UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
☒ |
| Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
| For the quarterly period ended | |
or | ||
☐ |
| Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
| For the transition period from to |
Commission File Number: | 0-21360 |
|
|
| |
| ||
(Exact name of registrant as specified in its charter) |
Indiana |
| 35-1736614 |
(State or other jurisdiction of incorporation or organization) |
| (IRS Employer Identification Number) |
|
|
|
7500 East Columbia Street Evansville, IN |
| 47715 |
(Address of principal executive offices) |
| (Zip code) |
|
(Registrant’s telephone number, including area code) |
|
NOT APPLICABLE |
(Former name, former address and former fiscal year, if changed since last report) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock, par value $0.01 per share | SCVL | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ ☒Yes Yes ☐ No No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ ☒Yes Yes ☐ No No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
☐ Large accelerated filer | ☒Accelerated filer | ☐ Non-accelerated filer | ☐ Smaller reporting company | ☐ Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Number of Shares of Common Stock, par value $0.01 per share, outstanding at November 24, 2021May 27, 2022 was 28,165,273.27,587,354.
SHOE CARNIVAL, INC.
INDEX TO FORM 10-Q
|
|
| Page | |
Part I | ||||
| Item 1. | |||
|
| 3 | ||
|
| 4 | ||
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| 5 | ||
|
| 6 | ||
|
| 7 | ||
|
|
| ||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
| |
|
|
| ||
| Item 3. |
| ||
|
|
| ||
| Item 4. |
| ||
|
| |||
Part II | ||||
| Item 1A. |
| ||
|
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| ||
| Item 2. |
| ||
|
|
| ||
| Item 6. |
| ||
|
| |||
|
|
2
SHOE CARNIVAL, INC.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SHOE CARNIVAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited
(In thousands, except share data) |
| October 30, 2021 |
|
| January 30, 2021 |
|
| October 31, 2020 |
|
| April 30, 2022 |
|
| January 29, 2022 |
|
| May 1, 2021 |
| ||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Current Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Cash and cash equivalents |
| $ | 173,364 |
|
| $ | 106,532 |
|
| $ | 46,740 |
|
| $ | 86,179 |
|
| $ | 117,443 |
|
| $ | 174,643 |
|
Marketable securities |
|
| 17,834 |
|
|
| 0 |
|
|
| 0 |
|
|
| 10,965 |
|
|
| 14,961 |
|
|
| 0 |
|
Accounts receivable |
|
| 10,018 |
|
|
| 7,096 |
|
|
| 8,435 |
|
|
| 14,442 |
|
|
| 14,159 |
|
|
| 7,477 |
|
Merchandise inventories |
|
| 282,014 |
|
|
| 233,266 |
|
|
| 274,264 |
|
|
| 345,021 |
|
|
| 285,205 |
|
|
| 268,629 |
|
Other |
|
| 12,435 |
|
|
| 8,411 |
|
|
| 10,727 |
|
|
| 14,592 |
|
|
| 10,264 |
|
|
| 11,896 |
|
Total Current Assets |
|
| 495,665 |
|
|
| 355,305 |
|
|
| 340,166 |
|
|
| 471,199 |
|
|
| 442,032 |
|
|
| 462,645 |
|
Property and equipment – net |
|
| 71,963 |
|
|
| 62,325 |
|
|
| 63,434 |
|
|
| 110,033 |
|
|
| 88,533 |
|
|
| 62,038 |
|
Operating lease right-of-use assets |
|
| 222,259 |
|
|
| 220,952 |
|
|
| 207,571 |
| ||||||||||||
Intangible assets |
|
| 32,600 |
|
|
| 32,600 |
|
|
| 0 |
| ||||||||||||
Goodwill |
|
| 11,698 |
|
|
| 11,384 |
|
|
| 0 |
| ||||||||||||
Deferred income taxes |
|
| 3,153 |
|
|
| 5,635 |
|
|
| 6,283 |
|
|
| 0 |
|
|
| 2,699 |
|
|
| 4,965 |
|
Other noncurrent assets |
|
| 14,218 |
|
|
| 13,843 |
|
|
| 11,802 |
|
|
| 13,945 |
|
|
| 14,064 |
|
|
| 12,870 |
|
Operating lease right-of-use assets |
|
| 201,510 |
|
|
| 205,639 |
|
|
| 201,658 |
| ||||||||||||
Total Assets |
| $ | 786,509 |
|
| $ | 642,747 |
|
| $ | 623,343 |
|
| $ | 861,734 |
|
| $ | 812,264 |
|
| $ | 750,089 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Liabilities and Shareholders’ Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Current Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Accounts payable |
| $ | 65,589 |
|
| $ | 57,717 |
|
| $ | 50,897 |
|
| $ | 116,837 |
|
| $ | 69,092 |
|
| $ | 102,405 |
|
Accrued and other liabilities |
|
| 48,536 |
|
|
| 24,390 |
|
|
| 25,346 |
|
|
| 31,243 |
|
|
| 33,053 |
|
|
| 55,011 |
|
Current portion of operating lease liabilities |
|
| 47,712 |
|
|
| 48,794 |
|
|
| 48,984 |
|
|
| 51,287 |
|
|
| 51,563 |
|
|
| 42,895 |
|
Total Current Liabilities |
|
| 161,837 |
|
|
| 130,901 |
|
|
| 125,227 |
|
|
| 199,367 |
|
|
| 153,708 |
|
|
| 200,311 |
|
Long-term portion of operating lease liabilities |
|
| 177,354 |
|
|
| 182,622 |
|
|
| 179,335 |
|
|
| 195,426 |
|
|
| 194,788 |
|
|
| 185,205 |
|
Deferred income taxes |
|
| 409 |
|
|
| 0 |
|
|
| 0 |
| ||||||||||||
Deferred compensation |
|
| 11,941 |
|
|
| 16,008 |
|
|
| 14,600 |
|
|
| 10,482 |
|
|
| 10,901 |
|
|
| 11,614 |
|
Other |
|
| 2,831 |
|
|
| 3,040 |
|
|
| 964 |
|
|
| 336 |
|
|
| 334 |
|
|
| 2,684 |
|
Total Liabilities |
|
| 353,963 |
|
|
| 332,571 |
|
|
| 320,126 |
|
|
| 406,020 |
|
|
| 359,731 |
|
|
| 399,814 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Shareholders’ Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Common stock, $0.01 par value, 50,000,000 shares authorized and 41,049,190 shares issued in each period, respectively |
|
| 410 |
|
|
| 410 |
|
|
| 410 |
| ||||||||||||
Common stock, $0.01 par value, 50,000,000 shares authorized and |
|
| 410 |
|
|
| 410 |
|
|
| 410 |
| ||||||||||||
Additional paid-in capital |
|
| 79,295 |
|
|
| 78,737 |
|
|
| 77,963 |
|
|
| 79,595 |
|
|
| 80,681 |
|
|
| 77,041 |
|
Retained earnings |
|
| 534,902 |
|
|
| 406,655 |
|
|
| 400,505 |
|
|
| 577,823 |
|
|
| 553,487 |
|
|
| 447,875 |
|
Treasury stock, at cost, 12,883,917 shares, 12,839,472 shares and 12,842,062 shares, respectively |
|
| (182,061 | ) |
|
| (175,626 | ) |
|
| (175,661 | ) | ||||||||||||
Treasury stock, at cost, 13,461,836 shares, 12,882,789 |
|
| (202,114 | ) |
|
| (182,045 | ) |
|
| (175,051 | ) | ||||||||||||
Total Shareholders’ Equity |
|
| 432,546 |
|
|
| 310,176 |
|
|
| 303,217 |
|
|
| 455,714 |
|
|
| 452,533 |
|
|
| 350,275 |
|
Total Liabilities and Shareholders’ Equity |
| $ | 786,509 |
|
| $ | 642,747 |
|
| $ | 623,343 |
|
| $ | 861,734 |
|
| $ | 812,264 |
|
| $ | 750,089 |
|
See notes to Condensed Consolidated Financial Statements.
3
SHOE CARNIVAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Unaudited
(In thousands, except per share data) |
| Thirteen Weeks Ended October 30, 2021 |
|
| Thirteen Weeks Ended October 31, 2020 |
|
| Thirty-nine Weeks Ended October 30, 2021 |
|
| Thirty-nine Weeks Ended October 31, 2020 |
|
| Thirteen |
|
| Thirteen |
| ||||||
Net sales |
| $ | 356,336 |
|
| $ | 274,579 |
|
| $ | 1,017,023 |
|
| $ | 722,868 |
|
| $ | 317,527 |
|
| $ | 328,457 |
|
Cost of sales (including buying, distribution and occupancy costs) |
|
| 212,280 |
|
|
| 186,818 |
|
|
| 607,057 |
|
|
| 521,038 |
|
|
| 204,664 |
|
|
| 198,299 |
|
Gross profit |
|
| 144,056 |
|
|
| 87,761 |
|
|
| 409,966 |
|
|
| 201,830 |
|
|
| 112,863 |
|
|
| 130,158 |
|
Selling, general and administrative expenses |
|
| 81,632 |
|
|
| 67,598 |
|
|
| 230,225 |
|
|
| 190,530 |
|
|
| 77,479 |
|
|
| 72,555 |
|
Operating income |
|
| 62,424 |
|
|
| 20,163 |
|
|
| 179,741 |
|
|
| 11,300 |
|
|
| 35,384 |
|
|
| 57,603 |
|
Interest income |
|
| (8 | ) |
|
| (2 | ) |
|
| (14 | ) |
|
| (95 | ) |
|
| (32 | ) |
|
| (4 | ) |
Interest expense |
|
| 120 |
|
|
| 119 |
|
|
| 358 |
|
|
| 293 |
|
|
| 95 |
|
|
| 119 |
|
Income before income taxes |
|
| 62,312 |
|
|
| 20,046 |
|
|
| 179,397 |
|
|
| 11,102 |
|
|
| 35,321 |
|
|
| 57,488 |
|
Income tax expense |
|
| 15,476 |
|
|
| 5,368 |
|
|
| 45,107 |
|
|
| 2,554 |
|
|
| 8,424 |
|
|
| 14,246 |
|
Net income |
| $ | 46,836 |
|
| $ | 14,678 |
|
| $ | 134,290 |
|
| $ | 8,548 |
|
| $ | 26,897 |
|
| $ | 43,242 |
|
Net income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Basic |
| $ | 1.66 |
|
| $ | 0.52 |
|
| $ | 4.75 |
|
| $ | 0.30 |
|
| $ | 0.96 |
|
| $ | 1.53 |
|
Diluted |
| $ | 1.64 |
|
| $ | 0.51 |
|
| $ | 4.69 |
|
| $ | 0.30 |
|
| $ | 0.95 |
|
| $ | 1.51 |
|
Weighted average shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Basic |
|
| 28,192 |
|
|
| 28,180 |
|
|
| 28,257 |
|
|
| 28,113 |
|
|
| 27,996 |
|
|
| 28,258 |
|
Diluted |
|
| 28,547 |
|
|
| 28,533 |
|
|
| 28,607 |
|
|
| 28,450 |
|
|
| 28,331 |
|
|
| 28,647 |
|
See notes to Condensed Consolidated Financial Statements.
4
SHOE CARNIVAL, INC.
Unaudited
|
| Thirteen Weeks Ended |
|
| Thirteen Weeks Ended |
| ||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Common Stock |
|
| Additional Paid-In |
|
| Retained |
|
| Treasury |
|
|
|
|
|
| Common Stock |
|
| Additional |
|
| Retained |
|
| Treasury |
|
|
|
| |||||||||||||||||||||||||
(In thousands, except per share data) |
| Issued |
|
| Treasury |
|
| Amount |
|
| Capital |
|
| Earnings |
|
| Stock |
|
| Total |
|
| Issued |
|
| Treasury |
|
| Amount |
|
| Capital |
|
| Earnings |
|
| Stock |
|
| Total |
| ||||||||||||||
Balance at July 31, 2021 |
|
| 41,049 |
|
|
| (12,811 | ) |
| $ | 410 |
|
| $ | 78,330 |
|
| $ | 490,069 |
|
| $ | (178,897 | ) |
| $ | 389,912 |
| ||||||||||||||||||||||||||||
Dividends declared ($0.070 per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (2,003 | ) |
|
|
|
|
|
| (2,003 | ) | ||||||||||||||||||||||||||||
Balance at January 29, 2022 |
|
| 41,049 |
|
|
| (12,883 | ) |
| $ | 410 |
|
| $ | 80,681 |
|
| $ | 553,487 |
|
| $ | (182,045 | ) |
| $ | 452,533 |
| ||||||||||||||||||||||||||||
Dividends declared ($0.09 per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (2,561 | ) |
|
|
|
|
| (2,561 | ) | |||||||||||||||||||||||||||||||||
Employee stock purchase plan purchases |
|
|
|
|
|
| 1 |
|
|
|
|
|
|
| 14 |
|
|
|
|
|
|
| 16 |
|
|
| 30 |
|
|
|
|
|
| 2 |
|
|
|
|
|
| 18 |
|
|
|
|
|
| 27 |
|
|
| 45 |
| |||
Stock-based compensation awards |
|
|
|
|
|
| 30 |
|
|
|
|
|
|
| (410 | ) |
|
|
|
|
|
| 410 |
|
|
| 0 |
|
|
|
|
|
| 170 |
|
|
|
|
|
| (2,467 | ) |
|
|
|
|
| 2,467 |
|
|
| 0 |
| |||
Shares surrendered by employees to pay taxes on stock-based compensation awards |
|
|
|
|
|
| (12 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (414 | ) |
|
| (414 | ) |
|
|
|
|
| (68 | ) |
|
|
|
|
|
|
|
|
|
|
| (2,048 | ) |
|
| (2,048 | ) | ||||
Purchase of common stock for treasury |
|
|
|
|
|
| (92 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (3,176 | ) |
|
| (3,176 | ) |
|
|
|
|
| (683 | ) |
|
|
|
|
|
|
|
|
|
|
| (20,515 | ) |
|
| (20,515 | ) | ||||
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1,361 |
|
|
|
|
|
|
|
|
|
|
| 1,361 |
|
|
|
|
|
|
|
|
|
|
|
| 1,363 |
|
|
|
|
|
|
|
|
| 1,363 |
| |||||
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 46,836 |
|
|
|
|
|
|
| 46,836 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 26,897 |
|
|
|
|
|
| 26,897 |
| |||||
Balance at October 30, 2021 |
|
| 41,049 |
|
|
| (12,884 | ) |
| $ | 410 |
|
| $ | 79,295 |
|
| $ | 534,902 |
|
| $ | (182,061 | ) |
| $ | 432,546 |
| ||||||||||||||||||||||||||||
Balance at April 30, 2022 |
|
| 41,049 |
|
|
| (13,462 | ) |
| $ | 410 |
|
| $ | 79,595 |
|
| $ | 577,823 |
|
| $ | (202,114 | ) |
| $ | 455,714 |
| ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Balance at August 1, 2020 |
|
| 41,049 |
|
|
| (12,847 | ) |
| $ | 410 |
|
| $ | 77,183 |
|
| $ | 387,119 |
|
| $ | (175,725 | ) |
| $ | 288,987 |
| ||||||||||||||||||||||||||||
Dividends declared ($0.045 per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1,292 | ) |
|
|
|
|
|
| (1,292 | ) | ||||||||||||||||||||||||||||
Balance at January 30, 2021 |
|
| 41,049 |
|
|
| (12,839 | ) |
| $ | 410 |
|
| $ | 78,737 |
|
| $ | 406,655 |
|
| $ | (175,626 | ) |
| $ | 310,176 |
| ||||||||||||||||||||||||||||
Dividends declared ($0.07 per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (2,022 | ) |
|
|
|
|
| (2,022 | ) | |||||||||||||||||||||||||||||||||
Employee stock purchase plan purchases |
|
|
|
|
|
| 4 |
|
|
|
|
|
|
| 1 |
|
|
|
|
|
|
| 46 |
|
|
| 47 |
|
|
|
|
|
| 2 |
|
|
|
|
|
| 31 |
|
|
|
|
|
| 33 |
|
|
| 64 |
| |||
Stock-based compensation awards |
|
|
|
|
|
| 1 |
|
|
|
|
|
|
| (27 | ) |
|
|
|
|
|
| 27 |
|
|
| 0 |
|
|
|
|
|
| 210 |
|
|
|
|
|
| (2,878 | ) |
|
|
|
|
| 2,878 |
|
|
| 0 |
| |||
Shares surrendered by employees to pay taxes on stock-based compensation awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (9 | ) |
|
| (9 | ) |
|
|
|
|
| (76 | ) |
|
|
|
|
|
|
|
|
|
|
| (2,336 | ) |
|
| (2,336 | ) | ||||
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 806 |
|
|
|
|
|
|
|
|
|
|
| 806 |
|
|
|
|
|
|
|
|
|
|
|
| 1,151 |
|
|
|
|
|
|
|
|
| 1,151 |
| |||||
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 14,678 |
|
|
|
|
|
|
| 14,678 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 43,242 |
|
|
|
|
|
| 43,242 |
| |||||
Balance at October 31, 2020 |
|
| 41,049 |
|
|
| (12,842 | ) |
| $ | 410 |
|
| $ | 77,963 |
|
| $ | 400,505 |
|
| $ | (175,661 | ) |
| $ | 303,217 |
| ||||||||||||||||||||||||||||
Balance at May 1, 2021 |
|
| 41,049 |
|
|
| (12,703 | ) |
| $ | 410 |
|
| $ | 77,041 |
|
| $ | 447,875 |
|
| $ | (175,051 | ) |
| $ | 350,275 |
|
|
| Thirty-nine Weeks Ended |
| |||||||||||||||||||||||||
|
| Common Stock |
|
| Additional Paid-In |
|
| Retained |
|
| Treasury |
|
|
|
|
| ||||||||||||
(In thousands, except per share data) |
| Issued |
|
| Treasury |
|
| Amount |
|
| Capital |
|
| Earnings |
|
| Stock |
|
| Total |
| |||||||
Balance at January 30, 2021 |
|
| 41,049 |
|
|
| (12,839 | ) |
| $ | 410 |
|
| $ | 78,737 |
|
| $ | 406,655 |
|
| $ | (175,626 | ) |
| $ | 310,176 |
|
Dividends declared ($0.210 per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (6,043 | ) |
|
|
|
|
|
| (6,043 | ) |
Employee stock purchase plan purchases |
|
|
|
|
|
| 4 |
|
|
|
|
|
|
| 60 |
|
|
|
|
|
|
| 62 |
|
|
| 122 |
|
Stock-based compensation awards |
|
|
|
|
|
| 248 |
|
|
|
|
|
|
| (3,400 | ) |
|
|
|
|
|
| 3,400 |
|
|
| 0 |
|
Shares surrendered by employees to pay taxes on stock-based compensation awards |
|
|
|
|
|
| (88 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (2,750 | ) |
|
| (2,750 | ) |
Purchase of common stock for treasury |
|
|
|
|
|
| (209 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (7,147 | ) |
|
| (7,147 | ) |
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 3,898 |
|
|
|
|
|
|
|
|
|
|
| 3,898 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 134,290 |
|
|
|
|
|
|
| 134,290 |
|
Balance at October 30, 2021 |
|
| 41,049 |
|
|
| (12,884 | ) |
| $ | 410 |
|
| $ | 79,295 |
|
| $ | 534,902 |
|
| $ | (182,061 | ) |
| $ | 432,546 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at February 1, 2020 |
|
| 41,049 |
|
|
| (13,034 | ) |
| $ | 410 |
|
| $ | 79,773 |
|
| $ | 395,761 |
|
| $ | (178,581 | ) |
| $ | 297,363 |
|
Dividends declared ($0.133 per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (3,804 | ) |
|
|
|
|
|
| (3,804 | ) |
Employee stock purchase plan purchases |
|
|
|
|
|
| 14 |
|
|
|
|
|
|
| (37 | ) |
|
|
|
|
|
| 189 |
|
|
| 152 |
|
Stock-based compensation awards |
|
|
|
|
|
| 322 |
|
|
|
|
|
|
| (4,467 | ) |
|
|
|
|
|
| 4,467 |
|
|
| 0 |
|
Shares surrendered by employees to pay taxes on stock-based compensation awards |
|
|
|
|
|
| (144 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1,736 | ) |
|
| (1,736 | ) |
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2,694 |
|
|
|
|
|
|
|
|
|
|
| 2,694 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 8,548 |
|
|
|
|
|
|
| 8,548 |
|
Balance at October 31, 2020 |
|
| 41,049 |
|
|
| (12,842 | ) |
| $ | 410 |
|
| $ | 77,963 |
|
| $ | 400,505 |
|
| $ | (175,661 | ) |
| $ | 303,217 |
|
See notes to Condensed Consolidated Financial Statements.
5
SHOE CARNIVAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
(In thousands) |
| Thirty-nine Weeks Ended October 30, 2021 |
|
| Thirty-nine Weeks Ended October 31, 2020 |
|
| Thirteen |
|
| Thirteen |
| ||||
Cash Flows From Operating Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Net income |
| $ | 134,290 |
|
| $ | 8,548 |
|
| $ | 26,897 |
|
| $ | 43,242 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Depreciation and amortization |
|
| 13,687 |
|
|
| 12,034 |
|
|
| 4,677 |
|
|
| 4,315 |
|
Stock-based compensation |
|
| 4,118 |
|
|
| 2,881 |
|
|
| 1,240 |
|
|
| 1,227 |
|
Loss on retirement and impairment of assets |
|
| 1,120 |
|
|
| 2,427 |
| ||||||||
Loss on retirement and impairment of assets, net |
|
| 22 |
|
|
| 757 |
| ||||||||
Deferred income taxes |
|
| 2,482 |
|
|
| 1,550 |
|
|
| 3,108 |
|
|
| 670 |
|
Non-cash operating lease expense |
|
| 31,797 |
|
|
| 31,087 |
|
|
| 11,998 |
|
|
| 11,434 |
|
Other |
|
| 1,950 |
|
|
| 494 |
|
|
| 304 |
|
|
| 1,187 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Accounts receivable |
|
| (2,922 | ) |
|
| (5,711 | ) |
|
| (283 | ) |
|
| (381 | ) |
Merchandise inventories |
|
| (48,748 | ) |
|
| (14,769 | ) |
|
| (59,816 | ) |
|
| (35,363 | ) |
Operating leases |
|
| (34,018 | ) |
|
| (26,673 | ) |
|
| (12,942 | ) |
|
| (16,682 | ) |
Accounts payable and accrued liabilities |
|
| 19,872 |
|
|
| (2,544 | ) |
|
| 41,697 |
|
|
| 61,519 |
|
Other |
|
| (3,150 | ) |
|
| (9,154 | ) |
|
| 801 |
|
|
| 4,595 |
|
Net cash provided by operating activities |
|
| 120,478 |
|
|
| 170 |
|
|
| 17,703 |
|
|
| 76,520 |
|
Cash Flows From Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Purchases of property and equipment |
|
| (20,350 | ) |
|
| (10,083 | ) |
|
| (26,907 | ) |
|
| (4,083 | ) |
Investments in marketable securities and other |
|
| (17,496 | ) |
|
| 0 |
|
|
| (6 | ) |
|
| 0 |
|
Other |
|
| 0 |
|
|
| 194 |
| ||||||||
Sales of marketable securities and other |
|
| 3,040 |
|
|
| 0 |
| ||||||||
Net cash used in investing activities |
|
| (37,846 | ) |
|
| (9,889 | ) |
|
| (23,873 | ) |
|
| (4,083 | ) |
Cash Flows From Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Borrowings under line of credit |
|
| 0 |
|
|
| 24,903 |
| ||||||||
Payments on line of credit |
|
| 0 |
|
|
| (24,903 | ) | ||||||||
Proceeds from issuance of stock |
|
| 122 |
|
|
| 152 |
|
|
| 45 |
|
|
| 64 |
|
Dividends paid |
|
| (6,025 | ) |
|
| (3,856 | ) |
|
| (2,576 | ) |
|
| (2,054 | ) |
Purchase of common stock for treasury |
|
| (7,147 | ) |
|
| 0 |
|
|
| (20,515 | ) |
|
| 0 |
|
Shares surrendered by employees to pay taxes on stock-based compensation awards |
|
| (2,750 | ) |
|
| (1,736 | ) |
|
| (2,048 | ) |
|
| (2,336 | ) |
Net cash used in financing activities |
|
| (15,800 | ) |
|
| (5,440 | ) |
|
| (25,094 | ) |
|
| (4,326 | ) |
Net increase (decrease) in cash and cash equivalents |
|
| 66,832 |
|
|
| (15,159 | ) | ||||||||
Net (decrease) increase in cash and cash equivalents |
|
| (31,264 | ) |
|
| 68,111 |
| ||||||||
Cash and cash equivalents at beginning of period |
|
| 106,532 |
|
|
| 61,899 |
|
|
| 117,443 |
|
|
| 106,532 |
|
Cash and cash equivalents at end of period |
| $ | 173,364 |
|
| $ | 46,740 |
|
| $ | 86,179 |
|
| $ | 174,643 |
|
Supplemental disclosures of cash flow information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Cash paid during period for interest |
| $ | 359 |
|
| $ | 276 |
|
| $ | 30 |
|
| $ | 118 |
|
Cash paid during period for income taxes |
| $ | 33,542 |
|
| $ | 1,812 |
|
| $ | 61 |
|
| $ | 68 |
|
Capital expenditures incurred but not yet paid |
| $ | 2,602 |
|
| $ | 808 |
|
| $ | 5,173 |
|
| $ | 1,323 |
|
Dividends declared but not yet paid |
| $ | 151 |
|
| $ | 113 |
|
| $ | 169 |
|
| $ | 101 |
|
See notes to Condensed Consolidated Financial Statements.
6
SHOE CARNIVAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
Note 1 – Basis of Presentation
Shoe Carnival, Inc. is one of the nation’s largest family footwear retailers, providing customers the convenience of shopping at any of our store locations or online.retailers. We offer customers a broad assortment of dress, casual and athletic footwear and accessories for men, women and children with an emphasis on national name brands.brands through our Shoe Carnival and Shoe Station store banners. We differentiateare an omnichannel retailer selling footwear and related products through our retail concept fromstores located in 35 states within the continental United States and in Puerto Rico, as well as through our competitors by our distinctive, fun and promotional marketing efforts.e-commerce platform. We are an Indiana corporation that was initially formed in Delaware in 1993 and reincorporated in Indiana in 1996. References to “Shoe Carnival,” “we,” “us,” “our” and the “Company” in this Quarterly Report on Form 10-Q refer to Shoe Carnival, Inc. and its subsidiaries.
In our opinion, the accompanying unaudited Condensed Consolidated Financial Statements and notes have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information and contain all normal recurring adjustments necessary to fairly present our financial position and the results of our operations and our cash flows for the periods presented. Certain information and disclosures normally included in the notes to Condensed Consolidated Financial Statements have been condensed or omitted as permitted by the rules and regulations of the SEC although we believe that the disclosures are adequate to make the information presented not misleading. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. The unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and the notes thereto contained in our Annual Report on Form 10-K for the fiscal year ended January 30, 2021.29, 2022.
On June 21, 2021, our Board of Directors authorized a two-for-one stock split of the shares of our common stock. 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 of common stock owned as of that date and was paid on July 19, 2021. Upon the completion of the stock split, our outstanding shares increased from approximately 14.1 million shares to approximately 28.2 million shares. In accordance with the provisions of our 2017 Equity Incentive Plan (the “2017 Plan”) and our Employee Stock Purchase Plan, and as determined by the Compensation Committee of our Board of Directors, the following, among other items, were adjusted to equitably reflect the effect of the two-for-one stock split:
• The number of shares reserved and available for issuance; • The number of shares subject to outstanding equity awards under our stock-based compensation programs; • The exercise prices and maximum gain of our outstanding stock appreciation rights; and • The annual diluted net income per share targets associated with our outstanding performance stock units granted under the 2017 Plan.
|
|
|
|
|
|
|
|
All share and per share amounts in this quarterly report on Form 10-Q give effect to the stock split and have been adjusted retroactively for all periods presented.
Note 2 - Acquisition of Shoe Station
On December 3, 2021, we acquired the physical stores and substantially all of the other assets and liabilities of Shoe Station, Inc. ("Shoe Station") for total consideration of $70.7 million, net of $77,000 of cash acquired. The purchase price paid is subject to an adjustment for finalization of the value of the net assets acquired and was funded with available cash on hand. Shoe Station was one of the nation's largest independent shoe retailers, with currently 22 locations in Alabama, Florida, Georgia, Mississippi, and Louisiana. We believe the addition of a new brand and new retail locations to the Shoe Carnival portfolio creates a complementary retail platform to serve a broader family footwear customer base across both urban and suburban demographics.
The results of Shoe Station are included in our condensed consolidated financial statements since the acquisition date. We recorded a preliminary allocation of the purchase price to the assets acquired and liabilities assumed based on the estimated fair values as of December 3, 2021. There were no material adjustments to our preliminary purchase price allocation recognized during the first quarter of fiscal 2022. The final determination of the fair values and related impacts will be completed as soon as practicable, and within the measurement period of up to one year from the acquisition date.
7
Note 23 - Net Income Per Share
The following tables set forth the computation of basic and diluted net income per share as shown on the face of the accompanying Condensed Consolidated Statements of Income:
|
| Thirteen Weeks Ended |
|
| Thirteen Weeks Ended |
| ||||||||||||||||||||||||||||||||||||||||||
|
| October 30, 2021 |
|
| October 31, 2020 |
|
| April 30, 2022 |
|
| May 1, 2021 |
| ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
| (In thousands, except per share data) |
|
|
|
|
|
|
|
| (In thousands, except per share data) | �� |
|
|
| |||||||||||||||||||||||||||||
Basic Net Income per Share: |
| Net Income |
|
| Shares |
|
| Per Share Amount |
|
| Net Income |
|
| Shares |
|
| Per Share Amount |
|
| Net |
|
| Shares |
|
| Per Share |
|
| Net |
|
| Shares |
|
| Per Share |
| ||||||||||||
Net income available for basic common shares and basic net income per share |
| $ | 46,836 |
|
|
| 28,192 |
|
| $ | 1.66 |
|
| $ | 14,678 |
|
|
| 28,180 |
|
| $ | 0.52 |
|
| $ | 26,897 |
|
|
| 27,996 |
|
| $ | 0.96 |
|
| $ | 43,242 |
|
|
| 28,258 |
|
| $ | 1.53 |
|
Diluted Net Income per Share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net income |
| $ | 46,836 |
|
|
|
|
|
|
|
|
|
| $ | 14,678 |
|
|
|
|
|
|
|
|
|
| $ | 26,897 |
|
|
|
|
|
|
|
| $ | 43,242 |
|
|
|
|
|
|
| ||||
Conversion of stock-based compensation arrangements |
|
| 0 |
|
|
| 355 |
|
|
|
|
|
|
| 0 |
|
|
| 353 |
|
|
|
|
|
|
| 0 |
|
|
| 335 |
|
|
|
|
|
| 0 |
|
|
| 389 |
|
|
|
| ||
Net income available for diluted common shares and diluted net income per share |
| $ | 46,836 |
|
|
| 28,547 |
|
| $ | 1.64 |
|
| $ | 14,678 |
|
|
| 28,533 |
|
| $ | 0.51 |
|
| $ | 26,897 |
|
|
| 28,331 |
|
| $ | 0.95 |
|
| $ | 43,242 |
|
|
| 28,647 |
|
| $ | 1.51 |
|
7
|
| Thirty-nine Weeks Ended |
| |||||||||||||||||||||
|
| October 30, 2021 |
|
| October 31, 2020 |
| ||||||||||||||||||
|
|
|
|
|
| (In thousands, except per share data) |
|
|
|
|
| |||||||||||||
Basic Net Income per Share: |
| Net Income |
|
| Shares |
|
| Per Share Amount |
|
| Net Income |
|
| Shares |
|
| Per Share Amount |
| ||||||
Net income available for basic common shares and basic net income per share |
| $ | 134,290 |
|
|
| 28,257 |
|
| $ | 4.75 |
|
| $ | 8,548 |
|
|
| 28,113 |
|
| $ | 0.30 |
|
Diluted Net Income per Share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 134,290 |
|
|
|
|
|
|
|
|
|
| $ | 8,548 |
|
|
|
|
|
|
|
|
|
Conversion of stock-based compensation arrangements |
|
| 0 |
|
|
| 350 |
|
|
|
|
|
|
| 0 |
|
|
| 337 |
|
|
|
|
|
Net income available for diluted common shares and diluted net income per share |
| $ | 134,290 |
|
|
| 28,607 |
|
| $ | 4.69 |
|
| $ | 8,548 |
|
|
| 28,450 |
|
| $ | 0.30 |
|
The computation of basic net income per share of common stock is based on the weighted average number of common shares outstanding during the period. The computation of diluted net income per share is based on the weighted average number of shares outstanding plus the dilutive incremental shares that would be outstanding assuming the vesting of stock-based compensation arrangements involving restricted stock, restricted stock units and performance stock units. A small portionThe computation of thesediluted net income per share for the thirteen weeks ended April 30, 2022 excluded approximately 24,000 unvested stock-based awards that were outstanding atwill be settled in shares because the beginning of fiscal 2020 had a non-forfeitable right to dividends. NaNimpact would have been anti-dilutive. During the thirteen weeks ended May 1, 2021, approximately 6,000 unvested stock-based awards that will be settled in shares were excluded from the computation of diluted net income per share for the thirteen and thirty-nine weeks ended October 30, 2021. During the thirteen and thirty-nine weeks ended October 31, 2020, unvested stock-based awards that will be settled in shares excluded from the computation were approximately 2,000 and 3,000, respectively, because the impact would have been anti-dilutive.
Note 3 – Recently Issued Accounting Pronouncements
The Financial Accounting Standards Board issued guidance related to reference rate reform, which addresses contract modifications that may be necessary due to the expected discontinuance of LIBOR as a broadly used reference rate. The guidance was effective immediately but is only available for contract modifications made through December 31, 2022. Our credit facility currently allows for LIBOR-based borrowings and, as amended in 2020, contains provisions providing for a benchmark replacement in the event LIBOR is discontinued. We will adopt this guidance when LIBOR is discontinued and do not expect the adoption will have a material impact on our consolidated financial statements or related disclosures.
Note 4 – Risk and Uncertainties Associated with the COVID-19 Pandemic
Our operations have been significantly disrupted by the outbreak of a novel strain of coronavirus (“COVID-19”). On March 11, 2020, the World Health Organization declared the COVID-19 outbreak a pandemic. The U.S. Government, as well as the vast majority of states and local municipalities, have taken unprecedented measures to control the spread of COVID-19 and to provide stimulus as a mitigating measure to deteriorating economic conditions and increasing unemployment.
The COVID-19 pandemic began significantly impacting our operations, sales and costs beginning in the first quarter of fiscal 2020. Impacts included the temporary closure of our physical stores effective March 19, 2020, reduced foot traffic and sales, deteriorating economic conditions for our customer base, and some disruption to our global supply chain. We began reopening physical stores in accordance with applicable public health guidelines in late April 2020. By the beginning of the second quarter of fiscal 2020, approximately 50% of our stores were reopened, and by early June 2020, substantially all of our stores had reopened. Our e-commerce platform has been fully operational during the pandemic with e-commerce orders generally fulfilled by our store locations.
We did not have any stores closed as of October 30, 2021 or for extended periods during the first nine months of fiscal 2021 due to the pandemic. The COVID-19 pandemic will likely continue to impact our financial condition and results of operations for the foreseeable future.
Note 54 - Fair Value Measurements
The accounting guidance related to fair value measurements defines fair value and provides a consistent framework for measuring fair value under the authoritative literature. Valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect market assumptions. This guidance only applies when other guidance requires or permits the fair value measurement of assets and liabilities. The guidance does not expand the use of fair value measurements. A fair value hierarchy was established, which prioritizes the inputs used in measuring fair value into three broad levels:
8
|
|
|
|
|
|
Fair Value of Financial Instruments
The following table presents financial instruments that are measured at fair value on a recurring basis at OctoberApril 30, 2021,2022, January 30, 202129, 2022 and October 31, 2020.May 1, 2021:
|
| Fair Value Measurements |
|
| Fair Value Measurements |
| ||||||||||||||||||||||||||
(In thousands) |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||||||
As of October 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
As of April 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Cash equivalents - money market mutual funds |
| $ | 165,072 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 165,072 |
|
| $ | 90,598 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 90,598 |
|
Marketable securities - mutual funds that fund deferred compensation |
|
| 17,834 |
|
|
| 0 |
|
|
| 0 |
|
|
| 17,834 |
|
|
| 10,965 |
|
|
| 0 |
|
|
| 0 |
|
|
| 10,965 |
|
Total |
| $ | 182,906 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 182,906 |
|
| $ | 101,563 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 101,563 |
|
As of January 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
As of January 29, 2022 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Cash equivalents - money market mutual funds |
| $ | 97,519 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 97,519 |
|
| $ | 115,528 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 115,528 |
|
As of October 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Marketable securities - mutual funds that fund |
|
| 14,961 |
|
|
|
|
|
|
|
|
| 14,961 |
| ||||||||||||||||||
Total |
| $ | 130,489 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 130,489 |
| ||||||||||||||||
As of May 1, 2021 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Cash equivalents - money market mutual funds |
| $ | 48,883 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 48,883 |
|
| $ | 175,612 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 175,612 |
|
During the second quarter of fiscal 2021, we invested in publicly traded mutual funds with readily determinable fair values. These marketable securities are designed to mitigate volatility in our Condensed Consolidated Statements of Income associated with our non-qualified deferred compensation plan. As of OctoberApril 30, 2021,2022, these marketable securities were principally invested in equity-based mutual funds, consistent with the allocation in our deferred compensation plan. As of OctoberApril 30, 2021,2022, the balance in our deferred compensation plan was $16.7 $10.5 million, of which $4.8 million $53,000was in Accrued and other liabilities based on scheduled payments due within the next 12 months and $11.9 millionthe remaining balance was in Deferred compensation.compensation, a long-term liability. To the extent there are funds in excess of the total non-qualifiednon-qualified deferred compensation plan liability, such funds are invested in a stable value mutual fund. We classify these marketable securities as current assets because we have the ability to convert the securities into cash at our discretion and these marketable securities are not held in a rabbi trust. For the thirteen and thirty-nine weeks ended October 30, 2021, weWe have recognized unrealized gainslosses of $390,000 and $338,000, respectively,$2.6 million related to equity securities still held at OctoberApril 30, 2021.2022.
The fair values of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and other current liabilities approximate their carrying values because of their short-term nature.
8
Long-Lived Asset Impairment Testing
We periodically evaluate our long-lived assets for impairment if events or circumstances indicate that the carrying value may not be recoverable. The carrying value of long-lived assets is considered impaired when the carrying value of the assets exceeds the expected future cash flows to be derived from their use. Assets are grouped, and the evaluation is performed, at the lowest level for which there are identifiable cash flows, which is generally at a store level. Store level asset groupings typically include property and equipment and operating lease right-of-use assets. If the estimated, undiscounted future cash flows for a store are determined to be less than the carrying value of the store’s assets, an impairment loss is recorded for the difference between estimated fair value and carrying value. Assets subject to impairment are adjusted to estimated fair value and, if applicable, an impairment loss is recorded in selling, general and administrative expenses. If the operating lease right-of-use asset is impaired, we would amortize the remaining right-of-use asset on a straight-line basis over the remaining lease term.term.
We estimate the fair value of our long-lived assets using store specific cash flow assumptions discounted by a rate commensurate with the risk involved with such assets while incorporating marketplace assumptions. Our estimates are derived from an income-based approach considering the cash flows expected over the remaining lease term for each location. These projections are primarily based on management’s estimates of store-level sales, exercise of future lease renewal options and the store’s contribution to cash flows and, by their nature, include judgments about how current initiatives will impact future performance. We estimate the fair value of operating lease right-of-use assets using the market value of rents applicable to the leased asset, discounted using the remaining lease term.
External factors, such as the local environment in which the store is located, including store traffic and competition, are evaluated in terms of their effect on sales trends. Changes in sales and operating income assumptions or unfavorable changes in external factors
9
can significantly impact the estimated future cash flows. An increase or decrease in the projected cash flow can significantly impact the fair value of these assets, which may have an effect on the impairment recorded. If actual operating results or market conditions differ from those anticipated, the carrying value of certain of our assets may prove unrecoverable and we may incur additional impairment charges in the future.
During the thirteen and thirty-nine weeks ended October 30,May 1, 2021, we recorded impairment charges of $15,000 and $983,000$724,000 associated with one store and four stores, respectively. During the thirteen and thirty-nine weeks ended October 31, 2020, we recorded impairment charges of $211,000 and $2.7 million associated with one store and nine stores, respectively.two stores. These charges were included in selling, general and administrative expenses. NaN impairment charges were recorded during the thirteen weeks ended April 30, 2022, and 0 impairments of operating right-of-use assets have been recorded in any of these periods.either period.
Note 65 - Stock-Based Compensation
Stock-based compensation includes share-settled awards issued pursuant to our shareholder approved Shoe Carnival, Inc. 2017 Equity Incentive Plan in the form of restricted stock units, performance stock units, and restricted stock.and other stock awards. Additionally, we recognize stock-based compensation expense for the discount on shares sold to employees through our Employee Stock Purchase Plan and for cash-settled stock appreciation rights. For the thirteen and thirty-nine weeks ended OctoberApril 30, 2022 and May 1, 2021, stock-based compensation expense forwas comprised of the Employee Stock Purchase Plan was $5,000 before the income tax benefit of $1,000 and $22,000 before the income tax benefit of $6,000, respectively. For the thirteen and thirty-nine weeks ended October 31, 2020, stock-based compensation expense for the Employee Stock Purchase Plan was $8,000 before the income tax benefit of $2,000 and $27,000 before the income tax benefit of $6,000, respectively.following:
Share-Settled Equity Awards
The following table summarizes transactions for our restricted stock units and performance stock units:
|
| Number of Shares |
|
| Weighted- Average Grant Date Fair Value |
| ||
Outstanding at January 30, 2021 |
|
| 513,016 |
|
| $ | 11.07 |
|
Granted |
|
| 215,972 |
|
|
| 28.21 |
|
Vested |
|
| (238,964 | ) |
|
| 15.50 |
|
Forfeited |
|
| (34,486 | ) |
|
| 16.17 |
|
Outstanding at October 30, 2021 |
|
| 455,538 |
|
| $ | 16.48 |
|
(In thousands) |
| Thirteen |
|
| Thirteen |
| ||
Share-settled equity awards |
| $ | 1,355 |
|
| $ | 1,140 |
|
Stock appreciation rights |
|
| (123 | ) |
|
| 76 |
|
Employee stock purchase plan |
|
| 8 |
|
|
| 11 |
|
Total stock-based compensation expense |
| $ | 1,240 |
|
| $ | 1,227 |
|
Income tax effect at statutory rates |
| $ | (296 | ) |
| $ | (304 | ) |
Additional income tax benefit on vesting of share-settled awards |
| $ | (495 | ) |
| $ | (880 | ) |
The total fair value at grant date of restricted stock units and performance stock units that vested during the thirty-nine weeks ended October 30, 2021 and October 31, 2020 was $3.7 million and $4.4 million, respectively. The weighted-average grant date fair value of restricted stock units and performance stock units granted during the thirty-nine weeks ended October 30, 2021 and October 31, 2020 was $28.21 and $7.44, respectively.
The following table summarizes transactions for our restricted stock and other stock awards:
|
| Number of Shares |
|
| Weighted- Average Grant Date Fair Value |
| ||
Outstanding at January 30, 2021 |
|
| 0 |
|
| $ | 0.00 |
|
Granted |
|
| 8,702 |
|
|
| 32.79 |
|
Vested |
|
| (802 | ) |
|
| 33.04 |
|
Forfeited or expired |
|
| 0 |
|
|
| 0.00 |
|
Outstanding at October 30, 2021 |
|
| 7,900 |
|
| $ | 32.76 |
|
The total fair value at grant date of restricted stock and other stock awards that vested during the thirty-nine weeks ended October 30, 2021 and October 31, 2020 was $26,000 and $1.3 million, respectively. The weighted-average grant date fair value of restricted stock and other stock awards granted during the thirty-nine weeks ended October 30, 2021 and October 31, 2020 was $32.79 and $12.46, respectively.
10
The following table summarizes information regarding stock-based compensation expense recognized for all share-settled equity awards (restricted stock units, performance stock units and restricted stock and other stock awards):
(In thousands) |
| Thirteen Weeks Ended October 30, 2021 |
|
| Thirteen Weeks Ended October 31, 2020 |
|
| Thirty-nine Weeks Ended October 30, 2021 |
|
| Thirty-nine Weeks Ended October 31, 2020 |
| ||||
Stock-based compensation expense before the recognized income tax effect |
| $ | 1,356 |
|
| $ | 797 |
|
| $ | 3,876 |
|
| $ | 2,667 |
|
Income tax effect at statutory rate |
| $ | (337 | ) |
| $ | (213 | ) |
| $ | (975 | ) |
| $ | (613 | ) |
Additional income tax (benefit)/expense on vesting of awards |
| $ | (107 | ) |
| $ | 3 |
|
| $ | (992 | ) |
| $ | 81 |
|
As of OctoberApril 30, 20212022, approximately $4.7$11.4 million of unrecognized compensation expense remained related to our share-settled equity awards. The cost is expected to be recognized over a weighted average period of approximately 1.11.9 years.
Cash-Settled Stock Appreciation Rights9
Cash-settled stock appreciation rights (“SARs”) are granted to certain non-executive employees. Each SAR entitles holders, upon exercise of their vested shares, to receive cash in an amount equal to the closing price of our stock on the date of exercise less the exercise price, with a maximum amount of gain defined. The SARs granted during the first quarter of fiscal 2021 will vest and become fully exercisable on March 31, 2022 and any unexercised SARs will expire on March 31, 2024. SARs granted during the first quarter of fiscal 2020 vested and became fully exercisable on March 31, 2021. The remaining unexercised SARs from the first quarter fiscal 2020 grant were exercised in the second quarter of fiscal 2021. SARs granted during the first quarter of fiscal 2019 vested and became fully exercisable on March 31, 2020. The remaining unexercised SARs from the first quarter fiscal 2019 grant were exercised in the first quarter of fiscal 2021. The SARs issued have a defined maximum gain of $5.00 over the exercise price of $30.94 for awards granted in fiscal 2021.Share-Settled Equity Awards
The following table summarizes transactions for our restricted stock units and performance stock units:
|
| Number of |
|
| Weighted- |
| ||
Outstanding at January 29, 2022 |
|
| 457,038 |
|
| $ | 16.54 |
|
Granted |
|
| 336,164 |
|
|
| 30.52 |
|
Vested |
|
| (170,425 | ) |
|
| 18.46 |
|
Forfeited |
|
| (25,103 | ) |
|
| (18.07 | ) |
Outstanding at April 30, 2022 |
|
| 597,674 |
|
| $ | 23.79 |
|
The total fair value at grant date of restricted stock units and performance stock units that vested during each of the SARs activity:
|
| Number of Shares |
|
| Weighted- Average Exercise Price |
|
| Weighted- Average Remaining Contractual Term (Years) |
| |||
Outstanding at January 30, 2021 |
|
| 88,400 |
|
| $ | 7.61 |
|
|
|
|
|
Granted |
|
| 93,800 |
|
|
| 30.94 |
|
|
|
|
|
Forfeited or expired |
|
| (5,800 | ) |
|
| 30.94 |
|
|
|
|
|
Exercised |
|
| (88,400 | ) |
|
| 7.61 |
|
|
|
|
|
Outstanding at October 30, 2021 |
|
| 88,000 |
|
| $ | 30.94 |
|
|
| 2.4 |
|
thirteen weeks ended April 30, 2022 and May 1, 2021 was $3.1 million. The weighted-average grant date fair value of these liability awards are remeasured, using a trinomial lattice model, at each reporting period untilrestricted stock units and performance stock units granted during the date of settlement. Increases or decreases in stock-based compensation expense are recognized over the vesting period, or immediately for vested awards. The weighted-average fair value of outstanding SAR awards as of Octoberthirteen weeks ended April 30, 2022 and May 1, 2021 was $3.02.
The fair value was estimated using a trinomial lattice model with the following assumptions:
|
| October 30, 2021 |
|
| October 31, 2020 |
| |||
Risk free interest rate yield curve |
| 0.06% - 1.18% |
|
| 0.08% - 0.38% |
| |||
Expected dividend yield |
| 0.8% |
|
| 1.2% |
| |||
Expected volatility |
| 63.29% |
|
| 64.09% |
| |||
Maximum life |
| 2.4 Years |
|
| 1.9 Years |
| |||
Exercise multiple |
|
| 1.03 |
|
|
| 1.29 |
| |
Maximum payout |
| $ | 5.00 |
|
| $ | 5.00 |
| |
Employee exit rate |
| 2.2% - 9.0% |
|
| 2.2% - 9.0% |
|
The risk free interest rate was based on the U.S. Treasury yield curve in effect at the end of the reporting period. The expected dividend yield was based on our historical quarterly cash dividends, with the assumption that quarterly dividends would continue at that rate. Expected volatility was based on the historical volatility of our common stock. The exercise multiple$30.52 and employee exit rate were calculated based on historical data.$28.21, respectively.
11
The following table summarizes information regarding stock-based compensation expense recognized for SARs:
(In thousands) |
| Thirteen Weeks Ended October 30, 2021 |
|
| Thirteen Weeks Ended October 31, 2020 |
|
| Thirty-nine Weeks Ended October 30, 2021 |
|
| Thirty-nine Weeks Ended October 31, 2020 |
| ||||
Stock-based compensation expense before the recognized income tax effect |
| $ | 71 |
|
| $ | 183 |
|
| $ | 220 |
|
| $ | 187 |
|
Income tax effect at statutory rate |
| $ | (18 | ) |
| $ | (49 | ) |
| $ | (55 | ) |
| $ | (43 | ) |
As of October 30, 2021, approximately $111,000 in unrecognized compensation expense remained related to non-vested SARs. This expense is expected to be recognized over a period of approximately 0.4 years.
Note 76 – Revenue
Disaggregation of Revenue by Product Category
Revenue is disaggregated by product category below. Net sales and percentage of Net sales for the thirteen and thirty-nine weeks ended OctoberApril 30, 20212022 and October 31, 2020May 1, 2021 were as follows:
(In thousands) |
| Thirteen Weeks Ended October 30, 2021 |
|
| Thirteen Weeks Ended October 31, 2020 |
| ||||||||||
Non-Athletics: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Women’s |
| $ | 73,031 |
|
|
| 21 | % |
| $ | 54,164 |
|
|
| 20 | % |
Men’s |
|
| 44,226 |
|
|
| 12 |
|
|
| 34,676 |
|
|
| 13 |
|
Children’s |
|
| 21,358 |
|
|
| 6 |
|
|
| 15,145 |
|
|
| 5 |
|
Total |
|
| 138,615 |
|
|
| 39 |
|
|
| 103,985 |
|
|
| 38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Athletics: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Women’s |
|
| 58,941 |
|
|
| 16 |
|
|
| 50,935 |
|
|
| 19 |
|
Men’s |
|
| 73,429 |
|
|
| 21 |
|
|
| 59,355 |
|
|
| 22 |
|
Children’s |
|
| 64,590 |
|
|
| 18 |
|
|
| 43,662 |
|
|
| 16 |
|
Total |
|
| 196,960 |
|
|
| 55 |
|
|
| 153,952 |
|
|
| 57 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accessories and Other |
|
| 20,761 |
|
|
| 6 |
|
|
| 16,642 |
|
|
| 5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
| $ | 356,336 |
|
|
| 100 | % |
| $ | 274,579 |
|
|
| 100 | % |
(In thousands) |
| Thirty-nine Weeks Ended October 30, 2021 |
|
| Thirty-nine Weeks Ended October 31, 2020 |
| ||||||||||
Non-Athletics: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Women’s |
| $ | 231,702 |
|
|
| 23 | % |
| $ | 148,252 |
|
|
| 21 | % |
Men’s |
|
| 140,186 |
|
|
| 14 |
|
|
| 95,710 |
|
|
| 13 |
|
Children’s |
|
| 67,205 |
|
|
| 7 |
|
|
| 38,698 |
|
|
| 5 |
|
Total |
|
| 439,093 |
|
|
| 44 |
|
|
| 282,660 |
|
|
| 39 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Athletics: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Women’s |
|
| 167,184 |
|
|
| 16 |
|
|
| 139,808 |
|
|
| 19 |
|
Men’s |
|
| 206,054 |
|
|
| 20 |
|
|
| 163,757 |
|
|
| 23 |
|
Children’s |
|
| 147,092 |
|
|
| 14 |
|
|
| 95,743 |
|
|
| 13 |
|
Total |
|
| 520,330 |
|
|
| 50 |
|
|
| 399,308 |
|
|
| 55 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accessories and Other |
|
| 57,600 |
|
|
| 6 |
|
|
| 40,900 |
|
|
| 6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
| $ | 1,017,023 |
|
|
| 100 | % |
| $ | 722,868 |
|
|
| 100 | % |
12
Accounting
(In thousands) |
| Thirteen Weeks |
|
| Thirteen Weeks |
| ||||||||||
Non-Athletics: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Women’s |
| $ | 88,554 |
|
|
| 28 | % |
| $ | 75,531 |
|
|
| 23 | % |
Men’s |
|
| 49,152 |
|
|
| 15 |
|
|
| 44,282 |
|
|
| 13 |
|
Children’s |
|
| 21,405 |
|
|
| 7 |
|
|
| 23,293 |
|
|
| 7 |
|
Total |
|
| 159,111 |
|
|
| 50 |
|
|
| 143,106 |
|
|
| 43 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Athletics: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Women’s |
|
| 51,034 |
|
|
| 16 |
|
|
| 58,595 |
|
|
| 18 |
|
Men’s |
|
| 53,026 |
|
|
| 17 |
|
|
| 65,724 |
|
|
| 20 |
|
Children’s |
|
| 36,731 |
|
|
| 11 |
|
|
| 42,578 |
|
|
| 13 |
|
Total |
|
| 140,791 |
|
|
| 44 |
|
|
| 166,897 |
|
|
| 51 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Accessories |
|
| 15,752 |
|
|
| 5 |
|
|
| 16,627 |
|
|
| 5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Other |
|
| 1,873 |
|
|
| 1 |
|
|
| 1,827 |
|
|
| 1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total |
| $ | 317,527 |
|
|
| 100 | % |
| $ | 328,457 |
|
|
| 100 | % |
Accounting Policy and Performance Obligations
We operate as an omnichannel, family footwear retailer and provide the convenience of shopping at our physical stores or shopping online through our e-commerce platform. As part of our omnichannel strategy, we offer Shoes 2U, a program that enables us to ship product to a customer’s home or selected store if the product is not in stock at a particular store. We also offer “buy online, pick up in store” services for our customers. “Buy online, pick up in store” provides the convenience of local pickup for our customers.
For our physical stores, we satisfy our performance obligation and control is transferred at the point of sale when the customer takes possession of the products. This also includes the “buy online, pick up in store” scenario described above and includes sales made via our Shoes 2U program when customers choose to pick up their goods at a physical store. For sales made through our e-commerce platform in which the customer chooses home delivery, we transfer control and recognize revenue when the product is shipped. This also includes sales made via our Shoes 2U program when the customer chooses home delivery.
10
We offer our customers sales incentives including coupons, discounts, and free merchandise. Sales are recorded net of such incentives and returns and allowances. If an incentive involves free merchandise, that merchandise is recorded as a zero sale and the cost is included in costCost of sales. Gift card revenue is recognized at the time of redemption. When a customer makes a purchase as part of our rewards program, we allocate the transaction price between the goods purchased and the loyalty reward points and recognize the loyalty revenue based on estimated customer redemptions.
Transaction Price and Payment Terms
The transaction price is the amount of consideration we expect to receive from our customers and is reduced by any stated promotional discounts at the time of purchase. The transaction price may be variable due to terms that permit customers to exchange or return products for a refund. The implicit contract with the customer reflected in the transaction receipt states the final terms of the sale, including the description, quantity, and price of each product purchased. The customer agrees to a stated price in the contract that does not vary over the term of the contract and may include revenue to offset shipping costs. Taxes imposed by governmental authorities such as sales taxes are excluded from Net sales.
Our physical storesWe accept various forms of payment from customers at the point of sale. These include cash, checks, credit/debit cards and gift cards. Our e-commerce platform accepts credit/debit cards, PayPal, Apple Pay, Klarna and gift cards as forms of payment.sale typical for an omnichannel retailer. Payments made for products are generally collected when control passes to the customer, either at the point of sale or at the time the customer order is shipped. For Shoes 2U transactions, customers may order the product at the point of sale. For these transactions, customers pay in advance and unearned revenue is recorded as a contract liability. We recognize the related revenue when control has been transferred to the customer (i.e., when the product is picked up by the customer or shipped to the customer). Unearned revenue related to our Shoes 2U program was not material to our Condensed Consolidated Financial Statementsconsolidated financial statements at OctoberApril 30, 2021,2022, January 30, 202129, 2022 or October 31, 2020.May 1, 2021.
Returns and Refunds
We have established an allowance based upon historical experience in order to estimate return and refund transactions. This allowance is recorded as a reduction in sales with a corresponding refund liability recorded in Accrued and other liabilities. The estimated cost of merchandise inventory is recorded as a reduction to Cost of sales and an increase in Merchandise inventories. Approximately $740,000$884,000 of refund liabilities and $495,000 of$516,000 of right of return assets associated with estimated product returns were recorded in Accrued and other liabilities as of OctoberApril 30, 20212022 and January 30, 2021. 29, 2022. Approximately $718,000$740,000 of refund liabilities and $500,000$495,000 of right of return assets associated with estimated product returns were recorded in Accrued and other liabilities at October 31, 2020.May 1, 2021.
Contract Liabilities
The issuance of a gift card is recorded as an increase to contract liabilities and a decrease to contract liabilities when a customer redeems a gift card. Estimated breakage is determined based on historical breakage percentages and recognized as revenue based on expected gift card usage. We do not record breakage revenue when escheat liability to relevant jurisdictions exists. At OctoberApril 30, 2022, January 29, 2022 and May 1, 2021, January 30, 2021 and October 31, 2020, approximately $1.4approximately $2.0 million, $1.7$2.3 million and $1.2$1.4 million of contract liabilities associated with unredeemed gift cards were recorded in Accrued and other liabilities, respectively. We expect the revenue associated with these liabilities to be recognized in proportion to the pattern of customer redemptions within two years. Breakage revenue associated with our gift cards of $41,000$59,000 and $121,000$42,000 was recognized in Net sales during the thirteen and thirty-nine weeks ended OctoberApril 30, 2022 and May 1, 2021, respectively. Breakage revenue associated with our gift cards of $27,000 and $69,000 was recognized in Net sales during the thirteen and thirty-nine weeks ended October 31, 2020, respectively.
13
Our Shoe Perks rewards program allows customers to accrue points and provides customers with the opportunity to earn rewards. Points under Shoe Perks are earned primarily by making purchases through any of our omnichannel points of sale. Once a certain threshold of accumulated points is reached, the customer earns a reward certificate, which is redeemable through any of our sales channels.
When a Shoe Perks customer makes a purchase, we allocate the transaction price between the goods purchased and the loyalty reward points earned based on the relative standalone selling price. The portion allocated to the points program is recorded as a contract liability for rewards that are expected to be redeemed. We then recognize revenue based on an estimate of when customers redeem rewards, which incorporates an estimate of points expected to expire using historical rates. During each of the thirteen and thirty-nine weeks ended OctoberApril 30, 2022 and May 1, 2021, approximately $1.7$1.3 million and $4.5 million, respectively, of loyalty rewards were recognized in Net sales. During the thirteen and thirty-nine weeks ended October 31, 2020, approximately $1.3 million and $3.2 million, respectively, of loyalty rewards were recognized in Net sales. At OctoberApril 30, 2022, January 29, 2022 and May 1, 2021, January 30, 2021approximately $849,000, $852,000 and October 31, 2020, approximately $1.0$1.1 million $755,000 and $828,000 of contract liabilities associated with loyalty rewards were recorded in Accrued and other liabilities, respectively. We expect the revenue associated with these liabilities to be recognized in proportion to the pattern of customer redemptions in less than one year.
11
Note 87 – Leases
We lease all of our physical stores, and our single distribution center, which has a current lease term expiring in 2034.2034, and certain other locations that support the recently acquired Shoe Station operations. We also enter into leases of equipment, copiers and billboards. All of our leases are operating leases. Leases with terms of twelve months or less are immaterial and are expensed as incurred, and we did not have any leases with related parties as of OctoberApril 30, 2021. 2022.
Lease costs, including related common area maintenance (“CAM”), property taxes, and insurance, reported in our Condensed Consolidated Statements of Income were as follows for the thirteen and thirty-nine weeks ended OctoberApril 30, 20212022 and October 31, 2020:May 1, 2021:
|
| Thirteen Weeks |
|
| Thirteen Weeks |
| ||||||||||||||||||
(In thousands) |
| Thirteen Weeks Ended October 30, 2021 |
|
| Thirteen Weeks Ended October 31, 2020 |
|
| Thirty-nine Weeks Ended October 30, 2021 |
|
| Thirty-nine Weeks Ended October 31, 2020 |
|
| Ended April 30, 2022 |
|
| Ended May 1, 2021 |
| ||||||
Operating lease cost |
| $ | 13,520 |
|
| $ | 13,432 |
|
| $ | 40,272 |
|
| $ | 40,047 |
|
| $ | 14,699 |
|
| $ | 13,263 |
|
Variable lease cost |
|
| 713 |
|
|
| 490 |
|
|
| 2,413 |
|
|
| 1,464 |
|
|
|
|
|
|
| ||
CAM, property taxes and insurance |
|
| 4,746 |
|
|
| 4,888 |
|
|
| 14,375 |
|
|
| 15,023 |
|
|
| 4,761 |
|
|
| 4,768 |
|
Percentage rent and other variable lease costs |
|
| 193 |
|
|
| 648 |
| ||||||||||||||||
Total |
| $ | 18,979 |
|
| $ | 18,810 |
|
| $ | 57,060 |
|
| $ | 56,534 |
|
| $ | 19,653 |
|
| $ | 18,679 |
|
1412
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Factors That May Affect Future Results
This Quarterly Report on Form 10-Q contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve a number of risks and uncertainties. A number of factors could cause our actual results, performance, achievements or industry results to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. These factors include, but are not limited to: our ability to control costs and meet our labor needs in a rising wage, inflationary, and/or supply chain constrained environment; the duration and spread of the COVID-19 pandemic, mitigating efforts deployed, including the effects of government stimulus on consumer spending, and the pandemic’s overall impact on our operations, including our stores, supply chain and distribution processes, economic conditions, and financial market volatility; our ability to operate the recently acquired Shoe Station assets, retain Shoe Station employees and achieve expected operating results and other benefits from the Shoe Station acquisition within expected time frames, or at all; risks that the Shoe Station acquisition may disrupt our current plans and operations or negatively impact our relationship with our vendors and other suppliers; the potential impact of national and international security concerns, including those caused by war and terrorism, on the retail environment; general economic conditions in the areas of the continental United States and Puerto Rico where our stores are located; the effects and duration of economic downturns and unemployment rates; changes in the overall retail environment and more specifically in the apparel and footwear retail sectors; our ability to generate increased sales; our ability to successfully navigate the increasing use of online retailers for fashion purchases and the impact on traffic and transactions in our physical stores; the success of the open-air shopping centers where many of our stores are located and its impact on our ability to attract customers to our stores; our ability to attract customers to our e-commerce platform and to successfully grow our omnichannel sales; the potential impact of national and international security concerns on the retail environment; the effectiveness of our inventory management, including our ability to manage key merchandise vendor relationships and emerging direct-to-consumer initiatives; changes in our relationships with other key suppliers; our ability to control costs and meet our labor needs in a rising wage and/or inflationary environment; changes in the political and economic environments in, the status of trade relations with, and the impact of changes in trade policies and tariffs impacting, China and other countries which are the major manufacturers of footwear; the impact of competition and pricing; our ability to successfully manage and execute our marketing initiatives and maintain positive brand perception and recognition; our ability to successfully manage our current real estate portfolio and leasing obligations; changes in weather, including patterns impacted by climate change; changes in consumer buying trends and our ability to identify and respond to emerging fashion trends; the impact of disruptions in our distribution or information technology operations; the impact of natural disasters, other public health crises, political crises, civil unrest, and other catastrophic events on our operations and the operations of our suppliers, as well as on consumer confidence and purchasing in general; risks associated with the seasonality of the retail industry; the impact of unauthorized disclosure or misuse of personal and confidential information about our customers, vendors and employees, including as a result of a cybersecurity breach; our ability to successfully execute our business strategy, including the availability of desirable store locations at acceptable lease terms, our ability to identify, consummate or effectively integrate future acquisitions, our ability to implement and adapt to new technology and systems, our ability to open new stores in a timely and profitable manner, including our entry into major new markets, and the availability of sufficient funds to implement our business plans; higher than anticipated costs associated with the closing of underperforming stores; the inability of manufacturers to deliver products in a timely manner; an increase in the cost, or a disruption in the flow, of imported goods; the impact of regulatory changes in the United States, including minimum wage laws and regulations, and the countries where our manufacturers are located; the resolution of litigation or regulatory proceedings in which we are or may become involved; continued volatility and disruption in the capital and credit markets; future stock repurchases under our stock repurchase program and future dividend payments. payments. For a moremore detailed discussion of risk factors impacting us, see the “Risk Factors”Factors�� section of our Annual Report on Form 10-K for the fiscal year ended January 30, 2021, and “Risk Factors” in Part II, Item 1A of our Quarterly Reports on Forms 10-Q for the quarters ended May 1, 2021 and July 31, 2021.29, 2022.
General
General
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide information to assist the reader in better understanding and evaluating our financial condition and results of operations. We encourage you to read this in conjunction with our Condensed Consolidated Financial Statements and the notes thereto included in PartPART I, ItemITEM 1 of this Quarterly Report on Form 10-Q, as well as our Annual Report on Form 10-K for the fiscal year ended January 30, 202129, 2022 as filed with the SEC. This section of this Quarterly Report on Form 10-Q generally discusses the first quarter 2022 and the first quarter 2021 and year-over-year comparisons between the first quarter 2022 and the first quarter 2021. However, given the significant impact of the COVID-19 pandemic on our fiscal 2021 and fiscal 2020 results, we have included certain comparisons in this MD&A between the first quarter 2022 and the first quarter 2019 to provide further context regarding our first quarter 2022 results of operations.
Referred to herein the first quarter 2022 is the thirteen weeks ended April 30, 2022; the first quarter 2021 is the thirteen weeks ended May 1, 2021; the first quarter 2020 is the thirteen weeks ended May 2, 2020; and the first quarter 2019 is the thirteen weeks ended May 4, 2019.
13
Overview of Our Business
Shoe Carnival, Inc. is one of the nation’s largest family footwear retailers, providing customersretailers. After our acquisition of the conveniencephysical stores and substantially all of shopping at anythe assets and liabilities of our store locations, our mobile app or online at www.shoecarnival.com. Our stores combine competitive pricing with a promotional, high-energy in-store environment that encourages customer participationShoe Station, Inc. ("Shoe Station") on December 3, 2021, we began operating under two banners: Shoe Carnival and injects fun and excitement into every shopping experience. We believe our distinctive shopping experience gives us various competitive advantages, including increased multiple unit sales; the building of a loyal, repeat customer base; the creation of word-of-mouth advertising; and enhanced sell-through of in-season goods. A similar customer experience is reflected in our e-commerce platform through special promotions and limited time sales.
Shoe Station. Our objective is to be the omnichannel retailer-of-choice for on-trend branded and private label footwear for the entire family. Our product assortment, whether shopping in a physical store or on our e-commerce platform, includes dress, casual, and casualwork shoes, sandals, boots and a wide assortment of athletic shoes. Our averagetypical physical store carries shoes in fourtwo general categories – women’s, men’s, children’sathletics and athletics,non-athletics with subcategories for men's, women's, and children's, as well as a broad range of accessories. In addition to our physical stores, our e-commerce platform offers customers the same assortment of merchandise in all categories of footwear with expanded options through direct-ship arrangements with certain vendors.
Our stores under the Shoe Carnival banner combine competitive pricing with a high-energy in-store environment that encourages customer participation. Footwear in our Shoe Carnival physical stores is organized by category and brand, creating strong brand statements within the aisles. These brand statements are underscored by branded signage on endcaps and in-line signage throughout the store. Our signage may highlight a vendor’s product offerings or sales promotions, or may highlight seasonal or lifestyle
15
statements by grouping similar footwear from multiple vendors. Over 100Certain of our physicalShoe Carnival stores have strongly branded Nikeathletic shops that highlight Nike products within the stores,leading athletic brands, and we expect to add at least 100continue growing our "athletic shop" in-store concept and other shop-in-shop concepts across our fleet in the years ahead.
The addition of the Shoe Station banner and retail locations creates a complementary retail platform to serve a broader family footwear customer base across both urban and suburban demographics. The Shoe Station concept targets a more Nike shopsaffluent family footwear customer and has a strong track record of capitalizing on emerging footwear fashion trends and introducing new brands. See Note 2 — “Acquisition of Shoe Station” to our physical stores through 2023. Our e-commerce platform offers customersNotes to Condensed Consolidated Financial Statements contained in PART I, ITEM 1 of this Quarterly Report on Form 10-Q and Note 3 — “Acquisition of Shoe Station” to our Notes to Consolidated Financial Statements contained in PART II, ITEM 8 of our Annual Report on Form 10-K for the same assortmentfiscal year ended January 29, 2022, for further discussion.
We believe our distinctive shopping experiences give us various competitive advantages, including increased multiple unit sales; the building of merchandise in all categoriesa loyal, repeat customer base; the creation of footwear with expanded options in certain instances.word-of-mouth advertising; and enhanced sell-through of in-season goods.
Critical Accounting Policies
We use judgment in reporting our financial results. This judgment involves estimates based in part on our historical experience and incorporates the impact of the current general economic climate and company-specific circumstances. However, because future events and economic conditions are inherently uncertain, our actual results could differ materially from these estimates. Our accounting policies that require more significant judgments include those with respect to merchandise inventories, valuation of long-lived assets, accounting for business combinations, leases, and income taxes. The accounting policies that require more significant judgment are discussed in our Annual Report on Form 10-K for the fiscal year ended January 30, 2021,29, 2022, and there have been no material changes to those critical accounting policies.
Results of Operations Summary Information regarding the COVID-19 Coronavirus Pandemic (“COVID-19”)
We continue
|
| Number of Stores |
|
| Store Square Footage |
|
|
|
| |||||||||||||||||||
|
| Beginning |
|
|
|
|
|
|
|
| End of |
|
| Net |
|
| End |
|
| Comparable |
| |||||||
Quarter Ended |
| Of Period |
|
| Opened |
|
| Closed |
|
| Period |
|
| Change |
|
| of Period |
|
| Store Sales(1) |
| |||||||
April 30, 2022 |
|
| 393 |
|
|
| 2 |
|
|
| 0 |
|
|
| 395 |
|
|
| 31,000 |
|
|
| 4,450,000 |
|
|
| (10.6 | )% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
May 1, 2021 |
|
| 383 |
|
|
| 0 |
|
|
| 6 |
|
|
| 377 |
|
|
| (46,000 | ) |
|
| 4,100,000 |
|
|
| 125.8 | % |
In response to the COVID-19 pandemic, all of our physical stores were temporarily closed effective March 19, 2020. Our e-commerce platform continued to operate, and our e-commerce sales increased significantly in fiscal 2020 as customers shifted purchases to our online channel. We began reopening our physical stores in accordance with applicable public health guidelines in late April 2020. Thus, substantially all of our physical stores were closed for approximately 50% of the first fiscal quarter of 2020. By the beginning of the second quarter of fiscal 2020, approximately 50%period, including those stores that have been relocated or remodeled. Therefore, all Shoe Station sales (physical store and e-commerce) are excluded from our comparable store sales. In addition, sales related to any Shoe Carnival bannered physical stores recently opened or closed are not included in comparable store sales. We do include e-commerce sales sold using the Shoe Carnival brand in our comparable store sales as a result of our stores were reopened, and by early June 2020, substantially allomnichannel retailer strategy. We view these e-commerce sales as an extension of our stores had reopened. We did not have any stores closed as of October 30, 2021 or for extended periods during the first nine months of fiscal 2021 due to the pandemic.
Results of Operations Summary Information
|
| Number of Stores |
|
| Store Square Footage |
|
|
|
|
| ||||||||||||||||||
|
| Beginning |
|
|
|
|
|
|
|
|
|
| End of |
|
| Net |
|
| End |
|
| Comparable |
| |||||
Quarter Ended |
| Of Period |
|
| Opened |
|
| Closed |
|
| Period |
|
| Change |
|
| of Period |
|
| Store Sales(1) |
| |||||||
May 1, 2021 |
|
| 383 |
|
|
| 0 |
|
|
| 6 |
|
|
| 377 |
|
|
| (46,000 | ) |
|
| 4,100,000 |
|
|
| 125.8 | % |
July 31, 2021 |
|
| 377 |
|
|
| 1 |
|
|
| 0 |
|
|
| 378 |
|
|
| 12,000 |
|
|
| 4,112,000 |
|
|
| 11.4 | % |
October 30, 2021 |
|
| 378 |
|
|
| 0 |
|
|
| 1 |
|
|
| 377 |
|
|
| (7,000 | ) |
|
| 4,105,000 |
|
|
| 30.1 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year-to-date |
|
| 383 |
|
|
| 1 |
|
|
| 7 |
|
|
| 377 |
|
|
| (41,000 | ) |
|
| 4,105,000 |
|
|
| 41.6 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 2, 2020 |
|
| 392 |
|
|
| 0 |
|
|
| 2 |
|
|
| 390 |
|
|
| (22,000 | ) |
|
| 4,198,000 |
|
|
| (42.3 | )% |
August 1, 2020 |
|
| 390 |
|
|
| 2 |
|
|
| 10 |
|
|
| 382 |
|
|
| (66,000 | ) |
|
| 4,132,000 |
|
|
| 12.6 | % |
October 31, 2020 |
|
| 382 |
|
|
| 1 |
|
|
| 0 |
|
|
| 383 |
|
|
| 10,000 |
|
|
| 4,142,000 |
|
|
| 0.9 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year-to-date |
|
| 392 |
|
|
| 3 |
|
|
| 12 |
|
|
| 383 |
|
|
| (78,000 | ) |
|
| 4,142,000 |
|
|
| (8.8 | )% |
|
|
16
The following table sets forth our results of operations expressed as a percentage of net sales for the periods indicated:
| Thirteen Weeks Ended October 30, 2021 |
|
| Thirteen Weeks Ended October 31, 2020 |
|
| Thirty-nine Weeks Ended October 30, 2021 |
|
| Thirty-nine Weeks Ended October 31, 2020 |
| Thirteen |
|
| Thirteen |
| ||||||
Net sales |
| 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % |
| 100.0 | % |
|
| 100.0 | % |
Cost of sales (including buying, distribution and occupancy costs) |
| 59.6 |
|
|
| 68.0 |
|
|
| 59.7 |
|
|
| 72.1 |
|
| 64.5 |
|
|
| 60.4 |
|
Gross profit |
| 40.4 |
|
|
| 32.0 |
|
|
| 40.3 |
|
|
| 27.9 |
|
| 35.5 |
|
|
| 39.6 |
|
Selling, general and administrative expenses |
| 22.9 |
|
|
| 24.7 |
|
|
| 22.6 |
|
|
| 26.3 |
|
| 24.4 |
|
|
| 22.1 |
|
Operating income |
| 17.5 |
|
|
| 7.3 |
|
|
| 17.7 |
|
|
| 1.6 |
|
| 11.1 |
|
|
| 17.5 |
|
Interest income |
| 0.0 |
|
|
| 0.0 |
|
|
| 0.0 |
|
|
| 0.0 |
| |||||||
Interest expense (income), net |
| 0.0 |
|
|
| 0.0 |
| |||||||||||||||
Income tax expense |
| 4.4 |
|
|
| 1.9 |
|
|
| 4.5 |
|
|
| 0.4 |
|
| 2.6 |
|
|
| 4.3 |
|
Net income |
| 13.1 | % |
|
| 5.4 | % |
|
| 13.2 | % |
|
| 1.2 | % |
| 8.5 | % |
|
| 13.2 | % |
Given the significant impact of the COVID-19 pandemic on our fiscal 2020 results, we have included certain comparisons in this MD&A between fiscal 2021 and fiscal 2019 to provide further context regarding our fiscal 2021 results of operations.
The shares outstanding and net income per share information for the first quarter of 2021 throughout this MD&A has been adjusted retroactively for all periods presented as a result of a two-for-one stock split of the outstanding shares of our common stock held by shareholders of record on July 6, 2021 that was completed on July 19, 2021. See Note 1 — “Basis of Presentation” to our Notes to Condensed Consolidated Financial Statements contained in PART I, ITEM 1 of this Quarterly Report on Form 10-Q for additional information on the stock split.
Executive Summary for the ThirdFirst Fiscal Quarter Ended OctoberApril 30, 20212022
The thirdDuring the first quarter 2022, our customers shopped for footwear without the pandemic-related government stimulus received in 2021 and without the pandemic-related retail store closures experienced in 2020. Our customers returned to a more normal, pre-pandemic shopping pattern, with the mix of fiscal 2021 was another record-breaking quarter. Results forsales being more balanced between the thirdathletic and non-athletic categories. Our first quarter of fiscal 2021 were2022 results demonstrated the highest in terms of quarterly net sales,structural profit transformation and increased scale our strategic plans have achieved compared to pre-pandemic results. This quarter we continued to achieve gross profit margins in the mid-thirties, double-digit operating income margin and trailing twelve-month store productivity above $300 per square foot, despite the current economic headwinds and continuing global uncertainty.
For the first quarter 2022, diluted net income per share was $0.95, the second highest first quarter in our history and only surpassed by the stimulus-enhanced first quarter 2021. The $0.95 per share earned was more than double the amount earned pre-pandemic in the first quarter 2019. Net sales in the first quarter 2022 were $317.5 million. Excluding the stimulus-enhanced first quarter 2021, the first quarter 2022 net sales were also the highest in our history, surpassing any other first quarter by more than 20%. As an indicator of the strength of our previous records setfirst quarter 2022 results against the pre-pandemic first quarter 2019, net sales increased 25.1% and comparable store sales increased 16.8%. Our physical store comparable store sales increased 9.1% and e-commerce net sales increased 154.4%.
Our first quarter 2022 results were positively impacted by growth in our customer base and the transformation of our gross profit margin. During the quarter, we surpassed 29 million Shoe Perks loyalty program members, representing an increase in new customers of 10% compared to the first quarter 2021 and growth of over 25% compared to the first quarter 2019. Gross profit margin during the first quarter 2022 was 35.5%, a near 600 basis point increase compared to the first quarter 2019, driven primarily by changes to our customer relationship management and promotional strategies, offset by increased transportation and fuel costs.
Compared to the stimulus-enhanced first quarter 2021, net sales were down 3.3% and comparable store sales declined 10.6%. These results compared to a net sales increase of 122.7% and a comparable store sales increase of 125.8% in the second and first quarters of fiscal 2021. Thus, this fiscal quarter represented the third consecutive quarter where we established all-time quarterly records. Through2021 compared to the first nine monthsquarter 2020 when our stores were closed for about half of fiscalthe quarter. Due to the current global supply chain issues and inflation, we incurred significantly higher transportation and fuel costs in the first quarter 2022 compared to the first quarter 2021, which reduced our merchandise margin by 150 basis points and increased our distribution costs by 190 basis points. Excluding the 150 basis point increase in transportation and fuel costs, our merchandise margin would have increased in the first quarter 2022 compared to the first quarter 2021. Also compared to the first quarter 2021, these additional costs decreased our diluted net income per share by $0.29.
We ended the first quarter 2022 with inventory of $4.69 exceeded the diluted net income per share earned during the last five fiscal years combined.
Comparable store sales in the third quarter$345.0 million, an increase of fiscal 2021 increased 30.1%$76.4 million compared to the thirdfirst quarter 2021, or 22.6% on a per store basis. The majority of the increase was due to accelerated receipts of merchandise in an effort to mitigate supply chain issues for the back-to-school shopping period, and approximately 40% of the increase was due to the addition of Shoe Station stores.
We had no borrowings outstanding under our credit facility, which was amended and restated during the first quarter 2022, and we ended the first quarter 2022 with $97.1 million of cash, cash equivalents and marketable securities. Our new credit facility expires on March 23, 2027.
15
We are currently in the process of modernizing our stores and plan to have over 50% of our stores modernized by the summer of 2023 and the full program complete by the end of fiscal 2020 and increased 31.4% compared to the third quarter of fiscal 2019.
We believe these record-breaking results were driven by the following:
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During the third quarter of fiscal 2021, physical store traffic increased 29.9% compared to the third quarter of fiscal 2020 and increased 2.6% compared to the third quarter of fiscal 2019.2024. Through the first nine monthsquarter 2022, 31% of the fleet is complete.
Two new stores were opened in the first quarter 2022 and no stores were closed. We aim to open approximately 10 new stores in fiscal 2022 and expect no store closures and for store count to exceed 400 stores by the end of fiscal 2021, physical store traffic increased over 40% compared to the same period in fiscal 2020. The increased store traffic, combined with stable conversion rates, resulted in an increased number of converted customers, compared to the prior year periods.2022.
All of our major product categories had comparable store sale increases ranging from low to mid double digits compared to the third quarter of fiscal 2020 and the third quarter of fiscal 2019. These increases were driven by higher average per unit prices across all categories and, overall, more units sold.
Highlights for the third quarter of fiscal 2021 and a brief discussion of some key initiatives follows:
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Results of Operations for the ThirdFirst Quarter Ended OctoberApril 30, 2022 Compared to the First Quarter Ended May 1, 2021
Net Sales
Net sales were a record $356.3$317.5 million during the thirdfirst quarter of fiscal 20212022 and increased 29.8%decreased 3.3% compared to the thirdfirst quarter 2021. The change in net sales was primarily a result of fiscal 2020. Comparable storesa 10.6% comparable store sales increased 30.1% compareddecline due primarily to the thirdimpact of government stimulus dollars in the first quarter of fiscal 2020. Sales generated from our comparable physical2021 offset by revenues attributable to new stores, increased 32.8% forincluding the third quarter of fiscal 2021 compared to the third quarter of fiscal 2020 and 22.6% compared to the third quarter of fiscal 2019. Sales generated from our e-commerce platform increased 12.5% compared to the third quarter of fiscal 2020 and 186.2% compared to the third quarter of fiscal 2019.Shoe Station stores. E-commerce sales were approximately 12%11% of merchandise sales in the thirdfirst quarter of fiscal 2021,2022, compared to 13%12% in the thirdfirst quarter of fiscal 2020 and 5% in the third quarter of fiscal 2019.2021.
Net sales were positively impacted by continued demand for our merchandise as result of our merchandise selection, the continued easing of COVID-19 restrictions and customers returning a more normal lifestyle, including going back to work and fully back to in-person learning, and a stronger economy (including impacts from consumer-based government stimulus). Net sales in the third quarter of fiscal 2021 were favorably impacted by increased average transaction price and more units sold compared to the third quarter of fiscal 2020, with traffic 2.6% above pre-pandemic levels experienced in the third quarter of fiscal 2019. The increase in average transaction price was primarily driven by our more focused promotional activity.
Gross Profit
Gross profit was a record $144.1$112.9 million during the thirdfirst quarter 2022, a decrease of fiscal 2021, an increase of $56.3$17.3 million compared to the thirdfirst quarter of fiscal 2020.2021. Gross profit margin in the thirdfirst quarter of fiscal 2021 increased to 40.4%2022 was 35.5% compared to 32.0%39.6% in the thirdfirst quarter of fiscal 2020 and 30.9% in the third quarter of fiscal 2019.2021. Merchandise margin increased 6.7 percentage points compared to the third quarter of fiscal 2020decreased 1.3% and 8.3 percentage points compared to the third quarter of fiscal 2019. Our more focused promotional strategy drove a higher merchandise margin compared to both fiscal 2020 and 2019. We began eliminating broad-based use of the “buy one get one half off” promotional strategy during fiscal 2020 and have completely eliminated its broad use during the current fiscal year.
As a percentage of sales, our buying, distribution and occupancy costs decreased 1.7increased 2.8% as a percentage pointsof net sales compared to the thirdfirst quarter 2021. The changes were primarily a result of fiscal 2020 due toinflation on transportation and fuel costs in the leveraging effect of higher sales, despite higher supply chain expense.first quarter 2022.
Selling, General and Administrative Expenses (“SG&A”)
SG&A increased $14.0$4.9 million in the thirdfirst quarter of fiscal 20212022 to $81.6$77.5 million compared to $67.6$72.6 million in the thirdfirst quarter of fiscal 2020. Nearly half of the2021. The overall increase in SG&A induring the thirdfirst quarter of fiscal 2021 compared to the third quarter of fiscal 20202022 was due to increased advertising expense, with the remaining increase primarily attributable to continued investment in advertising and store level wages, includingpartially offset by lower levels of incentive compensation. As a percentage of net sales, SG&A was 22.9%24.4% in the thirdfirst quarter of fiscal 20212022 compared to 24.7%22.1% in the thirdfirst quarter of fiscal 2020 and 24.3% recorded in the third quarter of fiscal 2019, with the decrease due to the leveraging effect of higher sales.2021.
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Income Taxes
The effective income tax rate for the thirdfirst quarter of fiscal 20212022 was 24.8%23.8% compared to 26.8%24.8% for the same period in fiscal 2020.first quarter 2021. Our provision for income taxes is based on the current estimate of our annual effective tax rate and is adjusted as necessary for quarterly events. The lower quarterly effective tax rate was primarily due to the timinga lower level of discrete tax adjustments and increased utilization of foreign tax credits associated with our Puerto Rico operations.expected non-deductible compensation in fiscal 2022. For the full 20212022 fiscal year, we expect our tax rate to be between 25%24% and 26%25% compared to the 25.8%25.3% effective tax rate recognized during the full 20202021 fiscal year.
Results of Operations for the Nine-Month Period Ended October 30, 2021
Net Sales
Net sales were $1,017.0 million year-to-date in fiscal 2021, a 40.7% increase over the prior year’s year-to-date net sales of $722.9 million. The overall increase in net sales was primarily due to our more focused promotional strategies and inventory selection. The temporary closure of our physical stores for approximately 50% of the first quarter of fiscal 2020 as a result of the COVID-19 pandemic, with some stores closed through May 2020, decreased net sales in the prior year. Comparable stores sales increased 41.6% compared to the first nine months of fiscal 2020 and increased 29.2% compared to the first nine months of fiscal 2019.
Gross Profit
Gross profit was $410.0 million during the first nine months of fiscal 2021, an increase of $208.1 million compared to the first nine months of fiscal 2020. Gross profit margin in the first nine months of fiscal 2021 increased to 40.3% compared to 27.9% in fiscal 2020 and 30.4% in fiscal 2019. Merchandise margin increased 10.0 percentage points compared to the first nine months of fiscal 2020 and 8.7 percentage points compared to the first nine months of fiscal 2019. Our more focused promotional strategies throughout fiscal 2021 drove a higher merchandise margin compared to both fiscal 2020 and 2019. A more standard product mix, with more non-athletic merchandise sold in fiscal 2021 compared to fiscal 2020, further increased margins compared to fiscal 2020.
As a percentage of sales, our buying, distribution and occupancy costs decreased 2.4 percentage points compared to the first nine months of fiscal 2020 and 1.2 percentage points compared to the first nine months fiscal 2019 primarily due to the leveraging effect of increased sales, offset somewhat by increased freight and distribution labor costs.
Selling, General and Administrative Expenses
SG&A increased $39.7 million to $230.2 million in the first nine months of fiscal 2021 compared to $190.5 million in the first nine months of fiscal 2020. As a percentage of net sales, SG&A was leveraged to 22.6% in the first nine months of fiscal 2021 compared to 26.3% in the first nine months of fiscal 2020 and 24.2% in the first nine months fiscal 2019.
Compared to the first nine months of fiscal 2020, the increase in SG&A primarily correlated with our record performance, in terms of increased performance-based incentive compensation, general wages (inclusive of CARES Act payroll retention tax credits recognized in fiscal 2020) and variable costs, such as credit card fees. SG&A also increased due to higher advertising expense, as well as market return volatility on our deferred compensation plan and higher stock-based compensation. Store level wages, incentives paid to store level employees, and annual performance-based compensation comprised the majority of the year-to-date increase compared to the prior year. Our performance year-to-date has exceeded annual fiscal 2021 performance targets; therefore, virtually all annual performance-based compensation expected for the full year has been recognized.
Income Taxes
The effective income tax rate year-to-date for fiscal 2021 was 25.1% compared to 23.0% for the same period in fiscal 2020. The higher effective rate was primarily attributable to more unfavorable permanent differences and discrete tax adjustments, partially offset by increased utilization of foreign tax credits associated with our Puerto Rico operations.
Liquidity and Capital Resources
Our primary sources of liquidity are $191.2$97.1 million of cash, cash equivalents and marketable securities on hand at the end of the third fiscalfirst quarter of 2021,2022, cash generated from operations and availability under our $100 million credit facility. While the continued economic uncertainty and future effects on customer behavior caused byof the COVID-19 pandemic makesand other economic uncertainty associated with inflation, constrained supply chains and the Eastern European conflict, among other macroeconomic uncertainty, make our operating cash flow less predictable, we believe our resources will be sufficient to fund our cash needs, as they arise, for at least the next 12 months. Our primary uses of cash are normally for working capital, which are principally inventory purchases, investments in our stores, such as new stores, remodels and relocations, distribution center initiatives, lease payments associated with our real estate leases, potential dividend payments, potential share repurchases under our share repurchase program and the financing of capital projects, including investments in new systems. As part of our growth strategy, we may also pursue strategic acquisitions of other footwear retailers.
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Cash Flow - Operating Activities
Net cash generated from operating activities was $120.5$17.7 million in the first nine months of fiscal 2021quarter 2022 compared to $0.2$76.5 million during the first nine months of fiscal 2020.quarter 2021. The increasechange in operating cash flow was primarily driven by higher cash receipts on increased sales, partially offset byearnings in the first quarter 2021 and timing of inventory purchases and payments for operating expenses and income taxes.purchases.
Working capital increased on a year-over-year basis and totaled $333.8$271.8 million at OctoberApril 30, 20212022 compared to $214.9$262.3 million at October 31, 2020.May 1, 2021. The increase was primarily attributable to increasedhigher merchandise inventory levels offset by lower cash balances due to the acquisition of Shoe Station and marketable securities positions.share repurchases. Our current ratio was 3.12.4 as of OctoberApril 30, 20212022 compared to 2.72.3 as of October 31, 2020. May 1, 2021.
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Cash Flow – Investing Activities
Our cash outflows for investing activities are normally for capital expenditures. During the first nine monthsquarters of fiscal2022 and 2021, we expended $20.4$26.9 million and $4.1 million, respectively, for the purchase of property and equipment, primarily related to our store portfolio modernization plan. During the first nine months of fiscal 2020, we expended $10.1 million for the purchase of property and equipment, primarily related to investments in technology and normal asset replacement activities.
During the first nine months of fiscal 2021, we invested approximately $17.5 millionWe invest in publicly traded mutual funds designed to mitigate income statement volatility associated with our nonqualified deferred compensation plan. Additional information regardingThe balance of these marketable securities was $11.0 million at April 30, 2022. Additional information can be found in Note 54 — “Fair Value Measurements” to our Notes to Condensed Consolidated Financial Statements contained in PART I, ITEM 1 of this Quarterly Report on Form 10-Q.
Cash Flow – Financing Activities
Our cash outflows for financing activities are typically for cash dividend payments, share repurchases or payments on our credit facility. Shares of our common stock can be either acquired as part of a publicly announced repurchase program or withheld by us in connection with employee payroll tax withholding upon the vesting of stock-based compensation awards that are settled in shares. Our cash inflows from financing activities generally reflect stock issuances to employees under our Employee Stock Purchase Plan and borrowings under our credit facility.
During the first nine months of fiscal 2021,quarter 2022, net cash used in financing activities was $15.8$25.1 million compared to $5.4$4.3 million during the first nine months of fiscal 2020.quarter 2021. The increase in net cash used in financing activities was primarily due to the repurchase of $7.1$20.5 million of shares in fiscal 2021the first quarter 2022 associated with our Board of Directors’ authorized share repurchase program. In fiscal 2021 we also increased our dividend payments and more shares were withheld upon the vesting of stock-based compensation awards. During the first nine months of fiscal 2021, we did not borrow or repay funds under our credit facility. Letters of credit outstanding were $700,000 at October 30, 2021, and our borrowing capacity was $99.3 million.
Our credit facility requires us to maintain compliance with various financial covenants. See Note 7 – “Debt” to our Notes to Consolidated Financial Statements contained in PART II, ITEM 8 of our Annual Report on Form 10-K for the fiscal year ended January 30, 2021 for a further discussion of our credit facility and its covenants. We were in compliance with these covenants as of October 30, 2021.
Capital Expenditures
Capital expenditures for fiscal 2021,2022, including actual expenditures forin the first nine months of fiscal 2021,quarter 2022 , are expected to be between $30$55 million and $35$65 million, with approximately $24$50 million to $26$55 million to be used for a new store,stores, relocations and remodels and approximately $2$5 million to $4$10 million for upgrades to our distribution center and e-commerce platform. The remaining capital expenditures are expected to be incurred forplatform, various other store improvements, continued investments in technology and normal asset replacement activities. The resources allocated to these projects are subject to near-term changes depending on the impacts associated with the COVID-19, pandemic and ongoing supply chain disruptions.disruptions, and other macroeconomic uncertainty. Furthermore, the actual amount of cash required for capital expenditures for store operations depends in part on the number of stores opened, the number of stores relocated, the amount of lease incentives, if any, received from landlords and the number of stores remodeled. The number of new store openings and relocations will be dependent upon, among other things, the availability of desirable locations, the negotiation of acceptable lease terms and general economic and business conditions affecting consumer spending.
Store Portfolio
We continually analyze ouropened one Shoe Carnival branded store portfolio and the potential for new stores based on our view of internal and external opportunities and challengesone Shoe Station branded store in the marketplace.first quarter 2022. Increasing market penetration by openingadding new stores has historically beenis a key component of our long-term growth strategy,strategy. Through a combination of both organic and acquired store growth, we continueaim to focus on generating positive long-term financial performance fromadd approximately 10 new stores in fiscal 2022, over 20 new stores in fiscal 2023, and over 25 new stores annually by fiscal 2024, across both banners. We believe our current store portfolio. Wefootprint provides for growth in new markets within the United States as well as fill-in opportunities within existing markets. In the near term, we expect to pursue fill-in opportunities for store growth across large and mid-size markets as we continue to leverage customer data from our customer
20
relationship management program andprogram. We believe more attractive real estate options become available. In fiscal 2021, we opened one new store within our existing geographic footprint and do not anticipate opening any more stores this fiscal year. We anticipate store growth will return after fiscal 2021.
When we identify a store that produces, or may potentially produce, low or negative contribution, we either renegotiate lease terms, relocate or closebe available with the store. In instances when underperformance indicates the carrying value of a store’s assets may not be recoverable, we impair the store. Although store closings could reduce our overall net sales volume, we believe this strategy will realize long-term improvement in operating income and diluted net income per share. Depending upon the results of lease negotiations with certain landlords of underperforming stores, we may increase or decrease the number of store closures in future periods. We closed seven stores in the first nine months of fiscal 2021 and expect to close three additional stores by the endaddition of the current fiscal year.
OurShoe Station retail concept to our portfolio. However, our future store strategiesgrowth may continue to be impacted by the current economic uncertaintyCOVID-19 pandemic and other macroeconomic uncertainty.
Over the last several years, we performed a store rationalization and performance improvement plan. As part of the plan, which is now complete, we identified underperforming stores and worked to address the performance of these stores through renegotiation of lease terms, relocation or closure. While we continue to actively monitor the store portfolio, we do not expect any further significant closures over the next several years.
Credit Facility
On March 23, 2022, we entered into a new $100 million Amended and Restated Credit Agreement (the “New Credit Agreement”), which replaced our existing credit agreement. The New Credit Agreement is collateralized by our inventory, expires on March 23, 2027, and uses a Secured Overnight Financing Rate ("SOFR") as quoted by The Federal Reserve Bank of New York as the basis for financing charges. Material covenants associated with the COVID-19 pandemic. New Credit Agreement require that we maintain a minimum net worth of $250 million and a consolidated interest coverage ratio of not less than 3.0 to 1.0. We were in compliance with these covenants as of April 30, 2022.
DividendsThe New Credit Agreement contains certain restrictions. However, as long as our consolidated EBITDA is positive and there are either no or low borrowings outstanding, we expect these restrictions would have no impact on our ability pay cash dividends, execute share
17
repurchases or facilitate acquisitions from cash on hand. The New Credit Agreement stipulates that cash dividends and share repurchases of $15 million or less per fiscal year can be made without restriction as long as there is no default or event of default before and immediately after such distributions. We are also permitted to make acquisitions and pay cash dividends or repurchase shares in excess of $15 million in a fiscal year provided that (a) no default or event of default exists before and immediately after the transaction and (b) on a proforma basis, the ratio of (i) the sum of (A) our consolidated funded indebtedness plus (B) three times our consolidated rental expense to (ii) the sum of (A) our consolidated EBITDA plus (B) our consolidated rental expense is less than 3.5 to 1.0. Among other restrictions, the New Credit Agreement also limits our ability to incur additional secured or unsecured debt to $20 million.
The New Credit Agreement bears interest, at our option, at (1) the agent bank’s base rate plus 0.0% to 1.0% or (2) Adjusted Term SOFR plus 0.9% to 1.9%, depending on our achievement of certain performance criteria. A commitment fee is charged at 0.2% to 0.3% per annum, depending on our achievement of certain performance criteria, on the unused portion of the lenders’ commitment. During the first quarter 2022, we did not borrow or repay funds under our prior credit facility or the New Credit Agreement. Letters of credit outstanding were $700,000 at April 30, 2022 and our borrowing capacity was $99.3 million.
The terms “net worth”, “consolidated interest coverage ratio”, “consolidated funded indebtedness”, “consolidated rental expense”, “consolidated EBITDA”, “base rate” and “Adjusted Term SOFR” are defined in the New Credit Agreement.
Dividends
On September 16, 2021,March 10, 2022, the Board of Directors approved the payment of a thirdfirst quarter 2022 cash dividend to our shareholders. The quarterly cash dividend of $0.070$0.090 per share was paid on OctoberApril 18, 20212022 to shareholders of record as of the close of business on OctoberApril 4, 2021. 2022. In fiscal 2020, the thirdfirst quarter 2021, the dividend paid was $0.045$0.070 per share. During the first nine monthsquarters of fiscal2022 and 2021, and 2020, we returned $6.0$2.6 million and $3.9$2.1 million, respectively, to our shareholders through our quarterly cash dividends.
The declaration and payment of any future dividends are at the discretion of the Board of Directors and will depend on our results of operations, financial condition, business conditions and other factors deemed relevant by our Board of Directors. Our credit agreement permitsDirectors, subject to restrictions as outlined above in the payment of cash dividends as long as no default or event of default exists under the credit agreement both immediately before and immediately after giving effect to the cash dividends, and the aggregate amount of cash dividends for a fiscal year does not exceed $10 million. “Credit Facility” discussion. See Note 7 –9 — “Debt” to our Notes to Consolidated Financial Statements contained in PART II, ITEM 8 of our Annual Report on Form 10-K for the fiscal year ended January 30, 202129, 2022 for a further discussion of our credit facility and its covenants.facility.
Share Repurchase Program
On December 15, 2020,16, 2021, our Board of Directors authorized a share repurchase program for up to $50.0 million of outstanding common stock, effective January 1, 20212022 (the “2021“2022 Share Repurchase Program”). The purchases may be made in the open market or through privately negotiated transactions from time-to-time through December 31, 20212022 and in accordance with applicable laws, rules and regulations. The 20212022 Share Repurchase Program may be amended, suspended or discontinued at any time and does not commit us to repurchase shares of our common stock. We have funded, and intend to continue to fund, share repurchases from cash on hand, and any shares acquired will be available for stock-based compensation awards and other corporate purposes. The actual number and value of the shares to be purchased will depend on the performance of our stock price and other market conditions.
Dueand economic factors and are subject to uncertainty related to the COVID-19 pandemic, share repurchases have been limited in fiscal 2021 and no repurchases were made in fiscal 2020. Shares totaling 91,594 shares were repurchased during the third quarter of fiscal 2021 at a cost of $3.2 million. We purchased a total of 208,662 shares at a cost of $7.1 million under this share repurchase program in fiscal 2021. As of October 30, 2021, we had $42.9 million available for future repurchases. We will continue to evaluate the repurchase of shares under the 2021 Share Repurchase Program given the uncertainty.
Our credit facility stipulates that distributionsrestrictions as outlined above in the form of redemptions of Equity Interests (as defined in the credit agreement) can be made solely with cash on hand so long as before and immediately after such distributions there are no revolving loans outstanding under the credit agreement.“Credit Facility” discussion. See Note 7 –9 — “Debt” to our Notes to Consolidated Financial Statements contained in PART II, ITEM 8 of our Annual Report on Form 10-K for the fiscal year ended January 30, 202129, 2022 for a further discussion of our credit facilityfacility.
During the first quarter 2022, we repurchased 682,886 shares of common stock at a total cost of $20.5 million under the 2022 Share Repurchase Program. As of April 30, 2022, we had $29.5 million available for future repurchases. Due to uncertainty related to the COVID-19 pandemic, share repurchases were limited in fiscal 2021 and its covenants.no repurchases were made in the first quarter 2021.
Seasonality
We have three distinct peak selling periods: Easter, back-to-school and Christmas. Our operating results depend significantly upon the sales generated during these periods. To prepare for our peak shopping seasons, we must order and keep in stock significantly more merchandise than we would carry during other periods of the year. Any unanticipated decrease in demand for our products or a supply chain disruption that reduces inventory availability during these peak shopping seasons in future periods could reduce our net sales and gross profit and negatively affect our profitability.
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Recent Accounting Pronouncements
See Note 3 — “Recently Issued Accounting Pronouncements” in the accompanying notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements that may have an impact on our condensed consolidated financial statements when adopted.18
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk in that the interest payable under our credit facility is based on variable interest rates and therefore is affected by changes in market rates. We do not use interest rate derivative instruments to manage exposure to changes in market interest rates. We had no borrowings under our credit facilityoutstanding during the first nine months of fiscal 2021.quarter 2022.
ITEM 4. CONTROLS AND PROCEDURES
Our Chief Executive Officer and Chief Financial Officer have concluded, based on their evaluation as of OctoberApril 30, 2021,2022, that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and include controls and procedures designed to ensure that information required to be disclosed by us in such reports is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
On December 3, 2021, we acquired the physical stores and substantially all of the other assets and liabilities of Shoe Station, a privately held, family-owned shoe retailer. Under the rules and regulations of the Securities and Exchange Commission, we elected to exclude Shoe Station during the year ended January 29, 2022 from management's assessment of effectiveness of our internal control over financial reporting as of January 29, 2022. In our Annual Report on Form 10-K for the year ending January 28, 2023, management and our independent registered public accounting firm will be required to provide an assessment as to the effectiveness of our internal control over financial reporting, inclusive of the acquired assets of Shoe Station.
There have been no significant changes in our internal control over financial reporting that occurred during the quarter ended OctoberApril 30, 20212022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
ITEM 1A. RISK FACTORS
Except as set forth in our Quarterly Reports on Form 10-Q for the quarters ended May 1, 2021 and July 31, 2021, thereThere have been no additional material changes to the risk factors set forth in our Annual Report on Form 10-K for the fiscal year ended January 30, 2021. 29, 2022.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
Period |
| Total Number |
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| Average |
|
| Total Number |
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| Approximate |
| ||||
January 30, 2022 to February 26, 2022 |
|
| 0 |
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| $ | 0 |
|
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| 0 |
|
| $ | 50,000,000 |
|
February 27, 2022 to April 2, 2022 |
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| 481,385 |
|
| $ | 30.24 |
|
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| 412,990 |
|
| $ | 37,493,056 |
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April 3, 2022 to April 30, 2022 |
|
| 269,896 |
|
| $ | 29.67 |
|
|
| 269,896 |
|
| $ | 29,485,035 |
|
|
|
| 751,281 |
|
|
|
|
|
| 682,886 |
|
|
|
|
Period |
| Total Number of Shares Purchased(1) |
|
| Average Price Paid per Share |
|
| Total Number Of Shares Purchased as Part of Publicly Announced Programs (2) |
|
| Approximate Dollar Value of Shares that May Yet Be Purchased Under Programs (2) |
| ||||
August 1, 2021 to August 28, 2021 |
|
| 0 |
|
| $ | 0 |
|
|
| 0 |
|
| $ | 46,029,000 |
|
August 29, 2021 to October 2, 2021 |
|
| 103,465 |
|
| $ | 34.69 |
|
|
| 91,594 |
|
| $ | 42,853,000 |
|
October 3, 2021 to October 30, 2021 |
|
| 0 |
|
| $ | 0 |
|
|
| 0 |
|
| $ | 42,853,000 |
|
|
|
| 103,465 |
|
|
|
|
|
|
| 91,594 |
|
|
|
|
|
|
|
|
|
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ITEM 6. EXHIBITS
EXHIBIT INDEX
|
|
|
| Incorporated by Reference To |
|
|
| Incorporated by Reference To | ||||||||||||
Exhibit No. |
| Description |
| Form |
| Exhibit |
| Filing Date |
| Filed Herewith |
| Description |
| Form |
| Exhibit |
| Filing Date |
| Filed Herewith |
3-A |
| Amended and Restated Articles of Incorporation of Registrant |
| 8-K |
| 3-A |
| 06/14/2013 |
|
|
| Amended and Restated Articles of Incorporation of Registrant |
| 8-K |
| 3-A |
| 06/14/2013 |
|
|
3-B |
|
| 8-K |
| 3-B |
| 06/14/2013 |
|
|
|
| 8-K |
| 3-B |
| 06/14/2013 |
|
| ||
4.1 |
|
| 8-K |
| 4.1 |
| 03/24/2022 |
|
| |||||||||||
4.2 |
|
| 8-K |
| 4.2 |
| 03/24/2022 |
|
| |||||||||||
10.1 |
|
| 8-K |
| 10.1 |
| 10/05/2021 |
|
|
|
| 8-K |
| 10.1 |
| 03/15/2022 |
| |||
10.2 |
| Letter Agreement, dated September 30, 2021, by and between the Company and Clifton E. Sifford |
| 8-K |
| 10.2 |
| 10/05/2021 |
|
|
|
| 8-K |
| 10.2 |
| 03/15/2022 |
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31.1 |
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31.2 |
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32.1 |
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32.2 |
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101 |
| The following materials from Shoe Carnival, Inc.’s Quarterly Report on Form 10-Q for the quarter ended October 30, 2021, formatted in Inline XBRL (Inline Extensible Business Reporting Language): (1) Condensed Consolidated Balance Sheets, (2) Condensed Consolidated Statements of Income, (3) Condensed Consolidated Statements of Shareholders’ Equity, (4) Condensed Consolidated Statements of Cash Flows, and (5) Notes to Condensed Consolidated Financial Statements. |
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| The following materials from Shoe Carnival, Inc.’s Quarterly Report on Form 10-Q for the quarter ended April 30, 2022, formatted in Inline XBRL (Inline Extensible Business Reporting Language): (1) Condensed Consolidated Balance Sheets, (2) Condensed Consolidated Statements of Income, (3) Condensed Consolidated Statements of Shareholders’ Equity, (4) Condensed Consolidated Statements of Cash Flows, and (5) Notes to Condensed Consolidated Financial Statements. |
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104 |
| Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
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| Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
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2321
SHOE CARNIVAL, INC.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed, on its behalf by the undersigned thereunto duly authorized.
Date: | SHOE CARNIVAL, INC. |
| (Registrant) |
| By: /s/ W. Kerry Jackson (Duly Authorized Officer and Principal Financial Officer) |
2422