Shoe Carnival Inc. (SCVL) recently posted fourth quarter earnings of 33 cents per share, beating the Zacks Consensus Estimate of 31 cents and showing a marked improvement from 20 cents earned in the year-earlier quarter.
The better-than-expected results were attributable to a surge in demand for footwear as well as higher quarterly gross margin. The company’s full-year earnings per share were $2.05 versus $1.20 in fiscal 2009.
Net sales grew 5.3% year over year to $179.9 million during the quarter. The upside in revenue was attributable to continued strength in women’s boots, November being the strongest month in terms of sales. However, adverse weather in the Midwest in December and January resulted in lower volumes sold. Comparable store sales grew 4.6% year over year in the quarter. Net sales increased 8.3% year over year to $739.2 million in fiscal 2010 and comparable store sales rose 8.2%.
During the quarter, gross margin climbed 130 basis points to 30.0% buoyed by the strength in women’s, men’s and children’s boots and the women’s casual sport category. Selling, general and administrative (SG&A) expenses increased 5.6% year over year to $47.0 million. However, as a percentage of net sales, the company’s SG&A remained at par with last year’s level of 26.1%.
Financial Position
At the end of 2010, the company had cash and cash equivalents of $60.2 million and shareholders’ equity of $254.3 million.
Store Count
The company opened 10 and closed 7 stores, exiting the year with 314 stores in total. Notably, Shoe Carnival did not open any store in the fourth quarter, but closed two.
Outlook
For first quarter 2011, the company anticipates revenue to increase in the range of $198 to $201 million and earnings per share to be approximately 72 to 75 cents. Comparable store sales are expected to rise 3% to 5%.
For fiscal 2011, Shoe Carnival expects to open approximately 20 new stores mostly in its existing markets. Four of these new openings are slated for a first quarter launch. The company plans to close five stores during 2011.
Our Take
Shoe Carnival is a leading retailer of value-priced footwear and accessories. We remain positive on the stock based on the company’s strong operational and financial execution. From financial standpoint, Shoe Carnival is free of interest-bearing debt. However, we remain cautious on the execution risk associated with the launch of Shoe Carnival’s e-commerce platform, which will increase software costs.
Shoe Carnival currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock.
One of Shoe Carnival’s peers, LaCrosse Footwear Inc. (BOOT) reported fourth quarter 2010 earnings of 60 cents, which surpassed the Zacks Consensus Estimate of 55 cents and came in much better than 36 cents reported in the prior-year quarter.
LACROSSE FOOTWR (BOOT): Free Stock Analysis Report
SHOE CARNIVAL (SCVL): Free Stock Analysis Report
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