Shoe Carnival(SCVL) - 2022 Q1 - Quarterly Report

Part I - Financial Information Overview of the company's unaudited financial statements and management's analysis Item 1. Financial Statements (Unaudited) Unaudited condensed consolidated financial statements for Q1 2021, showing record performance and detailing accounting policies Condensed Consolidated Balance Sheets The balance sheet as of May 1, 2021, shows strong financial position with increased assets and shareholders' equity | (In thousands) | May 1, 2021 | January 30, 2021 | May 2, 2020 | | :--- | :--- | :--- | :--- | | Assets | | | | | Cash and cash equivalents | $174,643 | $106,532 | $13,084 | | Merchandise inventories | $268,629 | $233,266 | $303,988 | | Total Current Assets | $462,645 | $355,305 | $337,574 | | Total Assets | $750,089 | $642,747 | $629,550 | | Liabilities & Equity | | | | | Total Current Liabilities | $200,311 | $130,901 | $151,635 | | Total Liabilities | $399,814 | $332,571 | $350,092 | | Total Shareholders' Equity | $350,275 | $310,176 | $279,458 | Condensed Consolidated Statements of Income Income statements for Q1 2021 show a dramatic turnaround to net income of $43.2 million from a prior-year loss | (In thousands, except per share data) | Thirteen Weeks Ended May 1, 2021 | Thirteen Weeks Ended May 2, 2020 | | :--- | :--- | :--- | | Net sales | $328,457 | $147,495 | | Gross profit | $130,158 | $31,464 | | Operating income/(loss) | $57,603 | $(23,261) | | Net income/(loss) | $43,242 | $(16,190) | | Diluted net income/(loss) per share | $3.02 | $(1.16) | Condensed Consolidated Statements of Shareholders' Equity Shareholders' equity increased to $350.3 million, driven by net income and partially offset by dividends - Total shareholders' equity increased by $40.1 million during the quarter, from $310.2 million to $350.3 million, mainly due to net income of $43.2 million[17] - The company declared dividends of $0.140 per share, totaling approximately $2.0 million[17] Condensed Consolidated Statements of Cash Flows Operating activities generated $76.5 million in cash, leading to a $68.1 million increase in cash and cash equivalents | (In thousands) | Thirteen Weeks Ended May 1, 2021 | Thirteen Weeks Ended May 2, 2020 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $76,520 | $(42,863) | | Net cash used in investing activities | $(4,083) | $(2,995) | | Net cash used in financing activities | $(4,326) | $(2,957) | | Net increase (decrease) in cash and cash equivalents | $68,111 | $(48,815) | | Cash and cash equivalents at end of period | $174,643 | $13,084 | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, COVID-19 impact, revenue disaggregation, and other financial components - The COVID-19 pandemic led to the temporary closure of all physical stores effective March 19, 2020, but no stores were closed for extended periods during the first quarter of fiscal 2021[28][29] | Product Category | % of Net Sales (Q1 2021) | % of Net Sales (Q1 2020) | | :--- | :--- | :--- | | Non-Athletics | 43% | 38% | | Athletics | 51% | 57% | | Accessories and Other | 6% | 5% | - Total lease costs, including operating and variable costs, were $18.7 million for Q1 2021, slightly up from $18.4 million in Q1 2020[59] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses record Q1 2021 results, attributing success to strong demand, strategic shifts, and robust liquidity Executive Summary and Results of Operations Q1 2021 set new records with $328.5 million in net sales and $3.02 diluted EPS, driven by improved gross profit margin | Metric | Q1 2021 (Millions) | Change vs Q1 2020 | Change vs Q1 2019 | | :--- | :--- | :--- | :--- | | Net Sales | $328.5 | - | +31.6% (vs Q1 2019 sales) | | Comparable Store Sales | - | +125.8% | +31.6% | | Gross Profit Margin | 39.6% | +18.3 p.p. | +10.0 p.p. | | Net Income | $43.2 | from $(16.2) loss | - | | Diluted EPS | $3.02 | from $(1.16) loss | - | - The company eliminated low margin, chain-wide promotional events, including Buy One, Get One Half Off ("BOGO"), for the entire quarter and anticipates continuing this strategy for the remainder of fiscal 2021[75] - The Shoe Perks customer loyalty program grew over 10% YoY to more than 27 million members[73] Liquidity and Capital Resources The company maintains strong liquidity with $174.6 million in cash and no debt, supporting increased dividends and capital expenditures - Primary sources of liquidity are $174.6 million of cash and cash equivalents, cash from operations, and a $100 million credit facility with no outstanding borrowings[80][85] - Fiscal 2021 capital expenditures are expected to be between $30 million and $35 million, with a focus on store remodels, relocations, and technology[87] - The quarterly cash dividend was increased by 56% from $0.09 to $0.14 per share on March 18, 2021[91] - No shares were repurchased under the $50.0 million share repurchase program during the quarter due to uncertainty related to the COVID-19 pandemic[94] Item 3. Quantitative and Qualitative Disclosures About Market Risk Market risk primarily relates to variable interest rates on the credit facility, with no exposure due to zero borrowings - The company is exposed to market risk from variable interest rates under its credit facility, but had no borrowings during the first quarter of fiscal 2021[99] Item 4. Controls and Procedures Disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - The CEO and CFO concluded that as of May 1, 2021, the company's disclosure controls and procedures are effective[100] - No significant changes in internal control over financial reporting occurred during the quarter ended May 1, 2021[101] Part II - Other Information This section provides other information, including updated risk factors, equity security sales, and a list of exhibits Item 1A. Risk Factors Updated risk factors emphasize dependency on discretionary consumer spending, influenced by economic conditions and stimulus uncertainty - The risk factor related to consumer spending was updated to reflect that the business depends on discretionary spending, which is affected by economic conditions, unemployment, and the uncertain impact of government stimulus[104][105] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No shares were repurchased under the $50.0 million program, with only shares withheld for employee tax obligations - No shares were repurchased under the publicly announced $50.0 million program. The full amount remains available for purchase through December 31, 2021[107][109] - A total of 38,005 shares were withheld by the company to cover employee payroll taxes related to the vesting of share-settled equity awards[107][109] Item 6. Exhibits This section indexes all exhibits filed with Form 10-Q, including certifications and financial data - The report includes a list of filed exhibits, such as employment agreements, CEO/CFO certifications (Sections 302 and 906), and financial statements in Inline XBRL format[111]