact of
national and international security concerns on the retail
environment; changes in our relationships with key suppliers; our
ability to control costs and meet our labor needs in a rising wage
environment; changes in the political and economic environments in,
the status of trade relations with, and the impact of changes in
trade policies and tariffs impacting, China and other countries
which are the major manufacturers of footwear; the impact of
competition and pricing; our ability to successfully manage and
execute our marketing initiatives and maintain positive brand
perception and recognition; our ability to successfully manage our
current real estate portfolio and leasing obligations; changes in
weather, including patterns impacted by climate change; changes in
consumer buying trends and our ability to identify and respond to
emerging fashion trends; the impact of disruptions in our
distribution or information technology operations; the
effectiveness of our inventory management; the impact of natural
disasters, other public health crises, political crises, civil
unrest, and other catastrophic events on our stores and our
suppliers, as well as on consumer confidence and purchasing in
general; risks associated with the seasonality of the retail
industry; the impact of unauthorized disclosure or misuse of
personal and confidential information about our customers, vendors
and employees, including as a result of a cyber-security breach;
our ability to manage our third-party vendor relationships; our
ability to successfully execute our business strategy, including
the availability of desirable store locations at acceptable lease
terms, our ability to open new stores in a timely and profitable
manner, including our entry into major new markets, and the
availability of sufficient funds to implement our business plans;
higher than anticipated costs associated with the closing of
underperforming stores; the inability of manufacturers to deliver
products in a timely manner; the impact of regulatory changes in
the United States and the countries where our manufacturers are
located; the resolution of litigation or regulatory proceedings in
which we are or may become involved; continued volatility and
disruption in the capital and credit markets; and future stock
repurchases under our stock repurchase program and future dividend
payments; and other factors described in the Company’s SEC filings,
including the Company’s latest Annual Report on Form 10-K and
Quarterly Reports on Form 10-Q.
In addition, these forward-looking statements necessarily depend
upon assumptions, estimates and dates that may be incorrect or
imprecise and involve known and unknown risks, uncertainties and
other factors. Accordingly, any forward-looking statements included
in this press release do not purport to be predictions of future
events or circumstances and may not be realized. Forward-looking
statements can be identified by, among other things, the use of
forward-looking terms such as “believes,” “expects,” “may,” “will,”
“should,” “seeks,” “pro forma,” “anticipates,” “intends” or the
negative of any of these terms, or comparable terminology, or by
discussions of strategy or intentions. Given these uncertainties,
we caution investors not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof.
We disclaim any obligation to update any of these factors or to
publicly announce any revisions to the forward-looking statements
contained in this press release to reflect future events or
developments.
Financial Tables Follow
SHOE CARNIVAL, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
(In thousands, except per share
data)
(Unaudited)
Thirteen
Thirteen
Twenty-six
Twenty-six
Weeks Ended
Weeks Ended
Weeks Ended
Weeks Ended
August 1, 2020
August 3, 2019
August 1, 2020
August 3, 2019
Net sales
$
300,794
$
268,221
$
448,289
$
522,031
Cost of sales (including buying,
distribution
and occupancy costs)
218,189
186,126
334,220
364,796
Gross profit
82,605
82,095
114,069
157,235
Selling, general and administrative
expenses
68,207
66,421
122,932
125,953
Operating income/(loss)
14,398
15,674
(8,863
)
31,282
Interest income
(4
)
(86
)
(93
)
(417
)
Interest expense
118
85
174
121
Income/(loss) before income taxes
14,284
15,675
(8,944
)
31,578
Income tax expense/(benefit)
4,224
3,843
(2,814
)
5,873
Net income/(loss)
$
10,060
$
11,832
$
(6,130
)
$
25,705
Net income/(loss) per share:
Basic
$
0.71
$
0.81
$
(0.44
)
$
1.76
Diluted
$
0.71
$
0.80
$
(0.44
)
$
1.71
Weighted average shares:
Basic
14,088
14,615
14,040
14,614
Diluted
14,215
14,736
14,040
14,964
Cash dividends declared per share
$
0.090
$
0.085
$
0.175
$
0.165
SHOE CARNIVAL, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands)
(Unaudited)
August 1,
February 1,
August 3,
2020
2020
2019
ASSETS
Current Assets:
Cash and cash equivalents
$
76,885
$
61,899
$
37,458
Accounts receivable
6,844
2,724
2,414
Merchandise inventories
298,856
259,495
336,919
Other
13,419
5,529
10,887
Total Current Assets
396,004
329,647
387,678
Property and equipment – net
65,043
67,781
70,855
Deferred income taxes
7,289
7,833
7,020
Other noncurrent assets
10,589
8,106
4,284
Operating lease right-of-use assets
210,593
215,007
223,536
Total Assets
$
689,518
$
628,374
$
693,373
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current Liabilities:
Accounts payable
$
129,641
$
60,665
$
108,410
Accrued and other liabilities
20,863
18,695
20,179
Current portion of operating lease
liabilities
45,376
43,146
46,783
Total Current Liabilities
195,880
122,506
175,372
Long-term portion of operating lease
liabilities
189,411
194,108
199,592
Deferred compensation
14,249
13,345
13,751
Other
991
1,052
1,098
Total Liabilities
400,531
331,011
389,813
Total Shareholders’ Equity
288,987
297,363
303,560
Total Liabilities and Shareholders’
Equity
$
689,518
$
628,374
$
693,373
SHOE CARNIVAL, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Twenty-six
Twenty-six
Weeks Ended
Weeks Ended
August 1, 2020
August 3, 2019
Cash Flows From Operating Activities
Net income/(loss)
$
(6,130
)
$
25,705
Adjustments to reconcile net income/(loss)
to net
cash provided by operating activities:
Depreciation and amortization
7,866
8,395
Stock-based compensation
1,892
3,440
Loss on retirement and impairment of
assets, net
2,289
205
Deferred income taxes
544
2,602
Non-cash operating lease expense
20,844
20,352
Other
334
1,643
Changes in operating assets and
liabilities:
Accounts receivable
(4,120
)
(1,194
)
Merchandise inventories
(39,361
)
(79,380
)
Operating leases
(18,898
)
(23,346
)
Accounts payable and accrued
liabilities
71,373
59,565
Other
(10,425
)
(7,970
)
Net cash provided by operating
activities
26,208
10,017
Cash Flows From Investing Activities
Purchases of property and equipment
(7,206
)
(11,490
)
Other
194
8
Net cash used in investing activities
(7,012
)
(11,482
)
Cash Flow From Financing Activities
Borrowings under line of credit
24,903
20,000
Payments on line of credit
(24,903
)
(20,000
)
Proceeds from issuance of stock
105
104
Dividends paid
(2,588
)
(3,250
)
Purchase of common stock for treasury
0
(14,012
)
Shares surrendered by employees to pay
taxes on
restricted stock
(1,727
)
(10,940
)
Net cash used in financing activities
(4,210
)
(28,098
)
Net increase (decrease) in cash and cash
equivalents
14,986
(29,563
)
Cash and cash equivalents at beginning of
period
61,899
67,021
Cash and cash equivalents at end of
period
$
76,885
$
37,458
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200901006031/en/
Cliff Sifford Vice Chairman and Chief Executive Officer, or W.
Kerry Jackson Senior Executive Vice President, Chief Financial and
Administrative Officer and Treasurer 7500 East Columbia Street
Evansville, IN 47715 www.shoecarnival.com (812) 867-6471
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