Shoe Carnival’s decision to not furlough workers during the early coronavirus pandemic has turned into an advantage, the company said, as more than 95 percent of its store fleet is set to be up and running by the second week of June.
In a Nutshell: As soon as the Evansville, Ind.-based shoe chain realized it would have to shut down its physical store fleet as the pandemic spread across the U.S., the company shifted marketing spend to its e-commerce platform.
This quick decision resulted in exponential e-commerce growth as consumers flocked to digital channels, Shoe Carnival said.
“E-commerce sales achieved all-time week, month and quarter highs while our stores were closed, with sales growth over 350 percent for the second half of the quarter, resulting in over 160 percent sales growth for the total Q1,” president and chief customer officer Mark Worden said during the retailer’s Q1 conference call.
“To provide some perspective, e-commerce represented approximately 5 percent of corporate revenues in the fiscal first quarter of 2019,” he added. “However, our fiscal first quarter 2020 e-commerce revenue would have represented nearly 15 percent of fiscal Q1 2019 revenues.”
The company doesn’t expect digital sales growth to fully sustain this trajectory once stores are opened but remains confident it has grown its digital customer base by leveraging stores to fulfill online orders during the shutdown.
Currently, Shoe Carnival has reactivated 82 percent of its store fleet and is implementing extra safety precautions such as providing employees with protective gear like face masks and installing plexiglass dividers at checkout stations.
“Early results from our stores that have reopened are encouraging,” vice chairman and CEO Cliff Sifford said. So far, foot traffic in the stores is down by double-digits from the prior year, he added, though shoppers coming in are converting at a significantly higher rate and purchasing more units per transaction.
The company said it managed to make it through the first quarter without adding any debt to its balance sheet, working closely with vendors to manage inventory and payables during the period. Shoe Carnival said it also received extended credit terms from supply partners to maintain financial flexibility.
Sales: In the first quarter, Shoe Carnival reported net sales of $147.5 million, a decline of 41.9 percent compared to Q1 last year and below the $164.63 million estimated by Wall Street analysts.
Comparable store sales were up 3.9 percent through March 12, the company said, but fell by 42.3 percent for the quarter as a whole. In response, Shoe Carnival canceled seasonal products like dress shoes and some sandals that had a short selling window.
Flat sandals, sport sandals, soccer sandals and other footwear with longer selling periods were moved to later ship dates. The company said it is “pleased” with sales for athletic footwear and children’s shoes so far.
Inventory increased by 4.2 percent during the six-week shutdown, according to Shoe Carnival, but a strong reopening has reduced on-hand inventory by 6.3 percent compared to last year.
As of May 19, Shoe Carnival’s monthly comp showed mid-single-digit growth.
Earnings: First-quarter net losses totaled $16.2 million, a loss of $1.16 per diluted share—below the 47 cent loss estimated by Wall Street.
As a percentage of sales, expenses increased to 37.1 percent compared to 23.4 percent in the comparable period as a result of deleveraging due to lost sales.
CEO’s Take: “In this trying time, the commitment and dedication of our team really shined through, and I could not be prouder,” Sifford said. “We continued to serve our loyal customers through our e-commerce platform, which resulted in triple-digit sales increases, while at the same time, we made swift decisions to ensure we mitigated the impact of this global pandemic on our business.”