Shoe Carnival Reports First Quarter 2004 Results

Business Wire, May 13, 2004

Business Editors

EVANSVILLE, Ind.--(BUSINESS WIRE)--May 13, 2004

Shoe Carnival, Inc. (Nasdaq: SCVL) a leading retailer of value-priced footwear and accessories, today announced sales and earnings for the first quarter ended May 1, 2004. Net earnings for the 13-week first quarter were $4.6 million as compared with net earnings of $5.1 million in the first quarter ended May 3, 2003. Diluted earnings per share were $0.35 per share compared with $0.39 per share last year.

Net sales for the first quarter increased 6.3 percent to $145.5 million from $136.9 million last year. Comparable store sales decreased 2.2 percent for the 13-week period.

The gross profit margin for the first quarter of 2004 decreased to 29.2 percent from 29.9 percent in the first quarter of 2003 due to the deleveraging effect of lower same store sales and the lower sales productivity of new stores on buying, distribution and occupancy costs. Selling, general and administrative expenses for the first quarter, as a percentage of sales, increased to 23.9 percent from 23.8 percent in last year's first quarter. New store pre-opening costs incurred in the first quarter were $729,000 or 0.5 percent of sales, compared with $772,000 or 0.6 percent of sales last year. The Company opened 11 new stores in the first quarter of 2004 versus opening 13 stores in the first quarter of 2003.

Commenting on the results, Mark Lemond, president and chief executive officer said, "We are clearly disappointed in our results for the first quarter of 2004. In an effort to increase customer traffic during the quarter, we tried new approaches in advertising and merchandise promotions, including a reduction of "buy one get one at half price" promotions. Although it is apparent these strategies were not successful in total, we did gain valuable insights on a market-by-market basis. We have responded by effecting changes to our advertising and merchandise promotions, continuing the media and message that did resonate and changing what did not. While certain of these changes will be implemented in the second quarter, the primary effect will be seen during back-to-school, our next peak selling period."

"Although sales fell short of our original expectations for the quarter, we effectively managed our inventories and expenses. Our per-store inventories at the end of the quarter were down 1.2 percent. Tight expense controls during the quarter limited the deleveraging effect of the lower than expected sales results."

The Company also issued sales and earnings guidance for the second quarter of 2004. Due to tax-free shopping days in multiple states shifting from late in the second quarter last year to early in the third quarter this year, comparable store sales are expected to decline low single digits for the second quarter. Earnings per diluted share are expected to range from $0.12 to $0.15 in the second quarter.

Currently, the Company expects to open between 20 to 25 stores in fiscal 2004, net of store closings. Eleven stores were opened in the first quarter and two stores are expected to open in the second quarter. Store openings in the second half of 2004 will occur primarily in the third quarter.

The 11 stores opened during the first quarter included locations in:

             City                   Market/Stores
             ----                   -------------
             Conway, AR             Little Rock/4
             Covington, LA          New Orleans/4
             St. Louis, MO          St. Louis/10
             Spartanburg, SC        Greenville/6
             Summerville, SC        Charleston/3
             Austin TX (2)          Austin/3
             Lufkin, TX             Tyler/2
             San Antonio, TX        San Antonio/2
             Wichita Falls, TX      Wichita Falls/1
             Vienna, WV             Vienna/1

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

This press release contains forward-looking statements 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; 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; risks associated with the seasonality of the retail industry; the availability of desirable store locations at acceptable lease terms and our ability to open new stores in a timely and profitable manner; 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, a major manufacturer of footwear; and the continued favorable trade relations between the United States and China and other countries which are the major manufacturers of footwear.