02 Sep Shoe Carnival’s Earnings Surge In Second Quarter
Shoe Carnival Inc. reported earnings in the second quarter ended July 31 increased four-fold as same-store sales grew 11.4 percent. Results came in well above company guidance.
Second Quarter Highlights
- Record quarterly net income of $44.2 million and record diluted net income per share of $1.54 (adjusted for the two-for-one stock split effected July 20, 2021);
- Record quarterly net sales of $332.2 million and quarterly comparable-store sales increase of 11.4 percent;
- Record quarterly gross profit of $135.8 million and record quarterly gross profit margin of 40.9 percent;
- Shoe Perks customer loyalty program membership increased over 10 percent compared to the prior year with total membership approaching 28 million; and
- Cash, cash equivalents, and investments were $163.9 million with no outstanding debt as of July 31, 2021.
Previously, Shoe Carnival had anticipated diluted net income per share in the range of $1.00 to $1.20 and net sales in the range of $268 million to $278 million for the second quarter of fiscal 2021.
“Our best in class merchandising strategy, innovative store operations and powerful data analytics derived from our CRM program continued to drive outstanding financial results and increases in new customer acquisition. Our business fundamentals are the strongest they have ever been, which gives us the confidence to lean forward and aggressively plan for continued growth through the remainder of the year. I am incredibly proud of our amazing personnel and their unwavering commitment, which is on display seven days a week in all our stores,” said Cliff Sifford, Shoe Carnival’s vice chairman and chief executive officer.
“As I hand the reins over to Mark Worden to enhance Shoe Carnival’s leadership position in the family footwear channel, I have never been more confident. Our team is smart, customer-centric, and ready to take Shoe Carnival to new levels. Our execution over the last twelve months gives us conviction as we forge ahead even in an uncertain environment. To our amazing workforce, thank you for your dedication to operational excellence. I am eternally grateful to our customers, employees, shareholders, and everyone else who has made my tenure so wonderful. I look forward as Vice Chairman of the Board to watching the company continue to execute its growth strategies and drive value for all of its stakeholders,” concluded Sifford.
Mark Worden, president and incoming chief executive officer added, “The Shoe Carnival team delivered spectacular results, posting record sales and EPS growth, which included our highest operating profit on record, during the fiscal second quarter. This momentum has continued through the first three weeks of August, with comparable-store sales increasing 23 percent and product margins increasing nearly 11 percentage points when compared to August 2019. Given our strong performance in the first half of the year, we are raising our full-year guidance, as well as offering our view of the fiscal third quarter.”
Worden concluded, “I would like to thank Cliff for his innumerable contributions to Shoe Carnival, as well as his leadership and partnership over the last three years. Cliff has built an incredible organization and established a strong foundation for us to build upon. I wish him all the best as he transitions into his new role.”
Second Quarter Financial Results
On June 21, 2021, the company’s Board of Directors authorized a two-for-one stock split of the shares of the company’s common stock, which was effected in the form of a dividend. The stock split entitled each shareholder of record at the close of business on July 6, 2021, to receive one additional share of common stock for each share owned as of that date, and was paid on July 19, 2021. Upon the completion of the stock split, the company’s outstanding shares increased from approximately 14.1 million shares to approximately 28.2 million shares. The financial information included with this press release has been adjusted to reflect the completion of the stock split.
The company reported net sales of $332.2 million for the second quarter of fiscal 2021, a 10.5 percent increase compared to net sales of $300.8 million for the second quarter of fiscal 2020. The increase resulted from continued broad-based demand for the company’s product offerings, a more normalized beginning to the back-to-school season, improving macroeconomic factors in the U.S. and the easing of COVID-19 restrictions.
Gross profit margin for the second quarter of fiscal 2021 increased 13.4 percentage points to 40.9 percent compared to 27.5 percent in the prior year. Merchandise margin increased 13.3 percentage points, as consumer demand for product offerings continued to strengthen, which resulted in less promotional activity compared to the second quarter of fiscal 2020. Buying, distribution and occupancy expenses declined slightly as a percentage of net sales compared to the second quarter of fiscal 2020 as higher freight and distribution labor costs mostly offset the leveraging effect of higher sales.
Selling, general and administrative expenses (“SG&A”) for the second quarter of fiscal 2021 increased $7.8 million to $76.0 million. As a percentage of net sales, these expenses increased 0.2 percentage points to 22.9 percent. The increase in SG&A primarily correlates with the company’s continued record performance, with increases in store level wages and incentive compensation comprising a majority of the increase.
Net income for the second quarter of fiscal 2021 was $44.2 million, or $1.54 per diluted share. For the second quarter of fiscal 2020, the company reported net income of $10.1 million, or $0.35 per diluted share.
Six Month Financial Results
Net sales for the first six months of fiscal 2021 were $660.7 million compared to $448.3 million in the first six months of fiscal 2020. Comparable store sales increased 48.8 percent for the first six months of fiscal 2021.
The gross profit margin for the first six months of fiscal 2021 was 40.3 percent compared to 25.4 percent in the same period last year. Selling, general and administrative expenses for the first six months increased $25.7 million to $148.6 million. As a percentage of net sales, these expenses decreased to 22.5 percent compared to 27.4 percent in the first six months of fiscal 2020.
Net income for the first six months of fiscal 2021 was $87.5 million, or $3.05 per diluted share, compared to a net loss of $6.1 million, or a loss of $0.22 per diluted share, for the first six months of fiscal 2020.
One new store opened in the second quarter of fiscal 2021 and no stores were closed. For the first six months of fiscal 2021, the company has opened one store and closed six stores. The company expects to close three additional stores during the remainder of fiscal 2021 compared to a total of four store openings and 13 store closings in fiscal 2020.
The company is currently in the process of modernizing its stores and plans to modernize approximately 100 stores by the spring of 2022, with the goal of modernizing two-thirds of its store fleet in the next three to five years.
Fiscal 2021 Outlook
Based on third-quarter results to date and expected continued strength in gross profit margin for the remainder of the quarter, the company currently anticipates diluted net income per share in the range of $1.10 to $1.15 and net sales in the range of $307 million to $315 million for the third quarter of fiscal 2021. For full-year fiscal 2021, the company currently anticipates diluted net income per share in the range of $4.35 to $4.50 and net sales in the range of $1.21 billion to $1.23 billion. Shoe Carnival hasn’t been providing full-year guidance due to the uncertainty created by the pandemic.
Share Repurchase Program
In the second quarter of fiscal 2021, the company repurchased 117,068 shares of common stock at a total cost $4.0 million. As of July 31, 2021, the company had $46.0 million available for future repurchases under its share repurchase program. The company will continue to evaluate the repurchase of shares under the repurchase program during the remainder of fiscal 2021.