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 OctoberJuly 30, 20212022

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

 

 

Shoe Carnival, Inc.

(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)

 

(812) (812) 867-4034

(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 ☐ No

 Yes   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 ☐ No

 Yes  

 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

 

 

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, 2021August 26, 2022 was 28,165,273.27,613,894.

 


 

SHOE CARNIVAL, INC.

INDEX TO FORM 10-Q

 

 

 

 

Page

Part I

Financial Information

 

 

 

 

 

 

Item 1.

Financial Statements (Unaudited)

 

 

 

Condensed Consolidated Balance Sheets

3

 

 

Condensed Consolidated Statements of Income

4

 

 

Condensed Consolidated Statements of Shareholders’ Equity

5

 

 

Condensed Consolidated Statements of Cash Flows

6

 

 

Notes to Condensed Consolidated Financial Statements

7

 

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

1514

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

2220

 

 

 

 

 

Item 4.

Controls and Procedures

2220

 

 

 

Part II

Other Information

 

 

 

 

 

 

Item 1A.

Risk Factors

2321

 

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

2321

 

 

 

 

 

Item 6.

Exhibits

2322

 

 

 

 

Signature

2423

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

 

 

July 30, 2022

 

 

January 29, 2022

 

 

July 31, 2021

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

173,364

 

 

$

106,532

 

 

$

46,740

 

 

$

51,620

 

 

$

117,443

 

 

$

146,506

 

Marketable securities

 

 

17,834

 

 

 

0

 

 

 

0

 

 

 

10,994

 

 

 

14,961

 

 

 

17,431

 

Accounts receivable

 

 

10,018

 

 

 

7,096

 

 

 

8,435

 

 

 

10,677

 

 

 

14,159

 

 

 

7,871

 

Merchandise inventories

 

 

282,014

 

 

 

233,266

 

 

 

274,264

 

 

 

385,510

 

 

 

285,205

 

 

 

308,141

 

Other

 

 

12,435

 

 

 

8,411

 

 

 

10,727

 

 

 

18,131

 

 

 

10,264

 

 

 

13,131

 

Total Current Assets

 

 

495,665

 

 

 

355,305

 

 

 

340,166

 

 

 

476,932

 

 

 

442,032

 

 

 

493,080

 

Property and equipment – net

 

 

71,963

 

 

 

62,325

 

 

 

63,434

 

 

 

124,789

 

 

 

88,533

 

 

 

65,871

 

Operating lease right-of-use assets

 

 

254,537

 

 

 

220,952

 

 

 

208,472

 

Intangible assets

 

 

32,600

 

 

 

32,600

 

 

 

0

 

Goodwill

 

 

10,786

 

 

 

11,384

 

 

 

0

 

Deferred income taxes

 

 

3,153

 

 

 

5,635

 

 

 

6,283

 

 

 

0

 

 

 

2,699

 

 

 

4,135

 

Other noncurrent assets

 

 

14,218

 

 

 

13,843

 

 

 

11,802

 

 

 

14,871

 

 

 

14,064

 

 

 

12,498

 

Operating lease right-of-use assets

 

 

201,510

 

 

 

205,639

 

 

 

201,658

 

Total Assets

 

$

786,509

 

 

$

642,747

 

 

$

623,343

 

 

$

914,515

 

 

$

812,264

 

 

$

784,056

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

65,589

 

 

$

57,717

 

 

$

50,897

 

 

$

113,826

 

 

$

69,092

 

 

$

96,494

 

Accrued and other liabilities

 

 

48,536

 

 

 

24,390

 

 

 

25,346

 

 

 

22,893

 

 

 

33,053

 

 

 

50,126

 

Current portion of operating lease liabilities

 

 

47,712

 

 

 

48,794

 

 

 

48,984

 

 

 

52,523

 

 

 

51,563

 

 

 

47,769

 

Total Current Liabilities

 

 

161,837

 

 

 

130,901

 

 

 

125,227

 

 

 

189,242

 

 

 

153,708

 

 

 

194,389

 

Long-term portion of operating lease liabilities

 

 

177,354

 

 

 

182,622

 

 

 

179,335

 

 

 

226,115

 

 

 

194,788

 

 

 

185,555

 

Deferred income taxes

 

 

4,436

 

 

 

0

 

 

 

0

 

Deferred compensation

 

 

11,941

 

 

 

16,008

 

 

 

14,600

 

 

 

10,779

 

 

 

10,901

 

 

 

11,440

 

Other

 

 

2,831

 

 

 

3,040

 

 

 

964

 

 

 

311

 

 

 

334

 

 

 

2,760

 

Total Liabilities

 

 

353,963

 

 

 

332,571

 

 

 

320,126

 

 

 

430,883

 

 

 

359,731

 

 

 

394,144

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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
41,049,190 shares issued in each period, respectively

 

 

410

 

 

 

410

 

 

 

410

 

Additional paid-in capital

 

 

79,295

 

 

 

78,737

 

 

 

77,963

 

 

 

80,760

 

 

 

80,681

 

 

 

78,330

 

Retained earnings

 

 

534,902

 

 

 

406,655

 

 

 

400,505

 

 

 

604,192

 

 

 

553,487

 

 

 

490,069

 

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, 13,435,296 shares, 12,882,789
shares and
12,810,740 shares, respectively

 

 

(201,730

)

 

 

(182,045

)

 

 

(178,897

)

Total Shareholders’ Equity

 

 

432,546

 

 

 

310,176

 

 

 

303,217

 

 

 

483,632

 

 

 

452,533

 

 

 

389,912

 

Total Liabilities and Shareholders’ Equity

 

$

786,509

 

 

$

642,747

 

 

$

623,343

 

 

$

914,515

 

 

$

812,264

 

 

$

784,056

 

 

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
Weeks Ended
 July 30, 2022

 

 

Thirteen
Weeks Ended
 July 31, 2021

 

 

Twenty-six
Weeks Ended
 July 30, 2022

 

 

Twenty-six
Weeks Ended
 July 31, 2021

 

Net sales

 

$

356,336

 

 

$

274,579

 

 

$

1,017,023

 

 

$

722,868

 

 

$

312,268

 

 

$

332,230

 

 

$

629,795

 

 

$

660,687

 

Cost of sales (including buying, distribution

and occupancy costs)

 

 

212,280

 

 

 

186,818

 

 

 

607,057

 

 

 

521,038

 

 

 

199,138

 

 

 

196,478

 

 

 

403,802

 

 

 

394,777

 

Gross profit

 

 

144,056

 

 

 

87,761

 

 

 

409,966

 

 

 

201,830

 

 

 

113,130

 

 

 

135,752

 

 

 

225,993

 

 

 

265,910

 

Selling, general and administrative expenses

 

 

81,632

 

 

 

67,598

 

 

 

230,225

 

 

 

190,530

 

 

 

74,341

 

 

 

76,038

 

 

 

151,820

 

 

 

148,593

 

Operating income

 

 

62,424

 

 

 

20,163

 

 

 

179,741

 

 

 

11,300

 

 

 

38,789

 

 

 

59,714

 

 

 

74,173

 

 

 

117,317

 

Interest income

 

 

(8

)

 

 

(2

)

 

 

(14

)

 

 

(95

)

 

 

(138

)

 

 

(2

)

 

 

(170

)

 

 

(6

)

Interest expense

 

 

120

 

 

 

119

 

 

 

358

 

 

 

293

 

 

 

65

 

 

 

119

 

 

 

160

 

 

 

238

 

Income before income taxes

 

 

62,312

 

 

 

20,046

 

 

 

179,397

 

 

 

11,102

 

 

 

38,862

 

 

 

59,597

 

 

 

74,183

 

 

 

117,085

 

Income tax expense

 

 

15,476

 

 

 

5,368

 

 

 

45,107

 

 

 

2,554

 

 

 

9,953

 

 

 

15,385

 

 

 

18,377

 

 

 

29,631

 

Net income

 

$

46,836

 

 

$

14,678

 

 

$

134,290

 

 

$

8,548

 

 

$

28,909

 

 

$

44,212

 

 

$

55,806

 

 

$

87,454

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.66

 

 

$

0.52

 

 

$

4.75

 

 

$

0.30

 

 

$

1.05

 

 

$

1.56

 

 

$

2.01

 

 

$

3.09

 

Diluted

 

$

1.64

 

 

$

0.51

 

 

$

4.69

 

 

$

0.30

 

 

$

1.04

 

 

$

1.54

 

 

$

1.99

 

 

$

3.05

 

Weighted average shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

28,192

 

 

 

28,180

 

 

 

28,257

 

 

 

28,113

 

 

 

27,590

 

 

 

28,323

 

 

 

27,784

 

 

 

28,290

 

Diluted

 

 

28,547

 

 

 

28,533

 

 

 

28,607

 

 

 

28,450

 

 

 

27,812

 

 

 

28,652

 

 

 

28,061

 

 

 

28,643

 

 

See notes to Condensed Consolidated Financial Statements.

4


SHOE CARNIVAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Unaudited

 

 

Thirteen Weeks Ended

 

 

Thirteen Weeks Ended

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Retained

 

 

Treasury

 

 

 

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

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

)

Employee stock purchase plan purchases

 

 

 

 

 

 

1

 

 

 

 

 

 

 

14

 

 

 

 

 

 

 

16

 

 

 

30

 

Stock-based compensation awards

 

 

 

 

 

 

30

 

 

 

 

 

 

 

(410

)

 

 

 

 

 

 

410

 

 

 

0

 

Shares surrendered by employees to pay taxes

on stock-based compensation awards

 

 

 

 

 

 

(12

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(414

)

 

 

(414

)

Purchase of common stock for treasury

 

 

 

 

 

 

(92

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,176

)

 

 

(3,176

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,361

 

 

 

 

 

 

 

 

 

 

 

1,361

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

46,836

 

 

 

 

 

 

 

46,836

 

Balance at October 30, 2021

 

 

41,049

 

 

 

(12,884

)

 

$

410

 

 

$

79,295

 

 

$

534,902

 

 

$

(182,061

)

 

$

432,546

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 April 30, 2022

 

 

41,049

 

 

 

(13,462

)

 

$

410

 

 

$

79,595

 

 

$

577,823

 

 

$

(202,114

)

 

$

455,714

 

Dividends declared ($0.09 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,540

)

 

 

 

 

 

(2,540

)

Employee stock purchase plan purchases

 

 

 

 

 

 

4

 

 

 

 

 

 

 

1

 

 

 

 

 

 

 

46

 

 

 

47

 

 

 

 

 

 

3

 

 

 

 

 

 

9

 

 

 

 

 

 

39

 

 

 

48

 

Stock-based compensation awards

 

 

 

 

 

 

1

 

 

 

 

 

 

 

(27

)

 

 

 

 

 

 

27

 

 

 

0

 

 

 

 

 

 

26

 

 

 

 

 

 

(383

)

 

 

 

 

 

383

 

 

 

0

 

Shares surrendered by employees to pay taxes

on stock-based compensation awards

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9

)

 

 

(9

)

 

 

 

 

 

(2

)

 

 

 

 

 

 

 

 

 

 

 

(38

)

 

 

(38

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

806

 

 

 

 

 

 

 

 

 

 

 

806

 

 

 

 

 

 

 

 

 

 

 

 

1,539

 

 

 

 

 

 

 

 

 

1,539

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14,678

 

 

 

 

 

 

 

14,678

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

28,909

 

 

 

 

 

 

28,909

 

Balance at October 31, 2020

 

 

41,049

 

 

 

(12,842

)

 

$

410

 

 

$

77,963

 

 

$

400,505

 

 

$

(175,661

)

 

$

303,217

 

Balance at July 30, 2022

 

 

41,049

 

 

 

(13,435

)

 

$

410

 

 

$

80,760

 

 

$

604,192

 

 

$

(201,730

)

 

$

483,632

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at May 1, 2021

 

 

41,049

 

 

 

(12,703

)

 

$

410

 

 

$

77,041

 

 

$

447,875

 

 

$

(175,051

)

 

$

350,275

 

Dividends declared ($0.07 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,018

)

 

 

 

 

 

(2,018

)

Employee stock purchase plan purchases

 

 

 

 

 

1

 

 

 

 

 

 

15

 

 

 

 

 

 

13

 

 

 

28

 

Stock-based compensation awards

 

 

 

 

 

8

 

 

 

 

 

 

(112

)

 

 

 

 

 

112

 

 

 

0

 

Purchase of common stock for treasury

 

 

 

 

 

(117

)

 

 

 

 

 

 

 

 

 

 

 

(3,971

)

 

 

(3,971

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

1,386

 

 

 

 

 

 

 

 

 

1,386

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

44,212

 

 

 

 

 

 

44,212

 

Balance at July 31, 2021

 

 

41,049

 

 

 

(12,811

)

 

$

410

 

 

$

78,330

 

 

$

490,069

 

 

$

(178,897

)

 

$

389,912

 

 

 

Twenty-six 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 29, 2022

 

 

41,049

 

 

 

(12,883

)

 

$

410

 

 

$

80,681

 

 

$

553,487

 

 

$

(182,045

)

 

$

452,533

 

Dividends declared ($0.18 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,101

)

 

 

 

 

 

(5,101

)

Employee stock purchase plan purchases

 

 

 

 

 

5

 

 

 

 

 

 

27

 

 

 

 

 

 

66

 

 

 

93

 

Stock-based compensation awards

 

 

 

 

 

196

 

 

 

 

 

 

(2,850

)

 

 

 

 

 

2,850

 

 

 

0

 

Shares surrendered by employees to pay taxes
   on stock-based compensation awards

 

 

 

 

 

(70

)

 

 

 

 

 

 

 

 

 

 

 

(2,086

)

 

 

(2,086

)

Purchase of common stock for treasury

 

 

 

 

 

(683

)

 

 

 

 

 

 

 

 

 

 

 

(20,515

)

 

 

(20,515

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

2,902

 

 

 

 

 

 

 

 

 

2,902

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

55,806

 

 

 

 

 

 

55,806

 

Balance at July 30, 2022

 

 

41,049

 

 

 

(13,435

)

 

$

410

 

 

$

80,760

 

 

$

604,192

 

 

$

(201,730

)

 

$

483,632

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 30, 2021

 

 

41,049

 

 

 

(12,839

)

 

$

410

 

 

$

78,737

 

 

$

406,655

 

 

$

(175,626

)

 

$

310,176

 

Dividends declared ($0.14 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,040

)

 

 

 

 

 

(4,040

)

Employee stock purchase plan purchases

 

 

 

 

 

3

 

 

 

 

 

 

46

 

 

 

 

 

 

46

 

 

 

92

 

Stock-based compensation awards

 

 

 

 

 

218

 

 

 

 

 

 

(2,990

)

 

 

 

 

 

2,990

 

 

 

0

 

Shares surrendered by employees to pay taxes
   on stock-based compensation awards

 

 

 

 

 

(76

)

 

 

 

 

 

 

 

 

 

 

 

(2,336

)

 

 

(2,336

)

Purchase of common stock for treasury

 

 

 

 

 

(117

)

 

 

 

 

 

 

 

 

 

 

 

(3,971

)

 

 

(3,971

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

2,537

 

 

 

 

 

 

 

 

 

2,537

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

87,454

 

 

 

 

 

 

87,454

 

Balance at July 31, 2021

 

 

41,049

 

 

 

(12,811

)

 

$

410

 

 

$

78,330

 

 

$

490,069

 

 

$

(178,897

)

 

$

389,912

 

 

 

 

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

 

 

Twenty-six
Weeks Ended
July 30, 2022

 

 

Twenty-six
Weeks Ended
July 31, 2021

 

Cash Flows From Operating Activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

134,290

 

 

$

8,548

 

 

$

55,806

 

 

$

87,454

 

Adjustments to reconcile net income to net cash

provided by operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

13,687

 

 

 

12,034

 

 

 

10,416

 

 

 

8,926

 

Stock-based compensation

 

 

4,118

 

 

 

2,881

 

 

 

2,741

 

 

 

2,686

 

Loss on retirement and impairment of assets

 

 

1,120

 

 

 

2,427

 

Loss on retirement and impairment of assets, net

 

 

83

 

 

 

1,034

 

Deferred income taxes

 

 

2,482

 

 

 

1,550

 

 

 

7,135

 

 

 

1,499

 

Non-cash operating lease expense

 

 

31,797

 

 

 

31,087

 

 

 

23,497

 

 

 

21,214

 

Other

 

 

1,950

 

 

 

494

 

 

 

384

 

 

 

1,845

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(2,922

)

 

 

(5,711

)

 

 

3,481

 

 

 

(775

)

Merchandise inventories

 

 

(48,748

)

 

 

(14,769

)

 

 

(100,305

)

 

 

(74,875

)

Operating leases

 

 

(34,018

)

 

 

(26,673

)

 

 

(24,794

)

 

 

(22,140

)

Accounts payable and accrued liabilities

 

 

19,872

 

 

 

(2,544

)

 

 

40,514

 

 

 

53,236

 

Other

 

 

(3,150

)

 

 

(9,154

)

 

 

(10,040

)

 

 

(257

)

Net cash provided by operating activities

 

 

120,478

 

 

 

170

 

 

 

8,918

 

 

 

79,847

 

Cash Flows From Investing Activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(20,350

)

 

 

(10,083

)

 

 

(50,198

)

 

 

(12,137

)

Investments in marketable securities and other

 

 

(17,496

)

 

 

0

 

 

 

(11

)

 

 

(17,482

)

Other

 

 

0

 

 

 

194

 

Sales of marketable securities and other

 

 

3,040

 

 

 

0

 

Net cash used in investing activities

 

 

(37,846

)

 

 

(9,889

)

 

 

(47,169

)

 

 

(29,619

)

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

 

 

 

93

 

 

 

92

 

Dividends paid

 

 

(6,025

)

 

 

(3,856

)

 

 

(5,064

)

 

 

(4,039

)

Purchase of common stock for treasury

 

 

(7,147

)

 

 

0

 

 

 

(20,515

)

 

 

(3,971

)

Shares surrendered by employees to pay taxes on stock-based compensation awards

 

 

(2,750

)

 

 

(1,736

)

 

 

(2,086

)

 

 

(2,336

)

Net cash used in financing activities

 

 

(15,800

)

 

 

(5,440

)

 

 

(27,572

)

 

 

(10,254

)

Net increase (decrease) in cash and cash equivalents

 

 

66,832

 

 

 

(15,159

)

Net (decrease) increase in cash and cash equivalents

 

 

(65,823

)

 

 

39,974

 

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

 

 

$

51,620

 

 

$

146,506

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash paid during period for interest

 

$

359

 

 

$

276

 

 

$

164

 

 

$

238

 

Cash paid during period for income taxes

 

$

33,542

 

 

$

1,812

 

 

$

13,955

 

 

$

16,784

 

Capital expenditures incurred but not yet paid

 

$

2,602

 

 

$

808

 

 

$

1,899

 

 

$

941

 

Dividends declared but not yet paid

 

$

151

 

 

$

113

 

 

$

222

 

 

$

135

 

 

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.

Note 2 - Acquisition of Shoe Station

On June 21,December 3, 2021, our Board of Directors authorized a two-for-one stock splitwe acquired the physical stores and substantially all of the sharesother 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 common stock.  The stock split entitled each shareholdercondensed consolidated financial statements since the acquisition date. Shoe Station bannered stores contributed Net sales of record at$27.2 million and $53.4 million in the closethirteen and twenty-six weeks ended July 30, 2022, respectively. We recorded a preliminary allocation of businessthe purchase price to the assets acquired and liabilities assumed based on July 6, 2021 to receive one additional share of common stock for each share of common stock ownedthe estimated fair values as of that date and was paid on July 19,December 3, 2021. Upon the completionThere were no material adjustments to our preliminary purchase price allocation recognized in year-to-date 2022. The final determination of the stock split, our outstanding shares increasedfair values and related impacts will be completed as soon as practicable, and within the measurement period of up to one year 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:acquisition date.

7


 

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 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

 

 

July 30, 2022

 

 

July 31, 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
Income

 

 

Shares

 

 

Per Share
Amount

 

 

Net
Income

 

 

Shares

 

 

Per Share
Amount

 

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

 

 

$

28,909

 

 

 

27,590

 

 

$

1.05

 

 

$

44,212

 

 

 

28,323

 

 

$

1.56

 

Diluted Net Income per Share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

46,836

 

 

 

 

 

 

 

 

 

 

$

14,678

 

 

 

 

 

 

 

 

 

 

$

28,909

 

 

 

 

 

 

 

 

$

44,212

 

 

 

 

 

 

 

Conversion of stock-based compensation

arrangements

 

 

0

 

 

 

355

 

 

 

 

 

 

 

0

 

 

 

353

 

 

 

 

 

 

 

0

 

 

 

222

 

 

 

 

 

 

0

 

 

 

329

 

 

 

 

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

 

 

$

28,909

 

 

 

27,812

 

 

$

1.04

 

 

$

44,212

 

 

 

28,652

 

 

$

1.54

 

 

 

Twenty-six Weeks Ended

 

 

 

July 30, 2022

 

 

July 31, 2021

 

 

 

 

 

 

(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

 

$

55,806

 

 

 

27,784

 

 

$

2.01

 

 

$

87,454

 

 

 

28,290

 

 

$

3.09

 

Diluted Net Income per Share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

55,806

 

 

 

 

 

 

 

 

$

87,454

 

 

 

 

 

 

 

Conversion of stock-based compensation
   arrangements

 

 

0

 

 

 

277

 

 

 

 

 

 

0

 

 

 

353

 

 

 

 

Net income available for diluted common
   shares and diluted net income per share

 

$

55,806

 

 

 

28,061

 

 

$

1.99

 

 

$

87,454

 

 

 

28,643

 

 

$

3.05

 

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 and twenty-six weeks ended July 30, 2022 excluded approximately 318,000 and 31,000, respectively, of 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. No 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-ninetwenty-six weeks ended October 30,July 31, 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 Pandemic8


 

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


Level 1 – Quoted prices in active markets for identical assets or liabilities;

Level 2 – Quoted prices in active or inactive markets for similar assets or liabilities that are either directly or indirectly observable; and

Level 3 – Significant unobservable inputs that are not corroborated by market data. Generally, these fair value measures are model-based valuation techniques such as discounted cash flows, and are based on the best information available, including our own data. Fair values of our long-lived assets are estimated using an income-based approach and are classified within Level 3 of the valuation hierarchy.

Fair Value of Financial Instruments

The following table presents financial instruments that are measured at fair value on a recurring basis at OctoberJuly 30, 2021,2022, January 30, 202129, 2022 and OctoberJuly 31, 2020.2021:

 

 

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 July 30, 2022

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents - money market mutual funds

 

$

165,072

 

 

$

0

 

 

$

0

 

 

$

165,072

 

 

$

41,401

 

 

$

0

 

 

$

0

 

 

$

41,401

 

Marketable securities - mutual funds that fund

deferred compensation

 

 

17,834

 

 

 

0

 

 

 

0

 

 

 

17,834

 

 

 

10,994

 

 

 

0

 

 

 

0

 

 

 

10,994

 

Total

 

$

182,906

 

 

$

0

 

 

$

0

 

 

$

182,906

 

 

$

52,395

 

 

$

0

 

 

$

0

 

 

$

52,395

 

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
deferred compensation

 

 

14,961

 

 

 

 

 

 

 

 

 

14,961

 

Total

 

$

130,489

 

 

$

0

 

 

$

0

 

 

$

130,489

 

As of July 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents - money market mutual funds

 

$

48,883

 

 

$

0

 

 

$

0

 

 

$

48,883

 

 

$

132,514

 

 

$

0

 

 

$

0

 

 

$

132,514

 

Marketable securities - mutual funds that fund
deferred compensation

 

 

17,431

 

 

 

 

 

 

 

 

 

17,431

 

Total

 

$

149,945

 

 

$

0

 

 

$

0

 

 

$

149,945

 

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 OctoberJuly 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 OctoberJuly 30, 2021,2022, the balance in our deferred compensation plan was $16.7$10.8 million, of which $4.8 million$42,000 was 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-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,$2.5 million related to equity securities still held at OctoberJuly 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.

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.

9


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-ninetwenty-six weeks ended October 30,July 31, 2021, we recorded impairment charges of $15,000$243,000 and $983,000$967,000 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 ninethree stores, respectively. These charges were included in selling, general and administrative expenses. NaNNo impairment charges were recorded during the thirteen and twenty-six weeks ended July 30, 2022, and no impairments of operating right-of-use assets have been recorded in any of these periods.

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-ninetwenty-six weeks ended OctoberJuly 30, 2022 and July 31, 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

 

 

 

Thirteen

 

 

Thirteen

 

 

Twenty-six

 

 

Twenty-six

 

 

 

Weeks Ended

 

 

Weeks Ended

 

 

Weeks Ended

 

 

Weeks Ended

 

(In thousands)

 

July 30, 2022

 

 

July 31, 2021

 

 

July 30, 2022

 

 

July 31, 2021

 

Share-settled equity awards

 

$

1,530

 

 

$

1,381

 

 

$

2,885

 

 

$

2,521

 

Stock appreciation rights

 

 

(38

)

 

 

74

 

 

 

(161

)

 

 

149

 

Employee stock purchase plan

 

 

9

 

 

 

5

 

 

 

17

 

 

 

16

 

Total stock-based compensation expense

 

$

1,501

 

 

$

1,460

 

 

$

2,741

 

 

$

2,686

 

Income tax effect at statutory rates

 

$

(385

)

 

$

(377

)

 

$

(678

)

 

$

(680

)

Additional income tax benefit on vesting of share-settled awards

 

$

(26

)

 

$

(5

)

 

$

(521

)

 

$

(885

)

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 OctoberJuly 30, 20212022, approximately $4.7$10.5 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 1.11.6 years.

Cash-Settled Stock Appreciation RightsShare-Settled Equity Awards

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.

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 29, 2022

 

 

457,038

 

 

$

16.54

 

Granted

 

 

345,164

 

 

 

30.32

 

Vested

 

 

(176,425

)

 

 

18.28

 

Forfeited

 

 

(25,103

)

 

 

18.07

 

Outstanding at July 30, 2022

 

 

600,674

 

 

$

23.88

 

The total fair value at grant date of restricted stock units and performance stock units that vested during 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

 

twenty-six weeks ended July 30, 2022 and July 31, 2021 was $3.2 million and $3.1 million, respectively. 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 October 30,twenty-six weeks ended July 31, 2021 was $3.02.$28.21.

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 and employee exit rate were calculated based on historical data.

1110


The following table summarizes information regarding stock-based compensation expense recognizedtransactions for SARs:our 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

 

$

71

 

 

$

183

 

 

$

220

 

 

$

187

 

Income tax effect at statutory rate

 

$

(18

)

 

$

(49

)

 

$

(55

)

 

$

(43

)

 

 

Number of
Shares

 

 

Weighted-
Average Grant
Date Fair Value

 

Outstanding at January 29, 2022

 

 

0

 

 

$

0.00

 

Granted

 

 

19,487

 

 

 

24.12

 

Vested

 

 

0

 

 

 

0.00

 

Forfeited

 

 

0

 

 

 

0.00

 

Outstanding at July 30, 2022

 

 

19,487

 

 

$

24.12

 

AsNo restricted stock and other stock awards vested during the twenty-six weeks ended July 30, 2022. The total fair value at grant date of October 30,restricted stock and other stock awards that vested during the twenty-six weeks ended July 31, 2021 approximately $111,000 in unrecognized compensation expense remained related to non-vested SARs. This expense is expected to be recognized over a periodwas $26,000. The weighted-average grant date fair value of approximately 0.4 years.restricted stock and other stock awards granted during the twenty-six weeks ended July 31, 2021 was $32.65.

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-ninetwenty-six weeks ended OctoberJuly 30, 20212022 and OctoberJuly 31, 20202021 were as follows:

 

(In thousands)

 

Thirteen Weeks

Ended October 30, 2021

 

 

Thirteen Weeks

Ended October 31, 2020

 

 

Thirteen Weeks
Ended July 30, 2022

 

 

Thirteen Weeks
Ended July 31, 2021

 

Non-Athletics:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Women’s

 

$

73,031

 

 

 

21

%

 

$

54,164

 

 

 

20

%

 

$

94,013

 

 

 

30

%

 

$

83,141

 

 

 

25

%

Men’s

 

 

44,226

 

 

 

12

 

 

 

34,676

 

 

 

13

 

 

 

55,102

 

 

 

18

 

 

 

51,678

 

 

 

16

 

Children’s

 

 

21,358

 

 

 

6

 

 

 

15,145

 

 

 

5

 

 

 

22,822

 

 

 

7

 

 

 

22,553

 

 

 

7

 

Total

 

 

138,615

 

 

 

39

 

 

 

103,985

 

 

 

38

 

 

 

171,937

 

 

 

55

 

 

 

157,372

 

 

 

48

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Athletics:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Women’s

 

 

58,941

 

 

 

16

 

 

 

50,935

 

 

 

19

 

 

 

40,511

 

 

 

13

 

 

 

49,648

 

 

 

15

 

Men’s

 

 

73,429

 

 

 

21

 

 

 

59,355

 

 

 

22

 

 

 

50,776

 

 

 

17

 

 

 

66,902

 

 

 

20

 

Children’s

 

 

64,590

 

 

 

18

 

 

 

43,662

 

 

 

16

 

 

 

30,977

 

 

 

10

 

 

 

39,925

 

 

 

12

 

Total

 

 

196,960

 

 

 

55

 

 

 

153,952

 

 

 

57

 

 

 

122,264

 

 

 

40

 

 

 

156,475

 

 

 

47

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accessories and Other

 

 

20,761

 

 

 

6

 

 

 

16,642

 

 

 

5

 

Accessories

 

 

16,664

 

 

 

5

 

 

 

16,266

 

 

 

5

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

1,403

 

 

 

0

 

 

 

2,117

 

 

 

0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

356,336

 

 

 

100

%

 

$

274,579

 

 

 

100

%

 

$

312,268

 

 

 

100

%

 

$

332,230

 

 

 

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

%

1211


 

 

(In thousands)

 

Twenty-six Weeks
Ended July 30, 2022

 

 

Twenty-six Weeks
Ended July 31, 2021

 

Non-Athletics:

 

 

 

 

 

 

 

 

 

 

 

 

Women’s

 

$

182,569

 

 

 

29

%

 

$

158,672

 

 

 

24

%

Men’s

 

 

104,254

 

 

 

17

 

 

 

95,960

 

 

 

15

 

Children’s

 

 

44,231

 

 

 

7

 

 

 

45,846

 

 

 

7

 

Total

 

 

331,054

 

 

 

53

 

 

 

300,478

 

 

 

46

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Athletics:

 

 

 

 

 

 

 

 

 

 

 

 

Women’s

 

 

91,545

 

 

 

14

 

 

 

108,243

 

 

 

16

 

Men’s

 

 

103,802

 

 

 

16

 

 

 

132,626

 

 

 

20

 

Children’s

 

 

67,705

 

 

 

11

 

 

 

82,503

 

 

 

12

 

Total

 

 

263,052

 

 

 

41

 

 

 

323,372

 

 

 

48

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accessories

 

 

32,414

 

 

 

5

 

 

 

32,894

 

 

 

5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

3,275

 

 

 

1

 

 

 

3,943

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

629,795

 

 

 

100

%

 

$

660,687

 

 

 

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.

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 OctoberJuly 30, 2021,2022, January 30, 202129, 2022 or OctoberJuly 31, 2020.2021.

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

12


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$516,000 of right of return assets associated with estimated product returns were recorded in Accrued and other liabilities as of OctoberJuly 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 OctoberJuly 31, 2020.2021.

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 OctoberJuly 30, 2022, January 29, 2022 and July 31, 2021, January 30, 2021 and October 31, 2020, approximately $1.4$2.0 million, $1.7$2.3 million and $1.2$1.5 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$49,000 and $121,000$108,000 was recognized in Net sales during the thirteen and thirty-ninetwenty-six weeks ended OctoberJuly 30, 2021,2022, respectively. Breakage revenue associated with our gift cards of $27,000$38,000 and $69,000$80,000 was recognized in Net sales during the thirteen and thirty-ninetwenty-six weeks ended OctoberJuly 31, 2020,2021, 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 the thirteen and thirty-ninetwenty-six weeks ended OctoberJuly 30, 2021,2022, approximately $1.7$1.3 million and $4.5$2.6 million, respectively, of loyalty rewards were recognized in Net sales. During the thirteen and thirty-ninetwenty-six weeks ended OctoberJuly 31, 2020,2021, approximately $1.3$1.6 million and $3.2$2.9 million, respectively, of loyalty rewards were recognized in Net sales. At OctoberJuly 30, 2022, January 29, 2022 and July 31, 2021, January 30, 2021approximately $889,000, $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.

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 OctoberJuly 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-ninetwenty-six weeks ended OctoberJuly 30, 20212022 and OctoberJuly 31, 2020:2021:

 

 

Thirteen Weeks

 

 

Thirteen Weeks

 

 

Twenty-six

 

 

Twenty-six

 

 

Weeks Ended

 

 

Weeks Ended

 

 

Weeks Ended

 

 

Weeks Ended

 

(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

 

 

July 30, 2022

 

 

July 31, 2021

 

 

July 30, 2022

 

 

July 31, 2021

 

Operating lease cost

 

$

13,520

 

 

$

13,432

 

 

$

40,272

 

 

$

40,047

 

 

$

14,943

 

 

$

13,489

 

 

$

29,642

 

 

$

26,752

 

Variable lease cost

 

 

713

 

 

 

490

 

 

 

2,413

 

 

 

1,464

 

 

 

 

 

 

 

 

 

 

 

 

 

CAM, property taxes and insurance

 

 

4,746

 

 

 

4,888

 

 

 

14,375

 

 

 

15,023

 

 

 

4,667

 

 

 

4,861

 

 

 

9,429

 

 

 

9,629

 

Percentage rent and other variable lease costs

 

 

301

 

 

 

993

 

 

 

494

 

 

 

1,641

 

Total

 

$

18,979

 

 

$

18,810

 

 

$

57,060

 

 

$

56,534

 

 

$

19,911

 

 

$

19,343

 

 

$

39,565

 

 

$

38,022

 

 

1413


 

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, synergies, 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. For a more detailed discussion of risk factors impacting us, see the “Risk 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 our results for the second quarter 2022 and the second quarter 2021 and year-over-year comparisons between the second quarter 2022 and the second quarter 2021, as well as year-to-date results between the two periods. 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 second quarter 2022 and the second quarter 2019 and respective year-to-date periods to provide further context regarding our second quarter and year-to-date 2022 results of operations.

Referred to herein, the second quarter 2022 is the thirteen weeks ended July 30, 2022; the second quarter 2021 is the thirteen weeks ended July 31, 2021; and the second quarter 2019 is the thirteen weeks ended August 3, 2019. Also referred to herein, year-to-date 2022 is the twenty-six weeks ended July 30, 2022; year-to-date 2021 is the twenty-six weeks ended July 31, 2021; and year-to-date 2019 is the twenty-six weeks ended August 3, 2019.

14


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. 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

)%

July 30, 2022

 

 

395

 

 

 

0

 

 

 

0

 

 

 

395

 

 

 

0

 

 

 

4,450,000

 

 

 

(13.8

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year-to-date

 

 

393

 

 

 

2

 

 

 

0

 

 

 

395

 

 

 

31,000

 

 

 

4,450,000

 

 

 

(12.2

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year-to-date

 

 

383

 

 

 

1

 

 

 

6

 

 

 

378

 

 

 

(34,000

)

 

 

4,112,000

 

 

 

48.8

%

(1)
Comparable store sales is a key performance indicator for us. Comparable store sales include stores that have been open for 13 full months after such stores’ grand opening or acquisition prior to closely monitor and manage the impact of the COVID-19 pandemic, and the safety and well-being of our customers, employees and business partners remains a top priority.  The COVID-19 pandemic has significantly impacted, and is expected to continue to impact, our operations, supply chains, distribution processes, and overall economic conditions and consumer spending for the foreseeable future.  

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

)%

physical stores.

(1)15

Comparable store sales is a key performance indicator for us.  Comparable store sales include stores that have been open for 13 full months after such stores’ grand opening prior to the beginning of the period, including those stores that have been relocated or remodeled.  Therefore, stores recently opened or closed are not included in comparable store sales.  We include e-commerce sales in our comparable store sales as a result of our omnichannel retailer strategy.  Due to our omnichannel retailer strategy, we view e-commerce sales as an extension of our physical stores.

16


 

The following table sets forth our results of operations expressed as a percentage of netNet sales for the periods indicated:

 

Thirteen

 

 

Thirteen

 

 

Twenty-six

 

 

Twenty-six

 

Weeks Ended

 

 

Weeks Ended

 

 

Weeks Ended

 

 

Weeks Ended

 

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

 

July 30, 2022

 

 

July 31, 2021

 

 

July 30, 2022

 

 

July 31, 2021

 

Net sales

 

100.0

%

 

 

100.0

%

 

 

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

 

 

63.8

 

 

 

59.1

 

 

 

64.1

 

 

 

59.7

 

Gross profit

 

40.4

 

 

 

32.0

 

 

 

40.3

 

 

 

27.9

 

 

36.2

 

 

 

40.9

 

 

 

35.9

 

 

 

40.3

 

Selling, general and administrative expenses

 

22.9

 

 

 

24.7

 

 

 

22.6

 

 

 

26.3

 

 

23.8

 

 

 

22.9

 

 

 

24.1

 

 

 

22.5

 

Operating income

 

17.5

 

 

 

7.3

 

 

 

17.7

 

 

 

1.6

 

 

12.4

 

 

 

18.0

 

 

 

11.8

 

 

 

17.8

 

Interest income

 

0.0

 

 

 

0.0

 

 

 

0.0

 

 

 

0.0

 

Interest expense (income), net

 

0.0

 

 

 

0.0

 

 

 

0.0

 

 

 

0.0

 

Income tax expense

 

4.4

 

 

 

1.9

 

 

 

4.5

 

 

 

0.4

 

 

3.1

 

 

 

4.7

 

 

 

2.9

 

 

 

4.6

 

Net income

 

13.1

%

 

 

5.4

%

 

 

13.2

%

 

 

1.2

%

 

9.3

%

 

 

13.3

%

 

 

8.9

%

 

 

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 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 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 Third FiscalSecond Quarter Ended OctoberJuly 30, 20212022

The thirdFor the second quarter of fiscal 2021 was another record-breaking quarter.  Results for the third quarter of fiscal 2021 were the highest in terms of quarterly net sales, gross profit, operating income and2022, diluted net income per share was $1.04, the second highest second quarter in our history surpassing our previous records setand only surpassed by the second quarter 2021. The $1.04 per diluted share earned was more than double the amount earned pre-pandemic in the second quarter 2019, and first quarters of fiscal 2021.  Thus, this fiscal quarter represented the third consecutive quarter where we established all-time quarterly records.  Through the first nine months of fiscal 2021, our diluted net income per share of $4.69 exceeded the diluted net income$1.99 per share earned during theyear-to-date 2022 is greater than any full year earnings in our 44 years of operation except for last five fiscal years combined.  year.

Comparable storeNet sales in the thirdsecond quarter of fiscal 20212022 were $312.3 million and were also the highest second quarter Net sales in our history except for last year. In a challenging economic environment, our second quarter 2022 Net sales increased 30.1%16.4% and comparable store sales increased 8.0% compared to the thirdpre-pandemic second quarter of fiscal 20202019. Our physical store comparable store sales increased 4.2% and e-commerce Net sales increased 31.4%75.3% compared to second quarter 2019.

Our second quarter 2022 results were positively impacted by sustained higher gross profit margin compared to pre-pandemic results, new growth provided from the Shoe Station acquisition and growth in our customer base. Gross profit margin during the second quarter 2022 was 36.2%, a 560 basis point increase compared to the thirdsecond quarter 2019, due primarily to enhancements to our customer relationship management capabilities and promotional strategies which increased average selling prices. This was the primary driver for the comparable store sales increase and was partially offset by increased transportation and fuel costs. Shoe Station bannered stores contributed Net sales of fiscal 2019.  

We believe these record-breaking results were driven by$27.2 million in the following:

our inventory selection;

our more focused promotional strategy;

our customer base returning to a more normal lifestyle, including going back to work and fully back to in-person learning; and

a stronger economy, inclusive of the impacts of government stimulus on consumer spending.

quarter and $53.4 million year-to-date. During the third quarter we continued growing our Shoe Perks loyalty program members. The 29.7 million Shoe Perks members as of fiscal 2021, physical store traffic increased 29.9%July 30, 2022 represented an increase in new customers of 6.9% compared to the thirdsecond quarter of fiscal 20202021 and increased 2.6%28.0% compared to the thirdsecond quarter 2019.

Compared to the second quarter 2021, Net sales were down 6.0% and comparable store sales declined 13.8% due to lower traffic and sales volume. This decrease was due primarily to fluctuations in our customer base's discretionary income as impacted by government stimulus in 2021 and inflation in 2022 and continued COVID-19-related manufacturing and supply chain disruptions decreasing the availability of fiscalathletic inventory in 2022. Lower athletic inventory levels contributed to the decrease in comparable store athletic sales in the quarter. Comparable store athletic sales were down 25.6% compared to 2021 and down 12.9% compared to 2019. ThroughOn a comparable store basis, non-athletic sales decreased 1.9% compared to 2021 and increased 30.8% compared to 2019. Net sales attributed to athletic sales were 40% in the first nine months of fiscalsecond quarter 2022, compared to 47% in the second quarter 2021 physical store traffic increased over 40%and 50% in the second quarter 2019.

We also incurred higher transportation and fuel costs in the second quarter 2022 compared to the same period in fiscal 2020.second quarter 2021 and the second quarter 2019. The increased store traffic, combined with stable conversion rates, resulted in an increased number of converted customers,higher transportation and fuel costs reduced our gross profit margin by 270 basis points compared to the prior year periods.

All of our major product categories had comparable store sale increases ranging from low to mid double digitssecond quarter 2021 and by 300 basis points compared to the thirdsecond quarter 2019.

We ended the second quarter 2022 with Inventory of $385.5 million, an increase of $48.6 million over the second quarter 2019. Approximately 59% of the increase is inventory for the Shoe Station stores acquired last year or opened this year. The 14.4% increase in Inventory is supportive of the 20.6% increase in Net sales year-to-date 2022 compared to year-to-date 2019 and the expectation of increases in Net sales compared to 2019 for the remainder of the fiscal year.

We had no borrowings outstanding under our credit facility, which was amended and restated during the first quarter 2022, and we ended the second quarter 2022 with $62.6 million of cash, cash equivalents and marketable securities. Our new credit facility expires on March 23, 2027.

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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 20202024.

Two new stores were opened in year-to-date 2022 and no stores were closed. Store count is on track to reach 400 stores by the third quarterend of fiscal 2019. These increases were driven by higher average per unit prices across all categories and, overall, more units sold.2022. No store closures during fiscal 2022 are anticipated.

Highlights for the third quarter of fiscal 2021 and a brief discussion of some key initiatives follows:

Net sales for the third quarter of fiscal 2021 of $356.3 million set another all-time quarterly record, eclipsing the previous all-time records established earlier this fiscal year.  

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Net income for the third quarter of fiscal 2021 was $46.8 million, or $1.64 per diluted share, compared to net income of $14.7 million, or $0.51 per diluted share in the third quarter of fiscal 2020.  Earnings in the third quarter of fiscal 2021 exceeded any previous quarterly or full-year record, including exceeding results recognized in the first quarter and second quarter of fiscal 2021, which were records at those points in time.

We achieved record quarterly gross profit of $144.1 million during the third quarter of fiscal 2021. Gross profit margin as a percent of sales increased 8.4 percentage points compared to the third quarter of fiscal 2020 to 40.4% and increased 9.5 percentage points compared to the third quarter of fiscal 2019.

We had no borrowings during the third quarter of fiscal 2021 and ended the quarter with $191.2 million of cash, cash equivalents and marketable securities.

In the third quarter of fiscal 2021, we continued to increase membership in our Shoe Perks customer loyalty program, which grew over 10% compared to the prior year third quarter.  This brought total membership in the program to over 28.5 million customers as of October 30, 2021.  We believe our Shoe Perks program affords us opportunities to communicate, build relationships and engage with our most loyal shoppers, which we believe will result in long-term customer commitment to our brand.

We are continuing to modernize our stores and expect to have approximately 100 stores completed by the spring of fiscal 2022, within our plan to modernize 90 percent of our store portfolio by 2025.

Results of Operations for the ThirdSecond Quarter Ended OctoberJuly 30, 2022 Compared to the Second Quarter Ended July 31, 2021

Net Sales

Net sales were a record $356.3$312.3 million during the thirdsecond quarter of fiscal 20212022 and increased 29.8%decreased 6.0% compared to the thirdsecond quarter 2021. The decrease in Net sales was primarily the result of fiscal 2020. Comparablea 13.8% comparable store sales decline due largely to fluctuations in the discretionary income of our customer base and reduced availability of athletic shoes in the second quarter 2022, partially offset by Net sales attributable to new stores, sales increased 30.1% compared tomostly the third quarter of fiscal 2020.  Sales generated from our comparable physical stores increased 32.8% for 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%9% of merchandise sales in the thirdsecond quarter of fiscal 2021,2022, compared to 13%10% in the thirdsecond 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$113.1 million during the thirdsecond quarter 2022, a decrease of fiscal 2021, an increase of $56.3$22.6 million compared to the thirdsecond quarter of fiscal 2020.2021. Gross profit margin in the thirdsecond quarter of fiscal 2021 increased to 40.4%2022 was 36.2% compared to 32.0%40.9% in the thirdsecond quarter of fiscal 2020 and 30.9% in the third quarter of fiscal 2019.2021. Merchandise margin increased 6.7decreased 2.8 percentage points compared to the third quarter of fiscal 2020 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 1.8 percentage points as a percentage of Net sales compared to the thirdsecond quarter 2021. These changes were primarily the result of fiscal 2020the impact of inflation on transportation and fuel costs, other merchandise cost increases and the de-leveraging of other buying, distribution and occupancy costs due to lower Net sales in the leveraging effect of higher sales, despite higher supply chain expense.second quarter 2022.

Selling, General and Administrative Expenses (“SG&A”)

SG&A increased $14.0decreased $1.7 million in the thirdsecond quarter of fiscal 20212022 to $81.6$74.3 million compared to $67.6$76.0 million in the thirdsecond quarter of fiscal 2020.  Nearly half of the increase in SG&A in the third quarter of fiscal 2021 compared to the third quarter of fiscal 20202021. The decrease was due to increased advertising expense, with the remaining increase primarily attributable to reduced incentive compensation expense as a result of maximum performance achieved last year, partially offset by increased depreciation expense resulting from investment in property and equipment related to our store level wages, including incentive compensation.  portfolio modernization plan. As a percentage of netNet sales, SG&A was 23.8% in the second quarter 2022 compared to 22.9% in the thirdsecond quarter of fiscal 2021 compared to 24.7% in the third 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 thirdsecond quarter of fiscal 20212022 was 24.8%25.6% compared to 26.8%25.8% for the same period in fiscal 2020.second 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 timing of discrete tax adjustments and increased utilization of foreign tax credits associated with our Puerto Rico operations.  For the full 20212022 fiscal year, we expect our tax rate to be between 25% and 26% 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 OctoberYear-to-Date Through July 30, 2022 Compared to Year-to-Date Through July 31, 2021

Net Sales

Net sales were $1,017.0$629.8 million in year-to-date 2022, a decrease of 4.7% compared to year-to-date 2021. The decrease 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 netNet sales was primarily the result of a 12.2% comparable store sales decline due largely to our more focused promotional strategies and inventory selection. The temporary closurefluctuations in the discretionary income of our physicalcustomer base and reduced availability of athletic shoes in year-to-date 2022, partially offset by Net sales attributable to new stores, formostly the Shoe Station stores. E-commerce sales were approximately 50%10% of the first quarter of fiscal 2020 as a result of the COVID-19 pandemic, with some stores closed through May 2020, decreased netmerchandise sales in the prior year.  Comparable stores sales increased 41.6%year-to-date 2022, compared to the first nine months of fiscal 2020 and increased 29.2% compared to the first nine months of fiscal 2019.11% in year-to-date 2021.

Gross Profit

Gross profit was $410.0$226.0 million during the first nine monthsin year-to-date 2022, a decrease of fiscal 2021, an increase of $208.1$39.9 million compared to the first nine months of fiscal 2020.year-to-date 2021. Gross profit margin in the first nine months of fiscal 2021 increasedyear-to-date 2022 was 35.9% compared to 40.3% compared to 27.9% in fiscal 2020 and 30.4% in fiscal 2019.year-to-date 2021. Merchandise margin increased 10.0decreased 2.0 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 decreasedincreased 2.4 percentage points as a percentage of Net sales compared to year-to-date 2021. These changes were primarily the first nine monthsresult of fiscal 2020the impact of inflation on transportation and 1.2 percentage points compared tofuel costs, other merchandise cost increases and the first nine months fiscal 2019 primarilyde-leveraging of other buying, distribution and occupancy costs due to the leveraging effect of increasedlower Net sales offset somewhat by increased freight and distribution labor costs.  in year-to-date 2022.

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Selling, General and Administrative Expenses

SG&A increased $39.7 million to $230.2$3.2 million in the first nine months of fiscal 2021year-to-date 2022 to $151.8 million compared to $190.5$148.6 million in the first nine monthsyear-to-date 2021. The overall increase in SG&A during year-to-date 2022 was primarily attributable to continued investment in store level wages and advertising and increased depreciation resulting from investment in property and equipment related to our store portfolio modernization plan. The increases were partially offset by lower levels of fiscal 2020.  incentive compensation. As a percentage of netNet sales, SG&A was leveraged to 22.6%24.1% in the first nine months of fiscal 2021year-to-date 2022 compared to 26.3%22.5% in the first nine months of fiscal 2020 and 24.2% in the first nine months fiscal 2019.  year-to-date 2021.

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 for year-to-date for fiscal 20212022 was 25.1%24.8% compared to 23.0%25.3% 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.year-to-date 2021.

Liquidity and Capital Resources

Our primary sources of liquidity are $191.2$62.6 million of cash, cash equivalents and marketable securities on hand at the end of the third fiscalsecond 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$8.9 million in the first nine months of fiscal 2021year-to-date 2022 compared to $0.2$79.8 million during the first nine months of fiscal 2020.year-to-date 2021. The increasechange in operating cash flow was primarily driven by higher cash receipts on increased sales, partially offset byearnings in year-to-date 2021 and timing of inventory purchases and payments for operating expenses and income taxes.purchases.

 

Working capital increaseddecreased on a year-over-year basis and totaled $333.8$287.7 million at OctoberJuly 30, 20212022 compared to $214.9$298.7 million at OctoberJuly 31, 2020.2021. The increasedecrease was primarily attributable to increasedlower cash balances due to the acquisition of Shoe Station in December 2021 and marketable securities positions.share repurchases, partially offset by higher merchandise inventory levels. Our current ratio was 3.12.5 as of OctoberJuly 30, 2021 compared to 2.7 as of October2022 and July 31, 2020.  2021.

Cash Flow – Investing Activities

Our cash outflows for investing activities are normally for capital expenditures. During the first nine months of fiscalyear-to-date 2022 and 2021, we expended $20.4$50.2 million and $12.1 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 million

We 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 July 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,year-to-date 2022, net cash used in financing activities was $15.8$27.6 million compared to $5.4$10.3 million during the first nine months of fiscal 2020.year-to-date 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 fiscalyear-to-date 2022, compared to the repurchase of $4.0 million of shares in year-to-date 2021, 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.program .

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 for the first nine months of fiscal 2021,in year-to-date 2022, are expected to be between $30$63 million and $35$73 million, with approximately $24$53 million to $26$58 million to be used for a new store,stores, relocations and remodels and approximately $2 $10

18


million to $4$15 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.year-to-date 2022. Increasing market penetration by openingadding new stores has historically beenis a key component of our long-term growth strategy,strategy. We are on track to achieve 400 stores by the end of fiscal 2022 and we continueaim to focus on generating positive long-term financial performance fromadd over 20 new stores in fiscal 2023 and over 25 new stores annually by fiscal 2024, across both banners. These store objectives will be accomplished through a combination of both organic and acquired store growth. 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 July 30, 2022.

Dividends

The 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 to pay cash dividends, execute share 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 year-to-date 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 July 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,June 23, 2022, the Board of Directors approved the payment of a thirdsecond quarter 2022 cash dividend to our shareholders. The quarterly cash dividend of $0.070$0.090 per share was paid on October 18, 2021July 25, 2022 to shareholders of record as of the close of business on October 4, 2021.  July 11, 2022. In fiscal 2020, the thirdsecond quarter 2021, the dividend paid was $0.045$0.070 per share. During the first nine monthshalf of fiscal2022 and 2021, and 2020, we returned $6.0$5.1 million and $3.9$4.0 million, respectively, to our shareholders through our quarterly cash dividends.

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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 facility and its covenants.facility.

Seasonality

No shares were repurchased during the second quarter of 2022 under the 2022 Share Repurchase Program. During year-to-date 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 July 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. In year-to-date 2021, we repurchased 117,068 shares of common stock at a total cost of $4.0 million.

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 netNet sales and gross profit and negatively affect our profitability.

21


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.

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.second quarter 2022.

ITEM 4. CONTROLS AND PROCEDURES

Our Chief Executive Officer and Chief Financial Officer have concluded, based on their evaluation as of OctoberJuly 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 SEC, we elected to exclude Shoe Station during the year ended January 29, 2022 from management's assessment of the 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 OctoberJuly 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
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)

 

May 1, 2022 to May 28, 2022

 

 

0

 

 

$

0

 

 

 

0

 

 

$

29,485,035

 

May 29, 2022 to July 2, 2022

 

 

1,580

 

 

$

24.07

 

 

 

0

 

 

$

29,485,035

 

July 3, 2022 to July 30, 2022

 

 

0

 

 

$

0

 

 

 

0

 

 

$

29,485,035

 

 

 

 

1,580

 

 

 

 

 

 

0

 

 

 

 

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

 

 

 

 

 

(1)
1,580 shares were withheld by us in connection with employee payroll tax withholding upon the vesting of stock-based compensation awards that were settled in shares.
(2)
On December 16, 2021, our Board of Directors authorized the 2022 Share Repurchase Program for up to $50.0 million of our outstanding common stock, effective January 1, 2022 and expiring on December 31, 2022.

 

(1)

Includes 11,871 shares withheld by us in connection with employee payroll tax withholding upon the vesting of stock-based compensation awards that were settled in shares.

(2)

On December 15, 2020, our Board of Directors authorized the 2021 Share Repurchase Program for up to $50.0 million of our outstanding common stock, effective January 1, 2021 and expiring on December 31, 2021.

21


 

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

 

06/27/2022

 

 

3-B

 

By-laws of Registrant, as amended to date

 

8-K

 

3-B

 

06/14/2013

 

 

 

By-laws of Registrant, as amended to date

 

8-K

 

3-B

 

06/27/2022

 

 

10.1

 

Amended and Restated Employment and Noncompetition Agreement, made and entered into as of October 1, 2021, by and between the Company and Mark J. Worden

 

8-K

 

10.1

 

10/05/2021

 

 

 

Form of Restricted Stock Award Agreement under the Registrant's 2017 Equity Incentive Plan (Employee Directors)

 

X

10.2

 

Letter Agreement, dated September 30, 2021, by and between the Company and Clifton E. Sifford

 

8-K

 

10.2

 

10/05/2021

 

 

 

Employment Agreement dated July 7, 2022 between the Company and Patrick C. Edwards

 

8-K

 

10.1

 

07/11/2022

 

31.1

 

Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

 

 

 

 

 

X

 

Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

 

 

 

 

 

X

31.2

 

Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

 

 

 

 

 

X

 

Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

 

 

 

 

 

X

32.1

 

Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

 

 

 

 

 

X

 

Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

 

 

 

 

 

X

32.2

 

Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

 

 

 

 

 

X

 

Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

 

 

 

 

 

X

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.

 

 

 

 

 

 

 

X

 

The following materials from Shoe Carnival, Inc.’s Quarterly Report on Form 10-Q for the quarter ended July 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.

 

 

 

 

 

 

 

X

104

 

Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

 

 

 

 

 

 

 

X

 

Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

 

 

 

 

 

 

 

X

 

2322


 

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: November 29, 2021August 31, 2022

SHOE CARNIVAL, INC.

 

(Registrant)

 

 

By: /s/ W. Kerry Jackson
W. Kerry Jackson
Senior Executive Vice President,
Chief Financial and Administrative Officer and Treasurer

(Duly Authorized Officer and Principal Financial Officer)

 

2423