Shoe Carnival Q1 2025 Earnings Report

Shoe Carnival EPS Results

• Actual EPS: $0.34
• Consensus EPS: $0.30
• Beat/Miss: Beat by +$0.04
• One Year Ago EPS: $0.64

Shoe Carnival Revenue Results

• Actual Revenue: $277.72 million
• Expected Revenue: $285.16 million
• Beat/Miss: Missed by -$7.45 million
• YoY Revenue Growth: -7.60%

Shoe Carnival Announcement Details

• Quarter: Q1 2025
• Date: 5/30/2025
• Time: Before Market Opens
• Conference Call Date: Friday, May 30, 2025
• 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 2025 Earnings Call Transcript

Key Takeaways

• Profits outperformed in Q1 by about 10% versus expectations, the company remains debt-free with growing cash reserves and has reaffirmed its full-year guidance.
• Shoe Station banner sales grew 4.9% overall and delivered double-digit growth in rebannered stores, prompting a plan to convert 75 locations this year and to have over 80% of the store fleet under the Shoe Station brand by March 2027.
• Comparable store sales declined 8.1% in Q1, driven by a high single-digit drop at Shoe Carnival and muted spending among lower-income households during tax-refund season.
• Elevated inventory levels have been maintained to secure key brands at competitive costs and ensure in-stock positions through back-to-school and the holiday season, leveraging the company’s strong balance sheet.

Presentation

[Operator]

Good morning and welcome to Shoe Carnival's first quarter 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. 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 the 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.

[Operator]

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. I will now turn the conference over to Mr. Mark Worden, President and CEO of Shoe Carnival, for opening remarks. Mr. Worden, you may begin.

[Mark Worden, President and CEO at Shoe Carnival]

Good morning, everyone, and thank you for joining us today for Shoe Carnival's first quarter 2025 earnings conference call. Joining me on today's call are Patrick Edwards, Chief Financial Officer, and Tanya Gordon, Chief Merchandising Officer. The company's first quarter 2025 results were better than expected, with profits outperforming expectations by approximately 10%. Our Rebounder expansion plans delivering outstanding results, and our debt-free balance sheet getting even stronger. Given the volatility in the market and high levels of uncertainty the teams are navigating, I'm very pleased with our position as we start the second quarter. I may be a contrarian on this next statement, but I'm starting to feel cautiously optimistic about back to school as we have a compelling assortment in hand and our product costs have not skyrocketed.

[Mark Worden, President and CEO at Shoe Carnival]

I would like to thank our vendor partners for their close collaboration and our merchant organization under Tanya's leadership for their tireless work, ensuring we have our best foot forward for customers during back to school. Our Q1 financial results landed squarely within our annual guidance ranges. We have not yet experienced, nor do we have visibility to, any massive product cost or price increases outside of ranges considered in our guidance. This could evolve, but that is the situation now. Our singular corporate focus is to be the nation's leading footwear retailer for families. We operate no wholesale businesses, and this has us in a comparatively solid and flexible stance to shift our buying decisions as costs evolve. This does not mean we're immune to vendor price volatility. However, we enjoy a superior position compared to our competitors for two reasons. First, we do not have direct manufacturing exposure.

[Mark Worden, President and CEO at Shoe Carnival]

Second, we're not locked into our own production commitments that could force uncompetitive decisions. Additionally, our debt-free balance sheet with expanded cash reserves compared to the end of Q1 last year had us poised to make opportunistic buys in this volatile time and capture margin growth prospects ahead. Given all these variables, the executive team does not view it appropriate to withdraw 2025 guidance, and today are reaffirming our annual profit guidance as the most likely outcome. Turning to specifics of the quarter, similar sales trends to last year continued across our banners and the family footwear industry. Shoe Station achieved industry-leading growth again this quarter, and Rogan's produced solid, profitable results in line with our integration and synergy plans. Shoe Carnival declined similar to the industry and consistent with our annual guidance, albeit on the lower side of sales ranges for Carnival.

[Mark Worden, President and CEO at Shoe Carnival]

Our teams observed a cautious customer during the quarter with the Shoe Carnival lower-income household. Tax refund season saw muted results as it appeared customer concerns about prices today and speculation of higher prices forthcoming kept a small segment on the sidelines. As previously shared, I do not anticipate that Shoe Carnival nor the family footwear industry return to profitable sales growth in the near term based on the current external conditions and soft consumer confidence we are seeing. However, implicit in our guidance range is a moderating sales decline trend in the back half of the year, primarily driven by Shoe Station momentum and expansion, compelling back to school assortments, and encouraging progress on trade negotiations. The organization's organic growth approach remains focused on expanding Shoe Station from the regional market leader it is today into a national footwear and accessories market leader.

[Mark Worden, President and CEO at Shoe Carnival]

Shoe Station is our premium retail banner, attracting higher-income households, providing customers the top branded assortments for both non-athletic and athletic branded footwear, high levels of service, and a welcoming contemporary shopping environment. It is a market leader in the Gulf of America region, and as we rebounded Shoe Carnival stores to Shoe Station stores in existing markets, we expected a positive customer response, and we achieved them. Since our last earnings call, the rebound results continue to be outstanding, and I would like to now unpack the results, share key learnings we have gained, and provide transparency to our accelerated plans and targets. First, Shoe Station grew sales 4.9% for the quarter, driven by the rebounder approach growing sales low double-digits.

[Mark Worden, President and CEO at Shoe Carnival]

The continued Shoe Station sales growth, including comp growth in the quarter, is in stark contrast to the family footwear industry and Shoe Carnival trends, where both had comparable store declines in the high single-digits during Q1. This creates an exciting national growth opportunity to scale up Shoe Station store counts to drive the overall corporation sales and profit growth impact. Previously, the leadership team shared a range for our Shoe Station rebounder plans between 50 and 75 stores during fiscal 2025. Based on the continued sharp superior performance of Shoe Station versus the industry and Shoe Carnival, we will complete all 75 rebounders this year, the top point of the range. These 75 stores will be completed on the following quarterly cadence. 24 were completed during Q1. 20 will be completed in Q2, of which three are completed.

[Mark Worden, President and CEO at Shoe Carnival]

25 will be completed during Q3, and 6 will be completed in Q4. To summarize the Shoe Station store count progression this fiscal year, the business started this year with 42 Shoe Station stores representing 10% of our store fleet. Today, we operate 70 Shoe Station stores representing 16% of the fleet, and we plan to end fiscal 2025 with approximately 120 Shoe Station stores representing 28% of the fleet. Given this rapid growth of Shoe Station, we will plan to disclose the banner sales growth ongoing starting now. Each month, our teams are discovering valuable insights to help us optimize our rollout plans as we enter new markets. The corporation has already expanded significantly into new markets in Alabama, Mississippi, Georgia, Louisiana, South Carolina, Tennessee, and Florida, and will further extend our presence.

[Mark Worden, President and CEO at Shoe Carnival]

As operations move beyond core markets into new states, the customer and market data highlighted a large set of stores with similar dynamics where Shoe Station should also surpass Shoe Carnival, and those are being rebounded now. I would like to share four brief examples from Q1 stores rebounded to highlight real-world learnings and what we are doing with those expanded insights as we move forward. Number one, Shoe Station entered the Atlantic coast of Florida, a very large opportunity for future growth. The team rebounded an underperforming Shoe Carnival store in a new market far from any other Shoe Station store. This market had demographics that appeared on paper should work far better as a station, a more affluent trade area, skewed older customer base, and had a beachy vibe similar to many areas station thrives in.

[Mark Worden, President and CEO at Shoe Carnival]

On paper, this store is prototypical of one we expect to hit at least a double in baseball terms, but we hit a home run here with sales growth over 20%, strong AUR growth from a superior branded assortment, and creative margins. Our action step from this learning, the organization will continue rebounding and expanding in markets like this one on the East Coast. Number two, Shoe Station entered a new rural market in Tennessee over an hour from any major city. This was previously an average performing Shoe Carnival store with typical rural community demographics. Customer data alone did not clearly indicate which banner would perform better.

[Mark Worden, President and CEO at Shoe Carnival]

However, our analysis of local competition and available product assortments in that area pinpointed a gap that Shoe Station's unique merchandise mix could fill, and our prediction was accurate with sales growing over 20% versus the prior year and again higher AUR and creative margins. Number three, the team executed the same type of rebounder in a rural market in Alabama, and results were even stronger. These home runs in rural markets where the brand has awareness and also where it does not gives us confidence to action rebounding our Shoe Carnival stores across rural markets in America. Fourth, and very exciting and frankly a bit surprising, we rebounded a poorly performing Shoe Carnival store in a lower-income, highly diverse market in Georgia, not in a major city. The executive team thought this might achieve slattish results or maybe even be rejected by the customer.

[Mark Worden, President and CEO at Shoe Carnival]

We were wrong as this lower-income customer also responded very strong to the new assortments just as well as the response in rural Tennessee and the affluent Florida beach town. This encouraging result could prove a game changer in how wide the scope is for Shoe Station customer acquisition as we go national. Action from this is the business will rebound more stores like this one to validate a Shoe Station can consistently exceed industry benchmarks in diverse rural markets that are not affluent. To summarize our field-based learning to date, Shoe Station is outpacing the industry and Shoe Carnival quarter-after-quarter for over two years now.

[Mark Worden, President and CEO at Shoe Carnival]

The rebounder approach is generating oversized growth of sales, in fact exceeding Shoe Carnival sales by over 20% during the last five quarters since beginning this rollout, producing increased AURs and accretive product margins in markets we expected to win in more affluent, suburban, mature customers. These new learnings are substantial. Shoe Station also is transforming an average or poor performing Shoe Carnival into a growth store in rural America, in new markets, in coastal America, and is showing early signs of growth in diverse lower-income areas outside major cities. With these results in hand, it is crystal clear that Shoe Station is the future of our organic growth and future of our store base. The superior performance in regions quarter-after-quarter versus Shoe Carnival and the industry have provided us the customer data and the on-the-ground confidence to accelerate and increase our ambition with this approach.

[Mark Worden, President and CEO at Shoe Carnival]

Today, I'm announcing an ambitious expansion. Shoe Station will represent over 80% of our store fleet by March 2027, up from our previous target of 51%. We're accelerating our investment to maximize this rollout before back to school 2026. By July 2026, at least 51% of our current store fleet will operate a Shoe Station. I believe this expansion gives us the scale necessary to deliver total company comparable store growth starting in Q3 2026, as the strength and scale of Shoe Station will more than offset the ongoing challenges we expect to face with the Shoe Carnival banner. We can't wait. Tanya and I have been meeting extensively with our vendors and key stakeholders discussing this initiative, and it's being met with great enthusiasm and support. I'm asked one question time and time again. Will Shoe Station represent 100% of the current store fleet in the future?

[Mark Worden, President and CEO at Shoe Carnival]

I can share the organization is deeply evaluating that. While I do not have a decision today, I can share we're planning steps in market during 2026 to help us answer that based on the customer. The key topic to learn about is how best to operate our urban stores and satisfy the needs of the low household income, highly diverse customer base in cities like Chicago or Houston. The answers aren't clear today, but I believe it is prudent to explore this topic and plan to begin testing in urban doors by early 2026. We anticipate the potential for meaningful internal synergies and efficiencies if we were to learn that the Station banner can better meet all of our store needs. I look forward to sharing more about our organic growth approach after back to school.

[Mark Worden, President and CEO at Shoe Carnival]

Turning to our inventory strategy, we've made a deliberate decision to maintain elevated inventory levels in the current environment, leveraging our strong balance sheet to navigate marketplace uncertainties. With our cash-rich position, we determined the best approach to serve customers during back to school and holiday seasons was to invest early in key products, maximize our in-stock position, and ensure our stores are fully prepared. Media pundits have warned about potential empty shelves across retail this year. I want to assure you, our customers will find their favorite brands fully stocked across Shoe Station, Shoe Carnival, and Rogan's locations throughout 2025. One specific inventory investment I'd like to call out. Our men's and women's performance running brands continue to deliver exceptional results across the company and are particularly strong with double-digit growth at Shoe Station.

[Mark Worden, President and CEO at Shoe Carnival]

We have the best-in-class brands with the latest styles ready for back to school with robust AURs over $130 on average. As always, I'm not going to share brand-specific details for obvious competitive reasons, but I will share our merchant team is continually working with the world's best brands to add sought-after styles and the hottest brands. No doubt, our exceptional merchants have exciting additions to our assortments coming before fiscal end. Shoe Carnival Inc is strategically buying goods now at a lower cost basis where appropriate, and if those costs increase for whatever reason, this approach positions us well to gain margin, go to market with a sharp price, or both. I like that competitive advantage and financial upside possibility. The corporation will maintain these higher inventory levels until we no longer see it as the best risk position for us.

[Mark Worden, President and CEO at Shoe Carnival]

At that point, the team will reduce inventory levels, but only once we see limited risk of supply or cost disruption. Again, with a balance sheet that grew cash compared to Q1 last year, as we invested in more inventory and accelerated our capital plans, the business is well positioned. In addition to our organic growth approach, Shoe Carnival remains committed to pursuing M&A to achieve our long-term vision to be the nation's leading footwear retailer for families. Our financial foundation started the year strong, and despite the market volatility, our balance sheet is stronger now than a year or even two years ago. Our prior acquisitions have integrated smoothly. Both synergies captured and built our readiness for further acquisitions when the right opportunity at a fair valuation becomes available.

[Mark Worden, President and CEO at Shoe Carnival]

Our M&A targeting focus is on market-leading footwear retailers with scale, providing geographic expansion and/or diversifying to a higher-income customer base. The leadership team will pursue scale-changing M&A. Turning briefly to an organizational topic, earlier this year, we designated our existing office in Fort Mill, South Carolina, small town 15 minutes south of Charlotte, as our corporate HQ. This office is where I am based, along with our senior leaders, merchants, marketers, and our customer-facing teams. It is also where we collaborate with our vendor partners, host our annual shareholder meeting, and conduct our board meetings and earnings calls. As such, the leadership team thought this office location would best serve as our corporate headquarters. The organization also operates our shared service back office functions for Shoe Station, Shoe Carnival, and Rogan's stores, as well as our supply chain from our existing office and distribution center in Indiana.

[Mark Worden, President and CEO at Shoe Carnival]

Our company has been here in the Charlotte suburb for a few years now, and we found it a great advantage for engaging more frequently with our vendors, help to track the best talent, and provides us efficiencies to travel all over the country to be with our customers, vendors, and stakeholders. With that, I would like to now hand over to Patrick to provide further details on our financials and results, and then I will provide closing comments before opening the call for Q&A with Patrick, Tanya, and myself. Patrick?

[Patrick Edwards, CFO at Shoe Carnival]

Thank you, Mark, and good morning, everyone. I'm pleased to report that despite the challenging macroeconomic and retail environment, our first quarter profits outperformed market expectations by approximately 10%.

[Patrick Edwards, CFO at Shoe Carnival]

While our profits are down compared to last year, this reflects our deliberate decision to invest in the Rebounder Initiative that Mark just outlined, a choice that is already showing promising returns through Shoe Station's exceptional performance and our continued balance sheet strength. Our first quarter net income was $9.3 million or $0.34 per diluted share, which exceeded analyst consensus despite being lower than the $17.3 million or $0.63 per diluted share we reported in Q1 of fiscal 2024. This year-over-year decrease primarily reflects the planned investments in the Rebounder Initiative that we estimated $0.15 in the quarter and the broader industry headwinds that Mark described. The encouraging story behind our better-than-expected profit performance is the early success we are seeing with Shoe Station.

[Patrick Edwards, CFO at Shoe Carnival]

As Mark highlighted, while the broader family footwear industry declined, Shoe Station achieved sales growth of 4.9% and was comp positive in the quarter. The impact goes beyond just sales. Our rebounder stores showed meaningful product margin improvement compared to their performance at Shoe Carnival locations. These accretive product margins generated by the rebounder strategy, inclusive of rebounder stores, contributed to our increased merchandise margin in the quarter. Store-level profit contribution was also up double digits, inclusive of ongoing amortization of the new CapEx investments and normal advertising costs. These early phase outcomes are compelling and in line with the modeling we discussed last quarter that supports a two to three-year payback of the P&L investment we are making this year. This rebounder strategy is the best use of capital in our current portfolio of opportunities, and these results strongly support acceleration of the approach that Mark outlined.

[Patrick Edwards, CFO at Shoe Carnival]

I found the four examples Mark shared particularly informative. Those locations showed varying degrees of improvement and profitable sales following Rebounder, providing us with valuable data to refine our approach going forward. When Mark talks about Shoe Station representing 80% of our store fleet by March 2027, we see this as a path to restore and eventually grow our profit trajectory. Our financial foundation continues to be a competitive advantage, with cash positions in a stronger position compared to the prior year, even as we simultaneously accelerated Rebounder investments and increased our inventory levels. We ended the quarter with $93 million in cash, cash equivalents, and marketable securities, up over 30% or $23.5 million compared to the end of Q1 last year. We also continue to have no debt and nearly $100 million of available credit.

[Patrick Edwards, CFO at Shoe Carnival]

This financial strength enabled the deliberate approach Mark described to increase our inventory levels, which are up 4% compared to last year. With respect to our on-hand inventory, there are a few concepts I would like to highlight. First, our inventory has been secured at competitive costs and at levels that are expected to protect and perhaps increase our margins. Second, we're maintaining an appropriate level of in-stock positions across key categories that continue to support strong conversion rates. Further, we believe our in-stock inventory positions us well to navigate any potential future supply chain disruption. As Mark emphasized, we will adjust these inventory levels as conditions evolve, balancing working capital efficiency with ensuring product availability in an uncertain environment. Our debt-free position, combined with increased liquidity on hand, gives us flexibility in this volatile environment.

[Patrick Edwards, CFO at Shoe Carnival]

While some competitors may need to pull back on investments due to leverage concerns, we were able to simultaneously invest in our long-term vision and strengthen our financial position. Now, moving on to our broader financial results for our first quarter ended May 3rd, 2025, starting with net sales. In first quarter 2025, net sales totaled $277.7 million and compared to $300.4 million last year, a decline of 7.5%, similar with declines across family footwear. Our comparable store sales were down 8.1%. Our net sales and comp sales in the quarter were both impacted approximately 1% by lost sales associated with the 24 stores reboundered in the quarter, in line with our expectations. Breaking down performance by storefront, Shoe Station's sales increased 4.9% and were comp positive in the quarter.

[Patrick Edwards, CFO at Shoe Carnival]

Rogan's achieved results in line with our synergy and integration plans, with net sales above $19 million both this year and last year. Shoe Carnival experienced the industry-wide challenges that Mark referenced, with total sales declining 10%. Shoe Carnival's high singles comp decline in the quarter was the main driver of our overall comparable store sale decrease. Let me now provide some additional color on our performance by major footwear categories, which offers further insight into both our challenges and opportunities. Athletic footwear, which accounted for 46% of our revenue in the quarter, was in greater demand and outperformed our overall comparable store metrics. The mid-singles decline in athletic footwear in the quarter reflects the relative resilience of our consumers' emphasis on casual and active lifestyles.

[Patrick Edwards, CFO at Shoe Carnival]

Shoe Station's athletic business grew low teens during the quarter, demonstrating that even in a more competitive category, our premium banner positioning, including in the performance running category, resonates with consumers willing to invest in quality branded athletic footwear. In women's non-athletic footwear, which represented 24% of our business in the quarter, we saw comp declines in the mid-teens compared to the same period last year. This category was most impacted by the cautious consumer behavior Mark described, with Shoe Carnival's comp decline nearly double Shoe Station's. Within our Shoe Station banner, women's non-athletic was driven by stronger performance primarily in dress shoes. This notable outperformance compared to Carnival underscores the power of our Rebounder Initiative and Shoe Station's appeal to a different customer demographic. Men's non-athletic footwear, which represented 7% of our business in the quarter, declined low singles compared to Q1 last year.

[Patrick Edwards, CFO at Shoe Carnival]

Similar to women's, we saw a significant divergence between the banners, with Shoe Station achieving low singles comp positive growth in this category. The difference was particularly pronounced in casual footwear, with Shoe Station's expanded branded assortment and higher price points. Finally, children's footwear, representing 18% of our business in the quarter, experienced a low teens decline versus the prior year. This category was particularly challenged by the low-income consumers' reduced spending. However, Shoe Station's kids' business declined only low singles, significantly outperforming the company average. This relative outperformance in the children's category at Shoe Station is encouraging as we approach the important back-to-school season. What's particularly notable across all these categories is the consistent pattern of Shoe Station outperforming Shoe Carnival regardless of category. This reinforces our confidence in the rebounder strategy as a driver of future growth.

[Patrick Edwards, CFO at Shoe Carnival]

We believe the combination of upgraded store environments, enhanced brand presentations, and higher service levels that characterize the Shoe Station format creates a compelling value proposition that resonates across multiple footwear categories. Moving on to gross profit. Q1 gross profit margin was 34.5%, consistent with expectations, and was lower than Q1 2024 gross profit margin by 110 basis points. BD&O resulted in 160 basis points of the decrease, most of which was deleveraged as a result of lower net sales. Our merchandise margins were higher in the quarter by 50 basis points, consistent with our profit objectives to not chase unprofitable sales and as impacted by benefits from the rebounder stores. First quarter 2025 SG&A was $83.8 million, representing an approximate $500,000 decrease in the quarter versus 2024's first quarter.

[Patrick Edwards, CFO at Shoe Carnival]

In the quarter, selling expense increases associated with the rebounder strategy were offset by the timing of selling expenses impacting other stores. As a percentage of net sales, SG&A in the quarter was 30.2%, up 2.1 percentage points from last year. That increase is reflective of rebounder costs in the quarter, including store closing costs, amortization of new store construction costs, and customer acquisition costs. Our first quarter tax rate was 28.1% compared to 25.4% last year. This increase resulted from discreet adjustments this year and last year related to share-settled equity awards. We anticipate a tax rate in a range around 26% for all of fiscal 2025. Regarding the Rebounder Initiative that Mark outlined, we continue to expect $30 million-$40 million of capital expenditures to complete the 75 rebounders this year. During first quarter 2025, capital expenditures were $10 million for rebounders.

[Patrick Edwards, CFO at Shoe Carnival]

In addition, we continue to expect a P&L investment of between $20 million and $25 million, inclusive of amortization of the CapEx investments, other new store opening costs, and customer acquisition costs, sales reductions during the four to six-week period while the Shoe Carnival store is closed and the Shoe Station stores grand opened, and write-offs of existing assets. We continue to expect this $20 million-$25 million P&L investment to decrease our operating income in fiscal 2025 compared to fiscal 2024 in a range around $0.65 per share. The amount of the P&L investment estimated during the quarter was in line with expectations at approximately $5.5 million on a pre-tax basis or $0.15 per share, inclusive of an approximate 1 percentage point decrease in our sales and an approximate 2 percentage point increase in our SG&A as a percent of net sales.

[Patrick Edwards, CFO at Shoe Carnival]

When we analyze our capital allocation options, this two- to three-year payback period on this P&L investment makes the Rebounder Initiative the most compelling use of our resources. Few retail investments offer this combination of reasonable payback, proven execution, and strategic alignment. Moving on to our outlook. As Mark indicated, we are reaffirming our annual fiscal 2025 outlook, which calls for net sales of $1.15 billion-$1.23 billion, representing a range of down 4% to up 2% versus fiscal 2024. GAAP EPS in a range of $1.60-$2.10, gross profit margins in a range of 35%-36%, SG&A in a range of $350 million-$360 million, and CapEx in a range of $45 million-$60 million, with $30 million-$40 million for rebounders. As a result of the changes taking place in fiscal 2025, we are providing additional information on the second quarter.

[Patrick Edwards, CFO at Shoe Carnival]

For Q2 specifically, we are forecasting net sales in a range of $310 million-$320 million, and EPS in a range of $0.55-$0.65. We expect our Q2 gross profit margins to be in a range of 36%-36.5%. As Mark noted, we expect a moderating trend in our sales declines in the back half of the year. This moderating decline results from our rebounder strategy and continued success in event-period shopping. As more stores are reboundered, we expect that Shoe Station scale will eventually begin to more substantially offset the industry declines impacting Shoe Carnival. Second, we are cautiously optimistic for a back-to-school shopping season that results in market share gain, reflecting Shoe Station momentum and a compelling fresh assortment of branded merchandise.

[Patrick Edwards, CFO at Shoe Carnival]

We expect this moderating sales trend in the back half of the year to be coupled with stable to improving margins as reflected by the value and strength of our inventory positions. As noted, we do expect our SG&A to increase in Q2 and Q3 above the $84 million expensed in Q1, reflective of the timing of our planned operating expenses. However, if these moderating trends do not present within the expected timeframe, the low end of our EPS guidance is a potential outcome. In summary, our first quarter results demonstrate our ability to execute effectively in a challenging retail environment. While our profits are down year-over-year due to planned investments and industry headwinds, our outperformance versus expectations reflects the early promise of our strategic direction.

[Patrick Edwards, CFO at Shoe Carnival]

The Rebounder Initiative, with its compelling two to three-year payback period, combined with our strength and balance sheet, provides us with a clear path forward despite current challenges. We remain confident that these investments, though impacting near-term profitability, position us for more sustainable performance as we progress through our transformation. We are seeing encouraging early results with sharp sales gains over 20% better than Shoe Carnival in the quarter. Higher average unit retail selling prices from the branded assortment, accretive margins from reboundered store locations, and increased profit contribution driven by controlled cost and stable labor efficiency metrics. Before I turn the call back to Mark for closing remarks and opening the line for questions, I would like to remind everyone that our annual meeting of shareholders will be held on June 25th, 2025.

[Patrick Edwards, CFO at Shoe Carnival]

Information about the annual meeting and related material, including our proxy statement and annual report, can be found on our investors' website. Mark.

[Mark Worden, President and CEO at Shoe Carnival]

Thank you, Patrick. Before we open the call for questions, I want to emphasize the key takeaways that I believe are most important about our first quarter results and strategic direction. First, our Shoe Station growth approach is working and working exceptionally well. The Rebounder Initiative has consistently yielded double-digit sales growth and accretive merchants across diverse market types. This isn't just a regional success story limited to the Gulf States. We're seeing this performance in suburban markets, rural communities, and even in areas with more diverse demographics. The data is compelling and provides us with the confidence to accelerate this transformation. Second, we're implementing a disciplined approach to capital allocation.

[Mark Worden, President and CEO at Shoe Carnival]

As Patrick outlined, the two to three-year payback period on our rebounder investments makes this the best use of our capital. We're making these investments from a position of financial strength, with growing cash reserves and zero debt, allowing us to pursue both organic growth and potential M&A opportunities when the right valuation presents itself. Third, we're executing inventory decisions that provide both defensive protection and offensive opportunity. In the current uncertain environment, we've secured key products at favorable costs, ensuring we'll be in stock for our customers while potentially benefiting from margin expansion if costs rise. Importantly, we've managed to increase inventory while simultaneously growing our cash position, a testament to our disciplined financial management. Fourth, while industry-wide pressures continue to affect the lower-income consumer, we're seeing encouraging signals in our business.

[Mark Worden, President and CEO at Shoe Carnival]

Shoe Station's consistent superior performance demonstrates that our premium offering resonates with customers who remain willing to spend on quality branded footwear. The early success of our Rebounder Initiative in diverse markets suggests there is broader appeal for the Shoe Station concept than we initially anticipated. Finally, I want to emphasize that we are building for the long term while producing near-term results. Our profits outperformed expectations this quarter despite deliberate investments in our future. We believe the aggressive acceleration of our Rebounder Initiative puts us on a path to generate total company comparable store growth starting in Q3 of 2026, with Shoe Station representing over 80% of our store base by March 2027. This is a pivotal moment for our company as we transform from a traditional family footwear retailer to a premium-focused national leader in footwear.

[Mark Worden, President and CEO at Shoe Carnival]

Our strong balance sheet, proven rebounder playbook, and experienced leadership team position us well to execute this vision despite the challenging environment. With that, we'd be happy to take your questions. Operator, please open the line up for Q&A.

[Mark Worden, President and CEO at Shoe Carnival]

We will now begin the question and answer session. To ask a question, press star one on your telephone keypad. Our first question comes from the line of Sam Poser with Williams Trading. Please go ahead.

[Sam Poser, Equity Analyst at Williams Trading]

Good morning. Thank you for taking my questions. I guess I have two that are top of mind. Number one, with the decision to expand Shoe Station stores more quickly, is this really a situation where you're seeing the outperformance there?

[Sam Poser, Equity Analyst at Williams Trading]

You're also looking at the competitive set because if I think of Shoe Carnival goes up against, I mean, I'll just name names, Shoe Show, Rack Room, Famous Footwear, Kohl's, maybe Shoe Sensation, and then DSW to a degree, but then you have Shoe Station that goes more directly up against, let's say, a DSW and a Nordstrom Rack. While it does compete to some degree with those others, it's less so. This can be more of a standalone situation. Looking at your private label, private brand exposure there, as you mentioned, you really don't have a wholesale component of your business either. I mean, how much of that sort of do you think is forming the outperformance and then informing the decisions that you're making?

[Mark Worden, President and CEO at Shoe Carnival]

Thanks Sam, it's Mark. Thanks for that great question.

[Mark Worden, President and CEO at Shoe Carnival]

I think you characterized it well, and I build one thought. For Shoe Station, we see a lot of white space nationally where the competitive set is not completely fulfilling what that higher-end customer wants. When we looked at it, we really see that the moderate department store is really where we've seen that person looking for a place to shop. That off-mall, large sq ft store with a higher-end premium brand performance running women's is an unmet need that we are seeing, whether it's rural Tennessee or coastal Florida or as we move through Carolina, the unmet need is really capturing new customers at an exciting rate. Thanks for the question. I think you characterized Carnival spot on, too. I think that absolutely is the competitive set, the traditional family footwear.

[Mark Worden, President and CEO at Shoe Carnival]

Station's a different animal, higher-end, going after white space that we see national over the decade ahead.

[Sam Poser, Equity Analyst at Williams Trading]

I just want to follow real quick. You mentioned, Patrick, when you were going through the—you mentioned that dress shoes did well in Shoe Station. Do you think that that—I mean, is that really part, Mark, of the same? Is that just another one of sort of a—is that another part of that proof point?

[Mark Worden, President and CEO at Shoe Carnival]

Sam it's Mark. I'm going to grab that. Absolutely. I think we offer to our customers a dress assortment that's very hard to curate in any of the competitive set. Those competitors you mentioned would be the competitive set as well as the mall department stores. But Tanya's team's got a spectacular women's and men's dress category with exciting brands, high AURs, and profitable margins.

[Mark Worden, President and CEO at Shoe Carnival]

That is a great competitive advantage to be able to get non-athletic dress or non-athletic period with the best athletic brands all under one house of brands. Thank you. Two great questions, Sam.

[Sam Poser, Equity Analyst at Williams Trading]

Okay. Lastly, speaking of athletic, one of your competitors is getting the Jordan Brand. I had thought that sort of Shoe Carnival was probably more of a natural fit there, but it appears that they have it exclusive for this year. Is that something we're going to see in the mix next year? I'll just point this right to Tanya so she can welcome aboard. Good luck. Carl misses you while he's on the beach somewhere.

[Mark Worden, President and CEO at Shoe Carnival]

Hey, I'm going to grab that. That is a great brand, which we do not offer today.

[Mark Worden, President and CEO at Shoe Carnival]

As always, Sam, you're not going to share forward-looking brand information with our competitors on the line, but I'll share two things. We are focused on the hottest category in athletics right now, which is performance running, and have the best-in-class brands, new assortments coming for back to school, and we're going to be able to continue with that double-digit growth trend I talked about a little earlier. Second, and I'm not going to answer it, but here's how I'm going to answer it for you. Our merchant team is always working to add the brands our customers want most. I have no doubt they will secure new brands before fiscal end.

[Mark Worden, President and CEO at Shoe Carnival]

Once again, to ask a question, press star, followed by the number one on your telephone keypad. Our next question comes from the line of Mitch Kummetz with Seaport Research Partners. Please go ahead.

[Mitch Kummetz, Senior Analyst at Seaport Research Partners]

Yes, thanks for taking my questions. I think I got maybe a handful here. I hope you'll indulge me. Mark, on the rebounder examples you provided, especially the three that were kind of rural, lower-income, how instructive are those initial results to how those locations might perform on a forward basis? I'm just curious, was there any kind of unusual marketing that was put behind those reboundings? I'm wondering if maybe the consumers in those markets were kind of attracted to something new in the area. Is there anything about the initial results that you wouldn't think would continue as those stores are in those locations the further down the road we go?

[Mark Worden, President and CEO at Shoe Carnival]

Yeah, I've got one that I didn't talk about, but I can build on that. We're just starting to lap the stores we did last year.

[Mark Worden, President and CEO at Shoe Carnival]

Last year, we had a store in rural America that just did outstanding and got us invigorated to do more and more stores. It's comping up again as we're in year two without significant activity going on. We read that as an incredibly encouraging thing that it grew double-digit in its first year, capturing new customers with the new assortments and higher AURs. In year two, it was able to sustain that. Hey, it's early, and we've got a lot more stores we'll keep evaluating, but we thought that was encouraging. Second, in the Tennessee or Florida example, it's really looking at the competitive set and that we have that unique offering.

[Mark Worden, President and CEO at Shoe Carnival]

Like Sam asked, it really is fitting a white space where unless you want to go to an A or B mall where you could find similar non-athletic products or say a Dick's Sporting Goods where they have outstanding, of course, athletics, we offer all of that stuff under one building. You do not have to go to a mall and then to a Dick's Sporting Goods. You can come straight to our place and get both of those things. Those are some early learnings. We are going to learn a lot more as we do the full 75 this year. We get towards, well, above 51% at minimum by back to school next year.

[Mitch Kummetz, Senior Analyst at Seaport Research Partners]

Yep. Maybe for Patrick, I am trying to understand the rebounder impact on the P&L for next year.

[Mitch Kummetz, Senior Analyst at Seaport Research Partners]

I mean, this year, from an earnings standpoint, it's a $0.65 drag on 75 stores. It looks to me that next year, you're going to be 2x plus in terms of the rebounderings. Should we think of a $1.30 negative drag on EPS? I would imagine there's some offset to that as you then you're pulling the $0.65 drag out of the business this year and the next year, plus you get the benefit of the performance of the rebounder stores. How should I think of it? I think prior to this acceleration, next year kind of looked like it might just be sort of a wash, but now I would think rebounderings are going to be a drag on next year's earnings. Is that fair?

[Patrick Edwards, CFO at Shoe Carnival]

Hey, Mitch, thanks for the question.

[Patrick Edwards, CFO at Shoe Carnival]

We're really excited about the 10% revenue growth that we saw last year on these rebounders. We're excited this year as we continue to see the double-digit growth in sales that Mark talked about and seeing down the P&L store-level profit contributions also increase. We pointed to the two- to three-year payback period, and our results early on in this process are continuing to support that. With respect to next year, we've got a number out on the street that was $22 million-$27 million of P&L investment, and that was to rebounder approximately 100 stores over the entire horizon through March of 2027. That number has now been accelerated where we would expect to spend those sort of dollars by the end of Q2 in advance of back to school now to meet that 51% goal that we had. You're correct.

[Patrick Edwards, CFO at Shoe Carnival]

All of those costs that we've disclosed previously have been accelerated into the first two quarters. With respect to what happens in Q3 and Q4 and into Q1 of next year, we do not exactly have all of those costs identified and planned out through our process yet. There is still work for us to do on that front and additional information that we will provide at a later date. We do anticipate that there will be more costs beyond the $22 million-$27 million that we've disclosed.

[Mitch Kummetz, Senior Analyst at Seaport Research Partners]

Got it. That is helpful. Thank you. I still have a few more. On Q2, you guys provided sales and earnings, gross margin guide. I am curious if there is anything you can say in terms of kind of what comp is embedded in that sales range, and is there anything you can say about kind of performance quarter-to-date?

[Mark Worden, President and CEO at Shoe Carnival]

Hey, Mitch, I would think through that guidance as a similar comp expectations with Shoe Carnival performing poorly like it has been and Shoe Station outperforming at similar rates we've just disclosed is our baseline assumption.

[Mitch Kummetz, Senior Analyst at Seaport Research Partners]

Okay. Mark, I know you don't want to talk about brands necessarily, but in your prepared remarks, you talked about an exciting addition of assortments. In response to Sam's question, you talked about on the performance running side, some new product for back to school. I mean, is it fair to say that in terms of the brands that you're adding for back to school, they're all on the Shoe Station side? Is that correct?

[Mark Worden, President and CEO at Shoe Carnival]

I think that's what I'm most excited about to see our continued strength. That's our focus, of course, as we progress towards 80% or over 80% of the company being stationed.

[Mark Worden, President and CEO at Shoe Carnival]

We're focused on building those relationships with the world's best brands. I'm sure we have all those world's best brands, some we don't have today, but Tanya is aggressively scouring and meeting with people across all coasts over the last few weeks, learning, seeing what excites her, getting ready to go.

[Mitch Kummetz, Senior Analyst at Seaport Research Partners]

Lastly, on the tariff side, obviously, you guys haven't changed your guidance. I think in your prepared remarks, Mark, you said something like you haven't experienced any cost increases outside of the guide. That being said, versus when you provided that initial guidance, we're now looking at a 30% China tariff versus 20%, and we're now looking at a 10% universal tariff, which I believe didn't exist when you provided the initial guidance.

[Mitch Kummetz, Senior Analyst at Seaport Research Partners]

Is there essentially no change at all in your thinking around tariffs in terms of kind of what vendor pricing might look like as you get further into the year? I know you guys brought a lot of inventory in early, but I mean, no change at all, or is there anything more you can say there?

[Mark Worden, President and CEO at Shoe Carnival]

Again, I'm going to be a contrarian here. I feel really optimistic about how this is playing out. In the longer term, thoughts for jobs coming to America is a good thing for our footwear in the long term. In the short term, near term, comparatively, as I said in my prepared remarks, we're not a wholesaler. Comparatively, we're in great position with what we do, with what we control. Tanya's doing a fantastic job working with our partners to help them get some things in here opportunistically.

[Mark Worden, President and CEO at Shoe Carnival]

Our balance sheet's very strong. With our cash position, Tanya and I have taken a position of, let's bring in key brands, key products right this second at attractive prices and have been continuing to do so, whether that's for BTS or boots or sandals next year. Great products at great prices are things I like a lot. I feel good about all that. I said in my prepared remarks, of course, we're not naive. The vendors have to sort through a myriad of changing fluid things. To date, we've had nothing that surprised us. That could change tomorrow if this is very fluid.

[Mark Worden, President and CEO at Shoe Carnival]

As I said here today, Mitch, we've seen no cost or price change that materially impacts how we think about the shape of the year, how we think about back to school, or how we have a great relationship with any particular partner. I feel cautiously optimistic. The one thing that we don't have a good read on is consumer sentiment, right? Cost and price isn't what's spooking us. What is concerning is the endless barrage of the world is ending in the media, and we keep hearing that. It's a very small segment of our Shoe Carnival customer that is pulling back. Our Shoe Station customer is expanding. I feel good, but consumer sentiment going into back to school is the one big question mark that we'll learn a lot more about.

[Mitch Kummetz, Senior Analyst at Seaport Research Partners]

All right. Thanks, guys. Good luck.

[Mitch Kummetz, Senior Analyst at Seaport Research Partners]

Our next question comes from the line of Jim Chartier from Moness, Crespi, Hardt & Co. Please go ahead.

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

Hi. Thanks for taking my question. Could you talk about trends during first quarter? How did March, April compare to February? And then what is kind of the Q2 guidance assumed? Does it assume the trend for March, April continues or gets better or worse? Thanks.

[Mark Worden, President and CEO at Shoe Carnival]

Hey, James, Mark again. Yeah, February was tough. As I said, we did not see an exciting tax mid-season this year. As March, April, we look at those combined, we think it is silly logic for people to separate that as Easter shifts later and call victory. We would say March, April combined was okay. Again, the trends we talked about were not materially different across. Carnival did poorly across the months. Station was exciting. Rogan's delivered just as we thought. So we did not have a real material trend.

[Mark Worden, President and CEO at Shoe Carnival]

Yes, March, April was better with the holiday there, but nothing I would pound our chest on about exciting consumer sentiment or trends other than what we've said about Station. Nothing to share early May. We haven't seen any major changes in that. I'm going to ask Tanya to maybe just build on sharing your sandals perspective on the first couple months so the team can hear hello to our new chief merchant too.

[Tanya Gordon, CMO at Shoe Carnival]

Yeah, sure. Thanks, Mark. Just to speak to sandals, which comprises a big portion of our women's business, it was a little softer than we initially planned. However, last year was our best sandal season that we've had in the history of the company, at least since I've been here, and that's 11 years of sandal season.

[Tanya Gordon, CMO at Shoe Carnival]

I went back and looked at the two-year stack, and based on the two-year stack, we were up low double digits. That makes me pretty happy sitting here today. I feel good that the sandal trend, the seasonal trend is really normalizing, and we've enjoyed some increased AURs and increased margins in the sandal category. I feel good about that.

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

Great. Thank you.

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

Our next question is a follow-up from the line of Sam Poser with Williams Trading. Please go ahead.

[Sam Poser, Equity Analyst at Williams Trading]

Thank you. Real quick, you guided the full year to be down 4% to up 2%, and then you called out that, and basically your comp and your store sales growth totaled pretty close. You also said that you anticipate that year-over-year sales will start to be up into 3.6%.

[Sam Poser, Equity Analyst at Williams Trading]

How do you get, I mean, how do you foresee you even get to this high end of the trend this year? Or are we most likely looking at a down 2%-4% comp kind of situation where Q4 could be up because you'll have all those conversions up and you've got a holiday with more Shoe Station stores open and so on, and that could offset on lessening weakness at Shoe Carnival?

[Mark Worden, President and CEO at Shoe Carnival]

Clear, Sam. So Mark again, we see the pace moderating as the two things you laid out happen. More Shoe Station percent of total fleet, continued success on that, and that starts to dampen the continued negative results we expect on Carnival. We foresee that when we get to 51% of the fleet being Shoe Station, that Q3 2026 becomes that pivotal moment where we go comp positive, and we can't wait to get there.

[Mark Worden, President and CEO at Shoe Carnival]

In the back half of the year, you're right, some things have to go our way for the sales to hit the high end of our guidance. It's not implicit, but if things were to go our way with back to school season being not just a market share gain, which we expect, but a consumer sentiment helps us, we can start to see moderating trends turn to flourish results in Q3 with potential for even better in Q4. That's not our expectation implicit in the mid zone, but is it possible? Absolutely. As we have very strong market share growth plans that we are confident about for BTS holiday and into next year. I would think about it more like you said, that mid to lower end of the range is the right way to think about the sales. I think I addressed it.

[Mark Worden, President and CEO at Shoe Carnival]

Shoe Carnival was very much on the low end of our expectations during the start of the year, and we anticipate that likely doesn't change.

[Sam Poser, Equity Analyst at Williams Trading]

Secondly, can you talk about your use of private label both at Shoe Carnival and what's going on with the private label product that you have at Shoe Station? I mean, it appears to be a promotional vehicle on key items at Shoe Carnival. I'm wondering what that percent is and then how do you utilize it at Station?

[Mark Worden, President and CEO at Shoe Carnival]

I'd say we're very small percent. Under 10% is private label and smaller than that. You didn't ask it, and a very small percent has any exposure to the high tariff country risk. It's almost de minimis.

[Mark Worden, President and CEO at Shoe Carnival]

We do see a unique role for having private label and Shoe Station to provide women's non-athletic uniqueness and traffic driving activity as we continue to develop that. We are excited about the role it can play, but let's make no mistake. We are a house of brands. Shoe Station is a house of the best brands. That is our vision. Private label will be a small place to fill in maybe a price point, maybe a promotional point, or something unique. We will have the best brands at high AURs and robust margins of Shoe Station.

[Sam Poser, Equity Analyst at Williams Trading]

Thank you very much.

[Mark Worden, President and CEO at Shoe Carnival]

Thank you, Sam.

[Mark Worden, President and CEO at Shoe Carnival]

Our final question is a follow-up from the line of Mitch Kummetz with Seaport Research Partners. Please go ahead.

[Mitch Kummetz, Senior Analyst at Seaport Research Partners]

Yeah, thanks again.

[Mitch Kummetz, Senior Analyst at Seaport Research Partners]

Mark, you made the comment that you will be evaluating whether or not it makes sense for Shoe Station to become 100% of the total business. When I kind of do my math on store count, assuming that the 429 sort of stays 429 over the next couple of years, Rogan stays around 28, and you grow Station to be 80% of the total, that puts Carnival down to like around 60 stores or somewhere in that neighborhood. I don't know if you can endorse the math, but if that is somewhat correct, does it make sense for Shoe Carnival to be a 60-store concept? At that level, it seems like it would have to be very concentrated within just a few days. I wouldn't think that it would make sense to have like 60-ish stores over 20-something states across the U.S. Can you say anything along about that?

[Mark Worden, President and CEO at Shoe Carnival]

Yeah, happy to, Mitch. Your math's not wrong. It'd be under 100 stores for the Shoe Carnival banner by the time you get to March 2027 on this announcement. That's accurate. You're right. There will be significant synergy, internal efficiencies that can be gained if we learn that the Shoe Carnival banner customers can better be served by Shoe Station in those particularly urban markets concentrated with lower-income diverse households. We believe it is a high possibility it can, but we don't have the proof points for me to say it today. I don't want to get ahead of myself, but I want to be real transparent. I like the potential synergies that could come from that. We are going to answer that question within market data to see if that's the right path for our customers and shareholders.

[Mark Worden, President and CEO at Shoe Carnival]

I hope that is the outcome that the data shows us because that leads to an even more profitable 2027 and beyond for our corporation. I do not know now. We will take the steps to do that at latest by early 2026. If opportunity presents towards the end of this fiscal year, we might get an early start in trying to learn that. Great question. More to come after back to school.

[Mark Worden, President and CEO at Shoe Carnival]

That will conclude our question and answer session, and I will now hand the call back over to Mark Worden for closing remarks.

[Mark Worden, President and CEO at Shoe Carnival]

Thank you for the questions and joining us today. I hope you can hear we are incredibly excited about our news that Shoe Station is working incredibly well with customers, our partners, and our stakeholders.

[Mark Worden, President and CEO at Shoe Carnival]

We are accelerating this to be the largest portion of our corporation, and we believe the fastest growing. It is our path back to comp growth as we get into the back half of 2026, and profit accretion is on the horizon as we look to 2027. It is a big investment now, but it is absolutely the right thing as we pursue being the leading family footwear across America. I wanted to take the chance again to welcome Tanya to our leadership team. So excited to have her here and for all of you to get to know her. Wishing you all a great summer, and we will talk to you after back to school.

[Mark Worden, President and CEO at Shoe Carnival]

This concludes today's conference call. Thank you all for joining. You may now disconnect.

Participants

Executives

• Tanya Gordon, CMO
• Mark Worden, President and CEO
• Patrick Edwards, CFO

Analysts

• Operator
• Jim Chartier, Senior Equity Research Analyst at Monness, Crespi, Hardt & Co
• Mitch Kummetz, Senior Analyst at Seaport Research Partners
• Sam Poser, Equity Analyst at Williams Trading