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Shoe Carnival Sees ‘Minor’ Uptick in Social-Occasion Shoes

Strong athletic sales, reduced promotional activity and a booming e-commerce business coalesced to boost Shoe Carnival’s fourth quarter sales to record numbers.

As it predicted in February, the shoe retailer finished the quarter ended Jan. 30 with net sales of $253.9 million, a 5.8 percent increase compared to the year-ago period. Comparable store sales rose 6.4 percent. E-commerce sales, meanwhile, grew in the triple digits for yet another quarter.

In a Nutshell: According to Mark Worden, Shoe Carnival’s president and chief customer officer—and, as of Sep. 30 of this year, CEO—a key part of the retailer’s strategy has been reducing promotional intensity.

This shift has seen the company pivot away from its historically heavy reliance on “buy one, get one half off” deals. Instead, it has turned to its customer relationship platform and analytics to personalize “compelling product offers,” Worden said. Pleased with what it has seen, Shoe Carnival has accelerated these plans, including by cutting all BOGO half off deals in the current quarter.

“The strategy is working and we have great confidence that we can continue to make merchandise margin improvements and lower promotional intensity this year,” Worden said.

Adult athletics continued to outperform in the fourth quarter. According to senior executive vice president and chief merchandising officer Carl Scibetta, comparable store sales within the category were up in the mid-teens for both women’s and men’s. Comfort sport sales drove sales in women’s non-athletic categories, while boots—both work and hiking—led sales in men’s non-athletic.

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Kids’ comparable store sales also saw gains in the mid-teens. “Once schools in many markets returned to some form of in-class learning, we experienced strong sales in children’s casuals and in the athletic categories,” Scibetta said.

Dress shoes, however, remained down double digits, consistent with last quarter. CEO Cliff Sifford noted that the company has recently seen “a minor tick up” in fashion-forward, younger dress shoes that might be used for social occasions, rather than work.

“It’s the first one we’ve seen in over a year,” Sifford said. “So that gives us encouragement that the consumers’ mindset is ready to get out there and get back to normal life.”

Shoe Carnival opened four stores and closed 13 in fiscal 2020. This compared to one opening and six closings in 2019. In 2021, Worden said, the company plans to open one new location while also not renewing 10 store leases “that do not drive long-term profit potential [or] connect with our most valuable consumers.”

Though he declined to offer any 2022 store opening guidance, Worden said it is the company’s “intent to reignite store growth in the years ahead,” while also rapidly accelerating e-commerce growth. “As highly profitable real estate opportunities open up in late 2022 and 2023, we plan to pursue store openings within existing operating states as a top strategic priority.”

Net Sales: Shoe Carnival reported net sales of $253.9 million in the fourth quarter of fiscal 2020, a 5.8 percent increase compared to net sales of $239.9 million a year earlier. The timing of the sales increase, the shoe retailer noted, correlated with issuance of government stimulus toward the end of calendar year 2020.

Gross profit margin increased in the fourth quarter, from 29.1 percent a year ago to 30.8 percent. Merchandise margin as a percentage of net sales increased 1.6 percent, primarily due to lower promotional activity but partially offset by high shipping costs associated with increased e-commerce sales.

Net sales for fiscal 2020 fell $59.8 million to $976.8 million. This included a $106.3 million year-over-year decrease in the first quarter of 2020 due to temporary store closures at the beginning of the pandemic.

E-commerce sales jumped 175 percent compared to fiscal 2019 and grew to comprise approximately 19 percent of net sales in 2020. Comparable store sales, meanwhile, declined 5.3 percent in fiscal 2020. This included a 42.3 percent year-on-year drop in the first quarter.

Gross profit margin for the year shrank from 30.1 percent in 2019 to 28.7 percent. Merchandise margin as a percentage of net sales decreased 0.6 percent, primarily due to increased shipping costs from higher e-commerce sales, but partially offset by lower promotional activity.

Net Earnings: The retailer posted a net income of $7.4 million, or $0.52 per diluted share, in the fourth quarter. This compared to a net income of $3.5 million, or $0.24 per diluted share, in the fourth quarter of fiscal 2019.

Despite a decrease in sales, Shoe Carnival remained positive in fiscal 2020, reporting a net income of $16 million, or $1.12 per diluted share. This compared to a net income of $42.9 million, or $2.92 per diluted share, in fiscal 2019.

CEO’s Take: Shoe Carnival announced earlier this month that Sifford would step down as CEO after nine years, effective Sept. 30, with Worden taking over the role.

“Mark and I have worked closely together over the last several years and his clear passion for our concept and vision for this business gives me great confidence in his ability to lead Shoe Carnival into our next chapter,” Sifford said. “His strategic direction, deep knowledge of our customers and unwavering commitment to our employees make him the perfect fit for the job. He has been instrumental in the company’s growth since the day he started in 2018. So, I transition to vice chairman with unwavering confidence that Shoe Carnival will not miss a beat and I have tremendous confidence that Mark will take Shoe Carnival to new heights.”