Shoe Carnival faced a difficult start to its fiscal year, with profits and sales dipping in the quarter ended April 29, 2017. This was no surprise, since the company warned on May 2 that delays in the mailing out of tax refund checks was largely responsible for a 3.9 percent drop in same-store sales in its first quarter. Consequently, the shoe chain revised down its full-year guidance for sales and earnings.
Net income declined by 23.4 percent to $8.2 million in the latest quarter, while sales were down by 2.7 percent to $253.4 million. Cliff Sifford, the company's chief executive, said on a conference call with analysts that historically, in conjunction with the timing of tax refunds, customers use the beginning of the year as a second back-to-school sales period, where they replace the athletic footwear purchased in July and August. This year, an escalation of sales occurred in the first few weeks of the tax refund season, but sales results never hit the peaks experienced in similar periods in the past year. In addition, the later Easter selling season hurt sales because the holiday moved away from the timing of the spring break.
Among the various product categories, the adult athletic segment declined by a low-single digit on a comparable sales basis. Women's non-athletic comparable sales were down by high single digits, while men's non-athletic comparable sales dipped by mid-single digits. Children's shoes were down by low single digits. In the first quarter, the company opened seven stores in Michigan, Florida, Virginia, Texas and Pennsylvania.
Overall, the gross margin decreased by 0.5 percentage points to 28.5 percent at Shoe Carnival.
Despite the poor performance, Sifford said he was encouraged by the early positive trend that the company had experiencing in May. He added that the company expects that the positive athletic and athleisure trend in footwear will continue, with the company having reallocated inventory dollars to these categories for the second half to take advantage of it.
For the full year, Shoe Carnival's sales are expected to reach a range of $1,002 million to $1,018 million, with comparable store sales flat to down by low single digits. This is not as good as the company's prior outlook for sales of $1,028 million to $1,040 million and comparable store sales flat to up by low single digits. The company says it plans to open 19 new stores and close 18 to 20 stores in the current financial year.