Shoe Carnival Q1 Earnings Call Highlights

Key Points

• Strategic reset: Shoe Carnival will keep both the Shoe Carnival and Shoe Station banners as permanent, separate concepts after its review found they serve different customer segments. The company is also slowing rebannering and expects only a limited number of additional conversions over the next two years.
• Store closures and charges: The retailer plans to close 12 to 14 stores in fiscal 2026 and another 6 to 10 in fiscal 2027, mostly Shoe Carnival locations. The review and CEO transition produced $13.6 million in pre-tax charges, while first-quarter GAAP results showed a $5.6 million loss.
• Guidance held despite weak quarter: Q1 net sales fell to $270.7 million and comparable store sales declined 2.1%, but Shoe Carnival reaffirmed fiscal 2026 guidance for $1.125 billion to $1.147 billion in sales and adjusted EPS of $1.40 to $1.60. Management says the second half should improve as assortment changes and back-to-school/fall demand kick in.

Shoe Carnival NASDAQ: SCVL said it is keeping both its Shoe Carnival and Shoe Station banners as permanent, separate concepts after completing a strategic review that also led management to slow its rebannering program and plan store closures over the next two years.

Interim President and Chief Executive Officer Cliff Sifford, who returned to the role in late February, told investors on the company’s fiscal first-quarter 2026 earnings call that the review found the two banners serve distinct customer segments. He said Shoe Carnival is not pursuing a single-banner strategy and expects only a limited number of additional conversions from Shoe Carnival to Shoe Station over the next two years.

“The Shoe Carnival and Shoe Station banners each serve distinct consumer segments, and the company is best positioned to operate both banners as permanent, independent components of our portfolio,” Sifford said.

Strategic Review Leads to Store Closures

Sifford said the company identified underperforming locations that do not have a path to acceptable economics, regardless of whether they are converted to another banner. Shoe Carnival expects to close 12 to 14 stores during fiscal 2026 and another 6 to 10 stores during fiscal 2027.

Chief Operating Officer Marc Chilton said during the question-and-answer session that the current store base includes 281 Shoe Carnival stores and 145 Shoe Station stores, for a total of 426. He said most of the planned fiscal 2026 closures are Shoe Carnival locations, with one Shoe Station store currently slated to close. Chilton said the company expects to close five stores in the second quarter, two in the third quarter and five to seven in the fourth quarter.

The company recorded approximately $8 million of strategic review charges in the first quarter tied to store impairments, fixed asset write-offs and related lease costs. Chief Financial Officer Kerry Jackson said total pre-tax charges associated with the CEO transition and strategic review were $13.6 million, including $5.3 million related to the CEO transition and $8.3 million tied to the review.

First-Quarter Results Include GAAP Loss, Adjusted Profit

On a GAAP basis, Shoe Carnival reported a first-quarter net loss of $5.6 million, or $0.21 per diluted share. Excluding the CEO transition and strategic review charges, the company reported adjusted net income of $6.2 million, or $0.23 per diluted share. Jackson said the adjusted EPS matched consensus expectations.

Net sales were $270.7 million, compared with $277.7 million in the first quarter of fiscal 2025. Total comparable store sales declined 2.1%.

• Shoe Carnival banner: Net sales were $177.3 million, down 2.2% from the prior-year quarter. Comparable store sales declined approximately 1.7%.
• Shoe Station banner: Net sales were $93.4 million, down 3.1%. Comparable store sales declined approximately 2.9%.

Gross profit margin was 33.3%, down about 120 basis points from the prior-year quarter. Jackson said merchandise margin declined about 140 basis points, primarily due to increased promotional activity and higher e-commerce shipping costs, partially offset by lower buying, distribution and occupancy costs.

Adjusted selling, general and administrative expense was $82.5 million, down approximately $1.3 million from the prior-year quarter. On a GAAP basis, SG&A rose to $96.1 million because of the transition and review charges.

Assortment Issues Cited at Both Banners

Sifford said the company’s first-quarter performance reflected consumer pressure as well as product positioning issues at both banners. He said adult athletic, men’s non-athletic, women’s non-athletic and children’s footwear were each down low single digits in the quarter, which management viewed as evidence of broad pressure on shoppers rather than weakness in a single category.

At Shoe Carnival stores, Sifford said merchandising had shifted toward higher price points and a more moderate-income customer, underserving value-focused families and fast-fashion customers. He said the company is working to restore competitive opening price points and a more deliberate promotional cadence.

At Shoe Station, Sifford said converted stores had been given a uniform assortment based on the legacy Shoe Station model, which is more premium and brand-led. That assortment performed well in markets where demographics aligned, but did not resonate in all converted locations. Chief Merchandising Officer Tanya Gordon said the company is adjusting assortments by market and store, with changes expected to become more visible during back-to-school and fall.

Gordon said roughly 60% to 65% of the assortment remains similar because of national brands, but the penetration of brands and price points will vary by customer base. She said Shoe Carnival will lean more heavily into value and younger fast-fashion products, while Shoe Station will target a more mature customer seeking brands at a value.

Management Reaffirms Fiscal 2026 Guidance

Shoe Carnival reaffirmed its fiscal 2026 outlook. The company continues to expect net sales of $1.125 billion to $1.147 billion, representing a range of down 1% to up 1% versus fiscal 2025. Adjusted diluted EPS is expected to be $1.40 to $1.60.

The company also reiterated expectations for gross profit margin of approximately 34%, representing about 260 basis points of compression compared with fiscal 2025, and adjusted SG&A reductions of $12 million to $14 million versus fiscal 2025. The adjusted effective tax rate is expected to be approximately 26%.

Jackson said the company still expects the first half of the year to be down and the second half to improve, with back-to-school and fall representing the bulk of the annual earnings opportunity. He said second-quarter gross margin will face pressure from last year’s higher merchandise margin comparison, promotional activity and inventory liquidation efforts.

Sifford said the company expects corrective actions to begin showing in athletic categories during back-to-school and in non-athletic categories during the fall. He also said the consumer environment remains challenging, particularly for moderate-income households facing higher costs for fuel, food and other essentials.

Debt-Free Balance Sheet Supports Plan

Shoe Carnival ended the first quarter with $129.3 million in cash, cash equivalents and marketable securities, up $36.4 million, or about 39%, from the prior-year quarter. The company had no debt.

Operating cash flow increased $32.7 million from the first quarter of fiscal 2025, while capital expenditures declined by about $3 million to $10.4 million, reflecting the slower pace of rebannering. Merchandise inventories were $417.2 million at quarter-end, down approximately $11 million from the prior year. Jackson said the company still expects inventory to decline by $50 million to $65 million by the end of fiscal 2026 compared with the end of fiscal 2025.

The company returned approximately $12 million to shareholders during the quarter through dividends and share repurchases. It paid a quarterly dividend of $0.17 per share, up 13.3% from the prior-year quarter, and repurchased 390,492 shares for about $7 million at an average price of $17.93. Jackson said approximately $43 million remained available under the company’s share repurchase authorization at quarter-end.

Looking ahead, Sifford said Shoe Carnival plans selective new store growth beginning in fiscal 2027, with 3 to 5 new stores planned that year and 8 to 10 in fiscal 2028. He said those stores will primarily be Shoe Station locations in suburban trade areas within the company’s existing 35-state footprint where demographics support the concept.

About Shoe Carnival NASDAQ: SCVL

Shoe Carnival, Inc 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.

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