19 May Shoe Carnival Lifts Earnings Outlook On Q1 Beat
Shoe Carnival, Inc. reported earnings and sales declined in the first quarter against challenging year-ago comparisons but were well above the pre-pandemic 2019 first quarter and topped Wall Street targets. The off-priced retailer raised its EPS guidance for the year.
In the quarter ended April 30, sales fell 3.3 percent to $317.5 million from $328.5 million a year ago. Wall Street’s consensus estimate had been $314 million.
Earnings fell 37.8 percent to $26.9 million, or 95 cents, from $43.2 million, or $1.51. Wall Street’s estimate was 86 cents.
Shoe Carnival, in its statement, said that given the volatility during 2020/21, the company believes the most relevant indicator of the company’s strength is the 25.1 percent sales growth and 107 percent EPS growth achieved during 2022 versus the first quarter of 2019 before the pandemic.
The company’s first-quarter operating results during 2020/21 were impacted by the pandemic. In 2020, the company’s retail stores were closed for over half the first quarter due to the pandemic shutdown. In 2021 the company’s first-quarter net sales grew 122.7 percent from retail stores being open the full period, expanding market share and gains from the government distributing over $400 billion in consumer stimulus.
“Our strategies to double our operating profit compared to the levels before the pandemic have worked. Our first-quarter results demonstrate the structural profit transformation and increased scale our plans have achieved compared to pre-pandemic results. With gross profit margins in the mid-thirties, double-digit operating profit margin and store productivity above $300 per square foot, we are incredibly optimistic about our future growth and long-term profit potential,” said Mark Worden, president and CEO.
“Both of our store banners exceeded expectations despite the quarter’s economic headwinds and global uncertainties. Based on the strong start versus our plans, we are raising our annual EPS guidance and reiterating our sales growth guidance for 2022,” concluded Worden.
Enhanced Fiscal 2022 Earnings Outlook
Net sales are expected to increase 4 percent to 7 percent compared to the prior year, on top of 36 percent growth in fiscal 2021. EPS is now expected to be in the range of $3.95 to $4.15 compared to previous guidance of $3.80 to $4.10 and a pre-pandemic annual high of $1.46 in fiscal 2019.
First-quarter 2022 net sales of $317.5 million increased 25.1 percent compared to the pre-pandemic first quarter 2019 driven by new customer acquisition of over 25 percent versus first quarter 2019.
First-quarter 2022 gross profit margin was 35.5 percent, a nearly 600 basis point increase compared to the pre-pandemic first quarter 2019. An increase in the merchandise margin was partially offset by higher distribution costs due to the impact of inflation on transportation and fuel.
Operating income for the first quarter of 2022 was 11.1 percent of net sales, a 500 basis point increase compared to the pre-pandemic level in the first quarter of 2019.
First-quarter 2022 net income was $26.9 million, or $0.95 per diluted share, compared to first quarter 2019 of $13.9 million, or $0.46 per diluted share, and $43.2 million, or $1.51 per diluted share, in the first quarter of 2021.
Two new stores were opened in the first quarter of fiscal 2022 and no stores were closed. The company plans to open ten new stores in fiscal 2022 and expects no store closures and store count to exceed 400 by the end of fiscal 2022.
The company plans to have over 50 percent of stores modernized by the summer of 2023 and the full program complete by the end of fiscal 2024. Through the first quarter of 2022, 31 percent of its stores are complete.
Share Repurchase Program
As of April 30, 2022, the company had $29.5 million available for future repurchases under its share repurchase program and, during the first quarter, repurchased 682,886 shares at a total cost of $20.5 million.