EXEC: Shoe Carnival Information Second-Finest Third Quarter For Gross sales

Shoe Carnival, Inc. reported gross sales reached the second highest degree for any quarter within the household footwear chain’s 44 years in existence, solely behind final yr’s ranges that benefited from government-stimulus measures. Boosted by non-athletic choices, the household footwear chain’s gross sales have been nicely above the pre-pandemic third quarter of 2019, indicating robust progress momentum.

Shoe Carnival mentioned it’s on observe to ship beforehand introduced full-year steerage inside a tightened vary.

“All through Q3, American households continued to face a difficult inflationary setting, placing stress on the disposable incomes and on our visitors,” mentioned Mark Worden, president and CEO, on a name with analysts. “Regardless of the macroeconomic volatility, the corporate’s strategic plans to develop buyer accounts and double working revenue margins versus historic ranges proceed to work. Q3 earnings per share of $1.18 exceeded consensus expectations and profitability progress has continued to speed up every quarter as 2022 progressed.”

Third-Quarter Revenues Sink Yr-Over-Yr
Within the third quarter ended October 29, gross sales decreased 4.1 p.c to $341.7 million. Within the year-ago quarter, gross sales jumped 29.8 p.c as vital authorities stimulus distributions enhanced discretionary incomes.

Gross revenue margin decreased 210 foundation factors to 38.3 p.c from 40.4 p.c a yr in the past. Merchandise margin decreased 70 foundation factors and shopping for and distribution whereas occupancy prices elevated 140 foundation factors as a p.c of gross sales.

SG&A expense jumped 31.1 p.c to $87.3 million, or to 25.5 p.c of gross sales from 22.9 a yr in the past. The rise within the SG&A was primarily because of investments in promoting and store-level wages together with the bills for the Shoe Station banner acquired final yr.

Working earnings fell 30.2 p.c to $43.6 million from $62.4 million a yr in the past with working margins sliding 470 foundation factors to 12.8 p.c from 17.5 p.c. Internet earnings declined 30.3 p.c to $32.7 million, or $1.18 a share, from $46.8 million, or $1.64, the prior yr.

Shoe Carnival mentioned that given the volatility skilled over 2020 and 2021, it believes essentially the most related comparability for the 2022 third quarter is to the third quarter of 2019, previous to the onset of the COVID-19 pandemic and associated authorities stimulus and provide chain disruption.

In comparison with the third quarter of 2019, gross sales grew 24.4 p.c, gross margins elevated 740 foundation factors; and working margins expanded 620 foundation factors with the quarter, marking the corporate’s seventh consecutive quarter in double-digit working margins. Working margin averaged 6.0 p.c for the prior 10-year interval.

Third-quarter EPS of $1.18 was up 151 p.c versus the third quarter of 2019. For the nine-month year-to-date interval, EPS was $3.17, up 138 p.c from 2019 ranges and greater than double any full yr of earnings in its historical past.

Non-Athletic Outpaces Athletic
By class within the quarter, non-athletic gross sales total stay sizzling, climbing 35.1 p.c versus 2019. Athletic gross sales stabilized in Q3, up 4.4 p.c versus 2019, pushed by enhancements in stock positions and diminished provide chain challenges because the quarter progressed. Gross sales versus 2021 have been up within the mid-singles for non-athletic and down within the low-20s for athletics.

By division, ladies’s non-athletic was up within the mid-20s versus 2019, in accordance with Carl Scibetta, senior EVP and chief merchandising officer. Gross sales have been pushed by gown, up mid-40s; sport, up mid-30s; and sandals, up high-20s. Males’s non-athletic gross sales have been up high-30s versus 2019, pushed by males’s casuals up over 50 p.c, which additional displays the customers’ transfer from athletic to non-athletic footwear for the back-to-school time interval. Males’s boots have been up within the high-20s, and males’s gown was up within the mid-teens in comparison with 2019.

Kids’s non-athletic gross sales versus 2019 have been up within the high-60s. Kids’s casuals drove will increase up over one hundred pc, and infants’ non-athletic gross sales have been up within the low-60s. Gross sales of youngsters’s athletic have been up within the low-teens, and grownup athletics have been up within the low singles versus 2019.

Scibetta mentioned, “With the style developments we’re seeing and the improved product movement, we anticipate robust gross sales ends in the non-athletic classes for the rest of 2023.”

Product margins, improved 700 foundation factors versus 2019, mirrored a more-optimized promotional technique. Scibetta mentioned, “We proceed to make use of the info supplied from our best-in-class CRM program to drive loyal buyer progress. This knowledge offers us helpful insights into our over 31 million clients and allows us to have interaction with these customers by way of sensible efficient promotions that aren’t margin-dilutive.”

Through the third quarter, Shoe Carnival skilled a 50-50 athletic, non-athletic gross sales cut up, advertising and marketing a shift of 700 foundation factors to the non-athletic class in comparison with 2019. Scibetta mentioned the retailer anticipated this transfer in shopper demand to non-athletic product and positioned inventories to make the most of the style change. Nevertheless, provide chain points continued to impression athletic stock availability earlier within the quarter.

Athletic Impacted By Provide Disruption
Scibetta mentioned Shoe Carnival noticed enchancment within the athletic footwear deliveries within the latter a part of the quarter and inventories by class have been in step with ahead gross sales expectations coming into the fourth quarter. He mentioned, “Wanting forward, we consider the provision chain points we’ve been coping with for over two years will proceed to enhance to a extra normalized state as we transfer into fiscal 2023. At quarter finish, our stock ahead weeks of provide was in step with 2019. Importantly, each aged stock and seasonal carryover inventories are in line. Because of this, we would not have a variety of stock and see no want to offer deep reductions or dump items within the fourth quarter.”

Within the fourth quarter, the non-athletic classes historically enhance in penetration to whole gross sales. Scibetta mentioned the chain’s seasonal boot stock place is a lot better than final yr and its athletic stock ranges and freshness are the strongest they’ve been all through 2022.

Worden famous that buyer accounts for loyalty membership surpassed 30 million for the primary time on the finish of Q3, setting a brand new file of 31.5 million members, up roughly 35 p.c in comparison with 2019 and up over 10 p.c versus 2021. The CEO mentioned, “The continued progress of loyal clients is the strongest indicator that our model is resonating with clients throughout geographies, throughout demographics and throughout our a number of banners.”

Wanting forward, Shoe Carnival raised its working revenue margin expectations for 2022, however total now expects to ship gross sales on the decrease facet of its annual 2022 steerage and EPS on the mid-to-lower facet of steerage because of softening market situations. Stated Worden, “We count on our clients to face a traditionally excessive inflationary setting all through This autumn and all through this vacation season, which is able to put stress on their disposable incomes and sure on our visitors.”

Shoe Carnival’s up to date steerage for the yr requires:

• EPS within the vary of $3.95 to $4.10 ($3.95 to $4.15 beforehand) in comparison with a pre-pandemic annual excessive of $1.46 in 2019;
• Internet gross sales between $1.27 billion and $1.30 billion ($1.29 billion and $1.34 billion beforehand), up 23 p.c to 25 p.c (24 p.c to 29 p.c beforehand);
• Gross margins of roughly 37.0 p.c (36.6 p.c to 36.7 p.c beforehand), in comparison with 30.1 p.c in 2019; and
• Working earnings margin within the vary of 11.5 p.c to 11.7 p.c (11.4 p.c to 11.6 p.c beforehand) in comparison with 5.2 p.c in 2019.

Photograph courtesy Shoe Carnival