Shoe Carnival Reports 7.5% Decline in Net Sales for Q1 Fiscal 2025

Shoe Carnival, Inc. reported a decline in financial performance for the first quarter of fiscal 2025, with net sales totaling $277.7 million, a decrease of 7.5% from $300.4 million in the same period last year. The company's net income also fell to $9.3 million, or $0.34 per diluted share, compared to $17.3 million, or $0.63 per diluted share, in the prior year. The decrease in revenue was primarily attributed to a 10% decline in sales at the Shoe Carnival banner, which was partially offset by a 4.9% increase in sales at the Shoe Station banner.

The company's gross profit for the quarter was $95.8 million, down from $106.8 million in the previous year, resulting in a gross profit margin of 34.5%, compared to 35.6% in the first quarter of 2024. Selling, general, and administrative expenses decreased slightly to $83.8 million from $84.3 million, but as a percentage of net sales, these expenses rose to 30.2% from 28.1% due to the impact of the rebanner strategy and lower sales. The company also reported an increase in interest income, which contributed positively to income before taxes.

Strategically, Shoe Carnival has been focusing on its rebanner strategy, converting existing Shoe Carnival stores into Shoe Station locations. During the first quarter, the company rebannered 24 stores, bringing the total to 34 stores rebannered since the strategy's inception. This initiative aims to stabilize and grow net sales while increasing market share. The company plans to have approximately 120 stores operating as Shoe Station by the end of fiscal 2025, with a goal of over 80% of its current fleet operating under this banner by March 2027.

Operationally, Shoe Carnival's total store count decreased slightly to 429, with 10 new stores opened and 2 closed during the quarter. The company reported a comparable store net sales decline of 8.1%, primarily driven by the Shoe Carnival banner's performance. E-commerce sales accounted for approximately 9% of merchandise sales, consistent with the previous year. The company also noted an increase in merchandise inventories, which rose by about 4% year-over-year, as it prepared for potential tariff increases and aimed to maintain strong in-stock positions across key categories.

Looking ahead, Shoe Carnival anticipates a reduction in operating income of $20 to $25 million for fiscal 2025 due to costs associated with the rebanner strategy. The company expects to incur capital expenditures between $30 million and $40 million to support this initiative. Despite the near-term impact on profitability, Shoe Carnival remains optimistic about the long-term benefits of its strategic transformation, aiming for sustainable performance as it adapts to changing market conditions and consumer preferences.