Shoe Carnival Inc. (NASDAQ:SCVL) has reported a steady third quarter for 2024, meeting expectations despite the impacts of hurricanes and unseasonably warm weather. The company saw an adjusted earnings per share (EPS) of $0.71, aligning with market predictions, and a slight year-over-year increase in adjusted EPS. The retailer's net sales experienced a slight decline, yet gross profit margins held firm, and the recent acquisition of Rogan's contributed positively to the quarter's performance.
Key Takeaways
- Adjusted EPS for Q3 matched expectations at $0.71.
- Year-to-date adjusted EPS rose by 3.8% to $2.19.
- Net sales for Q3 decreased by 4.1% to $306.9 million.
- Gross profit margin sustained at 36%.
- Rogan's acquisition reported net sales of $22.3 million in Q3.
- Full run-rate synergies from Rogan's were achieved six months ahead of schedule.
Company Outlook
- Shoe Carnival (NYSE:CCL) has revised its full-year net sales guidance to between $1.200 billion and $1.230 billion.
- The company is maintaining its EPS guidance of $2.60 to $2.75.
- Due to the warm weather, the company anticipates achieving the lower end of the guidance range.
- There is potential for higher guidance if the winter boot season and holiday sales exceed expectations.
Bearish Highlights
- The boot category saw a significant decrease, with sales dropping over 35% in October.
- Comparable store sales fell by 4.1%, mainly due to the adverse effects of hurricanes and the delay in the winter season.
Bullish Highlights
- The back-to-school season performed well, especially in children's and athletics categories.
- The athletics category experienced low single-digit growth, with notable performance in women's and children's segments.
- The company's re-bannering initiative is progressing, with plans to convert 25 more stores in the first half of fiscal 2025.
Misses
- Net sales for the third quarter saw a 4.1% decline from the previous year.
Q&A Highlights
- CEO Mark Warden expressed satisfaction with the profitable quarter and the EPS meeting expectations.
- CFO Patrick Edwards highlighted the possibility of reaching the higher end of net sales and EPS guidance but anticipates a more likely outcome at the lower end of both ranges.
- CEO Mark Warden showed enthusiasm for the re-bannering strategy as a key element for long-term growth.
Despite the headwinds faced in the third quarter, Shoe Carnival remains positive about its strategic initiatives and its capacity to steer through the challenging market conditions. The company's focus on a digital-first marketing approach and the expansion of its Shoe Station stores demonstrate its commitment to adaptability and growth.
Full transcript - Shoe Carnival Inc (SCVL) Q3 2025:
Conference Operator: Good morning, and welcome to Shoe Carnival's Third Quarter 2024 Earnings Conference Call. Today's conference call is being recorded and is also being broadcast via webcast. Any reproduction or rebroadcast of any portion of this call is expressly prohibited. I would now like to introduce Mr. Steve Alexander with Shoe Carnival Investor Relations.
Mr. Alexander, please go ahead.
Steve Alexander, Investor Relations, Shoe Carnival: Thank you, and good morning. Thanks for joining us today. Earlier this morning, we issued our earnings press release for the Q3 of 2024. If you need a copy of the release, it is available on our website in the Investors section. Joining me on today's call are Mark Warden, President and Chief Executive Officer of Schuh Carnival Carl Chabetta, Chief Merchandising Officer and Patrick Edwards, Chief Financial Officer.
Management's remarks today may contain forward looking statements that involve a number of risk factors. These risk factors could cause the company's actual results to be materially different from those projected in such statements. Forward looking statements should also be considered in conjunction with the discussion of risk factors included in the company's SEC filings and today's earnings press release. Investors are cautioned not to place undue reliance on these forward looking statements, which speak only as of today's date. The company disclaims any obligation to update any of the risk factors or to publicly announce any revisions to the forward looking statements discussed on today's conference call or contained in today's press release to reflect future events or developments.
Today's call will reference non GAAP measures. The non GAAP measures or adjusted results referenced exclude the purchase accounting, merger, integration and transaction costs related to the acquisition of Rogan Shoes. A reconciliation of GAAP to non GAAP results is included in this morning's release. And with that, I'll hand the call over to Mark.
Mark Warden, President and Chief Executive Officer, Shoe Carnival: Thank you, Steve, and good morning, everyone. Before discussing results for the quarter, I'd like to start today by thanking all our team members for their hard work and tireless dedication. As a result of the devastating hurricanes Helene and Milton, the lives of both our employees and our customers were dramatically impacted. Importantly, all our team members are now safe and accounted for and we're fortunate that we did not suffer meaningful damage to our stores. We're grateful for both outcomes and thank you team.
Moving now to our results. I'm so proud of the profitability the team achieved in the quarter. We delivered 3rd quarter adjusted EPS of $0.71 which was in line with our expectations shared earlier this year. On a year to date basis, adjusted EPS totaled $2.19 an increase of 3.8% versus prior year. Gross profit margin in the quarter was 36%, exceeding 35% for the 15th consecutive quarter.
We achieved year to date net sales of $939,900,000 an increase of 4.9% and year to date adjusted operating income of $78,400,000 an increase of 6.6% versus prior year and growing faster than sales. The key drivers of our 3rd quarter profit delivery included a very strong back to school performance with comparable store sales growth across our banners, efficiencies in our digital first marketing approach, the addition of Rogan's in February 2024 and the rapid progress testing our store re banner strategy, which I will discuss in a few moments. From a top line perspective, Rogan's continued to deliver in line with our expectation. And from a profit perspective, we further accelerated the Rogan's integration timeline and began capturing significant profit synergies in the Q3, a full 6 months ahead of our previous schedule, which was to begin capturing synergies in fiscal 2025. The synergy capture in the quarter was primarily corporate and back office support, where we had the capacity to consolidate functions ahead of schedule.
Patrick will go into more details in his comments, but our ability to accelerate the capture of these savings into 2024 demonstrates our team's ability to quickly identify and capture profit synergies, while also delivering on our top line expectations for Rogan's. In addition to the profit synergies on Rogan's, we also drove leverage in our SG and A led by our digital first marketing strategies. As we have previously discussed, our transition to a digital first approach and away from more traditional forms of media, which began over a year ago, gives us the ability to quickly pivot and adjust spending to invest strategically and maximize engagement when customers are ready to purchase, just as we did during back to school in the quarter. Importantly, the inverse is also a key aspect of our digital strategy to be flexible enough to ratchet spending down when consumers are not engaging with advertising investments at a sufficiently profitable level, such as the week surrounding hurricanes Helene and Milton. Our spending flexibility to match the customers' real time behavior was essential to delivering our profit expectations this quarter.
Turning to sales in the quarter. Back to school was an all around success led by children's and athletics, we achieved solid comparable store net sales growth. In the back to school weeks leading up to Labor Day, we achieved comparable store net sales growth in both Carnival and Station banners, delivered strong product margins, customer traffic growth and transaction size increases versus prior year. And as I mentioned earlier, our flexible digital first marketing campaigns were very effective, driving increased customer engagement, while also delivering continued profit efficiencies as we were able to reach more customers while spending less. After Labor Day in September October, sales slowed meaningfully as a result of the 2 hurricanes and persistently warm weather.
While we did not experience major damage to our stores resulting from the hurricanes, our business was significantly disrupted, ranging from some stores being closed for a day or 2, all the way to one of our stores in Western North Carolina being closed for nearly a month without electricity or water. From a high level perspective, about half of our stores were affected to varying degrees by the hurricanes, and our customers' lives were significantly impacted as well. Understandably, shopping for shoes during these storms was simply not a priority for them. Later in the quarter, the weather remained unseasonably warm into November, which delayed the start of our winter boots season. Carl will go into more details in his remarks, but as a point of reference, boots were down over 35% in the month of October and our sandals assortment, given the very warm weather, continued to deliver sales up double digit in October.
All in, the disruption from the hurricanes to our stores and to our customers' lives, combined with a lack of a boot season in the quarter, were the primary drivers of sales performing about $10,000,000 below our goals in the back half of the quarter. Now shifting to thoughts on the balance of the year. Today, we revised our full year sales guidance given the sales performance in the Q3. We anticipate customer purchasing behaviors during non event periods, which we are in now until the holidays, will continue to be in decline across the industry. And while the winter boots season was delayed out of the Q3 due to the warm weather, I expect trends to improve materially when the weather turns cooler and we enter the winter holiday event period.
Consistent with last quarter, we anticipate the lower side of our guidance range is the most likely outcome considering where we stand today. But if boot trends turn to significant growth once the weather gets cold and strong holiday results are achieved, then the mid to higher side of the range is a possible outcome. As I said, we believe the lower end is most likely as persistent warm weather has continued into early Q4. We also reiterated our fiscal 2024 EPS guidance range based on our strong margins and profit delivery in the Q3 year to date. Patrick will go into more details on guidance, but I'm proud of the team for delivering such strong profit results in the Q3 in the face of many unexpected weather challenges.
I would now like to take a few moments to discuss 2 core growth strategies that support our vision to be the nation's leading family footwear retailer. One of those core strategies is profitable M and A activity. Rogan's, which we acquired in February 2024, continues to deliver top line results in line with our expectation. And as I discussed earlier, we achieved full run rate synergies in the quarter, 6 months faster than we anticipated. With integration largely complete and full synergies now being captured, the team is turning to building out our Shoe Perks CRM program in the Rovin stores, which we just rolled out and are mining customer data for new growth opportunities in the years ahead.
Shoe Station, which we acquired in December 2021, continues to deliver strong sales growth year over year since the acquisition, along with profitable results that are accretive to our bottom line. In addition to being a profitable acquisition, the Shoe Station brand, product assortment and in store shopping experience make Shoe Station a key component of a second core growth strategy, which is to grow our existing business. One of the primary focus areas in this strategy is to evaluate data on community characteristics, purchasing trends, product assortment and mix at a store level. As part of that analysis, we have defined existing Shoe Carnival locations where the customer and real estate characteristics are better aligned with Shoe Station. As I discussed on our last call, we re bannered 3 stores from Carnival to Station during the Q2 in the core station markets of Alabama and Mississippi.
The results were very encouraging, surpassing our expectations early on and continuing to do so in the Q3. During the Q3, we expanded the testing of this strategy by re bantering 7 more stores, bringing the total number of re bannered stores to 10. Our focus on this round of testing was to further validate that re bantering stores in core markets is profit accretive and to test expansion into additional southern markets where Shoe Station is present or known, but not the market leader. With the addition of these 7 newly re bannered stores, we entered multiple new station markets in Florida, Alabama and Mississippi, along with the state of Tennessee. It's still early days on these 7 stores, but the results are promising.
Our success criteria for re banner stores are plus 3% to 5% sales and profit growth. And based on the first 10 stores, we are very encouraged with the early results. The stores with more than 1 fiscal month of operating history have delivered a total sales and profit increase of over 10%. We will continue to learn from the re bannered stores during the Q4 and the important holiday shopping period, but it is very clear that these stores are significantly outperforming as Shoe Station banner stores compared to their performance prior as Shoe Carnival stores. As such, we plan to further expand the testing by re bantering an additional 25 stores in the first half of fiscal twenty twenty five.
The markets currently planned are in the South and include new shoe station markets in Tennessee, Florida, Alabama, Mississippi, Louisiana, Georgia and possibly Kentucky and the Carolinas. With this round of testing, we plan to further test the success of this strategy by expanding it to markets outside of Alabama and Mississippi into markets further away from where the Shoe Station brand is known. With the additional 25 stores planned in early 2025, the number of re bannered stores will total 35 and represent approximately 10% of Shoe Carnival stores that will have been re bannered during the first phase of our testing. We see this strategy as a potential long term source of growth, and I look forward to providing an update on our next earnings call as well as our expectations for 2025 impact and thoughts on potentially expanding testing further geographically in the years ahead. I'd like to thank our team for their spirit of innovation and reimagining ways to better meet our customers' needs.
This new strategy is energizing teams, delighting customers and early days are very profit accretive. Before handing it over to Carl, I'll summarize with a few closing thoughts. We delivered a very profitable quarter and EPS that was in line with our expectation, led by a successful back to school, strong margins and continued efficiencies in our successful digital first marketing approach. Robins delivered top line results that were in line with our expectations for the quarter and we accelerated the integration and delivered full profit synergies in the quarter, 6 months ahead of schedule. As part of our store re banner strategy, we expanded testing in the quarter with 7 additional stores, bringing the total number of stores to 10.
We continue to be encouraged by the early results and currently plan to further expand the strategy by re bantering 25 additional stores in the first half of fiscal twenty twenty five. And as we announced in October, Carl Schibetta has decided to retire during the spring of 2025 after over 50 years in the retail industry and over a decade of service to Shoe Carnival. I'd like to thank Carl for his partnership over the last decade as well as his valuable leadership, his friendship and many contributions to Shoe Carnival's successful growth during his tenure. The process to select Carl's successor is underway, we plan to share further information at the appropriate time in 2025. We are grateful that Carl will remain with the company to close out fiscal 2024 and to facilitate a smooth transition during fiscal 2025.
And now, I'll hand it over to Carl. Carl?
Carl Chabetta, Chief Merchandising Officer, Shoe Carnival: Thank you, Mark. I appreciate your kind words and I very much enjoyed working with you and the team over the last decade. And I look forward to closing out the year strong. As you discussed, we delivered a strong back to school season with comparable store sales growth led by mid to high single digit growth in children's and athletics. In September October sales slowed as the 2 hurricanes disrupted our business and impacted our customers.
The weather also remained persistently warm in October resulting in a boot season that was delayed out of the 3rd quarter. From a category perspective, athletics performed well, growing low single digits in the quarter with growth in women's and children's, partially offset by a decline in men's. Boots in the Q3, which historically has represented about 1 third of our entire winter boot season were down over 35% in the month of October and over 30% in the Q3 with declines in women's, men's and children's. In the quarter, we again delivered gross profit margin above 35% for the 15th consecutive quarter and we remain committed to our targeted CRM strategies to continue delivering sustained gross profit margin performance. Our merchandise margins in the quarter increased by approximately 50 basis points versus prior year and on a year to date basis our merchandise margins were even with the prior year.
Inventory at the end of the quarter totaled $406,600,000 an increase of $38,300,000 versus prior year primarily reflecting the impacts of the Rogan's acquisition in February 2024. Excluding the impacts from Rogan's, our merchandise inventory at the end of Q3 was lower by approximately 1% on a dollar basis than prior year and on a unit basis merchandise inventory was down approximately 3% versus prior year. Now moving to sales and categories for the quarter. Total (EPA:TTEF) Q3 comp sales were down 4.1%, which reflected weakness in boots that was partially offset by growth in athletics driven by strong back to school performance. From a category perspective, total adult athletics comp sales increased low single digit in the quarter.
Comp (WA:CMP) sales in Women's Adult Athletics were up high singles led by court and basketball, partially offset by a decline in skate. Comp sales in Men's Adult Athletics were down low singles with declines in skate and running partially offset by strength in court and walking. Children's comp sales were down low single digit with athletic up low single digit led by court and non athletics down high single digit. The children's non athletic performance was primarily due to softness in boots, which were down over 30% in the quarter. 3rd quarter comp sales in women's non athletic footwear were down mid teens.
Dress and casual were both down high teens and sport was down low single digit. Sandals were down high single digit and boots were down over 35% in the quarter. Men's non athletic comp sales were down mid single digit, dress was down low double digit and casual was down low single digit. Men's boots were down high single digit. Coming out of the quarter, inventory content is clean and in good position.
Specifically, our boot inventory is over 15% lower than prior year. And with our strong vendor relationships, the team has been able to adjust receipts based on category trends to date and we are on target to finish the season in line with our boot inventory plan. In closing, we achieved a strong back to school performance by children's and athletics in the quarter. Sales in September October slowed due to the impacts of hurricanes on our business and our customers and the persistently warm weather, which resulted in the winter boot season being delayed out of the quarter. Despite these significant impacts to sales after Labor Day, we delivered a very profitable quarter with strong margins and our inventory is well positioned to continue providing the product assortment, mix and values that our customers want.
And with that, I'll turn the call over to Patrick for a review of our financials. Patrick?
Patrick Edwards, Chief Financial Officer, Shoe Carnival: Thanks, Carl. Moving on to our financial results. We were pleased to deliver EPS in line with expectations for the quarter and grow our year to date top line and EPS compared to the prior year. As a reminder, the 53rd week in fiscal 2023 will not recur in fiscal 2024. And as a result, the retail calendar weeks in each quarter shift in 2024 as compared to prior year.
This shift benefited 2nd quarter net sales approximately $20,000,000 and unfavorably impacted our Q3 by approximately $20,000,000 On a year to date basis comparisons to the prior year now incorporate material elements of the shift between these two quarters. In the Q3 net sales totaled $306,900,000 down $13,000,000 compared to the prior year or 4.1%. This decrease was due to the $20,000,000 retail calendar shift. In the quarter, net sales otherwise increased $7,000,000 or 2.2% compared to Q3 last year. On a year to date basis, which now includes the material impacts of the retail calendar shift, net sales totaled $939,900,000 an increase of 4.9% versus prior year.
Now going into a little more detail on the top line in the quarter. Net sales were led by strong back to school performance and comparable store sales growth across our banners in August. Net sales in the quarter were also favorably impacted by Rogan's, which we acquired in mid February of this year. I'll discuss Rogan sales activity and integration successes in more detail in a moment. Net sales in September October were significantly impacted by the 2 hurricanes that disrupted many of our store operations and customer shopping trends.
Net sales were also negatively impacted by persistently warm weather that delayed a meaningful start to the winter boots shopping season out of the Q3. On a comparable store sale basis, which excludes the impact of the retail calendar shift, Rogan sales and other new store growth, net sales in the 3rd quarter declined 4.1% as impacted by August back to school low singles comp growth and the weather related declines in September October. Comparable store sales in these two months were down high singles compared to last year's combined September October with boots driving about half of the decline. For the entire quarter, the slower boots sales also drove about half of the 4.1% comparable store sale decline, partially offset by continued strength in athletics. Q3 gross profit margin was 36% compared to Q3 2023 gross profit margin of 36.8%, declining 80 basis points compared to last year's Q3.
The decrease was primarily due to BD and O costs, which increased in the quarter on higher occupancy costs from operating more stores and deleverage as impacted by the retail calendar shift. On a year to date basis, gross profit margin was even with the prior year consistent with our expectations and full year guidance. For the quarter, merchandise margins were up 50 basis points as Carl discussed. And on a year to date basis merchandise margins were flat to prior year consistent with our overall gross profit margin and in line with expectations. As a percentage of net sales, SG and A was 28%, reflecting a 10 basis point decrease in the quarter even with the lower shifted net sales.
SG and A in Q3 was $85,900,000 representing a decrease of $3,900,000 versus 2023's Q3, primarily related to lower selling costs at Shoe Carnival and Shoe Station stores. As Mark discussed, these lower selling costs reflect optimized advertising spend driven by our digital first marketing strategy. These lower selling expenses more than offset the cost of operating Rogan's stores in the quarter. Now going into more detail on Rogan's top line results and accelerated integration. We are very happy with how the Rogan's acquisition has performed with net sales approximating $22,300,000 in the quarter $63,900,000 year to date in line with our full year expectation.
We continue to expect Rogan's to deliver annual net sales of over $80,000,000 in fiscal 2024. We have completed integration of store operations, marketing, e commerce platforms, point of sale systems, merchandising and back office. With respect to customer facing technology, Rogan's customers can now participate in Shoe Perks, our customer loyalty program. And toward the end of Q3, we integrated the Rogan's e commerce platform into shoe stations. For Rogan's customers, these changes expand merchandise selection and provide access to other new benefits.
As Mark discussed, we captured significant profit synergies in the quarter, 6 months ahead of our previously expected schedule, which was to generate savings beginning in fiscal 2025. We currently estimate Rogan's synergy capture of over $1,000,000 in fiscal 2024 with a significant portion of that total banked in the 3rd quarter. Our estimate for total Rogan's profit synergies continues to be approximately $2,500,000 with approximately half of that total now expected to be captured in fiscal 2024. Moving back to results in the quarter. Operating income totaled $24,500,000 a decrease of $3,400,000 versus prior year on a GAAP basis and a decrease of $3,000,000 on an adjusted basis as impacted by the lower net sales from the retail calendar shift, partially offset by growth, principally from the Rogan's acquisition and related profit synergies as well as lower SG and A.
Year to date adjusted operating income totaled $78,400,000 increasing 6.6% versus the prior year. On a GAAP basis in the quarter, operating income included approximately $300,000 of merger and integration expenses related to the Rogan's acquisition, of which approximately $200,000 was in cost of sales and $100,000 was in SG and A. Year to date, these expenses totaled $1,300,000 with approximately $800,000 in cost of sales and $500,000 in SG and A. Our income tax rate in the quarter was 24.7% resulting in a headwind to EPS of approximately $0.01 per share versus the prior year Q3 rate of 23.8%. This higher rate primarily reflected discrete benefits that favorably impacted the prior year and did not recur in 2024.
Year to date, our tax rate is 25.5 percent in fiscal 2024 compared to 23% last year, a headwind to the year to date EPS of approximately 0 point 0 $7 On a GAAP basis, net income for Q3 2024 was $19,200,000 or $0.70 per diluted share and in line with expectation. On a year to date basis, GAAP net income and EPS have increased 2.2% and 1.9% respectively versus prior year. On a non GAAP basis, excluding the Rogan's acquisition related costs, adjusted net income for the Q3 was 19,500,000 dollars or $0.71 per diluted share and in line with expectation. On a year to date basis, adjusted EPS totaled $2.19 an increase of 3.8% versus prior year, even with the challenging market conditions experienced in September October. 2023 fiscal year end marked the 19th consecutive year the company ended the year with no debt.
And through the Q3 of 2024, we have continued to fund our operations and growth investments from our operating cash flow and without debt. At the end of the quarter, we had total cash, cash equivalents and marketable securities of approximately $91,000,000 an increase of $20,000,000 versus Q3 2023 even with the all cash acquisition of Brogan's earlier this year. Cash flow from operations year to date in fiscal 2024 totaled $58,100,000 Our strong balance sheet and history of generating steady operating cash flow are key drivers to internally fund our growth objectives, including our emerging re banner strategy and profitable M and A as well as to deliver dividends and when desirable share repurchases. During the quarter, we did not repurchase any shares and had $50,000,000 available under our current share repurchase program. Inventory at the end of the quarter totaled $406,600,000 an increase of approximately $38,000,000 versus prior year, primarily reflecting Rogan's acquired inventory.
As Carl discussed earlier, our inventory content is clean and in good position including boot inventory. Including the newly re bannered stores in Q3, at the end of the quarter, we operated 4 31 stores with 361 Shoe Carnival stores, 42 Shoe Station stores and the 28 Rogan's locations. 1 new Shoe Station store opened in Q3 entering Tennessee, an expansion into a new market for the banner. And as Mark mentioned, we plan to re banner 25 additional stores in the first half of fiscal twenty twenty five. Moving on to our 2024 outlook.
Based on year to date results inclusive of 3rd quarter profitability that was in line with expectation and net sales that was lower than expectation, today we provided the following fiscal 2024 guidance ranges. We now expect full year 2024 net sales in a range of $1,200,000,000 to $1,230,000,000 reflecting growth of 2% to 4.5% versus fiscal 2023. We continue to expect gross profit margin to be approximately even with fiscal 2023. We now expect SG and A as a percent of net sales to be approximately 30 basis points higher than fiscal 2023 compared to our previous guidance of 40 basis points higher. This improved guidance is driven by expected synergy capture and 3rd quarter operating expense management.
We now expect our income tax rate to be lower than our previous guidance at approximately 25.6 percent to 26 percent. Our previous guidance was a tax rate of 26%. We continue to expect GAAP EPS in a range of $2.55 to $2.70 and adjusted EPS in a range of $2.60 to $2.75 Going into a little more detail on our revised guidance and what it means for the balance of the year. We are currently in a non event buying period until we get to the holidays. As Mark discussed, we expect that customer purchasing behavior during non event periods will continue to be in decline across the industry.
We continue to monitor customer buying behavior closely during this period before and after the holiday season and pivot accordingly. While we see a path to achieving the higher side of our net sales guidance and the higher side of our EPS guidance, Consistent with last quarter, we anticipate the more likely outcome is the lower side of both ranges, unless as Mark pointed out, we have a record boot season and holiday to close out fiscal 2024. Our guidance assumes 4th quarter growth from Rogan's and Shoe Station new stores and a comparable store sale decline led by Shoe Carnival brick and mortar stores, consistent with the low to mid single digit comparable store sale decrease experienced in the quarter year to date at the lower side of our guidance range. In Q4 2024, the loss of the 53rd week and the retail calendar shift will result in the loss of approximately $20,000,000 in net sales compared to the prior year. We estimate the retail calendar shift and the loss of the 53rd week will be a headwind to EPS of approximately $0.10 in the 4th quarter compared to the prior year Q4 when we earned EPS of $0.57 To close, we delivered a profitable 3rd quarter and EPS that was in line with the expectations set in our last earnings call.
We are very proud of the team and teamwork it took to achieve this for our shareholders. Achievement was driven by a very successful August back to school and overcoming subsequent softness in market demand caused by 2 natural disasters that affected about half our stores and that changed the landscape of consumer spending, in addition to very warm weather that delayed our boot season. Lower boot sales were about half of our comparable store to sell decline in the quarter. We pivoted in the quarter to accelerated synergy capture and expense management to offset the slower than expected September October market conditions. With respect to our outlook for the remainder of fiscal 2024, we lowered our sales guidance given the September October market conditions and reiterated our EPS guidance.
We now expect lower SG and A as a percent of net sales given synergy capture in Q3 expense management. And while our tax rate is higher than last year, we are now anticipating it will be lower than originally expected. And we are excited about our product assortment for holiday and our plans to drive traffic and profitability in the Q4. Our strategy to drive long term growth remains unchanged. Our strong balance sheet and solid steady cash flow put us in a great position to continue to fund internal growth including our emerging re banner strategy to execute on desirable M and A opportunities, and most importantly, the continued ability to deliver long term shareholder return.
This concludes our financial review. Now we would like to open up the call for questions. Operator? Thank
Conference Operator: you. Our first question comes from the line of Mitch Kummetz with Seaport Research Partners. Please go ahead.
Mitch Kummetz, Analyst, Seaport Research Partners: Yes. Thanks for taking my questions. And Carl, congrats and best of luck to you. And unfortunately, I'm going to break your rule about one question and one follow-up. I've got maybe a handful here.
So let me start just, Mark, on the hurricanes. Is there any way to quantify the sales impact from those 2 hurricanes? And I'm curious, have you seen any replacement buying kick in of late as far as those impacted markets? That's my first question.
Mark Warden, President and Chief Executive Officer, Shoe Carnival: Good morning, Mitch. Thanks for the question. When you look at the losses, I think Patrick summed it up well. About half of our loss came from that persistently warm weather and boots declined with boots down over 35%, specifically in the month of October. The other half, not all of it, but most of the other half would come from the hurricane disruption we had from about half of our fleet, during the Hurricane Helene and Milton.
So roughly half and half.
Mitch Kummetz, Analyst, Seaport Research Partners: And then how about replacement buying, anything there? Are you seeing any benefit from that?
Mark Warden, President and Chief Executive Officer, Shoe Carnival: We have not yet. We still believe as the weather turns cold, people will be rethinking about the lost boots, the lost product that they suffered during some of these catastrophic storms in the South. So we remain optimistic that once it gets colder and people really start to pivot from recovery mode, which they've been in for the last 6, 8 weeks to starting to think about more joyful things, the holiday time with families together, they'll start to think about repurchasing and things they need to do, whether they lost that dress shoe, so they can go to a special Thanksgiving next week or holiday gifting. We think that is ahead of us and we remain optimistic as you can see in our guidance that profitable quarter remains ahead of us.
Mitch Kummetz, Analyst, Seaport Research Partners: And then on boots, obviously a slow start as you detailed. What is your expectation for the Q4? And Carl, I'm curious, do you see any pent up demand potentially benefiting you in the Q4 just given the slow start? Or is that just lost business?
Carl Chabetta, Chief Merchandising Officer, Shoe Carnival: Hi, Mitch. We certainly we did believe there's some pent up demand that's going to come our way in the Q4. However, we don't see any recovery from the loss business in Q3. And while we are planning Q4 in our guidance, we are still planning boots down and managing that boot inventory down in Q4 much more much less than we did in Q3, but we do not see any recovery nor do we see boots turning positive in the quarter.
Mark Warden, President and Chief Executive Officer, Shoe Carnival: Mitchell, on that real quick, it's Mark. We're only a couple of weeks in, so I can't share how the holiday is going to play out. But that persistent warm weather I spoke about, it continued to now. So boots have not started to turn to that positive place. We expect it coming.
And while we're no weather forecasters, cold weather is coming, winter is coming, and we do anticipate growth then. But as you all know, the highly accretive margin capture was not made in these early weeks. And so that's going to make it very unlikely it's a record boot season. It will be strong, but it's getting shorter by the week before it kicks in.
Mitch Kummetz, Analyst, Seaport Research Partners: And it sounds like your boot inventory coming out of 3Q is in pretty good shape. And I'm guessing that as we're early in 4Q, you've been able to kind of continue to work down those receipts as the weather hasn't cooperated? Sure,
Carl Chabetta, Chief Merchandising Officer, Shoe Carnival: Mitch. The team did a great job planning the boot season out holding back on some Q4 receipts, so they can get a good glimpse at what was going to happen. That on top of the fact that our partners have really come to the table and helped us. We believe we're going to be in great position coming out of the quarter. And we're in great position to take advantage of what's remaining in the season right now.
So very pleased with the way the team managed this. They did an outstanding job handling the boot season this year.
Mark Warden, President and Chief Executive Officer, Shoe Carnival: Okay.
Mitch Kummetz, Analyst, Seaport Research Partners: And then a couple of last ones. Maybe sort of big picture on the sales guide. It looks like the low end of the range is down $30,000,000 and that would seem to factor in 3Q coming in about $13,000,000 below plan, which would suggest that maybe the 4th quarter is looking about $17,000,000 worse than prior expectations. First of all, I don't know if you want to confirm my math, but I guess more so, what's changed in terms of your outlook for 4Q versus sort of prior expectations and how much of that is what you're seeing quarter to date with boots?
Mark Warden, President and Chief Executive Officer, Shoe Carnival: Yes. As I said in my speech, we anticipate mid to low side of the guidance being likely. The big change you've characterized it accurately, we're building into the lower side of the revenue forecast that persistently warm weather has continued through today as we speak. And so the boots season is getting shorter and shorter for positive impacts and revenue impacts. We've built that in to say it turns, but it hasn't turned yet.
But I want to reiterate, if boots really kick in next week when the holiday season starts in earnest, the mid to upper side of our guides remains squarely in reach. And if we have a great holiday, we have great confidence that we have in our sights the profit delivery.
Mitch Kummetz, Analyst, Seaport Research Partners: And then Mark, maybe lastly on the re bantering, I know you're still super early in the process, but is there anything that you're seeing now that you've moved outside of Alabama in terms of the performance of the re bannered stores, Alabama versus non Alabama?
Mark Warden, President and Chief Executive Officer, Shoe Carnival: Yes. Thank you. We are very excited about this for a long term growth strategy. The first test, inclusive of the 10 stores, showed us explosive results in markets where the Shoe Station brand is known and we were operating a Shoe Carnival, far stronger than plus 10% sales and profit. As we get further away and we're building brand awareness, we're still seeing very strong results with over 10% sales and profit.
But now we're starting to enter new markets like the state of Tennessee. We're very excited. We've just re bannered 2 stores in the state of Tennessee and opened a new one and progressing in earnest in 2025 with re bantering in Tennessee. They're still showing promising results as well. But our expectation is as we get further and further away from the mother ship of Core Alabama, we get closer and closer to our success criteria, which is in that plus 3% to 5% sales and profit range.
We're still doing better than that now, but as we branch further and further into those new states I mentioned, we would anticipate things get incredibly profitable, strong leverage and a significant outperform compared to say the Shoe Carnival low to mid single comp declines, we're flipping that dramatically. But I would set the stage as we're in these early learning, the 3% to 5% range is probably a more likely anticipation. We hope to beat it. A lot more to learn when we re banner 25 more in all these new markets during Q1. But it is a big winner so far.
Mitch Kummetz, Analyst, Seaport Research Partners: Great. Thanks and good luck for holiday.
Mark Warden, President and Chief Executive Officer, Shoe Carnival: Thank you and happy holiday to you, Mitch.
Conference Operator: Our next question comes from the line of Sam Poser with Williams Trading. Please go ahead.
Sam Poser, Analyst, Williams Trading: Good morning. Thank you for taking my question. I just want to verify one thing and then ask another question. Did you say on the prior earnings calls that Rogan's was expected to $84,000,000 Is that has Rogan's guidance changed? Or is it just a are you wording it differently?
Mark Warden, President and Chief Executive Officer, Shoe Carnival: Hi, Sam. Good morning. We have said that. There's no change. It's still over 80%.
We still expect it to deliver that.
Sam Poser, Analyst, Williams Trading: Thank you. And then your inventory levels are higher than I anticipated going into the quarter, taking Rugged into account. When we get to the end of the year, what's it going to look like? And have any of the inventory receipts or planned receipts going forward impacted by the potential for tariffs? And I also want to know what your thoughts are about tariffs within your mix and how you're thinking about that going into 2025?
Patrick Edwards, Chief Financial Officer, Shoe Carnival: Hey Sam, it's Patrick. I'll take the first part of your question about our inventory balances and then I'll pass it off to Carl to talk about tariffs. Our inventory balance, we expect it right now it's 3% down on a unit basis, 1% down on a dollar basis. We do see currently reductions in that by the time we get to the end of the year. But that balance reduction won't be as great as previously disclosed.
This rebrand our strategy that we're very excited about requires us to carry a little bit more inventory and investing in those hot brands that shoe station sells and having them ready for re bantering these 25 stores in the Q1 requires us to carry a little bit more inventory at year end.
Carl Chabetta, Chief Merchandising Officer, Shoe Carnival: Sam on the tariff front seems to be the topic of conversation with every vendor appointment we have. We're watching it closely. We direct import ourselves a very small percentage of our own inventory. So we'll see how that gets affected and how the vendors if indeed the tariffs come across at whatever they come, we'll have to be very careful about pricing to our consumer and certainly look at where products are being made and how we can best provide the value that our consumers are used to at this point. But at this point, we're like everybody else.
We're watching it very carefully and we will adjust where we need to, but most importantly, continue to attempt continue to deliver value to our customers.
Sam Poser, Analyst, Williams Trading: Thanks. What percent exposure of your purchases or sales, however you want to talk about it, do you have to China right now?
Carl Chabetta, Chief Merchandising Officer, Shoe Carnival: Of our the percentage of our own imports from China.
Sam Poser, Analyst, Williams Trading: I'm talking about total like from the brand.
Carl Chabetta, Chief Merchandising Officer, Shoe Carnival: Sam, I don't have that number. I would say it's less than 50% because the majority of the athletic product is coming out of countries other than China. And I would say on the non athletic side, it's probably sixty-forty in China. But as you put it all together, it will be less than 50%.
Sam Poser, Analyst, Williams Trading: Thanks. And congratulations, Carl. We're going to miss you.
Carl Chabetta, Chief Merchandising Officer, Shoe Carnival: Thanks, Sam.
Conference Operator: Our next question comes from the line of Jim Chartier with Monness Crespi Hardt. Please go ahead.
Jim Chartier, Analyst, Monness Crespi Hardt: Hi, good morning. Thanks for taking my question. So it looks like your SG and A is coming down about $5,000,000 from where I had it previously. In addition to the Rogan synergies and some advertising savings, what are the other key components of that?
Patrick Edwards, Chief Financial Officer, Shoe Carnival: Hey, Jim, it's Patrick Edwards. You're spot on the synergy concepts and you're spot on, on the digital first marketing strategy, the flexibility that it brings. Those are the 2 and really only variables that we were able to press on in the quarter in order to do that expense management synergy capture to bring our EPS in line with our expectations.
Jim Chartier, Analyst, Monness Crespi Hardt: Okay. And that's the same kind of component for Q4 any SG and A savings in Q4 would be those 2 components as well?
Patrick Edwards, Chief Financial Officer, Shoe Carnival: Sure Jim. In the Q4 obviously there's a wide range on sales plus or minus $30,000,000 I believe. So we are able to manage those 2 levers reasonably well especially the advertising spend. When demand is there, we're going to ramp that up and if we see weak demand during non event periods like we did this quarter, we'll be less in the market with our advertising.
Jim Chartier, Analyst, Monness Crespi Hardt: Okay. And then in terms of the re banner opportunity, how many stores kind of fit the shoe station profile from a demographic and store size standpoint?
Mark Warden, President and Chief Executive Officer, Shoe Carnival: Hey, Jim, it's Mark. We don't know how wide the legs to the strategy go yet. We know it's resonating across the South and now we're going to push that limit further into these new states further and further where the brand is not known. The next 25 stores that we complete in the first half of next year are going to help us answer that question. I can give you one thing.
We're very confident that we're going to have over 100 Shoe Station stores near term and ahead of what we previously disclosed as a 2028 objective. Re bantering is rapidly accelerating that expectation. And as we get into guidance next year, we'll be able to be far more explicit when we get into these new states. But we see the opportunity is significant. We see the opportunity has potential to go beyond just Alabama and Mississippi profitably.
And we're going to learn by early next year if this thing has legs to go beyond those core markets into new places like Kentucky, the Carolinas, Atlanta and even further beyond that. We don't have those answers yet, but we're excited with what it is delivering so far.
Jim Chartier, Analyst, Monness Crespi Hardt: Great. Thank you and Carl best of luck to you.
Carl Chabetta, Chief Merchandising Officer, Shoe Carnival: Thanks Jim.
Conference Operator: At this time there are no other questions. So I will hand the call back over to Steve Alexander for closing remarks.
Steve Alexander, Investor Relations, Shoe Carnival: Thanks for joining the call today. We're available all day if you have any follow-up questions and I'd like to quickly hand it over
Mark Warden, President and Chief Executive Officer, Shoe Carnival: to Mark as well. Hi. As we wrap up 2024, I just want to take a moment to wish all of you, your families a happy holiday. I hope you have a safe and enjoyable time ahead. And we thank you so much for your time spent getting to know Shoe Carnival, spending time with us in person, in NDRs, on the road or wherever we may have joined you, if it's just in a call.
Best wishes from Shoe Carnival to all of you.
Conference Operator: This concludes today's conference call. Thank you all for your participation. You may now disconnect.
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