Shoe Carnival Reports Third Quarter 2008 Results

Shoe Carnival, Inc. (Nasdaq: SCVL), a leading retailer of value-priced footwear and accessories, today announced sales and earnings for the third quarter ended November 1, 2008.

Net earnings for the thirteen-week third quarter were $2.6 million, or $0.21 per diluted share, compared to net earnings of $4.2 million, or $0.33 per diluted share, for the thirteen-week prior year third quarter ended November 3, 2007.

Sales for the third quarter were $170.1 million compared to sales of $173.9 million for the prior year third quarter. Comparable store sales for the thirteen-week period ended November 1, 2008 decreased 5.0 percent compared with the thirteen-week period ended November 3, 2007.

The gross profit margin for the third quarter was 27.2 percent compared to 29.1 percent for the third quarter of the prior year. As a percentage of sales, the merchandise margin decreased 1.1 percent while buying, distribution and occupancy costs increased 0.8 percent.

Selling, general and administrative expenses for the third quarter were $42.4 million, or 24.9 percent of sales, compared to $43.6 million, or 25.1 percent of sales, for the third quarter of 2007.

Speaking on the results for the quarter, Mark Lemond, chief executive officer and president said, "Our customers continue to be impacted by the economic downturn as buying habits have shifted to periods of need. We saw a definite lift in sales during the back-to-school season. However, sales trended lower during September and October when spending became more discretionary."

Mr. Lemond continued, "Despite operating an additional 17 stores at the end of the third quarter and incurring store closing costs of an additional $321,000 as compared to the prior year, we were still able to decrease our selling, general and administrative expenses by $1.2 million or 0.2 percent as a percentage of sales. We are managing our business conservatively by focusing on reducing inventory and thereby generating cash flow. At the end of the third quarter, we reduced inventories on a per store basis by 8.0 percent and generated $10.8 million in cash provided by operations year-to-date. We had no borrowings on our line of credit at the end of the quarter and look to continue to manage our business to remain free of long-term debt."

Net income for the first nine months of 2008 was $8.4 million, or $0.67 per diluted share, compared with net income of $11.7 million, or $0.87 per diluted share, in the first nine months of last year. Net sales for the first nine months was $490.7 million compared to net sales of $494.3 million for the same period last year. Comparable store sales for the thirty-nine week period ended November 1, 2008 decreased 3.7 percent compared to the thirty-nine week period last year ended November 3, 2007. The gross profit margin for the first nine months of 2008 was 27.6 percent compared to 28.5 percent last year. Selling, general and administrative expenses, as a percentage of sales, was 24.9 percent for both 2008 and 2007.

Store Growth

Currently, the Company expects to open 24 new stores in fiscal 2008 and close 12 stores. Store openings and closings by quarter and for the fiscal year are currently planned as follows:

The eight stores opened during the third quarter included locations in:

Conference Call

Today, at 2:00 p.m. Eastern time, the Company will host a conference call to discuss the third 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 311 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.

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