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Shoe Carnival Blows Past $1 Billion in Sales

On Wednesday’s third-quarter earnings report conference call, Shoe Carnival announced it had crossed the billion-dollar sales threshold for the year, while the period yielded its second-highest quarterly sales and greatest number of customers (31.5 million) in its 44-year history, even as supply chain and inflationary issues continued to be a drag industry-wide.

Spurred by these superlatives, the Indiana-based company is leaning forward into the fourth quarter with the opening of three additional Shoe Station stores in Alabama and Georgia to take the current number of the satellite brand stores the company acquired in December last year to 25, and by midyear 2023 to have more than 400 stores between the two banners combined.

In a Nutshell: Shoe Carnival’s apparent third-quarter reprieve from supply chain issues that have continued to dog much of the industry was likely due in part to the company having undergone those inventory pains earlier. A delayed supply that began to trickle in in early Q3 was blamed in the previous quarter’s earnings report for a “steeper” decline in inventory.

The company reported third quarter inventory at $392.3 million, an increase of $94.3 million from 2019 with about 40 percent of that inventory due to the acquisition of Shoe Station. Shoe Carnival executives compare current year to pre-pandemic 2019, a common industry practice.

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Inflation appeared to leave Shoe Carnival relatively unscathed as well, according to Mark Worden, president and CEO.

“Despite the macroeconomic volatility, the company’s strategic plan to expand customer counts and double operating profit margins versus historical levels continues to work,” Worden said.

Net Sales: The third quarter saw net sales of $341.7 million, a 24.4 percent increase from the same period in 2019. Shoe Station stores accounted for $22.2 million of those sales and are expected to top $100 million in sales for the calendar year.

The third quarter’s sales performance was bested only by the year-ago quarter at $356.3 million. All of this good news has the company upping its forecast for Q4.

“We are raising our operating profit margin expectations for 2022 and providing guidance today to achieve between 11.5% and 11.7% operating margins, nearly doubling the company’s prior 10-year historical levels,” Worden said.

Non-athletic styles were up 35.1 percent versus 2019’s third quarter and athletic styles were up 4.4 percent as a result of reduced supply chain challenges.

Chief merchandising officer Carl Scibetta said that the company hit its ideal 50/50 athletic/non-athletic sales balance in the third quarter .

The company generated strong gains in all children’s categories in the period, up in the 60-percent range in non-athletic and up in the high teens in athletic.

With boot sales lagging somewhat due to an unusually warm fall in much of the country, non-athletic sales are expected to continue to surge into the holiday season.

“With the fashion trends we are seeing and the improved product flow, we anticipate strong sales results in the non-athletic categories for the remainder of 2022,” said Scibetta, who added in the Q&A portion of the call that boots tend to run at 45 percent of women’s and children’s sales, and in Q4, historically, non-athletic footwear tends to consume 6 of every 10 dollars in sales.

Net Earnings: Shoe Carnival’s gross margin for the third quarter was 38.3 percent, a 740 base point increase over 2019 and two percentage points over the previous quarter.

At the bottom line, Shoe Carnival announced a third-quarter profit of 12.8 percent, the highest of the year after the prior period’s 12.4 percent and the seventh consecutive quarter in double figures.

“As we have seen the past seven quarters, we continue to deliver excellent product margins. These product margins continue to run up over 700 basis points versus 2019 and are a result of our transformational promotional strategy,” Scibetta said, pointing to a ‘best-in-class’ CRM program.

Shoe Carnival’s earnings per share vaulted up $1.18 or 151 percent compared to 2019 after jumping up 160 percent over. 2019 in the second quarter and is expected to land at $3.95 to $4.00 by year’s end.

CEO’s Take: Worden addressed the retailer’s promotional strategy. “While other retailers in our space continue with that outdated buy one, get one half off year round and many other competitors punctuated it during back-to-school, we’ve stayed true to what we said. We’re going to sustain double-digit operating profits and we’re going to grow by targeted loyalty enhancements,” Worden said. “Case in point, we’re now achieving 31.5 million people we can talk to about what they want, not just giving away our best product at a cheap price.”