Shoe Carnival, Inc. Q4 FY2025 earnings call

Mark Worden departed as president and CEO, Cliff Sifford is interim president and CEO. Fiscal 25 demonstrated operational discipline. Shoe Station's net sales grew 2.7% for the year. Completed 101 rebanners in fiscal 2025, but observed variability in store sales performance. Focused on understanding consumer demographics, marketing approaches, and product refinement for rebanners. Plan to re-banner approximately 21 stores before back to school 2026. Fiscal 2026 operational priorities: reducing inventory, completing targeted rebanners, and controlling cost. SG&A expenses expected to decrease approximately $12 to $14 million. Launched Jordan brand from Nike, available in over 60% of stores with full fleet rollout expected by mid-April. Dividend increased to 17 cents per share, 12th consecutive year of increase.

Full year EPS of $1.90 exceeded consensus. Gross profit margin exceeded 35% for the fifth consecutive year. Ended the year debt-free for the 21st consecutive year with over $130 million in cash and securities. Fourth quarter EPS was $0.33 per diluted share. Shoe Station net sales grew 2.7% for the year, outperforming the family footwear industry for the third consecutive year, with net sales of $236.7 million representing 21% of total net sales. Shoe Carnival sales declined. Rogan's, fully integrated into Shoe Station's operating structure, generated $15.5 million in net sales with product margin expansion exceeding 500 basis points. Fourth quarter net sales were $254.1 million, a decline of 3.4% versus prior year. Gross profit margin was 34.9% in the fourth quarter. Full year net sales were $1.135 billion, a decline of 5.6%. Full year gross profit margin was 36.6%, an increase of 100 basis points versus prior year.

Fiscal 2026 EPS guidance $1.40 to $1.60. Net sales expected to be down 1% to up 1% versus fiscal 2025. Comparable store sales expected to decline in first half and improve in second half. Full-year comparable store sales expected to show improvement versus 5.6% decline in fiscal 2025. Gross profit margin expected to be approximately 34%, a decline of approximately 260 basis points compared to fiscal 2025. SG&A costs expected to decrease approximately 12 to 14 million versus fiscal 2025. Operating income expected in range of approximately 47 to 55 million. EPS in range of $1.40 to $1.60 excluding CEO transition costs.

Variability in store sales performance across converted rebanner stores. Inventory elevation from opportunistic pre-tariff buys creating near-term gross margin pressure. Competitive consumer environment affecting retail pricing. Uncertainty in the effectiveness of rebanner strategy pace and targeting. Impact of tariff-driven cost increases on gross margin.

Q: You guys talked about some variability of the shoe station in-store performance. Could you just explain what's going on there?

A: The best way is a little bit of everything mentioned, like maybe raised assortment level too high for some consumers.

Q: You said you're at 144 Shoe Station stores now. Is it reasonable to think that maybe some of those need to be converted back to Shoe Carnival stores? And when you think about the business longer term, are you rethinking that?

A: No, we're not going to re-banner a Shoe Station store back to a Shoe Carnival store. We are going to adjust product mix. Our goal is to operate two banners.

Q: As far as the guidance goes, it sounds like more pressure in the first half than the back half. Is there anything more explicitly you can say about the first quarter in terms of comp, in terms of margins and earnings?

A: We're not going to give details on the per quarter, but 2026 is a margin story, Q2 is the most difficult margin compare for the year.

Q: You mentioned that Shoe Station's comp was for the year up low singles and for the quarter it was down low singles. How much of that was driven through by the e-commerce versus the stores versus compared to Shoe Carnival?

A: The e-commerce business at Shoe Station was incredibly strong, but rebanner stores were down hot single digits and legacy stores down mid-singles.

Q: We just talked about your Shoe Station comps turned negative in fourth quarter. In light of sales slowing at Shoe Station and turning negative in fourth quarter, what gives you the confidence that sales turned positive in the back half of this year?

A: We're going through each individual store and their assortment, making adjustments from an assortment standpoint, and believe adjustments will be in place by back to school.

Q: Just trying to understand what FY27 should look like. Is the impact from selling pre-tariff inventory at post-tariff prices normalized this year? And what about rebanner investments for next year and synergy benefits?

A: Those are part of evaluation, we need to take a tighter look at stores that haven't met expectations and extrapolate causes.

Q: In terms of your comp guide for 2026, could you be a little bit more specific?

A: Our guide is minus one to up one for total sales, comp is directionally similar, and we expect better second half from a sales perspective than the first half.