Shoe Carnival Inc. (SCVL) 2025 Q2 Earnings Call Summary

Optimistic Highlights

• New Sales Record

Achieved a new sales record for the second quarter, driven by strong back-to-school season performance.

• Digital Marketing Success

Digital-first marketing approach exceeded expectations, driving customer engagement and sales without additional marketing spend.

• Shoe Station Growth

Shoe Station net sales grew faster than planned, increasing double-digits and contributing to overall sales growth.

• Gross Profit Margin

Gross profit margin expanded to 36.1%, marking the 14th consecutive quarter above 35%.

• Raised Guidance

Raised full-year net sales guidance to growth of 5% to 6% and comparable store sales guidance to down 1.5% to up 1%.

Pessimistic Highlights

• Non-Event Periods

Sales during non-event periods remain uncertain, with no clear category expansion.

• Competitive Intensity

Merchandise margin decreased by 50 basis points due to high competitive intensity.

• Inventory Levels

Inventory increased by $16.1 million, primarily due to the Rogan's acquisition, though excluding Rogan's, inventory was down.

• SG&A Expenses

SG&A expenses increased by $9.1 million, primarily due to the addition of Rogan's, with expected deleverage in Q4.

• Tax Rate Impact

Higher income tax rate in Q2 resulted in a headwind to EPS of approximately $0.04 per share.

Company Outlook

• Full-Year Guidance

Increased full-year guidance ranges for net sales, comparable store sales, and EPS.

• Back Half of the Year

Expecting comparable store sales in the back half of the year to range from flat to up 5%, with the lower side being the most likely outcome.

• Boot Season and Holiday

Potential for higher sales if there is a record-setting boot season and strong holiday performance.

• M&A Strategy

Continued focus on profitable M&A activity, with Rogan's integration progressing smoothly and on track for synergy delivery in fiscal 2025.

Q & A Highlights

• Q: Can you give us the comp by month in 2Q? (Mitchel Kummetz, from Seaport Research)

A: The months didn't vary greatly. Non-event periods were slow but not as bad as last year. Back-to-school season turned July into comp growth. (Mark Worden)

• Q: What percent of the third quarter is August? (Mitchel Kummetz, from Seaport Research)

A: It's less than half. (Mark Worden)

• Q: What's the comp expectation for the quarter? (Mitchel Kummetz, from Seaport Research)

A: Guiding to about $320 million in Q3, with back half of the year comp positive, flattish to up 5%. (Mark Worden)

• Q: What percentage of the business is boots in the back half? (Mitchel Kummetz, from Seaport Research)

A: Boots are about 25% in Q3 and 50% in Q4. Last year, boots were down high-singles; planning boots up low-singles this fall. (Carl Scibetta)

• Q: Any change to marketing spend in the second half? (Jim Chartier, from Monness & Crespi Hardt)

A: No increased cost; continuing with the digital-first approach for the holiday season. (Mark Worden)

• Q: What's driving the improved sales in the store switch strategy? (Jim Chartier, from Monness & Crespi Hardt)

A: Capturing new customers who did not previously shop at Shoe Carnival, with a better product assortment and shopping experience. (Mark Worden)

• Q: How are you activating digital marketing during non-event periods? (Sam Poser, from Williams Trading)

A: Running social and digital programs to drive engagement and sales, with plans to apply learnings to September, October, and early November. (Mark Worden)

• Q: Why won't you feel some SG&A pressure in the third quarter as well? (Sam Poser, from Williams Trading)

A: Advertising moves around based on business performance; some pressure in Q3 but more apparent in Q4. (Steve Alexander)

• Q: What is the adjusted EPS for Q3? (Mitchel Kummetz, from Seaport Research)

A: The differential between GAAP and non-GAAP is about $0.01 to $0.015. (Steve Alexander)