Shoe Carnival, Inc. (NASDAQ:SCVL) Q2 2023 Results Conference Call August 29, 2023 8:30 AM ET Company Participants Mark Worden - President, CEO Carl Scibetta - Chief Merchandising Officer Erik Gast - Chief Financial Officer Conference Call Participants Mitch Kummetz - Seaport Research Sam Poser - Williams Trading Operator Good morning, and welcome to Shoe Carnival's Second Quarter 2023 Earnings Conference Call. Today's conference is being recorded. It is also being broadcast via webcast. Any reproduction or ...

[Part I - Financial Information](index=3&type=section&id=Part%20I%20-%20Financial%20Information) [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents Shoe Carnival, Inc.'s unaudited condensed consolidated financial statements, including balance sheets, income statements, shareholders' equity, cash flows, and detailed notes on presentation, net income per share, fair value, stock-based compensation, revenue, and leases [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) | (In thousands) | April 29, 2023 | January 28, 2023 | April 30, 2022 | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $32,587 | $51,372 | $86,179 | | Merchandise inventories | $389,508 | $390,390 | $345,021 | | Total Current Assets | $453,550 | $469,723 | $471,199 | | Total Assets | $976,629 | $989,781 | $861,734 | | Total Current Liabilities | $135,244 | $157,285 | $199,367 | | Total Liabilities | $438,949 | $464,213 | $406,020 | | Total Shareholders' Equity | $537,680 | $525,568 | $455,714 | [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) | (In thousands, except per share data) | Thirteen Weeks Ended April 29, 2023 | Thirteen Weeks Ended April 30, 2022 | | :--- | :--- | :--- | | Net sales | $281,184 | $317,527 | | Gross profit | $98,517 | $112,863 | | Operating income | $20,939 | $35,384 | | Net income | $16,526 | $26,897 | | Basic Net income per share | $0.61 | $0.96 | | Diluted Net income per share | $0.60 | $0.95 | [Condensed Consolidated Statements of Shareholders' Equity](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders%27%20Equity) | (In thousands) | Balance at January 28, 2023 | Dividends declared | Net income | Balance at April 29, 2023 | | :--- | :--- | :--- | :--- | :--- | | Total Shareholders' Equity | $525,568 | $(2,780) | $16,526 | $537,680 | | (In thousands) | Balance at January 29, 2022 | Dividends declared | Net income | Balance at April 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Total Shareholders' Equity | $452,533 | $(2,561) | $26,897 | $455,714 | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) | (In thousands) | Thirteen Weeks Ended April 29, 2023 | Thirteen Weeks Ended April 30, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $2,052 | $17,703 | | Net cash used in investing activities | $(15,026) | $(23,873) | | Net cash used in financing activities | $(5,811) | $(25,094) | | Net decrease in cash and cash equivalents | $(18,785) | $(31,264) | | Cash and cash equivalents at end of period | $32,587 | $86,179 | [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [Note 1 – Basis of Presentation](index=7&type=section&id=Note%201%20%E2%80%93%20Basis%20of%20Presentation) - Shoe Carnival, Inc. operates as a leading omnichannel family footwear retailer across **35** U.S. states, Puerto Rico, and its e-commerce platform[20](index=20&type=chunk) - The company offers a broad assortment of branded footwear and accessories for all ages under its Shoe Carnival and Shoe Station banners[20](index=20&type=chunk) [Note 2 - Net Income Per Share](index=7&type=section&id=Note%202%20-%20Net%20Income%20Per%20Share) | (In thousands, except per share data) | April 29, 2023 | April 30, 2022 | | :--- | :--- | :--- | | Basic Net Income per Share | $0.61 | $0.96 | | Diluted Net Income per Share | $0.60 | $0.95 | | Basic Weighted Average Shares | 27,223 | 27,996 | | Diluted Weighted Average Shares | 27,505 | 28,331 | - Approximately **1,000** unvested stock-based awards were excluded from diluted net income per share computation for Q1 2023 due to their anti-dilutive impact[22](index=22&type=chunk) [Note 3 - Fair Value Measurements](index=8&type=section&id=Note%203%20-%20Fair%20Value%20Measurements) | (In thousands) | April 29, 2023 | January 28, 2023 | April 30, 2022 | | :--- | :--- | :--- | :--- | | Cash equivalents - money market mutual funds | $29,456 | $45,265 | $90,598 | | Marketable securities - mutual funds that fund deferred compensation | $11,535 | $11,601 | $10,965 | | Total Fair Value Measurements | $40,991 | $56,866 | $101,563 | - The company recognized cumulative unrealized losses of **$2.6 million** on equity securities held as of April 29, 2023[24](index=24&type=chunk) - No impairment charges were recorded for long-lived assets during Q1 2023 or Q1 2022[26](index=26&type=chunk) [Note 4 - Stock-Based Compensation](index=8&type=section&id=Note%204%20-%20Stock-Based%20Compensation) | (In thousands) | Thirteen Weeks Ended April 29, 2023 | Thirteen Weeks Ended April 30, 2022 | | :--- | :--- | :--- | | Total stock-based compensation expense | $1,209 | $1,240 | - As of April 29, 2023, **$10.9 million** of unrecognized compensation expense for share-settled equity awards is expected to be recognized over approximately **2.4 years**[28](index=28&type=chunk) | Share-Settled Equity Awards | Number of Shares (April 29, 2023) | Weighted Average Grant Date Fair Value (April 29, 2023) | | :--- | :--- | :--- | | Outstanding at January 28, 2023 | 560,323 | $23.27 | | Granted | 370,653 | $24.98 | | Vested | (282,927) | $16.83 | | Forfeited | (10,420) | $30.00 | | Outstanding at April 29, 2023 | 637,629 | $27.01 | [Note 5 – Revenue](index=9&type=section&id=Note%205%20%E2%80%93%20Revenue) | (In thousands) | Thirteen Weeks Ended April 29, 2023 | % of Net Sales | Thirteen Weeks Ended April 30, 2022 | % of Net Sales | | :--- | :--- | :--- | :--- | :--- | | Non-Athletics | $142,732 | 51% | $159,111 | 50% | | Athletics | $122,853 | 44% | $140,791 | 44% | | Accessories | $14,548 | 5% | $15,752 | 5% | | Other | $1,051 | 0% | $1,873 | 1% | | Total Net Sales | $281,184 | 100% | $317,527 | 100% | - Revenue is recognized at the point of sale for in-store and 'buy online, pick up in store' transactions, and upon shipment for e-commerce home deliveries[32](index=32&type=chunk) - The Shoe Perks rewards program allocates transaction price, recognizing revenue for loyalty points based on estimated redemptions and expirations[39](index=39&type=chunk) [Note 6 – Leases](index=11&type=section&id=Note%206%20%E2%80%93%20Leases) - All physical stores, the distribution center, and office space are leased and classified as operating leases[40](index=40&type=chunk) | (In thousands) | Thirteen Weeks Ended April 29, 2023 | Thirteen Weeks Ended April 30, 2022 | | :--- | :--- | :--- | | Operating lease cost | $15,872 | $14,699 | | Variable lease cost (CAM, property taxes, insurance) | $5,352 | $4,761 | | Percentage rent and other variable lease costs | $243 | $193 | | Total Lease Costs | $21,467 | $19,653 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=12&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's Q1 2023 financial condition and results, covering sales, profitability, expenses, liquidity, cash flows, capital resources, store strategy, and credit agreement details [Factors That May Affect Future Results](index=12&type=section&id=Factors%20That%20May%20Affect%20Future%20Results) - Future results are subject to various factors including cost control, labor, promotions, economic downturns, the Shoe Station acquisition, security, retail environment changes, online competition, inventory, supplier relations, trade policies, competition, marketing, real estate, weather, consumer trends, IT disruptions, natural disasters, public health, seasonality, cybersecurity, and business strategy execution[42](index=42&type=chunk) [Overview of Our Business](index=12&type=section&id=Overview%20of%20Our%20Business) - Shoe Carnival, Inc. operates as an omnichannel family footwear retailer under Shoe Carnival and Shoe Station banners, aiming to be the preferred retailer for on-trend branded footwear[45](index=45&type=chunk) - The Shoe Carnival banner offers competitive pricing and a high-energy in-store experience, while Shoe Station targets affluent customers with a larger format and focus on emerging fashion[47](index=47&type=chunk)[48](index=48&type=chunk) - Distinctive shopping experiences provide competitive advantages, including increased multiple unit sales, a loyal customer base, word-of-mouth advertising, and enhanced sell-through of in-season goods[49](index=49&type=chunk) [Critical Accounting Policies](index=13&type=section&id=Critical%20Accounting%20Policies) - No material changes occurred in critical accounting policies, including Merchandise Inventories, long-lived assets, goodwill, intangible assets, leases, and income taxes, as detailed in the Annual Report on Form 10-K[50](index=50&type=chunk) [Results of Operations Summary Information](index=13&type=section&id=Results%20of%20Operations%20Summary%20Information) | Quarter Ended | Number of Stores (End of Period) | Net Change in Store Square Footage | Comparable Store Sales | | :--- | :--- | :--- | :--- | | April 29, 2023 | 397 | 5,000 | (11.9)% | | April 30, 2022 | 395 | 31,000 | (10.6)% | - Comparable store sales include e-commerce, with the original **21** Shoe Station stores and www.shoestation.com included in calculations from Q1 2023[51](index=51&type=chunk) [Executive Summary for First Quarter Ended April 29, 2023](index=14&type=section&id=Executive%20Summary%20for%20First%20Quarter%20Ended%20April%2029%2C%202023) - Diluted net income per share decreased to **$0.60** in Q1 2023 from **$0.95** in Q1 2022, primarily due to an **11.4%** reduction in Net Sales[54](index=54&type=chunk) - Reduced footwear demand stemmed from persistent inflation, a nearly **9%** reduction in federal tax refunds, and unfavorable weather, causing a **23%** decline in spring seasonal product sales[54](index=54&type=chunk) - Despite reduced sales, Q1 2023 was a top-three first quarter, with CRM investments sustaining gross profit margin above **35%**, growing loyalty customers by over **12%** to **32.7 million**, and increasing store conversion to a seven-quarter high[55](index=55&type=chunk)[58](index=58&type=chunk) - Merchandise Inventories were **$44.5 million** higher year-over-year but decreased from **$105.2 million** higher at year-end fiscal 2022, with a goal to reduce inventories by approximately **$40 million** by year-end fiscal 2023[55](index=55&type=chunk) - The company ended Q1 2023 with **397** stores (**372** Shoe Carnival, **25** Shoe Station), opened one Shoe Station store and its e-commerce site, and plans to operate over **400** stores in Q3 2023[57](index=57&type=chunk) [Results of Operations Comparison (Q1 2023 vs. Q1 2022)](index=14&type=section&id=Results%20of%20Operations%20for%20First%20Quarter%20Ended%20April%2029%2C%202023%20Compared%20to%20First%20Quarter%20Ended%20April%2030%2C%202022) [Net Sales](index=14&type=section&id=Net%20Sales) | Metric | Q1 2023 | Q1 2022 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $281.2 million | $317.5 million | -11.4% | | Comparable Store Sales | -11.9% | N/A | N/A | | E-commerce sales as % of merchandise sales | 8% | 11% | -3 percentage points | - The **11.4%** decrease in Net Sales was primarily due to an **11.9%** comparable store sales decline, driven by decreased traffic in physical stores and e-commerce, attributed to persistent inflation, reduced federal tax refunds, and unfavorable weather[58](index=58&type=chunk) [Gross Profit](index=15&type=section&id=Gross%20Profit) | Metric | Q1 2023 | Q1 2022 | Change | | :--- | :--- | :--- | :--- | | Gross Profit | $98.5 million | $112.8 million | -$14.3 million | | Gross profit margin | 35.0% | 35.5% | -0.5 percentage points | | Merchandise margin | -30 basis points | N/A | N/A | | BDO costs impact on gross profit margin | -20 basis points | N/A | N/A | - Merchandise margin decreased due to increased promotional intensity on lower volumes, while buying, distribution, and occupancy (BDO) costs, though lower, decreased gross profit margin by **20 basis points**[59](index=59&type=chunk) [Selling, General and Administrative Expenses ("SG&A")](index=15&type=section&id=Selling%2C%20General%20and%20Administrative%20Expenses%20(%22SG%26A%22)) | Metric | Q1 2023 | Q1 2022 | Change | | :--- | :--- | :--- | :--- | | SG&A Expenses | $77.6 million | $77.5 million | +$0.1 million | | SG&A as % of Net Sales | 27.6% | 24.4% | +3.2 percentage points | - SG&A expenses remained nearly flat year-over-year, with higher depreciation from store modernization and healthcare costs offset by reduced selling costs[60](index=60&type=chunk) [Interest Income and Interest Expense](index=15&type=section&id=Interest%20Income%20and%20Interest%20Expense) - Net interest income increased income before taxes by **$0.5 million** in Q1 2023 compared to Q1 2022, driven by higher interest on invested cash and lower unused commitment fees[61](index=61&type=chunk) [Income Taxes](index=15&type=section&id=Income%20Taxes) | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Effective income tax rate | 22.6% | 23.8% | - The lower quarterly effective tax rate resulted primarily from a discrete item related to a higher stock-based compensation benefit leveraged over lower pre-tax income[62](index=62&type=chunk) - For fiscal year 2023, the company expects its tax rate to be between **24%** and **26%**, compared to **25.2%** in fiscal 2022[62](index=62&type=chunk) [Liquidity and Capital Resources](index=15&type=section&id=Liquidity%20and%20Capital%20Resources) [Cash Flow - Operating Activities](index=15&type=section&id=Cash%20Flow%20-%20Operating%20Activities) | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net cash generated from operating activities | $2.1 million | $17.7 million | | Working capital | $318.3 million | $271.8 million | | Current ratio | 3.4 | 2.4 | - The decrease in operating cash flow was primarily driven by decreased Net Sales in Q1 2023[64](index=64&type=chunk) - Working capital increased year-over-year due to lower Accounts Payable and higher Merchandise Inventory levels, partially offset by lower cash balances[65](index=65&type=chunk) [Cash Flow – Investing Activities](index=15&type=section&id=Cash%20Flow%20%E2%80%93%20Investing%20Activities) | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Purchases of property and equipment | $15.0 million | $26.9 million | | Marketable Securities balance | $11.5 million | $11.0 million | - Cash outflows for investing activities primarily consisted of capital expenditures for property and equipment, mainly for the store portfolio modernization plan[66](index=66&type=chunk) [Cash Flow – Financing Activities](index=16&type=section&id=Cash%20Flow%20%E2%80%93%20Financing%20Activities) | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net cash used in financing activities | $5.8 million | $25.1 million | | Share repurchases | $0 | $20.5 million | - The decrease in net cash used in financing activities was primarily due to no share repurchases in Q1 2023, compared to **$20.5 million** in Q1 2022[69](index=69&type=chunk) [Capital Expenditures](index=16&type=section&id=Capital%20Expenditures) - Capital expenditures for Fiscal 2023 are expected to be between **$60 million** and **$70 million**[70](index=70&type=chunk) - Approximately **$55 million to $60 million** is allocated for new stores and modernization, and **$5 million to $10 million** for distribution center/e-commerce upgrades, other store improvements, technology investments, and asset replacement[70](index=70&type=chunk) [Store Portfolio](index=16&type=section&id=Store%20Portfolio) - The company opened one Shoe Station store and closed one Shoe Carnival store in Q1 2023[71](index=71&type=chunk) - The growth strategy targets operating over **400** stores in Q3 2023 and over **500** stores by 2028 through organic and acquired growth, aiming to grow the Shoe Station banner to over **100** stores[71](index=71&type=chunk) [Credit Agreement](index=16&type=section&id=Credit%20Agreement) - The company has a **$100 million** Amended and Restated Credit Agreement, collateralized by inventory, expiring March 23, 2027, with SOFR-based interest[72](index=72&type=chunk) - Key covenants require a minimum net worth of **$250 million** and a consolidated interest coverage ratio of not less than **3.0 to 1.0**, with which the company complied as of April 29, 2023[72](index=72&type=chunk) - The Credit Agreement permits cash dividends and share repurchases of **$15 million** or less per fiscal year without restriction, provided no default exists[73](index=73&type=chunk) - No funds were borrowed or repaid under the Credit Agreement during Q1 2023, with borrowing capacity at **$99.3 million** as of April 29, 2023[74](index=74&type=chunk) [Dividends](index=17&type=section&id=Dividends) - The Board approved a Q1 2023 cash dividend of **$0.10 per share**, paid April 17, 2023, totaling **$2.9 million** returned to shareholders[76](index=76&type=chunk) - In Q1 2022, the dividend paid was **$0.09 per share**, totaling **$2.6 million**[76](index=76&type=chunk) [Share Repurchase Program](index=17&type=section&id=Share%20Repurchase%20Program) - The Board authorized a **$50.0 million** share repurchase program effective January 1, 2023, expiring December 31, 2023[78](index=78&type=chunk) - No share repurchases were made in Fiscal 2023 to date; however, **682,886** shares were repurchased at a cost of **$20.5 million** in Q1 2022[79](index=79&type=chunk) [Seasonality](index=17&type=section&id=Seasonality) - The company experiences three distinct peak selling periods: Easter, back-to-school, and Christmas, significantly impacting operating results[80](index=80&type=chunk) - Unanticipated decreases in demand or supply chain disruptions during peak seasons could negatively affect Net Sales, Gross Profit, and profitability[80](index=80&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=17&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section outlines the company's market risk exposure, primarily from variable interest rates on its credit agreement, noting no use of interest rate derivative instruments - The company is exposed to market risk due to variable interest rates on its Credit Agreement[81](index=81&type=chunk) - No interest rate derivative instruments are used to manage exposure to changes in market interest rates[81](index=81&type=chunk) - No borrowings were outstanding during the first quarter of 2023[81](index=81&type=chunk) [Item 4. Controls and Procedures](index=17&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of disclosure controls and procedures as of April 29, 2023, with no significant changes in internal control over financial reporting during the quarter - The CEO and CFO concluded that disclosure controls and procedures were effective as of April 29, 2023[82](index=82&type=chunk) - No significant changes in internal control over financial reporting occurred during the quarter ended April 29, 2023[83](index=83&type=chunk) [Part II - Other Information](index=18&type=section&id=Part%20II%20-%20Other%20Information) [Item 1A. Risk Factors](index=18&type=section&id=Item%201A.%20Risk%20Factors) This section states no material changes to risk factors previously disclosed in the company's Annual Report on Form 10-K - No material changes occurred to the risk factors outlined in the Annual Report on Form 10-K for the fiscal year ended January 28, 2023[85](index=85&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=18&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details equity security transactions, focusing on shares withheld for employee payroll tax and the status of the authorized share repurchase program | Period | Total Number of Shares Purchased (1) | Average Price Paid per Share | Total Number Of Shares Purchased as Part of Publicly Announced Programs (2) | Approximate Dollar Value of Shares that May Yet Be Purchased Under Programs (2) | | :--- | :--- | :--- | :--- | :--- | | January 29, 2023 to February 25, 2023 | 1,289 | $27.56 | 0 | $50,000,000 | | February 26, 2023 to April 1, 2023 | 113,985 | $25.37 | 0 | $50,000,000 | | April 2, 2023 to April 29, 2023 | 0 | $0.00 | 0 | $50,000,000 | | Total | 115,274 | N/A | 0 | N/A | - **115,274** shares were withheld by the company for employee payroll tax withholding upon the vesting of stock-based compensation awards[87](index=87&type=chunk) - The **$50.0 million** 2023 Share Repurchase Program, effective January 1, 2023, and expiring December 31, 2023, has **$50,000,000** remaining available for purchase[87](index=87&type=chunk) [Item 6. Exhibits](index=18&type=section&id=Item%206.%20Exhibits) This section provides a comprehensive index of all exhibits filed with the Quarterly Report on Form 10-Q, including corporate documents, agreements, certifications, and XBRL data - The exhibit index includes corporate documents, employment and stock award agreements, CEO and CFO certifications (Sarbanes-Oxley Act), and Inline XBRL financial statements[89](index=89&type=chunk) [Signature](index=19&type=section&id=Signature) [Signature](index=19&type=section&id=Signature) This section formally concludes the Quarterly Report on Form 10-Q with the signature of an authorized officer, confirming submission under the Securities Exchange Act of 1934 - The report was signed on June 2, 2023, by Erik D. Gast, Executive Vice President, Chief Financial Officer, and Treasurer, as the duly authorized officer and principal financial officer[91](index=91&type=chunk)

Shoe Carnival, Inc. (NASDAQ:SCVL) Q1 2023 Earnings Conference Call May 24, 2023 8:30 AM ET Company Participants Mark Worden - President and Chief Executive Officer Carl Scibetta - Senior Executive Vice President and Chief Merchandising Officer Erik Gast - Executive Vice President and Chief Financial Officer Conference Call Participants Mitch Kummetz - Seaport Research Operator Good morning and welcome to Shoe Carnival Inc.'s Fiscal Year 2023 First Quarter Earnings Call. Today’s conference is being recorded. ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K (Mark One) [X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended: January 28, 2023 or [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ____________________ to ____________________ Commission File Number: 0-21360 | Shoe Carnival, Inc. | | | | | --- | --- | --- | --- | | (Exact name of registran ...

Financial Data and Key Metrics Changes - The company reported net sales in Q4 of $290.8 million, an increase of $50.9 million or 21.2% compared to Q4 2019, driven by sales from the Shoe Station banner and a comparable store sales increase of 12.6% from the Shoe Carnival banner [27] - Gross profit margins increased by 700 basis points for the year and 920 basis points for Q4 compared to three years prior, with Q4 gross profit margin at 38.3%, the highest in the company's history [3][96] - Operating profit margins for the full year reached 11.6%, up from 5.2% three years ago, and have been sustained over 11% for the last two years [4][78] Business Line Data and Key Metrics Changes - Non-athletic sales saw a significant shift, with comparable sales in non-athletic categories up in the low 20s compared to 2019, while athletic footwear sales were up in the mid-singles [13] - Women's non-athletic sales were up in the high singles versus 2019, with casuals driving sales up in the mid-40s [13] - Men's non-athletic sales were up in the high 20s versus 2019, with men's casuals increasing over 60% [71] Market Data and Key Metrics Changes - The company grew its customer base to over 32 million, with loyalty membership surging over 34% from three years ago [10] - The company experienced a decline in sales for non-athletic categories compared to 2021, attributed to lower boot sales, while athletic sales were down in the low 20s [13] - Inventory at the end of Q4 was $390.4 million, up $130.9 million compared to Q4 2019, with a significant portion attributed to Shoe Station acquisitions [28] Company Strategy and Development Direction - The company plans to surpass 400 stores this year and aims to exceed 500 stores by 2028 through organic growth and targeted acquisitions [5] - The company is focused on a modernization program, with over 40% of the fleet complete, and plans to complete over 60% by the end of fiscal 2023 [25] - The company aims to become a multibillion-dollar retailer with top-tier profitability by 2028, leveraging both organic expansion and acquisitions [30][73] Management's Comments on Operating Environment and Future Outlook - Management noted a slow start to the spring season due to cooler weather and delayed consumer demand, but anticipates sales acceleration later in the spring and summer [76] - The company is mindful of the inflationary environment and economic uncertainty, adjusting capital investments conservatively for the first half of 2023 [66] - Management expressed confidence in the ability to execute growth strategies despite current economic challenges, expecting earnings per share to exceed $4 for 2023 [70] Other Important Information - The company reported zero debt at the end of 2022, marking the 18th consecutive year without debt [66] - The CFO, Kerry Jackson, is retiring after 35 years of service, with Erik Gast set to take over [12] Q&A Session Summary Question: What is the sales trend for Q1? - Management indicated that Q1 sales are expected to be down mid-singles, with a decline in EPS compared to the previous year [32][80] Question: What was the gross margin in Q4? - The gross margin in Q4 was reported as the strongest in three years, with a 250 basis point increase in merchandise margin [52][96] Question: How is the company managing inventory? - Management stated that inventory levels are in line, with no need for deep discounts to liquidate goods, and they are working closely with vendors to maintain freshness [50][65]

[Report Information](index=1&type=section&id=Report%20Information) This section details the company's Form 10-Q filing information and the number of common shares outstanding [Filing Details](index=1&type=section&id=Filing%20Details) This section details the company's Form 10-Q filing as an Accelerated Filer, with common stock traded on Nasdaq - The report is a Quarterly Report on Form 10-Q for the period ended October 29, 2022[2](index=2&type=chunk) - Shoe Carnival, Inc. (SCVL) is an Accelerated Filer and its Common Stock is registered on The Nasdaq Stock Market LLC[3](index=3&type=chunk)[4](index=4&type=chunk) [Shares Outstanding](index=1&type=section&id=Shares%20Outstanding) This section reports Shoe Carnival, Inc.'s common stock shares outstanding as of November 23, 2022 - Number of Shares of Common Stock outstanding at November 23, 2022 was **27,166,175**[7](index=7&type=chunk) [Part I Financial Information](index=4&type=section&id=Part%20I%20Financial%20Information) This part presents unaudited financial statements and management's discussion on financial condition and operations [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents the unaudited condensed consolidated financial statements and their accompanying notes [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents the company's financial position, including assets, liabilities, and shareholders' equity | (In thousands) | October 29, 2022 | January 29, 2022 | October 30, 2021 | | :--------------- | :--------------- | :--------------- | :--------------- | | Total Assets | $966,336 | $812,264 | $786,509 | | Total Liabilities| $460,751 | $359,731 | $353,963 | | Total Shareholders' Equity | $505,585 | $452,533 | $432,546 | | Merchandise Inventories | $392,286 | $285,205 | $282,014 | [Condensed Consolidated Statements of Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) This section presents the company's financial performance, including net sales, gross profit, and net income Thirteen Weeks Ended | Metric (in thousands, except per share data) | October 29, 2022 | October 30, 2021 | | :----------------------------------------- | :--------------- | :--------------- | | Net sales | $341,661 | $356,336 | | Gross profit | $130,849 | $144,056 | | Operating income | $43,577 | $62,424 | | Net income | $32,652 | $46,836 | | Diluted Net income per share | $1.18 | $1.64 | Thirty-nine Weeks Ended | Metric (in thousands, except per share data) | October 29, 2022 | October 30, 2021 | | :----------------------------------------- | :--------------- | :--------------- | | Net sales | $971,456 | $1,017,023 | | Gross profit | $356,842 | $409,966 | | Operating income | $117,750 | $179,741 | | Net income | $88,458 | $134,290 | | Diluted Net income per share | $3.17 | $4.69 | [Condensed Consolidated Statements of Shareholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Equity) This section outlines changes in shareholders' equity, including treasury stock and dividends declared Shareholders' Equity and Treasury Stock (in thousands) | Metric | October 29, 2022 | January 29, 2022 | October 30, 2021 | | :------------------------------------------------ | :--------------- | :--------------- | :--------------- | | Total Shareholders' Equity | $505,585 | $452,533 | $432,546 | | Treasury stock, at cost (shares) | (211,676) (13,883,015) | (182,045) (12,882,789) | (182,061) (12,883,917) | | Dividends declared (39 weeks ended Oct 29, 2022) | $(7,622) ($0.27/share) | N/A | $(6,043) ($0.21/share) | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section presents cash inflows and outflows from operating, investing, and financing activities Cash Flows (Thirty-nine Weeks Ended, in thousands) | Metric | October 29, 2022 | October 30, 2021 | | :-------------------------------------- | :--------------- | :--------------- | | Net cash provided by operating activities | $18,947 | $120,478 | | Net cash used in investing activities | $(59,223) | $(37,846) |\n| Net cash used in financing activities | $(39,999) | $(15,800) | | Net (decrease) increase in cash and cash equivalents | $(80,275) | $66,832 | | Cash and cash equivalents at end of period | $37,168 | $173,364 | - The significant decrease in net cash from operating activities was primarily due to increased inventory purchases in 2022 compared to higher earnings in 2021[19](index=19&type=chunk) - Investing activities saw increased cash outflow due to higher purchases of property and equipment (**$63.6 million** in 2022 vs **$20.4 million** in 2021)[19](index=19&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides additional information and explanations for the condensed consolidated financial statements [Note 1 – Basis of Presentation](index=8&type=section&id=Note%201%20%E2%80%93%20Basis%20of%20Presentation) This note describes the company's business operations as a family footwear retailer with an omnichannel presence - Shoe Carnival, Inc. is a family footwear retailer operating Shoe Carnival and Shoe Station banners, with an omnichannel presence across 35 U.S. states, Puerto Rico, and e-commerce[21](index=21&type=chunk) [Note 2 - Acquisition of Shoe Station](index=8&type=section&id=Note%202%20-%20Acquisition%20of%20Shoe%20Station) This note details the acquisition of Shoe Station, including its cost, added locations, and net sales contribution - Acquired Shoe Station on December 3, 2021, for **$70.7 million**, adding 22 locations by October 29, 2022[23](index=23&type=chunk) - Shoe Station contributed **$22.2 million** in Net Sales for the thirteen weeks ended October 29, 2022, and **$75.6 million** for the thirty-nine weeks ended October 29, 2022[24](index=24&type=chunk) [Note 3 - Net Income Per Share](index=8&type=section&id=Note%203%20-%20Net%20Income%20Per%20Share) This note provides detailed calculations for basic and diluted net income per share for the reported periods Net Income Per Share (Thirteen Weeks Ended) | Metric | October 29, 2022 | October 30, 2021 | | :----- | :--------------- | :--------------- | | Basic EPS | $1.19 | $1.66 | | Diluted EPS | $1.18 | $1.64 | | Basic Shares (thousands) | 27,454 | 28,192 | | Diluted Shares (thousands) | 27,700 | 28,547 | Net Income Per Share (Thirty-nine Weeks Ended) | Metric | October 29, 2022 | October 30, 2021 | | :----- | :--------------- | :--------------- | | Basic EPS | $3.20 | $4.75 | | Diluted EPS | $3.17 | $4.69 | | Basic Shares (thousands) | 27,674 | 28,257 | | Diluted Shares (thousands) | 27,940 | 28,607 | - Approximately **290 thousand** (13 weeks) and **253 thousand** (39 weeks) unvested stock-based awards were excluded from diluted EPS calculations for October 29, 2022, as their impact would have been anti-dilutive[26](index=26&type=chunk) [Note 4 - Fair Value Measurements](index=9&type=section&id=Note%204%20-%20Fair%20Value%20Measurements) This note details fair value measurements for financial instruments and long-lived assets Fair Value Measurements (in thousands) | Instrument | October 29, 2022 | January 29, 2022 | October 30, 2021 | | :------------------------------------ | :--------------- | :--------------- | :--------------- | | Cash equivalents - money market mutual funds | $28,502 | $115,528 | $165,072 | | Marketable securities - mutual funds | $10,353 | $14,961 | $17,834 | | **Total** | **$38,855** | **$130,489** | **$182,906** | - Marketable securities, primarily equity-based mutual funds, are held to mitigate income statement volatility from the non-qualified deferred compensation plan, resulting in **$3.2 million** in unrealized losses as of October 29, 2022[27](index=27&type=chunk) - No impairment charges on long-lived assets were recorded during the thirteen and thirty-nine weeks ended October 29, 2022, compared to charges of **$15 thousand** and **$983 thousand** in the prior year periods[32](index=32&type=chunk) [Note 5 - Stock-Based Compensation](index=10&type=section&id=Note%205%20-%20Stock-Based%20Compensation) This note outlines the company's stock-based compensation expense and details share-settled equity awards Total Stock-Based Compensation Expense (in thousands) | Period | October 29, 2022 | October 30, 2021 | | :---------------- | :--------------- | :--------------- | | Thirteen Weeks | $1,795 | $1,432 | | Thirty-nine Weeks | $4,536 | $4,118 | - As of October 29, 2022, approximately **$9.3 million** of unrecognized compensation expense related to share-settled equity awards remains, expected to be recognized over a weighted average period of **1.4 years**[33](index=33&type=chunk) Share-Settled Equity Awards (Restricted Stock Units & Performance Stock Units) | Metric | Number of Shares | Weighted Average Grant Date Fair Value | | :----------------------------------- | :--------------- | :------------------------------------- | | Outstanding at January 29, 2022 | 457,038 | $16.54 | | Granted | 345,164 | $30.32 | | Vested | (178,425) | $18.26 | | Outstanding at October 29, 2022 | 598,674 | $23.91 | [Note 6 – Revenue](index=11&type=section&id=Note%206%20%E2%80%93%20Revenue) This note provides a breakdown of net sales by product category and explains revenue recognition policies Net Sales by Product Category (Thirteen Weeks Ended, in thousands) | Category | Oct 29, 2022 | % of Total | Oct 30, 2021 | % of Total | | :------------ | :----------- | :--------- | :----------- | :--------- | | Non-Athletics | $162,291 | 47% | $138,615 | 39% | | Athletics | $158,289 | 47% | $196,960 | 55% | | Accessories | $19,466 | 6% | $18,372 | 5% | | Other | $1,615 | 0% | $2,389 | 1% | | **Total** | **$341,661** | **100%** | **$356,336** | **100%** | Net Sales by Product Category (Thirty-nine Weeks Ended, in thousands) | Category | Oct 29, 2022 | % of Total | Oct 30, 2021 | % of Total | | :------------ | :----------- | :--------- | :----------- | :--------- | | Non-Athletics | $493,234 | 50% | $439,093 | 44% | | Athletics | $421,453 | 44% | $520,330 | 50% | | Accessories | $51,880 | 5% | $51,265 | 5% | | Other | $4,889 | 1% | $6,335 | 1% | | **Total** | **$971,456** | **100%** | **$1,017,023** | **100%** | - Revenue is recognized at the point of sale for physical stores and 'buy online, pick up in store' transactions, and upon shipment for e-commerce home deliveries[39](index=39&type=chunk) - Gift card breakage revenue recognized was **$54 thousand** (13 weeks) and **$162 thousand** (39 weeks) for October 29, 2022, while loyalty rewards recognized in Net Sales were **$1.5 million** (13 weeks) and **$4.1 million** (39 weeks) for the same period[45](index=45&type=chunk)[47](index=47&type=chunk) [Note 7 – Leases](index=13&type=section&id=Note%207%20%E2%80%93%20Leases) This note details the company's operating lease arrangements and associated lease costs - All physical stores, the distribution center, and certain Shoe Station operations are under operating leases[48](index=48&type=chunk) Total Lease Costs (in thousands) | Lease Cost Type | 13 Weeks Ended Oct 29, 2022 | 13 Weeks Ended Oct 30, 2021 | 39 Weeks Ended Oct 29, 2022 | 39 Weeks Ended Oct 30, 2021 | | :-------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Operating lease cost | $15,398 | $13,520 | $45,040 | $40,272 | | Variable lease cost (CAM, taxes, insurance) | $4,876 | $4,746 | $14,305 | $14,375 | | Percentage rent and other variable | $479 | $713 | $973 | $2,413 | | **Total** | **$20,753** | **$18,979** | **$60,318** | **$57,060** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=14&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's analysis of financial condition, operational results, and strategic initiatives [Factors That May Affect Future Results](index=14&type=section&id=Factors%20That%20May%20Affect%20Future%20Results) This section outlines various risks and factors that may affect the company's future financial results - Future results are subject to risks including cost control, labor needs, COVID-19 impacts, Shoe Station acquisition integration, economic conditions, online competition, supply chain disruptions, and the ability to execute business strategy[50](index=50&type=chunk) [General](index=14&type=section&id=General) This section provides context for financial results, including comparisons to pre-pandemic periods - The MD&A provides context for Q3 and year-to-date 2022 results, including comparisons to pre-pandemic Q3 2019 due to the significant impact of the COVID-19 pandemic on fiscal 2020 and 2021[51](index=51&type=chunk) [Overview of Our Business](index=15&type=section&id=Overview%20of%20Our%20Business) This section describes the company's business model as an omnichannel family footwear retailer with two banners - The company operates as an omnichannel family footwear retailer under the Shoe Carnival and Shoe Station banners, offering a broad assortment of branded and private label footwear[53](index=53&type=chunk) - Shoe Carnival stores emphasize competitive pricing and a high-energy in-store experience, while Shoe Station targets a more affluent customer base with a focus on emerging fashion trends[54](index=54&type=chunk)[55](index=55&type=chunk) [Critical Accounting Policies](index=15&type=section&id=Critical%20Accounting%20Policies) This section highlights key accounting policies requiring significant judgment, including inventories and leases - Key accounting policies requiring significant judgment include Merchandise Inventories, valuation of long-lived assets, business combinations, leases, and income taxes, with no material changes since the last Annual Report on Form 10-K[57](index=57&type=chunk) [Results of Operations Summary Information](index=15&type=section&id=Results%20of%20Operations%20Summary%20Information) This section summarizes operational results, including store count, comparable store sales, and financial percentages Store Count and Comparable Store Sales | Period | Beginning of Period | Opened | Closed | End of Period | Net Change (Sq Ft) | End of Period (Sq Ft) | Comparable Store Sales | | :---------------- | :------------------ | :----- | :----- | :------------ | :----------------- | :-------------------- | :--------------------- | | Q3 2022 (Oct 29) | 395 | 0 | 0 | 395 | 0 | 4,450,000 | (9.9)% | | YTD 2022 (Oct 29) | 393 | 2 | 0 | 395 | 31,000 | 4,450,000 | (11.4)% | | Q3 2021 (Oct 30) | 378 | 0 | 1 | 377 | (7,000) | 4,105,000 | 30.1% | | YTD 2021 (Oct 30) | 383 | 1 | 7 | 377 | (41,000) | 4,105,000 | 41.6% | - Comparable store sales exclude Shoe Station and recently opened/closed Shoe Carnival physical stores, but include Shoe Carnival e-commerce sales[61](index=61&type=chunk) Results as Percentage of Net Sales | Metric | 13 Weeks Ended Oct 29, 2022 | 13 Weeks Ended Oct 30, 2021 | 39 Weeks Ended Oct 29, 2022 | 39 Weeks Ended Oct 30, 2021 | | :------------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net sales | 100.0% | 100.0% | 100.0% | 100.0% | | Cost of sales | 61.7% | 59.6% | 63.3% | 59.7% | | Gross profit | 38.3% | 40.4% | 36.7% | 40.3% | | Selling, general and administrative expenses| 25.5% | 22.9% | 24.6% | 22.6% | | Operating income | 12.8% | 17.5% | 12.1% | 17.7% | | Net income | 9.6% | 13.1% | 9.1% | 13.2% | [Executive Summary for Third Quarter Ended October 29, 2022](index=17&type=section&id=Executive%20Summary%20for%20Third%20Quarter%20Ended%20October%2029,%202022) This section provides an executive overview of the company's financial and operational performance for Q3 2022 - Diluted net income per share for Q3 2022 was **$1.18**, the second highest in company history, representing **151% growth** compared to Q3 2019[63](index=63&type=chunk) - Net Sales in Q3 2022 were **$341.7 million**, also the second highest ever, increasing **24.4%** compared to pre-pandemic Q3 2019[64](index=64&type=chunk) - Comparable store sales declined **9.9%** YoY due to reduced discretionary income (post-stimulus, inflation) and athletic inventory delays, but non-athletic sales increased **6.8%** YoY[65](index=65&type=chunk)[66](index=66&type=chunk) - Gross profit margin was **38.3%** in Q3 2022, a **740 basis point increase** over Q3 2019, driven by CRM and promotional strategy enhancements[66](index=66&type=chunk) - Shoe Station contributed **$22.2 million** in Net Sales for Q3 2022, and the Shoe Perks loyalty program grew to **31.5 million** members, including over **1 million** from Shoe Station[66](index=66&type=chunk) - Merchandise Inventories increased by **$94.3 million** over Q3 2019, with approximately **40%** attributed to Shoe Station and higher in-transit inventory[67](index=67&type=chunk) - The company ended Q3 2022 with **$47.5 million** in cash, cash equivalents, and marketable securities, with no outstanding credit facility borrowings[68](index=68&type=chunk) - **41%** of stores have been remodeled as part of a modernization plan, targeting over **50%** by summer 2023 and full completion by end of fiscal 2024[69](index=69&type=chunk) [Results of Operations for Third Quarter Ended October 29, 2022 Compared to Third Quarter Ended October 30, 2021](index=18&type=section&id=Results%20of%20Operations%20for%20Third%20Quarter%20Ended%20October%2029,%202022%20Compared%20to%20Third%20Quarter%20Ended%20October%2030,%202021) This section analyzes operational results for Q3 2022 compared to Q3 2021 - Net Sales decreased **4.1%** to **$341.7 million**, primarily due to a **9.9%** comparable store sales decline driven by fluctuations in discretionary income and athletic shoe availability, partially offset by new Shoe Station stores[70](index=70&type=chunk) - Gross Profit decreased by **$13.2 million** to **$130.8 million**, with gross profit margin falling to **38.3%** from **40.4%** due to increased buying, distribution, and occupancy costs and decreased merchandise margin[71](index=71&type=chunk) - SG&A expenses increased **$5.7 million** to **$87.3 million**, mainly due to Shoe Station operations and higher depreciation from store modernization, leading to an increase as a percentage of Net Sales from **22.9%** to **25.5%**[72](index=72&type=chunk) - The effective income tax rate for Q3 2022 was **25.6%**, up from **24.8%** in Q3 2021, with the full year 2022 tax rate expected between **25%** and **26%**[73](index=73&type=chunk) [Results of Operations Year-to-Date Through October 29, 2022 Compared to Year-to-Date Through October 30, 2021](index=18&type=section&id=Results%20of%20Operations%20Year-to-Date%20Through%20October%2029,%202022%20Compared%20to%20Year-to-Date%20Through%20October%2030,%202021) This section analyzes year-to-date operational results through October 29, 2022 versus the prior year - Net Sales decreased **4.5%** to **$971.5 million**, primarily due to an **11.4%** comparable store sales decline, influenced by reduced discretionary income and athletic shoe availability, partially offset by new Shoe Station stores[74](index=74&type=chunk)[75](index=75&type=chunk) - Gross Profit decreased by **$53.1 million** to **$356.8 million**, with gross profit margin falling to **36.7%** from **40.3%** due to increased buying, distribution, and occupancy costs and decreased merchandise margin[76](index=76&type=chunk) - SG&A expenses increased **$8.9 million** to **$239.1 million**, mainly due to Shoe Station operations and higher depreciation from store modernization, partially offset by lower incentive compensation, increasing as a percentage of Net Sales to **24.6%** from **22.6%**[77](index=77&type=chunk) - The effective income tax rate remained consistent at **25.1%** for both year-to-date periods[78](index=78&type=chunk) [Liquidity and Capital Resources](index=19&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's sources of liquidity, cash flow activities, and working capital position - Primary liquidity sources include **$47.5 million** in cash, cash equivalents, and marketable securities, and a **$100 million** credit facility[79](index=79&type=chunk) - Net cash from operating activities significantly decreased to **$18.9 million** (YTD 2022) from **$120.5 million** (YTD 2021), primarily due to increased inventory purchases in 2022[80](index=80&type=chunk) - Working capital decreased to **$300.7 million** (Oct 29, 2022) from **$333.8 million** (Oct 30, 2021), driven by lower cash balances, increased property/equipment investment, and higher share repurchases[81](index=81&type=chunk) - Net cash used in investing activities increased to **$59.2 million** (YTD 2022) from **$37.8 million** (YTD 2021), mainly due to **$63.6 million** in property and equipment purchases for store modernization[82](index=82&type=chunk) - Net cash used in financing activities increased to **$40.0 million** (YTD 2022) from **$15.8 million** (YTD 2021), primarily due to **$30.5 million** in share repurchases in 2022[86](index=86&type=chunk) [Capital Expenditures](index=20&type=section&id=Capital%20Expenditures) This section outlines projected capital expenditures for fiscal year 2022, categorized by purpose - Fiscal 2022 capital expenditures are projected to be **$70-$75 million**, with **$59-$62 million** allocated to new stores, relocations, and remodels, and **$11-$13 million** for e-commerce, technology, and asset replacement[87](index=87&type=chunk) [Store Portfolio](index=20&type=section&id=Store%20Portfolio) This section details the company's current store count, future expansion plans, and rationalization strategy - The company expects to operate **398 stores** (373 Shoe Carnival, 25 Shoe Station) by the end of fiscal 2022 and **400 stores** in the first half of 2023[88](index=88&type=chunk) - A long-term goal is to operate at least **500 stores** within the next three to five years (2026-2028), with the Shoe Station banner targeted to grow to over **100 stores**[88](index=88&type=chunk) - The store rationalization plan is complete, and no further significant store closures are anticipated in the coming years[89](index=89&type=chunk) [Credit Facility](index=20&type=section&id=Credit%20Facility) This section describes the company's $100 million credit facility, its terms, and compliance with covenants - A new **$100 million** Amended and Restated Credit Agreement was established on March 23, 2022, expiring March 23, 2027, collateralized by inventory[90](index=90&type=chunk) - The company had no borrowings outstanding under its credit facility during Q3 or YTD 2022, with a borrowing capacity of **$99.3 million** as of October 29, 2022[92](index=92&type=chunk) - The company was in compliance with all credit facility covenants, including maintaining a minimum net worth of **$250 million** and a consolidated interest coverage ratio of not less than **3.0 to 1.0**[90](index=90&type=chunk) [Dividends](index=21&type=section&id=Dividends) This section reports the cash dividends declared and paid to shareholders during the reported periods - A Q3 2022 cash dividend of **$0.090 per share** was paid, an increase from **$0.070 per share** in Q3 2021[94](index=94&type=chunk) - Year-to-date 2022, **$7.5 million** was returned to shareholders through dividends, compared to **$6.0 million** in the prior year period[94](index=94&type=chunk) [Share Repurchase Program](index=21&type=section&id=Share%20Repurchase%20Program) This section details the company's share repurchase program, including authorized amounts and shares repurchased - A **$50.0 million** share repurchase program was authorized by the Board of Directors, effective January 1, 2022, and expiring December 31, 2022[96](index=96&type=chunk) - During Q3 2022, **451,638 shares** were repurchased for **$10.0 million**, and year-to-date 2022, approximately **1.1 million shares** were repurchased for **$30.5 million**[97](index=97&type=chunk) - As of October 29, 2022, **$19.5 million** remained available for future repurchases under the program[97](index=97&type=chunk) [Seasonality](index=21&type=section&id=Seasonality) This section explains the impact of seasonal peak selling periods on operating results and inventory - The company experiences three distinct peak selling periods: Easter, back-to-school, and Christmas, which significantly impact operating results and require higher merchandise inventory levels[98](index=98&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=22&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company is exposed to market risk from variable interest rates on its credit facility but does not use derivative instruments to manage this exposure. No borrowings were outstanding during the reported periods - The company is exposed to market risk from variable interest rates on its credit facility but does not use interest rate derivative instruments[100](index=100&type=chunk) - No borrowings were outstanding under the credit facility during the third quarter or year-to-date 2022[100](index=100&type=chunk) [Item 4. Controls and Procedures](index=22&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls and procedures were effective as of October 29, 2022. The acquired Shoe Station operations were excluded from the internal control assessment for fiscal year 2022 but will be included in the next annual report - The CEO and CFO concluded that disclosure controls and procedures were effective as of October 29, 2022[101](index=101&type=chunk) - Shoe Station operations were excluded from management's assessment of internal control over financial reporting for the year ended January 29, 2022, but will be included in the Annual Report on Form 10-K for the year ending January 28, 2023[102](index=102&type=chunk) - There have been no significant changes in internal control over financial reporting during the quarter ended October 29, 2022[103](index=103&type=chunk) [Part II Other Information](index=23&type=section&id=Part%20II%20Other%20Information) This part includes disclosures on risk factors, equity security sales, exhibits, and the report's official signature [Item 1A. Risk Factors](index=23&type=section&id=ITEM%201A.%20RISK%20FACTORS) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended January 29, 2022 - No material changes to the risk factors set forth in the Annual Report on Form 10-K for the fiscal year ended January 29, 2022[106](index=106&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=23&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) This section details the company's share repurchase activities during the third quarter of 2022 under its authorized program, including the number of shares purchased and the remaining dollar value available for repurchases Issuer Purchases of Equity Securities (Q3 2022) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number Of Shares Purchased as Part of Publicly Announced Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under Programs | | :-------------------------------- | :----------------------------- | :--------------------------- | :-------------------------------------------------------------------- | :------------------------------------------------------------------------- | | Aug 28, 2022 to Oct 1, 2022 | 275,379 | $21.76 | 274,500 | $23,511,888 | | Oct 2, 2022 to Oct 29, 2022 | 177,138 | $22.73 | 177,138 | $19,485,041 | | **Total (Q3)** | **452,517** | | **451,638** | | - **879 shares** were withheld by the company for employee payroll tax withholding upon the vesting of stock-based compensation awards[111](index=111&type=chunk) - As of October 29, 2022, **$19.5 million** remained available under the **$50.0 million** 2022 Share Repurchase Program[97](index=97&type=chunk)[111](index=111&type=chunk) [Item 6. Exhibits](index=23&type=section&id=ITEM%206.%20EXHIBITS) This section lists all exhibits filed with the Form 10-Q, including corporate governance and financial statements - Exhibits include Amended and Restated Articles of Incorporation, By-laws, CEO and CFO certifications (pursuant to Sarbanes-Oxley Act), and XBRL formatted financial statements[110](index=110&type=chunk) [Signature](index=25&type=section&id=Signature) The report was duly signed on behalf of Shoe Carnival, Inc. by W. Kerry Jackson, Senior Executive Vice President, Chief Financial and Administrative Officer and Treasurer, on December 2, 2022 - The report was signed by W. Kerry Jackson, Senior Executive Vice President, Chief Financial and Administrative Officer and Treasurer, on December 2, 2022[114](index=114&type=chunk)

Financial Data and Key Metrics Changes - Earnings per share (EPS) for the first nine months of fiscal 2022 reached $3.17, more than double any full year of earnings in the company's 44-year history except for one [5] - Q3 EPS was $1.18, exceeding consensus expectations, with operating profit margins at 12.8%, the highest of the year [6][7] - Q3 net sales were $341.7 million, a 24.4% increase compared to Q3 2019, marking the second highest quarterly sales in the company's history [34] - Gross profit margin for Q3 was 38.3%, a 740 basis point increase compared to Q3 2019 [35] - Net income for Q3 was $32.7 million, representing a 151% increase compared to Q3 2019 [37] Business Line Data and Key Metrics Changes - Non-athletic sales were up 35.1% compared to 2019, while athletic sales stabilized with a 4.4% increase [11] - Sales in non-athletic categories were up in the mid-30s versus 2019, with children's non-athletic sales up in the high 60s [29] - The company experienced a 50/50 sales balance between athletic and non-athletic categories, shifting 700 basis points towards non-athletic compared to 2019 [23] Market Data and Key Metrics Changes - Customer count for loyalty membership surpassed 31.5 million, up approximately 35% compared to 2019 [10] - The company achieved a 21.9% increase in overall sales for the first nine months of fiscal 2022 compared to 2019 [10] Company Strategy and Development Direction - The company is modernizing its store fleet, with 41% of stores modernized as of Q3 2022, aiming for over 50% by summer 2023 [14] - Shoe Station banner is expected to exceed original sales expectations of $100 million, with sales surpassing $75 million during the first nine months of 2022 [15] - Plans to expand the store footprint to over 400 locations in 2023 and target 500-plus stores by 2026 to 2028 [21] Management's Comments on Operating Environment and Future Outlook - Management anticipates a historically high inflationary environment affecting customer disposable incomes and traffic in Q4 [13] - Despite challenges, the company is confident in achieving its EPS and strategic targets for the remainder of fiscal 2022 [41] Other Important Information - The company repurchased 451,638 shares at a total cost of $10 million during Q3 [39] - Inventory at the end of Q3 was $392.3 million, up $94.3 million compared to Q3 2019, with 40% of the increase attributed to Shoe Station [38] Q&A Session Summary Question: Can you provide the merchandise margin and BD&O leverage year-over-year? - Merchandise margin increased 760 basis points for the quarter, and BD&O was de-leveraged by 20 basis points [45] Question: Can you discuss inventory levels and optimum inventory turn? - The company is comfortable with current inventory levels and plans to achieve goals with the Shoe Station banner coming online [48] Question: How is the supply chain situation improving? - The company is seeing more consistent on-time deliveries across all categories, with improved inventory levels for Q4 [53] Question: What are the trends in athletic versus non-athletic sales? - Historically, non-athletic sales tend to increase in the fourth quarter, with a potential shift towards 60/40 non-athletic sales [57] Question: What is the expected launch date for the e-commerce platform? - The launch of ShoeStation.com is in the final testing phase, expected to launch just in time for the holiday season or early Q1 [84] Question: How are merchandise margins holding up against industry promotional activity? - The company is not seeing significant increases in promotional activity compared to competitors, maintaining strong margins [85]

[Part I - Financial Information](index=3&type=section&id=Part%20I%20Financial%20Information) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The unaudited condensed consolidated financial statements for Q2 2022 detail the company's financial position, operations, and cash flows, showing decreased net sales and income, increased inventories, and reduced operating cash flow, incorporating the Shoe Station acquisition [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets increased to **$914.5 million** driven by higher merchandise inventories, while cash and cash equivalents decreased, and total liabilities and shareholders' equity grew Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | July 30, 2022 | January 29, 2022 | July 31, 2021 | | :--- | :--- | :--- | :--- | | **Assets** | | | | | Cash and cash equivalents | $51,620 | $117,443 | $146,506 | | Merchandise inventories | $385,510 | $285,205 | $308,141 | | Total Current Assets | $476,932 | $442,032 | $493,080 | | Total Assets | $914,515 | $812,264 | $784,056 | | **Liabilities & Equity** | | | | | Total Current Liabilities | $189,242 | $153,708 | $194,389 | | Total Liabilities | $430,883 | $359,731 | $394,144 | | Total Shareholders' Equity | $483,632 | $452,533 | $389,912 | [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) For Q2 2022, net sales decreased to **$312.3 million**, leading to a decline in gross profit and net income to **$28.9 million**, or **$1.04** per diluted share Income Statement Summary (in thousands, except per share data) | Metric | Thirteen Weeks Ended July 30, 2022 | Thirteen Weeks Ended July 31, 2021 | | :--- | :--- | :--- | | Net sales | $312,268 | $332,230 | | Gross profit | $113,130 | $135,752 | | Operating income | $38,789 | $59,714 | | Net income | $28,909 | $44,212 | | Diluted EPS | $1.04 | $1.54 | [Condensed Consolidated Statements of Shareholders' Equity](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Equity) Shareholders' equity increased to **$483.6 million** by July 30, 2022, driven by net income, partially offset by **$20.5 million** in stock repurchases and **$5.1 million** in dividends - For the twenty-six weeks ended July 30, 2022, the company repurchased **$20.5 million** of its common stock for treasury[18](index=18&type=chunk) - Dividends declared for the first half of 2022 amounted to **$5.1 million**, or **$0.18** per share[18](index=18&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities sharply decreased to **$8.9 million** for the first half of 2022 due to increased inventories, while investing and financing activities used **$47.2 million** and **$27.6 million** respectively Cash Flow Summary (in thousands) | Cash Flow Activity | Twenty-six Weeks Ended July 30, 2022 | Twenty-six Weeks Ended July 31, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $8,918 | $79,847 | | Net cash used in investing activities | ($47,169) | ($29,619) | | Net cash used in financing activities | ($27,572) | ($10,254) | | Net (decrease) increase in cash | ($65,823) | $39,974 | [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail financial statement policies, the Shoe Station acquisition contributing **$27.2 million** in Q2 2022 net sales, and revenue disaggregation showing a shift from athletic to non-athletic footwear - The acquisition of Shoe Station on December 3, 2021, contributed net sales of **$27.2 million** in Q2 2022 and **$53.4 million** in the first half of 2022[26](index=26&type=chunk)[27](index=27&type=chunk) Revenue by Product Category - Q2 2022 vs Q2 2021 (as % of Net Sales) | Category | Q2 2022 % | Q2 2021 % | | :--- | :--- | :--- | | Non-Athletics | 55% | 48% | | Athletics | 40% | 47% | | Accessories | 5% | 5% | Total Lease Costs (in thousands) | Period | Thirteen Weeks Ended July 30, 2022 | Thirteen Weeks Ended July 31, 2021 | | :--- | :--- | :--- | | Total Lease Cost | $19,911 | $19,343 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=14&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q2 2022 financial results, noting decreased sales and earnings from 2021 due to inflation and supply chain issues, yet remaining above pre-pandemic levels, while highlighting the Shoe Station acquisition and ongoing store modernization [Results of Operations](index=15&type=section&id=Results%20of%20Operations) Q2 2022 net sales decreased **6.0%** to **$312.3 million** due to a **13.8%** comparable store sales decline, while gross profit margin fell to **36.2%** due to higher costs and deleveraging - Q2 2022 net sales decreased **6.0%** YoY, driven by a **13.8%** decline in comparable store sales[75](index=75&type=chunk) - Gross profit margin decreased by **470 basis points** to **36.2%** in Q2 2022, primarily due to a **280 basis point** drop in merchandise margin and a **180 basis point** increase in buying, distribution, and occupancy costs as a percentage of sales[76](index=76&type=chunk) - Compared to pre-pandemic Q2 2019, Q2 2022 net sales increased **16.4%** and comparable store sales increased **8.0%**[68](index=68&type=chunk) [Liquidity and Capital Resources](index=18&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with **$62.6 million** in cash and no credit facility borrowings, projecting **$63-73 million** in capital expenditures for fiscal 2022, while operating cash flow decreased due to inventory increases - Primary sources of liquidity are **$62.6 million** in cash and securities, cash from operations, and a **$100 million** credit facility with no outstanding borrowings[83](index=83&type=chunk) - Fiscal 2022 capital expenditures are expected to be between **$63 million** and **$73 million**, primarily for new stores, relocations, and remodels[90](index=90&type=chunk) - Year-to-date 2022, the company repurchased **$20.5 million** of common stock and had **$29.5 million** remaining under its authorization[101](index=101&type=chunk) [Store Portfolio and Strategy](index=19&type=section&id=Store%20Portfolio%20and%20Strategy) The company is modernizing its store fleet by fiscal 2024 and plans to expand to **400** stores by the end of fiscal 2022, accelerating new openings to over **25** annually by fiscal 2024 - A store modernization program is underway, with a goal to complete the entire fleet by the end of **fiscal 2024**[74](index=74&type=chunk) - The company plans to reach **400** stores by the end of fiscal 2022 and add over **25** new stores annually by **fiscal 2024**[92](index=92&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=20&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's market risk from variable interest rates on its credit facility is currently immaterial due to no outstanding borrowings and no use of derivative instruments - The primary market risk is from variable interest rates on the credit facility, but there were no borrowings outstanding in Q2 2022[103](index=103&type=chunk) [Item 4. Controls and Procedures](index=20&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of July 30, 2022, with the Shoe Station acquisition excluded from internal control assessment for this period - Disclosure controls and procedures were deemed effective as of July 30, 2022[104](index=104&type=chunk) - The acquired Shoe Station business was excluded from the assessment of internal control over financial reporting for the period, as permitted by SEC rules[105](index=105&type=chunk) [Part II - Other Information](index=21&type=section&id=Part%20II%20Other%20Information) [Item 1A. Risk Factors](index=21&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the company's risk factors were reported from those disclosed in the most recent Form 10-K - There were no material changes to the company's risk factors from those disclosed in the most recent Form 10-K[109](index=109&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=21&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company did not repurchase shares under its public program in Q2 2022, but withheld **1,580** shares for employee tax obligations, with **$29.5 million** remaining for future repurchases Issuer Purchases of Equity Securities (Q2 2022) | Period | Total Shares Purchased | Avg. Price Paid | Shares Purchased as Part of Program | Value Remaining in Program | | :--- | :--- | :--- | :--- | :--- | | May 2022 | 0 | $0 | 0 | $29,485,035 | | June 2022 | 1,580 | $24.07 | 0 | $29,485,035 | | July 2022 | 0 | $0 | 0 | $29,485,035 | - The **1,580** shares purchased were withheld for employee payroll tax withholding upon vesting of stock-based awards and were not part of the public repurchase program[111](index=111&type=chunk) [Item 6. Exhibits](index=22&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL formatted financial data - Exhibits filed include: * Form of Restricted Stock Award Agreement * CEO and CFO Certifications (Sections 302 and 906 of Sarbanes-Oxley Act) * Inline XBRL formatted financial statements[113](index=113&type=chunk)

Shoe Carnival, Inc. (NASDAQ:SCVL) Q2 2022 Earnings Conference Call August 25, 2022 8:30 AM ET Company Participants Mark Worden – President and CEO Carl Scibetta – Chief Merchandising Officer Kerry Jackson – Chief Financial and Administrative Officer Conference Call Participants Mitch Kummetz – Seaport Research Sam Poser – Williams Trading Jim Chartier – Monness, Crespi and Hardt Operator Good morning and welcome to Shoe Carnival's Second Quarter 2022 Earnings Conference Call. Today's conference is being re ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) ☒ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended April 30, 2022 or ☐ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission File Number: 0-21360 Shoe Carnival, Inc. (Exact name of registrant as specified in its charter) | Indiana | 35-1736614 | | --- | --- | | (State ...