Shoe Carnival Inc. reported net income for the third quarter ended Oct. 31 hit a record $14.7 million, or an all-time-high $1.03 per diluted share, up from net income of $13.7 million, or 94 cents per diluted share in the year-ago period.
Net sales of $274.6 million for the third quarter were flat compared to the year-ago period. Comparable store sales increased 0.9 percent on top of a 3.5 percent gain in the 2019 third quarter. E-commerce sales increased over 150 percent and represented more than 13 percent of total sales in the quarter.
“Our strong fiscal third quarter results clearly demonstrated the strength and dedication of our team’s ability to execute on our strategic initiatives,” Cliff Sifford, Shoe Carnival’s vice chairman and CEO, said. “We achieved same store sales growth and delivered the most profitable quarter in Shoe Carnival’s history, despite the extended back-to-school season. This would not have been possible without the hard work of our Shoe Carnival team members, our incredibly solid vendor partnerships, and dedicated customers.”
Gross profit increased $3 million to a record $87.8 million in the three months and gross profit margin increased 110 basis points to 32 percent compared to the third quarter of fiscal 2019.
The company said membership in its Shoe Perks customer loyalty program approached 10 percent growth compared to the prior year, bringing total membership in the program to nearly 26 million. Cash and cash equivalents were $46.7 million with no outstanding debt as of Oct. 31.
“Our disciplined focus on financial flexibility and the strength of our business model continue to fuel our market leading performance notwithstanding the ongoing disruption caused by the global pandemic,” Sifford said. “We are excited about our market share gains in the quarter and believe our enduring competitive advantages position us for future growth.”
Shoe Carnival said the increase in merchandise margin was primarily due to lower promotional activity during the quarter. The increase in buying, distribution and occupancy costs as a percentage of sales was primarily due to higher distribution expense.
“We replenished fast-selling products, including higher performing sandals and athletic, further driving sales growth and providing the Shoe Carnival customer the differentiated and satisfying shopping experience,” Sifford told analysts during a conference call. “Once our merchant team solidified our back-to-school assortments, they quickly turned their attention to holiday, and by the time we ended the third quarter, we had transitioned our stores to a great selection of products across all categories for fourth quarter selling.”
The CEO said women’s athletic shoes were up low-double digits, while men’s athletic was up mid-single digit for the quarter. Sales in both men’s and women’s non-athletic categories were driven by sandals, canvas casuals and utility. Consistent with last quarter, dress shoes were down double digits, reflecting a more casual and active lifestyle as many offices remain closed, he noted.
Kid’s comparable store sales were down low-single digits as a result of delayed back-to-school and remote learning. Kid’s non-athletic was up mid-single digit, while athletic was down mid-single digit for the quarter.
Sifford said Shoe Carnival ended the quarter with inventory down 5.6 percent on a per store basis.
“We continue to work closely with our vendor partners to replenish key categories and classifications that are driving our sales,” he said. “We are very comfortable with the amount of inventory flow that we have coming in for the holiday period, and I’m especially happy with the terrific selection of fall and winter boots, as colder weather will dictate the transition to more seasonal footwear.”
Shoe Carnival said it continues to closely monitor and manage the impact of the Covid-19 pandemic and take action to maintain financial flexibility and keep our employees and customers safe. The pandemic is expected to continue to affect macroeconomic conditions and consumer spending in the retail sector.
The company said considerable uncertainty exists surrounding the impact the pandemic may have on sales and operations for the remainder of the fiscal year, including during the peak holiday shopping period. As a result, the company is not providing guidance for fiscal year 2020.
“I will say that we are encouraged by our market share gains in Q3 and feel we’re well positioned to continue capturing market share in the future,” Sifford added.