Shoe Carnival, Inc. Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Rebanner Expansion: Completed 24 stores in Q1, with plans to complete 75 rebanners by end of 2025 (20 in Q2, 25 in Q3, 6 in Q4). Shoe Station grew 4.9% driven by rebanners, outperforming industry and Shoe Carnival trends.
• Inventory Strategy: Maintaining elevated inventory levels to navigate marketplace uncertainties, with men's and women's performance running brands showing double-digit growth at Shoe Station. Inventory secured at competitive costs to protect margins.
• M&A: Committed to pursuing M&A to achieve long-term vision of being the nation's leading footwear retailer for families, targeting market-leading footwear retailers with scale.
• Organizational Update: Corporate HQ moved to Fort Mill, South Carolina, to better engage with vendors, attract talent, and serve stakeholders efficiently.

Segment Performance

• Shoe Station: Sales increased 4.9% for the quarter, driven by rebanner approach, growing sales in low double digits. Started the year with 42 stores (10% of store fleet), now operates 70 stores (16% of fleet), plans to end fiscal 2025 with ~120 stores (28% of fleet).
• Rogan's: Achieved results in line with synergy and integration plans, with net sales above $19 million both this year and last year.
• Shoe Carnival: Total sales declined 10%, comparable store sales down high single digits, impacted by lower-income household cautiousness and tax refund season effects. Athletic footwear (46% of revenue) showed relative resilience, while women's, men's, and children's nonathletic footwear faced declines, but Shoe Station outperformed in all categories.

Guidance

• Annual Fiscal 2025 Outlook: Reaffirmed net sales range of $1.15B-$1.23B, GAAP EPS range of $1.60-$2.10, gross profit margins 35%-36%, SG&A range of $350M-$360M, and CapEx range of $45M-$60M (with $30M-$40M for rebanners).
• Q2 2025 Forecast: Net sales forecast $310M-$320M, EPS range $0.55-$0.65, gross profit margins 36%-36.5%. Anticipates moderating sales decline trend in back half of the year due to Shoe Station momentum.

Risks

• Market Volatility: Uncertainty in the market and consumer confidence pose risks.
• Product Costs/Price Increases: Potential product cost or price increases outside of guidance ranges, though not currently visible.
• Supply Chain Disruption: Risk of supply or cost disruption, which could impact inventory levels and margins.

Question and Answer

• Q: About Shoe Station expansion and competitive set. A: Mark Worden discusses Shoe Station's white space and unique offering, targeting higher-end customers where competitive set is unfulfilled.
• Q: Rebannering results in rural markets. A: Mark Worden talks about positive initial results in rural, lower-income markets and continued evaluation of rebannering plans.
• Q: Tariffs and cost increases. A: Mark Worden states no significant impact seen yet but remains cautious, noting strong balance sheet and ability to bring in key products at attractive prices.