Shoe Carnival Reports Second Quarter 2008 Results

Shoe Carnival, Inc. (Nasdaq: SCVL) a leading retailer of value-priced footwear and accessories, today announced sales and earnings for the second quarter ended August 2, 2008. Net earnings for the thirteen-week second quarter were $977,000, or $0.08 per diluted share, compared to net earnings of $167,000, or $0.01 per diluted share, for the thirteen-week prior year second quarter ended August 4, 2007. Sales for the second quarter were $158.5 million compared to sales of $154.8 million for the prior year second quarter. Comparable store sales for the thirteen-week period ended August 2, 2008 decreased 1.0 percent compared with the thirteen-week period ended August 4, 2007. The gross profit margin for the second quarter was 26.6 percent compared to 26.0 percent for the second quarter of the prior year. As a percentage of sales, the merchandise margin increased 0.9 percent while buying, distribution and occupancy costs increased 0.3 percent. Selling, general and administrative expenses for the second quarter were $40.7 million, or 25.7 percent of sales, compared to $40.1 million, or 25.9 percent of sales, for the second quarter of 2007. Speaking on the results for the quarter, Mark Lemond, chief executive officer and president said, "Although consumers continued to face a great deal of economic pressure during the second quarter, we believe their use of the government stimulus checks did provide a short-term boost in our sales. We were able to increase the average realized price for our footwear, particularly within our adult and children's athletic categories. This price increase resulted in the second consecutive quarter of an increase in athletic footwear sales in comparable stores. Our second quarter performance continued to reflect strong inventory management and effective expense control. Our merchants reduced year-over-year inventory on a per store basis by approximately 7.0 percent and actually improved merchandise margins. Despite a 1.0 percent decrease in comparable store sales, we were able to leverage our selling, general and administrative expenses by 0.2 percent." Net income for the first half of 2008 was $5.8 million, or $0.46 per diluted share, compared with net income of $7.5 million, or $0.55 per diluted share, in the first half last year. Net sales for the first six months was $320.6 million compared to net sales of $320.5 million for the same period last year. Comparable store sales for the twenty-six week period ended August 2, 2008 decreased 3.0 percent compared to the twenty-six week period last year ended August 4, 2007. The gross profit margin for the first six months of 2008 was 27.8 percent compared to 28.1 percent last year. Selling, general and administrative expenses, as a percentage of sales, was 24.9 percent for the first six months of 2008 as compared to 24.8 percent last year. Store Growth Currently, the Company expects to open 24 new stores in fiscal 2008 and close 11 stores. Store openings and closings by quarter and for the fiscal year are currently planned as follows:   New Stores   Stores Closings 1st Quarter 2008 2 0 2nd Quarter 2008 12 2 3rd Quarter 2008 9 1 4th Quarter 2008 1 8 Fiscal 2008 24 11 The twelve stores opened during the second quarter included locations in:   City   Market/Total Stores in Market Virginia Beach, VA Norfolk/5 Edwardsville, IL St. Louis/11 Branson, MO Springfield/2 Boise, ID Boise/1 Logan, UT Salt Lake City/2 West Jordan, UT Salt Lake City/2 McCreeless, TX San Antonio/4 San Antonio, TX San Antonio/4 Omaha, NE Omaha/2 Council Bluffs, NE Omaha/2 Pace, FL Mobile/3 Loveland, CO Denver/5 Conference Call Today, at 2:00 p.m. Eastern time, the Company will host a conference call to discuss the second quarter results. The public can listen to the live webcast of the call by visiting Shoe Carnival's Investor Relations page at www.shoecarnival.com. While the question-and-answer session will be available to all listeners, questions from the audience will be limited to institutional analysts and investors. A replay of the webcast will be available on our website beginning approximately two hours after the conclusion of the conference call and will be archived for one year. Cautionary Statement Regarding Forward-Looking Information This press release 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: general economic conditions in the areas of the United States in which our stores are located; changes in the overall retail environment and more specifically in the apparel and footwear retail sectors; our ability to generate increased sales at our stores; the potential impact of national and international security concerns on the retail environment; changes in our relationships with key suppliers; the impact of competition and pricing; changes in weather patterns, 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 effectiveness of our inventory management; the impact of hurricanes or other natural disasters on our stores, as well as on consumer confidence and purchasing in general; risks associated with the seasonality of the retail industry; our ability to successfully execute our growth strategy, including the availability of desirable store locations at acceptable lease terms, our ability to open new stores in a timely and profitable manner and the availability of sufficient funds to implement our growth plans; higher than anticipated costs associated with the closing of underperforming stores; the inability of manufacturers to deliver products in a timely manner; changes in the political and economic environments in the People’s Republic of China, Brazil, Spain and East Asia, the primary manufacturers of footwear; and the continued favorable trade relations between the United States and China and the other countries which are the major manufacturers of footwear. In addition, these forward-looking statements necessarily depend upon assumptions, estimates and dates that may be incorrect or imprecise and involve known and unknown risks, uncertainties and other factors. Accordingly, any forward-looking statements included in this press release do not purport to be predictions of future events or circumstances and may not be realized. Forward-looking statements can be identified by, among other things, the use of forward-looking terms such as "believes," "expects," "may," "will," "should," "seeks," "pro forma," "anticipates," "intends" or the negative of any of these terms, or comparable terminology, or by discussions of strategy or intentions. Given these uncertainties, we caution investors not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We disclaim any obligation to update any of these factors or to publicly announce any revisions to the forward-looking statements contained in this press release to reflect future events or developments. Shoe Carnival is a chain of 303 footwear stores located in the Midwest, South and Southeast. Combining value pricing with an entertaining store format, Shoe Carnival is a leading retailer of name brand and private label footwear for the entire family. Headquartered in Evansville, IN, Shoe Carnival trades on The Nasdaq Stock Market LLC under the symbol SCVL. Shoe Carnival's press releases and annual report are available on the Company's website at www.shoecarnival.com. Financial Tables Follow SHOE CARNIVAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share)       Thirteen Thirteen Twenty-six Twenty-six Weeks Ended Weeks Ended Weeks Ended Weeks Ended August 2, 2008 August 4, 2007 August 2, 2008 August 4, 2007     Net sales $ 158,480 $ 154,805 $ 320,599 $ 320,458 Cost of sales (including buying, distribution and occupancy costs)   116,334     114,558     231,373     230,420       Gross profit 42,146 40,247 89,226 90,038 Selling, general and administrative Expenses   40,661     40,118     79,984     79,443       Operating income 1,485 129 9,242 10,595 Interest income (39 ) (176 ) (76 ) (510 ) Interest expense   36     32     69     64     Income before income taxes 1,488 273 9,249 11,041 Income tax expense   511     106     3,488     3,547     Net income $ 977   $ 167   $ 5,761   $ 7,494     Net income per share: Basic $ .08   $ .01   $ .47   $ 0.56   Diluted $ .08   $ .01   $ .46   $ 0.55     Average shares outstanding: Basic   12,367     13,091     12,360     13,295   Diluted   12,463     13,400     12,455     13,634   SHOE CARNIVAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)       August 2,2008 February 2,2008 August 4, 2007   ASSETS Current Assets: Cash and cash equivalents $ 16,659 $ 9,177 $ 15,466 Accounts receivable 1,961 411 1,216 Merchandise inventories 208,409 200,781 210,043 Deferred income tax benefit 2,481 2,340 2,304 Other   8,383   7,221   10,542 Total Current Assets 237,893 219,930 239,571 Property and equipment-net   71,014   71,686   74,736 Total Assets $ 308,907 $ 291,616 $ 314,307     LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable $ 74,953 $ 67,786 $ 84,859 Accrued and other liabilities   14,546   10,689   13,493 Total Current Liabilities 89,499 78,475 98,352 Deferred lease incentives 4,735 5,396 5,442 Accrued rent 5,626 5,925 6,163 Deferred income taxes 917 399 534 Deferred compensation 3,395 3,559 3,543 Other   1,410   1,250   795 Total Liabilities 105,582 95,004 114,829 Total Shareholders' Equity   203,325   196,612   199,478 Total Liabilities and Shareholders' Equity $ 308,907 $ 291,616 $ 314,307 SHOE CARNIVAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)   Twenty-sixWeeks EndedAugust 2, 2008 Twenty-sixWeeks EndedAugust 4, 2007   Cash flows from operating activities: Net income $ 5,761 $ 7,494 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 8,286 7,834 Stock-based compensation 559 830 Loss on retirement and impairment of assets 109 389 Deferred income taxes 377 (216 ) Deferred lease incentives 174 0 Other (1,135 ) (334 ) Changes in operating assets and liabilities: Accounts receivable (1,550 ) (268 ) Merchandise inventories (7,628 ) (13,381 ) Accounts payable and accrued liabilities 9,992 16,739 Other   (1,164 )   (8,710 )     Net cash provided by operating activities   13,781     10,377       Cash flows from investing activities: Purchases of property and equipment (6,700 ) (11,372 ) Proceeds from sale of property and equipment 2 379 Other   0     6       Net cash used in investing activities   (6,698 )   (10,987 )     Cash flows from financing activities: Borrowings under line of credit 6,625 0 Payments on line of credit (6,625 ) 0 Proceeds from issuance of stock 399 513 Excess tax benefits from stock-based compensation 0 290 Common stock repurchased   0     (19,566 )     Net cash provided by (used in) financing activities   399     (18,763 )     Net increase (decrease) in cash and cash equivalents 7,482 (19,373 ) Cash and cash equivalents at beginning of period   9,177     34,839       Cash and Cash Equivalents at End of Period $ 16,659   $ 15,466