Shoe Carnival reported a record first quarter Wednesday with earnings per share that not only surpassed any prior period, but also any previous fiscal year in the company’s history.
The footwear retailer also posted record quarterly net sales, comparable store sales growth, gross profit and gross profit margin.
After a slow February due to poor weather, Cliff Sifford, Shoe Carnival’s vice chairman and CEO, said business began to take off when spring product arrived and tax refunds and stimulus payments reached consumers. At the same time, he noted, the rollout of Covid-19 vaccinations and a decrease in coronavirus cases further boosted sales.
“The combination of both these events gave our customers confidence to shop brick-and-mortar stores again,” Sifford said Wednesday on a call with investors.
In a Nutshell: Even with physical stores recording a 161 percent comparable-store sales gain, e-commerce at Shoe Carnival continued upward in the quarter ended May 1. After more than 160 percent growth a year ago, the retailer saw this area of the business climb a further 11.8 percent. Compared to the same period two years ago, e-commerce sales jumped 191.3 percent.
With Covid-19 restrictions continuing to ease, Mark Worden, the retailer’s president, chief customer officer and incoming CEO, said the business believes the triple-digit digital growth of the past year “has begun to plateau” and brick-and-mortar sales growth will outpace e-commerce in 2021. Overall, he noted, the company expects the latter to deliver triple-digit gains compared to 2019 and moderate to single-digit year-over-year declines versus last year.
Moving ahead, though, Worden said e-commerce sales will be “a key strategic driver of new customer acquisition and profitable sales growth.” Assuming Covid-19 does not disrupt in-store shopping again, he said Shoe Carnival expects low double-digit e-commerce sales growth to become the “new norm” in 2022 and 2023.
Sifford said the company’s goal is to grow digital to 20 percent of overall sales. According to Carl Scibetta, senior executive vice president and chief merchandising officer, e-commerce sales represented nearly 12 percent of total merchandise sales in the first quarter.
The same categories that have driven growth throughout the pandemic continued to perform well during the first quarter, Scibetta said. Adult athletics grew in the mid-20s compared to the first quarter of 2019, with performance driven by the basketball, skate and running categories.
But starting in the late first quarter and into the second quarter, he said, Shoe Carnival began seeing “a much more diverse consumer coming out” and “a much greater expansion” of consumer interest in categories that suffered during Covid. “There’s a lot of weddings going on right now,” he noted. “Not all the categories [are] back, but we’re definitely seeing that movement to buy goods that, frankly, [the consumer] hadn’t bought for 14 months.”
Though sport and seasonal footwear drove sales in women’s, Scibetta said demand for dress shoes also climbed as communities began to reopen. Women’s non-athletic categories grew in the high 20s for the quarter compared to two years ago. Women’s dress shoes, meanwhile, dropped in the single digits. Year-over-year, however, the segment posted a triple-digit gain. “We expect this trend to continue throughout the year,” Scibetta said.
In men’s, non-athletic categories saw growth in the mid-20s, driven by casual, seasonal and all boot categories, Scibetta said. Kids’ comparable-store sales climbed more than 50 percent versus 2019.
After record growth in the first quarter, Shoe Carnival is forecasting a comparable sales decrease in the high single digits to the low double digits in the second quarter, Kerry Jackson, senior executive vice president and chief financial and administrative officer, said. So far, he noted, year-over-year comparisons have been in the mid-20s. But as the company reaches June and laps last year’s almost 40 percent growth, it is anticipating a tougher comparison. A lack of clarity on when and how schools will return this fall adds another layer of uncertainty.
Shoe Carnival closed six stores and opened no new locations in the first quarter. It plans to open one store and close two additional stores during the remainder of fiscal 2021, compared to four openings and 13 closings last year. The company is also in the process of modernizing its store fleet, with the goal of finishing 100 locations by May 2022 and two-thirds of all locations in the next three to five years.
As of May 1, Shoe Carnival had cash and cash equivalents of $174.6 million.
Net Sales: Shoe Carnival recorded net sales of $328.5 million in the first quarter of fiscal 2021, a 122.7 percent improvement compared to last year’s $147.5 million. Comparable store sales rose 125.8 percent.
Gross profit margin for the first quarter increased 18.3 percentage points to 39.6 percent, compared to last year’s 21.3 percent. This included a 10-percentage point gain in merchandise margin as the company dramatically cut down on promotional activity, including all “buy one get one half off” deals. The company also saw buying, distribution and occupancy costs decline 8.3 points as a percentage of net sales, primarily due to leveraging occupancy costs against a higher sales base.
The company posted a quarterly gross profit of $130.2 million, a dramatic increase from last year’s $31.5 million.
Net Earnings: Shoe Carnival recorded net income of $43.2 million in the first quarter, or $3.02 per diluted share. This compares to a net loss of $16.2 million, or $1.16 per diluted share, a year ago.
Based on second-quarter results to date, Shoe Carnival is forecasting net sales in the range of $268 million to $278 million for the second quarter of fiscal 2021 and diluted net income per share in the range of $1.00 to $1.20.
CEO’s Take: “We are excited about the remainder of this quarter and are looking forward to having a more normal back-to-school season,” Sifford said. “Many of our markets have not yet posted their plans for back-to-school, which makes it difficult to provide guidance for that particular time period. However, as vaccines continue to roll out to more and more of the population, schools should begin to announce a more normalized opening plan. I believe we are well positioned to continue our historic leadership position as the back-to-school headquarters of footwear in the markets we serve.”