Shoe Carnival, Inc. (NASDAQ:SCVL) is one of the nation's largest omnichannel family footwear retailers, operating under the Shoe Carnival and Shoe Station banners. Shoe Carnival has demonstrated a strong track record of profitability, with annual net income of $73,348,000 and annual revenue of $1,175,882,000 in its most recent fiscal year. Its annual operating cash flow stood at $122,756,000, while free cash flow reached $66,475,000, providing ample liquidity to fund growth initiatives.
Recent Developments
In the first quarter of fiscal 2024, Shoe Carnival delivered impressive results, with net sales increasing 6.8% year-over-year to $300,365,000. This growth was driven by several key factors, including the continued strength of the Shoe Station banner, robust e-commerce performance, and the successful integration of the recently acquired Rogan's Shoes. Comparable store sales, which exclude the impact of the Rogan's acquisition and calendar shifts, declined 3.4% in the quarter, representing a significant improvement from the more pronounced declines experienced in late fiscal 2023.
Financials
Gross profit margin expanded to 35.6% in the first quarter, marking the 13th consecutive quarter above 35%. This margin expansion was driven by stable product margins and lower inbound freight and e-commerce shipping costs. Operating income grew 7.5% year-over-year to $22,507,000, outpacing the top-line growth and demonstrating Shoe Carnival's ability to leverage its cost structure.
Marketing Strategy
Shoe Carnival's digital-first marketing strategy has been a key driver of its recent success, resonating well with customers and contributing to the strong performance in the Shoe Carnival banner. The new marketing campaign, launched in the first quarter, helped drive a significant improvement in sales trends, particularly in the sandals category, which grew 14% compared to the prior-year period.
Business Overview
Shoe Carnival's growth strategy is centered around two key pillars: organic expansion and strategic acquisitions. Shoe Carnival continues to pursue new store openings, with plans to operate over 500 stores by 2028, up from the current 430 locations. The recent acquisition of Rogan's Shoes, a 53-year-old work and family footwear company, has further strengthened Shoe Carnival's market position, particularly in the Midwest region.
The integration of Rogan's is progressing ahead of schedule, and Shoe Carnival expects the acquisition to be accretive to its results in fiscal 2024, with the level of accretion increasing meaningfully in fiscal 2025. Shoe Carnival is also exploring the potential to transition select Shoe Carnival stores to the Shoe Station banner, leveraging data-driven insights to identify markets where the Shoe Station concept can better serve customer needs and drive profitable growth.
Liquidity
Shoe Carnival's balance sheet remains strong, with $69,474,000 in cash, cash equivalents, and marketable securities as of the end of the first quarter. Shoe Carnival has maintained a debt-free position for the past 19 consecutive fiscal years, providing financial flexibility to fund growth initiatives, including potential future acquisitions, from operating cash flows.
Outlook
Looking ahead, Shoe Carnival has reiterated its full-year fiscal 2024 outlook, which calls for net sales growth in the range of 4% to 6% and adjusted earnings per share between $2.55 and $2.75. Shoe Carnival expects the second quarter of fiscal 2024 to benefit from a favorable calendar shift, with net sales projected to increase approximately 12% year-over-year to around $330,000,000 and earnings per share of approximately $0.80.
Conclusion
Shoe Carnival's consistent profitability, strong cash flow generation, and strategic growth initiatives position the company well to continue capturing market share and delivering value to shareholders. As Shoe Carnival navigates the evolving retail landscape, its focus on digital transformation, data-driven decision-making, and disciplined capital allocation should enable it to capitalize on emerging opportunities and solidify its position as a leading family footwear retailer.