For the second time this fiscal year, Shoe Carnival beat its all-time quarterly earnings record on positive same-store sales and growing margins.
In a Nutshell: Shoe Carnival stock was up by nearly 10 percent in early trading on Thursday afternoon after the footwear retailer released earnings results that showed accelerating growth and a solid balance sheet. This comes after two less-than-stellar quarters, marked by opposite results: crumbling margins and slow growth.
Record third-quarter earnings prompted Shoe Carnival to raise its full-year outlook for both EPS and net sales.
Increasing margins were likely one of the primary reasons for the footwear retailer’s results. Shoe Carnival’s gross profit margin was up 0.7 percent in Q3 to 30.9 percent. Merchandise margins increased by 0.5 percent and buying, distribution and occupancy expenses decreased by 0.2 percent as a percentage of net sales compared to the previous quarter.
Sales: Net sales at Shoe Carnival were $274.6 million in the third quarter, an increase of 2 percent compared to the $269.2 million it earned in the prior-year period. Analysts predicted a slightly lower $273.2 million from the retailer, giving Shoe Carnival its first revenue beat since the first quarter of this year. Same-store sales were up 3.5 percent compared to 1.4 percent growth in Q2.
“We are very pleased with our broad-based strength across all product categories, geographies and sales channels in the third quarter,” Cliff Sifford, the vice chairman and CEO of Shoe Carnival, said. “Our record earnings were fueled by solid comparable store sales growth throughout the quarter, including our seventeenth consecutive positive comparable store sales for the month of August.”
At year-end, the retailer now expects net sales in the range of $1.033 billion to $1.036 billion and has reiterated its guidance of a low single-digit increase in comparable store sales.
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Earnings: On net income of $13.7 million, Shoe Carnival turned in a record earnings per share of 94 cents, surpassing the previous record of 91 cents, notching a 23.7 percent increase over the comparable period last year and beating analyst expectations of 89 cents in the third quarter.
The retailer raised EPS guidance to between $2.85 and $2.89 for the end of the fiscal year, up from the previous range of $2.77 to $2.83.
CEO’s Take: Sifford said this result confirms the retailer’s strength in back-to-school sales season and that confidence and relevance should carry Shoe Carnival into the next year and beyond.
“This demonstrates that Shoe Carnival remains a destination for back-to-school family footwear. Our customer-centric organization and fun, engaging shopping environment continues to resonate with consumers and gives us confidence in our raised outlook for fiscal 2019,” Sifford said. “Going forward, we believe our strong foundation, combined with the recent addition of new customer-data driven resources, positions us well for sustainable, profitable growth for many years to come.”