Shoe Carnival Reports Second Quarter 2007 Results

Business Wire,  August 23, 2007  

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EVANSVILLE, Ind. -- 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 4, 2007. Net sales increased 5.4 percent to $154.8 million for the thirteen-week period ended August 4, 2007 compared to sales of $146.9 million for the thirteen-week period ended July 29, 2006. Comparable store sales for the thirteen-week period ended August 4, 2007 decreased 7.1 percent compared to the thirteen-week period last year ended August 5, 2006.

The gross profit margin for the second quarter of 2007 decreased to 26.0 percent compared to 27.8 percent for the second quarter of 2006. As a percentage of sales, the merchandise margin decreased 1.5 percent and buying, distribution and occupancy costs increased 0.3 percent. Selling, general and administrative expenses for the second quarter, as a percentage of sales, increased to 25.9 percent from 24.8 percent in last year's second quarter.

Net earnings for the 13-week second quarter ended August 4, 2007 were $167,000 as compared with net earnings of $2.9 million in the second quarter ended July 29, 2006. Diluted earnings per share were $0.01 per share as compared with $0.21 per share last year.

During the second quarter of fiscal 2007, the Company repurchased 662,000 shares of its outstanding common stock at a cost of $18.9 million. These repurchases are part of a $50.0 million stock buy-back program, which will terminate upon the earlier of the repurchase of the maximum amount or December 31, 2008. As of August 4, 2007, the amount that remained available under the existing repurchase authorization was $30.8 million. All repurchases under this program have been made utilizing available cash on hand.

Speaking on the results for the quarter, Mark Lemond, chief executive officer and president said, "Our second quarter sales were significantly affected by a decline in customer traffic. Our comparable store sales and traffic declines through most of the second quarter were similar to those experienced in the first quarter. These declines accelerated towards the tail-end of the second quarter and were significantly affected by the shifting of back-to-school dates and sales tax-free days later in August, particularly in Texas and Florida. While sales fell short of our original expectations for the second quarter, we have been aggressive in the liquidation of spring and summer product. Consequently, per-store inventories at August 4, 2007 were flat compared with inventories as of August 5, 2006."

Net income for the first half of 2007 was $7.5 million, or $0.55 per diluted share, compared with net income of $10.3 million, or $0.75 per diluted share, last year. Net sales for the first six months increased 1.6 percent to $320.5 million from sales of $315.4 million for the same period last year. Comparable store sales for the twenty-six week period ended August 4, 2007 decreased 5.4 percent compared to the twenty-six week period last year ended August 5, 2006. The gross profit margin for the first six months of 2007 decreased to 28.1 percent from 29.3 percent last year. Selling, general and administrative expenses, as a percentage of sales, increased to 24.8 percent in the first six months of 2007 from 24.1 percent last year.

Third Quarter Outlook

Based on recent sales trends, and due in part to the shift in the retail calendar affecting the second and third quarters, net sales for the third quarter are expected to range from $183.0 million to $186.0 million. On a comparable week-for-week basis, the Company now expects comparable store sales to be flat to slightly positive for the third quarter this year. Consequently, earnings in the third quarter are expected to range from $0.44 to $0.48 per diluted share.

Commenting on the third quarter outlook, Mr. Lemond said, "We, along with other retailers, have seen lower customer traffic during the second quarter. Although, we have seen traffic declines moderate in the early back-to-school period, our current sales trend leaves us with an expectation of flat to slightly positive comparable store sales in the third quarter.

"We will continue to manage our inventories and expenses aggressively. Our balance sheet is healthy and will support us as we continue our store expansion program this year and next. We expect to open 25 stores this year and between 30 and 40 stores in 2008."

Store Growth

Store openings and closings by quarter and for the fiscal year are planned as follows:

                  New Stores  >                   >
Stores Closings














1st Quarter 2007           7  >                   >















2nd Quarter 2007           6  >                   >















3rd Quarter 2007          11  >                   >
2














4th Quarter 2007           1  >                   >
2














Fiscal 2007               25  >                   >
4