Shoe Carnival, Inc. (Nasdaq: SCVL) a leading retailer of
moderately priced footwear and accessories, today reported results
for the second quarter and six months ended July 29, 2017.
Second Quarter Highlights
- Net sales increased 1.4 percent to
$235.1 million
- Comparable store sales increased 0.4
percent
- Earnings per diluted share increased
9.1 percent to $0.24
- Repurchased 469,000 shares of common
stock at a total cost of $10.2 million under existing share
repurchase program
Cliff Sifford, Shoe Carnival’s President and Chief Executive
Officer commented, “We are pleased with the quarterly improvement
in our sales trend, particularly given this year’s later
back-to-school dates in certain markets, which shifted sales from
July into August. Our quarterly earnings were driven by the
increase in sales along with our ability to efficiently manage our
expenses. Looking ahead, we believe we are well positioned for
back-to-school with a trend-right assortment of branded, family
footwear, favorable inventory position, and our multi-channel
initiatives which have already generated an August comparable store
sales increase of 7.0 percent. Our team remains focused on
enhancing value for shareholders through our recently increased
quarterly cash dividend and existing share repurchase program, in
addition to improved execution in a challenging retail
environment.”
Second Quarter Financial Results
The Company reported net sales of $235.1 million for the second
quarter of fiscal 2017, a 1.4 percent increase, compared to net
sales of $231.9 million for the second quarter of fiscal 2016.
Comparable store sales increased 0.4 percent in the second quarter
of fiscal 2017.
Gross profit margin for the second quarter of fiscal 2017
remained flat at 29.0 percent compared to the second quarter of
fiscal 2016. Merchandise margin, along with buying, distribution
and occupancy expenses as a percentage of net sales, remained flat
compared to the second quarter of fiscal 2016.
Selling, general and administrative expenses (“SG&A”) for
the second quarter of fiscal 2017 increased $1.2 million to $61.8
million. As a percentage of net sales, these expenses increased to
26.3 percent compared to 26.1 percent in the second quarter of
fiscal 2016.
Net income for the second quarter of fiscal 2017 was $3.9
million, or $0.24 per diluted share. For the second quarter of
fiscal 2016, the Company reported net income of $4.1 million, or
$0.22 per diluted share.
Six Month Financial Results
Net sales during the first six months of fiscal 2017 decreased
$3.9 million to $488.5 million compared to the same period last
year. Comparable store sales for the twenty-six week period ended
July 29, 2017, decreased 1.9 percent.
Net earnings for the first six months of fiscal 2017 were $12.1
million, or $0.73 per diluted share, compared to net earnings of
$14.8 million, or $0.78 per diluted share, in the first six months
of fiscal 2016. The gross profit margin for the first six months of
fiscal 2017 was 28.7 percent compared to 29.0 percent in the same
period last year. SG&A for the first six months increased $1.9
million to $120.7 million. As a percentage of net sales, these
expenses increased to 24.7 percent compared to 24.1 percent in the
first six months of fiscal 2016. The Company opened 12 stores and
closed nine stores during the first six months of fiscal 2017
compared to 12 store openings and four store closings in the first
six months of fiscal 2016.
Store Openings and Closings
The Company expects to open approximately 19 stores and close
approximately 25 to 27 stores during fiscal 2017 compared to
opening 19 stores and closing nine stores during fiscal 2016.
Expected store openings and closings by quarter for the fiscal
year are as follows:
New Stores Store Closings 1st quarter 2017 7 5 2nd
quarter 2017 5 4 3rd quarter 2017 7 1 4th quarter 2017 0 15 to 17
Fiscal year 2017 19 25 to 27
The five new stores opened during the second quarter include
locations in:
City Market Total Stores in the Market Columbus, IN
Indianapolis 14 Gainesville, FL Gainesville 1 Morristown, TN
Knoxville 5 Mt. Vernon, OH Columbus 2 Quakertown, PA Philadelphia
11
Fiscal 2017 Earnings Outlook
The Company expects fiscal 2017 net sales to be in the range of
$1.006 billion to $1.019 billion, with comparable store sales flat
to down low single digits. Earnings per diluted share for the
fiscal year are expected to be in the range of $1.35 to $1.45.
Fiscal 2016 earnings per diluted share were $1.28 and adjusted
earnings per diluted share were $1.40.
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.
Non-GAAP Adjusted Results
The non-GAAP adjusted results for the full year of fiscal 2016
discussed herein exclude the impact of non-cash asset impairment
charges related to long-lived assets associated with seven of the
Company’s Puerto Rico stores, which are recorded in SG&A. These
adjusted results are provided to enhance the user's overall
understanding of the Company's historical operations and financial
performance. Specifically, the Company believes the adjusted
results provide investors with relevant period-to-period
comparisons of the Company’s core operations. The unaudited
adjusted results are provided in addition to, and not as
alternatives for, the Company’s reported results determined in
accordance with generally accepted accounting principles. A
complete reconciliation of actual results to the adjusted results
appears below in the table entitled “Reconciliation of Non-GAAP
Financial Measures to GAAP.”
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 and regional name brands. As of
August 30, 2017, the Company operates 419 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. 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: 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 on-line retailers for fashion purchases and
the impact on traffic and transactions in our physical 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; the
impact of competition and pricing; our ability to successfully
manage and execute our marketing initiatives and maintain positive
brand perception and recognition; changes in weather patterns,
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 on our stores, 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; our ability to manage our third-party vendor
relationships; our ability to successfully execute our growth
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
growth plans; higher than anticipated costs associated with the
closing of underperforming stores; the inability of manufacturers
to deliver products in a timely manner; changes in the political
and economic environments in, and continued favorable trade
relations with, China and other countries which are the major
manufacturers of footwear; 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; our ability to meet our labor
needs while controlling costs; 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.
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.
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 July 29, 2017 July 30, 2016 July 29, 2017 July 30, 2016
Net sales $ 235,064 $ 231,907 $ 488,453 $ 492,377
Cost of sales (including buying,
distribution and occupancy costs)
166,837 164,677 348,070 349,591
Gross profit 68,227 67,230 140,383 142,786
Selling, general and administrative
expenses
61,803 60,570 120,732 118,841
Operating income 6,424 6,660 19,651 23,945 Interest income
(1 ) (2 ) (2 ) (5 ) Interest expense 149 41
191 84 Income before income taxes 6,276 6,621
19,462 23,866 Income tax expense 2,380 2,517
7,335 9,101 Net income $ 3,896 $ 4,104
$ 12,127 $ 14,765 Net income per share: Basic $ 0.24
$ 0.22 $ 0.73 $ 0.78 Diluted $ 0.24 $ 0.22 $ 0.73 $ 0.78
Weighted average shares: Basic 16,091
18,277 16,453 18,526 Diluted 16,094
18,282 16,457 18,531
Cash dividends declared per
share $ 0.075 $ 0.070 $ 0.145 $ 0.135
Financial Note:
Per share amounts are computed independently for each quarter of
the fiscal year. The sum of the quarters may not equal the total
year due to the impact of changes in weighted shares outstanding
and differing applications of earnings under the two-class
method.
SHOE CARNIVAL, INC. CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands)
(Unaudited)
July 29,
2017
January 28,2017
July 30,
2016
ASSETS Current Assets: Cash and cash equivalents $
18,531 $ 62,944 $ 41,549 Accounts receivable 2,798 4,424 3,185
Merchandise inventories 357,467 279,646 351,220 Deferred income
taxes 0 0 2,680 Other 7,029 4,737 7,991 Total
Current Assets 385,825 351,751 406,625 Property and equipment - net
96,046 96,216 103,363 Deferred income taxes 10,072 9,600 7,045
Other noncurrent assets 869 911 1,053 Total
Assets $ 492,812 $ 458,478 $ 518,086
LIABILITIES
AND SHAREHOLDERS’ EQUITY Current Liabilities: Accounts payable
$ 93,829 $ 67,808 $ 116,989 Accrued and other liabilities
20,367 18,488 19,759 Total Current Liabilities
114,196 86,296 136,748 Long-term debt 26,700 0 0 Deferred lease
incentives 28,909 30,751 30,634 Accrued rent 10,977 11,255 11,407
Deferred compensation 11,141 10,465 10,022 Other 686
829 811 Total Liabilities 192,609 139,596 189,622 Total
Shareholders' Equity 300,203 318,882 328,464
Total Liabilities and Shareholders' Equity $ 492,812 $ 458,478 $
518,086
SHOE CARNIVAL, INC. CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Twenty-six Weeks Ended July 29, 2017 Twenty-six Weeks
Ended July 30, 2016 Cash Flows From Operating Activities Net
income $ 12,127 $ 14,765
Adjustments to reconcile net income to net
cash (used in) provided by operating activities:
Depreciation and amortization 11,961 11,773 Stock-based
compensation 927 2,123 Loss on retirement and impairment of assets
1,705 59 Deferred income taxes (472 ) (1,506 ) Lease incentives
1,560 898 Other (3,140 ) (1,973 ) Changes in operating assets and
liabilities: Accounts receivable 1,626 (1,054 ) Merchandise
inventories (77,821 ) (58,341 ) Accounts payable and accrued
liabilities 27,356 49,229 Other (2,329 ) (3,381 ) Net
cash (used in) provided by operating activities (26,500 )
12,592 Cash Flows From Investing Activities
Purchases of property and equipment (12,737 ) (11,910 ) Proceeds
from notes receivable 0 0 Net cash used
in investing activities (12,737 ) (11,910 )
Cash Flows From Financing Activities Borrowings under line of
credit 79,200 0 Payments on line of credit (52,500 ) 0 Proceeds
from issuance of stock 142 133 Dividends paid (2,389 ) (2,533 )
Excess tax benefits from stock-based compensation 0 2 Purchase of
common stock for treasury (29,343 ) (25,238 ) Shares surrendered by
employees to pay taxes on restricted stock (286 )
(311 ) Net cash used in financing activities (5,176 )
(27,947 ) Net decrease in cash and cash equivalents (44,413 )
(27,265 ) Cash and cash equivalents at beginning of period
62,944 68,814 Cash and Cash Equivalents at End
of Period $ 18,531 $ 41,549
SHOE CARNIVAL, INC.RECONCILIATION OF
NON-GAAP FINANCIAL MEASURES TO GAAP(In thousands, except per
share data)(Unaudited)
The following table provides reconciliations of GAAP to non-GAAP
financial measures, to reflect the exclusion of non-cash impairment
charges of long-lived assets for seven Puerto Rico stores. There
were no non-cash impairment charges of long-lived assets for our
Puerto Rico stores for the first six months of fiscal 2017.
Fifty-two Weeks Ended
January 28,2017
% of
Net Sales
Non-cash impairment charges $ 3,573 0.3 % Tax effect
1,346 0.1 % Non-cash impairment charges net of income taxes $ 2,227
0.2 % Reported selling, general and administrative expenses
$ 251,323 25.1 % Non-cash impairment charges 3,573 0.3 %
Adjusted selling, general and administrative expenses, pre-tax $
247,750 24.8 % Reported operating income $ 37,912 3.8 %
Non-cash impairment charges 3,573 0.3 % Adjusted operating
income, pre-tax $ 41,485 4.1 % Reported net income $ 23,517
2.4 % Non-cash impairment charges net of income taxes 2,227
0.2 % Adjusted net income $ 25,744 2.6 % Reported net income
per diluted share $ 1.28 Non-cash impairment charges net of income
taxes 0.12 Adjusted diluted earnings per share $ 1.40
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Shoe Carnival, Inc.Cliff SiffordPresident and Chief Executive
OfficerorW. Kerry JacksonSenior Executive Vice President,Chief
Operating and Financial Officer and Treasurer(812)
867-6471www.shoecarnival.com
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