Earnings call transcript Q1 2023

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Conference Call Participants

Mitch Kummetz - Seaport Research

Operator

Good morning and welcome to Shoe Carnival Inc.'s Fiscal Year 2023 First Quarter Earnings Call. Today’s conference is being recorded. It is also being broadcast via webcast. Any reproduction or rebroadcast of any portion of this call is expressly prohibited.

forward-looking involve contain risk number may factors. remarks statements a that of Management’s could actual the materially risk cause These factors company’s those in different projected results such statements. from be to

with the obligation only also statements future today’s reliance or forward-looking today’s risk conference considered included date. of should on the filings disclaims Investors update these press SEC revisions factors as statements, today’s company’s of to are statements forward-looking Forward-looking to cautioned in any events publicly the to call The in discussed any conjunction not announce reflect in of risk developments. the press release to be factors any company earnings or today’s or release. speak to contained on and which discussion place undue

conference and I'll remarks. opening Worden, Mark to over Shoe of now Carnival Mr. turn CEO begin. for Worden, the you may Mr. President

Mark Worden

for first conference today and Good us for joining everyone Carnival’s Shoe call. thank morning earnings XXXX you quarter

on ahead. today’s Chief Financial Joining the to new the Chief few company him joined the to are and Erik weeks community have engage our call a Officer and excited Scibetta, me investment on and Gast, Officer. we Erik are team Carl ago with Merchandising

Let quarter. was out saying a me start that QX today challenging

prior with refunds inflation to quarter a and to on, continuing spend were throughout the against While in develop March customer climb many versus progress XX% continued our reduction need end. saw we to and faced tax federal biggest interest expected make unseasonable The consumer QX across the nearly trends and everyday persist our achieved softer they weather strategies persistent long-term quarter significant year. expenses in headwinds unexpectedly important and than milestones, rates that ended we April

segment as refund. Historically, our levels apparel when refund for of was not customers resulted announced year. annual traffic did sales stretched prior they customer year, trips households generate who we tax our traffic accessories. had income year. from XX% approximately in disposable footwear, declining income surge store prior and These reduced What their the This shopping traffic lower a saw versus tax headwinds receives their and delayed

Furthermore, conditions unseasonably most March This April. low end our this annual All improve did if finished improve sample during pathway the across not We season our second deliver guidance conditions annual combined of expectations. quarter of see wet resulted QX cold, and did spring sales low the not half economic in at meaningfully as persisted in earnings to end a the markets. of or weather a the that start original summer. of

we will to However, do positive. the landscape when not have visibility clear economic turn

we annual our such, are reducing reflect uncertainty. profit the will review guidance short-term and the sales updated As economic shortly. guidance our to Erik

improving. members' nearly as team landscape commitment led many the for the profitable Despite delivering I'm Their visibility shopping thankful advancing operational preferred wins incredibly economic our us X,XXX economic growth footwear we has backdrop, to to accelerate and a long-term position strong experience. strategies to in have financial and on as the soon to focus challenging our

the an the strategic key provide of of overview and now results I'll company's quarter. progress

on achievement First, loyal how quarter. fast most the energized base customer grew we this is our about

prior three a growth XX.X any quarter years. versus fastest million customer XX% quarter of of is record in to membership quarter over at members the the last This surged end, This expansion year. the

us. the footwear still in retailers our position, will are Simply every strong a actively Although where decisions making they're improve. and engaging for love they conditions when buying of a put, day shop customers on currently not segment economic more customers they with and picking more

American approximately the to whenever they with nearly engage every one and scale has footwear XX% now choose. advanced meaningful years just ago. wherever eight has platform with engage five now We capabilities CRM from up American Our and adults, out ongoing a of shoppers reached

commitment become reach, at Shoe scale part customers from engage. to our rapidly to footwear a loyalty choosing our sales With family very experience preferred members cost this XX% has our of come group large this Perks to of customer the customer now a shopping providing Our loyalty program. efficient

We keep continue ahead. to our see in confident core of base customer this our company are this the and a years we and advantage will growing year

deliver the for Second, over gross we XX% continue of consecutive quarter. to profit ninth margins

products our sustainably right last to leveraging our tier. the done top demand the our management capabilities among provide and relationship and the shopping have margins they we the customer analytics preferred years, deliver to with freshest at in to experience. customer the lowest customers, deep the We've transformed so value few from our industry in by want profitably Over engage tier the to

the achieved growth gross benchmark, is over basis of years points profit XXX just a this As from XX% quarter ago. four

trip in sales level highest customer this brand in finding the economy, Our challenging a climbed two experience love Carnival Station make ready to they've to conversion and nearly and shopping stores. at customer the that quarter the shopping footwear The Shoe is is years. Shoe

our but another at generated market share of quarter strong in value margins not for growth resulted only target Our company. and yet for assortments right compelling our the customers conversion growth,

and the our we Given financial for position Progress freshest is while the elaborate growth, XXXX. customers future are encouraging of more on will current fronts the Erik and our remainder providing inventory the building products also but prioritized headlines. levels, an economic and here even Carl landscape, shortly, sustaining reducing all for margins, have healthy stronger

XXXX. million level quarter. during with more the inventory with versus inventory ended size with year, $XX approximately chipping with rapidly versus already to about QX XXXX ended away prior year, during We plans prior the our made as with we million pleased progress $XXX million so place right in partners I'm $XX up this vendor the

dumping eroding are drastically Importantly, in product we by reducing market not levels the margins. inventory nor

inventory updated. on and Receipts complete. hard uploads is reduction work The topic inventory this are

year share I to levels we inventory have remain deliver prior our back-to-school end. concerns. confidently approximately below to with by continue annual guidance after million track $XX fresh to and no on year inventory can for inventory We on to prior be material our track be below inventory year aged

job has managing Our delivery, best-in-class. inventory the levels, they team as moment. elaborate excellent inventory always done of freshness, in Carl demonstrating are a partners and will merchants' our margin on along with balance an

also inventory materially versus position athletic Our last year. has improved

freshness you'll athletic year. As we issues the recall, on-hand we inventory for hand vendor did assortment supply chain athletic some and our we not depth This disrupted XXXX have year last back-to-school that of year. our have disappointed and last in brand choppers

While we will position we to this in do declining our gross see healthy to QX, athletic I'm customer solved I traffic market continue and share profits convert issues soft high driving levels grab not market in be a face. very year, saying the this environment to economic maintain in are

be Our and of for We development us Carnival to with our the advance The chain on a key approximately plans market to see continued at as roll store to with it's fiscal Shoe modernization customers fleet to and differentiator our end. to XX% success. sales this out conversion track continue growing share completed continues growth. rewarding rapidly who contributor a are

expectations. to deliver store Shoe our continues growth Station on New

among of strongest for six across stores we been grand corporation. store opening months. success Station the corporation of big entire be Alabama, the customers and the market give confidence Station past in as the in roadmap the great We're These expansion adjacent stores in in to to pacing stores Station Birmingham, into to to methodically two Shoe our markets. the us bring over These new One top over wins stores stores tier fleet are entry on XXX prototype our reach has a and Shoe Shoe advance XXX wins a XXXX. seeing for the

for are addition Stations to the affluent Shoe the past launch digits our over compared to base, the platform, quarter one single Shoe the company. declined the overall Station Station We signs seeing positive is CRM banner platform double our With customer Carnival of online weeks. Shoe outperforming digit. Shoe more low show and Sales

the over and banner Station mid-to-high weeks, Shoe few singles. growing However, past building is the momentum

We capable see growing to of quarters the despite economic Station headwinds in Shoe discussed. the continue ahead

growth Customer unfavorable are was great to and line progressing Inventory macro at surged value athletic disappointing experiences. levels rapidly record very due to Gross levels. conditions where line were bottom Yet in unseasonable we near-term product, Customer quarter that conversion level. our positions and for season for customer want sustained ever. is accelerated weather. foundations stronger than The margins the a on and fresh are ahead. high back-to-school traffic

with winning in health the consumer to plans We're top confident executing in shareholders accelerate does, returning returns on focused and in strategic our economy multi-billion retailer rapidly dollar the ready American XXXX a tier I on ahead. growth. we and our the it providing resilience in to am When become sector. our are our to path

color further provide ask ahead. I would quarter to like now and to the year Carl? Carl on

Carl Scibetta

Mark. you, Thank

Persistent was reduction affected tax inflation below highlighted, the QX. and that quarter first factors today's expectations. As were performance large in major our refunds

In we anticipated march addition, of quarter. normalized of quarter the and out the that the will our We the back that the remainder unfortunately weather materialized. -- weather the in cool half March in called have number continued

did seasonal As to a and categories not hit result, sales expectations contributed the in our shortfall.

in dress include our inventory women's our deliver categories, to down With quarter and double boots our non-athletic objectives, sales, transformational consumers, strategic were CRM to sandals connecting the negatively and our women's By the were reducing in arrival affected that low Sales high in on and continue with margin. driving being sales throughout product down late year we to comp said, footwear teens of with using XX%. sales which our program comp focus maximize were spring continuing category. by first the over down digits

singles. casuals Sport down singles sales low adult comps digits comp down Comp athletic and and teams. down single Children's and teens. dress non-athletic were mid-single double casuals high flat non-athletic were casuals with mid Men's teens. with down with low boots down sales athletic down was digits. footwear down low bright double high increased down in low spot also were were the digit sport low digits Men's and

in over strategy. were XXX enhanced the down, transformation merchandise late the demonstrates of the new margins pre-pandemic This points levels. up to activity our however remained selling seasonal further marketplace, Due and promotional of start promotional basis

team outstanding appropriate merchants to vendor collaborate of partners, continues ensuring products the our with Our of our to closely stores. flow

to consumer relationships vendor adjust us best-in-class demand. are to the Our enabling

previous year. is see with the The we XX.X% move We versus up year. inventory the we'll first as entered quarter result inventory through reducing

inventory versus quarter was XXXX. First up ending XX%

million we and to goals. be the achieve will ending end as level, to clean inventory approximately year $XX promote we expect previously inventory will anticipate our is we no reason content inventory. the distressed the below see stated quarter XXXX at inventory our and third XXXX We levels aggressively fiscal we Currently below finish levels

stores the maximize much into athletic this a ensure to store offerings our we our with as desired second are time brands. will balance inventory modernization and be season. position XXXX. inventory growth quarter sales stocked desirable As move fiscal managing well store will aggressive as critical during most that our most are will the in support better versus the This further reduction of through opportunity key we Diligently product our plans. with move the selling will XXXX as position the flow This we back-to-school timeframe, the appropriate us

Our loyal to drive program customer CRM continues best-in-class growth.

targeted have reducing us with expectations. XX to Using plays This data and maximizing reducing over seen million consumers our consumers We to to or million, in sales sales below XX inventory success maximize margins opportunities margins and drive continues key enables without loyal program a continues to engaging communicate our role with levels. this offers.

over With that, review turn for to the our call of Erik I Erik? will financials. a

Erik Gast

Thank morning everyone. Carl and you, good

am Shoe XX as years to a retail, here Carnival team dollar that and late at excited a Kerry grow collaborating forward the work from Kerry, transition stores with looking in with team in with and you I'm team. and he the in and April supported working retired. time XXXX, be they over multi-billion the of and The forward previous look appreciative experiences continuing in to the over I was of collective good XX me it. First, and Carnival CFO. Jackson, started have has long-term years recently to Shoe I plans to Carnival. to most retailer of I and the know, the joined become Having how part XXX I Shoe worked sharing company am

driven company of the million. first with versus needed Now XX.X% by decline in down context. results, a for an prior remarks decline, history. on highest revenues, results XX.X% perspective, of to a larger our comp quarter in Starting was sales The I is comp were quarter reduction while in QX if year. $XXX.X comparison offer with To to sales decline compare in noting first traffic. than representing were approximately our the some third net the quarter expected XX% my moving financial the XXXX first XXXX, will This

low negatively Our was normal XXX a at quarter seasonal Station of XX%. ninth customer loyalty Mark and implementation discussed. The seasonal contributing pre-pandemic over margin double consecutive lower at and in reflecting gross impacted was factor consumers XX%, Station by CRM driven cooler as increase or our of points in pre-CRM The the digit decline. spring an XX% versus QX to banner resulting in exceeding digit by Lack members sales weather continued patterns in compared margin gross being in margin at increased high reflects years. weather advancement are capabilities, conversion Shoe and tax XXXX. basis inflation prior profit represents by refunds. resulting banner over product mid-single a down decline a shifts negative also Shoe sales came to

merchandise promotional intensity. Compared distribution, occupancy reflecting to however. points, prior basis and our XX declined year, margins Buying, costs decreased

as declines. a prior year the by de-leveraging this with primarily in the result more result to XX are We of absence buying, return the basis and of expense The year. high distribution a reductions levels normal the experienced distribution cost occupancy points the of sales were

is in prior expenses the X.X% of QX as under and QX million, was the store sales. selling or low XX.X% $XX.X was result This decline. offset SG&A while compared were flat was income our our reduced with associated prior the to costs Overall, end to expectations. the by with in de-leveraging to essentially expense when increases SG&A at cost of program plan of depreciation million modernization costs healthcare in $XX.X a sales year, year operating

in share. earnings Net quarter $X.XX income XXXX diluted for of the $XX.X or first per was million

increase our our QX $XXX was was highest the a per the The increased year reflects diluted of this of year inventory this was the to back-to-school of XX.X% prior at $XX compares three only out closed quarter this $XX ago. inventory from an million million of merchandise than expectations. prior low shopping on or athletic Although end improved million, the XXXX We being store EPS with compared just $XXX higher higher, up XXXX and approximately basis. months with third assortment million which to the and year

XXXX million shopping we back-to-school approximately be last year by year do compared XXXX. lower inventory to After expect be lower to end $XX than year end and

to of At no cash, ample end total QX, cash of We fund we liquidity continue marketable initiatives. equivalents to securities had million have our and growth the $XX and outstanding debt.

the end funding of for company no consecutive the As the continued of XXXX without the has maintained quarter. operations and debt through first its year XXth debt

there amount for share During share $XX available have no the full repurchases. the the We million were quarter, of repurchase program. currently

of X% updating driven QX our range fiscal Given for down declines prior consumer to by down results X we and guidance the XXXX sales to trends, now are down to X X. to traffic up the compared

prior guidance and to We XX% versus gross of XX% be margin approximately expecting between profit are XX%.

to $X.XX the we to our expectations week previous to are year, guidance $X.XX including of diluted For from EPS $X.XX lowering the $X.XX. extra

to closing, macroeconomic highlighted me are about allow company. the conditions, higher inventory. share intensity, industry. headwinds There and upon observations initial In We promotional the them, some

I am However, the about company. encouraged

have We debt. no

look build all downturn. here fundamentals working with an you. forward for growth and the am I by to outlast We way product versus underway being and implemented business. team to the an glad are financial are in and reductions. as The I pre-pandemic are can the margins of economic solid am evidenced and quarter producing to opportunity Plans meaningfully that is inventory periods. ample the has are gross transformative business There grow a upon reduce up that current and

our conclude review. This does financial

Now for would call open to questions. the up like I

Operator

with Your Thank of from you. [Operator line ahead. comes Instructions] Mitch question the Research. first Kummetz Seaport go Please

Mitch Kummetz

for taking like thanks Erik. I'd questions my and Yes, to welcome

in didn't Can line had guide. the on for year? update and nothing operating with I or release in start hear SG&A me margin previously I EBIT given and on the anything Let but items? think you guidance the you us comments, There's those your either

Erik Gast

guidance you Sure, approximately SG&A out welcome. called in for our that as and you know previous we Mitch, thank XX.X%. kind

through our and operating for management. look look we year, continue as we income, to can look see the does reflect EPS through balance As management the continued that that cost of you we

is basis that percentages would points. with the in we've the what basis point provided guidance. So going to increased are to we range will give There guidance consistent in XX XX our that possibly changes be original be of the some

Regarding operating income.

at some XX.X%. we're the a XX decline. sales operating basis about a XXX range of to we've the looking the going income at Regarding guidance original range talked to to be points there in operating of of as impacts Really is the result income,

Mitch Kummetz

it. low of at up some why quarter, revised helpful? just but in around given, I obviously that sales around then you on that that's weather your Can just be that. more better more basis, inventory, just consumer any on what like quarter. year-over-year what All do you there balance guidance, came also numbers. would to it digits And of you which we're if be color the And tax of maybe most athletic normal? assumptions those get optimistic I'm can kind better and maybe achieved kind it said maybe can obviously down that by you expect right, of back a around color past to curious year, Got back-to-school just would looks just, provide the kind growth guess you're kind the XQ looking refunds, there's to thanks I year, than single least of for at the the you for the into over flat to is that the of is, sort elaborate but

Mark Worden

see with significantly today. improved it it's year. got you Mitch, back-to-school We versus key right elements. Yes, being joining last Hey those Thanks Mark. for

on positions, our shared far call, in I athletic it's fresh hand, and it's As the it's superior. inventory

we So still then QX Mitch. We're QX. get QX disrupted But to seeing last to more had go as control. chain ready more as is back-to-school in for the moderate the going year. of in I think continues that's we inflation and year our come continues supply believe to headwinds position in -- and back-to-school We the macro on,

the.com second our with the it briefly turned momentum has getting I think business about that talked I along encouraging going we're Shoe stores see goes about live. is and talked continuing thing progress as the Station, new CRM some we weather year the Station this accelerate and the on. Shoe QX we good into that nicely as as is live, growing Yes going to as you

growth. we're So by hit variability segment segment third Carnival's that our of that we're that small the that to shape that think really just start customers. the to customers going not really soon sure accelerating that's highlighting we're getting customer's healthier, That's going inflation. we are does; yet in which quarter a under be as It's great turn Shoe when of it to

Mitch Kummetz

Got work on they your it. thinking think there's about, ability then inventory challenged QX? of in the feel by there? QX and pent-up is you that, I your And through you far know that sandal how believe in kind your Do category and Carl you the are to What quarter. were sandals, largest quarter. I do demand for sandal

Operator

the you start the, operator. Sorry, broken. This sorry. line again? The I'm coming is in Could is

Mitch Kummetz

was expect kind for but quarter, quarter Carl QX to to biggest sort and inventory that second your sandal me planning obviously working how there's do was about you are about there's, being question it that whatever do especially in Okay. I pent-up through and of now. I you with the Hopefully if do have? The sandals. How you quarter demand play? sandals you curious of the sandals, feel think can you well didn't asking for has you better perform guys like hear

Operator

to [Technical will Difficulty] will The I'm seems operator. going please. continue question. We some momentarily. Instructions] difficulties with the speaker try is having them. Kummetz's we're rectify It conference this sorry, with continue Mitch as [Operator One the technical line. to moment though We're

Mitch Kummetz

quarter, outlook know QX. expecting the if guys curious just any pent-up work how question It's given that don't to, if your I you Carl, So sandals. you're about quarter, about given there's being through wondering my your your just also for shortfall on think the you demand for biggest and the XQ inventory sandal heard sandal in challenges really first

Carl Scibetta

have most thanks. do movement Mitch, some Sure. the We hit weather see to on Midwest. apart warm that consistent starting business believe sandal has of we as

bit on to sandal So based us by shop I And recent we're business, geographics that earlier. earlier. much Station income encouraged a in of business very the Shoe some Carnival that consumer business. a Shoe actually higher test and business the Pretty started believe

have In position the inventory did we our move regards to on And season results. reduced last on with anticipate inventory inventory, more we a position based made the we year. quarter the fourth adjustments necessary as in sandals forward than better we ending

got we've business confident we're under control. So that

Mitch Kummetz

right, I'll thanks. get queue just the All in back

Operator

Instructions] Kummetz. this there [Operator sorry. oh, Mitch a are And I at turn have will time. do follow-up to, from no We back questions Please further go the call ahead.

Mitch Kummetz

thought I other people. be there'd Okay.

Is of can that's my there my still on but the you other different Obviously you talked year-over-year, isolate about one comment how you BOGOs? them what or of you was four ago? am was So than talk years margin. you guys that particularly margin about differently very the kind ago, can but curious, there I before. four other Is the was from still do on years gross and way do any guess the from any I just down BOGOs, the side. way on way March BOGOs, questions up it of question margin it

Mark Worden

a very it and Sure. BOGO do that have we purchased a price. only we on take adventitious seasonal run, that that. a couple times I'll any The, we week at product promotion

planned margin there fact increase. and during company So them the on cases in margin the some BOGO in margin in is And actually is with selected in line items. on they're total

merchandise So product and that very for time, they're targeted was limited bought intent. that

Mitch Kummetz

better the those all assume have like to total, I like the a years way than margin, that for the expansion story you from when again much how was thousand store of were how can overall there isolate like margin you of that's but the sort four was more ago BOGO? four and years it within any kind does so that's mean, improved seen of margins of I a the that And of an kind compare bps ago BOGO of dilutive how or is piece, mean I is it much business?

Mark Worden

Mitch. you're BOGOs basis the is products. used and today the on to story. They run weren't pretty That selected was, entire the dilutive BOGO right [ph] the The Sure, that much run margin definitely to we targeted included inventory. on we thousand margin points about the very a

So factor that producing. the we've major in a margins is transitional been

Mitch Kummetz

kind can easy going speak Got a know then I just you for how comp. one and remind pretty back-to-school? don't and it's comparison to assume it. just me terms the it the last is speak I athletic And last on if athletic Carl, of you then year? back-to-school us up inventory percentage of in that you're against better from can athletic, versus much maybe to

Carl Scibetta

purchased athletic Yes, it that chain. never We that we last the to and really addition And go many August quite is. frankly year, [indiscernible] if we got. we The at late a that, supply delays we our by we back-to-school inventory really athletic into products few received looked September inventory, actually timeframe. hampered missed was with back in had historically

and of being we quality an as quality our We part a inventory as XX%. go anticipate products actually the have. moved into see So of through that around of I quality up in of it's standpoint, the mid-teens the But delivery we have the major the also that and athletic and ending the athletic August brands in in but July the teens. timing we the we in that the the early the inventory back-to-school the from really of improvement inventory timeframe products, of

Mark Worden

I point. yes, then, one I'll Mitch, give you And

July So where year June and in comp in last disrupted. and between in it period at remind really XX% declines that you and to our down QX you supply really was look XX% chain XX.X% if comps driven to during by was was

claw see talked year. we an with last have opportunity solid So more market great did as than QX back this to gain Carl position that much and share, and a we about

Mitch Kummetz

you guess then loyalty Shoe Mark, and plugged on loyalty then Okay. access customers buying has What I brands that, Station points all Shoe of that you of members. the know have to is seen those and And from now me, stores? there? maybe to Shoe product I one especially they the Shoe Station, some some have Have one those from into some Perks maybe Carnival seen price and didn't just access last in

Mark Worden

see on Shoe got two see have people joined We that almost rapidly. I to already do. We side. million Perks opportunity we've the grow great Shoe Station would a

the are them before. with too, categories importantly, where cross the too that So the in big growth. we're from introduced cross that really for a quarters direction Shoe buy brand products Perks opportunity are, aren't that seeing they to engage also And fueling starting Shoe just the offered. haven't This seeing we're with new is and purchases Carnival, over we're different ahead members now to them being new tiers different introducing engage them we had price now and seeing they can shop. We're

Mitch Kummetz

Good guys. thanks luck. right, All

Mark Worden

Thank you, Mitch.

Operator

turn further time. no call are There Mr. the I questions this Mark at back to Worden. will

Mark Worden

to for all back-to-school moment. QX us We all season for you you joining today's report. Thank talking for with we bearing as thank to forward struggles again there the into have and get look you technology and our call for a

Operator

Thank today's for joining concludes call. conference This us. you

your You line. disconnect may now

Shoe Carnival (SCVL) 24 May 232023 Q1 Earnings call transcript