Net sales reached an all-time quarterly record for Shoe Carnival, with the footwear retailer cracking $300 million for the first time on the back of a 332 percent e-commerce sales boost.
In a Nutshell: Shoe Carnival reopened its entire store fleet in the second quarter, but the star of the show was the company’s online operation, which now represents more than 20 percent of total sales. E-commerce traffic has increased over 100 percent compared to the prior year.
But a back-to-school season that has seen delayed start dates adversely impacted overall business in the quarter, particularly in the final two weeks of July, the company said.
Total merchandise inventories increased 15.2 percent in the quarter from $259.5 million to $298.9 million. Gross profit margin for the second quarter of fiscal 2020 decreased to 27.5 percent compared to 30.6 percent in the second quarter of fiscal 2019. Merchandise margin decreased 3.7 percent, with the decline primarily occurring due to higher shipping costs associated with the increased e-commerce sales and an increase in adult athletic footwear sales, which typically carry lower margins than non-athletic product.
Non-athletic footwear suffered negative lingering effects from early in the pandemic. In the first quarter, Shoe Carnival canceled seasonal products like dress shoes and some sandals that had a short selling window, and pushed back flat sandals, sport sandals, soccer slides and other footwear with longer selling periods to later ship dates.
As of Aug. 1, cash and cash equivalents at Shoe Carnival were $76.9 million, while the company has no outstanding payments left on its $100 million line of credit. The footwear retailer also had $43.1 million available for future buybacks under its share repurchase program. The company hasn’t bought back any shares in fiscal 2020, and doesn’t expect to buy any later in the year, but will continue to reevaluate further share repurchases on an ongoing basis.
With the pandemic expected to continue to affect macroeconomic conditions and consumer spending in the retail sector, Shoe Carnival is not providing guidance for fiscal year 2020.
Two new stores opened in the second quarter, while 10 stores were closed, bringing the company to a total of 382 stores.
Net Sales: Shoe Carnival reported record net sales of $300.8 million for the second quarter, exceeding the previous record set in the third quarter of fiscal 2017 by 4.6 percent. Net sales improved 12.1 percent compared to last year’s totals, when the retailer generated $268.2 million in the quarter. Of the $32.6 million increase in net sales, $29 million was attributable to adult athletic footwear sales.
Sales results were still short of Wall Street’s consensus estimate of $310.4 million.
Comparable store sales increased 12.6 percent year-over-year. E-commerce sales increased 332 percent and represented more than 20 percent of total sales in the second quarter of fiscal 2020.
The company said brick-and-mortar sales were adversely impacted by Covid-related closures early in the second quarter and Covid-related delays in back-to-school shopping late in the quarter.
The second-quarter record still wasn’t enough to offset the poor first-quarter showing, when net sales declined 41.9 percent. For the first six months of fiscal 2020, net sales were $448.3 million, compared to $522 million in the first six months of fiscal 2019, a decline of 14.1 percent. Likewise, comparable store sales decreased 14 percent for the first six months of fiscal 2020.
Net Earnings: Net income for the second quarter of fiscal 2020 was $10.1 million, or 71 cents per diluted share. This is a 14.4 percent decline from the last year’s second, the company reported net income of $11.8 million, or 80 cents per diluted share.
The results topped Wall Street’s consensus estimate of 61 cents.
Net loss for the first half was $6.1 million, or a loss of 44 cents per diluted share, compared to net income of $25.7 million, or $1.71 per diluted share, for the first half last year.
CEO’s Take: Cliff Sifford, Shoe Carnival’s vice chairman and CEO, anticipates the tepid early back-to-school response will pick up later in the season.
“The COVID pandemic has undoubtedly created significant uncertainty across the U.S., which has shifted our typical back-to-school season. Nearly all schools within the markets we operate in have, at a minimum, delayed their start dates. Despite this, we continue to see our customers shop Shoe Carnival for their back-to-school needs,” Sifford said. “Given the shift in the back-to-school season, we anticipate that the majority of the volume we typically see in August will shift later into our third quarter extending the back-to-school season through the end of October. As we look forward, we remain focused on executing our long-term strategic plan. Combined with our strong vendor partnerships and dedicated team, this vision will further propel Shoe Carnival to be America’s favorite family footwear retailer.”