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

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

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.

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

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, 2021~~August 26, 2022 was ~~28,165,273.~~27,613,894.

~~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.~~

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 portion~~The computation of ~~these~~diluted 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 at~~will be settled in shares because the ~~beginning of fiscal 2020 had a non-forfeitable right to dividends. NaN~~impact 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-nine~~twenty-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.

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.

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.

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 ~~October~~July 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 ~~October~~July 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 million~~the 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, we~~We have recognized unrealized ~~gains~~losses of ~~$390,000 and $338,000, respectively,~~$2.5 million related to equity securities still held at ~~October~~July 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.

We periodically evaluate our long-lived assets for impairment if events or circumstances indicate that the carrying value may not be recoverable. The carrying value of long-lived assets is considered impaired when the carrying value of the assets exceeds the expected future cash flows to be derived from their use. Assets are grouped, and the evaluation is performed, at the lowest level for which there are identifiable cash flows, which is generally at a store level. Store level asset groupings typically include property and equipment and operating lease right-of-use assets. If the estimated, undiscounted future cash flows for a store are determined to be less than the carrying value of the store’s assets, an impairment loss is recorded for the difference between estimated fair value and carrying value. Assets subject to impairment are adjusted to estimated fair value and, if applicable, an impairment loss is recorded in selling, general and administrative expenses. If the operating lease right-of-use asset is impaired, we would amortize the remaining right-of-use asset on a straight-line basis over the remaining lease ~~term~~.term.

We estimate the fair value of our long-lived assets using store specific cash flow assumptions discounted by a rate commensurate with the risk involved with such assets while incorporating marketplace assumptions. Our estimates are derived from an income-based approach considering the cash flows expected over the remaining lease term for each location. These projections are primarily based on management’s estimates of store-level sales, exercise of future lease renewal options and the store’s contribution to cash flows and, by their nature, include judgments about how current initiatives will impact future performance. We estimate the fair value of operating lease right-of-use assets using the market value of rents applicable to the leased asset, discounted using the remaining lease term.

External factors, such as the local environment in which the store is located, including store traffic and competition, are evaluated in terms of their effect on sales trends. Changes in sales and operating income assumptions or unfavorable changes in external factors

can significantly impact the estimated future cash flows. An increase or decrease in the projected cash flow can significantly impact the fair value of these assets, which may have an effect on the impairment recorded. If actual operating results or market conditions differ from those anticipated, the carrying value of certain of our assets may prove unrecoverable and we may incur additional impairment charges in the future.

During the thirteen and ~~thirty-nine~~twenty-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 nine~~three stores, respectively. These charges were included in selling, general and administrative expenses. ~~NaN~~No 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-nine~~twenty-six weeks ended ~~October~~July 30, 2022 and July 31, 2021, stock-based compensation expense ~~for~~was 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.

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 ~~October~~July 30, ~~2021~~2022, 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 ~~1.1~~1.6 years.

~~Cash-Settled Stock Appreciation Rights~~Share-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 until~~restricted 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 recognized~~transactions 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 period~~was $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-nine~~twenty-six weeks ended ~~October~~July 30, ~~2021~~2022 and ~~October~~July 31, ~~2020~~2021 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 ~~cost~~Cost 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 stores~~We 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 Statements~~consolidated financial statements at ~~October~~July 30, ~~2021,~~2022, January ~~30, 2021~~29, 2022 or ~~October~~July 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

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 ~~October~~July 30, ~~2021~~2022 and January ~~30, 2021.~~ 29, 2022. Approximately ~~$718,000~~$740,000 of refund liabilities and ~~$500,000~~$495,000 of right of return assets associated with estimated product returns were recorded in Accrued and other liabilities at ~~October~~July 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 ~~October~~July 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-nine~~twenty-six weeks ended ~~October~~July 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-nine~~twenty-six weeks ended ~~October~~July 31, ~~2020,~~2021, respectively.

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-nine~~twenty-six weeks ended ~~October~~July 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-nine~~twenty-six weeks ended ~~October~~July 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 ~~October~~July 30, 2022, January 29, 2022 and July 31, 2021, ~~January 30, 2021~~approximately $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 ~~October~~July 30, ~~2021.~~ 2022.

Lease costs, including related common area maintenance (“CAM”), property taxes, and insurance, reported in our Condensed Consolidated Statements of Income were as follows for the thirteen and ~~thirty-nine~~twenty-six weeks ended ~~October~~July 30, ~~2021~~2022 and ~~October~~July 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 ~~Part~~PART I, ~~Item~~ITEM 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, 2021~~29, 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.

Overview of Our Business

Shoe Carnival, Inc. is one of the nation’s largest family footwear ~~retailers, providing customers~~retailers. After our acquisition of the ~~convenience~~physical stores and substantially all of ~~shopping at any~~the 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 ~~casual~~work shoes, sandals, boots and a wide assortment of athletic shoes. Our ~~average~~typical physical store carries shoes in ~~four~~two general categories – ~~women’s, men’s, children’s~~athletics 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

statements by grouping similar footwear from multiple vendors. ~~Over 100~~Certain of our ~~physical~~Shoe Carnival stores have ~~strongly branded Nike~~athletic shops that highlight ~~Nike products within the stores,~~leading athletic brands, and we expect to ~~add at least 100~~continue 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 shops~~affluent 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 customers~~Notes 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 assortment~~fiscal 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 categories~~a 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 all~~omnichannel 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.

The following table sets forth our results of operations expressed as a percentage of ~~net~~Net 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 Fiscal~~Second Quarter Ended ~~October~~July 30, ~~2021~~2022

~~The third~~For 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 and~~2022, diluted net income per share was $1.04, the second highest second quarter in our history ~~surpassing our previous records set~~and 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 the~~year-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 store~~Net sales in the ~~third~~second quarter ~~of fiscal 2021~~2022 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 ~~third~~pre-pandemic second quarter ~~of fiscal 2020~~2019. 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 ~~third~~second 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 ~~third~~second quarter ~~of fiscal 2020~~2021 and ~~increased 2.6%~~28.0% compared to the ~~third~~second 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 ~~fiscal~~athletic 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. ~~Through~~On 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 fiscal~~second 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 digits~~second quarter 2021 and by 300 basis points compared to the ~~third~~second 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.

We are currently in the process of modernizing our stores and plan to have over 50% of our stores modernized by the summer of 2023 and the full program complete by the end of fiscal ~~2020~~2024.

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 quarter~~end 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.~~

•

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 ~~Third~~Second Quarter Ended ~~October~~July 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 ~~third~~second quarter ~~of fiscal 2021~~2022 and ~~increased 29.8%~~decreased 6.0% compared to the ~~third~~second quarter 2021. The decrease in Net sales was primarily the result of ~~fiscal 2020. Comparable~~a 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 to~~mostly 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 ~~third~~second quarter ~~of fiscal 2021,~~2022, compared to ~~13%~~10% in the ~~third~~second 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 ~~third~~second quarter 2022, a decrease of ~~fiscal 2021, an increase of $56.3~~$22.6 million compared to the ~~third~~second quarter ~~of fiscal 2020.~~2021. Gross profit margin in the ~~third~~second quarter ~~of fiscal 2021 increased to 40.4%~~2022 was 36.2% compared to ~~32.0%~~40.9% in the ~~third~~second quarter ~~of fiscal 2020 and 30.9% in the third quarter of fiscal 2019.~~2021. Merchandise margin ~~increased 6.7~~decreased 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 1.7~~increased 1.8 percentage points as a percentage of Net sales compared to the ~~third~~second quarter 2021. These changes were primarily the result of ~~fiscal 2020~~the 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 $14.0~~decreased $1.7 million in the ~~third~~second quarter ~~of fiscal 2021~~2022 to ~~$81.6~~$74.3 million compared to ~~$67.6~~$76.0 million in the ~~third~~second 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 2020~~2021. 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 ~~net~~Net sales, SG&A was 23.8% in the second quarter 2022 compared to 22.9% in the ~~third~~second 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.

Income Taxes

The effective income tax rate for the ~~third~~second quarter ~~of fiscal 2021~~2022 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 ~~2021~~2022 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 ~~2020~~2021 fiscal year.

Results of Operations ~~for the Nine-Month Period Ended October~~Year-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 net~~Net 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 closure~~fluctuations in the discretionary income of our ~~physical~~customer base and reduced availability of athletic shoes in year-to-date 2022, partially offset by Net sales attributable to new stores, ~~for~~mostly 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 net~~merchandise 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 months~~in 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 increased~~year-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 10.0~~decreased 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 ~~decreased~~increased 2.4 percentage points as a percentage of Net sales compared to year-to-date 2021. These changes were primarily the ~~first nine months~~result of ~~fiscal 2020~~the impact of inflation on transportation and ~~1.2 percentage points compared to~~fuel costs, other merchandise cost increases and the ~~first nine months fiscal 2019 primarily~~de-leveraging of other buying, distribution and occupancy costs due to ~~the leveraging effect of increased~~lower Net sales ~~offset somewhat by increased freight and distribution labor costs.~~ in year-to-date 2022.

Selling, General and Administrative Expenses

SG&A increased ~~$39.7 million to $230.2~~$3.2 million in ~~the first nine months of fiscal 2021~~year-to-date 2022 to $151.8 million compared to ~~$190.5~~$148.6 million in ~~the first nine months~~year-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 ~~net~~Net sales, SG&A was ~~leveraged to 22.6%~~24.1% in ~~the first nine months of fiscal 2021~~year-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 2021~~2022 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 fiscal~~second 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 by~~of the COVID-19 pandemic ~~makes~~and 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.

Cash Flow - Operating Activities

Net cash generated from operating activities was ~~$120.5~~$8.9 million in ~~the first nine months of fiscal 2021~~year-to-date 2022 compared to ~~$0.2~~$79.8 million during ~~the first nine months of fiscal 2020.~~year-to-date 2021. The ~~increase~~change in operating cash flow was primarily driven by ~~higher cash receipts on~~ increased ~~sales, partially offset by~~earnings in year-to-date 2021 and timing of inventory ~~purchases and payments for operating expenses and income taxes.~~purchases.

Working capital ~~increased~~decreased on a year-over-year basis and totaled ~~$333.8~~$287.7 million at ~~October~~July 30, ~~2021~~2022 compared to ~~$214.9~~$298.7 million at ~~October~~July 31, ~~2020.~~2021. The ~~increase~~decrease was primarily attributable to ~~increased~~lower 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 ~~3.1~~2.5 as of ~~October~~July 30, ~~2021 compared to 2.7 as of October~~2022 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 fiscal~~year-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 regarding~~The 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 ~~fiscal~~year-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. W~~e 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

million to $4$15 million for upgrades to our ~~distribution center and~~ e-commerce ~~platform. The remaining capital expenditures are expected to be incurred for~~platform, 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 our~~opened one Shoe Carnival branded store ~~portfolio~~ and ~~the potential for new stores based on our view of internal and external opportunities and challenges~~one Shoe Station branded store in ~~the marketplace.~~year-to-date 2022. Increasing market penetration by ~~opening~~adding new stores ~~has historically been~~is 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 continue~~aim to ~~focus on generating positive long-term financial performance from~~add 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. We~~footprint 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

relationship management ~~program and~~program. 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 close~~be 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.~~

~~Our~~Shoe Station retail concept to our portfolio. However, our future store ~~strategies~~growth may continue to be impacted by the ~~current economic uncertainty~~COVID-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 ~~third~~second quarter 2022 cash dividend to our shareholders. The quarterly cash dividend of ~~$0.070~~$0.090 per share was paid on ~~October 18, 2021~~July 25, 2022 to shareholders of record as of the close of business on ~~October 4, 2021.~~ July 11, 2022. In ~~fiscal 2020,~~ the ~~third~~second quarter 2021, the dividend paid was ~~$0.045~~$0.070 per share. During the first ~~nine months~~half of ~~fiscal~~2022 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.

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 permits~~Directors, 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, 2021~~29, 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, ~~2021~~2022 (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, ~~2021~~2022 and in accordance with applicable laws, rules and regulations. The ~~2021~~2022 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.~~

~~Due~~and 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~~ ~~distributions~~restrictions 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, 2021~~29, 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 ~~net~~Net sales and gross profit and negatively affect our profitability.

~~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 facility~~outstanding 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 ~~October~~July 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 ~~October~~July 30, ~~2021~~2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

2220

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, there~~There 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.

ITEM 6. EXHIBITS

EXHIBIT INDEX

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)

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

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

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

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

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.

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.

104

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

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, 2021~~August 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


☒		Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
		For the quarterly period ended ~~October~~July 30, ~~2021~~2022
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)


☐ Large accelerated filer	☒Accelerated filer	☐ Non-accelerated filer	☐ Smaller reporting company	☐ Emerging growth company


			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


(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


(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


	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


	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

	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

	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

	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%

(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	%

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