UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)

For the fiscal year ended:   February 1, 2020or

or

For the transition period from ____________________  to  ____________________

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.

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Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. [X]

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. [ ]

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

The aggregate market value of the voting stock held by non-affiliates of the registrant based on the last sale price for such stock at August 2, 2019July 29, 2022 (the last business day of the registrant’s most recently completed second fiscal quarter) was approximately $257,270,831$398,045,237 (assuming solely for the purposes of this calculation that all Directors and executive officers of the registrant are “affiliates”).

Number of Shares of Common Stock, $.01 par value, outstanding at March 18, 202017, 2023 was 14,009,059.27,167,658.

DOCUMENTS INCORPORATED BY REFERENCE

TABLE OF CONTENTS

PART I

PART II

PART III

PART IV

Shoe Carnival, Inc.

Evansville, Indiana

Annual Report to Securities and Exchange Commission

For the Fiscal Year Ended February 1, 2020January 28, 2023

PART I

Cautionary Statement Regarding Forward-Looking Information

This Annual Report on Form 10-K contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, 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: our ability to control costs and meet our labor needs in a rising wage, inflationary, and/or supply chain constrained environment; our ability to maintain current promotional intensity levels; the duration, spread and spreadany remaining effects of the COVID-19 outbreak,pandemic, mitigating efforts deployed, byincluding the effects of government agencies and the public at large, and the overall impact from such outbreakstimulus on the operations of our stores, economic conditions, financial market volatility, consumer spending, and the pandemic’s overall impact on our supply chainoperations; our ability to achieve expected operating results, synergies, and distribution processes;other benefits from the Shoe Station acquisition within expected time frames, or at all; the potential impact of national and international security concerns, including those caused by war and terrorism, on the retail environment; general economic conditions in the areas of the continental United States in whichand Puerto Rico where our stores are located and the impact of the ongoing economic crisis in Puerto Rico on sales at, and cash flows of, our stores located in Puerto Rico;located; the effects and duration of economic downturns and unemployment rates; changes in the overall retail environment and more specifically in the apparel and footwear retail sectors; our ability to generate increased sales at our stores;sales; our ability to successfully navigate the increasing use of online retailers for fashion purchases and the impact on traffic and transactions in our physical stores; the success of the open-air shopping centers where many of our stores are located and its impact on our ability to attract customers to our stores; our ability to attract customers to our e-commerce websiteplatform and to successfully grow our e-commerceomnichannel sales; the potential impacteffectiveness of nationalour inventory management, including our ability to manage key merchandise vendor relationships and international security concerns on the retail environment;direct-to-consumer initiatives; changes in our relationships with other key suppliers; our ability to control costs and meet our labor needs in a rising wage environment; changes in the political and economic environments in, the status of trade relations with, and the impact of changes in trade policies and tariffs impacting, China and other countries which are the major manufacturers of footwear; the impact of competition and pricing; our ability to successfully manage and execute our marketing initiatives and maintain positive brand perception and recognition; our ability to successfully manage our current real estate portfolio and leasing obligations; changes in weather, including patterns impacted by climate change; changes in consumer buying trends and our ability to identify and respond to emerging fashion trends; the impact of disruptions in our distribution or information technology operations; the effectiveness of our inventory management; the impact of natural disasters, other public health crises, political crises, civil unrest, and other catastrophic events on our storesoperations and the operations of our suppliers, as well as on consumer confidence and purchasing in general; risks associated with the seasonality of the retail industry; the impact of unauthorized disclosure or misuse of personal and confidential information about our customers, vendors and employees, including as a result of a cyber-securitycybersecurity breach; our ability to manage our third-party vendor relationships; our ability to successfully execute our business strategy, including the availability of desirable store locations at acceptable lease terms, our ability to identify, consummate or effectively integrate future acquisitions, our ability to implement and adapt to new technology and systems, our ability to open new stores in a timely and profitable manner, including our entry into major new markets, and the availability of sufficient funds to implement our business plans; higher than anticipated costs associated with the closing of underperforming stores; the inability of manufacturers to deliver products in a timely manner; an increase in the cost, or a disruption in the flow, of imported goods; the impact of regulatory changes in the United States, including minimum wage laws and regulations, and the countries where our manufacturers are located; the resolution of litigation or regulatory proceedings in which we are or may become involved; continued volatility and disruption in the capital and credit markets; and future stock repurchases under our stock repurchase program and future dividend payments. For a more detailed discussion of risk factors impacting us, see PART I, ITEM 1A. RISK FACTORS1A, "Risk Factors" of this Annual Report on Form 10-K.

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ITEM 1.BUSINESS

Our Company

Shoe Carnival, Inc. is one of the nation’s largest omnichannel sellers of family footwear. We operate a retail focused business model that aims to deliver the leading footwear retailers, providingshopping experience with the conveniencenational name brands desired by our customers. Our "bricks" first, omnichannel approach provides customers easy access to our wide assortment of shopping at anybranded footwear for work, athletics, daily activities and special events via their choice of delivery channel. We have a proven track record selling branded footwear, such as Nike, Skechers, adidas, Puma, HEYDUDE, Converse, Vans and Crocs, and generating profits without incurring debt. We have been in business for 44 years and have been a public company subject to SEC reporting requirements since 1993. Since 1993, we have earned a profit in every year except one.

We have experienced transformational growth in our business over the last two fiscal years, driven primarily by changes in our marketing and pricing strategies and the consummation and integration of our store locations, our mobile app or online.  We offer customers a broad assortmentfirst acquisition. Our total Diluted Net Income per Share earned over the past two fiscal years of moderately priced dress, casual$9.38 ($3.96 in Fiscal 2022 and athletic footwear for men, women and children with an emphasis on national name brands. We differentiate our retail concept from our competitors by our distinctive, fun and promotional marketing efforts. On average, our stores are approximately 10,800 square feet, generated approximately $2.5 million$5.42 in annual sales in fiscal 2019 and carry inventory of approximately 27,800 pairs of shoesFiscal 2021) exceeded the Diluted Net Income per location.  Share earned over the preceding 13 years combined.

As of February 1, 2020,our Fiscal 2022 year end, we operated 392397 stores inacross 35 states and Puerto RicoRico. Including e-commerce sales in close proximity to a physical store, our comparable physical stores generated an average of $3.2 million in Net Sales in Fiscal 2022 and offered online shopping at www.shoecarnival.com.over $281 in Net Sales per square foot. We believe there is room within our existing markets to grow our store count to over 500 stores by 2028 through both organic and acquired store growth. We believe this opportunity to increase our scale, together with stable double-digit operating income margins, will continue to drive shareholder value and our future earnings potential.

We are an Indiana corporation that was initially formed in Delaware in 1993In Fiscal 2022, our Net Sales were $1.26 billion and reincorporated in Indiana in 1996.  our goal is to be a multi-billion dollar omnichannel retailer by 2028.

Our fiscal year is a 52/53 week year ending on the Saturday closest to January 31. Referred to herein, Fiscal 2022 is the fiscal year ended January 28, 2023; Fiscal 2021 is the fiscal year ended January 29, 2022; Fiscal 2020 is the fiscal year ended January 30, 2021; and Fiscal 2019 is the fiscal year ended February 1, 2020. Fiscal years 2022, 2021, 2020 and 2019 all consisted of 52 weeks.

References to our store banners “Shoe Carnival,”Carnival” and “Shoe Station” are to the individual banners, not the entire company. References to “we,” “us,” “our” and the “Company” in this Annual Report on Form 10-K refer to Shoe Carnival, Inc. and its subsidiaries.

Key Competitive Strengths

We believe our financial success is due to a number of key competitive strengths that make Shoe Carnival, a destinationInc. is an Indiana corporation that was initially formed in Delaware in 1993 and reincorporated in Indiana in 1996.

References to the “SEC” refer to the United States Securities and Exchange Commission.

See PART II, ITEM 7, "Management's Discussion and Analysis of choiceFinancial Condition and Results of Operations" in this Annual Report on Form 10-K for today’smore information regarding the trends impacting our Fiscal 2022 operating results.

Our Banners

Shoe Carnival

Our Shoe Carnival retail consumer.

Distinctive shopping experience  

Ourconcept has developed over our 44 year history and is differentiated from competitors by our distinctive, fun and promotional marketing efforts. Shoe Carnival stores combine competitive pricing with a promotional, high-energy in-store environment that encourages customer participation and injects fun and excitement into every shopping experience.participation. Unique features of our store experience include upbeat music, opportunities for our customercustomers to spin our iconic spin-n-win wheel and a mic-person who runs specials for customers shopping at our stores.in-store specials. These specials include contests, and games and hot deals of the moment to encourage customers to take immediate advantage of our promotionalspecial, in-store pricing. Our staff is dedicated to customer service and assists and educates customers with the features and location of merchandise, as well as finding sizes, styles and colors. We believe our distinctive shopping experience gives us various competitive advantages, including increased multiple unit sales; the building of a loyal, repeat customer base; the creation of word-of-mouth advertising; and enhanced sell-through of in-season goods.  A similar customer experience is reflected in our e-commerce site and mobile app through special promotions and limited time sales.

Broad merchandise assortment

Our objective is to be the destination retailer-of-choice for value-priced, on-trend branded and private label footwear.  Our product assortment includes dress and casual shoes, sandals, boots and a wide assortment of athletic shoes for the entire family.  Our average store carries shoes in four general categories – women’s, men’s, children’s and athletics, as well as a broad range of accessories such as socks, belts, shoe care items, handbags, hats, sport bags, backpacks and wallets.  Footwear is organized by category and brand, creating strong brand statements within the aisles.  These brand statements are underscored by branded signage on endcaps and in-line signage throughout the store.  Our signage may highlight a vendor’s product offerings or sales promotions, or may highlight seasonal or lifestyle statements by grouping similar footwear from multiple vendors.  Our e-commerce site offers customers a large assortment of products in all categories of footwear with an increased depth of sizes and colors that may not be available in all stores.

Value pricing for our customers

Our customer is primarily a moderate income, value-conscious consumer seeking name brand footwear across all ages.  We believe that by offering a wide selection of popular styles of name brand and private label merchandise at competitive prices, we generate broad customer appeal. Additionally, the time-conscious customer appreciates the convenience of one-stop shopping for the entire family, whether this occurs at anyAs of our store locations, online at www.shoecarnival.com or through our mobile app.  Our fun and promotional shopping environment adds to our value-priced reputation.

Efficient store level cost structure

Our cost-efficient store operations and real estate strategy enable us to price products competitively.  We achieve low labor costs by housing merchandise directly on the selling floor in an open stock format, allowing customers to serve themselves, if they choose.  This reduces the staffing required to assist customers and reduces store level labor costs as a percentage of sales.  We locate stores predominantly in open-air shopping centers in order to take advantage of lower occupancy costs and maximize our exposure to value-conscious shoppers.

Heavy reliance on information technology

We have invested significant resources in information technology.  Our proprietary inventory management and advanced point-of-sale (“POS”) systems provide corporate management, buyers and store managers with the timely information necessary to monitor and control all phases of operations.  The POS provides, in addition to other features, full price management (including price look-up), promotion tracking capabilities (in support of the spontaneous nature of the in-store price promotions), real-time sales and cost of sales by product category at the store level and customer tracking.  Using the POS, store managers are able to monitor sales and cost of sales on a real-time basis throughout the day.  Reacting to sales trends, our mic-people use the POS to choose from among a number of product promotions supplied by our centralized merchandising staff.  

Our centralized network connects our corporate office to our distribution center and retail stores via a wide area network, providing up-to-date sales and inventory information as required.  Our data warehouse enables our merchandising and store operations staff to analyze sales, margin and inventory levels by location, by day, down to the size of shoe.  Using this information, our merchandise managers meet regularly with vendors to compare their product sales, gross margins and return on inventory investment against previously stated objectives.  We believe timely access to key business data has enabled us to drive annual comparable store sales increases, manage our markdown activity and improve inventory turnover.

In fiscal 2019, we began developing and deploying new processes underlying our traffic management (“TMS”), warehouse management (“WMS”) and order management (“OMS”) systems in order to build a more efficient supply chain, position us for long-term growth and ultimately enhance customer satisfaction and convenience in an increasingly competitive environment.  We believe that the expected enhancements to these systems will enable us to meet the complex demands of multi-channel fulfillment, but they will require significant investments in infrastructure and technology.  We have partnered with a third-party developer to provide a hosted solution for the deployment of the necessary software and tools to implement these improvements.  We expect these systems to go live in mid-fiscal 2020.

Growth Strategy

Store portfolio

Increasing market penetration by opening new stores has historically been a key component of our growth strategy, and we continue to focus on generating positive long-term financial performance for our store portfolio.  We opened one new store in fiscal 2019 and expect to open a limited number of new stores in existing markets in fiscal 2020.  We expect to pursue opportunities for brick-and-mortar store growth across large and mid-size markets as we leverage customer data from our Customer Relationship Management (“CRM”) program and more attractive real estate options become available.  Further, our future store growth may continue to be impacted by the current economic uncertainty associated with the COVID-19 pandemic.  Our CRM program is more fully described below under “Multi-Channel Strategy – Customer Relationship Management.”  

Our ability to cluster stores has been critical to the success of opening new stores in larger markets or geographic areas.  In large markets (populations greater than 400,000), clustering involves opening two or more stores at approximately the same time.  In smaller markets that can only support a single store, clustering involves seeking locations in reasonably close proximity to other existing markets.  This strategy creates cost efficiencies by enabling us to leverage store expenses with respect to advertising, distribution and management costs.  We believe the advantages of clustering stores in existing markets will lead to cost efficiencies and overall incremental sales gains that should more than offset any adverse effect on sales of existing stores.

We have continuously analyzed our portfolio of stores, with a concentration on underperforming stores, to meet our long-term goal of increasing shareholder value through increasing operating income. Our objective is to identify and address underperforming stores that produce low or negative contribution and either renegotiate lease terms, relocate or close those stores.  Based on this analysis, we closed six stores in fiscal 2019 and expect store closures to occur in fiscal 2020. Even though store closings could reduce our overall net sales volume, we believe this strategy will realize long-term improvement in operating income and diluted net income per share.

As of February 1, 2020,Fiscal 2022 year end, we operated 392373 Shoe Carnival stores located across 35 states and Puerto Rico.  Rico and offered online shopping at www.shoecarnival.com.

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Shoe Station

On December 3, 2021, we acquired the physical stores and substantially all of the other assets and liabilities of privately-held, family-owned Shoe Station, Inc. ("Shoe Station"). The Shoe Station assets were acquired for approximately $70.4 million, funded with cash on hand. This acquisition was the first in our history. As of our Fiscal 2022 year end, we operated 24 stores across five states in the Southeast under the Shoe Station banner, inclusive of the 21 stores acquired and three additional stores opened since the acquisition. The addition of this banner has created a complementary retail platform for us to serve a broader base of family footwear customers in both urban and suburban demographics.

Net Sales attributed to the Shoe Station banner were $99.9 million in Fiscal 2022 and $16.6 million from the acquisition date through January 29, 2022 in Fiscal 2021. The Shoe Station e-commerce website, www.shoestation.com, went live on our e-commerce platform in early February 2023. More information on the acquisition can be found in Note 3 - "Acquisition of Shoe Station" in our Notes to Consolidated Financial Statements contained in PART II, ITEM 8 of this Annual Report on Form 10-K.

Our Diversified Sales Mix

We sell broadly across the family footwear channel, with balanced distribution among type of customer (men, women and children), product (athletics and non-athletics) and age (senior citizens to infants) with no singular reliance on any particular segment. The products we offer are a mix of footwear necessities for sport, work, daily activities and special events. The table below sets forth our percentage of sales by product category over the last five fiscal years.

Our Strategic Growth Initiatives

Store Growth

Increasing market penetration by adding new stores averagedis as a key component of our growth strategy. We are targeting operating at least 500 stores by 2028. We believe our current store footprint provides for near-term fill-in opportunities within existing markets as well as longer-term growth to new markets within the United States. In Fiscal 2022, we opened four new stores (one Shoe Carnival store and three Shoe Station stores) within existing markets. We aim to operate approximately 10,800 square feet, ranging10 to 20 new stores in size from 4,000Fiscal 2023 with additional store growth acceleration in 2024 and beyond. This increased scale will be accomplished through a combination of both organic and acquired store growth. In the near term, our focus is to 26,000 square feet.  Newprimarily grow the Shoe Station banner within our existing footprint, and we aim to achieve 100 Shoe Station stores also by 2028.

Store Modernization

As a key component to increasing comparable store sizes typically depend upon location and population base, and our stores are predominantly locatedsales, in open-air shopping centers.  Our traditional store prototype typically utilizes between 8,000 and 12,000 square feet of leased area.  During the past several years,Fiscal 2021 we began a multiyear project to roll out scalablemodernize our store prototypes that reflectfleet. In Fiscal 2022 and Fiscal 2021 our capital expenditures were $77.3 million and $31.4 million,

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respectively, with a primary focus on store modernization and new stores. Our new store design is viewed as a differentiator by certain strategic vendor partners and has provided us an opportunity to increase access to branded merchandise in the diverse population densitiesnear term.

As of Fiscal 2022 year end, 41% of our markets.  These scalable prototypes utilize a wide range of leased space based on sales potential and opportunistic space availability.  The sales area is approximately 85%fleet modernization program has been completed, representing 164 of the typical gross store footprint.

The following table identifies the number397 stores in our fleet. Over 60% of our storesfleet modernization program is expected to be completed by Fiscal 2023 year end. The entire program is expected to be completed in each state and Puerto Rico as of February 1, 2020:the Fiscal 2024 - Fiscal 2025 horizon.

E-commerce Growth

We lease all store locations, as we believe the flexibility afforded by leasing allows us to avoid the inherent risks of owning real estate, particularly with respect to underperforming stores.  Before entering a new market, we perform a market, demographic and competition analysis to evaluate the suitability of the potential market.  Potential store site selection criteria include, among other factors, market demographics, traffic counts, tenant mix, visibility within the center and from major thoroughfares, overall retail activity of the area and proposed lease terms.  The time required to open a store after signing a lease depends primarily upon the property owner’s ability to deliver the premises.  After we accept the premises from the property owner, we can generally open a turnkey store within 60 days and

openOur e-commerce platform is an “as-is” store in up to 115 days.  A turnkey store is generally available for immediate use from the landlord, as the landlord performs nearly all aspects of construction and delivers the store in a condition ready for fixtures.  There are typically minimal tenant improvement allowances negotiated with landlords for turnkey stores.  An “as-is” store typically requires more significant capital investment by us, as the landlord performs minimal construction and delivers the space “as-is” while representing that the location is free of hazardous materials.  There are typically significant tenant improvement allowances negotiated with landlords for “as-is” stores.  

To do our part in helping to prevent the rapid spread of COVID-19 and to align with the evolving guidance from federal, state and local governments and health officials, we temporarily closed our stores across the United States and Puerto Rico effective March 19, 2020 until April 2, 2020.  Our website and mobile app are continuing to take e-commerce orders, which are generally being fulfilled at our store locations.  Store associates are being paid as scheduled during this timeframe.  As guidance and mandates from governments and health officials continue to evolve, closures to some, or all,extension of our operations will needphysical stores and is designed to extend beyond the announced closure period.

Multi-Channel Strategy

Our goal is to be a world class multi-channel retailer.  The foundation ofimprove our multi-channel strategy is connecting customers with our wide assortment of store inventory through multiple channels, while maintaining a personalized, seamless customer service experience.  Our customer’s shopping journey bridges multiple devices and touchpoints.experience. We are committed to providing an incomparablea personalized, seamless customer experience across all channels, and we believe that our ongoing multi-channelomnichannel initiatives represent the cornerstone for our long-term growth and are aligned with rapidly changing consumer behavior.  These initiatives are an integral part

Our customers will have new online experiences in Fiscal 2023, as we launched our www.shoestation.com website in February 2023, and we expect to relaunch our www.shoecarnival.com website later in Fiscal 2023. We have completed the technology migration for both banners to a single platform hosted by a leading provider. This marks the first major redesign of expanding our multi-channel footprintShoe Carnival website since 2016. We anticipate these enhancements will increase user conversion, enhance the ease of navigation and creating opportunitiesimprove overall functionality compared to connect withthe legacy website design.

We continue to expect our customerse-commerce platform to be a significant sales channel for us. Our goal is for our e-commerce sales channel to provide between 10% and 15% of enterprise-wide merchandise sales, versus a pre-pandemic 6% in new ways.  Fiscal 2019. E-commerce sales represented approximately 10% of our merchandise sales in Fiscal 2022, 12% in Fiscal 2021 and 19% in Fiscal 2020 as impacted by changes in customer shopping behavior during the peak of the pandemic.

Customer Relationship Management ("CRM")

In fiscal 2019, we continuedOur CRM program continues to investprovide valuable customer insights to our business, resulting in CRMmore efficient and completed the launch of our new, upgradedeffective marketing outreach. CRM platform in the third quarter of fiscal 2019.  This new platform includes a new production CRM database for a single source of customer information, identity resolution for multiple customer records, a new loyalty management platform and a new campaign management solution.

This new CRM platform provides our marketing, merchandising, analytics and real estate teams with a holisticbetter and more complete view of our customer’s shopping behaviors and forms the foundation of our digital marketing efforts and our Shoe Perks loyalty program (“Shoe Perks”). Our improved view into customer data allows us to more effectively communicate with our customers on a segmented basis through all owned and paid media channels and tailor the merchandise mix down to a store level. Through transaction data, we are gaininggain useful insights into our customers’ shopping habits, including where, when and how they shop our stores and navigate our online presence. Additionally, we are gainingour CRM program allows us to gain a deeper understanding of the brands and categories that our high-value customers consistently purchase so that we can continue to deliver strong performancemeet this customer need and demand at a geographic and store level.

Our CRM program allows us to drive customer retention by delivering to each customer more individualized shopping opportunities and experiences and aids in gaining a better understanding of our existing customer base as well as identifying new customers. We expect segmentation and activation of our high-value customers through data analysis and targeting the broader market of ‘look-a-like’ customers to continue to play a key role in our growth.

Customers who enrollOnce a customer enrolls in our Shoe Perks loyalty program or register on our website receiveand provides a means for digital communication, the customer will begin receiving personalized e-mail communications from us. These communications afford us additional opportunities to highlight our broad product assortment and promotions. Our Shoe Perks loyalty program provides customers with a heightened shopping experience, which includes exclusive offers and rewards that are earned by making purchases either in-store or online and through participating in other point earning opportunities that facilitate engagement with our brand.  brand and the national name brands we offer.

We remain highlyare focused on expanding our Shoe Perks enrollment. In fiscal 2019, we added 2.4 million new members, which brought total loyaltyFiscal 2022, our Shoe Perks membership grew to 23.932.1 million members, at therepresenting an increase in new customers of 34% compared to pre-pandemic Fiscal 2019 year end of fiscal 2019, an 11% increase

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Our in-store merchandise is displayed directly on the selling floor in an open stock format, allowing customers to serve themselves, if they choose. Our trained staff is dedicated to customer service and assists and educates customers with the features and location of merchandise, as well as finding sizes, styles and colors. Our new store design incorporates the use of digital screens that are centrally controlled and are more adaptable than printed visual in-store advertising. These digital screens further enhance the in-store shopping experience and provide another opportunity for our vendors to compete for in-store advertising. We believe our distinctive shopping experience gives us various competitive advantages, including increased multiple unit sales, the building of a 15% increase over fiscal 2018.  loyal, repeat customer base, the creation of word-of-mouth advertising, and enhanced sell-through of in-season goods.

Broad Merchandise Assortment

E-commerceOur product assortment is comprised primarily of on-trend branded footwear for the entire family and Mobile

includes dress and casual shoes, sandals, boots and a wide assortment of athletic shoes. Our physical stores carry shoes in two general categories – athletics and non-athletics with subcategories for men's, women's and children's shoes, as well as a broad range of accessories. Our e-commerce platform offers customers a large assortment of products in all categories of footwear with an increased depth of sizes and mobile storefrontscolors that may not be available in all stores. Although the core merchandise assortment tends to be similar for each store, there are differences between our store banners, and to some extent, there is further differentiation by store under each banner, reflecting each store’s unique demographics and customer interests. Our knowledge of these interests, combined with our vendor relationships and distribution process, allows us to react quickly to emerging trends or special events.

Information Technology

Our proprietary inventory management and advanced point-of-sale (“POS”) systems provide us with the timely information necessary to monitor and control all phases of operations. The POS provides, in addition to other features, full price management, promotion tracking capabilities (in support of the spontaneous nature of the in-store price

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promotions), real-time sales and cost of sales by product category at the store level and customer tracking. Using the POS, both store personnel and centralized merchandising staff are able to monitor sales, cost of sales and the success of product promotions in real-time.

Our systems provide up-to-date sales and inventory information. Our data warehouse enables our merchandising and store operations staff to analyze sales, margin and inventory levels by store. Using this information, our merchandise managers meet regularly with vendors to compare product sales and margins and return on inventory investment against previously stated objectives. We believe timely access to key business data has enabled us to drive our comparable store sales, manage our markdown activity and improve inventory turnover.

Efficient E-commerce Order Management and Fulfillment (Ship-From-Store and Vendor Drop Ship Program)

We recently implemented a third party hosted order management system designed to improve the customer’s journey and allowour specific needs, which has enabled us to provide a more relevantmeet the complex demands of omnichannel fulfillment and personalized shopping experiencehas positioned us for our customers. We continue to build upon this foundation and added new functionality in fiscal 2019, including mobile payment options and the ability to shop from a specific Shoe Carnival store location.  Due to our multi-channel retailer strategy, we viewscaling our e-commerce and mobile salescapabilities as an extension of our physical stores.we grow.

Given our desire to connect with customers anywhere and anytime, our mobile strategy is an important component of the customer’s journey and our overall multi-channel strategy. A majority of our customers are accessing our e-commerce site on their mobile devices, and we continue to enhance our mobile web experience to better serve the unique needs of each of our customers. In addition, our mobile app offers native e-commerce functionality directly from the app and provides Shoe Perks members easy access to their rewards.  When in physical stores, customers can use their mobile devices to scan bar codes that access product ratings and reviews and find extended sizes.  

Ship-From-Store

Our Ship-From-Store program is a core element of our multi-channelomnichannel strategy. This program allows stores to fulfill onlineOnline orders and has been implemented on a chain-wide basis (with limited exceptions).are primarily fulfilled using physical stores. By fulfilling e-commerce orders principally from our store level inventory and staff, we are able to minimize out-of-stocks, offer our customers an expanded online assortment and leverage store level inventory and overhead. E-commerce orders arecan also be fulfilled from our distribution center in Evansville, Indiana.Indiana and the distribution center is used in times of peak demand.

Vendor Drop-Ship Program

We also maintain a vendor drop-ship program with select business partners. This program offers our customers an expanded online assortment of styles and colors that we do not carry in-store. While our customers benefit from expanded item assortment, the functionality of this program is seamless, and our customers’ online experience is not impacted by the vendor drop-ship fulfillment option. We benefit from this program by not having to make a capital investment in the expanded inventory assortment, which is carried and fulfilled by our business partners participating in this program.

Competitive Pricing For Our Customers

Buy Online, Pick Up In Store

Another key elementOur customer is primarily a value-conscious consumer seeking name brand footwear across all ages, with our Shoe Station banner targeting a higher price point and more suburban customer. We believe that by offering a wide selection of our multi-channel strategy is our “buy online, pick up in store” program.  Not only can our customers choose to pick up their e-commerce orders in-store, but they can now shop their favorite or nearby stores online and only seepopular styles of primarily name brand merchandise at competitive prices, we generate broad customer appeal. Additionally, the product that is available in any given store. This program providestime-conscious customer appreciates the convenience of local pickupone-stop shopping for our customers with the added benefit of driving traffic back to our stores.  

Shoes 2U

Our Shoes 2U program enables us to ship product from any store to a customer’s home or store of their choice if they are unable to find the size, color or style of a shoe in the store in which they are shopping.  This creates an endless aisle experience for our customers in which our chain-wide inventory is accessible to any store customer.  

Order Management System

In fiscal 2020, we will launch a new hosted OMS, which we expect will enhance the operational efficiency of our direct-to-consumer programs. Combined with our new WMS capabilities, we will have the ability to optimize the allocation of e-commerce and Shoes 2U orders and further leverage our distribution center.  Moreover, with our new OMS, we will have increased insight into customer transactions, enhanced visibility as to availability of inventory and seamless orchestration of orders across the Company.

Merchandise

Critical to our success is maintaining fresh, fashionable merchandiseentire family, whether this occurs at moderate prices.  Our buyers stay in touch with evolving fashion trends and adjust growth strategies based on these trends.  This is accomplished by subscribing to an industry leading trend service, shopping fashion-leading markets, attending national trade shows, gathering vendor input and monitoring the current styles shown in leading fashion and lifestyle magazines.

Our buyers and planners have years of experience and in-depth knowledge of our customers and the markets in which we operate.  This helps us select our assortment and quantities in order to manage and allocate inventories at the store level.  The mix of merchandise and the brands offered in a particular store reflect the demographics of each market, climate and seasonality, among other factors.  Management encourages store operations personnel to provide input to our merchandising staff regarding market specific fashion trends.  Our e-commerce site offers customers an opportunity to choose from a large selection of products in all of the same categories of footwear and introduces our concept to consumers who are new to Shoe Carnival, in both existing and new markets.  

Our stores and e-commerce site offer a broad assortment of current-season, name brand footwear, supplemented with private label merchandise.  Our stores carry complementary accessories such as socks, belts, shoe care items, handbags, hats, sport bags, backpacks and wallets, while our e-commerce site offers certain handbags, sport bags and backpacks.  We purchase merchandise from approximately 160 footwear vendors.  Management of the purchasing function is the responsibility of our Executive Vice President – Chief Merchandising Officer.  Our buyers maintain ongoing communication with our vendors and provide feedback to our vendors on sales, profitability and current demand for their products.  We adjust future purchasing decisions based upon the results of this analysis.  In fiscal 2019, two branded suppliers, Nike, Inc. and Skechers USA, Inc., collectively accounted for approximately 41% of our net sales.  Nike, Inc. accounted for approximately 30% and Skechers USA, Inc. accounted for approximately 11% of our net sales, respectively.  Name brand suppliers also provide us with cooperative advertising and visual merchandising funds.  A loss of any of our key suppliers in certain product categoriesstore locations or through our inability to obtain name brand or other merchandise from suppliers at competitive prices could have a material adverse effect on our business.  As is common in the industry, we do not have any long‑term contracts with our suppliers.  omnichannel choices.

Initial pricing levels are typically established in accordance with the manufacturer’s suggested retail pricing structure.  Subsequent to this initial pricing, our buying staff manages our markdown cadence based on product-specific sell-through rates to achieve liquidation of inventory within the natural lifecycle of the product.  We emphasize our value proposition to customers by combining current season name brand products with marketing promotions.  These promotions include both advertised limited time sale offerings in addition to in-store and online timed specials.

The table below sets forth our percentage of merchandise sales by product category.Competition

Women’s, men’s and children’s non-athletic footwear categories are further divided into dress, casual, sport, sandals and boots.  We classify athletic shoes by functionality, such as running, basketball or fitness shoes.

Building Brand Awareness

Our goal is to communicate a consistent brand image across all aspects of our operations and throughout our marketing mix of paid, owned and earned channels.  We highlight brands, as well as specific styles of product, using lifestyle and product imagery to showcase the product. The use of digital media continues to grow in importance in our marketing mix, particularly as we leverage data that comes directly from our customers as part of our CRM solution, allowing us to directly communicate with our core customers.  For fiscal 2019, approximately 48% of our total advertising budget was directed to digital media, television and radio.  Print media (including inserts, direct mail and newspaper advertising) and outdoor advertising accounted for the balance of our total advertising budget.    

We strive to make each store opening a major retail event.  Major promotions during grand openings and peak selling periods feature contests and prize giveaways.  We believe our grand openings help establish a high-energy, promotional atmosphere that develops a loyal, repeat customer base and generates word of mouth advertising.  

Distribution

We operate a single 410,000 square foot distribution center located in Evansville, Indiana.  Our facility is leased from a third party and can support the processing and distribution needs for up to 460 stores based on our current configuration.  We have the right to expand the facility by 200,000 square feet, which would provide us processing capacity to support approximately 650 stores.  

Our distribution center is equipped with state-of-the-art processing and product movement equipment.  The facility utilizes cross docking/store replenishment and redistribution methods to fill store product requirements.  These methods may include count verification, price and bar code labeling of each unit (when not performed by the manufacturer), redistribution of an order into size assortments (when not performed by the manufacturer) and allocation of shipments to individual stores.  Throughout packing, allocating, storing and shipping, our distribution process is essentially paperless.  Merchandise is typically shipped to each store location once per week.  For stores within the continental United States, a dedicated carrier, with occasional use of common carriers, handles the majority of shipments.  Our shipments to Puerto Rico are loaded for containerized overseas shipment, with final delivery by a third-party provider.  

We are in the process of enhancing our current configuration and the key processes underlying our supply chain and distribution systems in order to optimize our supply chain and drive warehouse efficiency.  These new processes will allow us to modernize our distribution center to keep pace with the customers’ needs.  These enhancements are hosted solutions that will be integrated with our existing systems and require significant investment, including the payment of hosting fees long-term.  

Competition

The retail footwear business is highly competitive. We believe the principal competitive factors in our industry are merchandise selection, price, fashion, quality, location, shopping environment and service. We compete with department stores, shoe stores, sporting goods stores, e-commerce retailers and mass merchandisers.  Our specific competitors vary from market to market. We compete with most department stores and traditional shoe stores by offering competitive prices. We compete with off-price retailers, mass merchandisers and discount stores by offering a wider and deeper selection of merchandise. Many of our competitors are significantly larger and have substantially greater resources than we do.  However, we

Culture and Human Capital Management

We have intentionally built an employee-centric, customer-focused organization designed to compete at the highest levels in the retail industry. Our commitment to, and investment in, a strong performance culture is paramount to our long-term sustainability and success.

Workforce Diversity

We serve a diverse customer base and seek diversity in and among our workforce in all areas, from our stores to our distribution center and our corporate offices. We are firmly committed to providing equal opportunities in all aspects of employment and believe that all individuals should be treated with respect and dignity. Diversity is an important

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element in our distinctive retail format, in combinationongoing annual mandatory training for all employees and managers. We do not tolerate harassment or unlawful discrimination of any kind.

We have clear policies encouraging strong relationships and protecting open lines of communication with management at every level. This, coupled with our wide merchandise selection, competitive pricesnon-retaliation policy, encourages employees to raise issues and low operating costs, enablesseek immediate redress of those issues if they should arise.

We understand the value of diversity at all levels, whether of gender, race, ethnicity, background or experience. As of our Fiscal 2022 year end, our workforce identified as 64% female and 36% male. Our broad-based leadership team, including those who manage and lead our stores and those who lead our Company, identified as 60% female and 40% male. With respect to ethnicity, our leadership team identified as 64% Caucasian and 36% non-Caucasian. The diversity of our leadership team trends with the diversity of our customer base, which based on recent data from our Shoe Perks customer loyalty program, approximates 70% Caucasian and 30% African American, Hispanic or Asian and is more female than male.

In our corporate leadership roles (senior director-level employees through our named executive officers), the percentage identifying as female has significantly increased over the last five years from 5% to 18% with several departments, such as human resources, merchandising and technology, being led by those that identify as female.

We are also focused on the diversity of our Board. Currently, two of four (50%) of our non-employee Board members and two of seven of our total Board identify as female. We are continuing to refresh our Board and assess long-term succession as well as the diversity of the Board’s collective skill set. Over the last three years, three board members have transitioned, creating opportunity for new directors who have enhanced our diversity.

Retention

We believe our employee-centric culture not only supports higher levels of execution and performance, but also has led to increased retention of key talent. During the height of the pandemic when other retailers furloughed or laid off employees, we took a different route, finding innovative ways to retain and pay our full-time associates. We believe this decision had a positive impact on our employees and the communities we serve. This decision also allowed for us to compete effectively.

Store Operations

Management of store operations isreopen quickly to meet the responsibilityin-store needs of our Executive Vice President - Chief Retail Operations Officer,customer base and other stakeholders.

Our store-level training programs provide the foundation for long-term careers and our ability to promote from within. We support the first-time jobs for many of our associates where they gain workforce experiences that may grow into long-term careers.

Currently, all of the general managers who is assistedoperate our Shoe Carnival bannered stores and 90% of our district managers who oversee those general managers were trained, developed and promoted from within. As of our Fiscal 2022 year end, of our 33 district managers across both banners, 61% have been employed by divisionalus for more than 20 years. The average tenure of the general managers who operate our Shoe Carnival and Shoe Station bannered stores was 14 years as of Fiscal 2022 year end.

Individuals who comprise our leadership team, which includes our named executive officers, vice presidents district managers and individualsenior director-level employees, have been employed by Shoe Carnival or Shoe Station for an average of 19 years.

Employee Benefits

Among the many ways we seek to serve our employees, we offer a complete range of benefits. These include competitive wages and incentives; an employee stock purchase plan with a discount off the fair value of our common stock; employer-subsidized medical plans with dental and vision benefits; qualified and unqualified defined contribution plans with employer matching contributions; and merchandise discounts, among other benefits.

Training and Code of Business Conduct and Ethics

We are dedicated to strengthening our culture and execution through ongoing training for all associates. We are uniquely focused on training within our store-level, customer-facing operations. Employees must obtain necessary

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certifications in order to be responsible for the keys to a store general managers.  Generally, each store hasand eventually to become a general managermanager. Our broad-based training program also engages and upeducates our employees on the following key topics:

More information regarding our approach to three store managers, dependingconducting business responsibly, including our guidelines on sales volume.  Storediscrimination and harassment, can be found in our Code of Ethics. Our Code of Ethics applies to all of our Board members, officers and employees, including our principal executive officer, our principal financial officer and our principal accounting officer.

Our Code of Ethics is posted on our website at investors.shoecarnival.com/governance/governance-documents. We intend to disclose any amendments to the Code of Ethics by posting such amendments on our website. In addition, any waivers of the Code of Ethics for our Board members or executive officers will be disclosed in a Current Report on Form 8-K.

Safety of our Employees and Security of our Data

We strive to provide our associates with a safe and healthy work environment. We measure OSHA recordable incidents to gauge the success of our safety protocol. During calendar year 2022, we recorded 71 non COVID-related OSHA recordable incidents, an approximate 7% reduction in incidents compared to five years ago. Excluding the Shoe Station operations, personnel make certain merchandising decisions necessarywhich continue to maximize salesbe integrated into our safety culture, the decrease compared to five years ago was 20%.

Our strategies to address the ever-expanding complexities of protecting customer and profits primarily through merchandise placement, signageemployee data and timely clearanceexecuting our business strategies in an increasingly digital world continue to advance. Our technology department monitors and regularly tests compliance with our protocols, provides regular updates to employees and management and conducts annual training.

Number of slower selling items.  Administrative functions are centralized at the corporate headquarters.  These functions include accounting, purchasing, store maintenance, information systems, advertising, human resources, distribution and pricing.  Management oversight for e-commerce is also located atEmployees

As of our corporate headquarters.

Employees

At February 1, 2020,Fiscal 2022 year end, we had approximately 5,1005,500 employees, of which approximately 2,9003,000 were employed on a part-time basis. The number of employees fluctuates during the year primarily due to seasonality. NoNone of our employees are represented by a labor union.

We attributeSeasonality

For a large portion of our success in various areas of cost control to our inclusion of virtually all management level employees in incentive compensation plans.  We contribute all or a portiondiscussion of the costimpact of medical, disability and life insurance coverage for those employees who are eligible to participate in Company‑sponsored plans.  Additionally, we sponsor retirement plans that are open to all employees who have met the minimum age and work hour requirements.  All employees are eligible to receive discountsseasonality on purchases from our stores.  We consider our relationship with our employees to be satisfactory.

Seasonality

Our quarterly results of operations have fluctuated and are expected to continue to fluctuate in the future, primarily as a result of seasonal variances and the timing of sales and costs associated with opening new stores and closing underperforming stores.  Non-capital expenditures, such as advertising and payroll incurred prior to the opening of a new store, are expensed.  The timing and actual amount of expense recorded in closing a store can vary significantly depending, in part, on the period in which management commits to a closing plan, the remaining basis in the fixed assets to be disposed of at closing and the amount of any lease buyout.  Therefore, our results of operations may be adversely affected in any quarter in which we incur pre-opening expenses related to the opening of new stores or incur closing costs related to the closure of existing stores.  

We have three distinct peak selling periods: Easter, back-to-school and Christmas.  To prepare for our peak shopping seasons, we must order and keep in stock significantly more merchandise than we would carry during other parts of the year.  Any unanticipated decrease in demand for our products during these peak shopping seasons could require us to sell excess inventory at a substantial markdown, which could reduce our net sales and gross margins and negatively affect our profitability.  Our operating results depend significantly upon the sales generated during these periods.

Trademarksand our business, see PART II, ITEM 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations - Impact of Store Count and Seasonality on Quarterly Results.”

Trademarks

We own the following federally registered trademarks and service marks: Shoe Carnival®and associated trade dress and related logos, The Carnival^Y-NOT?®, Donna Lawrence^®, Innocence^®, Y-NOT?^®, UNR8ED®, Solanz®, Cabrizi^®, Shoe Perks®, SC Work Wear®, When You Want To 2^®, A Surprise In Store®, Shoes 2U®, Laces for Learning® and, Princess Lacey’s Laces®, Shoe Station®, Shoe Station Super Store® and Shoe Station Select®. We believe these marks are valuable and, accordingly, we intend to maintain the marks and the related registrations. We are not aware of any pending claims of infringement or other challenges to our right to use these marks.

Environmental

We seek to minimize our impact on the environment and reduce our carbon footprint by actively implementing environmentally-friendly processes throughout our business, including energy efficiency initiatives, waste minimization and the use of recycled materials within our supply chain. Our most significant areas of focus are fuel

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and packaging material used to deliver merchandise to our distribution center and stores; the HVAC and lighting systems in our stores, distribution center and corporate office; and recycling methods.

Compliance with current federal, state and local provisions regulating the discharge of materials into the environment or otherwise relating to the protection of the environment has not had a material effect upon our capital expenditures, earnings or competitive position. We believe the nature of our operations have little, if any, environmental impact. We therefore anticipate no material capital expenditures for environmental control facilities for our current fiscal year or for the near future.

Available Information

We make available free of charge through the investor relations portion of our website at www.shoecarnival.com our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission.SEC. We have included our website address throughout this filing as textual references only. The information contained on, or accessible through, our website is not incorporated into this Annual Report on Form 10-K.

This Annual Report on Form 10-K filed with the Securities and Exchange Commission,SEC, including the financial statements and schedules thereto, without the accompanying exhibits, is available without charge to shareholders, investment professionals and securities analysts upon written request. Requests should be directed to Investor Relations at our corporate address. A list of exhibits is included in this Annual Report on Form 10-K, and exhibits are available from us upon payment to us of the cost of furnishing them.

Information about our Executive Officers

The following table sets forth certain information with respect to our executive officers as of the date of filing this Annual Report on Form 10-K, March 24, 2023:

Mr. Weaver has served as Chairman of the Board since March 1988. From 1978 until February 2, 1993, Mr. Weaver had served as President and Chief Executive Officer of Nine West Group Inc., a designer, developer and marketer of women’s footwear. He has over 50 years of experience in the footwear industry. Mr. Weaver is a former Director of Nine West Group Inc. Mr. Weaver served as Chairman and Chief Executive Officer of Jacksonville Jaguars, LTD, a professional football franchise, until January 2012. Mr. Weaver previously served two terms as a Director of Stein Mart, Inc., a publicly traded chain of off-price retail stores, from June 2014 until March 2016 and from November 2000 until April 2008.

Mr. Sifford has been employed as Vice Chairman of the Board since October 2021. From September 2019 and hasto September 2021, Mr. Sifford served as Vice Chairman of the Board and Chief Executive Officer and a Director since October 2012.Officer. Mr. Sifford also served as President and Chief Executive Officer from October 2012 to September 2019.2019 and has been a Director since October 2012. Mr. Sifford served as Chief Merchandising Officer from October 2012 to March 2016. From June 2001 to October 2012, Mr. Sifford served as Executive Vice President – General Merchandise Manager and from April 1997 to June 2001, Mr. Sifford served as Senior Vice President – General Merchandise Manager. Prior to joining us, Mr. Sifford served as Merchandise Manager – Shoes for Belk, Inc.

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Mr. Wordenhas been employed as President and Chief Executive Officer and a Director of the Company since October 2021. From September 2019 to September 2021, Mr. Worden served as President and Chief Customer Officer since September 2019. Fromand from September 2018 to September 2019, Mr. Worden served as Executive Vice President – Chief Strategy and Marketing Officer. Prior to joining us,the Company, Mr. Worden led the Northern European region for S. C. Johnson & Son, Inc. (“SC Johnson”), a manufacturer of household cleaning supplies and products, and was responsible for revenue and share growth objectives across six countries from May 2014 to July 2018. Prior to that, Mr. Worden served as Assistant to the Chairman and Chief Executive Officer of SC Johnson from May 2012 to May 2014 and as a Senior Marketing Director from 2009 to 2012. Mr. Worden also served as a Senior Brand Manager at Kimberly-Clark Corporation and held multiple marketing roles across theirits flagship brands during his tenure there from 2003 through 2009.

Mr. Jackson has been employed as Senior Executive Vice President, Chief Financial and Administrative Officer and Treasurer since September 2019. From October 2012 to September 2019, Mr. Jackson served as Senior Executive Vice President – Chief Operating and Financial Officer and Treasurer. From August 2004 to October 2012, Mr. Jackson served as Executive Vice President – Chief Financial Officer and Treasurer. From June 2001 to August 2004, Mr. Jackson served as Senior Vice President – Chief Financial Officer and Treasurer. From September 1996 to June 2001, Mr. Jackson served as Vice President – Chief Financial Officer and Treasurer. From January 1993 to September 1996, Mr. Jackson served as Vice President – Controller and Chief Accounting Officer. Prior to January 1993, Mr. Jackson held various accounting positions with us. Prior to joining us in 1988, Mr. Jackson was associated with a public accounting firm. He is a Certified Public Accountant. We announced on September 22, 2022 that Mr. Jackson will be retiring, effective May 2023.

Mr. BakerScibetta has been employed as Executive Vice President – Chief Retail Operations Officer since September 2019. From June 2001 to September 2019, Mr. Baker served as Executive Vice President – Store Operations.  From March 1994 to June 2001, Mr. Baker served as Senior Vice President – Store Operations.  From May 1992 to March 1994, Mr. Baker served as Vice President – Store Operations.  Prior to that time, he served as one of our regional managers.  From 1983 to June 1989, Mr. Baker held various retail management positions with Payless ShoeSource.

Mr. Scibetta has been employed as Executive Vice President – Chief Merchandising Officer since March 2016.2021. From March 2016 to March 2021, Mr. Scibetta serviced as Executive Vice President – Chief Merchandising Officer. From December 2012 to March 2016, Mr. Scibetta served as General Merchandise Manager. Prior to joining us, Mr. Scibetta served as Vice President, Divisional Merchandise Manager– Footwear for Belk, Inc. since 2008. From 2004 to 2007, Mr. Scibetta served as Vice President, Divisional Merchandise Manager – Footwear for Parisian Department Stores. From 1998 to 2000, Mr. Scibetta served as Vice President, Divisional Merchandise Manager for Shoe Corporation of America. Mr. Scibetta began his retail career with Wohl Shoe Company in 1980.

Mr. Chilton has been employed as Executive Vice President – Chief Operating Officer since February 2023. From April 2021 to February 2023, Mr. Chilton served as our Executive Vice President – Chief Retail Operations Officer. From February 2020 to April 2021, Mr. Chilton served as our Senior Vice President – Store Administration and Development and from March 2019 to February 2020 served as our Senior Vice President – Store Operations and Administration. Mr. Chilton started with the Company in 1994 as a store manager and has served in roles of increasing responsibility in store management and operations since that time, including serving as the Vice President of our Northern Division, with approximately one-third of our stores reporting to him, from April 2012 until March 2019.

Mr. Edwards has been employed as Vice President, Chief Accounting Officer, Corporate Controller since March 2021. He has also served as our Secretary since June 2021 and as our Assistant Secretary from December 2019 to June 2021. From October 2019 to March 2021, Mr. Edwards served as our Vice President and Corporate Controller. Prior to joining us, Mr. Edwards was Vice President of Accounting for CenterPoint Energy, Inc. from February 2019 to August 2019 following its acquisition of Vectren Corporation (“Vectren”). For Vectren, Mr. Edwards held various leadership roles in the accounting, audit and finance functions from February 2001 through February 2019, including Vice President and Treasurer from April 2017 to February 2019 and Vice President of Corporate Audit from August 2013 to April 2017. Prior to joining Vectren, Mr. Edwards worked in public accounting. Mr. Edwards is a Certified Public Accountant.

Our executive officers serve at the discretion of the Board of Directors. There is no family relationship between any of our Directors or executive officers.

ITEM 1A. Risk Factors

Carefully consider the following risk factors and all other information contained in this Annual Report on Form 10-K before making an investment decision with respect to our common stock. Investing in our common stock involves a high degree of risk. If any of the following risks actually occur, we may not be able to conduct our business as

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currently planned and our financial condition and operating results could be materially and adversely affected. See PART I, “Cautionary Statement Regarding Forward-Looking Information” at the beginning of this Annual Report on Form 10-K. Our risk factors are categorized as follows: Operational and Strategic Risks, Compliance and Litigation Risks, Human Capital Risks, Financial and Liquidity Risks and Risks Relating to the Ownership of Our Common Stock.

The COVID-19 pandemic may further adversely affect our operations.Operational and Strategic Risks

Our operations and the markets in which we operate, procure merchandise and raise capital are currently experiencing significant disruption and financial market volatility associated with an outbreak of a novel strain of coronavirus (“COVID-19”).  The World Health Organization has declared COVID‑19 a pandemic. The U.S. Government has taken unprecedented measures to control the virus’ spread and to provide stimulus as an offsetting measure to quickly deteriorating economic conditions and increasing unemployment. Many businesses, schools, and other institutions have closed to further the practice of “social distancing” as a method to slow the outbreak.  While our supply chain has not experienced significant disruption, our operations have been significantly impacted by the temporary closure of our brick-and-mortar stores effective March 19, 2020 to April 2, 2020 and reduced foot traffic and sales prior to such time.  As guidance and mandates from governments and health officials continue to evolve, closures to some, or all, of our operations will need to extend beyond the announced closure period.  Our stock price has significantly declined, as have the stock prices of our peer companies.  The extent of the impact of the COVID‑19 pandemicAdverse impacts on our operational and financial performance will depend on future developments, including, but not limited to:

Should the spread of COVID-19 continue to cause financial market volatility and/or adverse changes in economic conditions and consumer spending or cause periods of temporary closures of our operations to extend beyond the announced closure period or cause increased disruption to our supply chain and distribution processes, our costs may increase, our sales and gross profit may continue to decline and our stock price may further decrease, any of which could negatively impact our results of operations, cash flows, and financial condition.

Economic conditions and unemployment rates may adversely affect consumer spending and may significantly harm our business.  business and impact our promotional strategies and intensity. The success of our business depends to a significant extent upon the level of consumer spending. A number of factors may affect the level of consumer spending on merchandise that we offer, including, among other things:

war, terrorism,

Consumer confidence remains hypersensitive to a variety of uncertain factors, including inflation, recessionary fears, a pandemic resurgence and military conflicts, among other hostilitiesmacroeconomic and security concerns.

The merchandise we sell generally consists of discretionary items.  Adverse economic conditionspolitical uncertainty and unemployment rates, and any related decreaseinstability. Any adverse change in consumer confidence and spending maythese factors could result in reduced consumer demand for discretionary items.  Anya decrease in consumer demand for our merchandise. Reduced consumer demand could reduceresult in reduced traffic in our physical stores limit the prices we can charge forand to our products and force us to take inventory markdowns, which could have a material adverse effect on our business, results of operations and financial condition.  Reduced demand may also requiree-commerce platform, increased selling and promotional expenses.  Reduced demandexpenses and increased competitioninventory markdowns, and could increase the needcause us to close underperforming stores, which could result in higher than anticipated closing costs. Reduced demand may result in higher than normal inventory positions across our competitive landscape and may limit the prices we can charge for our merchandise and force us to adjust our promotional intensity. Any of these factors, including becoming more promotional, could have an adverse effect on our business, results of operations and financial condition.

The COVID-19 pandemic has impacted, and may continue to impact, our business and our results of operations. Our operations and the markets in which we operate, procure merchandise and raise capital have experienced, and may continue to experience, disruption and financial market volatility associated with the remaining effects of the COVID-19 pandemic. Governments took, and may continue to take, unprecedented measures to control the spread of COVID-19 and to provide stimulus as a mitigating measure to deteriorating economic conditions. Our business and results of operations were impacted by the temporary closure of our physical stores in Fiscal 2020, government stimulus in Fiscal 2021 and impacts of inflation potentially sparked by the government stimulus and supply chain disruptions in Fiscal 2022. Federal stimulus payments made directly to consumers as a result of the COVID-19 pandemic likely had a positive impact on our Net Sales, including in Fiscal 2021. The amount of any future stimulus payments and duration of the impact of such payments is uncertain. Our sales and profitability have been volatile based on the amount of government stimulus and could be further impacted by stimulus in future periods.

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We did not have any stores closed as of our Fiscal 2022 and Fiscal 2021 year ends or for extended periods during Fiscal 2022 or Fiscal 2021 due to the pandemic. As guidance and mandates from governments and public health officials continue to evolve, closures to some, or all, of our store and other operations may reoccur.

The extent of the continued impact of the COVID‑19 pandemic on our operational and financial performance will depend on future developments, including, but not limited to:

Should the COVID-19 pandemic and/or its related after effects lead to further temporary closures of our physical stores; financial market volatility; adverse changes in economic conditions; adverse changes in consumer spending; increased operational risks; and/or further disruptions to our supply chain and distribution processes, our costs may increase, our sales and gross profit may decline and our stock price may decrease, any of which could negatively impact our results of operations, cash flows and financial condition.

Our customers and store employees are exposed to certain COVID-19-related safety risks at our physical stores. While we have taken measures to control these risks, the unpredictable nature of COVID-19 may result in unexpected outcomes. For example, if the established protocols cease to be effective, or are not followed, the health and safety of our employees and customers could be at risk. A future outbreak in our stores, distribution center or corporate headquarters could result in temporary or sustained workforce shortages or store or facility closures. Inadequate response by us, perceived or otherwise, could impact our costs, our reputation, and/or our ability to recruit a qualified workforce.

Failure to successfully manage and execute our marketing and pricing strategies could have a negative impact on our business. Our success and growth are partially dependent on generating customer traffic in order to gain sales momentum in our physical stores and drive traffic to our e-commerce platform. Effective use of CRM data and successful marketing efforts are necessary for us to reach customers through their desired mode of communication. Our inability to accurately predict our customers’ preferences, to utilize their desired mode of communication, or to ensure availability of advertised products at effective price points could adversely affect our business and results of operations.

An increase in the cost, or a disruption in the flow, of imported goods may decrease our sales and profits. We rely on imported merchandise to sell in our stores. Substantially all of our footwear product is manufactured overseas, including the merchandise we purchase from domestic vendors and the smaller portion we import directly from overseas manufacturers. Our primary footwear manufacturers are located in China. Currently, most retailers, including us, are experiencing some form of disruption in their supply chains involving goods imported from Asian countries. To date, such disruption has increased our costs and negatively impacted our access to merchandise, particularly athletic footwear. Should the disruption continue or worsen, it may further increase the cost of the goods we purchase, limit our ability to acquire merchandise and decrease our sales and profits.

If imported merchandise becomes more expensive or unavailable, the transition to alternative sources may not occur in time to meet our demands. Products from alternative sources may be of lesser quality and more expensive than those we currently import. Other risks associated with our use of imported goods include:

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We may not realize the expected operating results, growth opportunities and other benefits of the Shoe Station acquisition. A significant portion of our growth strategy is based on growing the Shoe Station banner. Our ability to achieve our strategies will depend, in part, on our ability to realize the expected operating results, growth opportunities and other benefits from acquiring the Shoe Station assets. We may not realize these operating results, growth opportunities or other benefits within the expected time frames, or at all. The acquired Shoe Station banner may underperform relative to our expectations. Any of these impacts could have an adverse effect on our growth opportunities, business, results of operations and financial condition.

We face significant competition in our markets, and we may be unable to compete favorably.The retail footwear industry is highly competitive with few barriers to entry. We compete primarily with department stores, shoe stores, sporting goods stores, e-commerce retailers and mass merchandisers. Many of our competitors are significantly larger and have substantially greater resources than we do. Economic pressures or bankruptcies of our competition could result in increased pricing pressures. This competition could adversely affect our results of operations and financial condition in the future.

Failure to successfully manage and execute our marketing initiatives could have a negative impact on our business.  Our success and growth are partially dependent on generating customer traffic in order to gain sales momentum in our stores and drive traffic to our website.  Successful marketing efforts require the ability to reach customers through their desired mode of communication, utilizing various media outlets.  Media placement decisions are generally made months in advance of the scheduled release date.  Our inability to accurately predict our customers’ preferences, to utilize their desired mode of communication, or to ensure availability of advertised products could adversely affect our business and results of operations.  In addition, our competitors may spend more on marketing or use different marketing approaches, which could provide them with a competitive advantage.  

Our failure to identify fashion trends could result in lower sales, higher markdowns and lower gross profits.Our success depends upon our ability to anticipate and react to the fashion tastes of our customers and provide merchandise that satisfies consumer demand. Our failure to anticipate, identify or react appropriately to changes in consumer fashion preferences may result in lower sales, higher markdowns to reduce excess inventories and lower gross profits. Conversely, if we fail to anticipate or react to consumer demand for our products, we may experience inventory shortages, which would result in lost sales and could negatively affect our customer goodwill, our brand image and our profitability. Moreover, our business relies on continuous changes in fashion preferences. Stagnating consumer preferences could also result in lower sales and would require us to take higher markdowns to reduce excess inventories.

Our failure to effectively manage our real estate portfolio may negatively impact our results of operations.Effective management of our real estate portfolio is critical to our multi-channelomnichannel strategy. All of our stores are subject to leases and as such, the effective evaluation of the range of considerations that may influence the success of our long-term real estate strategy is essential.  Such considerations include but are not limited to:

centers. If we fail to effectively evaluate these factorsimplement our real estate strategies or negotiate appropriate lease terms or if unforeseen changes arise, the consequences could include, for example:

These consequences could have a materialan adverse effect on our profitability, cash flows and liquidity. The financial impact of exiting a leased location can vary greatly depending on, among other factors, the terms of the lease, the condition of the local real estate market, demand for the specific property and our relationship with the landlord, and itinfluencing these factors is difficult for us to influence some of these factors.difficult. In addition to rent, we could still be responsible for the maintenance, taxes, insurance and common area maintenance (“CAM”) charges for vacant properties until the lease commitment expires or is terminated.

We locate our stores primarily in open-air shopping centers where we believe our customers and potential customers shop. The success of an individual store can depend on favorable placement within a given open-air shopping center and the volume of traffic generated by the other destination retailers and the anchor stores in the open-air shopping centers where our stores are located. We cannot control the development of alternative shopping destinations near

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our existing stores or the availability or cost of real estate within existing or new shopping destinations. If one or more of the destination retailers or anchor stores located in the open-air shopping centers where our stores are located close or leave, or if there is significant deterioration of the surrounding areas in which our stores are located, our business may be adversely affected. In addition, if our store locations fail to attract sufficient customer traffic or we are unable to locate replacement locations on terms acceptable to us, our business could suffer.

Various risks associated with our e-commerce platform may adversely affect our business and results of operations. E-commerce has been a rapidly growing sales channel and an increasing source of competition in the retail industry. We sell shoes and related accessories through our websites at www.shoecarnival.com and www.shoestation.com and through our related mobile app. We fulfill substantially all e-commerce orders from our store locations and from our distribution center. If we are unable to continue to grow our e-commerce sales, our sales, comparable store sales and gross profit may decline, and our stock price may decrease, any of which could negatively impact our results of operations, cash flows and financial condition.

Our e-commerce operations are subject to numerous other risks that could have an impact on our results of operations, including:

Any significant interruptions in the operations of our third-party providers, over which we have no control, could have an adverse effect on our e-commerce operations. Any breach involving our customer information could harm our reputation or result in liability including, but not limited to, fines, penalties and costs of litigation, any of which could have an adverse effect on our operating results, financial condition and cash flows.

A failure to increase sales at our existing stores may adversely affect our stock price and affect our results of operations. A number of factors have historically affected, and will continue to affect, our comparable store sales results, including:

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Our comparable store sales results have fluctuated in the past, and we believe such fluctuations may continue. The unpredictability of our comparable store sales may cause our revenue and results of operations to vary from quarter to quarter and year to year, and an unanticipated decline in revenues or operating income may cause our stock price to fluctuate significantly.

Members in our Shoe Perks customer loyalty program account for a significant portion of our sales, and any material decline in sales from our Shoe Perks members could have an adverse impact on our results of operations. We believe our Shoe Perks rewards program provides our customers with a heightened shopping experience, which includes exclusive offers and personalized messaging. Rewards are earned by making purchases and participating in other point earning opportunities that facilitate engagement with our brand. We remain focused on expanding our Shoe Perks enrollment. If our Shoe Perks members do not continue to shop with us, our sales may be adversely affected, which could have an adverse impact on our results of operations.

We may not be able to successfully execute our growth strategy, which could have an adverse effect on our business, financial condition and results of operations. We intend to continue to invest in omnichannel initiatives, which requires substantial investment in technology.

Our growth strategy requires that we continue to expand and improve our operating and financial systems and expand, train and manage our employee base. In addition, as we create more opportunities to connect with our customers through our omnichannel initiatives and as we grow the number of our physical stores, we may be unable to hire a sufficient number of qualified personnel or successfully integrate the omnichannel initiatives or new or acquired stores into our business.

If we fail to successfully implement our growth strategy, our business, financial condition or results of operations could be adversely affected. The success of our growth strategy will depend on a number of other factors, many of which are out of our control, including, among other things:

We depend on our key suppliers for merchandise and advertising support and the loss of key suppliers could adversely affect our business. Our business depends upon our ability to purchase fashionable, name brand and other merchandise at competitive prices from our suppliers. Two branded suppliers, Nike, Inc. and Skechers U.S.A., Inc.,

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collectively accounted for approximately 27% of our Net Sales in Fiscal 2022, 39% of our Net Sales in Fiscal 2021 and 43% in Fiscal 2020 (Nike, Inc. accounted for approximately 14% of our Net Sales in Fiscal 2022, 28% in Fiscal 2021 and 33% in Fiscal 2020 and Skechers U.S.A., Inc. accounted for approximately 13% of our Net Sales in Fiscal 2022, 11% in Fiscal 2021 and 10% in Fiscal 2020). Name brand suppliers also provide us with cooperative advertising and visual merchandising funds. Certain key suppliers’ business models are changing and such changes include, but are not limited to, increased direct-to-consumer initiatives, changes in planned product allocations and reductions in the number of retailers with which they are choosing to do business. A loss of any of our key suppliers in certain product categories or our inability to obtain name brand or other merchandise from suppliers at competitive prices could have an adverse effect on our business. As is common in the industry, we do not have any long‑term contracts with our suppliers.

We may not be able to identify or consummate future acquisitions or achieve expected benefits from or effectively integrate future acquisitions. From time to time, we expect to evaluate selective acquisitions and strategic investments. Future acquisitions involve many risks that could have an adverse effect on our business, results of operations or financial condition, including:

Our inability to achieve the anticipated benefits of any future acquisitions and other investments could adversely affect our business, results of operations and financial condition.

Natural disasters, other public health crises, political crises and other catastrophic events or other events outside of our control may damage our facilities or the facilities of third parties on which we depend and could impact our supply chain and consumer spending. access to customers. Our facilities, including our distribution center, our corporate headquarters and other offices and our retail stores, orand the facilities of our third-party vendors and service providers could suffer if affected by:

Disasters occurring at our distribution center, our corporate headquarters orand other offices, our retail stores or impacting the infrastructure of a key third-party vendor or service provider also could result in us being unable to deliver products

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merchandise to our stores or directly to customers for a prolonged period and could impact our reputation and our customers’ perception of our brand. In the event of a severe disruption resulting from such events, we have contingency plans and employ crisis management to respond and recover operations. Despite these measures, if such an occurrence were to occur, our results of operations and financial condition could be materially adversely affected.

Moreover, these types of eventsWe could result in economic instability and could impact consumer preferences or spending priorities in the impacted regions or, depending upon the severity, globally, which could adversely impact our results of operations.

A failure to increase sales at our existing stores may adversely affect our stock price and affect our results of operations.A number of factors have historically affected, and will continue to affect, our comparable store sales results, including:

In addition, consumers are increasingly using e-commerce retailers for their fashion purchases, shifting sales away from brick-and-mortar stores.  This shift in shopping preference has resulted, and may continue to result, in decreased traffic in our physical stores, which could reduce sales at our physical stores and, in turn, negatively affect our business and financial results.

Our comparable store sales results have fluctuated in the past, and we believe such fluctuations may continue.  The unpredictability of our comparable store sales may cause our revenue and results of operations to vary from quarter to quarter, and an unanticipated decline in revenues or operating income may cause our stock price to fluctuate significantly.

Emerging technologies may create disruption to the retail industry.  New and emerging technology may enable new approaches or choices for how our customers procure goods and services and pay for those goods and services. We may be unable to quickly adapt to rapid change resulting from artificial intelligence, blockchain, Internet of Things (IoT), including voice and smart home devices, and other advanced technologies that may result in changes to our supply chain, distribution channels, and point-of-sale capabilities.

Members in our Shoe Perks customer loyalty program account for a significant portion of our sales, and any material decline in sales from our Shoe Perks members could have an adverse impact on our results of operations.  We believe our Shoe Perks rewards program provides our customers with a heightened shopping experience, which includes exclusive offers and personalized messaging. Rewards are earned by making purchases either in-store or online and through participating in other point earning opportunities that facilitate engagement with our brand. We remain highly focused on expanding our Shoe Perks enrollment. In fiscal 2019, we added 2.4 million new members, and purchases from Shoe Perks members were 70% of comparable net sales. Shoe Perks members on average spent 19% more per transaction than non-members in fiscal 2019.  If our Shoe Perks members do not continue to shop with us, our sales may be adversely affected, which could have an adverse impact on our results of operations.

We would be adversely affected if our information technology systems fail to operate effectively, are disrupted or are compromised.We rely on our existing information technology systems in operating and monitoring major aspects of our business, including sales, warehousing, distribution, purchasing, inventory control, merchandise planning and replenishment, point-of-sale support and financial systems. We regularly make investments to upgrade, enhance or replace these systems and are currently making investments to upgrade our OMS, TMS and WMS systems as well as leverage new technologies to support our operational strategies. Any delays or difficulties transitioning to these new systems or integrating them with current systems in an orderly and timely fashionsuch projects could have a materialan adverse effect on our operational results, financial position and cash flows.

The reliability and capacity of our information technology systems, and in particular our distribution technology operations, are critical to our continued operations. We currently operate a single 410,000 square foot distribution center in Evansville, Indiana. Virtually all merchandise received by our physical stores is, and will be, shipped through our distribution center. We fulfill substantially all of our e-commerce orders from our store locations and our distribution center. Our corporate computer network is essential to our distribution process.

Despite our precautionary efforts, our information technology systems are vulnerable from time to time to damage or interruption from, among other things, natural or man-made disasters, technical malfunctions, inadequate systems capacity, power outages, or terrorist attack,attacks, computer viruses and security breaches, which may require significant investment to fix or replace.

If our distribution center is shut down for any reason, if our information technology systems do not operate effectively or if we are the target of attacks or security breaches, we may suffer the loss of critical data, we could incur significantly higher costs and longer lead times associated with distributing our products to our stores, our ability to operate our e-commerce site and mobile appplatform may be impacted and we could experience other interruptions or delays to our operations.  Our insurance only covers costs relating to specified, limited matters such as a shutdown due to fire and windstorms, as well as certain cyber-security incidents, but does not cover other events such as acts of war or terrorist attacks.  Even in the event of a shutdown due to covered matters, our insurance may not be sufficient, or the insurance proceeds may not be paid to us in a timely fashion.  Shutdowns or information technology disruptionsoperations, which could have an adverse effect on our operating and financial performance.

Failure to protect the integrity and security of individually identifiable data of our customers and employees could expose us to litigation and damage our reputation.  We receive and maintain certain personal, sensitive and confidential information about our customers, vendors and employees.  The collection and use of this information are regulated at the international, federal and state levels, and are subject to certain contractual restrictions in third-party contracts.  Non-compliance with these regulations and contractual restrictions may subject us to fines, penalties, restrictions and expulsion from credit card acceptance programs and civil liability.  Although we have implemented processes to collect and protect the integrity and security of this personal information, there can be no assurance that this information will not be obtained by unauthorized persons, or collected or used inappropriately, including as a result of cyber-security breaches, acts of vandalism, computer viruses, credit card fraud or phishing.  Advanced cyber-security threats are persistent and continue to evolve, making them increasingly difficult to identify and prevent.  If our security and information systems or the systems of our employees or external business associates are compromised or our employees or external business associates fail to comply with these laws and regulations and this information is obtained by unauthorized persons, or collected or used inappropriately, our reputation, as well as our operations and financial results, could be negatively affected and litigation or regulatory action against us or the imposition of costs, fines or other penalties could also occur.  As privacy and information security laws and regulations change, we may incur additional costs to remain in compliance.

We outsource certain business processes to third-party vendors and have certain business relationships that subject us to risks, including disruptions into our business and increased costs.We rely on third-party suppliers for our merchandise and outsource some of our business processes to third-party vendors. Our relationships with these business partners expose us to risks, including disruptions in our business and increased costs. In addition, other matters involving our business partners could have an adverse effect on our business and financial results. These include, but are not limited to:

We make a diligent effort to ensure that all providers of these outsourced services are observing proper internal control practices; however, there are no guarantees that failures will not occur.  Failure of our business partners to provide adequate services or our inability to arrange for alternative providers on favorable terms in a timely manner could disrupt our business, increase our costs or otherwise adversely affect our business and our financial results.

Failure to maintain positive brand perception and recognition could have a negative impact on our business.Maintaining a good reputation is critical to our business. In recent years, there has been a marked increase in the use of social media platforms, including blogs, chat platforms, social media websites and other forms of internet-based communications that allow individualsprovide access to a broad audience of consumers and other persons. The rising popularity of

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social media and other consumer-oriented technologies has increased the speed and accessibility of information dissemination. If we are unable to quickly and effectively respond to the dissemination of negative information about us via social media or any other incidents negatively impacting our reputation and brand, we may suffer declines in customer loyalty and traffic and we may experience vendor relationship issues and other issues, regardless of the information’s accuracy, all of which could negatively affect our financial results. In addition, we frequently use social media to communicate with customers and the public in general. Failure to use social media effectively could negatively impact our brand value and revenues.

We will require significant fundsEmerging technologies may create disruption to implement our business strategy and meet our other liquidity needs We may not generate sufficient cash flow from operations or obtain sufficient borrowings under our existing credit facility to finance our business strategy and meet our other liquidity needs.  In fiscal 2020, capital expenditures are expected to range from $15 to $20 million.  Our actual costs may be greater than anticipated; however, the resources allocated to projects requiring capital expenditures are subject to near-term changes depending on the impacts associated with the COVID-19 pandemic.  We also require working capital to support inventory for our existing stores.  Failure to generate or raise sufficient funds may require us to modify, delay or abandon some of our future growth or expenditure plans.  We utilize our existing credit facility to issue merchandise and special purpose standby letters of credit as well as to fund working capital requirements, as needed.  Significant decreases in cash flow from operations could result in our borrowing under the credit facility to fund operational needs.  If we borrow funds under our credit facility and interest rates materially increase from present levels, our results could be adversely affected.

Continued financial market volatility could have an adverse effect on the sources and costs of financing available to us. The capital and credit markets have recently experienced, and may continue to experience, volatility and disruption, which could have the following impacts, among other things:

Various risks associated with our e-commerce business may adversely affect our business and results of operations.  Digital commerce has been a rapidly growing sales channel, particularly with younger consumers, and an increasing source of competition in the retail industry. We sell shoesNew and related accessories throughemerging technology may enable new approaches or choices for how our website at www.shoecarnival.com.  We fulfill e-commerce orders from our store locationscustomers procure goods and from our distribution center.  We anticipate that the percentage of our sales through our e-commerce site will continue to growservices and thus the risks associated with these operations could have a material impact on our overall operations.  However, our e-commerce operations may not achieve growing sales and profitability.  Our e-commerce operations are subject to numerous risks that could have an impact on our results of operations, including:

Any significant interruptions in the operations of our third-party providers, over which we have no control, could have a material adverse effect on our e-commerce business.  Any breach involving our customer information could materially harm our reputation or result in liability including, but not limited to, fines, penalties and costs of litigation, any of which could have a material adverse effect on our operating results, financial position and cash flows.  

An increase in the cost or a disruption in the flow of imported goods may decrease our sales and profits.  We rely on imported goods to sell in our stores.  Substantially all of our footwear product is manufactured overseas, including the merchandise we import directly from overseas manufacturers and the merchandise we purchase from domestic vendors.  Our primary footwear manufacturers are located in China.  A disruption in the flow of imported merchandise or an increase in the cost of those goods may decrease our sales and profits.    

If imported merchandise becomes more expensive or unavailable, the transition to alternative sources may not occur in time to meet our demands.  Products from alternative sources may be of lesser quality and more expensive than those we currently import.  Other risks associated with our use of imported goods include:

services. We may not be able to successfully execute our growth strategy, which could have a material adverse effect on our business, financial condition and results of operations.  As part of our growth strategy, we intend to continue to invest in our multi-channel initiatives, which will require substantial investment in technology.  We expect to open a limited number of new stores in fiscal 2020. However, we may not be able to open all of the new stores contemplated by our growth strategy, and the new stores that we open may not be as profitable as existing stores.  

The complexity of our operations and management responsibilities will increase as we execute our growth strategy.  Our growth strategy requires that we continue to expand and improve our operating and financial systems and expand, train and manage our employee base.  In addition, as we create more opportunities to connect with our customers through our multi-channel initiatives and as we open new stores, we may be unable to hire a sufficient numberquickly adapt to rapid change resulting from artificial intelligence, blockchain, Internet of qualified personnel or successfully integrate the multi-channel initiatives or new stores into our business.

If we fail to successfully implement our growth strategy, our business, financial condition or results of operations could be materially adversely effected.  The success of our growth strategy will depend on a number ofThings, including voice and smart home devices, and other factors, many of which are out of our control, including, among other things:

We depend on our key suppliers for merchandise and advertising support and the loss of key suppliers could adversely affect our business.  Our business depends upon our ability to purchase fashionable, name brand and other merchandise at competitive prices from our suppliers.  In fiscal 2019, two branded suppliers, Nike, Inc. and Skechers USA, Inc., collectively accounted for approximately 41% of our net sales.  Nike, Inc. accounted for approximately 30% and Skechers USA, Inc. accounted for approximately 11% of our net sales, respectively. Name brand suppliers also provide us with cooperative advertising and visual merchandising funds.  A loss of any of our key suppliers in certain product categories or our inability to obtain name brand or other merchandise from suppliers at competitive prices could have a material adverse effect on our business. As is common in the industry, we do not have any long‑term contracts with our suppliers.point-of-sale capabilities.

Our quarterly operating results willcan fluctuate due to seasonality, weather conditions and other factors. Our quarterly results of operations have fluctuated and are expected to continue to fluctuate in the future, primarily as a result of seasonal variances, weather conditions and the timing of sales and costs associated with opening new stores and closing existing stores.

We have three distinct peak selling periods: Easter, back-to-school and Christmas. To prepare for our peak shopping seasons, we must order and keep in stock significantly more merchandise than we would carry during other partsperiods of the year. We expect reduced sales during the fiscal 2020 Easter season as a result of the COVID-19 pandemic.  This expected reduction and any other unanticipated decreaseReductions in demand for our productsmerchandise during these peak shopping seasons could require us to sell excess inventory at a substantial markdown, which could reduce our net salesNet Sales and gross margins and negatively affect our profitability. Our operating results depend significantly upon the sales generated during these periods, and our quarterly results may be impacted by calendar shifts of holiday or seasonal periods.

We also increase our inventory levels to offer styles particularly suited for the relevant season, such as sandals in the early summer season and boots during the winter season. If the weather conditions for a particular season vary significantly from those typical for such season, such as an unusually cold early summer or an unusually warm winter, consumer demand for the seasonally appropriate merchandise that we have available in our stores could be adversely affected and negatively impact net salesNet Sales and margins. Lower demand for seasonally appropriate merchandise may leave us with an excess inventory of our seasonally appropriate products, forcing us to sell these products at significantly discounted prices and adversely affecting our net salesNet Sales margins and operating cash flow.

Conversely, if weather conditions permit us to sell our seasonal product early in the season, this may reduce inventory levels needed to meet our customers’ needs later in that same season. Consequently, our results of operations are highly dependent on somewhat predictable weather conditions and our ability to react to changes in weather conditions.

Other factors that may affect our quarterly results of operations include:

If our future quarterly results fail to meet the expectations of research analysts, then the market price of our common stock could decline substantially.

We are exposed to physical and financial risks related to the uncertainty of climate change.A changing climate creates uncertainty and could result in broad changes, both physical and financial in nature, to our retail, distribution and corporate locations. These impacts could include, but are not limited to:

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Such changes could impact us in a number of ways including limiting available real estate; changing the demographics of our customer base and employees, andemployees; increasing the likelihood of capital expenditures to replace damaged infrastructure.infrastructure; and increasing the cost of insurance.

ToCompliance and Litigation Risks

Failure to protect the extent climate change impacts a region’s economic health, it may also impact the levelintegrity and security of discretionary incomeindividually identifiable data of that region’s population and thus impact our revenues.  Customers’ shopping habits vary with weather conditions. To the extent weather conditions are affected by climate change, our customers’ shopping habits will also change, and we may not be able to timely adapt to those changes.

Our ability to attract customers to our stores depends on the success of the open-air shopping centers where our stores are located.  We locate our stores primarily in open-air shopping centers where we believe our customers and potentialemployees could expose us to litigation and damage our reputation. We receive and maintain certain personal, sensitive and confidential information about our customers, shop.vendors and employees. The successcollection and use of an individual storethis information are regulated and are subject to certain contractual restrictions in third-party contracts. Non-compliance with these regulations and contractual restrictions may subject us to fines, penalties, restrictions and expulsion from credit card acceptance programs and civil liability. Although we have implemented processes to collect and protect the integrity and security of this personal information, there can depend on favorable placement withinbe no assurance that this information will not be obtained by unauthorized persons, or collected or used inappropriately, including as a given open-air shopping centerresult of cybersecurity breaches, acts of vandalism, computer viruses, credit card fraud or phishing. Advanced cybersecurity threats are persistent and from the volume of traffic generated by the other destination retailerscontinue to evolve, making them increasingly difficult to identify and the anchor stores in the open-air shopping centers whereprevent. If our stores are located. We cannot control the development of alternative shopping destinations near our existing storessecurity and information systems or the availabilitysystems of our employees or cost of real estate within existingexternal business partners are compromised or new shopping destinations. If our store locationsemployees or external business partners fail to attract sufficient customer trafficcomply with these laws and regulations and this information is obtained by unauthorized persons, or collected or used inappropriately, our reputation, as well as our operations and financial results, could be negatively affected and litigation or regulatory action against us or the imposition of costs, fines or other penalties could also occur. As privacy and information security laws and regulations change, we are unablemay incur additional costs to locate replacement locations on terms acceptable to us, our business could suffer. If one or more of the destination retailers or anchor stores locatedremain in the open-air shopping centers where our stores are located close or leave, or if there is significant deterioration of the surrounding areas in which our stores are located, our business may be adversely affected.compliance.

We may not have adequate insurance coverage for all potential liabilities. Natural risks, as well as other hazards associated with our operations, can result in personal injury, severe damage or destruction to our owned assets, leasehold improvements and inventory, and suspension of our operations.operations, and cybersecurity breaches. Our insurance covers costs relating to specified, limited matters, such as events involving casualty losses and property losses due to fire and windstorms, as well as securities litigation and certain cybersecurity incidents, but does not cover other events such as acts of war or terrorist attacks. We maintain an amount of insurance protection we believe is appropriate, but there can be no assurance that the amount of insurance will be sufficient or effective under all circumstances and against all hazards or liabilities to which we may be subject. A claim for which we are not adequately insured could have a materialan adverse effect on our financial condition. Further, due to the cyclical nature and current hardening of the insurance markets, we cannot provide assurance that insurance coverage will continue to be available on terms similar to those presently in place.

We are subject to periodic litigation and other regulatory proceedings, which could result in the unexpected expenditure of time and resources. We are a defendant from time to time in lawsuits and regulatory actions relating to our business. Due to the inherent uncertainties of litigation and regulatory proceedings, we cannot accurately predict the ultimate outcome of any such proceedings. An unfavorable outcome could have an adverse effect on our business, financial condition and results of operations. In addition, regardless of the outcome of any litigation or regulatory proceedings, such proceedings are expensive and will require us to devote substantial resources and executive time to defend, thereby diverting management’s attention and resources that are needed to successfully run our business.

Human Capital Risks

Our failure to manage key executive succession and retention could adversely affect our business. Our business would be adversely affected if we fail to retain key executives, or to adequately plan for the succession of members of our executive management team. While we have succession plans in place for members of our executive management team, and continue to review and update those plans, and we have employment agreements with certain key executive officers, these plans and agreements do not guarantee that the services of our executive officers will

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continue to be available to us or that we will be able to find suitable management personnel to replace departing executives on a timely basis.

Our failure to attract and retain qualified personnel could adversely affect our business. Our business model requires us to train, motivate and manage our employees and to attract, motivate and retain additional qualified managerial and merchandising personnel. Our ability to control costs and meet our labor needs in a rising wage and inflationary environment is subject to external factors such as unemployment levels, prevailing wage rates paid by those with whom we compete for talent, health care and minimum wage legislation, and changing demographics. If we are unable to attract and retain quality sales associates and management, embrace automation, such as robot and self-checkout technology, as necessary, or if market conditions or changes to minimum wage laws result in the need for higher wages paid to employees, our ability to meet our growth goals or to sustain expected levels of profitability may be compromised and our financial condition, results of operations and cash flows may be adversely affected.

Financial and Liquidity Risks

We will require significant funds to implement our business strategy and meet our other liquidity needs. We may not generate sufficient cash flow from operations or obtain sufficient borrowings under our credit agreement to finance our business strategy and meet our other liquidity needs. Failure to generate or raise sufficient funds may require us to modify, delay or abandon some of our future growth or expenditure plans. We utilize our credit agreement to fund working capital, including inventory purchases, and special purpose standby letters of credit, as needed. Significant decreases in cash flow from operations could result in our borrowing under the credit agreement to fund operational needs. If we borrow funds under our credit agreement and interest rates materially increase from present levels, our financial results could be adversely affected.

Continued financial market volatility could have an adverse effect on the sources and costs of financing available to us. The capital and credit markets have recently experienced, and may continue to experience, volatility and disruption, which could have the following impacts, among other things:

If our long-lived assets become impaired, we may need to record significant non-cash impairment charges.Periodically, we review our long-lived assets for impairment whenever economic events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.recoverable, and certain intangible assets, such as goodwill and non-amortizing tradenames, are evaluated annually regardless of triggering events. Significant negative industry or general economic trends, disruptions to our business and unexpected significant changes or planned changes in our use of the assets (such as store relocations or closures) have resulted, and in the future may result, in impairment charges. Any such impairment charges, if significant, would adversely affect our financial position and results of operations.

We are subject to periodic litigation and other regulatory proceedings, which could result in the unexpected expenditure of time and resources.  We are a defendant from time to time in lawsuits and regulatory actions relating to our business.  Due to the inherent uncertainties of litigation and regulatory proceedings, we cannot accurately predict the ultimate outcome of any such proceedings.  An unfavorable outcome could have a material adverse impact on our business, financial condition and results of operations.  In addition, regardless of the outcome of any litigation or regulatory proceedings, such proceedings are expensive and will require us to devote substantial resources and executive time to defend, thereby diverting management’s attention and resources that are needed to successfully run our business.

Our failure to manage key executive succession and retention and to continue to attract qualified personnel could adversely affect our business.  Our success depends largely on the continued service of our executive management team.  Our business would be adversely affected if we fail to adequately plan for the succession and retention of our executive management team.  While we have succession plans in place for members of our executive management team, and continue to review and update those plans, and we have employment agreements with certain key executive officers, these plans and agreements do not guarantee that the services of our executive officers will continue to be available to us or that we will be able to find suitable management personnel to replace departing executives on a timely basis.

Furthermore, our strategy requires us to continue to train, motivate and manage our employees and to attract, motivate and retain additional qualified managerial and merchandising personnel.  Our ability to control costs and meet our labor needs in a rising wage environment is subject to external factors such as unemployment levels, prevailing wage rates paid by those with whom we compete for talent, health care and minimum wage legislation and changing demographics.  If we are unable to attract and retain quality sales associates and management, the ability to meet growth goals or to sustain expected levels of profitability may be compromised. 

Perception of the overall retail industry may impact our stock price and operations.  The retail industry continues to evolve and undergo structural change.  This evolution and structural change has resulted in the bankruptcy and/or reorganization of various footwear specific and other publicly traded retailers.  Despite our best efforts to differentiate our business model and processes, our stock price has fluctuated as a result of perceptions of the overall retail environment and investor confidence in the retail sector.  We cannot provide any assurance that perception of the retail industry overall will not continue to impact our stock price or our ability to engage business partners on terms acceptable to us.

Our stock price may be volatile and could decline substantially.  The stock market has, from time to time, experienced extreme price and volume fluctuations.  Many factors may cause the market price for our common stock to decline, including:

In the past, companies that have experienced volatility in the market price of their stock have been the subject of securities class action litigation.  If we become involved in securities class action litigation in the future, it could result in substantial costs and diversion of management attention and resources, thus harming our business.

We cannot guarantee that we will continue to make dividend payments or that we will continue to repurchase stock pursuant to our stock repurchase program.  Our Board of Directors determines if it is in our best interest to pay a dividend to our shareholders and the amount of any dividend and declares all dividend payments. In the future, our results of operations and financial condition may not allow for a dividend to be declared or the Board of Directors may decide not to continue to declare dividends. In addition, our current share repurchase program authorizes the purchase of up to $50 million of our common stock through December 31, 2020.  However, we are not obligated to make any purchases under the share repurchase program and the program may be amended, suspended or discontinued at any time.

Failure to maintain effective internal control over financial reporting could result in a loss of investor confidence in our financial reports and have a materialan adverse effect on our stock price. We must continue to document, test and evaluate our internal control over financial reporting in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, which requires annual reports by management regarding the effectiveness of our internal control over financial reporting and a report by our independent registered public accounting firm attesting to the effectiveness of our internal control over financial reporting. We have expended, and expect that we will continue to expend, significant management time and resources documenting and testing our internal control over financial reporting. If we conclude in future periods that our internal control over financial reporting is not effective, it could result in lost investor confidence in the accuracy, reliability and completeness of our financial reports. Any such events could have a materialan adverse effect on our stock price.

Risks Relating to the Ownership of Our Common Stock

Perception of the overall retail industry and other macroeconomic conditions may impact our stock price and operations. The retail industry continues to evolve and undergo structural change. This evolution and structural change has resulted in the bankruptcy and/or reorganization of various footwear specific and other publicly traded retailers. Despite our best efforts to differentiate our business model and processes, our stock price has fluctuated as

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a result of perceptions of the overall retail environment and investor confidence in the retail sector. The volatility in our stock price could be exacerbated by macroeconomic conditions that affect the market generally or our industry in particular and could have the effect of diverting management’s attention and could harm our business. We cannot provide any assurance that perception of the retail industry overall and other macroeconomic conditions will not continue to impact our stock price or our ability to engage business partners on terms acceptable to us.

Our stock price may be volatile and could decline substantially. The stock market has, from time to time, experienced extreme price and volume fluctuations. Many factors may cause the market price for our common stock to decline, including:

The price of our common stock may decline and the value of any investment in our common stock may be reduced regardless of our performance. In the past, companies that have experienced volatility in the market price of their stock have been the subject of securities class action litigation. If we become involved in securities class action litigation in the future, it could result in substantial costs and diversion of management attention and resources, thus harming our business.

We cannot guarantee that we will continue to make dividend payments or that we will continue to repurchase stock pursuant to our stock repurchase program. Our Board of Directors determines if it is in our best interest to pay a dividend to our shareholders and the amount of any dividend and declares all dividend payments. In the future, our results of operations and financial condition may not allow for a dividend to be declared or the Board of Directors may decide not to continue to declare dividends. In addition, our current share repurchase program authorizes the purchase of up to $50 million of our common stock through December 31, 2023. However, we are not obligated to make any purchases under the share repurchase program and the program may be amended, suspended or discontinued at any time.

We are controlled by our principal shareholders. J. Wayne Weaver, our Chairman of the Board of Directors, and his spouse together beneficially own approximately 23.9%32.0% of our outstanding common stock. Mr. Weaver’s adult son is the sole trustee of the J. Wayne Weaver 2018 Grantor Retained Annuity Trust for Bradley Wayne Weaver, and, as a result, beneficially owns the approximately 4.7% of our outstanding common stock held by such trust. Mr. Weaver’sWeaver's adult daughter is the sole trustee of the J. Wayne Weaver 2018 Grantor Retained Annuity Trust for Leigh Anne Weaver and is the sole trustee of the J. Wayne Weaver 2019 Grantor Retained Annuity Trust for Leigh Anne Weaver,several grantor retained annuity trusts and, as a result, beneficially owns the approximately 7.1%4.5% of our outstanding common stock held by such trusts. Accordingly, the Weaver family is able to exert substantial influence over our management and operations. In addition, their interests may differ from, or be opposed to, the interests of our other shareholders, and their ownership may have the effect of delaying or preventing a change in control that may be favored by other shareholders.

Provisions of our organizational documents and Indiana law might deter acquisition bids for us. Our Amended and Restated Articles of Incorporation, our By-Laws and Indiana corporate laws contain provisions that may discourage other persons from attempting to acquire control of us, including, without limitation, a Board of Directors that has staggered three-year terms for its members, supermajority voting provisions, restrictions on the ability of shareholders to call a special meeting of shareholders and proceduraladvance notice requirements in connection with shareholder proposals or director nominations. The Board of Directors has the authority to issue preferred stock in one or more series without the approval of the holders of our common stock. Further, Indiana corporate law contains business combination provisions that, in general, prohibit for five years any business combination with a beneficial owner of 10% or more of our common stock unless the holder’s acquisition of the stock was approved in advance by our Board of Directors. Indiana corporate law also contains control share acquisition provisions that limit the ability of certain shareholders to vote their shares unless their control share acquisition is approved. In certain circumstances, the fact that corporate devices are in place that inhibit or discourage takeover attempts could reduce the market value of our common stock.

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ITEM 1B. Unresolved staff comments

None.

ITEM 2. PROPERTIES

Physical Stores

As of February 1, 2020,our Fiscal 2022 year end, we operated 392leased our 397 stores inlocated across 35 states and Puerto Rico. We lease all stores and intend to lease all future stores.  Approximately 97%98% of the leases for our existing stores provide for fixed minimum rentals and approximately 52%51% provide for contingent rental payments based upon various specified percentages of sales above minimum levels.sales. Certain leases also contain escalation clauses for increases in minimum rentals, operating costs and taxes.

Our traditional Shoe Carnival store prototype typically utilizes between 8,000 and 12,000 square feet of leased space and our Shoe Station store prototype utilizes between 12,000 to 20,000 square feet of leased space. The sales area comprises substantially all (greater than 80%) of our typical gross store footprint.

In February 2006,Following is a roll forward of our leased locations over the last five years:

Over the last several years, we entered into an operatingperformed a store improvement plan. As part of that plan, which was completed in Fiscal 2021, we identified underperforming stores and worked to address these stores' performance through renegotiation of lease with an independent third partyterms, relocation, or closure. We closed 45 stores from Fiscal 2018 through Fiscal 2021. While we continue to leaseactively monitor the store portfolio, we do not expect any further significant closures over the next several years.

The following table identifies the number of our stores in each state and Puerto Rico as of our Fiscal 2022 year end:

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Distribution Center

We operate a single 410,000 square foot distribution center located in Evansville, Indiana. The lease had an initial term of 15 years.  In April 2019, we extended this leaseOur facility can support the processing and distribution needs for a term of 15 years, expiring in 2034.  We have theapproximately 470 stores. With additional resources added, including our right to further extend the lease term for up to eight additional periods of five years each, and to expand the facility by up to 200,000 square feet.feet, the current location could provide processing capacity for approximately 650 stores. We lease the facility from a third party. The lease expires in 2034.

In the first quarter of fiscal 2019, we purchasedCorporate Headquarters

We own our corporate headquarters located in Evansville, Indiana and lease office space for approximately $7 million. Prior to that, we had been leasing our corporate headquarters from an independent third party since June 2006, and the initial term of that lease was to expireSouthern office located in 2021.  Fort Mill, South Carolina.

For additional information with respect to our properties, see ITEM 1. BUSINESS – “Growth Strategy” and “Distribution” as well as PART II, ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS – “Executive Summary” of this Annual Report on Form 10-K.

ITEM 3. LEGAL PROCEEDINGS

From time to time, we are involved in certain legal proceedings in the ordinary course of conducting our business. While the outcome of any legal proceeding is uncertain, we do not currently expect that any such proceedings will have a material adverse effect on our financial position or results of operations.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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PART II

ITEM 5.MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information and Holders

Our common stock has beenis quoted on The Nasdaq Stock Market LLC under the trading symbol “SCVL” since March 16, 1993.“SCVL.” As of March 25, 2020,17, 2023, there were approximately 145123 holders of record of our common stock. We did not sell any unregistered equity securities during fiscal 2019, 2018Fiscal 2022, 2021 or 2017.  2020.

On June 21, 2021, our Board of Directors authorized a two-for-one stock split of the shares of our common stock. The stock split entitled each shareholder of record at the close of business on July 6, 2021 to receive one additional share of common stock for each share of common stock owned as of that date and was paid on July 19, 2021. Upon the completion of the stock split, our outstanding shares increased from approximately 14.1 million shares to approximately 28.2 million shares. All share and per share amounts in this Annual Report on Form 10-K give effect to the stock split and have been adjusted retroactively for all periods presented.

Cash Dividends

During fiscal 2019,Fiscal 2022, we paid quarterly cash dividends of $0.080$0.09 per share in the first quarter and $0.085 per share in the second, third and fourthall four fiscal quarters. The declaration and payment of any future dividends are at the discretion of the Board of Directors and will depend on our results of operations, financial condition, business conditions and other factors deemed relevant by our Board of Directors.  Our credit agreement permits the payment of cash dividends as long as no default or event of default exists under the credit agreement both immediately before and immediately after giving effect to the cash dividends, and the aggregate amount of cash dividends for a fiscal year does not exceed $10 million.

On March 18, 2020,14, 2023, the Board of Directors approvedincreased the payment of aquarterly cash dividend from $0.09 to our shareholders in$0.10 per share, an increase of 11%, for the first quarter of fiscal 2020.Fiscal 2023. The quarterly cash dividend of $0.085$0.10 per share will be paid on April 20, 202017, 2023 to shareholders of record as of the close of business on April 6, 2020.3, 2023.

Issuer Purchases of Equity Securities

We did not repurchase any shares of our common stock under our Board-approved share repurchase program during the fourth quarter of Fiscal 2022. For a discussion of our share repurchase program, see “Share Repurchase Program” in PART II, ITEM 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” of this Annual Report on Form 10-K.

Throughout fiscal 2019,Fiscal 2022, we issued treasury shares to certain employees and to our non-employee directors in the form of restricted stock awards and upon the vesting of restricted stock units and performance stock units.units and to our non-employee directors upon the issuance of service-based restricted stock awards. We also repurchased 324,21473,817 shares of common stock as a result of our withholding shares or allowing our employees to deliver shares to us for the income taxes resulting from the vesting of certain share-settled equity awards. We intend to continue issuing shares out of treasury to meet these needs.

The following table summarizes our repurchase activity during the fourth quarter of Fiscal 2022:

Issuer Purchases of Equity Securities

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Credit Agreement's Impact on Share Repurchases and Dividends

Our amended and restated credit agreement, dated as of March 23, 2022 (our "Credit Agreement") contains certain restrictions on our ability to pay cash dividends and to repurchase shares of our common stock. However, as long as our consolidated EBITDA is positive and there are either no or low borrowings outstanding under the Credit Agreement, we expect these restrictions would have no impact on our ability to pay cash dividends or execute share repurchases from cash on hand. The Credit Agreement stipulates that cash dividends and share repurchases of $15 million or less per fiscal year can be made without restriction as long as there is no default or event of default before and immediately after such distributions. We are also permitted to pay cash dividends or repurchase shares of our common stock in excess of $15 million in a fiscal year provided that (a) no default or event of default exists before and immediately after the distribution, and (b) on a proforma basis, the ratio of (i) the sum of (A) our consolidated funded indebtedness plus (B) three times our consolidated rental expense to (ii) the sum of (A) our consolidated EBITDA plus (B) our consolidated rental expense is less than 3.5 to 1.0. See Note 9 - "Debt" in our Notes to Consolidated Financial Statements contained in PART II, ITEM 8 of this Annual Report on Form 10-K for more information regarding the Credit Agreement.

ITEM 6.[RESERVED]

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ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations (the "MD&A") should be read together with our consolidated financial statements and notes to those statements included in PART II, ITEM 8 of this Annual Report on Form 10-K. This section of this Annual Report on Form 10-K generally discusses Fiscal 2022 and Fiscal 2021 and year-over-year comparisons between Fiscal 2022 and Fiscal 2021. A discussion of Fiscal 2020 and year-over-year comparisons between Fiscal 2021 and Fiscal 2020 that are not included in this Annual Report on Form 10-K can be found in PART II, ITEM 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for our fiscal year ended January 29, 2022, filed with the United States SEC on March 25, 2022.

Given the significant impact of the COVID-19 pandemic on our Fiscal 2021 and Fiscal 2020 results, we have included certain comparisons in this MD&A between Fiscal 2022 and Fiscal 2019 to provide further context regarding our Fiscal 2022 results of operations. At the end of this section of this Annual Report on Form 10-K, we have included historical data for the past five fiscal years to facilitate trend analysis of key data reported in our consolidated financial statements and other select operating data.

Overview of Our Business

Shoe Carnival, Inc. is one of the nation’s largest omnichannel family footwear retailers. On December 3, 2021, we began operating under two banners: Shoe Carnival and Shoe Station. Our objective is to be the omnichannel retailer-of-choice for on-trend branded footwear for the entire family. Our product assortment, whether shopping in a physical store or on our e-commerce platform, includes dress, casual, and work shoes, sandals, boots and a wide assortment of athletic shoes. Our typical physical store carries shoes in two general categories – athletics and non-athletics with subcategories for men's, women's and children's, as well as a broad range of accessories. In addition to our physical stores, our e-commerce platform offers customers the same assortment of merchandise in all categories of footwear with expanded options in certain instances.

Our stores under the Shoe Carnival banner combine competitive pricing with a high-energy in-store environment that encourages customer participation. Footwear in our Shoe Carnival physical stores is organized by category and brand, creating strong brand statements within the aisles. These brand statements are underscored by branded signage on endcaps and in-line signage throughout the store. Our signage may highlight a vendor’s product offerings or sales promotions, or may highlight seasonal or lifestyle statements by grouping similar footwear from multiple vendors.

The addition of the Shoe Station banner and retail locations has created a complementary retail platform for us to serve a broader base of family footwear customers in both urban and suburban demographics. The Shoe Station concept targets a more affluent family footwear customer and has a strong track record of capitalizing on emerging footwear fashion trends and introducing new brands. Due to the larger average size of our Shoe Station stores and the targeted, more affluent customer, these locations provide for a primary destination shopping experience.

We believe our distinctive shopping experiences give us various competitive advantages, including increased multiple unit sales; the building of a loyal, repeat customer base; the creation of word-of-mouth advertising; and enhanced sell-through of in-season goods.

Acquisition of Shoe Station

On December 3, 2021, we acquired the physical stores and substantially all of the other assets and liabilities of Shoe Station, Inc. ("Shoe Station"), a privately-held, family-owned shoe retailer. The Shoe Station assets were acquired for approximately $70.4 million, funded with cash on hand. We are continuing to operate the 21 locations acquired under the Shoe Station banner and have opened three new Shoe Station bannered stores since the acquisition. Shoe Station contributed Net Sales of $16.6 million during the period from the acquisition date through January 29, 2022 in Fiscal 2021 and $99.9 million in Fiscal 2022. We incurred acquisition and integration-related charges of $4.3 million ($3.2 million after tax, or $0.11 on a diluted per share basis) during Fiscal 2021. These charges were comprised of non-recurring expense related to the fair value adjustment to acquisition-date inventory of $1.1 million recorded in Cost of Goods Sold and $3.2 million of transaction costs and integration-related charges recorded in Selling, General and Administrative Expenses. See Note 3 — “Acquisition of Shoe Station” in our Notes to Consolidated Financial

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Statements contained in PART II, ITEM 8 of this Annual Report on Form 10-K for additional information on the acquisition.

Comparable Store Sales

Comparable store sales is a key performance indicator for us. Comparable store sales include stores that have been open for 13 full months after such stores’ acquisition or grand opening prior to the beginning of the period, including those stores that have been relocated or remodeled. Therefore, stores recently opened, acquired or closed are not included in comparable store sales. We generally include e-commerce sales in our comparable store sales as a result of our omnichannel retailer strategy. Due to our omnichannel retailer strategy, we view e-commerce sales as an extension of our physical stores. E-commerce platforms associated with a physical store acquisition will not be included in comparable store sales until the initial physical stores are included. Our method for calculating comparable store sales in Fiscal 2022 and Fiscal 2021, therefore, does not include any sales activity from Shoe Station. The 21 original Shoe Station stores acquired and the www.shoestation.com e-commerce site that went live in early February 2023 will be included in comparable store sales calculations beginning in the first quarter of the fiscal year ending February 3, 2024 (Fiscal 2023).

Executive Summary

In Fiscal 2022, we delivered operating income margins and overall profitability more than double those generated pre-pandemic. These Fiscal 2022 results demonstrate the sustainability of our business and set the new benchmark for us going forward. For Fiscal 2022, Diluted Net Income per Share was the second highest year in our history and was only surpassed by Fiscal 2021. Our Diluted Net Income per Share in Fiscal 2022 grew in each quarter compared to Fiscal 2019's pre-pandemic results with growth compared to Fiscal 2019 of 107%, 160%, 151%, and 558%, respectively. Our total Diluted Net Income per Share earned over the past two fiscal years of $9.38 ($3.96 in Fiscal 2022 and $5.42 in Fiscal 2021) exceeded the Diluted Net Income per Share earned over the preceding 13 years combined.

Net Sales in Fiscal 2022 were $1.26 billion and were the second highest of any fiscal year in our history, only exceeded by Fiscal 2021. In a challenging economic environment, our Fiscal 2022 Net Sales increased 21.8% and comparable store sales increased 13.9% compared to pre-pandemic results in Fiscal 2019. Our physical store comparable store sales increased 8.9% and e-commerce Net Sales increased 85.4% compared to Fiscal 2019. Our Fiscal 2022 results were positively impacted by sustained higher gross profit margin compared to pre-pandemic results, new growth provided from the Shoe Station acquisition and growth in our Shoe Perks loyalty member program. More detail on each of these factors follows:

Compared to Fiscal 2021, Net Sales were down 5.1% and comparable store sales declined 11.1% on lower traffic and sales volume. This decrease was due primarily to fluctuations in our customer base's income as impacted by government stimulus in Fiscal 2021, inflation in Fiscal 2022 and continued COVID-19-related manufacturing delays, which decreased availability of athletic inventory and athletic sales in Fiscal 2022.

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Comparable store athletic sales were down 21.6% compared to Fiscal 2021 and were flat compared to Fiscal 2019. On a comparable store basis, non-athletic sales were flat compared to Fiscal 2021 and increased 29.5% compared to Fiscal 2019. Net Sales attributed to athletic sales were 42% in Fiscal 2022, compared to 50% in Fiscal 2021 and 51% in Fiscal 2019. Athletic sales began to show some improvement during the second half of Fiscal 2022, as athletic inventory availability began to improve.

We ended Fiscal 2022 with Merchandise Inventories of $390.4 million, an increase of $130.9 million over Fiscal 2019. Approximately 40% of the increase was inventory in Shoe Station stores acquired last year or opened this year and higher in-transit inventory. The remaining increase in inventory was supportive of the Net Sales increases compared to Fiscal 2019 and the expectation of increased sales in Fiscal 2023.

We had no borrowings outstanding under our credit agreement (the "Credit Agreement"), which was amended and restated during the first quarter of Fiscal 2022 and expires on March 23, 2027. We ended Fiscal 2022 with $63.0 million of Cash, Cash Equivalents and Marketable Securities.

We are currently in the process of modernizing our stores and plan to have over 60% of our stores modernized by the end of Fiscal 2023 and the full program complete in the Fiscal 2024 - Fiscal 2025 horizon. Through Fiscal 2022, 41% of the stores in our fleet have been remodeled.

We opened two Shoe Station stores in the fourth quarter of Fiscal 2022, ending Fiscal 2022 with 397 total stores, 373 Shoe Carnival stores and 24 Shoe Station stores. We are on track to operate 400 stores in the third quarter of Fiscal 2023.

Results of Operations

The following table sets forth our results of operations expressed as a percentage of Net Sales for the following fiscal years: