Shoe Carnival(SCVL) - 2021 Q4 - Annual Report

Part I Business Shoe Carnival, Inc. is a major U.S. family footwear retailer with 383 stores and a significant e-commerce presence, differentiating through promotional in-store experiences and a broad assortment of branded footwear - As of January 30, 2021, the company operated 383 stores across 35 states and Puerto Rico, with each physical store generating an average of $2.5 million in annual sales[8] Historical Store Count | Fiscal Years | 2020 | 2019 | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | :--- | :--- | | Stores open at the beginning of the year | 392 | 397 | 408 | 415 | 405 | | New store openings | 4 | 1 | 3 | 19 | 19 | | Store closings | (13) | (6) | (14) | (26) | (9) | | Stores open at the end of the year | 383 | 392 | 397 | 408 | 415 | - The Shoe Perks loyalty program grew by 10% in fiscal 2020 to 26.3 million members, with purchases from members accounting for approximately 67% of comparable net sales[35] - E-commerce sales surged in fiscal 2020, representing approximately 19% of merchandise sales, a significant increase from 6% in fiscal 2019, driven by the COVID-19 pandemic[36] - The company has a significant supplier concentration, with Nike, Inc. and Skechers USA, Inc. collectively accounting for approximately 43% of net sales in fiscal 2020 (33% and 10%, respectively)[47] Merchandise Sales by Product Category | Fiscal Years | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Non-Athletics: | | | | | Women's | 22% | 25% | 24% | | Men's | 14% | 14% | 14% | | Children's | 5% | 5% | 5% | | Total Non-Athletics | 41% | 44% | 43% | | Athletics: | | | | | Women's | 19% | 17% | 18% | | Men's | 22% | 20% | 21% | | Children's | 13% | 14% | 14% | | Total Athletics | 54% | 51% | 53% | | Accessories | 5% | 5% | 4% | | Total | 100% | 100% | 100% | - The company highlights a diverse workforce, with 66% female employees overall and 59% female in its broad-based leadership team as of fiscal year-end 2020[62] Risk Factors The company faces significant operational, compliance, human capital, financial, and stock ownership risks, including pandemic impacts, supply chain disruptions, and high supplier dependence - The COVID-19 pandemic poses a significant ongoing risk, with potential impacts from further store closures, financial market volatility, changes in consumer spending, and supply chain disruptions[95][97] - The company is heavily reliant on imported goods, with substantially all footwear manufactured overseas, primarily in China, exposing the business to risks of cost increases, tariffs, and supply chain disruptions[99] - Dependence on key suppliers is a major risk, as two branded suppliers, Nike, Inc. and Skechers USA, Inc., accounted for approximately 43% of net sales in fiscal 2020[121] - The rapid growth of the e-commerce channel presents risks related to operational challenges, reliance on third-party systems, cybersecurity threats, and the ability to maintain market share gains[110][111] - The Chairman, J. Wayne Weaver, and his family beneficially own approximately 35.4% of the company's outstanding common stock, enabling them to exert substantial influence over management and operations[154] Unresolved Staff Comments The company reports no unresolved staff comments from the Securities and Exchange Commission - None[156] Properties The company operates 383 leased stores and a 410,000 square foot leased distribution center, having purchased its corporate headquarters in fiscal 2019 - The company operates 383 stores in 35 states and Puerto Rico, all of which are leased properties[157] - The company's 410,000 square foot distribution center in Evansville, Indiana is leased from a third party, with the current lease term extended to 2034[158] - In the first quarter of fiscal 2019, the company purchased its corporate headquarters for approximately $7 million[159] Legal Proceedings The company is involved in various ordinary course legal proceedings, none of which are expected to have a material adverse effect on its financial position - The company does not currently expect any ongoing legal proceedings to have a material adverse effect on its financial position or results of operations[161] Mine Safety Disclosures This item is not applicable to the company's operations - Not applicable[162] Part II Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Shoe Carnival's common stock trades on Nasdaq (SCVL), paid quarterly dividends in fiscal 2020, increased Q1 2021 dividend by 56%, and made no share repurchases in Q4 2020 - The company's common stock is traded on The Nasdaq Stock Market LLC under the symbol "SCVL"[165] - In fiscal 2020, the company paid quarterly cash dividends totaling $0.355 per share. On March 18, 2021, the Board increased the quarterly dividend by 56% to $0.14 per share for Q1 2021[166][167] - No shares of common stock were repurchased under the Board-approved share repurchase program during the fourth quarter of fiscal 2020[168] Selected Financial Data This item has been eliminated in accordance with amendments to Regulation S-K - Part II, Item 6 is no longer required as the company has adopted amendments to Regulation S-K that eliminate Item 301[171] Management's Discussion and Analysis of Financial Condition and Results of Operations Fiscal 2020 net sales decreased by 5.8% to $976.8 million due to pandemic-related store closures, despite 175% e-commerce growth and strong Q2-Q4 performance, ending with $106.5 million cash and no debt Fiscal 2020 vs. Fiscal 2019 Performance | Metric | Fiscal 2020 | Fiscal 2019 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $976.8 million | $1,036.6 million | -5.8% | | Comparable Store Sales | -5.3% | +1.9% | -7.2 p.p. | | Gross Profit Margin | 28.7% | 30.1% | -1.4 p.p. | | Net Income | $16.0 million | $42.9 million | -62.7% | | Diluted EPS | $1.12 | $2.92 | -61.6% | | E-commerce Sales Growth | ~175% | N/A | N/A | - The COVID-19 pandemic caused a significant quarterly performance variance: a 42.3% comparable store sales decrease in Q1 was followed by increases of 12.6% in Q2, 0.9% in Q3, and 6.4% in Q4[181] - The company ended fiscal 2020 with a strong balance sheet, holding $106.5 million in cash and cash equivalents with no outstanding debt[183][206] - For fiscal 2021, capital expenditures are projected to be between $23 million and $25 million, with a majority allocated to store remodels and new store construction[215] Results of Operations Fiscal 2020 net sales decreased by 5.8% to $976.8 million due to Q1 store closures, gross profit margin fell to 28.7% from higher e-commerce shipping costs, and SG&A expenses remained flat - Net sales decreased by $59.8 million (5.8%) in fiscal 2020, with a $106.3 million decline in the first quarter alone due to temporary store closures[200] - Gross profit margin decreased by 1.4% to 28.7%, with merchandise margin down 0.6% due to higher e-commerce shipping costs, and buying, distribution, and occupancy costs increasing 0.8% as a percentage of sales[202] - SG&A expenses increased by $0.5 million to $258.1 million, with increases in e-commerce fulfillment and impairment charges partially offset by lower store wages (due to CARES Act credits) and reduced stock-based compensation[203] Liquidity and Capital Resources The company maintained strong liquidity in fiscal 2020 with $106.5 million cash and no debt, supported by a $100 million credit facility and $63.4 million in operating cash flow - The company ended fiscal 2020 with $106.5 million in cash and cash equivalents and no outstanding debt[206] - During fiscal 2020, the company amended its credit facility to increase borrowing capacity from $50 million to $100 million[206] - Net cash provided by operating activities decreased by $3.5 million to $63.4 million in fiscal 2020, primarily due to reduced earnings[208] - No share repurchases were made in fiscal 2020. A new $50 million share repurchase program was authorized for fiscal 2021[219][221] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is minimal, stemming from variable interest rates on its credit facility, with a 1% rate change having an immaterial impact on interest expense - The company's market risk is primarily from variable interest rates on its credit facility. With weighted average borrowings of only $256,000 in fiscal 2020, a 1% change in interest rates would have increased interest expense by an insignificant $3,000[244] Financial Statements and Supplementary Data This section presents the audited consolidated financial statements for fiscal 2020, including an unqualified auditor's opinion, detailing assets, liabilities, equity, net sales, and net income - The independent registered public accounting firm, Deloitte & Touche LLP, issued an unqualified opinion on the consolidated financial statements[248][249] - The auditor identified Merchandise Inventories as a critical audit matter due to the significant judgments made by management to estimate their net realizable value[253][254] Consolidated Balance Sheet Summary (as of Jan 30, 2021) | Category | Amount (in thousands) | | :--- | :--- | | Total Current Assets | $355,305 | | Total Assets | $642,747 | | Total Current Liabilities | $130,901 | | Total Liabilities | $332,571 | | Total Shareholders' Equity | $310,176 | Consolidated Income Statement Summary (for FY 2020) | Category | Amount (in thousands) | | :--- | :--- | | Net Sales | $976,765 | | Gross Profit | $279,982 | | Operating Income | $21,865 | | Net Income | $15,991 | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting principles, financial disclosure, or auditing scope - None[375] Controls and Procedures Management and independent auditors concluded that the company's internal control over financial reporting was effective as of January 30, 2021, with no significant changes in Q4 - Management concluded that the company's internal control over financial reporting was effective as of January 30, 2021, based on the criteria set forth by COSO[378] - The independent auditor, Deloitte & Touche LLP, audited and issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of January 30, 2021[379][384] - The CEO and CFO concluded that disclosure controls and procedures were effective as of the end of the fiscal year[380] Other Information The company reports no other information for this item - None[390] Part III Part III incorporates information by reference from the 2021 Proxy Statement, covering directors, executive compensation, security ownership, related transactions, and accounting fees Directors, Executive Officers and Corporate Governance Information on directors, corporate governance, and the code of ethics is incorporated by reference from the 2021 Proxy Statement - Required information is incorporated by reference from the definitive Proxy Statement for the 2021 Annual Meeting of Shareholders[392] Executive Compensation Details on executive and director remuneration, including Compensation Discussion and Analysis, are incorporated by reference from the 2021 Proxy Statement - Required information is incorporated by reference from the definitive Proxy Statement for the 2021 Annual Meeting of Shareholders[393] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information on stock ownership by management and major shareholders, and equity compensation plans, is incorporated by reference from the 2021 Proxy Statement - Required information is incorporated by reference from the definitive Proxy Statement for the 2021 Annual Meeting of Shareholders[394] Certain Relationships and Related Transactions, and Director Independence Information regarding related party transactions and director independence is incorporated by reference from the 2021 Proxy Statement - Required information is incorporated by reference from the definitive Proxy Statement for the 2021 Annual Meeting of Shareholders[395] Principal Accounting Fees and Services Details concerning fees paid to and services provided by the principal accountant are incorporated by reference from the 2021 Proxy Statement - Required information is incorporated by reference from the definitive Proxy Statement for the 2021 Annual Meeting of Shareholders[396] Part IV Exhibits and Financial Statement Schedules This section lists financial statements and provides a detailed index of all exhibits filed as part of the Form 10-K, including material contracts and certifications - This item lists the financial statements filed with the report and provides an index to all exhibits, such as material contracts and executive compensation plans[398][401] Form 10-K Summary The company did not provide a summary for this item - None[405]