Shoe Carnival Q1 2024 Earnings Report

Shoe Carnival EPS Results

• Actual EPS: $0.64
• Consensus EPS: $0.60
• Beat/Miss: Beat by +$0.04
• One Year Ago EPS: N/A

Shoe Carnival Revenue Results

• Actual Revenue: $300.37 million
• Expected Revenue: $292.38 million
• Beat/Miss: Beat by +$7.99 million
• YoY Revenue Growth: N/A

Shoe Carnival Announcement Details

• Quarter: Q1 2024
• Date: 5/23/2024
• Time: N/A
• Conference Call Date: Thursday, May 23, 2024
• Conference Call Time: 9:00AM ET

Shoe Carnival (NASDAQ:SCVL) (NASDAQ: SCVL) is a U.S.-based specialty retailer offering a broad assortment of footwear, apparel and accessories for the entire family. Through its network of brick-and-mortar stores and e-commerce platform, the company provides casual, athletic and dress shoes for men, women and children, as well as complementary apparel, handbags, socks and other accessories designed to deliver value and variety. Its distinctive in-store carnival host service model aims to create an engaging shopping experience and foster customer loyalty.

Founded in 1978 and headquartered in Evansville, Indiana, Shoe Carnival has expanded over four decades to operate more than 350 retail locations across over 30 states. The company’s stores are typically situated in regional shopping centers, providing convenient access to a wide demographic of families and budget-minded consumers. In addition to its physical presence, Shoe Carnival’s online channel supports nationwide shipping and periodic promotions aimed at driving both traffic and sales conversion in the digital marketplace.

Since its initial public offering in the early 1990s, Shoe Carnival has focused on balancing everyday value with an engaging retail environment. Under the leadership of President and Chief Executive Officer Scott N. Motter, the company continues to evolve its merchandise mix, optimize store formats and enhance omnichannel capabilities. With a multidecade track record in family footwear retailing, Shoe Carnival seeks to capitalize on its brand recognition, operational expertise and customer-centric service model to support sustainable growth.

Shoe Carnival Q1 2024 Earnings Call Transcript

Key Takeaways

• Net sales in Q1 rose 6.8% to $300.4 million, exceeding expectations and gaining significant market share.
• Gross profit margin expanded to 35.6% for the 13th consecutive quarter above 35%, with operating income up 7.5% and pretax income up 8.5%.
• The new digital-first marketing campaign drove a 14% increase in sandal sales, with accelerating trends in March, April and early May across all banners and demographics.
• Acquisitions performed well as Shoe Station delivered low-double-digit sales growth and the mid-February Rogan’s deal met expectations with integration ahead of schedule and increased synergies of $2.5 million now targeted for fiscal 2025.
• Management cautioned that sustaining momentum through the upcoming non-event period (mid-May to back-to-school) remains uncertain, and customer buying behavior will be closely monitored before potential pivots.

Presentation

[Operator]

Good morning, and welcome to Shoe Carnival's First Quarter 2024 Earnings Conference Call. Today's conference call is being recorded and is also being broadcast via webcast. Any reproduction or rebroadcast of any portion of this call is expressly prohibited. I would now like to introduce Mr. Steve Alexander with Shoe Carnival Investor Relations. Mr. Alexander, please go ahead.

[Steve Alexander, Head of Investor Relations at Shoe Carnival]

Thank you, and good morning. Thanks for joining us today. Earlier this morning, we issued our earnings press release for the first quarter of 2024. If you need a copy of the release, it is available on our website in the Investors section. Joining me on today's call are Mark Warden, President and Chief Executive Officer of Shoe Carnival, Carl Scibetta, Chief Merchandising Officer, and Patrick Edwards, Chief Financial Officer.

[Steve Alexander, Head of Investor Relations at Shoe Carnival]

Management's remarks today may contain forward-looking statements that involve a number of risk factors. These risk factors could cause the company's actual results to be materially different from those projected in such statements. Forward-looking statements should also be considered in conjunction with a discussion of risk factors included in the company's SEC filings and today's earnings press release. Investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of today's date.

[Steve Alexander, Head of Investor Relations at Shoe Carnival]

The company disclaims any obligation to update any of the risk factors or to publicly announce any revisions to the forward-looking statements discussed on today's conference call or contained in today's press release to reflect future events or developments.

[Steve Alexander, Head of Investor Relations at Shoe Carnival]

Today's call will reference non-GAAP measures. The non-GAAP or adjusted results referenced exclude the purchase accounting, merger, integration, and transaction costs related to the acquisition of Rogan's Shoes. A reconciliation of GAAP to non-GAAP results is included in this morning's release. With that, I'll hand the call over to Mark.

[Mark Worden, CEO at Shoe Carnival]

Thank you, Steve, and good morning, everyone. Let me start today by saying that sales momentum is accelerating across the company. We gained significant market share during the quarter. Our new digital-first marketing plans worked, and we sold a ton of sandals at Shoe Carnival. During the quarter, net sales grew 6.8% to $300.4 million.

[Mark Worden, CEO at Shoe Carnival]

Our sales growth surpassed the high end of our expectations for the quarter, and there are four key drivers I would like to highlight. First, Shoe Station net sales grew faster than planned, increasing low double digits as we entered new markets, engaged new customers, and continued to rapidly grow share in the existing markets we serve. Second, e-commerce sales continued to grow double digit during the quarter, driven by the relaunch of shoecarnival.com in the third quarter of 2023.

[Mark Worden, CEO at Shoe Carnival]

That relaunch enhanced the customer experience and is driving significant gains in customer conversion and ultimately in sales growth. Additionally, our launch of shoestation.com in early 2023 continues to drive growth as the platform scales up customer acquisition. Third, Rogan's, which we acquired during the middle of February 2024, delivered first quarter net sales in line with our expectations.

[Mark Worden, CEO at Shoe Carnival]

The integration is progressing ahead of schedule, and we continue to be on pace to deliver the increased synergies in fiscal 2025, as discussed last quarter. Fourth, and most encouraging to me, during the quarter, trends significantly improved at our Shoe Carnival banner when we kicked off our new digital-first marketing campaign. The customer response to our sandal assortment has been outstanding, with total sales growth of 14% in sandals during the quarter and accelerated sales growth in April after the Easter holiday period ended.

[Mark Worden, CEO at Shoe Carnival]

The results are clear. Our new digital-first marketing approach and compelling product assortment are working. We launched the new Sandal Season Easter holiday marketing campaign about a month into Q1 and accelerated investments as spring weather progressed. Prior to the campaign launch, sales were soft in January and February, with a declining sales trend similar to non-event periods in the prior year.

[Mark Worden, CEO at Shoe Carnival]

Once we started the new campaign, we saw an immediate improvement in results. During March, sales accelerated to single-digit growth early in the month and continued to accelerate significantly in the days leading up to Easter, with double-digit growth across both the Shoe Station and Shoe Carnival banners. Coming out of the Easter holiday event period, we saw encouraging sandal buying trends, so we continued to engage customers with our marketing campaign focused on social, digital, and targeted CRM activities.

[Mark Worden, CEO at Shoe Carnival]

While April is not what I would consider a non-event period due to it being an important seasonal event month for us, it did provide some early insights about customer buying behavior. We need to see this play out over a longer time period to understand that this is a sustaining trend in 2024, but I can share that the customer was far more engaged and motivated to purchase across our banners, across our geographies, and across household income levels in both March and April as compared to January and February.

[Mark Worden, CEO at Shoe Carnival]

We will be monitoring this encouraging pattern closely and investing appropriately into trends as they emerge ahead. Shifting from our sales growth to financial highlights in the quarter. We again delivered sustained margin performance in the quarter, with gross profit margin expanding to 35.6%, representing the 13th consecutive quarter above 35%.

[Mark Worden, CEO at Shoe Carnival]

Operating income in the quarter increased 7.5%, and pre-tax income increased 8.5% to $23.2 million. Margin expansion over the long term has been a key driver of our profit transformation, led by our targeted promotional plans, smart buying strategies, and growth of our Shoe Perks CRM membership. I'm particularly pleased with the merchandise margin expansion achieved this quarter versus Q1 last year, and at the same time, we were able to grow sales ahead of our expectation.

[Mark Worden, CEO at Shoe Carnival]

Compared to five years ago, gross profit margin in first quarter 2024 expanded 600 basis points, and operating income grew 44% on sales growth of 18%, demonstrating our success to grow the business profitably over the long term.

[Mark Worden, CEO at Shoe Carnival]

Our vision is to be the nation's leading family footwear retailer, and a core strategy of realizing this vision is profitable M&A activity. We've completed two acquisitions in our company's history: Shoe Station, which we acquired in late 2021, and then most recently, Rogan's, which we acquired in February 2024. Starting with Shoe Station, we completed the integration about a year ahead of schedule and achieved both the efficiencies and synergies that we expected.

[Mark Worden, CEO at Shoe Carnival]

A little over two years later, Shoe Station continues to significantly grow sales ahead of the retail footwear category, grow profit, and expand margins. We have added new stores as part of growing the Shoe Station banner, and we are well positioned to continue expanding our market reach, engaging with new customers, and continue rapidly expanding the Shoe Station banner in the years ahead.

[Mark Worden, CEO at Shoe Carnival]

We also launched the shoestation.com website in early 2023, which is driving e-commerce growth. We've fully integrated Shoe Station into our Shoe Perks platform and are leveraging our advanced CRM analytics and capabilities to drive deeper engagement with both new and existing customers. Moving to Rogan's, which we acquired in February 2024.

[Mark Worden, CEO at Shoe Carnival]

We're in the early stages of integration and continue to be encouraged with the progress. Rogan's delivered first quarter 2024 sales and profit results in line with our expectation, and we continue to expect that it will be accretive to our results in fiscal 2024. We also continue to expect that the level of accretion will increase meaningfully in fiscal 2025.

[Mark Worden, CEO at Shoe Carnival]

As discussed previously, based on the early pace of progress of the integration, we accelerated the timeline, increased the expected synergy amount to $2.5 million, and accelerated the timing of the synergy capture entirely into fiscal 2025, rather than across fiscal 2025 and 2026. Today, we continue to expect full synergy capture in the amount of $2.5 million, and we continue to expect the entirety of those synergies will be realized in fiscal 2025.

[Mark Worden, CEO at Shoe Carnival]

Additionally, we are on pace to have Rogan's fully integrated into our Shoe Station growth banner operations in early 2025 and expect that Rogan's will be a solid source of accretive profit growth in 2025 and beyond. In 2025, with Rogan's fully integrated, we believe that our Shoe Station banner will be even better positioned to drive sales and profit growth.

[Mark Worden, CEO at Shoe Carnival]

Including Rogan's, Shoe Station is currently at 59 stores, and we expect to surpass the 100-store count sooner than planned as part of our long-term strategy to surpass 500 total stores in 2028. Shoe Station and Rogan's both demonstrate our successful approach to M&A as a key component of our long-term growth strategy.

[Mark Worden, CEO at Shoe Carnival]

To date, we've largely focused on acquisitions that provide market leadership in their regions, are profitable, and give us the opportunity to expand our market presence or further penetrate existing markets. Going forward, we are well positioned to continue pursuing M&A as part of our growth strategy. Our balance sheet is strong, and we have zero debt.

[Mark Worden, CEO at Shoe Carnival]

We have the flexibility to consider using equity or modest debt for the appropriate M&A opportunity, but given our solid cash position, funding M&A with cash flow from operations has been our approach, just as we did with Shoe Station and Rogan's. In addition to M&A, another key component of our growth strategy is to continue leveraging our advanced customer analytics and capabilities.

[Mark Worden, CEO at Shoe Carnival]

By doing this, we can better identify customer priorities at a market level and drive engagement both in store and online. One of the primary focus areas in this strategy is to evaluate data on community characteristics, purchasing trends, product assortment, and mix.

[Mark Worden, CEO at Shoe Carnival]

We've gained valuable insights about our Shoe Station customer by doing this analysis and have defined many markets where Shoe Station stores can likely outperform. Specifically, we've identified existing Shoe Carnival locations where the customer and real estate characteristics better align with Shoe Station.

[Mark Worden, CEO at Shoe Carnival]

We're now in the early test-and-learn development process of banner transitions, meaning closing an existing Shoe Carnival store and opening a Shoe Station store in the market where customer dynamics better fit our growth banner. It's very early days on executing the strategy, but I'm excited about what the data indicates regarding the potential for profitable growth in the years ahead.

[Mark Worden, CEO at Shoe Carnival]

I'll have an in-market test to discuss at our next conference call, so stay tuned. Moving now to thoughts on the balance of fiscal 2024. As I discussed earlier, we are encouraged with the sales growth and profitability we achieved in the first quarter. We achieved sales ahead of our expectation and grew operating profit even faster than sales. Patrick will provide additional details in his remarks, but given the solid performance in the quarter, today we are reiterating our entire fiscal 2024 outlook.

[Mark Worden, CEO at Shoe Carnival]

We are only two weeks into Q2, so I do not have a lot to share about this quarter yet, but I can provide a brief update on a few things we are seeing so far in May. First, sandals continue to sell very well, with double-digit growth in the first two weeks of May, and this is particularly encouraging as we are now in the peak selling period.

[Mark Worden, CEO at Shoe Carnival]

Second, product gross margins remain strong and in line with what I would like to see for Q2. Third, we are continuing to see sales trends pace where I would like to see them to achieve our annual expectations across our banners. Last, we're now entering a non-event buying period until we get into back to school. It is not yet clear if the customer remains as cautious about buying in non-event periods as they were last year.

[Mark Worden, CEO at Shoe Carnival]

We will continue to monitor customer buying behavior closely during this period before back-to-school starts and pivot accordingly. Before handing it to Carl to discuss Q1 category level performance, I'd like to share a few summary comments. We are encouraged by the results we achieved in the quarter. We delivered sales growth and operating profits higher than our expectations.

[Mark Worden, CEO at Shoe Carnival]

We again delivered sustained gross profit margin performance, exceeding 35% for the thirteenth consecutive quarter. Sales growth in the quarter was led by continued strength in our Shoe Station banner, e-commerce, and Rogan's acquisition. Trends improved sharply at our Shoe Carnival banner during March and April, as we are having a strong start to the sandal season. Our digital-first marketing strategy is resonating with customers, and our assortment of the right brands with the right depth is working.

[Mark Worden, CEO at Shoe Carnival]

Our strategies to grow sales and increase profitability over the long term have put us in a competitive position of strength to continue growing market share and delivering shareholder value. Our long-term vision is clear: to be the nation's leading family footwear retailer, and I believe we are very well positioned to continue advancing toward that ambition in 2024 and beyond. Now I'll hand it over to Carl to provide further color on our categories performance. Carl?

[Carl Scibetta, Chief Merchandising Officer at Shoe Carnival]

Thank you, Mark. As you discussed, sales momentum accelerated across the business during the quarter. From a category perspective, both children's and adult athletics performed very well, and we did sell a lot of sandals at Shoe Carnival.

[Carl Scibetta, Chief Merchandising Officer at Shoe Carnival]

While competitive intensity remained high during the quarter, we delivered gross profit margin of about 35% for the thirteenth consecutive quarter, and we remain committed to our long-term profit transformation and targeted CRM strategies to continue delivering sustained gross profit margin performance. Our merchandise margin in the quarter expanded by 50 basis points versus prior year, primarily due to lower inbound freight and shipping costs. During the first quarter, we continued to further optimize our inventory levels.

[Carl Scibetta, Chief Merchandising Officer at Shoe Carnival]

Inventory at the end of the quarter totaled $411.6 million, an increase of $22.1 million versus prior year, primarily reflecting the impact of the Rogan's acquisition in February 2024. Excluding the impacts of Rogan's, our merchandise inventory at the end of Q1 was lower by approximately 6% on a dollar basis than prior year, and on a unit basis, merchandise inventory was down approximately 9% versus prior year.

[Carl Scibetta, Chief Merchandising Officer at Shoe Carnival]

Excluding the impacts of Rogan's inventory, we continue to expect fiscal 2024 year-end inventory to be approximately $20 million or 5% lower than fiscal 2023 year-end, while maintaining the freshest product assortment for our customers. Now, moving to sales by category for the quarter.

[Carl Scibetta, Chief Merchandising Officer at Shoe Carnival]

Total Q1 comp sales were down 3.4%, which reflected our very strong performance in sandals combined with growth in athletics. As Mark discussed, our comp sales trend strengthened as the quarter progressed. From a category perspective, total adult athletics comp sales increased low single digits in the quarter. Comp sales in women's adult athletics were up by mid-singles, led by court and basketball.

[Carl Scibetta, Chief Merchandising Officer at Shoe Carnival]

Comp sales in men's adult athletics were down low singles, with a decline in running, partially offset by strength in training and walking. Children's comp sales were down very low single digit, with athletic up low single digit and non-athletic down mid-single digit. The strong performance in children's athletic was led by court and running. The children's non-athletic performance was primarily due to softness in boots and dress, partially offset by solid growth in sandals.

[Carl Scibetta, Chief Merchandising Officer at Shoe Carnival]

First quarter comp sales in women's non-athletic footwear were down high single digit, with boots down low 20s. Dress and casual were both down high teens. Sport was down mid-teens, and sandals were very strong in the quarter, growing 14%, with performance trends accelerating during the quarter, led by flat sandals, footbeds, and slides.

[Carl Scibetta, Chief Merchandising Officer at Shoe Carnival]

Men's non-athletic comp sales were down mid-single digit. Dress was down low teens. Boots were down low double digit, and casual was down low single digit. In casual, canvas casuals were down, partially offset by strong growth in sandals. Coming out of the quarter, our inventory content is clean and in good position, including sandals.

[Carl Scibetta, Chief Merchandising Officer at Shoe Carnival]

We are excited about the fresh, new products coming into our stores in 2024. As our back-to-school inventory begins to arrive later this month and build in May and June, we are well-positioned to win back-to-school by growing our children's business, just as we did last year, providing the product assortment and mix that our customers want. And with this, I'll turn the call over to Patrick for a review of our financials. Patrick?

[Patrick Edwards, CFO at Shoe Carnival]

Thanks, Carl. Moving on to our financial results. Starting with top line, our net sales in Q1 were $300.4 million, an increase of 6.8% versus prior year. Rogan's and continued growth from Shoe Station, combined with strengthening trends at Shoe Carnival, were the key drivers to this strong performance. Going into a little more detail, Shoe Station total sales performed very well, with a low double-digit increase versus prior year on the strength of new stores and share growth in existing markets.

[Patrick Edwards, CFO at Shoe Carnival]

Shoe Carnival total sales came in at a low single-digit decline. While sales trends were soft early in the quarter, they strengthened as the quarter progressed and demonstrated comparable store sales growth versus prior year, late in the quarter on the strength of sandals and athletics. Rogan's sales in the quarter approximated $19.6 million.

[Patrick Edwards, CFO at Shoe Carnival]

As you will recall, we completed the Rogan's acquisition in mid-February of this year, and therefore, only a partial month of Rogan's sales from February are included in our first quarter results. Consistent with previous guidance, we continue to expect full year 2024 net sales for Rogan's to approximate $84 million.

[Patrick Edwards, CFO at Shoe Carnival]

As a result of the 53rd week in fiscal 2023, that will not recur in fiscal 2024, the calendar weeks in each quarter shift in 2024 as compared to prior year, which we discussed on our earnings call in March. On a comparable store sale basis, which excludes the impact of this calendar shift, Rogan's sales and other new store growth, net sales declined 3.4% for first quarter, representing a significant improvement versus comparable store sale trends in late fiscal 2023.

[Patrick Edwards, CFO at Shoe Carnival]

As the first quarter progressed and we continued to execute our digital-first marketing campaign, we saw strengthening comparable store sale trends, and those trends turned to low single-digit growth versus prior year, late in the quarter. Q1 gross profit margin expanded to 35.6%, marking the 13th consecutive quarter that our gross profit margin has exceeded 35%.

[Patrick Edwards, CFO at Shoe Carnival]

Compared to Q1 2023, gross profit margin increased approximately 60 basis points, with merchandise margins increasing approximately 50 basis points, led by stable product margins and lower incoming freight and e-commerce shipping costs during the quarter.

[Patrick Edwards, CFO at Shoe Carnival]

Buying, distribution, and occupancy costs were higher in the quarter, primarily due to increased rent associated with operating more stores. Despite these higher overall costs in the quarter, BD&O leveraged approximately 10 basis points on the higher sales delivery versus the prior year.

[Patrick Edwards, CFO at Shoe Carnival]

SG&A expense in Q1 was $84.3 million, representing an increase of $6.7 million versus Q1 2023. Q1 SG&A increased on higher marketing investments that drove our strong sales performance in the quarter and higher selling expenses associated with Rogan's. As a percentage of net sales, our SG&A was 28.1%.

[Patrick Edwards, CFO at Shoe Carnival]

We continue to expect synergies from the Rogan's acquisition into 2025, and we expect those synergies to lower our SG&A as a percentage of sales as they are achieved. Operating income in the quarter totaled $22.5 million, an increase of 7.5% versus prior year on a GAAP basis, and 9.8% on an adjusted basis. We were pleased that our operating income grew faster than net sales in the quarter.

[Patrick Edwards, CFO at Shoe Carnival]

On a GAAP basis, operating income included approximately $500,000 of expenses from the Rogan's acquisition. Our income tax rate in the quarter was 25.4% versus 22.6% in the prior year, resulting in a headwind to EPS of approximately $0.02 per share. This higher rate primarily reflects a lower benefit in fiscal 2024 from share settled equity awards.

[Patrick Edwards, CFO at Shoe Carnival]

On a GAAP basis, net income for first quarter 2024 was $17.3 million or $0.63 per diluted share. On a non-GAAP basis, excluding the Rogan's-related costs, adjusted net income for the first quarter was $17.7 million or $0.64 per diluted share. At the end of the quarter, we had total cash, cash equivalents, and marketable securities of approximately $69 million.

[Patrick Edwards, CFO at Shoe Carnival]

Cash and cash equivalents increased over $24 million versus first quarter 2023, and cash flow from operations in the quarter increased approximately $15 million. 2023 fiscal year-end marked the 19th consecutive year the company ended a year with no debt. Through the first quarter of 2024, we have continued to fund our operations and growth investments, including the acquisition of Rogan's in February 2024, from operating cash flow and without debt.

[Patrick Edwards, CFO at Shoe Carnival]

During the quarter, we did not repurchase any shares and have $50 million available under our current share repurchase program. Inventory at the end of the quarter totaled $412 million, an increase of approximately $22 million versus prior year. The increase reflected Rogan's acquired inventory and the timing of purchases, partially offset by continued efficiencies from our ongoing inventory optimization improvement plan.

[Patrick Edwards, CFO at Shoe Carnival]

As Carl discussed, we continue to expect inventory will be lower by approximately $20 million on our business, excluding Rogan's, by the end of the year. Moving on to our 2024 outlook. Based on first quarter results, today, we reiterated our entire full year 2024 outlook, including net sales growth in a range of 4%-6% versus fiscal 2023, and full year fiscal adjusted EPS in a range of $2.55-$2.75.

[Patrick Edwards, CFO at Shoe Carnival]

The phasing of our Q2 and Q3 quarterly results versus the prior year will be significantly impacted by the retail calendar shift. One of our highest volume back-to-school weeks will move out of Q3 and into Q2. As a result, we are providing additional information on our expected second quarter net sales and second quarter EPS.

[Patrick Edwards, CFO at Shoe Carnival]

We expect net sales for the second quarter to be about $300 million, compared to $295 million in the prior year. This would be an increase in net sales of about 12% versus last year. This increase includes a benefit of approximately $20 million in the quarter as a result of the retail calendar shift.

[Patrick Edwards, CFO at Shoe Carnival]

We expect a similar increase in our EPS, which would put EPS at about $0.80 in the quarter, compared to $0.71 earned in last year's second quarter. We continue to expect the combined total of Q2 and Q3 sales growth in 2024 versus prior year to be in line with our full year outlook of 4%-6% net sales growth.

[Patrick Edwards, CFO at Shoe Carnival]

To close, in the first quarter, we delivered net sales growth of 6.8% and operating income growth of nearly 10% on an adjusted basis. Our strong balance sheet and cash flow continue to position us to fund internal growth, execute on desirable M&A opportunities, and the continued ability to deliver long-term shareholder return.

[Patrick Edwards, CFO at Shoe Carnival]

As previously announced, we will hold our annual meeting of shareholders on June 25th, 2024 at 9:00 A.M. Eastern Time. The distribution of information to shareholders for the annual meeting began on May 14th. This concludes our financial review. Now, we would like to open the call up for questions. Operator?

[Operator]

Thank you. If you have a question, please press star one on your telephone keypad. If you wish to remove yourself from the queue, simply press star one again. In the interest of time, we ask that you please limit yourself to one question and one follow-up question. If you have any additional questions, you may rejoin the queue. One moment for your first question. Your first question comes from the line of Sam Poser with Williams Trading. Please go ahead.

[Sam Poser, Equity Analyst at Williams Trading]

Good morning, everybody. Thank you for taking my question. Just a follow-up on the calendar shift stuff in the second quarter. I believe on the first quarter call or on the fourth quarter call, you inferred that it was gonna be about a $25 million per quarter maneuver versus the $20 million you just said. What I wanna make sure I got that right, but what changed if I did?

[Patrick Edwards, CFO at Shoe Carnival]

Hey, Sam, this is Patrick. Great question. Appreciate you asking it. The $25 million versus the $20 million, the difference is the amount of benefit that exists in the first quarter that shifted into there, which is about 2%.

[Sam Poser, Equity Analyst at Williams Trading]

So just so I get this right, you're gaining a $25 million week, and you're losing a $5 million week just at the beginning of-

[Patrick Edwards, CFO at Shoe Carnival]

Correct.

[Sam Poser, Equity Analyst at Williams Trading]

You lost a $5 million week at the beginning of the quarter. But so my question on Q3 then is, theoretically, in Q3, you wouldn't lose as much because I believe the last week in with the shift, the shift in Q3 is bigger than the shift out in Q1. Just-

[Patrick Edwards, CFO at Shoe Carnival]

That's correct.

[Sam Poser, Equity Analyst at Williams Trading]

correctly, that we... And so how should—so you're losing 20 in Q... You're gaining 20 in Q2, and you're gonna, what, lose about 18 in Q3 or something like that?

[Patrick Edwards, CFO at Shoe Carnival]

I'll try to just reiterate what we said here one more time, and then if necessary, we can go a little bit deeper on it. But our Q2 net sales are gonna be up 12%, with $20 million of that caused by the shift. And as you said $25 million coming in from Q3, $5 million coming out into Q1.

[Patrick Edwards, CFO at Shoe Carnival]

Q2 and Q3 combined are going to be about flat, leaving us with growth of 4%-6% over both those periods. And then you're right, Q4 has this more significant and material impacts, where we just completely lose that 53rd week in its entirety, which is about $15 million.

[Sam Poser, Equity Analyst at Williams Trading]

Which, which is gonna be offset by, what, about $35 million from Rogan's. So you lose $15 million, you gain $35 million. Yeah, I mean, it's like, yeah.

[Patrick Edwards, CFO at Shoe Carnival]

So, Sam, we know we've tried to for Q2, we've tried to give a lot of increased color around this because of the complexity that you're dealing with right now and the complexity that most retailers are dealing with right now. So, our goal is to provide a range around that $330 million in our EPS, and as we move through the year, we'll continue to do that.

[Patrick Edwards, CFO at Shoe Carnival]

But the other elements of our growth and of our drivers, we're just not prepared yet to give that for Q2 or any other quarter. But for the full year, we're still expecting revenue growth of 4%-6% on that unshifted basis and a cost decline of somewhere between down 3% to up 1% on a shifted basis.

[Sam Poser, Equity Analyst at Williams Trading]

Okay. Thank you very much. I appreciate it, and I may get back in, but thank you.

[Operator]

Your next question comes from the line of Mitch Kummetz with Seaport Research Partners. Please go ahead.

[Mitch Kummetz, Managing Director and Senior Equity Research Analyst at Seaport Research]

Yes, thanks for taking my questions, and I did kinda lose connection there for a few minutes. I apologize if you've already addressed something that I asked. I just wanna start just... Again, I wanna get a little bit more color on the, on the guide. So for 2Q, you, you've given us the sales. Can you say what comp and what Rogan's contribution are embedded in that sales number?

[Patrick Edwards, CFO at Shoe Carnival]

Hey, Mitch, it's Patrick. We are, again, trying to prepare a North Star for everyone for the second quarter in the range of $330 million on the top line. We're not prepared to provide the individual other key drivers other than the impact of the shift, which is about $20 million.

[Mitch Kummetz, Managing Director and Senior Equity Research Analyst at Seaport Research]

So you said $0.80 of earnings, and I know you said that obviously the earnings benefit from the sales shift, but is there any way you can sort of isolate how much earnings are shifting from 2Q, from 3Q to 2Q?

[Patrick Edwards, CFO at Shoe Carnival]

Right. So what we're providing is a 12% overall increase in our net sales, and then what we're seeing is an overall increase in EPS of the same, about 12%.

[Mitch Kummetz, Managing Director and Senior Equity Research Analyst at Seaport Research]

Okay.

[Patrick Edwards, CFO at Shoe Carnival]

In between the, as, as Mark mentioned, what we're seeing so far into Q2, stable, stable margins, some increased selling expenses, and as I said, a higher tax rate. If you think about our tax rate in Q2 of last year, that number was about 22.3%. This year, it will be more like 26%, in line with our annual guidance, and that creates a fairly sizable headwind to EPS in the quarter. So that, that, is why we provided that sort of 12% top line and ended about 12% bottom line sort of point of view on growth in the quarter.

[Mitch Kummetz, Managing Director and Senior Equity Research Analyst at Seaport Research]

Okay. And then, Mark, you were starting to talk about, I think some of the improved sales trend when I kinda lost my connection. So again, maybe you've already addressed this, but can you walk us through, maybe the months in 1Q, and then kinda how that's progressed into early 2Q? Like, maybe the comp by month, and then what you're seeing through the first two weeks of May.

[Mark Worden, CEO at Shoe Carnival]

Sure, Mitch. Good morning. Thanks for joining. Really pleased with the progression as the quarter went. February was slow, and as we talked at the year-end, we were just kicking off our new digital campaign as we were heading into tax season and the sandal season. And as soon as we did that, along with Carl's team's outstanding sandal assortment, we saw the consumer respond immediately.

[Mark Worden, CEO at Shoe Carnival]

Started, again, February was down, similar to non-event periods last year. We got into early March, started growing low singles, got towards Easter, we were growing double digit across banners, which was very encouraging to see it drive results at Shoe Carnival and Shoe Station. And then as we got into April, that was gonna be our first big unknown.

[Mark Worden, CEO at Shoe Carnival]

I said earlier, it's not really a non-event period because it's sandals' core season kicking in, but nonetheless, we weren't sure if April was gonna look more like January or last year's non-events, or if it would sustain trends. So we invested, and we continued to invest, like I said in the last call, in this marketing campaign, and it worked. We accelerated sandals after Easter.

[Mark Worden, CEO at Shoe Carnival]

Our sales results accelerated across the company after Easter, and in fact, as Patrick mentioned, comp sales grew after Easter. Flipping into May, this looks very similar, right? We're kind of wrapping up, and I'd say May still is giving us very encouraging results. I'm pleased with the margins. I'm really pleased with the sales across banners. Look to be able to deliver what we said, and the campaign is working, and we're keeping on going with it.

[Mark Worden, CEO at Shoe Carnival]

I wanna call the one thing, though, that I did say, we just don't know fully yet of what a non-event period is gonna look like, and we're in that now until, you know, late July, when back to school kicks in. I'm encouraged with what I've seen, you know, in the last 10 days or so, which are really non-event, but nonetheless, we're going into about a two-month extended period, where we're gonna learn a lot about the customer's behavior.

[Mitch Kummetz, Managing Director and Senior Equity Research Analyst at Seaport Research]

And just as a follow-up to that, Mark, 'cause I know you're somewhat hesitant to, you know, make any sort of projections on the business through these non-event periods, but I think what you said was that, you know, sort of April and early May are kind of event, non-event.

[Mitch Kummetz, Managing Director and Senior Equity Research Analyst at Seaport Research]

Like, it's maybe an event because it's sandals, but it's not really an event because you don't have kind of the holidays like you did maybe in March with Easter. So are there any learnings? And actually, I think June historically is your biggest sandal month, so maybe you could kind of call June event. I don't know.

[Mitch Kummetz, Managing Director and Senior Equity Research Analyst at Seaport Research]

But are there any sort of learnings that you kind of, when you reflect on April and early May, as it relates to sort of the digital-first marketing campaign that really suggests that this is, you know, something that is working?

[Mark Worden, CEO at Shoe Carnival]

Yes, I mean, the results to get the comp growth post-Easter was very encouraging when we continued on with this digital social influencer work. We weren't originally going to do that, but we saw trends were strong with sandals coming out of Easter. We saw people were still responding, so we made the decision to increase investments, and it continued to work in April and continues to work in early May.

[Mark Worden, CEO at Shoe Carnival]

I think the insight's too early to call, but I think what I'm most pleased about, I said in the call, we're seeing improved trends across all geographies. We're seeing improved trends across all demographics and across all banners. We didn't see that last year, and so I think that's a big change, that the campaign's working, the product is fresher, and the product's really resonating, that particularly in sandals that Carl brought in.

[Mark Worden, CEO at Shoe Carnival]

So, really encouraged, Mitch. Again, I think the next six to eight weeks are... we would call them really the most non-event of non-event. Sandals just becomes incredibly important, to your point. It's peak season, but there's no real spike in an event until we get to BTS. So we're gonna learn a lot, but I like what I'm seeing very much these first couple weeks of May.

[Mitch Kummetz, Managing Director and Senior Equity Research Analyst at Seaport Research]

And then last one for me, for Carl. I just wanna drill down on sandals a bit more because it sounds like you had a lot of success there. You know, my sense is that, you know, early March was good weather-wise, and the rest of the quarter was a little more inconsistent, and yet you guys had good sandal performance throughout. In fact, it sounds like it actually accelerated.

[Mitch Kummetz, Managing Director and Senior Equity Research Analyst at Seaport Research]

So, maybe Carl, you know, when you, when you look at sandals, you know, can you parse out how much is weather, how much is product, how much is inventory, how much is, you know, the digital marketing campaign behind the sandals?

[Mitch Kummetz, Managing Director and Senior Equity Research Analyst at Seaport Research]

Like, and again, going into really peak sandal season, you know, how much can we look at what's happened to sandal season to date and have that be, you know, a read-through to kind of the balance of the sandal season?

[Carl Scibetta, Chief Merchandising Officer at Shoe Carnival]

Well, sure, Mitch. First of all, early on, I would say, we did get some benefit early on from weather. The weather was a little bit, from a cold, weather standpoint, a little better than a year ago. But however, as we continued to move through April and early May, it's not as much of a factor.

[Carl Scibetta, Chief Merchandising Officer at Shoe Carnival]

In fact, weather may not be a cold issue, but with the amount of storms and things coming through the heart of our business, weather certainly would have played an effect on traffic. That said, our sandal business continues to perform well. I think, by category, the categories that we invested in are performing quite well, and it has taken...

[Carl Scibetta, Chief Merchandising Officer at Shoe Carnival]

The sandal business has taken over other categories in the footwear business, as I talked about in my prepared remarks. So, we feel good about where we are. We're focused. We've made the big items and categories bigger, and we do think there's some sustainability, as we move forward in that category to continue to outperform.

[Mitch Kummetz, Managing Director and Senior Equity Research Analyst at Seaport Research]

All right. That's very helpful. Thanks, guys.

[Operator]

Your next question comes from the line of Jim Chartier with Monness, Crespi, Hardt. Please go ahead.

[Jim Chartier, Senior Equity Research Analyst at Monness and Crespi Hardt]

Hi, good morning. Thanks for taking my questions. So, you know, I guess given kind of the success of the digital marketing, you know, how have your plans changed for the rest of the year, from a marketing standpoint? And then, you know, what can you do to kind of minimize this non-event lull that you're expecting or, you know, facing potentially in June and early July?

[Mark Worden, CEO at Shoe Carnival]

Hi, Jim, it's Mark. Good morning. Two things. First, we're gonna continue the campaign investments between now and back to school. We liked the response to the campaign in the first two weeks of May. We loved it in April, so we're gonna keep on testing to see if this investing in a non-event can continue to drive comps within the higher side of that range that we have for the year.

[Mark Worden, CEO at Shoe Carnival]

Second, for back to school, yeah, we're fully committed to the assist approach. It worked to grow kids' business last year. It worked to grow our holiday business in total last year. It worked now again to drive, you know, growth, you know, beyond our expectations in Q1.

[Mark Worden, CEO at Shoe Carnival]

Expect the entirety of back to school, we will be on this campaign approach, and we will probably be accelerating investments, and we're ready to increase SG&A as appropriately responding as, you know, profitable margin gets thrown off and share keeps growing.

[Jim Chartier, Senior Equity Research Analyst at Monness and Crespi Hardt]

Great. And then, yeah, for, for Rogan's, can you give us any color on what, you know, comp trends there look like? Is it more similar to Shoe Station or Shoe Carnival?

[Mark Worden, CEO at Shoe Carnival]

Sure. We don't really have comp trends. I think we'll go comp till next year. I can say it's a consistent business, is what we're learning in this first quarter, where it's really not like Shoe Carnival that spikes with events. We're seeing a much more stable, and we're only into it about a quarter, and that's what we're seeing in early days, a very stable. It doesn't.

[Mark Worden, CEO at Shoe Carnival]

It's not as volatile towards economic activity. It has a more affluent customer that doesn't seem to react to inflation as much, which we like, a very balanced, predictable business. It delivered right what we wanted to for the quarter, and we think we're squarely on target to be delivering that annual number that we put out there already.

[Mark Worden, CEO at Shoe Carnival]

So, good start, real good start, and I love that the integration's faster than we thought, and we really believe that full increased synergy capture. I got a good line of sight to bringing that in in 2025.

[Jim Chartier, Senior Equity Research Analyst at Monness and Crespi Hardt]

Great. Then, yeah, Patrick, I think you said, you know, non-Rogan inventory was down 6% in dollars, but 9% in units. You know, what did ASPs look like in first quarter? And, you know, does it look like kind of a 3% ASP growth for, you know, kinda going forward? Is that the right way to look at it?

[Carl Scibetta, Chief Merchandising Officer at Shoe Carnival]

Hey, Jim, it's Carl. I'll tell you. You're pretty close. The ASPs for first quarter were up about mid-single digits.

[Jim Chartier, Senior Equity Research Analyst at Monness and Crespi Hardt]

Okay, and is that sustainable? Is that kind of, you know, what you're seeing for the rest of the year?

[Carl Scibetta, Chief Merchandising Officer at Shoe Carnival]

Yes, I believe it is sustainable, and it's a reflection of some of the athletic inventory that's performing at a higher retail than the brown shoe side of the business.

[Jim Chartier, Senior Equity Research Analyst at Monness and Crespi Hardt]

Okay. All right. Thanks, and best of luck.

[Operator]

Your next question comes from the line of Sam Poser with Williams Trading. Go ahead.

[Sam Poser, Equity Analyst at Williams Trading]

Thank you. Just to follow up, on the Rogan's business, can you talk... Now that you have it, can you talk about what categories and so on you're really seeing the strength in and where you see the opportunities initially?

[Mark Worden, CEO at Shoe Carnival]

Sure, Sam. Hey, it's Mark. I'm really excited about the work business in particular that Rogan's brings. We knew that they were a leader in that category. They've got great breadth, great strength of brands, really wide range that meets the Wisconsin and Upper Midwest consumers' work needs. So we think there's a lot to mine there and learn, and to grow in the future.

[Mark Worden, CEO at Shoe Carnival]

We also really like, you know, as we think about them becoming part of the Shoe Station operations in early 2025, I really like the similarities in performance running and the high-end performance brands that Rogan's customers love. It really synchronizes great with Shoe Station, and we're gonna, we're gonna be able to lean into that as well. And then, I'll give you an opportunity.

[Mark Worden, CEO at Shoe Carnival]

You didn't ask it, but their, you know, their kids business doesn't keep pace with the exceptional Shoe Carnival kids business. So I think Carl and team are really excited about how we can take our strength and market leadership in kids from Shoe Carnival and build that as we get into 2025, 2026, at the Rogan's, you know, banner.

[Sam Poser, Equity Analyst at Williams Trading]

Thank you. And then, Carl, two things for you. One, how much have you narrowed the mix, like on narrower and deeper on key items, year over year? And two, are you finding, and the confidence you have in the ASPs, which I understand is athletic, but it's also probably selling more regular priced product or product at higher prices than you did a year ago.

[Sam Poser, Equity Analyst at Williams Trading]

Do you have more product now that people are coming in and asking for, like within sandals or other categories, they just say, "I want this particular shoe," versus, looking for a shoe and knowing about to find it, or brand for that matter?

[Carl Scibetta, Chief Merchandising Officer at Shoe Carnival]

Okay, I will tell you on the first part, Sam, you know, we continue to constantly attempt to optimize our assortment and squeeze down, and focus in on categories and/or items. We try to target percentage numbers, I would say as a percent, anywhere from high singles to low teens % every year in style count.

[Carl Scibetta, Chief Merchandising Officer at Shoe Carnival]

Sometimes that varies throughout the season, but, you know, a major focus of ours is tightening the assortment, making big items bigger. The second part of your question, definitely, Sam, the consumer that we're finding right now is brand shopping, and they are coming in, and they're looking for the brand-hot brand in the category, and they have faith in the styling and quality of that brand.

[Carl Scibetta, Chief Merchandising Officer at Shoe Carnival]

So most definitely, the key brands, the key iconic brands by category that we carry, are performing very, very well. And then, beyond that, we use—as you're aware, we have, somewhat of a private label business that we use to drive those big, those big items, and it's an item-driven business. But first and foremost, brands are on the customer's mind, as they're a little bit stressed with their economic dollar, they have faith in the quality and fit of the brands.

[Sam Poser, Equity Analyst at Williams Trading]

What are those strong brands?

[Carl Scibetta, Chief Merchandising Officer at Shoe Carnival]

Well, I can't go into that on the call.

[Sam Poser, Equity Analyst at Williams Trading]

Those brands.

[Carl Scibetta, Chief Merchandising Officer at Shoe Carnival]

But I'm sure you know who they are.

[Sam Poser, Equity Analyst at Williams Trading]

All right, guys. Thank you very much. Continued success.

[Carl Scibetta, Chief Merchandising Officer at Shoe Carnival]

Thanks, Sam.

[Operator]

We have another question from the line of Mitch Kummetz. Please go ahead.

[Mitch Kummetz, Managing Director and Senior Equity Research Analyst at Seaport Research]

Yeah, I got a couple follow-ups. Mark, you talked on Shoe Station, you mentioned the benefit of customer acquisition. Can you maybe elaborate on that? Are these Shoe Carnival customers that are kind of migrating over, or are these entirely new to the organization? Like, you know, maybe you can say about them or how you're picking them up.

[Mark Worden, CEO at Shoe Carnival]

Sure, Mitch. Two things. We're gaining new customers in our existing markets, not from Shoe Carnival. We're taking market share in the existing legacy markets, Alabama, Mississippi, Florida, and our rural Georgia. We've gained significant market share and continue to quarter after quarter.

[Mark Worden, CEO at Shoe Carnival]

Second, with Shoe Station fully integrated into Shoe Perks and the shoestation.com fully launched, we're able to now reach other customers even beyond that footprint, and it's giving us a customer base in states that we don't have current store bases for us to allow to mine and understand these new markets outside of where we have stores are looking very appealing for future growth. So it's coming, both, both market share growth as well as new markets where we don't have current stores.

[Mark Worden, CEO at Shoe Carnival]

And then, in your prepared remarks, you briefly discussed this potential transition of some Shoe Carnival stores to Shoe Station stores. I know it's probably too early for me to ask, you know, what that might do in terms of kind of the, the P&L, but can you, can you at least say, you know, how many stores you think might make sense for such a transition? I mean, is it 10 stores? Is it 50 stores? I mean, can you give us sort of a rough idea as to how meaningful this might be?

[Mark Worden, CEO at Shoe Carnival]

Like, what I can say is we're looking at our 34 million customer base in Shoe Perks now, and we see a lot of locations where a Shoe Station store seems to fit the customer profile very well. We're not ready to give a range or a number at this moment in time because we're just getting deep into the data, and the data shows a lot of profitable growth opportunities ahead.

[Mark Worden, CEO at Shoe Carnival]

And so, like I said in my prepared remarks, I'll have an in-market test that I can share at the next quarter, and we can, you know, give some insight as to, well, where did we try this and how is it looking in terms of, you know, revenue upside as well as profit. But too early to give any feedback at this moment, Mitch, but stay tuned. Very excited about the data.

[Mitch Kummetz, Managing Director and Senior Equity Research Analyst at Seaport Research]

And then maybe one last thing, and it sounds like you guys are ahead of schedule on the Rogan's integration. Just looking at the website there, I don't get the sense that it's plugged into Shoe Perks yet. Maybe it is, and I'm just not seeing it.

[Mitch Kummetz, Managing Director and Senior Equity Research Analyst at Seaport Research]

But talk about some of those things in terms of, like, getting it on board with the CRM, loyalty, you know, any adjustments to the product assortment, like, in terms of maybe bringing in some new brands. I know that you were able to kind of leverage, you know, your relationships with brands on Shoe Carnival to maybe do some things on Shoe Station.

[Mitch Kummetz, Managing Director and Senior Equity Research Analyst at Seaport Research]

I don't know what you're looking to do at Rogan's, but how quickly there, and then, like, is there a digital marketing opportunity for Rogan's for back to school, like there is with the other banners?

[Mark Worden, CEO at Shoe Carnival]

It's Mark again. Thanks, Mitch. You're correct when you see it. It is not integrated at all from a consumer standpoint, and it's not in the horizon over the next few months. Our focus in the 18-month integration plan is to have the business fully integrated by early 2025, and that'll include becoming part of the Shoe Station operations.

[Mark Worden, CEO at Shoe Carnival]

That will include being part of the shoestation.com experience for the customer, as well as being part of the Shoe Perks loyalty program. But we expect all of that by early 2025 as we get into the new fiscal. Our focus right now is on, yeah, blocking and tackling, getting really the back office integrations done, getting operations and customer service done, and that's progressing very smooth and really pleased with that.

[Mark Worden, CEO at Shoe Carnival]

But the customer-facing benefits we would see happening in 2025, early 2025, along with the full synergy capture.

[Mitch Kummetz, Managing Director and Senior Equity Research Analyst at Seaport Research]

Okay. Thanks again, good luck.

[Mark Worden, CEO at Shoe Carnival]

Thank you.

[Operator]

We have another question coming from the line of Sam Poser. Please go ahead.

[Sam Poser, Equity Analyst at Williams Trading]

Just one last thing. What is the difference... I, I would assume that your average selling price at Shoe Carnival is lower than it is at Shoe Station and Rogan's. So what, like, like, how many basis points higher is the average selling price within, you know, relative to Shoe Carnival in, in Shoe Station and Rogan's?

[Carl Scibetta, Chief Merchandising Officer at Shoe Carnival]

Sam, good question. I would say the average transaction, we want to look at it that way, in Shoe Station today is about 20% higher than Shoe Carnival, and Rogan's is about 15% higher than Shoe Station. That's average transaction, not ASP.

[Sam Poser, Equity Analyst at Williams Trading]

Thank you.

[Operator]

At this time, there are no other questions, so I will hand the call back over to Steve Alexander for closing remarks.

[Carl Scibetta, Chief Merchandising Officer at Shoe Carnival]

Thank you. We're available all day, so please feel free to reach out with any follow-up questions. Regarding Q2 results, we intend to report in early September, after Labor Day, including an update on back to school, which will essentially be complete at that time. So thanks again to everyone for joining the call today. Thank you.

[Operator]

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Participants

Executives

• Carl Scibetta, Chief Merchandising Officer
• Mark Worden, CEO
• Patrick Edwards, CFO
• Steve Alexander, Head of Investor Relations

Analysts

• Jim Chartier, Senior Equity Research Analyst at Monness and Crespi Hardt
• Mitch Kummetz, Managing Director and Senior Equity Research Analyst at Seaport Research
• Sam Poser, Equity Analyst at Williams Trading